Gross Margin Outlook
Q: How will gross margins normalize back below 33%?
A: Peter Jackson explained that gross margins are expected to normalize due to a pullback in the multifamily sector and increasing competition in certain markets. Despite tailwinds like volume growth, $100 million in productivity gains this year, and growth in value-added mix, margins will erode as the year progresses due to these headwinds.

Guidance and Market Growth
Q: How will your growth outpace the modest market tailwind?
A: Peter Jackson stated they anticipate modest market growth but are challenging themselves in areas like digital initiatives and value-added products. New capacity and equipment will drive growth, and they aim to gain market share through their strong team.

Free Cash Flow Outlook
Q: Why is free cash flow conversion lower in 2024?
A: Peter Jackson explained that the lower free cash flow is due to working capital usage as the business shifts from shrinking to growing sales. The headwind from growth is larger in a turning year but is expected to normalize in future years. They remain committed to delivering cumulative free cash flow benefits as outlined in their Investor Day.

Multifamily Decline Impact
Q: How will a 20–30% decline in multifamily starts affect sales?
A: Peter Jackson indicated that they expect a meaningful decline in multifamily sales and margins starting in Q1 and continuing throughout the year due to a pullback in the sector. However, it's only 13% of their overall business, and they are focusing on smaller multifamily projects to help bridge the headwind.

Digital Sales Impact
Q: What is the outlook for digital sales growth this year?
A: David Rush mentioned they expect an additional $200 million in digital sales, weighted towards the back half of the year as they launch new digital tools and drive adoption. The full rollout starts next week, and they are excited about its potential.

Productivity Initiatives
Q: What productivity projects will benefit 2024?
A: Peter Jackson highlighted initiatives focusing on automation, technology, and best practices to improve throughput and customer service. Investments over $100 million have been made in existing plants, with over 65% of tables having some level of automation. These efforts are expected to continue driving productivity gains.

Weather Impact on Sales
Q: Will Q1 weather issues push sales into Q2?
A: Peter Jackson noted that weather-related delays in Q1 are expected to gradually recover over the next quarters, with sales catching up later in the year but not immediately all at once.

M&A Environment
Q: Are acquisition targets more willing to sell now?
A: Peter Jackson observed that the M&A environment has improved as uncertainties lessen and valuations become clearer. There's more optimism for this year, and they see potential in acquisitions, especially as sellers align with base business valuations.

Commodity vs. Value-Added Margins
Q: How have margins between commodity and value-added products changed?
A: Peter Jackson stated that margins have improved across both categories, but value-added products have extended their margin differentiation over commodities, driven by productivity improvements and investments in automation and technology.

R&R Market Outlook
Q: What is your outlook for the R&R market?
A: Peter Jackson explained they expect low single-digit growth in their repair and remodel business, focusing on pro-remodel and specific markets. Their small market share allows them to grow by focusing on this segment despite national forecasts.

Installation Sales Growth
Q: How will installation sales contribute in 2024?
A: Peter Jackson mentioned that installation is a strategic focus, and they plan to grow both organically and through acquisitions. They aim to expand offerings in existing markets and enter new ones, leveraging their scale and best practices to drive growth starting in Q2.

Price Deflation in Products
Q: Are you expecting price deflation in EWP and millwork?
A: Peter Jackson expects prices in categories like engineered wood products (EWP) and millwork to remain stable, having already seen supply chain normalization. He doesn't anticipate significant deflation and notes that inflationary operating costs may even lead to price increases.

Residential Market Turnaround
Q: What evidence shows residential is turning around?
A: Peter Jackson observed high single-digit growth in lumber and low single-digit growth in truss sales in Q4, indicating the beginning of a turnaround. These products are early in the build process and reflect improvements in demand.

Gross Margin Guidance
Q: Can you maintain gross margins above 30% with lower starts?
A: Peter Jackson believes they can hold gross margins in the 30–33% range due to continued growth in value-added products and productivity improvements, despite single-family starts being below long-term targets.

Impact of Competition
Q: Are competitors ramping up capacity in manufactured products?
A: Peter Jackson acknowledged minimal competitive capacity increases but noted their significantly larger scale allows them to manage competition effectively. Their focus on improving throughput in existing plants gives them an advantage.

Digital Tools Cost Impact
Q: What is the cost impact of rolling out digital tools?
A: Peter Jackson stated that the costs associated with digital tools have been spent over the past few years and are included in the numbers. Sales pull-through is expected to be consistent, and any additional support costs are anticipated to be minimal.

First Quarter Expectations
Q: Why is Q1 EBITDA down more than sales?
A: Peter Jackson explained that aside from modest weather impacts, the year-over-year decline is due to normalization of margins as the supply chain and competitive environment return to normal, resulting in EBITDA decreasing more than sales.

Scenario Framework for 2024
Q: Does your prior earnings scenario framework still hold?
A: Peter Jackson confirmed that the prior scenarios are still indicative of their outlook, with no structural changes in variables. They believe the framework remains a fair way to assess the business.