Bluelinx Holdings Inc.

mode, and today's call is being recorded. We will begin with opening remarks and introductions. At this time, I will turn the conference over to your host, Investor Relations Officer Tom Morbideau. Please go ahead, sir.

Thank you, Operator, and welcome to the Blue Wings fourth quarter and full year 2024 earnings call. Joining me on today's call is Sham Reddy, our President and Chief Executive Officer, and Kim DeBrock, our Vice President, Chief Accounting Officer, and Interim Principal Financial Officer. At the end of today's prepared remarks, we will take questions. Our fourth quarter and full year news release informed 10K were issued yesterday after the close of the market, along with our webcast presentation. And these items are available in the investor section of our website, bluelinksco.com. We encourage you to follow along with the detailed information on the slides during our webcast. Today's discussion contains forward-looking statements. Actual results may differ significantly from those forward-looking statements due to various risks and uncertainties, including the risks described in our most recent SEC filings. Today's presentation includes certain non-GAAP and adjusted financial measures that we believe provide helpful context for investors evaluating our business. Reconciliations to the closest GAAP financial measure can be found in the appendix of our presentation. Now, I'll turn it over to Shan. Thanks, Tom, and good morning, everyone.

We are pleased with both our fourth quarter and full year 2024 results, especially in a year when elevated high mortgage rates and record home prices depressed sales in the housing and building product sector. Despite these headwinds, our margins remain strong in specialty products, and we continue to generate solid margins in our structural products business as well. During the quarter, we also demonstrated our commitment to returning capital to shareholders by continuing to repurchase shares under our $100 million share repurchase authorization. Next, I'd like to offer a few highlights from 2024. First, we delivered solid full-year 2024 results. Our teams and supplier partners, combined with the confidence our customers have in BlueLynx, helped us compete effectively in challenging ed markets. resulting in strong gross margins of 19.4% for specialty products and 10.1% for structural products for the year. Second, our fourth quarter results were also solid. As expected, our revenues were flat year over year, largely due to market-driven price deflation. However, our specialty and structural gross margins came in at 18.4% and 10.8% respectively. That's testament to the value of our service proposition to customers and our ability to effectively manage our inventory. In addition, while deflation still had an impact in Q4, it improved from Q3. It is also worth noting that specialty product volumes were up low single digits year over year, demonstrating that our corporate growth strategy is bearing fruit. Third, we remain focused on our five key high-margin specialty product categories, engineered wood, siding, millwork, industrial, and outdoor living products. specialty products accounted for approximately 70% of net sales and 80% of gross profit for both the fourth quarter and full year of 2024. We also continue to execute successfully on our local and national market share gain strategies, as seen by our multifamily growth, expansion of product lines with key national accounts, our expansion of branded product lines into new geographic markets, and launches of new product lines. For example, we recently announced an expanded distribution partnership Louisiana Pacific that will broaden the geographic reach of our wood-based siding offering, demonstrating our focus on specialty product growth. These product categories and the strategic vendor partners we've aligned with enable us to be a necessary extension of our customers in a scalable way, whether they are local or national. These product categories are also sold at various points of the construction cycle rather than at just the front or back end of a single or multifamily housing project or remodeling job for that matter. In addition, they drive higher net sales and gross profit, which generates sustainable and durable operating cash flow that can be reinvested back into the business and used to fund opportunistic greenfields and M&A opportunities. Fourth, our digital transformation journey is well underway as we strive to become the most technologically advanced two-step distributor of building products in the United States, transforming BlueLynx and making us the provider of choice for both suppliers and customers. These technology improvements are designed to enable us to rapidly grow our business at scale with both customers and suppliers by providing an exceptional customer and supplier experience that is more efficient and effective. They will also enable us to drive productivity improvements that will enhance our gross margins and EBITDA margins. Phase one includes implementing a new master data management platform, launching an e-commerce platform, which is now live in a pilot phase, and establishing a new transportation management system, which is on track to be fully implemented by Q3 2025. We are also emphasizing the technology enablement of our warehouse operations. We believe that subsequent phases will further enhance our operational and commercial capabilities. Modernizing the business with new technology will differentiate ourselves in the marketplace and accelerate our profitable sales growth and operational excellence initiatives. In November, we announced our first greenfield in Portland, Oregon, and we expect to have additional announcements in 2025. We expect our upfront cash investment for each new location to be less than $5 million and EBITDA positive after two years with EBITDA margins between 6% and 10%. These greenfields should generate between $40 and $100 million of net sales at maturity. Of course, these expectations will vary depending on the size of the market, the branch real estate footprint, product mix, and other factors. It is also important to note that as we launch at Greenfield, we intend to have a product mix more heavily weighted to specialty