Alright. Please standby. Good day, and welcome to the Builders FirstSource Fourth Quarter 2024 and Full Year Earnings Conference Call. Today's call is scheduled to last about one hour, including remarks by management. I would now like to turn the call over to Heather Kos, Senior Vice President of Investor Relations for Builders FirstSource. Please go ahead.

Good morning, and welcome to our fourth quarter and full year 2024 earnings call. With me on the call are Peter Jackson, our CEO, and Pete Beckmann, our CFO. The earnings press release and presentation are available on our website at investors.cldr.com. We will refer to the presentation during our call. The results discussed today include GAAP and non-GAAP results adjusted for certain items. We provide these non-GAAP results for informational purposes and they should not be considered in isolation from the most directly comparable GAAP measures. You can find the reconciliation of these non-GAAP measures to the corresponding GAAP measures, where applicable, and a discussion of why we believe they can be useful to investors in our earnings press release, SEC filings, and presentation. Our remarks in the press release, presentation, and on this call contain forward-looking and cautionary statements within the meaning of the Private Securities Litigation Reform Act and projections of future results. Please review the forward-looking statements section in today's press release and in our SEC filings for various factors that could cause our actual results to differ from forward-looking statements and projections. With that, I'll turn the call over to Peter.

Thank you, Heather, and good morning, everyone. Before I get into my prepared remarks, on behalf of Builders FirstSource, I want to send our thoughts to all of those who have been impacted by the California wildfires. I'm proud of how we have come together as a company to support disaster relief efforts. We will work together with our partners to help communities rebuild in the years ahead. Our fourth quarter and full year results demonstrate our resilience and ability to drive results in the face of a complex operating environment while maintaining our focus on building the future. This begins with our strategic pillars, as we show on slide three. By continuing to invest in our value-added products and services, along with leveraging cutting-edge technology, we are addressing customer challenges and serving as a supplier of choice. We have a fortress balance sheet and consistently generate strong cash flow over the cycle, enabling us to remain disciplined and opportunistic as it pertains to capital allocation. Our investments today in organic growth opportunities and value-enhancing acquisitions position us to perform well in any environment. Let's turn now to our full year 2024 performance on Slide four. The strength of our differentiated platform and our operational excellence initiatives drove a mid-teens adjusted EBITDA margin and a nearly 33% gross margin in 2024. Results this year are further proof that our success is driven by the dedication of our hardworking team members and the support of our customers. Turning to slide five, I'd like to share more detail on the execution of our strategy. Our strong organic growth engine is fueled by our investments in value-added solutions and digital tools. In 2024, we invested more than $75 million in our value-added facilities to address demand in our growing markets. This included opening…

Thank you, Peter, and good morning, everyone. Our fourth quarter and full year results reflect our ability to execute by leveraging our exceptional operating platform and financial flexibility. Our fortress balance sheet, consistently strong cash flow generation over the cycle, and ability to prudently deploy capital to the highest return opportunities are positioning us for further success. Our scale and investments in innovation enable us to serve as a key partner to homebuilders, and we have a clear line of sight to compound value creation over the long term. We believe we are well positioned for meaningful operating leverage into the recovery. Let's begin by reviewing our fourth quarter performance on Slide nine and ten. Net sales decreased 8% to $3.8 billion driven by lower core organic sales as well as commodity deflation, partially offset by growth from acquisitions and one additional selling day. The core organic sales decrease was driven by a 29% decline in multifamily amid muted activity levels against strong prior year comps. Additionally, single-family declined 7% amid lower value, while repair and remodel was roughly flat versus the prior year. Valuated products represented 50% of our net sales during the fourth quarter and were roughly balanced between manufactured products and window doors in the work. As we have shared on recent calls, there are three main variables reconciling single-family starts to our core organic sales. The first variable is the lag between permits and starts. Like Q3, this was less of a factor, with construction times mostly back to normal for our larger customers. On average, we expect a roughly two-month lag between a single-family start and our first sale. Second, the value of the average home has fallen as size and complexity have decreased. Finally, we saw slight normalization in selling margins of non-commodity products…

Let me close by reiterating that we remain focused on controlling the controllables. Our resilient business model enables us to win in any environment. Given our scale, breadth of product offerings, and investments in technology, I'm confident in the long-term strength of our industry due to significant housing underbuild across our core markets. We are well positioned to capitalize on this, driving growth for years to come as we execute our strategy. We continue to deepen our value proposition as a key partner to our customers by helping them solve problems through our investment in value-added products, digital tools, and install services. Our proven growth playbook, fortress balance sheet, and robust free cash flow generation through the cycle will help us continue to compound long-term shareholder value. We are making strategic investments today to enhance efficiency and drive sustainable growth for the future. Thank you again for joining us today. Operator, let's please open the call now for questions.

