Kurt Yinger

Kurt Yinger asked for insights into the main contributors to Weyerhaeuser's Investor Day targets over the next 12-24 months and the expected proportion of the $1 billion incremental Adjusted EBITDA. He also inquired about the net positive impact of 2025 acquisition and divestiture (A&D) deals on Timberlands profitability in 2026, and the EBITDA/cash flow contribution of the Virginia transaction.

Answer

CFO David Wold explained that growth won't be linear, highlighting significant groundwork laid in 2025. He pointed to Climate Solutions (growing from $84M to $119M from 2024 to 2025) and Timberlands optimization as early contributors, with biocarbon and TimberStrand being more 'chunky' later. He confirmed that 2025 A&D activity will be net positive for cash flow generation, citing Investor Day materials showing $60 million average incremental cash flow from portfolio optimization since 2020, and noted Virginia properties were below average for Weyerhaeuser's portfolio.

Kurt Yinger asked about the key contributors to Weyerhaeuser's Investor Day targets over the next 12-24 months and any guideposts for the $1 billion incremental Adjusted EBITDA target. He also questioned the net positive impact of 2025 Timberlands acquisitions and divestitures on 2026 profitability and sought details on the Virginia transaction's EBITDA or cash flow contribution.

Answer

CFO David Wold explained that growth will not be linear, highlighting progress in Climate Solutions (from $84M to $119M Adjusted EBITDA) and Timberlands optimization. He confirmed that 2025 A&D activity would be net positive to cash flow, but did not provide specific EBITDA for the Virginia properties, noting they were below average for the portfolio.

Kurt Yinger asked about the funding plan and timeline for the Roanoke timberland acquisition and inquired about the company's appetite for share repurchases given balance sheet leverage and future spending on the Monticello project.

Answer

CFO David Wold stated the acquisition would be funded by the 'vast majority' of proceeds from non-core divestitures, noting the 180-day timeline for 1031 exchanges. He emphasized the balance sheet's strength and flexibility, pointing to the significant Q2 share repurchase as evidence of its attractiveness as a capital allocation tool.

Kurt Yinger asked about the drivers behind improved demand from southern treaters, the significant decline in I-joist volumes relative to housing starts, and the potential for a supplemental dividend given capital returns.

Answer

CEO Devin Stockfish suggested the treater demand is likely a mix of inventory building at attractive prices and a genuine pickup in R&R activity. On EWP, he attributed the I-joist share loss to availability issues during the pandemic and noted that low lumber prices currently make recapture difficult, but expects to regain share as lumber prices normalize. Regarding capital returns, CEO Devin Stockfish explained that while a supplemental dividend is possible, the framework's flexibility has enabled share repurchases, acquisitions, and dividend increases even in a challenging market.

Kurt Yinger questioned the competitive dynamics in residential installation, asking if pricing pressures are primarily from material savings or increased bidding, and how customer conversations with builders are evolving amidst affordability challenges. He also followed up on whether TopBuild is increasingly walking away from projects or bids as the year progressed due to price-volume trade-offs.

Answer

Robert Buck, President and CEO, acknowledged increased competitiveness and bidding pressures in slower residential markets, with teams balancing volume and price. He noted that builders are re-engineering products and collaborating with TopBuild on value engineering to address affordability. Rob Kuhns, CFO, clarified that TopBuild is not stepping away from more work and is maintaining market share, but has become more aggressive on pricing, leading to negative price on the install side in Q3, largely offset by productivity savings.

Kurt Yinger inquired about the competitive dynamics on the residential installation side, specifically whether it's driven by material savings or increased bidding pressures, and the tone of customer conversations as builders address affordability challenges. He also asked if TopBuild is increasingly walking away from projects or bids as residential activity has softened, or if this trend is consistent with prior quarters.

