UFP Industries (UFPI) 29 Oct 242024 Q3 Earnings call transcript

Good day, and welcome to the Q3 2024 UFP Industries Inc. Earnings Conference Call and Webcast. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Mr. Dick Gauthier, Vice President of Investor Relations. ahead. go Please

Third the Conference for Call Welcome Quarter Industries. UFP to XXXX

then at Matt today at will will CFO, and available be simultaneously call all call the webcast entirety investors This Missad; that for offer call be questions. open also are remarks, in Mike Hosting our is and and replay CEO, and news ufpi.com. conference through will website. A Matt Mike prepared available to its the interested Cole. media

and Matt defined to statements today's Reform over let Private call me presentation uncertainties limited that Commission. risks the are the turn projections. XXXX. include, but are that and those I press Litigation you Missad, Securities to, uncertainties and These press Exchange materially and risks include remind cause could Before These results expectations Securities to of Act forward-looking to and not in actual identified with the in differ and subject release release statements as the in factors filings the company's from the

now the to over turn call Matt Missad. will I

you and Thank thank want to call. our joining XXXX us everyone. on I Dick, good third morning, quarter you, for earnings

You while be by they standards, results, financial great today. have they would aren't the XXXX seen and

Osmonds bunch. that spoil the apple the bad don't While say one whole

We This for outlook our but vinegar. tasted efforts quarter like the team apple or the future. were results, of with disappointed cider not our with the

rate of our year in rate originally drops as not second would a last July first would not As we the X rebound interest of hoped. the economy discussed at the in the months indicated half. second in be expected the the 'XX half beginning months the the in And we XXXX. followed interest in any of in good we of reductions results X impact We XXXX, by year, as that

Halloween, funds rate hiring the by put adage Halloween to in government on U.S. still costume pig, creation little Unfortunately, Fed now slowing a up lowering putting mask you pig. economy can overstating the and job the the is government celebrating a and for started citizens. on on lipstick the It a appears Fed it early, the a ramping even true holds but September,

officials, do unpopular and recognizes many work job pork to the our the team done willing to elected get is unlike Fortunately, right.

We do and overcome takes what UFPI a it will more to position future. macroeconomic for prosperous challenges

but in posture aggressive taking be many steadily Getting a X% would economy markets, slowing signal we to it higher likely very term. many With in long-term a near mortgage costs, inflation-fueled areas. X rates for mind, turn the with course data our likely around. to take With will those helpful Recent and through correction remain of a much consumers in consequential below are economy factors in election housing, mid-XXXX. struggling rates looming higher are the a more

First, we're reduce expanding and previously operating facility costs. and leverage planned utilization completing the capacity consolidations to

our strategic Second, core we're third, exploring long-term are operating unrelated our SG&A growth for our which, fit And initiatives. positive, and costs longer to no businesses, targets. ROI although alternatives or reducing EBITDA strategic strategy which our our

our cost initiatives are they our million these to implementing team, which decisions reductions long-term $XX necessary Fully us drive would difficult impact but annualized than more value are an These of basis. bring for on company.

economy our is as our Our of positioned recovers. ensure best the for teammates to success customers, all UFPI desire is all of retain and keep valued that

who are Peter be. adopt create be to and external we who change, ] we to change we [ of to from need the to want When philosopher, factors able mantra Brady

UFP, that more means For company. streamlined, nimble a and focused

our about optimistic company. outlook we short-term rosy, the the is not of While very remain future

an sheet, significant a team growth. more runways for dozen an We experienced and strong management balance exceptionally have excellent than

culture a is it closely has thrive and team built to but in our times survive before, adversity, these. overcome successfully like with only said not I've has aligned to shareholders

last have capital. we strategic As we to deploy several areas quarter, outlined

may for portfolio. growth, acquisitions opportunities to In greenfield economy our add addition better new more also this to open to valued products opportunities and

continue dividends capital and cash to to via repurchases. return will share shareholders We

are report are opportunities week, July last opportunities Board shareholders what We dividend the on to prepared to believe meaningful in worth $X.XX to cash aggressive of of December discount from shares a the We of create be of If share year. stock XX, that well. $XXX received also beneficial pleased repurchase December million Board we to is company's we to outlook near-term current more record in a share X. The over to next repurchases. the are obtain per authority payable declared the repurchase value, may there as

and we guided and to are our EBITDA are grow we Consistently with improving investing hard-working be success. our capital, growth make return. the our company successful uses teammates an where keys better of our us can creating principle where by growing making margin, sales can with of by As all driving environment ROI, highest

