Good morning. And welcome to our third quarter earnings call.

With me on the call are Dave Rush, our CEO; and Peter Jackson, our CFO. The earnings press release and investor presentation are available on our website at investors.bldr.com.

We will refer to the investor 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 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 Dave.

Thank you, Heather. Good morning, everyone, and thanks for joining our call.

I'm proud of our full-year results. I'm proud of our full-year results, which demonstrate the strength of our broad product portfolio and continued execution by our team members.

Despite a challenging operating environment in 2023, which saw significant reduction in single-family starts, we delivered resilient results. As promised, we delivered a double-digit EBITDA margin in the high teens along with robust free cash flow.

We accomplished this through operational rigor and by closely partnering with our customers to help address their pain points through the use of our value-added solutions. Our results in 2023 further validate our strategy to be the easiest to do business with across the industry.

I also want to thank everyone who participated both in person and virtually at our Investor Day in December, where we laid out the next leg of our growth journey. We're grateful for your ongoing support.

As we begin 2024, we are excited about the opportunities in front of us. We remain focused on profitable growth by leading with our value-added solutions, deploying our digital platform, and expanding in desirable markets through our proven M&A strategy.

These initiatives, along with our commitment to efficient operations and disciplined capital deployment, will continue to compound long-term shareholder value. Our investments in value-added and digital solutions are driving clear market differentiation, delivering greater efficiency, and empowering the next generation of home building.

By leveraging our scale in value-added products, we are able to help meet our customers' needs, such as reducing cycle times, addressing labor constraints, and improving home construction quality. As a proof point of our execution, I'm pleased that our service levels for on-time and in-full have continued to improve year-over-year.

Our on-time delivery was 90% in 2023, while our in-full performance was 96%. With our investments in technology and automation, we'll keep working to drive these metrics higher.

We remain committed to operational excellence and innovation to increase efficiency and create value. We have a robust set of operational and productivity initiatives and are focused on leveraging our scale and fixed costs while delivering the highest quality products to our customers.

Our continuous improvement mindset employs technology, including our digital solutions and automation, to improve the construction process and drive greater discipline in our operations. As an important pillar of our strategy, we are focused on maintaining a fortress balance sheet.

Our strong free cash flow provides financial flexibility and multiple high returning paths for capital deployment, enabling our clear set of priorities. We continued our robust buyback program in 2023, repurchasing nearly $1.8 billion of shares.

I'm happy to announce that yesterday our board increased our share repurchase authorization to a total of $1 billion. We remain disciplined in our approach to tuck-in acquisitions and still have a long runway of targets in a fragmented market.

Our focus areas for M&A include increasing our market position in desirable geographies, extending our lead in value-added and specialty solutions, and enhancing customer stickiness. Let's turn to our full year highlights on slide 4.

We delivered strong margins in 2023, including a robust 17% adjusted EBITDA margin that underscores our differentiated product portfolio and scale. Our resilient gross margin of more than 35% reflects stronger mix in value-added products, notably in our multifamily business, and improved manufacturing efficiencies.

As we have communicated, we continue to see some normalization in core margins. We are also seeing multifamily normalized and expected to continue over the course of this year.

Looking at slide 5, I want to highlight the over 30% improvement in our recordable incident rate in 2023, which is a remarkable achievement. At BFS, the safety of our team members is always our highest priority, and I am proud of the culture we have created to be a safer company every day.

I am also excited to see the structural improvements we are making to remove excess costs and operate more efficiently. Our strong productivity savings of $175 million for 2023 reflect the hard work we are doing on targeted initiatives, and we expect another $100 million of productivity savings in 2024.

Prudent SG&A expense management also remains a key focus area. This includes the ongoing optimization of our footprint and balancing the need for cost reductions against future capacity demands.

We remain disciplined stewards of discretionary spending, and our team has responsibly managed cost in the short term while executing our strategy for the long term. As expected, we had a strong year in multifamily as prior year acquisitions were supercharged by a strong market.

Multifamily remained a tailwind in Q4 as we worked through record backlogs. For single family, lower mortgage rates and low existing home inventories have helped us steady activity levels.

National builder customers have done a good job of utilizing specs in conjunction with interest rate buy-downs to provide homebuyers with affordable options to purchase new homes. Our focus this year is on being the best partner to our customers by providing the highest quality customer service, driving our robust value-added solutions, and launching our BFS digital tools to make the building process faster, more efficient, and more affordable.

