Good day. Welcome to the Builders FirstSource First Quarter 2023 Earnings Conference Call. Today's call is scheduled to last about one hour, including remarks by management and a question and answer session. In order to ask a question, please press the star key followed by the one on your touch-tone phone at any time during the call. I'd now like to turn the call over to Mr. Michael Neese, Senior Vice President, Investor Relations for Builders FirstSource. Please go ahead, sir. Thank you, Shelby. Good morning, welcome to our first quarter earnings call. With me on the call are Dave Rush, our CEO, and Peter Jackson, our CFO. Today, we will review our results for the first quarter of 2023. The earnings release, investor presentation are available on our website at investors.bldr.com. We will refer to several slides from 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 for the most directly comparable GAAP measures. You can find the reconciliation of these non-GAAP measures to the corresponding GAAP measures where applicable in the 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 statement 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'd like to turn the call over to Dave. Thank you, Mike. Good morning, everyone, thanks for joining our call. Our start to 2023 has exceeded our expectations as the work that we have put into transforming Builders FirstSource into the premier supplier of building product solutions is driving tangible results. We are confident that the resilience of our business and the exceptional positioning with our customers will become increasingly evident to the market as we progress through a dynamic year in 2023. Despite a challenging macro backdrop, we performed above forecast due to the strength of our product portfolio, execution on our strategic priorities, and the tireless efforts of our team members. We are managing through this complex environment by leveraging our best-in-class distribution footprint and end market exposure. We remain committed to enhancing our customer relationships by being the easiest in the industry to do business with while driving improvements that will make home building more affordable and efficient. Our unrelenting emphasis on operational excellence positions us well to continue to execute our goals. We are driving share growth and mix improvement while continuing to grow through accretive acquisitions. Our recent transactions allow us to further expand our value-added offerings and reach a more diverse customer base in attractive markets. While macroeconomic factors continue to dominate the headlines, we are closely monitoring local market activity by staying close to our customers and maintaining focus on our strategy. We are controlling what we can control and running the business for long-term value creation. Elevated mortgage rates and affordability challenges are headwinds, but feedback from some home builders has suggested that underlying demand has been resilient when we have seen mortgage rates dip. Though the results vary slightly by region, our April sales continue to offer encouraging signs that green shoots are starting to emerge across home building. On slide four, we show what we achieved in the first quarter. Among the highlights, our gross margin percentage increased 300 basis points to 35.3%, driven by the strength of our multifamily value-added product category. Our recent acquisitions, which have diversified our footprint and enhanced our exposure to the multifamily sector, have been a strong contributor for us this first quarter. Our EBITDA margin remained healthy in the first quarter as we executed well and drove improved productivity across the business. It is important to note that during the quarter with sales down 31.6%, our adjusted EBITDA margin was only off by 130 basis points compared to the prior year quarter. This reinforces our belief that we can sustain a double-digit EBITDA margin throughout this year, assuming single-family starts decline by no more than 25%. On slide five, while core organic sales declined relative to prior year as single-family housing demand slowed, I would point out that multifamily and R&R and other both grew. Multifamily was a tailwind this quarter, and we expect this strength to continue for the remainder of 2023. Following recent acquisitions, multifamily more than doubled to 13% of our net sales in the first quarter versus 6% this time last year. We continue to focus on improving productivity, we are pleased to deliver $34 million in savings for the quarter as we leverage our BFS One Team operating system. We are working hard to improve efficiencies through operational excellence focused on manufacturing and delivery improvements. This is evidenced by our 96% in full delivery metric. We are dedicated to reducing our customer cycle times with full deliveries and fewer trips to the job site, strengthening our customer relationships and helping to lower their total cost. We remain focused on the importance of controlling SG&A and other expenses. This includes efficient capacity utilization, ongoing optimization of our footprint, and balancing the need for variable cost reductions against future capacity needs. In May 2020, we released our first corporate social responsibility report. We expect to release our 2023 CSR report later this month and look forward to sharing our progress on sustainability with our stakeholders. We are committed to addressing the risks of climate change, including taking actions to reduce our greenhouse gas emissions. In 2022 and early 2023, we undertook and completed an extensive project to consolidate and report our energy use data. Through this work, we now monitor our Scope one and Scope two greenhouse gas emissions across our facilities and fleet and expect to report our 2022 greenhouse gas emissions later this month. We are leveraging this 2022 carbon emissions baseline to set appropriate emissions reduction goals. When we talk about our high-performing BFS culture, safety is our first priority. I'm proud to say that we achieved a 22% reduction in our Total Recordable Incident Rate last year and have reduced it by another 30% so far this year. We have improved benefits to better attract and retain high-performing talent and have trained over 99% of our team members to date on diversity, equity, and inclusion initiatives. Turning to M&A on slide six. While the current M&A pipeline remains slower than prior years, we continue to target attractive opportunities with a disciplined approach. Thus far in 2023, these have been smaller deals. Given the highly fragmented nature of our industry, we still believe in our goal to invest an average of $500 million in M&A per year for the next several years. As