We factors Construction. also as these will best value. A the segments review combination shareholder quick the is the create believe of follows: of

overall resilient. softer in family single has and with has eased our been holding Multifamily single-family slowing as Construction well. line recent Site-built the has The been For was quarter, trend steady. expectation. roughly yet most remained

to starts confident above when still Based in ability are are million forecasters, returns housing at are above recent in year. X.X estimates from on starts to XXXX that be level. expected our or We per solid earn

rates believe We if the mortgage housing range. to boost could mid-X% site-built drop a receive

that we see XXXX. environment, don't fiscal rate current until the to a level least at path clear Given

the On side, capacity. where see we we facility consolidations cost will excess have

option experiencing its new showing. in today's is geographies, factory housing crucial to continue best add Affordable strong challenged and Factory population environment built for as housing growth. the However, continued built we in housing. are which will inexpensive capacity

and material business opportunities market challenged we and introducing gains, And also, share products, launched continue part trailers new Light recently including The soft. not in RVs. Packaging is come the natural may company being while a short-term cargo which light cost. it's market continues face at RV remains demand expected today, softer, When ], our headwinds. which to for [ Led the to pursue of is a demand creates is more

protect to also We critical are long-term mutual to our success. customer that need relationships

Soft a where provide demand compete, also create landscape afford can't to competitive acquisition could future which some may operators opportunities.

the well and facility the will to On leverage promote efficiency see enhance group lower the cost capacity most Packaging side, reductions. This as and cost consolidations also will profitability. SG&A operating overall costs as driving utilization

results we by for At acquisitions, are the encouraged same which Packaging. boost will time, XXXX customer

reductions line will product line efficiencies operating the Retail had to reduce synergies of UFP-Edge continues create and declines Finally, to was channel in cost the capabilities segment costs. utilization expectations ProWood with Retail also improve on cost line distribution absorb the retail SG&A ProWood with and expectations. unit its with inputs, line in and outlets. general. in ProWood direct in to its increase pursue

space For DIY being Surestone and retailers. Summit, Deckorators, By early in and fewer QX see we believe able which more basic affordable lines believe point applications. for benefits big-box we we features product shelf price railing new both at and a the and remain product while XXXX, our enthusiastic same for designed Surestone small contractor products among big-box for decking that win we retail will the called feature a to customers, with our will will technology launch decking purchase independent shifts and by will consumers

order. retail and channel will Voyage decking available be products special independent through stocked our premium a still by Our

other development process products We including continue using the pattern our trim, to and technology on Surestone fascia.

soft in product preassembled entry-level a in when expect will capacity XXXX. railing Deckorators additional product We be early available. also launch mid-XXXX is launching an

sales for product new include interest of of year-to-date and million the matters other million. Some of $XXX.X quarter $XXX.X

XXXX target our $XXX tracking We of to are close million.

New unit's continue increase and area. integral development strategic an our is of each in to part investment product this business we plan, will

units companies are without These business The its future. improved companies have be late-stage are September by in development workers the Fund seventh unemployment jobs. indicates which new investment to Our seasonally one unemployment, has just or and U-X have of means substantially. commercialization. The which more innovative utilized Innovate for market potential solutions, in Venture labor closed index adjusted products X.X% which early-stage our

cost labor the higher pool to While is more meet. families and remains for the inflation of difficult make ends making is applicants of it larger,

burdened requirements by by part continue higher costs benefit in health coverage driven be unnecessarily pharmaceuticals. care We expensive mandatory and to for

states some the themselves labor through addition, the risk mandated burdens. out of new regulatory and run of benefits In market pricing

seeing On a yields product and the acquisition bit more a is targets. return, are in growing, better that a a to a runway, realism geographies acquire startup. front, which In valuations desired from some our we we we and acquisition can company and new greenfield pipeline of extensions, prefer cases when

to ask to like financial I'd Now Mike report results. on the Cole

you, Thank Matt.

