Bluelinx Holdings Inc.

Ladies and gentlemen, thank you for standing by and welcome to the Blue Links Holdings Second Quarter 2025 Earnings Conference Call. At this time, all participants are in the listen-only mode and today's call is being recorded. We will begin with opening remarks and introductions. At this time, I would like to turn the conference over to your host, Investor Relations Officer, Tom Muravillo. Please go ahead.

Thank you, Operator, and welcome to the Blue Link second quarter 2025 earnings call. Joining me on today's call is Sham Reddy, our Chief Executive Officer, and Kelly Wall, our Chief Financial Officer and Treasurer. At the end of today's prepared remarks, we will take questions. Our second quarter news release and Form 10-Q were issued yesterday after the close of the market, along with our webcast presentation, and these items are available in the Investors section of our website, bluelinksco.com. We encourage you to follow along with the detailed information on the slides during the 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 gap financial measures can be found in the appendix of our presentation. Now, I'll turn it over to Shan.

Thanks, Tom, and good morning, everyone. I'm pleased to report that we continue to execute successfully on our product and channel strategies to gain market share. Our gross margins for specialty and structural products are solid, and our net sales and volumes are higher for both product categories, despite soft or otherwise challenging market conditions. We remained focused on creating demand for our products via multifamily initiatives, builder pull-through efforts, and national account support to drive growth. As a result, we experienced another quarter of share gains. Demand creation strengthens our value proposition to both customers and suppliers, which puts us in a better position to win business and, convince our suppliers to give us new geographic territories, to expand their SKU assortment with us, and to enable us to disrupt dual distribution via our demand creation efforts. We believe that our strategy, when coupled with our strong balance sheet, positions us well for better-than-market success when the housing market recovers. We also returned capital to shareholders by repurchasing $20 million of shares in Q2. our board of directors approved a new $50 million share repurchase authorization, bringing the total current availability to $61.5 million. This clearly demonstrates our commitment to returning capital to our shareholders and our continued confidence in the company's long-term growth strategy. While market-driven price deflation has improved over the past year, it continues to reduce the profitability of the business. especially in certain product categories. We're offsetting this impact, however, with volume growth in engineered wood products, millwork, lumber and panels, and several key strategic channels as our channel and product strategies continue to bear fruit. With a disciplined focus on growing our five key specialty product categories, engineered wood, siding, millwork, industrial, and outdoor living products across all of our customer segments, the mixed shift strategy remains the same. That said, it's being executed in a manner that has our channel growth strategy front and center when making decisions about new product launches and working capital investments across the enterprise. We are also accelerating our focus on the multifamily market, an area where we are gaining significant traction. In fact, we have grown this business more than 30% year over year. While coming off of a relatively small base, we are excited about the prospects of multifamily-related growth. Moreover, it strengthens our value proposition for both our customers and suppliers as we're creating demand for them in a space that is otherwise challenging and expensive to do on their own, as scale, grit, and endurance are critical to long-term success with multifamily projects. It is important to note that multifamily sales may lead to longer turn days for certain product lines, resulting in higher than customary inventory levels in some cases. Though their product sales are committed, they remain on our books until they ship. In addition, multifamily dynamics lead to more direct sales, which is good for the business, but lower in gross margins. After a couple of challenging years, we believe that the multifamily segment is poised for a significant rebound, as it's an efficient way to meet increasing housing demand quickly and to address housing affordability efficiently. We are already seeing these improvements in the reported housing data, and we believe our strategy positions as well for long-term success in this attractive segment of the housing market. Our digital transformation efforts remain on track, with phase one set to be completed this year. We have re-architected our data and strengthened our master data foundation for future digital transformation. We have converted 11 markets to our new Oracle transportation management system, and we are processing e-commerce transactions in our pilot market. At the same time, we're incorporating AI into the business to drive financial improvements and operational efficiencies. Early pilots include demand forecasting using machine learning. branch video surveillance, training, HR and IT help desk chatbots, and Microsoft Co-Pilot to enable salary workforce productivity. Our continued focus on modernizing the business with new technology will allow us to differentiate ourselves in the market and accelerate our profitable sales growth and operational excellence initiatives. In addition, M&A and Greenfields remain important elements of our profitable sales growth strategy. So we continue to explore and evaluate opportunities in both areas in order to expand our geographic reach and to support our specialty product sales growth initiatives. Our greenfield in Portland, Oregon continues to perform well. In fact, we just doubled our warehouse space there because demand is higher than we initially expected, which is testament to the team's ability to quickly instill confidence on the part of our customers. Now turning to our second quarter results. We generated net sales of $780 million and adjusted EBITDA of $26.8 million for a 3.4% adjusted EBITDA margin. Adjusted net income was $5.6 million or 70 cents per share. Specialty products continue to account for approximately 70% of net sales and over 80% of gross profit for Q2. Specialty product net sales increased slightly year over year due to strong volumes in engineered wood products and millwork. Unfortunately, price deflation in those same categories muted the benefits of our net sales and volume increases that drove share gains