we mentioned on our call in February, we acquired Noltex Truss during the first quarter, a five-location truss manufacturer providing building components to the single- and multi-family markets throughout Texas. Since then, we have acquired 2 more companies. Last month, we acquired Builders Millwork Supply, a millwork distributor serving Anchorage. This past Monday, we acquired JB Millworks, which contributes important value-added capacity in the Chattanooga area. We're excited to welcome these businesses and new team members to the BFS family. Moving to slide seven in capital allocation. In the first quarter, we deployed approximately $800 million of capital towards organic growth investments, tuck-in M&A, and share repurchases, and we have cumulatively deployed $4.3 billion against our 2025 $7 billion-10 billion goal. Looking forward, I am happy to announce we plan to host another Investor Day in December in Atlanta, where we will update our progress on the strategic initiatives, including the latest on our digital offerings. We will also provide a tour of our nearby robotic truss facility. We are planning to release more details in the coming months. Now let's turn to slide eight and provide an update on our digital strategy. We continue to play a pioneering role in the digital transformation of the home building industry, growing our capabilities in 2022, and are working to drive enhancements and adoption throughout 2023. We are executing our digital product development plan and introducing our customers to the tools and their benefits through the myBLDR.com platform. We firmly believe our long-term commitment to investing in digital innovations and technologies will deliver greater efficiency across home building, enhance our product and service offerings, and extend BFS's lead as the partner of choice in the market. During our last call, we announced the launch of our myBLDR.com customer portal, which will ultimately provide our home builder customers with access to easily use digital tools to virtually design and build their homes. One of those applications is Home Configure, which is already in use with a significant number of customers while we continue to develop and pilot new capabilities that will be deployed throughout 2023. Home Configure is a three-dimensional virtual application that allows a user to configure a home while providing a more collaborative experience. These are the types of advancements putting us at the forefront of our industry as we continue to rapidly scale full suite capabilities. In Q1, we completed over 6,000 automated window and lumber takeoffs, an 80% increase over Q4 2022, and we had nearly 15,000 visitors who started 56,000 sessions in our Home Configurator. This momentum gives us early confidence that our digital strategy remains on schedule, and we will continue to enhance the platform to drive adoption. Our digital tools will help us integrate more closely with our customers and ultimately result in incremental sell-through of our core building products as we gain share of wallet. We are on track to gain an incremental $1 billion in sales by 2026. You have heard me say that our people are the building blocks of our organization. They inspire me every day to continue the evolution and growth of our people-first culture. Today, I'm delighted to share a success story that represents the best of our sales team, Mitchell Ingram from Blairsville, Georgia. Mitchell's journey began with us 17 years ago as a CDL driver, and from the very beginning, he stood out for delivering exceptional customer service. For five years, Mitchell was the driver that every customer wanted as he flawlessly delivered materials to their job sites, earning their trust and loyalty. That natural ability for exceptional customer service led Mitchell to being promoted to inside sales, where he continued to excel and quickly became the go-to salesperson for both our internal team and our customers. Today, as a key member of our outside sales team, Mitchell has become the market's top salesperson and recently won a Leader of the Pack award recognizing him as one of our top sales team members. On behalf of BFS, I extend my warmest congratulations to Mitchell for his outstanding contributions and achievements. At BFS, we have many similar remarkable stories, further exemplifying our commitment to the team members that make us so successful. Their dedication and commitment are invaluable to our team's success, and we are fortunate to have them. I will conclude by saying that our differentiated platform, experienced management team, and clear focus on delivering value-added solutions to our customers have positioned us well to win in the market and outperform. I'm very excited to lead this winning team. I'll now turn the call over to Peter to discuss our first quarter financial results in greater detail. Thank you, Dave. Good morning, everyone. I'm pleased to report that we delivered exceptional gross margins in the first quarter despite a challenging macro backdrop. The advantages of value-added products and services are evident and key to our outperformance. We generated strong free cash flow as we leveraged our best-in-class operating platform and extended our track record of effective cost containment and working capital management. Our robust financial position, industry-leading products and solutions, and reputation for providing excellent customer service allow us to successfully navigate macro volatility and position us for above-market growth in the years to come. I will cover three topics with you this morning. First, I'll recap our first quarter results. Second, I'll provide an update on capital deployment. Finally, I'll discuss our second quarter guidance and provide an update on our illustrative full-year scenarios. Let's begin by reviewing our first quarter performance on slide 10. We delivered $3.9 billion in net sales. Core organic sales decreased by 26%, attributable to a 34% decline in single-family due to slowing demand and compared to a strong first quarter of 2022. Multifamily was a bright spot that reflects the benefit of our expansion strategy in this category, growing by nearly 70%. The growth was driven by multiple acquisitions and a strong rental market. R&R and other grew by more than 3%, mainly attributable to increased sales focus and capacity versus prior year. The cumulative effect of our acquisitions over the past year contributed approximately 5 percentage points of growth to net sales. One additional selling day had a favorable impact of 1%. While core organic sales and value-added products decreased by nearly 17% due to slowing single-family starts, this is almost 10 points better than the overall core organic