Certainly. At this time, if you would like to ask a question, please press star, then the number one on your telephone keypad. We will take our first question from Matthew Bouley with Barclays. Please go ahead.

Morning, everyone. Thank you for taking the questions. A couple of questions on the outlook. So organic revenues, core organic in 2025, I think you're speaking to sort of a very low single-digit decline if I back out the M&A. Correct me if I'm wrong, but I wanted to get a sense for what you're thinking on some of those variables that you mentioned earlier that impacted the business in 2024. You know, the declining home sizes and the value of homes, some of the vendor price reductions, I think you called out. Those seem like a bit of a headwind in Q4. So I wanted to get a sense if you're seeing any signs of stabilization across those variables and how those are contemplated in the guide. Thank you.

Thanks, Matt. Maybe I'll frame it and let Pete fill in any details that I missed. But what I would tell you is that, broadly, the market is pretty stable at a level below where we would like. I think that as you listen to the builders, we're hearing a lot of the same things. Obviously, the challenges that they're seeing in the broader market or in the broader public discussions that they're having. There is a battle that's going on with affordability. We're all engaged in it and trying to make sure that we find ways to deliver homes that people can actually acquire. And it's been a bit of a rocky road. Interest rates haven't helped. Builders have been sort of modulating their build pace in order to maintain inventories at a reasonable level. Seems, by all accounts, they've done a pretty good job of it. But that's put us in this rather stagnant sort of stable but lower than we would like level. I think that continues. Some puts and takes around starts, some puts and takes around completions, but that's been sort of the storyline, and we continue to see that on the single-family side. Multifamily, it's down. I would say it's been leveling out. Stable, kind of like we've talked about. Unfortunately, again, at a fairly low level, haven't quite seen the recovery and the run that I think we're all hoping for. Maybe that's just dependent on rates, as people say. We'll see. Pete, I'm not sure what I missed.

Yeah. So regarding the average home size, we're seeing that start to level out. It's still downward pressure consistent with what the public builders have communicated. They're seeing some, I would say, mixed toward a smaller home, but it's very more modest than it has been over the past year. As Peter mentioned with the multifamily, that's included in our core business. And we indicated last quarter that we were gonna see about $400 million to $500 million headwind in sales really in the first half of this year as we continue to lap the prior year comps. So that's included in the core organic as we look forward through the year.

Okay. Perfect. Thank you for all that detail. Very helpful. And then I guess jumping down to the gross margin, obviously, the fourth quarter came in above the guide and you're calling for that 30% to 32% this year, in a year where starts are still fairly well below that normalized range. So is that, you know, you talked about that kind of mix of higher margin products, maybe it's lower value, but, you know, like EWP, solving challenges for builders. Is that piece primarily what's surprising you to the upside on the gross margin? Or, you know, as we kind of look out to this year, is maintaining that margin really where the priority is, or does it make sense in some cases to be more aggressive with share? Thank you.

That's a great question. It's a fine line and a balancing act that we deal with every day. Our exit velocity, just as a reminder, was around 31.5% even though our Q4 margins were a bit higher. Our exit velocity was still around that 31.5%. We see continued competitive pressures from the single-family side as we continue through 2025. Right now, given our current assumptions, we believe the 30% to 32% range is a reasonable range. Now if something changes from the assumptions, we'll have to evaluate it. But right now, we're seeing the strength in our value-added mix continue to help our margin profile. And as we come out of the seasonal lows of Q4 and Q1, seeing that mix strength from value add continues for our margin profile.

Yeah. We're, I mean, we're seeing the pressure you would expect of an industry below normal in terms of total starts. And I think what we've baked in here is our desire, our intent, and I think our proven ability to protect share and manage margins in a thoughtful way. Gotta stay in the market. But we think what we've laid out is a plan that allows us to do that. Effect our share, to be aggressive, and make sure we're competitive but to still demonstrate, I would say, a very healthy margin profile.

Got it. Well, thank you both, and good luck, guys.

Okay. Thank you.

We'll take our next question from Mike Dahl with RBC Capital Markets.