Turning to M&A on slide 6, we continue to target attractive opportunities while remaining financially disciplined. In 2023, we completed seven deals with aggregate 2022 sales of roughly $540 million.

Early in the fourth quarter, we acquired Standale Lumber, which gives us a strong presence in the growing Grand Rapids, Michigan market. Then in December, we acquired Encore Building Products, a leading building materials distributor that represents our entry into the Arkansas market and will serve as our platform for future growth in the state.

And in early February, we acquired Quality Door and Millwork, a leading distributor of millwork doors and windows in Southern Idaho. We're excited to welcome these talented new team members to the BFS family.

We also show how our M&A and organic investments increased value-added products as a percent of overall mix by 700 basis points over the past two years. Our success with this strategy has been a core component of our improved margin profile through the cycle.

On slide 7, we provide an update on capital allocation. During the fourth quarter, we made two tuck-in acquisitions and repurchased over $200 million of shares while maintaining a strong balance sheet.

And for all 2023, we prudently deployed approximately $2.5 billion in-line with our stated priorities. We have cumulatively deployed approximately $6.1 billion from 2022 through 2023, and we communicated a new goal at our investor day this past December to deploy $5.5 billion to $8.5 billion of capital from 2024 to 2026.

Now let's turn to slides eight and nine for an update on our digital strategy. We are establishing a differentiated position as the only provider of an end-to-end digital platform in our space.

Combined with our leading operating model and strong relationships, we believe BFS Digital Tools will be a substantial driver of growth for us and transformative for the industry. Our easy-to-use mybldr.com portal will seamlessly deliver our full digital capabilities to our customers.

It is designed to create efficiencies for our team members and improve service for our customers by offering increased transparency and engagement in the home building process. Combined with our proprietary estimating and configuration tools, our customers will have more control over the entire building process.

This will save both time and money for both our customers and their clients while making the home building process more personalized. We are excited to showcase the full digital product capabilities at the International Builders Show next week.

To drive the adoption of these innovative solutions, we have focused on training our sales and operations teams to help our customers leverage these powerful new tools. We are confident in our ability to deliver value from our digital solutions and meet our target of $200 million of incremental digital revenue by the end of this year and $1 billion by 2026 as we grow wallet share and new customers.

Throughout the year, we acknowledge team members that go above and beyond. Rich Rapuzi, market manager in our Alaska market embodies these values like no other.

I had the pleasure of spending time with Rich recently and witnessed the positive impact he has made on his team during his remarkable 50-year career at BFS and Legacy companies. Rich's journey started as a customer service rep in 1974 and is rooted in hands-on experience and continuous learning.

Through his career, Rich established vital departments and assumed multiple leadership roles. What truly sets Rich apart is his passion for his community and mentoring others.

His colleagues will tell you that he deeply cares about helping people reach their potential. As Rich prepares for retirement later this year, his impact will endure through the lives he has touched.

While he'll be greatly missed, his legacy will resonate within our organization for years to come. I'll now turn the call over to Peter to discuss our financial results in greater detail.

Thank you, Dave, and good morning, everyone. Our results throughout the year demonstrate the effectiveness of our operating model regardless of the macro environment.

Our fortress balance sheet, strong cash flow generation and ability to prudently deploy capital to the highest return opportunities, including acquisitions and share repurchases, continues to deliver value and positions us for long-term success. We are leveraging our sustainable competitive advantages and strong financial position to drive future growth and create value for our shareholders.

I will cover three topics with you this morning. First, I'll recap our fourth quarter and full year results.

Second, I'll provide an update on capital deployment. And finally, I'll discuss our full year 2024 guidance and related assumptions.

Let's begin by reviewing our fourth quarter performance on Slides 10 and 11. We delivered $4.2 billion in net sales, driven by a 1% decline in core organic sales and commodity deflation of 5%, partially offset by growth from acquisitions of roughly 2%.

The core organic sales were driven by a single-family decline of 4% amid a weak housing market and share in supply chain normalization. That said, there are signs that the single-family market is starting to pick up.

Our early cycle products are beginning to show growth, including high single digits growth in lumber and mid-single digits growth in truss. Multifamily grew by more than 4% driven by our prior year acquisitions as well as favorable margins.

R&R and other also grew by over 4% due to increased sales focus and capacity versus 2022. Importantly, value-added products represented 52% of our net sales during the fourth quarter, reflecting our position as the supplier of choice for these higher-margin products.

