Good day. Welcome to the Q1 2023 UFP Industries, Inc. Earnings Conference Call and Webcast. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one one on your telephone. You will hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. 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. Your line is open, sir. Welcome to the 1st quarter 2023 conference call for UFP Industries. Hosting the call today are CEO Matt Missad and CFO Mike Cole. Matt and Mike will offer prepared remarks, and then the call will be open for questions. This conference call is available simultaneously in its entirety to all interested investors and news media through our website webcast at ufpi.com. A replay will also be available at that website. Before I turn the call over to Matt Missad, let me remind you that today's press release and presentation include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that could cause actual results to differ materially from the company's expectations and projections. These risks and uncertainties include, but are not limited to, those factors identified in the press release and in the filings with the Securities and Exchange Commission. I will now turn the call over to Matt Missad. Thank you Dick. Good afternoon, everyone. Thank you for joining the first quarter 2023 conference call. Going through the Hitler's party. You think unpredictable would happen, in the end, everything okay. Our chaperoning through a tricky quarter, we were able to report earnings per share of $1.98, which exceeded our analyst consensus estimate. The first quarter results were generally in line with our expectations, although some unanticipated things happened. As an example, January was in line with expectations, February was below, and March was above. We will review the results by segment, the overarching theme is that challenges will continue as the economy is affected by interest rate changes, reactions to unsustainable federal debt levels, and the resiliency of consumers. We plan to anticipate and meet the challenges head on. We discussed in February, the year 2023 will not likely be smooth, but we expect it to be more in line with pre-COVID economies plus normal growth. Our team is focused on executing our plans and taking advantage of opportunities if others stumble. We have accumulated a significant amount of capital and will stay operationally aggressive and fiscally conservative using our balance sheet to support our growth and value creation. Our unique business model allows decisions on cost containment, staffing, and inventory levels to be handled by those closest to the action, and we don't wait for events to make decisions. Our growth hasn't affected our agility, and we intend to keep it that way. Let's review segment performance and outlook. In retail solutions, as a value-added manufacturer, seller, and self-distributor, our products provide solutions for the DIY consumer as well as the professional contractor. Our strategy in this segment is simple: provide innovative new products and solutions, find, harness, and expand opportunities, select and build the right brands, and utilize our national reach, purchasing expertise, and distribution network to provide the best customer value. Overall, retail unit sales were only down 2% versus 2022, a better-than-expected result. The leading indicators of remodeling activity published by the Joint Center for Housing Studies predict a modest 2.8% decline in remodeling activity over the period ending in Q1 of 2024. Our big box customers are executing their strategies to capture business from the professional contractor, and they appear to be taking share. We, too, will work hard to make sure we can capture additional market share while enhancing our return on investment. In the first quarter, ProWood and Sunbelt unit sales were up double digits from 2022. The growth can be attributed to favorable market where prices are comparable to pre-pan-pandemic levels. Outdoor projects using lumber are much more affordable now than in the previous few years. Most of the total revenue shortfall was due to a lower level of lumber market. As we predicted, margins were lower in Q1 of 2022 as the buying opportunities did not materialize in 2023 like they did a year ago. On a positive note, you may recall in Q2, the declining market hurt margins in ProWood and Sunbelt. Thankfully, we don't expect a similar lumber market decline in 2023, and I am encouraged by the words of Paul who said, "You cannot fall off the floor." Deckorators had a solid first quarter. They have invested in more innovation capacity and will be driving new products to market using our patented mineral-based technology, which has considerable opportunities for growth. Its durability, ease of use, and enhanced strength-to-weight ratio make it a contractor favorite. The launch of our Rapid Rail has exceeded our expectations, helping us achieve our goal of increasing share while achieving better sales attachments of railing to decking sales. In our UFP-Edge business unit, we named a new leader. Chris Hain will bring a renewed focus on driving efficiency and implementing the growth strategy set forth by Will Schwartz and the retail team. While Edge was slow in the first quarter, market demand has started to pick up. Edge sales were particularly affected by weather, including key markets on the West Coast. Inventories in the channel are also better balanced, which will allow Edge to better manage demand with the ability to react quickly. Share gains are a critical piece of the Edge strategy. As we analyze the next manufacturing location in the U.S. for this great product lineup, we will utilize our partnership with Paneles Universales in Mexico to produce product in one of the best facilities in North America. Moving to the Construction segment, factory-built is trending according to plan and is well below year-ago levels. The RV industry is down by as much as 80% in some areas, while the MH industry is down 29% based on February shipments. The current forecast for shipments of manufactured housing units in 2023 is 71,000. We have adjusted our business accordingly and are investing in more technology to provide options for affordable homes. Our sales into RV are a small percentage of total sales, but there continue to be opportunities to innovate and create more value in that space. Site build has been a pleasant surprise thus far, even with February actual new home sales being down from 2022. March showed a rebound and current order files have improved as well. We are adding a second shift in many locations as we ramp up to ship customer orders. The outlook for our site build business is more positive than it was two months ago, as the annual starts forecast ranges between 1.2 million and 1.4 