Hi. Thanks for taking my questions. Just follow-up on the gross margins and, you know, with the exit rate comment on 31.5% from, you know, back of the envelope, it seems like maybe the Q1 guide implies something closer to, yes, 30% to 31.5%, maybe a little bit lower than that exit rate. But can you just talk a little bit more about what's really embedded in Q1 and how you see the progression through the year in gross margins?

So, Mike, what I can tell you is we're seeing that continued normalization from the multifamily as we're exiting the year, and the competitive pressure on the single-family side, especially in the seasonal lows, having further pressure on the margins in Q1, not to a significant degree, but some degree from that exit velocity. We see that really being the entry point to the year and have some of that mix built in from the rest of the year to help keep that margin in the midpoint of what we guided.

I guess the only thing I'd add to that is if you think about it at a higher level, we have been focused on the 2025 bids. Right? So at the beginning of the year, you frequently see a lot of builders coming out saying, okay, here we're gonna set up for the year. Let's put out our big bids. Let's work hard to set things up for the year. We've been engaged very heavily in that, as you might imagine. It's given us a sense of where the year is starting out and trying to give you that with our quote exit velocity. That's our sense of it. So I think it gives us a good flow into the beginning of the year for the core business. Layered on top of that is all of that sort of lapping of the final throws of multifamily in the first half of this year that Pete referred to. So those are kind of the two aspects of what we're looking at as we build out the forecast and give it back.

Okay. That's helpful. And that segues into my other follow-up, which is about the comments on protecting share, competitive dynamics. You know, you've obviously been very selective in terms of the type of business and margin that you pursue over the last couple of years. You know, it sounds like maybe a little bit more focus on share, which maybe means participating in some of the commodity dynamics. So maybe can you just help us understand when you make that comment? Are you looking to hold share kind of in commodities and still grow share in your value add? How would you characterize the goals in terms of share for this year and where you need to be most competitive?

Sure. I guess for context, I do want to describe how I see the trend over the past couple of years. You know, when we came out of the big COVID build push, there were across-the-board elevated margins, elevated volumes, elevated prices. We've been talking about normalization forever, to the point where all of us are a little tired of using the word. Unfortunately, I don't think we're done. I think what we saw were waves of normalization that have flowed through this industry via the individual categories. So right out of the gate, you saw a large amount of normalization in the lumber and lumber sheet goods category. You saw normalization in price. And then you saw a normalization in margins as sort of the competition returned to what we would consider to be normal levels. We talked a little bit about what we saw in that and the share battle and what we were doing. We thought we lost a little. I would tell you right now, I feel pretty good about where we are. I think the team has done a nice job of responding and finding equilibrium and where margins needed to be. We have seen that flow through the other categories. And, you know, we've talked a little bit. Mike, you and I have talked about why has it been so difficult to forecast margins. What I would tell you is because the timing of how those normalizations have occurred has been a bit different than we anticipated. So I think what we're seeing now and have over the last year is the completion of that. Right? The normalization of those individual categories and the price versus share battle that ensues in each one in order to find equilibrium. I think we're closer to the end than the beginning, but that's where we're talking now in the other categories, even more so than I would say lumber and lumber sheet. Finding that balance and protecting that share in a way that we feel like we're able to have good value for our customers but still protect where we are so that as the growth returns, we're able to take advantage of our frankly superior capacity and capabilities to really show outsized returns for investors.

Okay. That's very helpful. Thank you, Peter.

We'll take our next question from John Mulaloe with UBS. Please go ahead.

Hey. Good morning, guys, and thank you for taking my questions as well. Maybe starting off again with the first quarter outlook. I mean, it seems to be a number of, I guess, unusual items. There's the fires, weather, I think there's one less selling day as well. And you framed the quarter-to-date impact, I believe, from weather and the fires, but can you help us think about how you're thinking about that for the full quarter for each of those buckets? And maybe can you help us bridge from that 10.3% implied EBITDA margin in the first quarter to the full year range of, you know, 11.5% to 13%?