result and underscores the resilience of the value-added product portfolio. Importantly, value-added products represent 56% of our net sales in the quarter, reflecting our position as the supplier of choice for these valuable, high-margin products. During the first quarter, gross profit was $1.4 billion, a decrease of 25.2% compared to the prior year period. Gross margin increased 300 basis points to 35.3%, with more than half of the 300 basis points change coming from our multifamily value-added products and services. SG&A decreased $64.4 million to 904.2 million, mainly due to lower variable compensation, partially offset by additional expenses from operations acquired in the last year. Acquisitions increased SG&A by $46 million in the quarter. As a percentage of net sales, total SG&A increased by 630 basis points to 23.3%, primarily attributable to decreased leverage to net sales. We remain focused on disciplined cost management and are taking appropriate actions in response to volume dynamics on a market by market basis. As we have stated in the past, approximately 70% of SG&A expense is variable with volumes. We are striking the right balance between calibrating operations based on changes in volume and protecting capacity for future growth. Adjusted EBITDA was approximately $632 million, a decline of 37%. Primarily driven by lower net sales, including a decline in core organic products attributable to a slowing housing market and commodity deflation. Adjusted EBITDA margin was a robust 16.3%. Adjusted net income was $410 million, down from an adjusted net income of $701 million in the prior year quarter. Adjusted earnings per diluted share was $2.96 compared to $3.90 in the prior year period. The decrease in adjusted EPS was favorably offset by our repurchase of more than 7.5 million shares, or $0.15 per share during the quarter. Our first quarter results beat the guidance we provided in February, supported by gross margin strength. Value-added products over-delivered and productivity came in faster than forecasted. As a result, we are increasingly confident that our long-term normalized gross margin percentage is now at 28% plus versus our previous expectation of 27% plus. Let's turn to our cash flow, balance sheet and liquidity on slide 12. Our first quarter operating cash flow was approximately $654 million, up from 180 million in the prior year, mainly attributable to disciplined working capital management and improved product mix, as well as effective pricing and cost management. Capital expenditures were $100 million. All in, we delivered robust free cash flow of approximately $554 million. Free cash flow yield is 28.5%, while operating cash flow return on invested capital was 47.1% for the trailing 12 months ended March 31st. Our net debt to adjusted EBITDA ratio was approximately 0.8 times. Excluding our ABL, we have no long-term debt maturities until 2030. At quarter end, our total liquidity was $1.4 billion, consisting of $1.2 billion in net borrowing availability under the revolving credit facility and $144 million of cash on hand. Moving to capital deployment. During the first quarter, we repurchased approximately 7.5 million shares for $628 million at an average stock price of $83.17 a share. In addition, we have repurchased approximately 3.8 million shares so far in the second quarter for $348 million at an average stock price of $91.90. In total, we have repurchased 39% of our outstanding shares since August of 2021. We have completed our prior share repurchase authorization, the board of directors decided to approve a new $1 billion share repurchase authorization. We remain disciplined stewards of capital and will continue to look for organic and inorganic growth opportunities and to repurchase shares at an attractive value while maintaining our fortress balance sheet. I would like to discuss our guide on slide 13. Given the ongoing challenging conditions in the housing market, we are continuing to provide quarterly guidance. We will reassess our full year guidance for actual and base business as the year progresses. For the second quarter, we expect net sales to be in the range of $4 billion-4.2 billion and adjusted EBITDA to be in the range of $525 million-575 million, with an adjusted EBITDA margin in the range of 13.1%-13.7%. Our adjusted EBITDA guide for the second quarter assumes gross margins in the 32%-34% range. Our second quarter guidance includes the following full year assumptions, which are also outlined in the earnings release and on slide 14. We expect total capital expenditures in the range of $325 million-375 million. This includes continued investments in scaling our value-added products. We expect interest expense in the range of $150 million-170 million. An effective tax rate between 23% and 25%. Depreciation and amortization expenses in the range of $525 million-575 million. No change in the number of selling days versus the prior year. Finally, we expect to deliver between $90 million and 110 million in annual productivity savings. We recognize that it is important to think about potential outcomes for the full year. On slide 15, we have updated our scenario analysis to demonstrate how we are positioned to generate resilient financial performance across a range of potential housing market and commodity conditions. As you can see, our strong Q1 performance and visibility into Q2 have meaningfully improved our expectations for each of the full year performance scenarios. If single-family starts are down 15% for the year, we now believe we could generate roughly $2.2 billion in adjusted EBITDA, which is up $500 million from our fourth quarter scenario analysis. This increased EBITDA ex-expectation reflects stronger gross margins and productivity savings than we previously expected. As I wrap up, I want to reiterate that we are exceptionally well-positioned to drive our strategic goals forward. We believe that we can sustain a double-digit adjusted EBITDA margin this year, and we continue to see the benefits of our transformed business. I believe that our long-term normalized gross margin percentage is now at 28% or higher. I'm confident in our best-in-class operating platform will continue to set us up to generate substantial free cash flow, which provides further financial flexibility on top of our healthy balance sheet. We will also continue to diligently deploy capital and work to maximize long-term shareholder value. With that, let me turn the call back over to Dave for his closing remarks. Thanks, Peter. Let me close by saying that we feel really good about our strategy and our execution so far in 2023. Our investments in value-added products, productivity initiatives, and digital solutions are all delivering