million for 2023. At that level of activity, we have a good sustainable business unit for site build. Commercial had a positive Q1. As we have seen in this business, when economic times are uncertain, there's a tendency to push back projects. They eventually come through, but it creates a much greater cost for us to service. While the order files are strong, our ability to hit plan for the year hinges on our customers moving forward on their remodeling and construction plans. Our team has done a very good job of refocusing for profitability and return, and we will need to continue to drive that improvement in order to compete for capital with our other business units. Concrete Forming Solutions is making investments in growth by opening new facilities and adding sales talent in selected markets. Our new locations in Long Island, New York, and Colorado are up and running. These will increase SG&A costs in the near term, but will serve as a catalyst for their target of $500 million in revenue and beyond. UFP Construction will rely on our experienced management team to guide the business through any uncertainty and to produce strong results for the balance of 2023. UFP Packaging continues to strengthen its structure to bring greater efficiency on the design and manufacturing sides of the business while better serving the customers. Our use of our investments in mixed materials allows us to make better solutions at better values. We expect these improvements to yield greater market share in each of our runways. The packaging industry is fragmented, and our modest market share leaves tremendous opportunity for growth in packaging. PalletOne performed well in Q1 and has been using the combination with other UFP facilities to serve national customers and grow their presence and importance with national, regional, and local customers. PalletOne continues to look for opportunities to expand its network to get closer to the customers nationwide. In structural packaging, demand for this business unit was unexpectedly soft in Q1. The Purchasing Managers' Index indicates a lack of strength with March's indicator of 46.3, a 19% drop from a year ago. As lumber and other input costs have normalized, the value of our product remains relatively better due to our focus on capacity and solution-based designs. We are growing capacity without adding additional facilities by consolidating production of certain items in key regional locations. We need to convert customers to more value-added products and services as well as increase our market share to reach our targets. Increasing our design, engineering, testing, and analytical capabilities will help this effort, as will adding increased capacity in our steel and mixed material solutions. Protective Packaging is growing revenues and looking to scale its recent acquisitions in corrugate and labels. The unit is executing its scale and synergy plans with designs to add 50% more capacity to the label production and to add a second corrugate conversion facility. Our international team is focused heavily on extending our packaging solutions to multinational customers. The recently acquired online timber trading platform, Timberbase, is expected to drive sales growth and create efficiency in the supply chain for our foreign-to-foreign sales. Some other areas of interest are new product sales. New product sales for the first quarter were $166.6 million. Our annual target for 2023 is $795 million. We have work to do to achieve that target. We are building out the framework to support achieving the target. Our Innovate Fund has a robust pipeline of new targets, which we will select from to ensure the best results three to five years from the date of our investment in these companies. Acquisition growth is another area of focus. We continue to drive our growth strategy, including acquisitions. Currently, our acquisition team is reviewing several potential transactions. One of the challenges is determining the new normal for financial results after a few years of outsized performance. Again, we look for companies with a good cultural fit who bring clear new product capabilities or expansion of existing product lines which we can scale through our network. Purchasing. The lumber market has been trading in a relatively narrow band thus far in 2023. For example, with southern yellow pine in week one of 2023, Random Lengths was $459 per 1,000 board feet. At quarter-end, in week 13, the market was $533 per 1,000 board feet. Contrast that with week 1 of 2022 at $922 per 1,000 board feet and week 13 of 2022 at $1,235 per 1,000 board feet. We expect that as new production comes online, mills will curtail other production to manage against excess supply. Unless there is unexpectedly high demand, we don't anticipate the same price levels in the lumber market we saw in 2022 or 2021, which may result in lower revenues per unit. Transportation. The availability of drivers is improving while the cost of labor, equipment, fuel, and insurance are elevated. We are implementing our new transportation management system in the second quarter, which will serve as a springboard to improve transportation management overall. Human capital. While the typical unemployment numbers remain low, the U-6 index was 6.7% in March. The workforce participation rate was 62.6%, still well below historical averages. We are receiving more applicants, yet finding those motivated to grow a career is still a challenge. We have enhanced our training programs to allow more of our internal candidates to obtain the skills and training they need to move up in the organization. We have implemented our new human capital management software in most of our facilities and will be integrating the most recent acquisitions over the next year. In an uncertain economy, our goal is to retain our key employees and to help them grow with our company. We will also try to bring outside skills and talents to our organization when other companies falter. Since our growth will be fueled by the talent of our team, we will keep training, recruiting, and making ourselves better for the future. All who want to work hard to create a better life for themselves and their families are welcome and encouraged at UFP. The best performers will win. Capital allocation. As you know, we are focused on prudently and profitably investing capital in our business. Growth capital is a priority via greenfield and technology investments, as well as targeted acquisitions that expand our product offerings or our reach for both. We also will provide capital for replacement and maintenance needs. In Q1, we returned capital to shareholders through share repurchases, buying back 451,000 shares, and our board declared a $0.25 per share dividend for payment in