Answer

Robert Buck (President and CEO) noted increased competitiveness in slower residential markets, requiring teams to balance volume and price. He added that builders are re-engineering products and seeking value engineering partnerships with TopBuild to manage pressures. Rob Kuhns (CFO) stated they are not stepping away from more work and are maintaining market share, though price pressure has led to more aggressive pricing, largely offset by productivity savings.

Kurt Yinger asked about the potential competitive advantages for TopBuild if deportation activity creates a premium on labor in the construction market. He also inquired what conditions would need to change for management to become more aggressive with labor-related cost-cutting.

Answer

CEO Robert Buck explained that while labor shortages could slow the overall construction cycle, TopBuild's stable and skilled workforce would become a significant competitive advantage, positioning them as a reliable service partner for builders. CFO Rob Kuhns stated that the company would need to see prolonged weakness in a market before making aggressive labor cuts, as they prioritize retaining their high-performing employees, a strategy proven effective in past downturns.

Kurt Yinger asked about the timing and allocation of the $30 million cost savings target between cost of goods sold and operating expenses. He also inquired about the residential market's performance, potential share gains, and the impact of regional mix, and sought clarification on any positive incremental factors contributing to the updated operating margin guide beyond the October price increase.

Answer

CFO Matt Dunn confirmed the $30 million in cost savings will be realized in 2026, with over 90% allocated to SG&A and a smaller portion to COGS. CEO Mike Olosky clarified that the residential business volume was down mid-single digits for the quarter, attributing this to regional mix (South/West down mid-single digits, Midwest/Northeast up double digits) and the higher content per unit in seismic/hurricane areas. He expressed confidence in gaining share through lumber yards, pro dealers, and increased shelf space. Mr. Dunn noted that the narrowed operating margin guide included one-time costs, and volume development was better than some market forecasts, with a known one-time gain on asset sale also contributing, but emphasized that cost actions were still necessary for 2026 targets.

Kurt Yinger followed up on Simpson Manufacturing Company's $30 million cost savings target, asking about its expected realization timeline and the split between cost of goods sold and operating expenses. He also questioned the residential market's performance, potential share gains, and the impact of regional housing mix, as well as the factors contributing to the updated, higher-end operating margin guidance.

Answer

Matt Dunn, CFO, confirmed the $30 million in savings would be realized throughout 2026, with over 90% impacting SG&A. Mike Olosky, President and CEO, clarified that the residential business volume was down mid-single digits for the quarter, and expressed confidence in gaining market share through dealer conversions and increased shelf space. He highlighted the significant impact of regional mix, noting that the South and West, where Simpson has higher content per unit, were down mid-single digits, while the Midwest and Northeast were up double digits. Mr. Dunn explained that the narrowed operating margin guidance reflects better-than-expected volume development compared to market forecasts, alongside the cost actions and a one-time gain from an asset sale.

Kurt Yinger of D.A. Davidson & Co. asked for confirmation of the expected 8% weighted average price increase for the second half, how the company balances competitive dynamics with margin goals amid new tariffs, whether there was pre-buying ahead of the price increase, and for more detail on customer expansion in the component manufacturer segment.

Answer

CFO Matt Dunn confirmed the 8% weighted average price increase is the correct assumption for the back half. CEO Michael Olosky stated the company balances its value proposition and service with cost control to maintain its margin targets. Matt Dunn added that tariff impacts are most significant on imported fasteners and anchors, and they are monitoring competitors before considering further pricing actions. Michael Olosky noted there was no substantial pre-buying and that the second half is starting softer, in line with forecasts. He also highlighted that progress in software solutions for truss engineering and project management is driving share gains with component manufacturers.

Kurt Yinger of D.A. Davidson & Co. asked about the seasonal progression of volumes, the expected trajectory of gross margins for the rest of the year, and the potential size of opportunities from recent customer conversions and retail shelf space gains.

Answer

Executive Michael Olosky described recent monthly performance as inconsistent but trending back toward traditional seasonality. CFO Matt Dunn noted Q1 volumes faced a tough year-over-year comparison and stated the full-year goal is to keep gross margins 'relatively flat' as pricing will not fully offset tariff impacts. Olosky added that recent wins are the 'singles and doubles' that contribute to the company's above-market growth, which was 420 basis points over U.S. housing starts on a trailing 12-month basis.