Yeah. So the first quarter is definitely feeling the effects of the severe weather. We had a foot of snow down in the Gulfport through Emerald Coast, and it's unusual. We're not used to seeing that. So we lost multiple days of business from that extreme weather in the east and south. We expect that to come back. It's a matter of time as the builders are able to pick up momentum and work through it in the seasonal low. So that $80 million impact that we had outlined in the prepared remarks, it's something that we do expect to get back, but it may take longer than Q1 to get it all back. As far as the California wildfires, it's not a huge immediate impact in Q1, but for the full year, it's gonna have a lingering effect. So it'll be something we continue to monitor as we work through the year. And then the one last selling day, that's just a simple math equation. I think you understand that one. And we are looking through the full year on what we believe the year is gonna deliver as we go through it. And we start to see the churn a bit in Q2 where we start passing those negative comps and seeing continued, I would say, organic growth through the back part of the year in conjunction with the contributions from the acquisitions we've completed. So as we indicated in our press release regarding Alpine, their trailing twelve-month sales is roughly $500 million. But we also have the benefit of the thirteen acquisitions we completed in 2024, where we have stub periods that we haven't lapped yet that are gonna contribute to overall sales growth. As Peter mentioned, we are targeting $200 million of additional incremental sales from our digital platform in 2025. So all those things added up is where we're seeing some of the growth in sales. And I already mentioned the multifamily headwind that we're gonna continue to have to lap and compare to on the comps, as well as some of the margin normalization, which is price. That'll have a different pressure on.

And, John, just to, I know you know, but to reinforce for the others on the call, you know, Q1 is easily by far our weakest quarter from a sales perspective. Distortions related to weather and fires have a sort of an outsized impact on our leverage and on our fall through. So just to keep that in mind as you're doing the analysis.

Okay. I mean, that's helpful. And then just in terms of the expected $500 million working capital swing in 2025, can you just help us think about the high end and the low end of the sales range? I mean, at the low end of the sales range, it seems like sales could actually be pretty flat year over year. I mean, how would you kind of think about that working capital swing as you got the high and low end?

It'll moderate, respectively. Really, the cash flow is a function of how you exit the year. So it'll be more skewed toward the exit rate from a sales velocity at that point compared to the prior year. It's just a point-to-point measurement. And as we mentioned, we were able to outperform our free cash flow guidance in 2024. So we did have a little bit of pull forward into the 2024 results. Roughly, $200 million that was recognized in 2024 that we had originally thought was gonna be in 2025. So some of that's washing between the years. Is the impact of the outsized change year over year.

Understood. Thank you.

Thank you. We'll take our next question from Charles Perron-Piche with Goldman Sachs. Please go ahead.

Thank you. Good morning, everyone. I guess, first, I want to talk about the product mix shift within your multifamily business. As you look for multifamily starts to contract this year, do you see risks of more degradation in your value-added content in there? And how is this factoring into your current guide expectations for your future business?

Yeah. You know, multifamily is a great product category for us. Right? It's a market segment. The majority of it is value add. So when we see declines in sales, it is disproportionately an impact on those value-added product categories, primarily truss and millwork. Those are both integrated into our guides and our forecast for the full year. So we have considered it. Got a fairly high degree of confidence in our forecast just given the amount of forward visibility we have in those categories given the backlog because of the types of projects and how far we can see.

Got it. No. That's good color. And then the new administration has been vocal about their stance on potential tariffs and labor and immigration policy. I guess, against that, how are you positioning the business against potential tariffs across your portfolio? Are you making any changes for inventory management, for example, if we were to get labor pressures in the construction industry, what do you think could be the repercussions for BFS and, you know, builders' willingness to use value-added content and your services?

And the new administration? I hadn't heard now. Just kidding. Just kidding. Yeah. So there's a lot going on. Right? The tariff world, as we described, about 15% of our total sales are exposed to potential tariffs given that it's not US. Of that, you know, in the high singles to 10% range is in that commodity product category. So for us, what we're doing differently, not much. Right? The dynamic around managing the flow of product is something that we are disciplined about, and given our lack of visibility into what the actual outcome is going to be, we've been pretty cautious about taking a position or changing our inventory levels in response. You know, I think that there's some optimism that there will be thoughtfulness around the potential impact on housing, but we'll see. We've always had a tariff regime on that Canadian softwood. That's not new. That was already expected to reset a bit higher this year based on the normal process there. But if there are significantly higher tariffs, if 25% were to be layered on top, that's pretty dramatic. That could be a 65% tariff. While a modest percentage of what we do, we have seen in the past that be a broader impact. Meaning, just because the Canadian wood goes up, the US wood will go up a bit as well. In short, we don't like it. You know? Any barrier or additional problem for housing right now we think is a net negative. It'll certainly be a tailwind to our sales per unit in the commodity space. But we think it will likely win it starts, and that's bad overall. On a net basis. The similar answer around immigration. You know, I think one of the things that Builders FirstSource has done better than anybody else is leaning into this idea of offering value-added products, which is essentially just finding ways to take skilled labor off the job site. We have a great portfolio of products that do that. We think we'll be advantaged if immigration were to tighten an already tight labor market in that skilled area. We think we'll be more advantaged than anyone else. The downside is we still think net net, any severe impact or radical impact on the labor force would be bad for the industry. It's bad for affordability, which is bad for starts, and we don't like it. So, you know, we think the trend is there. We think we're ready. We think we're gonna win. But we sure hope that there's some thoughtfulness around how it's executed in the market, both in tariffs and in immigration.

