UFP Industries(UFPI) - 2024 Q1 - Quarterly Results

Executive Summary & Q1 2024 Highlights UFP Industries reported Q1 2024 net sales of $1.64 billion, net earnings of $121 million, and diluted EPS of $1.96, emphasizing operational efficiency and growth First Quarter 2024 Financial Overview UFP Industries announced first-quarter 2024 results with net sales of $1.64 billion, net earnings attributable to controlling interests of $121 million, and diluted EPS of $1.96 Q1 2024 Key Financials | Metric | Q1 2024 | | :---------------------------------- | :---------- | | Net Sales | $1.64 billion | | Net Earnings Attributable to Controlling Interests | $121 million | | Earnings Per Diluted Share | $1.96 | CEO Commentary & Strategic Focus Chairman and CEO Matthew J. Missad highlighted that Q1 results met expectations, emphasizing a focus on improving operational efficiencies through automation and technology, consolidating operations, and investing in growth via new products and capacity expansion - The company is focused on improving operational efficiencies by investing in automation and technology, and consolidating operations[2] - Investments in growth include new products and additional capacity in new regions[2] - UFP Industries plans to leverage strong cash flow and liquidity for increased share repurchase activity and quarterly dividend payouts[2] Key Financial Highlights First quarter 2024 saw a 10% decrease in net sales to $1.64 billion, primarily due to lower selling prices and organic unit sales, with Adjusted EBITDA also decreasing by 10% to $181 million Q1 2024 Key Financial Highlights (Year-over-Year) | Metric | Q1 2024 | YoY Change | | :---------------------------------- | :---------- | :--------- | | Net Sales | $1.64 billion | -10% | | New Product Sales | $124 million | (7.6% of total sales, up from 7.4% in Q1 2023) | | Adjusted EBITDA | $181 million | -10% | | Adjusted EBITDA Margin | 11% | -10 basis points | | Net Earnings Attributable to Controlling Interests | $121 million | -4% | - The 10% decrease in net sales was driven by a 9% decrease in selling prices and a 1% decrease in organic unit sales[5] - Net earnings included a favorable impact of a $9.7 million increase in an anticipated tax deduction related to the company's share-based compensation plan[6] Capital Allocation The company maintains strong liquidity, targets significant capital investments, and enhances shareholder returns through increased dividends and share repurchases Balance Sheet and Liquidity UFP Industries maintains a robust financial position, reporting $702.6 million in net surplus cash as of March 30, 2024, a significant increase from $145.3 million in the prior year Balance Sheet and Liquidity (as of March 30) | Metric | 2024 | 2023 | | :---------------- | :----------- | :----------- | | Net Surplus Cash | $702.6 million | $145.3 million | | Liquidity | ~$2.2 billion | N/A | Strategic Investments The company is actively pursuing strategic acquisitions and organic growth, targeting up to $300 million in capital investments for 2024, including significant allocations for automation and new facilities - UFP Industries continues to pursue strategic acquisitions that drive long-term growth and margin improvements[9] - The company targets capital investments of up to $300 million in 2024[9] - Approximately $100 million is targeted for automation and technology upgrades, and another $100 million for new facilities and increased capacity[9] Shareholder Returns UFP Industries increased its quarterly dividend payment by 32% to $0.33 per share and actively repurchased shares, with $97 million remaining in its authorization Dividend Payments | Dividend Type | Q2 2024 (Approved April 24) | Q2 2023 (Paid June) | | :---------------- | :---------------------------- | :------------------ | | Quarterly Dividend | $0.33 per share | $0.25 per share | | YoY Increase | +32% | N/A | Share Repurchases | Period | Shares Repurchased (approx.) | Total Value (approx.) | Average Price | | :-------------------------------- | :--------------------------- | :-------------------- | :------------ | | July 26, 2023 - Q1 2024 end | 594,000 | $63.3 million | $106.64 | | Q1 2024 | 319,000 | $36.6 million | $114.74 | | April 2024 | 352,000 | $40.2 million | $114.15 | | Remaining Authorization (as of April 30, 2024) | N/A | $97 million | N/A | Segment Performance UFP Industries' segments showed varied Q1 2024 performance, with Retail and Packaging sales declining, while Construction sales remained stable with unit growth UFP Retail Solutions The Retail Solutions segment reported net sales of $629 million, a 17% decrease year-over-year, primarily due to declines in selling prices and organic unit sales, despite an increase in Deckorators decking and railing products UFP Retail Solutions Q1 2024 Performance | Metric | Q1 2024 | YoY Change | | :---------------- | :---------- | :--------- | | Net Sales | $629 million | -17% | | Gross Profit | $101 million | +6% | | Unit Sales (Overall) | N/A | -9% (big box), -7% (independent retailers) | | Unit Sales (Deckorators) | N/A | +4% | | Unit Sales (ProWood) | N/A | -9% | - The 17% net sales decline was attributed to a 6% decline in selling prices, a 3% decline due to sales transfers, and an 8% decline in organic unit sales[8] - Gross profit increase was primarily due to operational improvements, SKU rationalization, and better inventory positioning[8][10] UFP Packaging UFP Packaging's net sales decreased by 13% to $424 million in Q1 2024, mainly due to an 11% decrease in selling prices and a 6% decline in organic unit sales, with gross profit decreasing by 29% due to competitive price pressure UFP Packaging Q1 2024 Performance | Metric | Q1 2024 | YoY Change | | :---------------- | :---------- | :--------- | | Net Sales | $424 million | -13% | | Gross Profit | $85 million | -29% | | Unit Sales (PalletOne) | N/A | +9% | | Unit Sales (Structural Packaging) | N/A | -11% | - The 13% net sales decrease was driven by an 11% decrease in selling prices and a 6% decline in organic unit sales, partially offset by a 4% increase from sales transfers[11] - Gross profit decline was attributed to competitive price pressure[11] UFP Construction The Construction segment's net sales remained relatively unchanged at $518 million in Q1 2024, as an 8% increase in organic unit sales, particularly in Site Built and Factory Built, offset a 10% decrease in selling prices UFP Construction Q1 2024 Performance | Metric | Q1 2024 | YoY Change | | :---------------- | :---------- | :--------- | | Net Sales | $518 million | Relatively unchanged | | Gross Profit | $114 million | -6% | | Organic Unit Sales (Overall) | N/A | +8% | | Organic Unit Sales (Site Built) | N/A | +18% | | Organic Unit Sales (Factory Built) | N/A | +13% | - The stable net sales were a result of a 10% decrease in selling prices being offset by an 8% increase in organic unit sales and a 2% increase from sales transfers[12] - Gross profit decrease was due to competitive price pressure[12] Short-Term Outlook UFP Industries anticipates stable lumber prices and a soft demand environment for most of 2024, with improvements expected in the latter half Lumber Market Outlook UFP Industries anticipates lumber prices will remain at lower, more historical levels throughout 2024, based on current supply and demand dynamics - Lumber prices are expected to remain at lower, more historical levels in 2024[13] End Market Demand Forecast The company has revised its demand outlook based on recent macroeconomic data, projecting mid-single digit declines for packaging and retail, and a stable to slightly down construction segment for 2024 - Demand for packaging and retail segments is anticipated to be down mid-single digits in 2024[14] - Demand for the construction segment is expected to be slightly up to slightly down in 2024[14] - A soft demand and competitive price environment is expected to continue for most of the year, with year-over-year improvements in the back half due to more favorable comparisons[14] Company Information & Disclosures This section covers Q1 2024 conference call details, company overview, and standard disclaimers for forward-looking statements and non-GAAP financial measures Conference Call Details UFP Industries hosted a conference call on Tuesday, April 30, 2024, at 9 a.m. ET to discuss its outlook and Q1 results, with webcast and replay options available - A conference call was held on Tuesday, April 30, 2024, at 9 a.m. ET, hosted by Chairman and CEO Matthew J. Missad and CFO Michael Cole[15] - The call was available via webcast at www.ufpinvestor.com/news-filings-reports > Events & Presentations, with a replay also accessible[15] About UFP Industries, Inc. UFP Industries, Inc. is a holding company founded in 1955, headquartered in Grand Rapids, Mich., with operating subsidiaries manufacturing and distributing value-added products globally, and is ranked 403 on the Fortune 500 - UFP Industries is a holding company with operating subsidiaries: UFP Packaging, UFP Construction, and UFP Retail Solutions[16] - The company manufactures, distributes, and sells value-added products for residential and commercial construction, packaging, and other industrial applications worldwide[16] - Founded in 1955 and headquartered in Grand Rapids, Mich., UFP Industries is ranked 403 on the Fortune 500[16] Forward-Looking Statements This section contains a standard disclaimer regarding forward-looking statements, noting that they are based on management's beliefs and involve risks and uncertainties, and advises investors that actual results may differ materially from projections - The press release contains forward-looking statements based on management's beliefs, assumptions, expectations, estimates, and projections[17] - These statements do not guarantee future performance and involve risks, uncertainties, and assumptions that are difficult to predict[17] - Investors are cautioned that actual results could differ materially from forward-looking statements, and the company does not undertake to update them[17] Non-GAAP Financial Information The release includes non-GAAP financial information, specifically Adjusted EBITDA, which management uses to evaluate operations and enable meaningful comparisons, clarifying it is a supplement to, not a substitute for, GAAP financial results - The release includes non-GAAP financial information, specifically Adjusted EBITDA, which management uses to evaluate historical and ongoing operations[18] - Adjusted EBITDA is intended to supplement and should be read together with GAAP financial results, not as an alternative or superior measure[18] - Non-GAAP financial information may not be comparable to similarly titled measures used by other companies[18] Condensed Consolidated Financial Statements This section presents unaudited condensed consolidated financial statements for Q1 2024 and 2023, including earnings, segment performance, balance sheets, and cash flows Condensed Consolidated Statements of Earnings and Comprehensive Income This section presents the unaudited condensed consolidated statements of earnings and comprehensive income for the three months ended March 2024 and 2023, detailing net sales, cost of goods sold, gross profit, operating expenses, net earnings, and earnings per share Condensed Consolidated Statements of Earnings and Comprehensive Income (Unaudited) | (In thousands, except per share data) | 2024 | 2023 | | :------------------------------------ | :----------- | :----------- | | NET SALES | $1,638,966 | $1,822,476 | | COST OF GOODS SOLD | 1,312,888 | 1,464,147 | | GROSS PROFIT | 326,078 | 358,329 | | SELLING, GENERAL AND ADMINISTRATIVE EXPENSES | 192,059 | 194,683 | | EARNINGS FROM OPERATIONS | 133,823 | 161,708 | | NET EARNINGS ATTRIBUTABLE TO CONTROLLING INTEREST | $120,791 | $126,069 | | EARNINGS PER SHARE - DILUTED | $1.96 | $1.98 | Condensed Consolidated Statements of Earnings by Segment This table provides a breakdown of net sales, cost of goods sold, gross profit, and earnings from operations for each business segment (Retail, Packaging, Construction, All Other, and Corporate) for the three months ended March 2024 and 2023 Condensed Consolidated Statements of Earnings by Segment (Unaudited) - Q1 2024 | (In thousands) | Retail | Packaging | Construction | All Other | Corporate | Total | | :--------------- | :------- | :---------- | :----------- | :-------- | :-------- | :---------- | | NET SALES | $628,765 | $424,418 | $517,896 | $66,947 | $940 | $1,638,966 | | GROSS PROFIT | 101,124 | 85,440 | 114,335 | 17,945 | 7,234 | 326,078 | | EARNINGS FROM OPERATIONS | $45,980 | $31,246 | $45,342 | $3,873 | $7,382 | $133,823 | Condensed Consolidated Statements of Earnings by Segment (Unaudited) - Q1 2023 | (In thousands) | Retail | Packaging | Construction | All Other | Corporate | Total | | :--------------- | :------- | :---------- | :----------- | :-------- | :-------- | :---------- | | NET SALES | $761,294 | $486,561 | $515,593 | $55,795 | $3,233 | $1,822,476 | | GROSS PROFIT | 121,659 | 95,304 | 120,898 | 18,770 | 1,698 | 358,329 | | EARNINGS FROM OPERATIONS | $54,248 | $40,258 | $54,732 | $4,832 | $7,638 | $161,708 | Adjusted EBITDA Reconciliation by Segment This section provides a reconciliation of net earnings to Adjusted EBITDA for each segment and the total company for the three months ended March 2024 and 2023, along with Adjusted EBITDA as a percentage of net sales Adjusted EBITDA Reconciliation by Segment (Unaudited) - Q1 2024 | (In thousands) | Retail | Packaging | Construction | All Other | Corporate | Total | | :--------------- | :------- | :---------- | :----------- | :-------- | :-------- | :---------- | | Net earnings | $38,063 | $25,328 | $37,468 | $6,166 | $14,074 | $121,099 | | Adjusted EBITDA | $55,359 | $44,349 | $53,892 | $6,486 | $20,684 | $180,770 | | Adjusted EBITDA as a Percentage of Net Sales | 8.8% | 10.4% | 10.4% | 9.7% | 2200.4% | 11.0% | Adjusted EBITDA Reconciliation by Segment (Unaudited) - Q1 2023 | (In thousands) | Retail | Packaging | Construction | All Other | Corporate | Total | | :--------------- | :------- | :---------- | :----------- | :-------- | :-------- | :---------- | | Net earnings | $30,740 | $41,325 | $41,404 | $5,264 | $6,845 | $125,578 | | Adjusted EBITDA | $48,798 | $66,670 | $61,747 | $6,031 | $18,718 | $201,964 | | Adjusted EBITDA as a Percentage of Net Sales | 6.4% | 13.7% | 12.0% | 10.8% | 579.0% | 11.1% | Condensed Consolidated Balance Sheets This table presents the unaudited condensed consolidated balance sheets as of March 2024 and 2023, detailing assets (current, other, intangible, property/plant/equipment) and liabilities and equity (current liabilities, long-term debt, other liabilities, temporary equity, shareholders' equity) Condensed Consolidated Balance Sheets (Unaudited) | (In thousands) | 2024 | 2023 | | :------------------------------------ | :----------- | :----------- | | ASSETS | | | | TOTAL CURRENT ASSETS | $2,514,415 | $2,267,013 | | TOTAL ASSETS | $4,078,639 | $3,696,789 | | LIABILITIES AND EQUITY | | | | TOTAL CURRENT LIABILITIES | $525,018 | $530,359 | | LONG-TERM DEBT AND FINANCE LEASE OBLIGATIONS | 233,046 | 275,002 | | SHAREHOLDERS' EQUITY | 3,116,095 | 2,705,641 | | TOTAL LIABILITIES AND EQUITY | $4,078,639 | $3,696,789 | Condensed Consolidated Statements of Cash Flows This section provides the unaudited condensed consolidated statements of cash flows for the three months ended March 2024 and 2023, outlining cash flows from operating, investing, and financing activities, and the net change in cash and cash equivalents Condensed Consolidated Statements of Cash Flows (Unaudited) | (In thousands) | 2024 | 2023 | | :------------------------------------ | :----------- | :----------- | | NET CASH USED IN OPERATING ACTIVITIES | $(16,798) | $(37,076) | | NET CASH USED IN INVESTING ACTIVITIES | $(56,062) | $(41,858) | | NET CASH USED IN FINANCING ACTIVITIES | $(68,968) | $(59,368) | | NET CHANGE IN CASH AND CASH EQUIVALENTS | $(141,749) | $(135,563) | | ALL CASH AND CASH EQUIVALENTS, END OF PERIOD | $980,507 | $424,060 |