Core Insights - The housing market is currently weak, facing challenges such as affordability issues, low consumer confidence, and depressed commodity prices, leading to a decline in sales and starts [2][18] - Despite macroeconomic pressures, the company remains focused on growth, operational excellence, and strategic investments to enhance its competitive position [3][4][27] - The company has successfully navigated through a challenging environment by maintaining profitability and investing in technology and value-added solutions [3][4][7] Market Conditions - The housing market is characterized by more headwinds than tailwinds, with sales falling more than expected in late 2025 due to builders delaying starts to manage excess inventory [2][18] - Economists have mixed outlooks for 2026, with some predicting further declines in single-family starts while others expect modest growth amid uncertain macro conditions [2] - Commodity prices have dropped significantly, with a composite below $350 per thousand board feet as of late 2025, impacting overall market dynamics [2] Financial Performance - For Q4 2025, net sales decreased by 12% to $3.4 billion, driven by a 15% decline in single-family sales and a 20% decline in multifamily sales [18] - Gross profit for Q4 was $1 billion, a 19% decrease year-over-year, with a gross margin of 29.8%, down 250 basis points [19] - Adjusted EBITDA was $275 million, down approximately 44%, with an adjusted EBITDA margin of 8.2%, reflecting lower gross profit margins [21] Strategic Initiatives - The company invested over $110 million in new and upgraded value-added operations in 2025, focusing on enhancing capabilities and expanding its footprint [7] - A total of 25 facilities were consolidated in 2025, with a focus on maximizing operational flexibility and reducing capital expenditures [6] - The company has made 40 acquisitions since the BMC merger in 2021, representing over $2.3 billion in annual sales, indicating a strong commitment to growth through M&A [10][11] Technology and Innovation - The company is investing in digital solutions and technology to enhance customer experience and streamline operations, processing nearly $7 billion in quotes through its digital platform in 2025 [12][13] - Ongoing implementation of SAP is expected to improve operational efficiency, with plans for broader deployment in 2026 [14] - AI initiatives are being integrated to enhance estimating processes and improve sales efficiency, although headcount reductions have not been significant [69][71] 2026 Outlook - The company expects net sales for 2026 to be in the range of $14.8 billion to $15.8 billion, with adjusted EBITDA projected between $1.3 billion and $1.7 billion [23] - Gross margin for 2026 is anticipated to be between 28.5% and 30%, reflecting the ongoing challenges in the housing market [24] - Free cash flow is expected to be approximately $500 million, influenced by a shift in working capital dynamics compared to 2025 [24][22]

Financial Data and Key Metrics Changes - For Q4 2025, net sales decreased by 12% to $3.4 billion, driven by lower core organic sales and commodity deflation, partially offset by growth from acquisitions [19] - Gross profit was $1 billion, a decrease of 19% year-over-year, with a gross margin of 29.8%, down 250 basis points [22] - Adjusted EBITDA was $275 million, down approximately 44%, with an adjusted EBITDA margin of 8.2%, down 470 basis points from the prior year [23] - Adjusted EPS was $1.12, a decrease of 52% compared to the prior year [23] - Operating cash flow was $195 million, down $179 million, with free cash flow of $109 million for the quarter and $874 million for the year [24] Business Line Data and Key Metrics Changes - Core organic sales decreased by 15% in single-family and 20% in multifamily, with repair and remodel down 7% [20] - The company consolidated 25 facilities in 2025, maintaining an on-time and in-full delivery rate of 92% [9] - The install business remained around 16%-17% of overall business, outpacing the market decline [85] Market Data and Key Metrics Changes - The housing market remains weak, characterized by affordability challenges, muted consumer confidence, and depressed commodity prices [6] - Commodity prices for OSB were below $350 per thousand board foot as of the end of 2025 [7] - The company expects single-family and multifamily starts to be flat year-over-year in 2026, with repair and remodel up 1% [25] Company Strategy and Development Direction - The company is focused on reducing barriers to affordable housing and driving a more efficient, integrated supply chain [4] - Investments of over $110 million were made in new, expanded, or upgraded value-added operations across the footprint [10] - The company aims to pursue acquisitions that expand value-added product offerings and advance leadership in desirable geographies [11] Management's Comments on Operating Environment and Future Outlook - Management noted ongoing housing affordability challenges and a weak market environment impacting sales [6] - The outlook for 2026 is cautious, with expectations for modest growth amid macroeconomic uncertainties [7] - The company remains committed to advancing its strategy with a focus on growth, continuous improvement, and innovation [8] Other Important Information - The company has made 40 acquisitions since the BMC merger in 2021, representing over $2.3 billion in annual sales [14] - Digital investments have processed nearly $7 billion of quotes, reflecting a year-over-year increase of over 130% [15] - The company is implementing SAP across its operations, with plans for broader deployment in 2026 [16] Q&A Session Summary Question: Can you discuss the cadence of the year and expectations for single-family versus R&R? - Management indicated a slow exit from 2025, with expectations for a ramp-up in the first half of 2026, particularly in single-family starts [33][34] Question: Can you provide more detail on the cost actions planned for this year? - Cost actions are primarily SG&A related, with most already executed, and benefits expected to materialize throughout the year [36] Question: What are the dynamics driving gross margin expectations? - Management noted that gross margins have been stable, but Q1 may see volatility due to seasonal factors and contract resets [40][42] Question: How should incremental margins be viewed as volume returns? - Management expects higher than average incremental margins due to operational leverage as the market grows [51] Question: What is the outlook for modular housing and the acquisition of Pleasant Valley Homes? - The acquisition is seen as a strategic move to enhance modular housing capabilities, focusing on partnerships with builders rather than traditional retail [63][65]