tied to our strategy. Gross margins for specialty product sales came in at 18.5%. which is above our expected range. It is important to note that while industry-driven specialty products price deflation continues to adversely impact our top line and our cost of goods sold, the price declines remain steady in the low single-digit range in Q2 compared to prices being down high single digits this time last year. Structural product revenues increased over 3%, largely due to price increases in lumber, combined with volume increases in both lumber and panels. These volume increases were due to successful execution of our profitable sales growth strategies, especially with respect to those tied to multifamily related sales. For the quarter, industry average lumber prices were up 18%, while panel prices were down 19% year over year. We once again leveraged our strategic approach to inventory management and our centers of business excellence to successfully manage margins in our structural product categories. Through the first four weeks of Q3 2025, margins for specialty products were consistent with Q2. So far in Q3, overall pricing and daily volumes have both been relatively flat compared to Q2. We are optimistic that specialty pricing volatility will continue to stabilize. Despite our success gaining share, higher profitable sales growth may be tempered significantly by tariffs, high mortgage rates, and general economic uncertainty, which I will touch on in a minute. Structural product margins improved during the first four weeks of Q3 versus Q2, which is due to slightly higher lumber market pricing. Additionally, Lumber volumes have increased mid-single digits compared to Q2. Panel pricing continues to be under pressure, negatively impacting volumes and margins. Our focus on business excellence continues to support solid gross margin performance quarter after quarter, despite challenging market conditions. Additionally, our focus on driving an enterprise-wide corporate strategy enables us to better leverage our diversified customer base, our geographic footprint, and our scale to effectively navigate the challenging landscape while providing a more competitive value proposition to both our customers and suppliers. This disciplined approach positions us very well for the housing and building products market recovery when that occurs. Similarly, Our financial position remained strong, and our significant liquidity gave us the flexibility to return capital to shareholders by repurchasing $20 million in shares during the second quarter. That strong financial position, coupled with our confidence in the long-term strategy of the business, gave us the flexibility to authorize a new $50 million share repurchase authorization that will kick in after we exhaust the remaining $11.5 million of share repurchases under our current authorization. Now let's turn to our perspective on the broader housing and building products market. As you all know, the housing market continues to be soft, which is impacting the building materials and distribution sector. Broadly speaking, housing affordability, high mortgage rates, short-term rates, construction, labor availability, inflation, and other factors continue to affect the real estate and repair and remodel markets. The impacts of government policies and macroeconomic conditions should be short-term in nature, as the long-term fundamentals of housing are strong. Currently, the US is 4 million homes short on supply, which is certainly positive for the building product sector. In addition, At some point, homeowners will need to improve their existing homes or buy new homes, which will drive greater repair and remodel activity. In the meantime, there continues to be general uncertainty about the timing for a sustained housing recovery, which is reflected in various industry indicators of builder and consumer sentiment. June total starts were slightly down year over year, and single-family housing starts were down 10% from June 24. Builders' confidence and consumer sentiment levels are also down compared to this time last year. On the other hand, multifamily housing starts were actually much higher on a year-over-year basis, thereby serving as a seasonal catalyst for our strategy. Although the total starts are down, Our product and channel strategies are leading to share gains in a contracted market due to sales growth tied to success with our builder pull-through and multifamily efforts. Repair and remodel spending continues to be soft given low existing home sales. Despite this softness, our strategic focus on national accounts is enabling us to grow this business at scale. As housing activity increases, We believe the investments we're making today will accelerate our growth efforts in the repair and remodel-driven business. Although the near-term outlook remains uncertain, we believe in the long-term prospects of the housing and building product sector. It is estimated that more than 1.5 million homes need to be built every year for the next 10 years to meet the anticipated housing demand, and that is probably a low estimate. We believe that market stability will unlock consumer spending to meet this demand. We took these factors into account when we developed our share gain strategy to drive profitable sales growth. As we mentioned on our last call, tariffs will put pressure on gross margins. Regardless, we expect to pass them along via price increases. Regardless of market conditions and government policies, we will continue to emphasize our product and channel growth strategies. and in particular, our multifamily growth and our product expansion strategies to gain share in an otherwise difficult market. Our enterprise-wide product and channel strategies are a positive for long-term success, as they are designed to fully leverage our scale to drive profitable sales growth, not only in challenging markets like the one we're in, but even more so in a strong housing market. In summary, we delivered solid results for the second quarter of 2025. We're also executing our strategic initiatives as evidenced by our specialty product expansion efforts, channel growth, margin performance, and capital allocation initiatives. Focus and clarity will continue to be critical in the successful execution of our strategy for the remainder of 2025. I'd like to thank all of our Blue Links associates for their continued dedication to our customers, our suppliers, and each other. Our teams are committed to generating profitable specialty and structural product sales growth so that we are well positioned for long-term success, despite short-term market conditions. Now I'll turn it over to Kelly, who will provide more details on our financial results and on our capital structure.