Kurt Yinger sought to understand the primary drivers of higher input and factory costs, asking to distinguish between strategic investments, under-absorption from low volume, and general inflation. He also inquired about the long-term balance between margin expansion and reinvesting for growth, and asked for the expected gain on the sale of the old Gallatin facility.

Answer

CEO Michael Olosky confirmed the cost pressures were from 'all of the above,' including strategic warehouse investments, volume-related under-absorption, and broad inflation in areas like freight and labor. He reiterated the long-term strategy is to be a growth company with strong profitability at or above 20% operating margin, continuing to reinvest where opportunities exist. He also confirmed the Gallatin site sale should result in a gain of $10 million to $12 million.

Kurt Yinger questioned the impact of steel cost trends on 2025 gross margin expectations and asked about the competitive pricing environment, particularly for fasteners. He also sought a framework for achieving the 20% operating margin floor given the 2025 starts forecast and inquired about any exposure to the True Value bankruptcy.

Answer

CEO Michael Olosky stated the company feels comfortable with its material cost position, noting other cost increases may counterbalance steel trends, but they are in "good shape." He reiterated their strategy is to sell on value and service, not price, and that they haven't seen significant competitive pricing moves. Regarding the 20% margin, he emphasized they are working through details for 2025. CFO Brian Magstadt addressed the True Value situation, confirming they are a past customer and that Simpson is evaluating the situation with the potential buyer, noting the revenue exposure is not material.

Kurt Yinger from D.A. Davidson Companies asked about the opportunity for Siding share gains among large production homebuilders, particularly in light of a competitor announcing multi-year exclusivity agreements. He questioned whether this relegates LP to smaller builders or if the situation is more nuanced.

Answer

CEO Brad Southern described the competitive landscape as 'nuanced,' confirming that LP continues to actively pursue and win business with all large builders, including in segments like multifamily. He emphasized that the Builder Series product line is growing, driven by a strong value proposition, especially when bundled with LP's OSB offerings, and that they see continued opportunities for growth in this segment.

Kurt Yinger of D.A. Davidson Companies asked about the opportunity for Siding in new residential construction, specifically whether a competitor's exclusivity agreements with large builders limit LP's share gain potential to smaller and medium-sized builders.

Answer

CEO Brad Southern described the situation as 'nuanced,' stating that LP continues to pursue and win business with large builders, sometimes through their multifamily divisions. He emphasized that the Builder Series product provides a strong value proposition for this segment, especially when bundled with OSB, and that the company is 'full steam ahead' on growing its share with large builders.

Kurt Yinger asked about LP's strategy for penetrating the new residential market, specifically with large national builders, and whether market share gains would be 'chunky' or smooth. He also sought a rule of thumb for LP's current market share with these large production builders.

Answer

CEO William Southern explained that gaining share with large builders is 'chunky' on a deal-by-deal basis but will likely appear as smooth, overall growth in financial results due to ramp-up times. He noted the company has aggressive internal growth goals for this channel. When asked for a market share metric, he quipped that 'Outside Lennar, there's a lot of upside,' indicating significant room for growth with other major builders.

Kurt Yinger of D.A. Davidson asked about key learnings from the Lennar agreement that can be leveraged with other large builders and whether growing the trained contractor base makes future conversions easier.

Answer

CEO William Southern emphasized that a key element of success was providing extensive technical support and training to Lennar's contractor base. He confirmed that as the network of trained installers grows, they become advocates for the product, creating stickiness and making it easier to win future business with other builders.

Kurt Yinger asked how visibility from BuilderSeries and big builder wins informs goals for market outperformance in 2025, how housing affordability impacts premium material adoption, and requested a breakdown of the Q3 to Q4 Siding EBITDA bridge.