During the fourth quarter, gross profit was $1.5 billion, a decrease of approximately 1% compared to the prior year period. Gross margins were 35.3%, increasing 120 basis points mainly due to productivity and a tailwind from multifamily, partially offset by core organic margin normalization.

SG&A increased by $60 million to $974 million, mainly due to higher variable compensation, acquired operations and inflation, partially offset by lower customer reserve expenses. As a percentage of net sales, total SG&A increased 150 basis points to 23.5%, primarily attributable to decreased fixed cost leverage from lower sales.

Adjusted EBITDA was $686 million, down approximately 2%, primarily driven by lower net sales due to a weak housing market and commodity deflation. Adjusted EBITDA margin was 16.5%, up 50 basis points from the prior year as we continue to execute and drive improved productivity across the business.

Adjusted net income of $439 million was down $32 million from the prior year due to lower net sales. Adjusted earnings per diluted share was $3.55, an increase of 11% compared to the prior year.

On a year-over-year basis, share repurchases added roughly $0.55 per share for the fourth quarter. Now let's turn to our cash flow, balance sheet and liquidity on Slide 12.

Our 2023 operating cash flow was approximately $2.3 billion, down $1.3 billion compared to the prior year period, mainly attributable to commodity deflation and a shrinking housing market. Capital expenditures for the year were $430 million, all in, we delivered healthy free cash flow of approximately $1.9 billion.

For the year, our free cash flow yield was approximately 13% while operating cash flow return on invested capital was 28%. Our net debt to adjusted EBITDA ratio was approximately 1.1x, while base business leverage was 1.4x.

Excluding our ABL, we have no long-term debt maturities until 2030. At quarter end, our total liquidity was approximately $1.3 billion consisting of $1.27 billion and net borrowing availability under the revolving credit facility and $70 million of cash on hand.

Moving to capital deployment, during the fourth quarter, we repurchased approximately 1.6 million shares for $209 million at an average stock price of $131.74 per share. For the full year of 2023, we repurchased nearly $1.8 billion of shares at an average price of $100.49 per share.

As Dave mentioned, the Board approved the repurchase of up to $1 billion of common stock, inclusive of the approximately $200 million remaining on the prior share repurchase plan authorized in April of 2023. We remain disciplined stewards of capital and have multiple paths for value creation to approve an ability to deploy capital and deliver high returns.

Now let's turn to our outlook on Slide 13. For full year 2024, we expect total company net sales to be $17.5 million to $18.5 billion.

We expect adjusted EBITDA to be $2.4 billion to $2.8 billion. Adjusted EBITDA margin is forecasted to be 14% to 15%, and we are guiding gross margins to a range of 30% to 33%.

Our recent above normal margins reflect a greater mix of value-added products, along with the disciplined pricing required to offset increased operating costs. As we move through the year, we expect both our gross margins and the multifamily business to continue to normalize.

We expect full year 2024 free cash flow of $1 billion to $1.2 billion. The change from 2023 is primarily due to an expected $500 million year-over-year decrease due to working capital as we move from shrinking to growing sales.

The free cash flow forecast assumes average commodity prices in the range of $400 to $440 per 1,000 [indiscernible] our 2024 outlook is based on several assumptions. Please refer to our earnings release and Slide 14 of the investor presentation for a list of these key assumptions.

As you all know, we do not typically give quarterly guidance, but we wanted to provide directional color for Q1. On a year-over-year basis, we expect Q1 net sales to be flat to down low single digits as we have lost roughly two days of sales due to inclement weather conditions at the start of the year.

Year-over-year adjusted EBITDA is expected to be down high teens to low 20s in Q1 given the impact of extreme weather and continued margin and share normalization. We expect our sales to rebound as the severe weather conditions subside.

Regardless, we remain optimistic for a healthy housing market in 2024. Turning to Slides 15 and 16.

As a reminder, our base business approach showcases the underlying strength and profitability of our company by normalizing sales and margins for commodity volatility. This helps to clearly assess the core aspects of the business where we have focused our attention to drive sustainable outperformance.

Our base business guide on net sales for 2024 is approximately $17.6 billion. Our base business adjusted EBITDA guide is approximately $2.4 billion at a margin of 13.5%.

As I wrap up, I want to reiterate that we are confident in the near-term outlook, our exceptional positioning to execute our strategic goals and our ability to create shareholder value in any environment to support profitable growth. With that, let me turn the call back over to Dave for some final thoughts.