demand X%. X% prices, The largely reduction from XX% well this resulted consolidated headwinds in while more decline sales pricing our environment, a in declined in which led unit weaker These in by quarter decline by million. $XXX XX% decrease results as units. prices EBITDA in sales a to driven selling Our a selling in as lumber a most resulted to $X.XX to competitive adjusted decline business a billion, include in

and remained margin portfolio our execution our our decision at well the levels teams. strong historical to around above mix operating EBITDA strategic serve, adjusted reflecting improved our we overall the of our from business Importantly, XX%, align benefits markets

grown is Our to to generating historically our at strong levels continues the highlighting of and almost capital, weighted nearly with trailing with objectives. billion providing high this gain XX-month average our sheet almost XX%, that's balance remains us our business strategic cost And $X.X Xx also capital return pursue market. flexibility surplus strength ample the of cash on invested at in any our returns capable financial to year,

pleased sales. ProWood, overall continues and encouraging dropped Moving efforts. decline in decline were in X% to with Sales X% on in of experienced is was sales X%. By a X% our increased represented X% big-box million, decline our and Surestone our unit composite segment given our Edge segments business expand consisting decking solid selling XX% sales customers, Retail Deckorators. in other unit, retailers capacity our of in a increase prices, Surestone to and decking, performance a units. marketing decline of The of while increased which with in XX% independent $XXX X% segments. efforts due we We and a Deckorators and decline especially demand. of The product experience a X% of our nearly volume product X% volume to certain XX% a our to decking in transfers unit decline Sales with to declined drop comprised by a our of our half decline to

sustained ProWood offset costs. XX negative were primarily declined operating by improvement due by year. of Our cost lower leverage while positives of These as the by the lower discussed improved lumber. Operating points. gross gross of falling margin million well impact year-over-year profits XX%, favorable and changes our The the due a operating impact and expenses, throughout $X $X the partially to was sales profits from margins prices products, declined on mix as in in basis in we've unit improvements to resulted as SG&A incentive million by our compensation decline gross priced treated lumber primarily profit manufacturing offset variable decrease almost fixed

of in to of product an our to gain in we from segment segment Packaging. prices this more and X% competitive as strategy the a dropped in contributed decline demand sales offset this Moving result that's Sales transfer and a to share. in XX% selling pricing remains retail. partially certain as consisting to market soft, X% Customer execute million, units, increase on decrease of $XXX by X% a

year-over-year year-over-year Packaging decrease these Consequently, of profits for resulting the drop in gross $XX by $XX partially in million to in segment a As gross $XX a a SG&A by million total decline a of million the profit $X operating for in by result The million profits factors, the was from declined quarter. compensation. quarter. dropped offset incentive almost

to unit offset to due due partially decline this partially unit to demand. units our as an offset to segment in Concrete in and were weaker Site in in X% of by XX% Built, Turning units business $XXX a prices to as Construction. in X% X% from by The a increase Sales a production. factory an Retail. volume our decreased million industry declines a selling increase result Forming decline decline X% increase due in transfer These the was build Commercial and was

million Site overall in million Built profits which The I decline in along our $XX our to in unit, selling the to incentive operating experienced declined with resulted of quarter. decrease lower quarter. a $XX compensation, unit prices was in million our $X When mentioned, business profits SG&A with $XX for gross total combined the reduction for our due in declines by primarily a a million

value-added long-term our on through portfolio As continues we products. grow manage segment of cycle, our executing this strategies to each to focus

Our and this technology product XX% of We're slightly dropped ratio profitability. the appropriately to efficiency portfolio the XX% cost of is investing in year-to-date our sales to as value-added sales improved improved sales to also X.X% products, to for value-added this ratio sure of sales sized innovation, our to year from company total new an X.X% believe our higher mindful to structure product in environment building through slightly a total find of making improving our criteria to to work still relative from brands. that cycle and last margin while we including long-term balance needed the last we and investments of supporting demand growth minimum objectives made when our in stringent, resources this achieve we've year higher right positioned the returns well qualifying will year be for as more growth, with threshold. We year growth,

in prior incentive for expenses. the below Our SG&A bonus due expenses and year sales quarter, were lower primarily plan to