Answer

CEO Brad Southern expressed confidence in achieving pre-COVID growth rates (8-10%) in 2025, driven by momentum and SmartSide's value proposition, which includes labor savings that help offset affordability pressures. CFO Alan Haughie provided a detailed Q3-to-Q4 EBITDA bridge, attributing the change to a ~$5M maintenance timing shift, ~$30M from lower seasonal volume, and ~$8-10M in planned maintenance costs and downtime.

Kurt Yinger of D.A. Davidson Companies asked about the drivers behind the outperformance of Engineered Wood Products (EWP) volumes, particularly the difference between LVL and I-joist trends, relative to single-family housing starts. He also inquired about the potential magnitude and duration of the EWP inventory destocking expected in the third quarter.

Answer

CEO Nate Jorgensen explained that LVL has broader applications like beams, headers, and wall framing, giving it more resilience compared to I-joists, which are primarily used in floor systems and face competition from trusses and dimensional lumber. Regarding the Q3 destocking, Mr. Jorgensen noted that while mill direct orders might decrease, he anticipates a shift to more frequent, smaller orders out of distribution warehouses, a trend Boise Cascade is well-equipped to service.

Kurt Yinger of D.A. Davidson Companies inquired about the drivers behind the outperformance of LVL volumes compared to I-joist volumes, the potential for market share gains, and the expected magnitude of the EWP inventory destocking in the third quarter.

Answer

CEO Nate Jorgensen explained that LVL's outperformance is due to its broader range of applications, such as beams, headers, and wall framing, whereas I-joist use is primarily limited to floor systems. Regarding inventory, he noted that customers are shifting purchasing patterns across all products, favoring smaller, more frequent orders from distribution centers over large mill-direct shipments to better manage working capital, a trend Boise Cascade is well-equipped to handle.

Kurt Yinger inquired about EWP pricing, asking if the sequential pressure in Q2 would lessen compared to Q1 and about the competitive dynamics as the market enters a seasonal strengthening. He also sought clarification on the $5 million financial impact from the Oakdale outage and asked if a 15%+ gross margin for the BMD segment is attainable in 2025.

Answer

CFO Kelly Hibbs projected a low single-digit sequential decline in EWP pricing for Q2, similar to Q1, noting that competition for share persists until underlying demand strengthens. CEO Nate Jorgensen added that Q2 is typically more focused on execution than pricing. Hibbs clarified the $5 million Oakdale impact is a sequential estimate and affirmed that a 15% BMD gross margin for the year is still attainable.

Kurt Yinger from D.A. Davidson & Co. asked about the potential impact of tariffs on the Engineered Wood Products (EWP) market, particularly concerning Canadian supply. He also inquired about the EWP pricing environment, competitive dynamics, and the likelihood of product substitution between lumber and EWP based on commodity price fluctuations.

Answer

CEO Nate Jorgensen and CFO Kelly Hibbs explained that while the company has modeled various tariff scenarios, many unknowns remain. They noted that their U.S. manufacturing base is well-positioned, though some cost pressure could arise from Canadian OSB web-stock. For the BMD segment, the intent would be to pass through higher costs. On pricing, Kelly Hibbs stated that in a flat housing market, modest price erosion in EWP is likely to continue due to competition for market share. Nate Jorgensen added that EWP maintains a strong value proposition for builders, and significant substitution with dimensional lumber is not expected as builders tend to stick with their preferred systems.

Kurt Yinger asked about the drivers behind differing volume trends for LVL versus I-joist, a potential shift from floor trusses back to I-joists, the P&L impact of the Oakdale plant downtime, BMD gross margins in October, and EWP capacity positioning for 2025.

Answer

CEO Nate Jorgensen attributed the LVL/I-joist volume difference to geographic mix and slab construction, and noted that I-joists' advantage in reducing builder cycle times is key. CFO Kelly Hibbs stated there were no specific P&L impacts to model from the Oakdale project yet and confirmed October BMD margins were solid. Troy Little, Head of Wood Products, explained their integrated model provides flexibility to manage production and labor amid demand uncertainty.