Got it. Got it. That's helpful color. Thank you.

Thank you. We'll take our next question from Rafe Jadrosich with Bank of America. Please go ahead.

Hi. Good morning. Thanks for taking my questions. Just thinking about some of the assumptions sort of embedded in the 2025 guidance, at the 2023 Investor Day, some of the long-term targets you laid out, you were assuming 4% market outgrowth from share gains. Just how are you thinking about that for 2025?

Well, I would say that the 2026 targets based on what the market has done and the way things have played out, they're not unachievable, but it sure is a long putt from here. You know, I think the dynamics around that, around the share gain that would go along with that, are influenced by that weak market. I think it changes the competitive dynamics. It changes a lot of things. For 2025, our share gain expectations are pretty modest. You know, I think they really center around what we think we can do in the digital space. And I think the rest of what we're trying to accomplish is really defending our share with a manageable margin impact.

And that's really helpful. Then the other question I have is just you mentioned install earlier. Can you just talk about how big that is today as a percentage of either EBITDA or revenue? What is the margin profile of install? And then, like, what are the categories or services where you see the most opportunity? Where is it growing?

So our install is around 16% to 17% of our overall sales as of the end of 2024. It's about $1.7 billion of $2.7 billion of sales. Sorry. The margin profile, it's in line with what we see from the product categories that we're installing. And the opportunities, I think there's a lot there, right, that we can lean into. I mean, currently, it's framing, it's doors, it's windows, it's millwork more broadly. Those are the, I would say, main categories, but what we see are many opportunities to partner with customers depending on the local market need.

Great. Thank you.

Thank you. We'll take our next question from David Manthey with Baird. Please go ahead.

Yes. Thank you. Good morning, guys. When you issued 2024 guidance in February last year, the EBITDA range top to bottom was about a hundred basis points, and today's range is 150 on what appear to be smaller absolute numbers. I hope I'm not slicing this too thin, but maybe if you could just address the risk factors that you see as more volatile in today's environment versus what you might have seen last year.

Yeah. No. That's fair. I would tell you that coming into last year, there was kind of an expectation that the year was building momentum. That we were gonna see rate cuts, that, you know, the tone out of the builders was just very consistently optimistic amongst the larger players. And the smaller players were saying, oh, yeah. We're gonna be right behind them. It's gonna be good. That's not how it played out. That is not the tone this year. That is not the messaging we're hearing. If you're looking at the dynamics of what the core market looks like today, I think we feel okay. You know? It's not fantastic. But we're doing well. I think what is more intimidating and the reason for the wider band around it is what will the unknowns generate in terms of volatility in the competitive environment? Builders are pretty vocal about, hey, we have an affordability problem. We're gonna push everybody down. You know, everybody needs to take a cut, and that's not really new. But if you start to overlay some of these questions about tariffs and, you know, policy changes around immigration, policy changes around housing, I think that's where our hesitancy to keep such a narrow band this year comes from.

That's very clear. Thank you. And second on digital, the uptake has been a little slower than you expected so far. You got $134 million this year. I think you're expecting $200 million, which was, I guess, coincidentally, the fourth quarter exit rate. But if you're looking for $200 million in 2025, that implies that the exit run rate of the fourth quarter doesn't improve at all through 2025. So maybe you could address that. And then I see you still have the $1 billion target, but it doesn't say 2026 here anymore. Should we assume a slower ramp given the more complex environment today?