Given into plan an that be from XXXX. of our We're to aggressive we and taking have run for EBITDA actions that more will rate pricing capacity. annual adjusted selectively million $XX extends We cost and efforts improvements result of and in currently reductions XXXX. outlook of capacity million. $XX conservative in demand the We've more targeted in improvements reduce to cost well

cash Moving statement. our flow to on

$XXX from of Our included we our of our $XXX $XXX cash working as pandemic. demand year, nearly the elevated to year-to-date net capital reduction flow in operating million adjusted Last flow peak million. million cash inventories was reduce the was and operating

in comprising $XXX million and expenditures, million expansionary $XX of $XXX capital million included CapEx. activities CapEx investing maintenance Our of

our and core achieving reminder, value-added are in expanding and expansionary through areas: a focused X key higher-margin investments efficiencies As capacity manufacture to geographic primarily on new automation. our expansion businesses products,

This average shareholders price million million financing our primarily $XXX Finally, almost of we of million $XX dividends less shares so $XXX. than returning X.X repurchases capital year. repurchased and far share activities an approximately year, consisted through of of to this at

resources. Turning to and structure our capital

last We sheet cash continue pursue strong past. to long-term balance $X.X million which as with surplus balanced And we respect total includes compared nearly and availability we discussed in our year. lending have plan capital cash return-driven to billion under to a agreements. a approach in With $XXX to is allocation, $X.X approach liquidity and billion, to the continue

and that higher inorganic for returns. results is to capital allocation and priority drive Our highest organic in growth margins

our flow with from growth at strategy Our also our anticipated trading when buy stock our offset opportunistically repurchase we stock back dividends line to includes cash grow continuing in it's a share-based and to free more to believe discounted dilution compensation plans. We'll continue value.

With approved XXXX. or a paid a repurchase of from quarterly in approved excuse be expires Board share the $X.XX July million dividend -- paid a year increase another in at mind, Board XX% our of year, representing authorization December, to these me, our a points ago. last end another rate $XXX Board that quarter, the Last our share approved

to this of to to capitalize repurchases total our any accumulated we on segments. year, million in under automation plan of opportunities not meaningfully $XXX and CapEx, our see new expenditures capital this increase to growth range have We an XXXX each higher-margin million indicated in to we estimated earlier the we authorization. With $XXX regard

vary, far equipment however, of of already The may timing locations. in of as investments new with projects result as case investments So million for lead selection pipeline as million requests the the approved the in of time times we've our this another in $XXX of for a for evaluation. site needed year, $XX well

the and pipeline, fit pursue to strategic disciplined is remain activity a which providing growth will a of are seen that margin, Recently, more and Finally, potential. opportunities M&A we in we've on we encouraging return valuation. pipeline while continue higher strong

comparisons. to first believe the is and our the rest aren't or we comments reminder, up in competitive therefore anticipate will demand we pricing continue therefore demand to on we've of Further, balance but more -- will the a unit will and have impact the present greenfield reduction currently M&A, the As experiencing will grow soft priority of a targets. I'll pricing pivot XXXX. our into until growth, We in outlook sometime and any market and year, for appropriate, not sales make considered our through if profit we're CapEx with which significant well challenging for rates valuations year. aren't short-term finish for which about the opportunities pricing will

single For strength demand the demand single units. lower. year-over-year be year by down Built remain Retail year-over-year softer low in of digits high lower. mid-single mid- will unit as the Construction segment, to anticipate remain digits in offset demand year-over-year Packaging balance we demand And our in digits other Site will will

we Finally, competitive demand and the when our segment each continue impact that improves. to of market share in will offset believe help gain we'll demand strengthen lower positioning

in in and manage invest While and for we'll on wisely challenging through term, short we open we'll the these our remain to questions. growth potential we it conditions up that, more opportunities. With long-term confident margin to capitalize continue

of come And the [Operator Reuben with Garner question Benchmark. our Instructions] will line first from

cost Matt, you in referenced $XX reductions. million annualized

were internally? there how Or look those a strategic help might you down is business think coming each from is that. that's I detail more buckets? for something I it are one maybe us which few Can be? new. X the break on And at of Any not then much think been units announced those buckets

operating I I encapsulate facility the you would costs buckets Reuben, SG&A guess and Yes. different they what those all both say, is consolidations, would probably expenses. at when look of

connected as all group groups. opposed you that's able category. is a that have have detail, number think among I'm or way more give each I really X them that's looking be to why breakdown the for a a but and at you numbers little individual they're I headline the I And So by different to don't Mike may

million $XX About probably we're actions I $XX will combination. that that half be other similar capacity SG&A target is more referenced Reuben, a the on taking half Yes. The and is and of reductions million today. consolidation. the

Okay. outside get markets share having Great. a the the And up increasing over picked late? there then you fully to jumps Are Site that's from it's have of any Built packaging or multifamily a other else competitive anything construction weakness in to maybe and where rolling take with commodity, little the more mentioned specifically aggressive things out industry. of competition that pricing standpoint with whether

Yes.