Kurt Yinger of D.A. Davidson & Co. asked if the first half's low-to-mid single-digit growth was a good proxy for sell-through and inquired about the ongoing cost impact of the reengineered Enhance decking profile.

Answer

President & CEO Bryan Fairbanks confirmed that low-to-mid single-digit growth was a reasonable proxy for first-half sell-through. He also stated that the material change related to the Enhance profile was not significant enough to be a cause for concern going forward.

Kurt Yinger of D.A. Davidson & Co. asked if the first half's low-to-mid single-digit sales growth was a good proxy for sell-through and inquired about the lasting margin impact from the reengineered Enhance product profile.

Answer

President & CEO Bryan Fairbanks confirmed that low-to-mid single-digit growth accurately reflects first-half sell-through. He also stated that the material change in the Enhance profile was not significant enough to be a concern for future margins.

Kurt Yinger from D.A. Davidson & Co. asked what feedback the sales team receives on what's needed to convert more contractors to Trex railing and inquired about the nature of the railing transition costs.

Answer

CEO Bryan Fairbanks explained that for the past two years, contractors have explicitly asked for the types of railing products Trex is now launching, indicating strong pent-up demand. He noted the transition costs are primarily for in-field merchandising and dealer resets for the new products, with the impact concentrated in the first half of the year.

Kurt Yinger questioned how expanded distribution for railing translates into retail sales and asked about the strategy behind adding heat-mitigating technology to the more affordable Enhance decking lines.

Answer

CEO Bryan Fairbanks stated that increased distribution improves product availability and adds more sales personnel promoting the brand, which drives pull-through over time. He explained that adding premium features like heat-mitigation to value-oriented lines is a strategy to provide more value to the consumer, funded by cost savings from continuous improvement programs.

Kurt Yinger asked about the product mix in the multifamily business versus the legacy business and how the company manages potential channel conflict with job site deliveries. He also inquired about how contracts are structured to mitigate commodity price risk and the outlook for specialty pricing stabilization.

Answer

CEO & President, Shyam Reddy, clarified that multifamily sales are led by specialty products like EWP and siding, which then pull through structural products. He stated that job site deliveries for multifamily are collaborative with customers and not a source of channel friction. SVP, CFO & Treasurer, Kelly Wall, added that the multifamily mix has a slightly higher proportion of structural products. Regarding risk, Reddy explained their inventory management system effectively manages commodity volatility. On pricing, he noted that while he has no crystal ball, increased certainty on tariffs could lead to faster price stabilization in categories like EWP.

Kurt Yinger from D.A. Davidson Companies asked about the product mix in the multifamily business (structural vs. specialty) and how the company manages potential channel friction with legacy customers over job site deliveries. He also inquired about how contracts are structured to mitigate commodity price volatility and asked for an outlook on when specialty pricing might stabilize or turn positive.

Answer

CEO & President Shyam Reddy clarified that job site delivery for multifamily projects is done in collaboration with customers and is considered an acceptable, value-added service, thus avoiding channel conflict. He noted that commodity risk is managed through their established inventory management system. On specialty pricing, he stated there is no crystal ball but suggested that increased certainty around tariffs could lead to faster price stabilization, particularly in categories like EWP. SVP, CFO & Treasurer Kelly Wall added that the multifamily business has a slightly higher mix of structural products, which are often pulled through by leading with specialty products.

Kurt Yinger from D.A. Davidson Companies asked about the product mix in the multifamily business, how the company manages potential channel conflict with job site deliveries, how contracts are structured to mitigate commodity volatility, and the outlook for specialty product pricing.

Answer

CEO Shyam Reddy explained that they lead with specialty products like EWP and siding in multifamily projects, which helps pull through structural products. He clarified that job site deliveries are done in collaboration with customers, avoiding channel conflict. On risk mitigation, he pointed to the company's robust inventory management system. Regarding specialty pricing, he noted that a resolution to tariff uncertainty could lead to faster price stabilization. CFO Kelly Wall added that the multifamily business has a slightly higher mix of structural products.