Yeah. No. Thanks for the question. So digital is a tremendous learning opportunity for us. I remain very confident that the technology and the solution is the right answer. As we go through the learning process, I think what we've identified is that, and you hit the nail on the head, our pace this year isn't quite what we wanted. And we spent a lot of time at the end of the year to reassess why is that. Why is the pace not picking up where we thought it would be? And I think the answer has a lot to do with the way we've approached adoption. We were more generalized than I think we would like to be. I think there's a more specific, more focused way to approach the adoption process. And that's where we're leaning in this year. We've really focused on a reset coming out of December into January with regard to that with new metrics, with the alignment around the teams. It's a little bit of go slow to go fast, which I think is what you're identifying in terms of our pace for 2025 and where we think we can get. I think what we're executing now is gonna ultimately get us to where we wanna be. In terms of the 2026 finish line, it's a great question. I don't think it's out of the question yet. Where I would tell you is we're gonna find out in 2025 whether this reset and new approach to adoption is delivering like we think. And we'll have a much better sense as we get through the end of the year. We've got another investor day coming up, so we'll be able to give you a much clearer sense of where we're gonna be when. I am still 100% confident in the billion. I think it's only a question of when.

Alright. Thanks, Peter. Good luck.

Thank you. We'll take our next question from Keith Hughes with Truist. Please go ahead.

Thank you. My question is on multifamily. You've given us our view for the year, that mid-teens decline. Do you expect that to hit ratably during the year, or is there a chance this business could bottom out sometime in, you know, mid-second half 2025?

Yeah. What we're seeing right now is the lapping effect of the $400 million to $500 million headwind year over year is really gonna be in the first half of this year. We're seeing our current volume levels right now are pretty consistent month over month sequentially. But we're lapping tough comps from the prior year. So it's certainly front half weighted on that headwind.

Okay. Would that change? Would that within the it's in the midpoint of the guidance range? Does that allow EBITDA to show some level of growth in the second half of 2025?

When you say growth, is it growth sequentially or on a year-over-year basis?

Year over year.

Yeah. I would say overall, it's not enough.

Alright. Thank you.

Thank you. We'll take our next question from Philip Ng with Jefferies. Please go ahead.

Hey, guys. Appreciate all the great color. Peter, you gave some color on how perhaps your customers are progressing. But any early read on spring selling season? And you did mention in your prepared remarks, maybe some of the builders are testing out how they want to modulate build pace. My question is, have you seen them kind of really ratchet back spec homes? Are they working down inventory? Are you seeing any noticeable change in behavior in terms of buying out mortgages and stuff of that nature?

Yeah. No. Thanks for the question. So in general, I would say builders are behaving consistently. Continue to buy down pretty aggressively as their key lever for keeping the production moving. The larger production builders have really moved to sort of this land-light on one side, on the other side, very stable production mentality around how they want to put homes out. And what we've seen is modulation by market. So they're not doing it nationally. That's not how we see them thinking. It's very dependent on, you know, if you're in Florida or Denver or, you know, these individual markets. They'll behave in a way that, well, you'd expect them to behave. Right? So we have a little more inventory than we'd like. We're gonna goose up the buyback a little. We're gonna pull back on the new starts pace a little bit to ensure that we have this in a range that we like, but we're gonna move these houses. So I think consistent, but the pullback on starts is something that is probably the last maybe four to six months, certainly a much bigger part of the conversation than it had been in the prior period.

Okay. That's helpful. And then from an M&A standpoint, certainly, 2024 was an active year, and you guys have kicked off the year pretty busy. How is the pipeline looking in terms of seller expectations, evaluation you're seeing out there? Where are some of the big opportunities? How do you kind of balance that and buyback? You still have a lot of availability here.

Yeah. You know, we've consistently talked about M&A as being a priority for us. To the extent that we can effectively execute acquisitions, it has been a tremendous creator of shareholder value. We think it's good for the overall business in terms of our competitive space, our footprint, our efficiency. You know, our ability to serve customers in an effective way is advantaged by these new teams that we brought on into the BFS family. There are a lot of assets out there. You know, as you saw with 2024 and coming into 2025, you sort of have a large population, a large potential target list within the smaller world, with a much fewer more opportunistic materialization of a larger target. So I'd say that's kind of consistent. We continue to see a number of smaller opportunities, you know, some a little bit bigger, and then every once in a while, a big one will pop, and we'll have an opportunity to do something more meaningful. But regardless of sort of the periodic nature of all that, we believe in M&A. We're good at it. We will continue to capture value through it. We'll continue to deploy cash that way. And, certainly, we have had, I think, a lot of success with share buybacks. But it continues to be the, you know, number five on our list of capital allocation priorities.