Built demand every Site is as And in that able you're as to there the becomes for are I obviously consistently try them. value they wherever seeing bit, customer they're competitive think get in some a pressure. to more markets, other little they looking what looking to wanes deliver, can maximize reductions

competitive it that And So that, line drops it if If that a reference that atmosphere. more again, profound gets obviously, of high than starts or to million number pressure does better. more I level. stays create $X.X housing above below

line One Capital Ketan and of will moment question Markets. for come with next our the Mamtora from that BMO

Perhaps sort pipeline, in seeing of it other? for increased your greater to the M&A just appetite of any kind presented what of M&A is is of of are or value it kind the in start versus based there? Or of -- with the one you and kind opportunities segments one the on opportunity kind on

runways find is Reuben we're the each runways. sure Ketan trying of to [ best and make that Yes. values in our What stay we (sic) ] strategic do, within those

values as preference M&A out, what of the for explained, Mike end runways. we're valuations Mike greenfield last the value forth, wherever on each capital on are or and back waiting really the said as either if quarter, the those to is allocation M&A for being the any are pointed as based And of right. runway. not pivot those with model we'll we're going But And or at target. have more we we best it the we're looking less best So and

those Understood. sort And kind is for Mike, capital the of Or of position really have, an to there any about around the upturn? investments think you market and that the multiyear this you as reduce of costs investment opportunity backdrop rethink is the given currently? program cadence

assume that still improvement long-term you're $X what the sure to next to order goals. investments to that X cadence last occur and billion, pretty I are growth needing quarter. Those the over the referring to talked to from make to I'd margin evenly we our in X expect hit expect that make be years. I we've were about

last then And Understood. me. one for -- within just

kind of of you Within Can signs talk QX 'XX. of are half increased Construction you saw in through kind of of are any numbers back markets of the any seeing there? segment, just where end and about the you year? this taking sort you stabilization pressure sort down of And

Yes, rate finding sensitive, I you business was think the complex side softer also Ketan. out and question, that tell rate multifamily a is and would of I we're single-family the that's that's earlier, sensitive.

right 'XX. fourth what long-term it are now will important. I the The unsold difficult have. more is just in that, is how to would what there's I important. mortgage as stabilize on what's as predict think their making cancellation to where is currently But the now, homes their consumer expect customers better in going our at uncertainty quarter. and the economy well they in we're many backlogs And that listening probably rates right they're confidence are what looking rates

color about a more right. digits that little took single Forming, to sensitive. bit assumed which quarter last And mid-single up say of thought in projects the to The that be I Concrete occurred rate Built expectation which that seems us is to we Ketan, Commercial thought interest it's commercial be And down unusual Forming we single and for side, and a push And low what's not the would an difference unfortunately. QX. business down, unit if about a low unit, from add to -- Concrete is would better. that right. Site I digits is maybe Built, is business we on by little perform want strong, Factory digits

change Form So in I the reasons are for Concrete Commercial modest and the outlook. the think

the Kurt One line Davidson. moment for from our come with next will of D.A. that question Yinger and

I least kind you make that outcome would the you some a fit strategic related like you years, of want business no forward for to couple envision being could a understanding as you process? have? maybe not that want into the you do had to And a guess, about longer outset, at what of portfolio business to talk Matt, of you kind unit strategic or talk at talked look of specifics. criteria might to alternatives kind units, alluded this of the positive

That's a the acceptable really I good would easy, at closing straightforward are the question, say pretty either What underperforming decisions. to or We've as of had Kurt. an and relatively that's getting it basic. always operation mindset criteria looking are an Those level perform it. at