Kurt Yinger asked about opportunities to manage SG&A to protect profitability and the expected run-rate going forward. He also inquired about visibility into customer inventory levels and the company's capital allocation priorities, specifically comparing M&A opportunities to share buybacks.

Answer

CEO Shyam Reddy stated that BlueLinx is continuously focused on operational excellence but has no major changes planned for its SG&A structure, though he expects SG&A as a percentage of sales to improve. He noted customer inventories are low, which creates an opportunity for two-step distribution. Regarding capital allocation, Reddy affirmed a commitment to strategic M&A, greenfields, and opportunistic buybacks, all while maintaining a leverage target below 2x. CFO Kim DeBrock clarified the leverage calculation is net of real property finance leases.

Kurt Yinger asked if potential tariffs on Canadian lumber would change the company's structural products strategy and what customer purchasing patterns might indicate about market expectations. He also inquired about the status of vendor commitments for the Portland facility and the biggest potential downside risks to specialty gross margins.

Answer

Shyam Reddy, President and CEO, responded that while tariff uncertainty can cause customers to delay spending, BlueLinx's strategy would not fundamentally change due to its best-in-class inventory management capabilities for managing commodity volatility. For the Portland facility, he confirmed that vendor relationships and product mix are established. To protect specialty margins, Reddy highlighted the company's focus on leveraging its supply chain, strategic pricing, and operational excellence to mitigate risks from tariffs or demand shifts.

Kurt Yinger asked about the drivers of specialty product deflation, specifically the balance between manufacturer pricing and competitive dynamics, and which categories beyond EWP were facing pricing challenges. He also inquired about the opportunity for product line expansions into new geographies and which product lines were most under-indexed across the footprint. Finally, he sought confirmation that the quarter-to-date sales volumes were up on a year-over-year basis.

Answer

CFO and Treasurer Andy Wamser noted encouraging sequential price inflation in millwork, particularly in private label products, but identified EWP and millwork as the main sources of year-over-year deflation. President and CEO Shyam Reddy added that new manufacturing capacity post-pandemic has impacted the market, but BlueLinx is driving volume through channel strategies and value-add services. Reddy confirmed there is significant opportunity for geographic expansion and that the company is taking action to ensure optimal stocking positions across all markets. Wamser confirmed that quarter-to-date volumes were up mid-single digits year-over-year but cautioned against over-interpreting short-term data due to seasonality.

Kurt Yinger asked about PotlatchDeltic's inclination to be a buyer or seller of timberlands at current market prices and whether the certainty of new duties and tariffs would be sufficient to trigger more significant capacity shutdowns in Canada.

Answer

President & CEO Eric Cremers stated that while he would love to be a buyer of timberlands, high market prices make achieving acceptable returns difficult, positioning the company as an opportunistic seller, using proceeds for share repurchases. Regarding Canadian capacity, Cremers noted that mills are now facing a significant negative cash flow profile with higher duties, forcing operators to decide whether to "hang on and try to survive" or permanently shut down, which could remove substantial supply from the market.

Kurt Yinger of D.A. Davidson & Co. asked about the drivers of strength in the home center business and sought clarity on the sustainable, long-term harvest level for the company's Southern operations.

Answer

Executive Wayne Wasechek suggested the Repair and Remodel (R&R) market is turning, citing analyst forecasts for positive 2025 comp store sales at major home centers after two years of negative results. For the harvest level, he explained that while there is annual variability, the company's long-term sustainable harvest plan for its total land base ranges between 7.1 million and 8.2 million tons per year.

Kurt Yinger of D.A. Davidson Companies inquired about the drivers of sequential improvement in Construction segment gross margins, the risk from lumber price volatility amid competitive pressures, the meaning of "modest market share gain" for Deckorators, and the factors contributing to the 45% growth in SureStone decking sales.