on our goal to improve our customers' experience and partnership with BFS while driving growth over the long term. 2023 still appears to be a challenging year for our industry, I'm confident that we can create value for our shareholders through executing our strategy, our focus on value-added products and services, and our disciplined deployment of capital towards growth opportunities. Thank you again for joining us today. Operator, let's please open the call now for questions. At this time, if you would like to ask a question, please press the star and one on your touch tone phone. You may remove yourself from the queue at any time by pressing star two. Once again, that is star and one to ask a question. We will pause for a moment to allow questions to queue. We'll take our first question from Matthew Bouley with Barclays. Morning, everyone. Congrats on the results. Thank you for taking the questions. Jumping right to the gross margin question, you know, you raised the long-term guide to, you know, the normalized guide to 28% plus. I think I heard you say, you know, value adds a little better and productivity coming in faster. My question is, you know, you talk about the benefits of kind of a transformed business. I mean, is this a view to some of these shorter-term trends that you're talking about? You get a little more visibility to the trough as a result, you know. Or just what are some of the bigger underlying pieces, you know, market share, et cetera, you know, that give you confidence to say that, you know, now is the time to raise that gross margin target? Thank you. Thanks, Matt. Yeah, no, it's a great question. We've been talking, well, as you know, about gross margins for quite a while now ever since the merger and trying to get a sense of where normal is. We felt really good based on where the business was at that merger date, that, you know, 27% or better was something we felt good about on sort of a long-term normalized basis, taking out all the noise around supply chain and that type of thing. We were continuing to look at it, right? We've been looking at it, managing the business. In the meantime, we've been working. We've worked to improve our value add as a percentage of the overall business, right? The acquisitions we've made, improving mix, it's grown faster, it's been more resilient. The biggest component being just the increased mix of value add on an ongoing basis, we think that's meaningful and important to our average gross margins over time. In addition, we've done a really good job internally of managing productivity, even in a volume down market overall, certainly giving us a lot of confidence that the investments we've made in value add productivity and automation have yielded the benefits we were expecting. Those two factors are the most powerful. The last one I think is, as we've seen a market as down as it was in Q1, and I think we can all admit this was a challenging year-over-year compare, we still performed very, very well, and that gives us the confidence that we've needed to start moving that normalized margin up to 28%+ because we see that as being really proof positive of the value of what that product does for our customers and for us. Yeah. I'd just add, Matt, that customers see those products as less price sensitive because they're solving problems for them, they're addressing labor concerns for them, and they're reducing cycle times for them, and they can make up some of those costs through the reduction of those cycle times. That's why we focus on it, from a being easiest to do business with perspective and driving value for our customers. Gotcha. Okay. Great color there. Thank you for that. Second one, kind of jumping into the near term. The Q2 EBITDA guide, I mean, you're guiding in dollars and margin, I guess, to be lower than that of Q1, which is obviously unusual historically. I know you're on this path to normalizing gross margin and so that, you know, looks to be part of that. You know, any other detail on what are some of the underlying assumptions around Q2, you know, and why you would have such a kind of unusual seasonality there? Thank you. Sure. Yeah. I'll let Dave talk to the overall market. What I would say is this is consistent with what we have been communicating. This still assumes that we're going to continue to see an increased competitive environment, a challenging volume environment in Q2, and normalization that continues to flow through in margins and sales. While we're absolutely confident in the business, I don't want anybody to think that there still aren't some difficult comps coming, at least for the next quarter or two, and that's really what you're seeing there in the numbers. What we're hearing from customers is the word stability. You're not really hearing robust, you're hearing more things are stable. That's kind of what we're, you know, using as the backdrop of our valuations for our forecast as well. There's increased optimism when mortgage rates stay consistent, and the underlying demand supports a fairly resilient demand when mortgage rates stay consistent. It's still a volatile overall environment and we're working with that as a backdrop. You know, we're feeling pretty good, but it's all on a relative basis. All right. Well, thank you, Dave. Thanks, Peter. Good luck, guys. Thanks, Matt. We'll take our next question from Mike Dahl with RBC Capital Markets. Morning. Thanks for taking my question. Just to kind of pick up on a couple of those points or questions that Matt had. When we think about the margins and gross margins specifically, you know, I think clear enough in terms of your description of normal. You know, in the first half of this year, you're basically guiding to a mid-30s, low-to-mid 30s gross margin. Even if I were to adjust for mix, which seems more recurring than non-recurring, you still reach that level. It looks like the full year, like the middle scenario, if you're at 13%-14% EBITDA margins also seems to imply maybe like a low 30s gross margin. I guess, A, is that the full year expectation embedded? B, could, y ou know, I know there's still some potential timing impact in the first half. Maybe you could just articulate what some of those are in terms of things that have been good guys in your favor. If I, you know, sorry for the multi-part question, but the C would be, you know, I think you said, you know, "Hey, we'll tell you more about base business as the year progresses." If I take that delta between what you expect for gross margin this year and that 28, should we assume that it's kinda like a few hundred million dollars right now that could be still a little bit temporary in your opinion? There's one question in 27 parts. I'll do my best, then