Thanks, Peter. Let me close by saying that we are focused on executing our strategic pillars.

This focus, along with our close partnership with our customers to address their pain points is a competitive differentiator in our industry. We are the unquestioned leader in value-added solutions, which we believe are the most effective way to address labor and cycle time challenges.

Our industry-leading digital innovations are bringing greater efficiency to homebuilding and will win us new customers and grow wallet share along the way. Our robust free cash flow generation is funding a disciplined capital deployment strategy that will compound long-term shareholder value.

While 2023 was an exciting year, we are just getting started. Thank you again for joining us today.

Operator, let's please open the call now for questions.

Morning Dave Peter thanks for taking the questions. So to start off with on the gross margin, of course, exiting '23 over 35%.

I hear you. There is still some multifamily normalizing to come.

But it looks like you're guiding to volume growth, of course, in your single-family business this year, and I assume there's some operating leverage there in your manufacturing. I think I heard Dave say that there's another $100 million in productivity this year.

And I don't know if you're assuming value-add mix would continue to rise, and that's on top of everything you've done around automation and consolidating the industry and so forth in recent years. So my point is it seems like you've got a lot of tailwinds this year.

I guess, where am I being too optimistic? And what's kind of the cadence, timing of gross margins normalizing back to below 33%?

Thank you.

Thanks, Matt. Your points are all accurate.

I think that we've done a really nice job in the value-add sector. I think we've managed pricing in a disciplined way.

We certainly have done a good job on productivity and continuing to execute in that category. And certainly, a portion of that hits gross margins, not all of it.

What I think is continuing to happen, and I know this is a consistent theme from us, but we want to continue to be candid with investors. There is a normalization that we're seeing in the core and there's a normalization or maybe a recognition of a cycle in multifamily.

Those are the two really big components driving the ongoing normalization that we expect in 2024. So multifamily, as we look at it, certainly a dynamic market, but there's been a pullback, right?

A lot of multifamily units were put in the ground. Over the last few years, the backlog has been very full, very healthy, and we've done very, very well.

There are clear signals both in the broader market and in our numbers that multifamily is normalizing. It's pulling back, and it's going to pull back pretty aggressively.

We expect we'll start seeing that in sort of Q1 based on the latest information, and it will hit us all year. So certainly, multifamily is a good business, but there's a headwind there associated with that business shrinking.

And we continue to see in pockets around the country, the normalization of margins in a competitive environment, right? We're well below what we would consider to be normal starts, normal single-family starts in this industry.

So it's competitive out there. And there are certain markets where we've had to get aggressive, and we'll continue to do that to protect our position and to win in the market and to be the customer of choice.

We don't think it's putting us outside of that communicated range for gross margin, but certainly expect that to continue to erode as the year progresses.

Second one, I guess, sticking with the guidance, I think your end market growth kind of blends to maybe very low single digits and you're speaking to base business growth of, I think, 7% this year, and I know there's a couple of extra selling days in the second half. But my question is on your growth compared to the market.

Sounds like you should start to get some of the digital sales to kick in later this year. But just could you kind of bridge us from where the market is expected this year to your sort of several hundred basis points of market outgrowth?

And obviously, of course, how does the value-add growth kind of play into that? Thank you.

Thanks, Matt. You're right.

We are anticipating a fairly modest market tailwind this year, which obviously is appreciated, and we'll put to good use. But we are challenging ourselves as an organization in a couple of key areas.

A big one that we talked a lot about is digital. We're really excited about what this product is going to do for us in terms of attracting and enhancing our relationships with customers, we think there's real value there.

So we're putting that in our number. We also are continuing to invest as you see in value add.

So we've got new capacity in the ground. We've got new equipment.

We've got a new ability this year that we didn't have last year to provide those types of high-value impactful products to our customers. So we expect growth from that.

And we're certainly confident in our team. We've got -- we need to be the best team in the industry, and we think we can win in the market.

So those three things really kind of combined to give us the confidence to put out a number there that really represents share growth ultimately.

I would just add, Matt, that conversations with customers are almost uniformly optimistic for the year. There are differences in when they believe that timing of that rebound will start, and that's all obviously driven by the macro environment to a degree.

And the digital ad that we'll experience during the year will be more like a hockey stick. It will be weighted to the back half of the year as we continue to drive adoption and training throughout the organization and with our customers.

But we're excited about the year as a whole. It's a little more difficult to pinpoint the exact point in time when we start seeing it in real time.