Answer

CFO Michael Cole explained that the sequential margin improvement in Construction was driven by seasonality in concrete forming and commercial, as well as factory-built performance, while the site-built business remains under significant price pressure. CEO Will Schwartz acknowledged that the weak demand environment makes it harder to pass on lumber price increases. Regarding Deckorators, Schwartz stated the market share gain reflects expected growth, especially in the back half of the year, driven by both retail and distribution wins for the new SureStone technology, which is benefiting from a new consumer-focused marketing campaign and expanded internal distribution.

Kurt Yinger of D.A. Davidson & Co. asked about the outlook for competitive pricing, the balance between passing on lumber cost inflation and maintaining market share, the timing of the Deckorators recovery, ProWood pricing mechanisms, and the strategy behind expanding 2-step distribution.

Answer

Chief Financial Officer Michael Cole stated that pricing challenges are expected to persist in the Packaging and Construction segments, but he is more optimistic about Retail margins improving due to price increases and new capacity efficiencies. Chief Executive Officer William Schwartz emphasized the goal to retain and grow market share despite cost pressures. Schwartz clarified that the Deckorators customer shift impact was primarily a Q1 event, with a recovery expected in Q2 and volume gains for the full year. He also explained that the 2-step distribution expansion is a complementary strategy to their direct model, enhancing market access.

Kurt Yinger inquired about UFP Industries' Deckorators brand, specifically regarding shelf space changes at big-box retailers and growth strategies for the professional channel in 2025. He also asked for a breakdown of the pressures on construction gross margins, questioning the impact of business mix versus competitive dynamics in the Site Built unit. Finally, he sought clarity on the outlook for consolidated SG&A, particularly the influence of bonus expenses.

Answer

Executive Chairman Matthew Missad responded on Deckorators, highlighting that the Surestone product will gain significant placement in over 1,500 big-box stores, with the main impact expected in the second half of 2025 as manufacturing capacity increases. CFO Michael Cole addressed the other points, explaining that while it's difficult to separate, both mix and significant pricing declines in the high-margin Site Built unit have pressured construction margins. For SG&A, Cole guided to a core run rate of $565 million for 2025, with variable bonus expenses expected to be around 16-17% of pre-bonus operating profit.

Kurt Yinger from D.A. Davidson asked for the criteria that would make a business unit no longer a strategic fit, whether selling businesses was an option, and if the historical model of lumber prices having a minimal impact on earnings had changed. He also questioned the short-term margin risk if lumber prices were to rise.

Answer

CEO Matt Missad explained that the criteria for exploring strategic alternatives apply to profitable businesses that no longer align with long-term goals or lack synergies, and confirmed that selling them is an option. On lumber's impact, Matt Missad stated the dynamic is largely unchanged, though the company can gain certain efficiencies in a higher-priced lumber market. Both he and CFO Mike Cole suggested a rising lumber price environment would likely be a net positive, aiding variable-priced products and pressuring smaller competitors.

Kurt Yinger of D.A. Davidson Companies asked about the dynamics of recent wallboard price increases, the potential for price resiliency amid lower industry operating rates, and the risk to pricing if weak demand persists into 2026.

Answer

President & CEO John Turner stated that the current environment involves limited price increases that are being managed collaboratively with partners. He expressed confidence in near-term price resiliency, supported by manufacturers' own inflationary pressures and capital needs, but acknowledged that a prolonged period of low demand and ~75% industry utilization could introduce some price erosion.

Kurt Yinger asked for more details on the subsidiary consolidation initiative, including the timeline for completion and the specific operational improvements expected from the process.

Answer

CEO John Turner stated the data consolidation will be complete by the end of calendar 2025. The primary benefits are improved purchasing, pricing optimization, and better working capital management through enhanced visibility into inventory and receivables. CFO Scott Deakin added that while data standardization has a deadline, the organizational and process improvements are an ongoing evolution.