products. We will strive to get to our 70-30 specialty structural split in the initial year and then to around 80-20 at maturity. We have considerable strength managing our structural products business, so we believe that capability will provide us with a competitive advantage when launching Greenfields and allow us to meet our financial objectives much faster. Six, our financial position remains strong with liquidity of $852 million at the end of the year, including $506 million of cash on hand. This strength gives us the flexibility to reinvest in business initiatives that allow us to increase sales, improve productivity, expand our geographic reach, and provide better customer and vendor service, an example of which would be our digital transformation initiative. And of course, Having the ability to return capital to shareholders remains a priority, as demonstrated by our share repurchase program. For the year, we returned $45 million to shareholders. Now, for a few more details on our full year results. We generated 2024 net sales of $3 billion and $131 million in adjusted EBITDA for a 4.4% adjusted EBITDA margin. Adjusted net income was $55 million, or $6.44 per diluted share. For the year, we delivered solid gross margin performance with specialty products coming in at 19.4% and structural products at 10.1%. Our focus on business and operational excellence led to effective pricing, strong service levels, procurement opportunities, and cost management contributing to these strong results. Kim will provide more details in her remarks. Now let's turn to our perspective on the broader housing and building products markets. Early last year, industry sources were optimistic about the overall market for building products rebounding in the second half of 24. As we all know, that rebound never happened. As we continue to operate in an environment with the lowest existing housing sales backdrop in 30 years, elevated interest rates, home affordability issues, and market volatility due to tariff and other recent policy announcements, there is general uncertainty about the timing for a sustained housing recovery. Of course, One of the critical factors in inhibiting a housing recovery is the Federal Reserve's positioning regarding rate cuts, in addition to policies and market forces that may keep mortgage rates stubbornly high or otherwise volatile. As we've noted before, it is also important to note that the Federal Reserve interest rate cuts do not directly result in lower mortgage rates given other macroeconomic factors that influence these rates. Now, although the year ended with many observers expecting housing starts to be up slightly in 25, recent views suggest that housing starts will be flat to down this year. In fact, builder sentiment fell five points from January over concerns about tariffs, high mortgage rates, and affordability issues with housing. Regardless of market conditions, we will continue to emphasize our product and channel growth strategies, and, in particular, our multifamily growth strategy to gain share in an otherwise challenging market. Repair and remodel spending continues to be soft because existing home sales are low. Despite this softness, our strategic focus on national accounts is expected to enable us to grow this business on a year-over-year basis. And as the turnover increases, we believe the investments we're making today will accelerate our growth efforts in the repair and remodel-driven business when the markets turn. Now, although this near-term outlook remains uncertain, we continue to believe in the long-term prospects of the housing and building product sector. As many of you know, it is estimated that 1.8 million homes need to be built every year for the next 10 years to meet the housing demand, which if anything is probably a low estimate based on the actual need due to a variety of demographic trends. We took the anticipated demand curve and the fundamental drivers for housing and building products into account when we developed our share gain strategy to drive profitable sales growth, which generated positive results in 2024. Focus and clarity will continue to be critical in the successful execution of our strategy in 2025. Through the first seven weeks of Q1 2025, we have maintained solid margins for specialty products, which are generally in line with Q4 2024. Structural product margins are slightly lower so far in 2025, largely due to declining panel prices. Daily volumes have been adversely impacted by the extreme weather patterns experienced in January. In fact, over 20 of our locations were closed for at least half a day in January due to unusually cold weather and winter storms. In addition, it is important to note that while industry-driven specialty products price deflation continues to have an impact on both our top line and cost of goods sold, The situation improved in Q4. For example, in the fourth quarter, specialty pricing was down mid single digits versus high single digits in the third quarter. For the first seven weeks of the year, pricing has been volatile, but generally flat relative to Q4 when you take all the puts and takes into account. Given the political backdrop, inflationary pressures, and discussions with our vendor partners, we are optimistic that the specialty pricing volatility will abate at some point. The flip side, however, is that the outlook for volumes may be tempered a bit by these same factors, high mortgage rates and economic uncertainty. In summary, we delivered solid results for both the fourth quarter and full year of 2024. We're also delivering on our strategic priorities as seen by our specialty product expansion efforts, margin performance driven by our pricing and cost discipline, and capital allocation initiatives. I'd like to end by thanking my fellow Blue Lakes associates for their continued grit, tenacity, and resilience during a challenging housing market, and for their dedication to our customers and our suppliers. Our teams are committed to generating more profitable structural and specialty product sales to ensure that we position ourselves for long-term success, regardless of near-term market conditions. Now I'll turn it over to Kim, who will provide more details on our financial results and our capital structure.