But the long-term demand still is very, very encouraging.

Morning. Thanks for taking my question.

Just a question on free cash flow. I appreciate your articulation of kind of some of those timing differences and the swings in working cap.

And so I think as we move beyond 2024 because this represents kind of a lower-than-normal conversion for you. So can you just talk to -- is it kind of timing through the year that -- of how working cap has the ramp -- has growth ramps?

And then once we get to '25, you still expect to get back to a higher, more normal conversion rate or any other moving pieces there? I think, would be helpful.

Absolutely. So you're right, Mike.

This is a light year for us. The way that the numbers show, the comp looked obviously pretty dramatic on a year-over-year basis.

We're down a little bit on the EBITDA number due to that multifamily step down. But the change going from a business that's shrinking.

And as you know, we spent off a tremendous amount of cash as the business shrinks to turn to an increasing sales environment. And we use working capital when we grow.

That sort of turn for us showed large in the numbers. But that headwind that we would expect to see related to growth is generally going to be a little bit smaller in a normal growth year than in a turn year.

The turn year is always a big number when it goes from one to the other. So we do anticipate it to be a little bit higher in a normal year.

And as we laid out in our Investor Day, there's a cumulative benefit that we expect to deliver on, and that commitment hasn't changed.

Hey, good morning guys. Congrats on the results.

So is it right to think that if we've got the headwind from weather in 1Q, we're going to be probably pushing those sales more into 2Q. I'm just trying to think about the phasing of sales for the remainder of the year.

I think that's a fair assessment, Joe. Typically, what we see is it's not an immediate snapback but a gradual snapback in the future quarters as they catch up.

They don't catch up all at once. But at the end of the day, we actually do feel like what we lost in the first quarter due to weather will ultimately pick up in the back three quarters of the year.

And then looking at your guidance for the all-in business and the base business, is it right to think about the commodity element of this as a full normalization of the multifamily? Are we getting sort of all of both the commodity normalization and market normalization in these '24 numbers?

And then maybe if you could just talk about going forward, the opportunity within multifamily kind of between the five and below units versus the much larger projects?

That's right, Joe. These business reconciliation of those two components you mentioned is the last of the multifamily and the last of a little bit of the core not much left, which is nice, but that's certainly a piece of it.

And I would tell you, you're exactly right; our sales teams that have focused on the larger projects partly because their customers are also looking for opportunities in the smaller projects that still qualified technically as multifamily or light commercial. We're all focused on those opportunities and those will help us bridge that headwind a little easier for the rest of the year.

But it still takes a little bit of time for those projects to get out of the ground. And the timing of that makes it a little difficult, but only focused on that opportunity.

Hey, good morning, Dave and Peter. Peter, you mentioned that there's -- you're seeing some evidence of residential starting to turn around.

And I think you noted seeing high single-digit growth in lumber and low single-digit growth in truss. I guess what's the timing you're referring to there?

Is that since January? Just some color on the time frame there?

And then secondly, is there any reason why truss would be trending slower than lumber? I mean I didn't know if there would be anything going there from a mix standpoint or something?

I would just assume value add would at least stay in pace with lumber or maybe outpace, just any color there?

Thanks for the question, Trey. So the time frame we're talking about was 4Q.

So it was a fourth quarter dynamic. I think the storyline here, and we talked about it a bit in the past, but for those maybe who haven't heard it, what we sell goes into a start at a wide range of time lines, right?

So lumber is generally very, very early. It's not unusual to frame the first floor and then have maybe the trusses delivered.

There is a very close correlation between framing and trust. No argument there.

I think that in general, it's indicative of the beginning of the turn. What's also true is some of the later products, you go through windows and you got out to doors and trim, that's later in the build process.

And those are the products that you notice we didn't talk about as being turned and in good position. It's very reflective of last year.

At the end of '22, you saw lumber and truss go down really hard. Lumber down a lot more than truss.

So on a comparison basis, that's part of the answer as well that lumber was down aggressively if you go back to the numbers for the fourth quarter of last year. So on a comp basis, it's up a little bit more, but really because it was down a little bit.

I mean, lumber and truss go hand-in-hand together, but value-added is more than truss. I think that's the thing you get from the mind.

So value added is later in the process.

Hey, good morning, very thanks for taking my question. The last quarter, you provided a scenario framework for 2024 on different macro assumptions and then what that would mean for your earnings?

Are you -- should we still sort of be comfortable with that. So it starts tracking that 8% to 14% range on the single-family side and lumber is at $4.25 to $4.75.