you can tell me if I hit all the points. The first one is around margins. I mean, the difference between our guide, which is 28% plus on a normalized basis, and what we've talked about in our guide for Q2, for example, in the low to mid-30s, yes, you're right, there is a disconnect there. We didn't provide explicit guidance around full year. I mean, obviously those scenarios have some numbers embedded. I think the message we're trying to send is we're in a very volatile environment still. We're seeing pretty significant step downs in volumes. While we have a much better sense of how the market is going to react, we haven't fully digested it. What we're saying in our numbers for this year is that we started exceptionally strong. That will, of course, take our full year average gross margins up above what we would consider to be normalized margins on an ongoing basis. As we learn more and as we get better confidence, we'll continue to update that normalized number with our best understanding. You know, in terms of what has happened in the near term, I think one of the things that we've been pleasantly surprised by in recent periods has been the strength of gross margins, the resiliency of gross margins. While a big piece of that is mix, I think it's important to point out that our gross margin performance this quarter was really primarily driven by that multifamily investment that we've made. That business, as you know, has longer lead times on their quote to delivery, which means there's a bit more exposure to commodities. In this environment, that's a favorable thing. There's some transitory benefit in there. We're certainly pleased with that business's performance overall and really happy to have it as part of the business. Those are the types of things we're accounting for when we're giving these normalized gross margin numbers. Did I hit all your points, Mike? Yeah. Yeah. Pretty much. I would just add, Mike, that, yeah, the multifamily tailwind will wane as we go farther into the year, for sure. You know, we also anticipate the products that anyone can provide will be increasingly competitive because supply chain issues have waned as well. The stuff we're good at, the value-added stuff we're good at is where it's a little stickier. It's a combination of all of those. Okay. Yeah, that's very helpful. Thank you both. Then, in terms of a follow-up, just on capital allocation, I mean, look, again, even if some of this is a little temporary in the first half, the underlying EBITDA number, it starts coming through, you know, consistent with your middle scenario is incredibly strong. The free cash flow conversion's been great. You've obviously been pretty aggressive buying back the stock, you know, $1 billion effectively in just the last four months. The new authorization is for $1 billion. It seems like you'll throw off considerably more free cash this year. Just thoughts on kind of why not a bigger authorization just to have it out there, maybe some puts and takes and any more explicit direction you could provide on what type of free cash conversion you'd expect for the full year? Yeah. I think probably the first point is that, you know, our thinking around that free cash flow conversion is probably, you know, north of $1.5 billion now because of that call up, we said north of $1 billion in the past. That's a significant increase in terms of what we're seeing. As you know, Mike, some of that is really attributable to the slowdown in the business and the spinning off of some of the value on our working capital balance sheet. The reality is we are performing quite well, and we will continue to deploy capital in the strategy that we've outlined in the past. The board has been very supportive, you know, whenever we need authorization because we think we have cash to put to work, they'll be there for us. You know, they're absolutely hand in glove with us on this strategy. $1 billion seems fine for now, but we'll revisit if it makes sense. I mean, the only thing I'll point out is we're done with sort of the windfall benefit of the very high commodity. Some of the volumes of share buyback that we've seen over the past couple of years because of those commodities are past now. Okay. Thank you. Appreciate it. We'll take our next question from Trey Grooms with Stephens. Hey, good morning, everyone. Yeah, congrats on the quarter. Peter. Thank you. Sure thing. Peter, I think you said, you know, you expect to see increased competitive behavior, or an increased competitive environment. You know, how does the competitive behavior look in, you know, in some of your maybe tougher demand markets versus some of the better markets? You know, are you starting to see that behavior that competitiveness kind of creep up more in these more difficult markets? You know, is it more or less competitive maybe than what you've seen in prior slowdowns? Hey, Trey, this is Dave. I think it's a market by market evaluation, Trey. I mean, again, it's still similar to what we've said previously. If you go from west to east, it's a little tougher out west than it is in the east. Where demand is a little tougher, we're seeing definitely more competition, again, around the products that anyone can do. Where we're still doing really well is with the value-added products and the stickiness with those customers around those products, and being able to get value for those because they're more valuable to the customer. Again, it's something that creates efficiencies for them, solves problems for them. They're willing to pay more in those scenarios because they see the value. It's generally more west to east as far as competition is going right now around areas where anybody can provide the product and where the supply chain has started to normalize. Okay, got it. Thank you for that. I guess as a follow-up, you know, you call out the operational excellence and, you know, cost management initiatives that are helping to drive these gains in efficiency and productivity. Longer term, you know, I see kind of it's obvious what it's doing for the near term and in a downside kind of environment. Longer term, how do you think about maybe the sustainability of some of these actions and, you know, these things driving better margins as end markets improve? Well, I think the exciting thing for me, Trey, is where we have the most opportunity is where we're already pretty good. That's in the manufacturing efficiencies and driving technology to create labor efficiencies in the manufacturing process. You've heard us es that. We have increased 22%, board foot per labor hour. That's continuing to improve. As we continue to invest in that segment of the business, there's still a pretty long runway there. As far