Okay. Super appreciate the color. Thank you, guys.

Thank you. We'll take our next question from Trey Grooms with Stephens. Please go ahead.

Yeah. Thanks for taking the question. Just circling back on the market share just real quick, and I don't want to beat a dead horse because I know we have spent some time on it. But I was just asking if this was, you know, you mentioned that you lost a little bit. Was this specific to any, you know, geographic market or maybe specific to production builders, or was it more widespread? Then, Peter, you know, you said you were thinking kind of, excuse me, modest share gains this year I think is what's kind of embedded. I guess, what's kind of changed there in the market where, you know, working multifamily is gonna be down a little bit and single-family is expected to be kind of flat. Is it just more discipline in the market kind of coming back, or what's going on?

Well, going back to the initial conversation or the initial statement around having lost some share in the past, I think we were pretty open and transparent that as we look at the analysis, it's not, you know, decimal level precision. But based on what we can tell, there were certain builders, and I think production is fair. Some of the folks that had a sharp pencil with regard to how they were doing their bids and attacking their cost position were trying to find ways to drive down cost, and commodities is one of those areas where there are times when certain players will get progressive. They just will. They want to buy share. They think that that's a strategy for them. So they'll lean in and do something we would consider irresponsible. And sometimes we'll walk away, and we walked away a fair amount. And I think at some point said, okay. That's enough. We're gonna take the business that belongs to us, and we're gonna stay competitive to do it. So again, that goes back to the normalization thing and what we saw on that balance between share and margins. But I think that's largely the review here. I haven't seen anything lately in the past quarter or two that would indicate that's still in play. But it's a dynamic market. Right? In terms of what's going on this year and our ability to gain share, I think what you will see are ebbs and flows. There'll be aspects of it that we're gonna win at. I think we will continue to win in install. I think we're gonna continue to be the preferred supplier for trusses and for pre-owned doors. I think those are areas where we have a demonstrated advantage. We have a cost advantage. It's merely a matter of deciding how much are we willing to lean in in those categories? How much do we have to lean in in those categories to protect our share position? And then as we think about the last sort of leg of the stool, the digital is an area where we continue to capture new customers, where we get a stickier and deeper relationship with customers because of the solution set that that digital tool set provides.

Got it. That makes sense, and good to hear. So one follow-up for me, and, you know, you touched on tariffs and things like that. But we got a lot of questions around this, you know, earlier in the year, maybe a few weeks ago. And questions around more how, you know, if we were to see these additional tariffs come through and it meant, you know, $600 lumber as opposed to $400 lumber, whatever, pick the number. Can you remind us how, you know, this would flow through on the manufactured side, the prefab side, how margins would behave there in this kind of environment if we were to see this higher lumber? I know the old algorithm of years past seems to, I don't know if that's still kind of the best way to think about it. Seems like margins had been stickier both with lumber going up and down for you guys. So any help with that just so we can kind of put this into our scenario analysis as we think about tariffs, lumber, etcetera.

Well, I mean, I'm happy to repeat a little bit about the rules of thumb that we've kind of given in the past, but I think it's important to give you a lot of caution and caveat around that. I'll let you know what's gonna happen. I mean, the dynamics here are a little bit different in terms of how aggressive these changes are being proposed. How aggressive the changes being proposed are and whether or not there's a time that is manageable or not. You know, we've talked in the past about commodities. You know, plus or minus 5% on the commodities. Be worth around $300 million in sales over the course of a year. At the fall through, you know, relatively normal fall through in that sort of $60 to $70 million range. So it's not an exact science. These are all kind of high-level numbers, but I would say the most important thing is the velocity of the change and how the market responds.

Yep. Lot of still a lot of unknowns out there for sure, but that's still helpful. Peter, thank you so much, and best of luck.

Thanks, sir.

Okay. We'll take our next question from Adam Baumgarten with Stellman Associates. Please go ahead.

Hey, guys. Good morning. Could you give us some color on what you're seeing from a pricing perspective in the value-added products arena?

Yeah. We're still seeing, and we've provided in the past with respect to value-added products relative to the lumber commodity margins. It still goes at a premium of about a thousand to twelve hundred basis points higher because of what we're able to provide with improved cycle times or lead times for getting the product to the job site, the reduced waste, and the requirement on skilled labor being reduced by having that completed in a dedicated manufacturing facility. We're still seeing that premium or benefit from the value add in our results.