Would you still be looking for $2.7 million to $3.1 in EBITDA? Or has something else changed in the market where we should be thinking about upside or downside to those scenarios?

I think it's fair to say that directionally, those scenarios are still indicative of how we think of the business. There haven't been any real structural changes in any of the variables.

It's always subjective to a degree because the ending point for 2023 was a bit different. But generally, yes.

No, I think that's a fair way to look at it.

That's really helpful. And then just as you look at the gross margin guidance for this year, is it 30% to 33%.

And it's really in line with your long-term target despite single-family starts that are tracking below. I think the long-term assumption is $1.1 million.

As we look forward here, if you have years where the starts are below that target, do you think you'll be able to do gross margin kind of above 30%? Or is there something unique to '24 that's keeping it higher?

Is that just because you still have some multifamily that's flowing through?

It's a really good question. I think confidence, our confidence this year comes from that normalization component.

We still have some above what we consider to be normal margins in multifamily and in a couple of product categories in a few pockets around the country. We're continuing to see that normalization.

We're continuing to see some of that compete back to what we consider to be a likely normal. That said, we're obviously very good.

It's very strong, and we're feeling very confident about our ability to manage it in the long term. At this stage, I think it's hard to say that it's an exact point of starts that correlates to an exact point in gross margins.

I think we're most comfortable talking about it in sort of ranges around normal. It feels like a range around margins.

But right now, a lot of confidence that we can hold in that normal range based on everything we're seeing.

And what I would add is our belief in the resilience of that range and the fact that we can hold within that range is our belief in our value-added product portfolio and solutions. Those are the products that are more valuable to our customers and as a result, more have a better margin opportunity for us.

And as we continue to grow that as a percentage of our overall sales is always going to help that gross margin number be more resilient.

I don't think your projection here is aligned with what's thought in the market, just specific to Builders First Source. When do you think this is going to really start impacting your business?

And if you talk about the unit loss versus margin loss that's been such a positive for '23, that would be helpful.

I mean, timing is a tough thing to predict, as you know, Keith. I think based on what we're seeing in and hearing, in the market is healthy.

We've certainly seen some positive signs early in the year. It would be nice if the Fed helped, can't lie based on everything that's kind of out there in the public markets, it feels like a second half dynamic.

When we call out the numbers around core organic, there's certainly a big component of it. It's primarily price volume mix driven, like we give you the days, we give you the commodities in the price/volume mix space that normalization talking about in margins is certainly an important part, a driver in terms of the normalization of gross margins, it's less of an impact on sales.

So the driver this year really has to be unit volumes turning and starting to accelerate again. And that's our expectation, and that's what we're starting to see.

So there's certainly a lot of optimism, I would say, at this point, it really becomes a question of timing.

Hi, good morning. Thank you for taking my question.

I just want to dive into the multifamily, a little bit more in your assumption around that 20% to 30% decline in multifamily starts. I guess, any help in thinking about your sales performance versus that start to decline for the full year, just given the backlog of projects that's still under construction according to the Census Bureau data, and maybe the lag that you would normally see from a start to your sales?

And then I guess, second on that, can you just help us think about the cadence of the multifamily stores maybe on a quarterly basis throughout the year to kind of get to that sales performance?

I mean I would say, if you're thinking about our multifamily business, you do have to go back in the rearview mirror a bit, right, in the turn-around what we build, and this is the problem in terms of everybody being able to use the sort of publicly available information. It's a little bit more specific both to markets and what we're building.

However, I think what we're seeing right now is that the expected downturn throughout 2024, kind of thought it might hit late in 2023, didn't. I think people were pretty aggressive at trying to get the multifamily projects completed.

So we actually saw a nice pull through a little better than we thought of that business in the fourth quarter, but definitely seeing it turn down starting in Q1 in every quarter during the year, you'll see for the multifamily business. Meaningful declines in both sales and margins as the year progresses.

Still a really good business. It's just not sort of performing at those two standard deviations above normal levels anymore.

I would just add, remember, it's only 13% of our overall business. The other thing I would add is we were at the Harvard Housing Conference, and there were multifamily players there.

And it's a cost of capital challenge in addition to all of the multifamily that had been constructed over the last 12 to 18 months is coming to market all at the same time. So there's a little bit of a digestion of that in addition to solving the capital cost equation.