as the distribution side of the business, the exciting thing there is as we continue to develop best practices, and then we leverage it across 570 locations, that generally also is a meaningful number. We still think there's opportunity along those lines as well. All of that supports our pledge that we're going to be the easiest to do business with. It also is something that we can illustrate to our customers where we bring value to the party beyond just delivering product. The only thing I would add is, you know, when we talk about the productivity numbers, these are numbers that we've done the work around to analyze that this is permanent change. We're not trying to take credit on productivity for something that sort of comes and goes as a freebie in the year that we're not going to be able to repeat. These are changes to the business, these are operating changes, these are contractual changes that we feel good about in terms of having changed the business for the better over time. We do think it's cumulative and sticky. Perfect. Thanks for that, guys. I'll pass it on. Thank you. We'll take our next question from Collin Verron with Jefferies. Good morning. great quarter. my first question here is just, you came in ahead of that 1Q guide, which you gave at the end of February. Can you just talk about what came in better than you were expecting? Was it underlying demand? Was it a specific product category? Were you just able to hold onto commodity prices better? Since you gave that guide so late in the quarter, can you just give us a sense of how the year-over-year sales declines exited the quarter versus earlier in the quarter? No, that's certainly internally, that was a bit of a black eye for the organization in terms of the accuracy of our forecast. We knew we were doing well, and we felt like the momentum was good, but what we thought was coming was worse than what we actually experienced. That competitive dynamic did not ramp up as quick as we expected. The dynamics and, you know, a lot of it was obviously that value add, that multifamily we've talked about. Even the commodity numbers on some of the longer-term contracts and just some of the ways that we floated through was better than we anticipated. Certainly the operating team has done a fantastic job of managing through all the local market dynamics to ensure that they're moving through product and getting a good compensation for what we've been seeing. We were certainly surprised at how strong all that was. You know, it was an interesting quarter in terms of what we saw in the numbers. You won't hear us whine about the weather, but certainly weather on the West Coast, weather in Texas was disruptive in certain periods. That's been a push and a take. That, a give and a take. That's definitely continuing to work through. While we feel good about it, that's a piece. We also saw, you know, the impact of those interest rate changes, whether they be surprises up or down, were certainly influential on what our builders were reacting to, right? What our customers were reacting to in the market. Overall, I think we feel pretty good, as Dave was saying. I would just add, you know, early in the year with the volatility of expectation that was out, pretty much with anybody that you talked, it was tough to put a stake in the ground and say, "We're great, and we know we're gonna be okay." Our guys did a fantastic job of preparing for the worst and hoping for the best. We prepared for the downside scenario with our cost management. Then, as we got clearer sight to how the market of the quarter was gonna play out, we managed against that baseline. You know, as you heard, even from our builder customers, we just reflected the same sentiment they did at that point in time. As you're hearing them now, they're also saying it was better than they expected. It's kind of a combination of all of that. That's helpful color. Then just on the multifamily business here, obviously very strong in the quarter. Can you just talk about the size of the backlog that you guys have remaining in that business and any guardrails on how to think about the business through the rest of the year here? It's certainly a nice part about that business is we do have a bit more visibility to the backlog. Right now it is substantial because that part of the market has been strong and in somewhat surprising fashion, has maintained its strength. you know, I think there's absolutely a great profitability story in that world right now, but as Dave mentioned, that will continue to normalize over time as the quote prices and the market prices of commodities tighten. Yeah, that's absolutely part of both what allowed us to do the M&A in that sector of the market, but what we're enjoying in terms of the results so far this year and through all of 2023. The only thing I'd add is we've got a really substantial backlog that gets us through 2023 and beyond. That backlog is declining. In other words, we're completing jobs at a faster pace than we're filling the pipeline back up because that sector, in general, is facing the same capital cost issues that the single-family sector is facing. There's just kind of a pause or a hesitancy in that group to try to figure out what the value proposition going forward needs to look like. We still believe, again, long term, housing demand wins, including in multifamily. As there's a little bit of a recalibration of that capital cost, we are seeing jobs finish at a greater rate than jobs being entered into the pipeline out at 12 months and beyond. Great. Good luck in the second quarter. Thank you. We'll take our next question from Stanley Elliott with Stifel. Good morning, everybody. Thank you for the question, and nice start to the year. Hey, Dave, piggybacking on the commentary on the multifamily side, when we think about the value-added part of the business, does it break down pretty consistently between your single-family, multifamily buckets? Then, you know, how quickly is it, or how difficult is it rather, for you all to switch kind of focus in between the individual markets, you, if we do see kind of a multifamily decline, you know, in 2024 and beyond? Stanley, can you repeat the first question? You broke up. Yeah, sorry about that. In terms of kind of the multifamily or the value add piece as a whole, is there a way to differentiate or delineate between, you know, how much of your value add is going into multifamily now versus single family? Maybe it's just consistent with the overall portfolio, but I was looking for maybe a little direction there. Also in terms of, you, the ability to pivot, you know, products necessarily between multifamily or single family, more on some of the manufactured side, depending