One business past in we have we synergies of we've the opportunistic rest done expected with made things our businesses to that the the is of or purchases model. thought of that

time As be not out to it proves proves Other true. times, true. be sometimes to progresses, that out

alternatives with have ones relationships that be Those are So pursue. here that and that existing the looking businesses expect business but evaluate would and runways. very profitably think know don't that we or bit really goals, not I the it's long-term units to that we make would criteria we nebulous, strategic aligned at. the with on quickly operating we may strategic are have would are I I determinations synergy which that's a the

options? realm of I of guess, be just And be would the business some clear, those it. kind Got of those units selling like within to

Yes.

think table. I would the on also that be

generally to year, earnings the we if past? even the could earnings, leverage were a that it Okay. impactful the sales Is lumber it. same on there changed we've it you where, shown next that's you've expect historically And versus anything on and talked in pricing the to historically, though, not heard is to factor is stronger obviously, meaningful model line. Or line? that Got being the then environment lumber a message

in the think the we environment. message And lumber would that various may we being is certain to of too in than it's without the deep gain lumber getting market internal advantage have on be with that exception some we where that higher -- are in I a into think do efficiencies we same hedge better generally, market heard that believe, is I it efficiencies past pricing. the today. you've the take So there able

Okay.

last -- Benchmark Okay. That would maybe sense. suggest lumber the they sticking then on makes that year-over-year right in just topic. And could higher now be one, QX. prices

the You're momentum pressures Is a we were talking some units. that lot next risk could gross line? see Or your to in in X mind business could you inflation lumber challenging a about quarters that of that prove on short-term competitive at to more over still certain margin dynamic pricing there X through? least that that, would pass here expect still a the get you if

guess our on I that I would one is variable answer products, that simple the think to Yes. us, price actually us. hurt help not

of the on the in may opposite it's environment, demand fixed the would work given products think Some that current balance, be price positive. it I But direction. a net

lumber are prices Yes, environment that, you going just packaging time hard a to if competitors and like prices add fixed, too. move to in on to that, get maybe, have up into the if Kurt, side, environment, so on an the are fixed-price smaller product

with One moment Sidoti. line from the for question that come and our Guillaume will next of Stephan

any strategies consider to of Could My ramp manage you initiatives? If effectively? guys first question is further, margin on weakens up like market margins the you existing what margins. would the topic improvement

reductions at targeting. costs. looking, other SG&A trying already take ways I to eliminate improve or to margin. reducing than doing don't to certain to can we to, other magic that what capacity reduce further our Stephan, about reach we're we're utilization of I our create know there's any items operating think advantage We constantly facility that talked costs, consolidations and

positions some you you products somewhat you this macro How share in guess performance have new the said coming on can volatile? 'XX the you remain -- new you like slide through of if also your products? have -- I perspective in for conditions growth 'XX. I even you think

Yes.

out new think for criteria some Mike of I pointed the products.

from return us to a a have products and standpoint. meet New certain criteria to margin

same. there minimum even our the some products product. better are So innovations, would existing line would the with an call demand new if a a that We I basic what if quality at line was core product expect are enhancement replacing which

new And will to new have marketplace still we there to products, be at pick totally into gain an market would come profile. a products, sales opportunity be share market gain the share. up For absorbed market those to whatever to goal type and the better margin our

So at those working. would new product the to I that say X keys be would things the is initiative look

add that has development to been new I product excited I'd within R&D up, product think also cadence effort the effort new been the what stepped about is ramped up. company the for they've And and and able I'm accomplish. also the what introductions really has

we at years we few that, back, get that and to really discussed I as on progress making good think wanted initiative. a they're So faster

no queue showing this the further any at back would in the Matt turn over for Mr. remarks. call to closing to I like Missad I'm time. questions

you to like spending I'd again for with today. time Well, us thank

Depeche While help challenging, put numbers protects on outlook the responsibility, big preserves pop hard what personal as with is outcome, up optimistic. culture will to get personal is but like our team wishful thinking. we coupled and ability the offense and would referee work week term, icons be want. Hopefully, the freedom our Britney, enterprise short-term we Rihanna free we Regardless can that on remain requirement and and long the like Mode Lions the and of next of some excel selected constitutional also Sunday It scoreboard. last channel the to

a investment for you to working your Thank and ensure day. great long-term we'll great keep returns. in Have us

all concludes program. This participating. for Thank you today's

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