But again, just like in single-family, the long-term outlook for multifamily is very positive when you look at the demand curve and what people need housing and what multifamily satisfies for that population. So long term, we're still very positive on the business.

And we do know we'll have to manage some of the cost -- the capital challenges at or there today. But again, 13% of our business.

And then I just wanted to touch on productivity, which continues to be a pretty meaningful tailwind for you guys. Can you just talk about the projects you're looking to benefit from in 2024 and maybe the size of the project pipeline beyond 2024?

Yes. The productivity initiatives are in two kind of camps.

One is how can we improve our productivity through automation and technology and then how can we do it through best practices. The benefit of our scale, our 550-plus locations, is the ability to take a best practice across the enterprise and get little chunks of productivity in every single location.

So it falls in those two camps. A lot of the automation and technology is around improving customer service, improving truck turnaround times also in the manufacturing environment using automation to get more throughput per labor hour.

But that would outline the things we're working on for 2020.

Hey, good morning. If we look at the market for manufactured products like truss, are you seeing your competitors ramp up capacity as well?

Sure, a little. But I mean scale-wise, we're 5x, 10x, 20x their size.

So if they're adding one or two plants in certain markets, we know how to deal with it.

I would tell you the other differentiation we have is not just adding locations, it's actually improving the throughput of the locations we already own. We've invested over $100 million in existing plants.

Over 65% of our tables have some level of automation. Every plant has some level of automation.

So there's a lot of different ways we can extend our lead without building physical plant to do so, and we're focused on that as well.

And then just thinking about the M&A environment, are you seeing more willingness by acquisition targets to sell at this point given the improved outlook?

Yes, it's gotten a little better. I think one of the things that was holding back the M&A environment was just uncertainty around the direction of the market and people not knowing where the bottom was and not having sort of kind of a valuation to step off of.

And that created disagreements between buyers and sellers. I think that's calmed down a bit.

So we're a little bit more optimistic for this year, but deals are unique. Each one is a unicorn.

I would say the one thing that's also improved the farther away we've gotten to the unusual commodity impact on numbers. People are now more easily or readily accepting of a base business kind of valuation for the -- for what they have going forward, and that makes the conversations easier.

Thanks for taking my question. I was curious if you can talk a little bit about sort of what you're seeing in Q1.

I mean you talked about weather being a challenge. But sales, you're pointing to kind of flat to down, but EBITDA is down quite a bit more.

Peter, is there any way to sort of think about how much of it is weather-driven versus margin normalization?

Yes. The weather is modest.

I think it's two to three days in terms of what we are anticipating in terms of a headwind. So that's not a huge deal.

In general with the exception of that component, you've got pretty healthy business, both on a year-over-year basis and on a trending basis. So I think that's a positive.

What you are seeing, though, and I think it's fair to point it out is the year-over-year lapping of what we've been talking about. I think you've heard me talk about that normalization of margins.

And I've been pretty adamant that behind the scenes, regardless of this multifamily curing it, we have seen business getting back to normal in terms of the supply chain normalizing and are negotiating in the competitive environment, things just settling back down to a more normal level. And you're seeing a little bit of that in terms of the year-over-year again, still a very good number, still a very strong performance for the business, but more in line with what we would expect going forward.

I would just add from a customer sentiment perspective, the national biller, customers are seeing increased foot traffic. And more importantly, the foot traffic that they are seeing are more apt to actually buy a home.

So the percentage of closings to people looking, I feel like is gaining traction and their ability to match up available inventory and monthly mortgage payment to demand is -- they've done a great job with that. Now where we need a little help from the Fed mortgage rates would be to get the non-national builder customer in an arena where the cost of the mortgage is helping to drive that demand to them.

So that less so, but we expect that to be what is the first off the sidelines when we get that movement, but the national builders have done a good job in the existing environment.

Hi, good morning everyone. I'm thinking broadly on a product basis.

Is the margin differential between commodity and value-added product different than it was five to seven years ago? I assume both categories have moved up.

But as we normalize out here and go forward the next three to five, can you just discuss the delta between those two?

Yes, that's fair to say. You're right.

We've seen improvements across the Board in terms of margins. Some of that very simply to cover the inflation and the incremental cost, but we have certainly seen an increase and I would also point to our productivity as a driver for why value add has extended its differentiation from commodity.

Those Dave referred to $100-plus million worth of investment and the efforts we've put around our team to improve our internal board [indiscernible] hour, our doors per man hour type of productivity metrics has contributed to a bigger differential between value add on average and commodity.