Okay. Got it. Thanks. And then just, you know, in a scenario maybe where we start to see more pronounced labor constraints across the single-family construction space due to the Adam, you still there? We lost you.

Yeah. Can you hear me?

Yep. Oh, you're back now.

Okay. Sorry about that. So just in a scenario where, you know, we start to see more labor constraints in construction due to some of the immigration policies, you know, you have an install business. Do you see that as a risk to your business or actually maybe an opportunity as maybe some of your customers are looking for incremental labor?

Well, I mean, it's both. Right? It's certainly an opportunity for us in order to be able to win in the marketplace. We've got the build capacity. We've got the best skill set. We've got the most locations. We are ready to go with this. The problem with it in my mind is it's disruptive. And more broadly speaking, if it was just us being impacted, I'd say win-win. We got this. But you're not just gonna get rid of framers, you're gonna get rid of gypsum wall, you know, wallboard hangers. You're gonna get rid of roofers. You're gonna get rid of siding folks. And there are parts of this industry that are gonna be impacted that don't have the same outlet that we offer. Right? You need the people. And if you don't have the people, it's gonna cause inflation. Inflation is bad for affordability, and affordability is bad for starts.

Got it. Thanks, guys. Best of luck.

Thanks.

Thank you. We'll take our next question from Brian Deerez with Thompson Research Group. Please go ahead.

Hey. Good morning. Thanks for taking my questions today. Just a little bit more on the install base, you know, impressive, I think, growth this year in a down market. Any expectations for install for 2025 or how that kind of factors into the guide?

So we haven't laid a guide specifically around that category, but we're believers in it. We certainly talk a lot about it. So, hopefully, that's an indication of which way we think it'll go.

Makes sense. And then for single-family start guidance for the year, is there any way to think about variance by region in that guide for you guys? Or kind of where you're better or worse positioned across your footprint? Thank you.

Yeah. I'd love to be able to provide a deeper guide on that, but I don't think it's in any of our best interest at this point. Forecasting is difficult, especially about the future. He loves a good yogi, isn't it? Come on.

Thank you. We'll take our next question from Jay McCanless with Wedbush. Please go ahead.

Guys. Thanks for taking my question. So the first one, just to clarify, Peter. Are you guys having to lean in on price now on value-add sales, or are you just saying if you need to to protect share, you will lean on price? Just kind of clarify where things are right now.

Oh, yeah. No. That's already been going on. We've been managing through that for the last year. Eight months, I'd say more intently. It's implied. No question.

Okay. And then the second question, and not to read too much into it, but I think your tone around multifamily last quarter may have been a little more positive than what you talked about this quarter. But it is nice to hear that we're finally lapping that. I guess any material change in bid processes or bid volumes on the multifamily side to maybe change your tone around that.

Yeah. I would say any change in tone is unintentional. You know, I'd come back from a conference last quarter where there were some folks talking about some green shoots. I would say things have been pretty stable. Just sort of clicking along.

Okay. Alright. Sounds great. Thank you.

Thank you. We'll take our final question from Jeffrey Stevenson with Loop Capital. Please go ahead.

Yeah. Thanks for taking my questions today. I wanted to go back to single-family mix headwinds this year from a decrease in value size and complexity of an average single-family start. So on a year-over-year basis, are you expecting single-family mix headwinds to moderate as we move through fiscal '25? Or does your guidance imply relatively stable single-family mix throughout the year?

I would say our guidance reflects a pretty stable single-family mix from where we ended Q4 as we move through the year. The headwinds that we outlined throughout 2024, some of them are still there, and we'll have to lap that in the first half of this year. Some of that's related to the size of home and some of the complexity as well as some of that margin normalization on the single-family side with non-commodity products. So there's a little bit there, but we don't expect from a mix standpoint that it's gonna have a greater impact than kind of where we are exiting Q4.

No. That makes sense, Pete. Thanks for that. And then appreciate the first quarter guidance and update on the first weather to start out the year. But historically, what percentage of first-quarter sales are from March? And could you experience some pent-up demand if weather cooperates as we move through the largest month of the quarter?

You're right. March is important. From your lips to God's ears, let's have a hell of a March, I guess, is where I'm headed. We'll see.

Got it. Thank you.

Alright. Thank you.

There are no further questions at this time. With that, this will conclude today's program. Thank you for your participation. You may disconnect at any time.