upon what's gonna happen with those end markets. Thanks for that question. Within the multifamily segment for us, it's primarily value add. We don't do a lot of non-value add with our multifamily customers. Trust is the overwhelming, you know, majority of the value add. It will always have a higher percent of multifamily sales as being value add. Now, in the context of the overall business, it's still a fairly, you know, it's 13% of our total business. Even in that context, it doesn't move the needle very much either way versus the single family. Now, what I will tell you is our guys have done a great job, where we have multifamily plants at capacity, moving business to single-family plants that are under capacity. That's the value of our platform and the ability to have, you know, to manage the effectiveness of where we can build those trusses in the most efficient way by having, you know, the availability of those single-family plants. There is a coordinated effort to build those trusses where we can get the most efficient cost, and it has to be within the radius of the job that we're trying to supply. There's a lot of coordination that goes on there and a significant integration effort to make that happen. Perfect. Actually, that's great color. Thank you. In terms of kind of the outlook, I mean, the free cash flow, you know, continues to be quite good. Even with M&A, you guys are gonna be below, you know, a half a turn of leverage. Peter, how are you guys thinking about managing the capital structure? I mean, you mentioned repurchases, you know, what is your comfort level in terms of leverage right now, given that we are in kind of a still, you know, somewhat uncertain market? Yeah, you know, I think as a general guideline, we still like one to 2x base business as a guideline that is helpful in terms of thinking about how to minimize our risk, but still take on an appropriate amount of it. You know, it's a metric that if you think about base business in the last year, we'd say we have room, but we're certainly in the range rather than if you just look at our trailing 12 actuals, it looks like we're a little bit under-leveraged in that regard. As this business normalizes, as we get a better visibility into 2023 full year, we'll go ahead and update that base business, give you an updated thought process around the leverage ratio. At this point, we feel pretty good about our borrowing, both the cost and the tenure, and we'll continue to watch it. Great, guys. Thanks for the questions, and best of luck. Thanks. Thanks. We'll take our next question from Jay McCanless with Wedbush. Hey, good morning, everyone. Thanks for taking my questions. Just, I know that lumber, the actual commodity cost is becoming less relevant for your business, but it's been surprising how subdued the lumber market and lumber prices have been this year, especially in light of some of the curtailments that we're starting to hear about. What are you hearing from your suppliers there, and how are you feeling about the direction of the lumber prices over the next two to three months? Yeah, that's a tough question to answer. You know, I think we continue to manage it on a flow-through basis, ensuring that we get the right margins for us. You know, it's been a little bit of back and forth. I hear you. You know, there have been some indications that taking capacity out might be helpful to put a floor under it. There's been some other murmurings, particularly on the LVL side, about adding capacity. You know, I think it's kind of range-bound right now, but tough to say. It's been such a surprising commodity over the last few years. I certainly don't feel comfortable predicting, but we're ready. Okay. The other question, I think, Dave, you may have already addressed this, just wondering, with some of the financial pressures that supposedly are coming from banks tightening credit, et cetera, have you seen your competition on the distribution side getting more aggressive on price, or has this lift in sentiment from the builders in March and April been able to diffuse some of that or most of that? I think what you're saying is or asking about is the bank implications on demand, as a result, what is that doing with our supply chain partners. I would tell you there are products that there is a little of additional capacity versus demand. In general, our supply chain partners at this point in time have worked through where they had excess capacity in the first quarter and kept things at a normalized environment. They're still in, you know, experiencing inflationary pressures in their business as well, specifically around labor. They've been a little reluctant to get too aggressive unless it was to balance the capacity versus on-hand situation, which pretty much worked itself out in the first quarter. You know, I think we're in that, you know, the word of the day for the industry is stabilization. I think we're all in kind of a stable market and trying to be nimble and be able to respond either on the upside or the downside as necessary, and I think that's kind of where we are today. Okay. That sounds great. Thanks for taking my questions. Thanks, Jay. We'll take our next question from Steven Ramsey with Thompson Research Group. Hi, good morning. Maybe just to clarify on the first quarter, better than expected start to the year. Was that in all segments or did one segment drive that over another? Maybe you can dovetail into the green shoots that you saw in April, maybe elaborate how that is connected to the better start? Fair question. I would say overall, we saw more resiliency in the market than we had forecasted. I think that's fair to say across the board. We saw the most resiliency geographically in the East, I would say product-wise in value-add. And in terms of, you know, the timing on that, I don't think there's anything strong indicating there is a time horizon that caused the results to be different, meaning each market is digesting what their demand looks like. Each market is resetting and placing orders. Overall, I think it's been more orderly and more disciplined in terms of reacting to the step down in sales than we'd originally forecast. As far as the green shoots, comment, I think what we're seeing from our customers is they're cautiously optimistic, again, that things will be stable. There are areas where things are showing the ability for demand to be resilient when mortgage rates are at a level where buyers enter into the market again. Areas of the country that we've seen where that's a little better are where there's actual pockets of strength with real job growth versus what was somewhat of a boom during COVID that's kinda now receded. You know, again, mainly moving west to