Hey, good morning everyone. So my question is on the outlook for R&R.

I think, up low single digits probably a little bit better, I'd say, than what some of the other national forecasters are expecting. Is that acquisitions driving that?

Or do you feel like in those specific markets, you can actually see growth above what people are expecting? .

Jay, thanks for the question. For us, R&R kind of falls into two camps.

There's R&R DIY and Retail. And then there's kind of pro-remodel R&R.

And I think with us, too, it's market specific. We don't do it everywhere.

So that's why there's a little difference in what we believe is going to happen for us, possibly versus some of the national guys and a lot of what I think is a headwind for them are big ticket items that we have never sold and don't sell like appliances, et cetera. So the fact that we have kind of a different product offering to that group a different kind of customer focus and in different parts of the country is why we -- why I believe we might have a little different expectation.

Also, I think, taken advantage of capacity availability to lean into it as well, and that's a different component than others might have.

I mean we're such a small player in that overall market segment, it's a little easier for us to kind of grow that if we just focus on it a little bit. And we have the ability to do that in this current environment.

And just one other quick question. I think the $200 million you called out, Dave, in terms of incremental digital sales this year.

Maybe talk a little bit more about that, what that's going to look like and why you all feel like -- I think this is new guidance for you guys, just kind of why you wanted to talk about that now and what those incremental sales would look like, please?

Perfect. Thank you for teeing that up for me, Jay.

Next week, at IBS, we're doing a [indiscernible] product launch. Then we'll be rolling our digital tools out market by market.

There's a lot of preparation in training our sales team to then know how to intelligently explain it to our customers and show the benefits to our customers. And that just takes time.

And we're doing it market by market. We're making sure we do it right the first time.

And as we get momentum, it will -- you'll see the efforts paying off in the later part of the year. And that's why I said more like a hockey stick probably in 2024.

But we're really excited about it, and it all starts next week with the IBS product launch.

I just wanted to stick with the digital tools and the rollout there. I was hoping you could talk about maybe the cost impact in 2024 and recognizing that the sales are back half weighted, and it's kind of the first year that you're fully rolling these.

How should we think about kind of the incremental margins attached to those sales?

Yes Kurt, thanks for the question. So the short answer is we expect the sales pull-through to be pretty consistent with what we're already selling.

The costs associated with the digital tools and the development, the rollout and even largely the support is included in the numbers. It's really been spent over the past few years.

So there's no -- there's no other material that you're going to see in terms of deltas. The thing we're going to keep a close eye on is what is the support infrastructure necessary to make sure we have the right level of customer experience.

We think we have an eye on it, but that's probably the only one that could potentially increase if this really picks up quickly. Again, I don't think it will be big enough to really hit the radar for anybody, even if that were to happen, just based on the service model that we've built out.

It's really all about that incremental sales being pulled through from incremental share of wallet and new customers that really like being able to utilize these modern digital tools.

Wanted to hold in on the installation sales, which at the Investor Day, you estimated at 15% of 2023 sales. I guess, first, is that about where it landed last year?

and then thinking for 2024, is there an expectation that installation sales can grow on an absolute basis and where that lands as a percent of the total base business?

Thanks for the question. Installation is definitely a focus point for our strategy for 2024 as it fits very nicely into solving our customers' pain points.

We do it successfully in a lot of markets today. We did $2.5 billion of material labor sales in related insulation last year.

So our focus is to grow both organically and inorganically. The low-hanging fruit is the markets that we are already doing some level of installation expanding the products that we install in those markets.

But we're also looking at new markets that have not done installation in the past. To do that effectively, we put our best people together and we developed an installation playbook that people can access and utilize to grow that business in their markets.

And we're always looking for people who are already doing it well today that could fit into our profile through M&A. So we're going to pull all of those levers during the year, but it will be starting in Q2 and then going from there for the most part.

And it will be focused on the things we're already good at today.

Are you expecting any price deflation this year in categories such as EWP and millwork, which benefited from supply-driven pricing gains the last several years?

Well, we already saw that in the last part of the year for EWP. I don't know that we'd see too much more of that going forward.

And I would call it more supply chain normalization than I would significant deflation. I think they're still challenged with a lot of inflationary operating costs that we all are.

So I don't expect that they're going to be able to significantly reduce price. I think it's more holding than where it is right now that we're expecting and hoping for.

But quite frankly, it wouldn't surprise me if inflation cause is even price increases going into the year.