Kurt Yinger asked about which end markets GMS has the best visibility into and whether that visibility has improved recently. He also inquired about the outlook for SG&A, specifically when the company might return to neutral or positive operating leverage.

Answer

CEO John Turner stated that visibility is best in single-family, followed by commercial. He noted that multifamily visibility is challenging due to a high degree of project delays rather than cancellations. Regarding SG&A, Turner expressed confidence that they are close to neutral leverage in the upcoming quarter and expect improvement thereafter, assuming volumes do not decline further. He credited the recently implemented $30 million cost-saving initiative for positioning the company to navigate what he believes is the bottom of the cycle.

Kurt Yinger of D.A. Davidson & Co. questioned the drivers behind the Q2 guidance and the capital bookings level required to achieve the projected second-half sales ramp. He also asked about customer reactions to the recent tariff announcements and the company's confidence that delayed projects will still materialize this year. In a follow-up, he sought to quantify the total tariff cost impact before mitigation efforts and the potential exposure related to the Carmanah acquisition's Canadian operations.

Answer

Executive Michael McKenney stated that a 15-20% increase in capital order flow is needed to meet back-half targets, but he cautioned that timing delays could push revenue into 2026. President and CEO Jeffrey Powell described customers as being in 'shock,' causing a temporary pause, but he remains confident projects will proceed. McKenney clarified the $5-6M tariff impact is the net amount that cannot be mitigated in the short term. Both executives confirmed that equipment from the Canadian-based Carmanah acquisition is not currently subject to tariffs under the USMCA.

Kurt Yinger asked about the specific catalysts, such as tariff settlements or interest rate relief, needed to convert capital project discussions into bookings. He also inquired about geographic areas with strong capital visibility beyond wood products, how the 2025 outlook aligns with 2028 targets, and the puts and takes for gross margin given the softness in capital.

Answer

Jeffrey Powell, President and CEO, identified economic stability and clarity as the primary catalysts for capital investment, noting that customers can only defer projects for so long. He mentioned that an end to the Russia-Ukraine conflict would create significant demand in Europe. Michael McKenney, Executive, explained that while the parts mix will benefit gross margins in the first half, larger, more competitive capital projects could pressure margins later in the year.

Kurt Yinger of D.A. Davidson asked about the expected magnitude of the Q4 capital bookings pickup, key end-market opportunities, the normalization of the backlog, and the sustainability of high gross margins. He also followed up on Q3/Q4 foreign exchange impacts, the composition of the industrial sales mix, and specific exposure to box plants.

Answer

CEO Jeffrey Powell stated that the capital bookings recovery is expected to be a 'slow climb' rather than a step change, with the OSB market showing particular strength. Michael McKenney, Executive, confirmed the backlog consumption should normalize in 2025 and attributed strong gross margins to project mix, lower commodity costs, and the 80/20 program. McKenney also quantified the Q3 FX headwind and noted an expected favorable impact in Q4. Powell added that exposure to box plants is primarily through the sale of balers for waste handling.

Kurt Yinger asked for an update on the build-out of internal distribution capabilities, including 2025 plans, potential margin impact, and the overall timeline for the initiative.

Answer

CEO Jeffrey Edwards reported 'good measured progress' and confirmed a 3-to-5-year timeline for the build-out, viewing it as a way to improve margins over time. CFO Michael Miller noted that internal distribution sales doubled year-over-year to about $18 million. While it adds G&A, it is beginning to slightly benefit gross margin and is not expected to be a drag.

Kurt Yinger asked about the key internal focus areas and external variables, aside from demand, that are most important for achieving the company's long-term EBITDA incremental margin targets.

Answer

CFO Michael Miller identified the key drivers as limiting G&A growth, maintaining gross margins within the 32%-34% range, and achieving strong volume and sales growth. He noted that year-to-date, the company is within its 20%-25% target range for same-branch incremental EBITDA margins and remains confident in achieving that on a full-year basis.