east is where we see it improving. West is becoming, you know, starting to show signs of at least leveling out. Okay, that's helpful. Then thinking longer term, the secular penetration of value-added products in multifamily and single family, how do you see that shaping up over the long term? You said multifamily is mostly value-added products. Is there less of a penetration opportunity there or adding more value-added products into that portfolio for those customers? Yeah, I mean, overall, we're very excited about what value add means in the long term. You know, we've certainly, moved the needle quite a bit in terms of our maps being at 56% value add this quarter. We're not done. You know, there's more opportunity geographically. There are more opportunities to have the full portfolio of products that we have in our, in our offering in markets where it's not there yet. I think where we ultimately expect to get to is if you look at the digital world, the ability to do more and more of that value-added work right? We're looking for ways to grow, our ability to serve our customers, make them more efficient, help their total cost, of build go down. We're certainly excited about it. We think there's a lot of opportunity there still. You know, there's not a lot of great numbers in terms of share. It's a little hard to talk about it that way. We're certainly believers that there's much more to go. The only other thing I'd add specifically around truss is, you know, the premise around adding multifamily truss was end market diversification from single family. That only works when you have the coordination between the single family plants and the multifamily plants to be able to share work. What we're doing really well is figuring that out and integrating that. You know, it accomplishes our objective to make sure when multifamily is hot, we're able to hit there. When single family is hot, we're able to hit there. Excellent. Thank you for the color. We'll take our next question from Joe Ahlersmeyer with Deutsche Bank. Yeah, thanks for taking my questions, and congrats on the impressive results. Thanks, Joe. Looking at your windows, doors, and millwork performance in the quarter, essentially flat year-over-year, could you just maybe unpack that a little more with respect to what drove that? Are we seeing perhaps stronger pricing in doors? Is this mainly the multifamily performance, or are we also perhaps seeing, a manifestation of the single-family completion still, positive on a quarterly basis here? Yeah. I think it's a little bit of a couple of those things. The, the completion certainly remained strong on those back of the building process products. Window, doors, and millwork, good example. I think there was quite a bit of disruption in that part of the market as well, which slowed the ability to put product on the ground when needed. That's another big component. We've also invested, so there's increased ability to serve as well. Great. you know, sitting here this time next year, if we're looking at this bridge on page 10, is it likely that we see now the commodity deflation bucket fairly de minimis on a year-over-year basis? Relatedly, that same bucket in the second quarter coming up here, your expectation for that, I assume, is a significant increase in the headwind versus 1Q. Maybe just some context around how that shapes up next quarter and this time next year? Thanks. Yeah, no, you're right. Right. We should have digested the bulk of all this commodity noise, the commodity volatility by next year. Q2 would be the biggest comp in terms of peak pricing hit in Q2 of last year. You know, it may drain a little bit into Q3, but Q2 is the biggest impact on year-over-year basis. That's right. Could it be as much as, I mean, $2 billion-2.5 billion of a headwind on sales, or is that too aggressive? We can get back to you on that one. I don't actually have that narrow a guide off on top of my head. Okay, no worries. Thanks a lot, guys. Thank you. As a reminder, if you wish to ask a question, please press star one. As a reminder to participants, please only ask one question. We'll take our next question from David Manthey with Baird. Yeah, thank you. Good morning, everyone. When you talk about productivity savings here, I'm just definitionally wondering, is that mostly or entirely in SG&A? For example, the $34 million in productivity this quarter, is that separate from your higher gross margin outlook, or is there some overlap between the two? Yeah. With productivity savings actually is also a component of margin where it relates to manufacturing, where we've gained manufacturing efficiencies. It actually is a positive contributor to our margin as well. It's both when we get it in the SG&A categories and the COGS categories through manufacturing efficiencies. I assume that varies from quarter to quarter, so there's no base rule we should be thinking about. That is correct. Okay. Thanks for taking the question. Thanks, David. We'll take our next question from Adam Baumgarten with Zelman. Hey, good morning, guys. Can you walk through what you're seeing on pricing for the non-commodity part of the business? I mean, I think commodity pricing has been the headline that we've all talked about, there's certainly been a lot of work done on the pricing in the non-commodity side. It's an area that I think really lends itself to the process and the discipline that we've implemented over the last five years or so. Certainly, a nice offset to the volume headwinds from the pricing side. Obviously, not all of it, but certainly strong, healthy pricing in that space. A chunk of it absolutely attributable to the multifamily mix change and the profitability of that business. Got it. Thank you. Thank you. We'll take our next question from Ketan Mamtora with BMO Capital Markets. Thanks for taking my question. Peter, can you just clarify how you think about free cash flow for 2023? I thought I heard $1 and a half billion earlier in the comments? Yeah. You know what? Free cash flow continues to be a bright spot for us. We actually generated a substantial amount in Q1, you know that's a bit unusual for us. Some of that has to do with the resizing of the business on a year-over-year comparison basis. We are still performing well, quite profitable. We're comfortable saying that we expect cash flows to be kind of north of that $1.5 billion range for 2023, based on sort of the most likely or middle of the path scenario that we provided. You said north of one and a half, Peter, just to clarify? That's correct. Perfect. Thank you so much. It appears that we have no further questions at this time. That concludes today's teleconference. Thank you for your participation. You may now disconnect.