June. For the forward outlook, as I try to predict what will happen over the next three quarters, I am reminded of MGK's lyrics: "All I know is I don't know nothing. People talk, and they don't say nothing." While those lyrics may disappoint an English teacher, they create a simple reminder that there are hundreds of forecasts published and equally as many predictions as to what the Fed might do or whether Congress will rein in spending or increase the debt. From what we can glean today, we are still on track for our annual targets, and the current market indicators support us achieving those targets. Only time will tell if, quote, "I don't know nothing at all," end quote. Now I'd like to turn it over to Mike Cole to review the financial information. Thank you, Matt. Hello, everyone. Our results this quarter were in line with our overall expectations and included a 27% drop in sales to $1.8 billion, consisting of a 20% reduction in selling prices, primarily due to the decline in lumber prices we passed on to our customers and a 7% decrease in units. A 37.5% drop in operating profits to $162 million, resulting in a decremental operating margin of 14.6%, slightly better than the 15%-20% range we estimated for the year. A $208 million improvement in operating cash flow compared to last year as soft unit sales and low lumber prices reduced our seasonal increase in net working capital. A balance sheet that continues to gain strength with a net cash surplus of $145 million this year compared to net debt of $410 million last year. By segment, sales in our retail segment dropped 25% to $750 million, consisting of a 23% decline in selling prices and a 2% decrease in units. Given market conditions, our unit sales held up well this quarter, primarily driven by our ProWood and Deckorators business units. Our unit sales to big box customers also held up well with a 6% increase for the quarter, while our business with independent retailers, which is more closely correlated with new housing starts, dropped by 17%. Our big box customers continue to pursue a greater share of professional contractor business. Our retail operating profits dropped to $41 million this year, a 42% decrease from last year, resulting in a 12 and a half percent decremental operating margin. We mentioned last quarter, we expected a difficult comparison in Q1 this year for retail. Last year, retail, which has a sales mix heavily weighted toward variable priced treated lumber, greatly benefited from a rising lumber market that reached over $1,300 per thousand, compared to only $400 per thousand this year. This greatly enhanced profitability in Q1 last year, caused unfavorable results in Q2 through Q4, when prices then dropped steadily until they reached a bottom of just under $400 a thousand at the end of 2022. As we mentioned last quarter, we continue to believe retail is well-positioned to report an increase in operating profits for the year, as Q1 results were in line with our expectations. Moving on to Packaging. Sales in this segment dropped 20% to $487 million, consisting of an 18% decline in selling prices and a 2% decrease in units, which was in line with expectations. We were pleased to see that our team added approximately $28 million of sales to new accounts, and $7 million of sales to new locations of existing accounts. These increases were more than offset by a decline in prices and unit sales to existing accounts as market demand declined. Our packaging operating profits dropped to $55 million, a 34% decrease from last year, resulting in a decremental operating margin of 22%, which is within the 20%-25% range we estimated for the year. Customer quoting activity accelerated during the quarter, resulting in a more competitive environment. We believe this should also give us opportunities to gain market share of desirable business as the year progresses. Turning into Construction. Sales in this segment dropped 34% to $516 million, consisting of an 18% decline in selling prices and a 16% decrease in units. As expected, the unit decline was due to our site build and factory build businesses, whose units declined 22% and 19% respectively. These declines were offset by unit increases in our commercial and concrete forming units as these end markets remained resilient. Operating profits in our construction segment dropped to $54 million, a 31% decrease from last year, resulting in a decremental operating margin of 9%, which was better than the 20%-25% range we estimated for the full year. Last year, in Q2 through Q4, the construction segment benefited from the drop in lumber prices I mentioned earlier because its sales are more heavily weighted to products with selling prices that are fixed for a period of time. Peak demand and capacity constraints also allowed the team to be more selective in the business we pursued last year. As we manage through this down cycle, each segment continues to focus on executing our strategies to grow our portfolio of value-added products. We're pleased to report an increase in our ratio of value-added sales to total sales to 68% this year from 58% last year. Similarly, our ratio of new product sales to total sales increased to over 9% this year from 7.4% last year. We're confident these efforts will continue to help us achieve our 10% minimum EBITDA margin target and help us continue to enhance our profitability over the longer term. We're pleased to report an EBITDA margin for the quarter that exceeded 11%. We're also mindful of our cost structure in this environment as we ensure the company is appropriately sized relative to demand, while still providing the resources needed to execute long-term strategies and enhance our ability to offer value-added solutions and drive innovation. Our SG&A expenses came in slightly under plan, declining nearly $26 million this quarter or 12%, primarily due to lower bonus and sales incentive expenses. Moving on to our cash flow statement. Our cash flow used in operations was $37 million, a $208 million improvement over last year due to lower seasonal working capital requirements resulting from soft unit sales and lumber prices. Our cash cycle for the quarter increased to 71 days this year from 61 days last year due to a four-day increase in our receivable cycle and a seven-day increase in our inventory cycle, offset by a one-day increase in our payable cycle. While we've experienced a slight delay in payments with certain customers, our overall receivables are in good shape with over 93% current. Our inventory cycle is above historical trend and is an area of focus as we reset our safety stock levels for the improvement in supply chain constraints and lower demand environment. Our investing activities in Q1 included $38 million in capital expenditures. We continue to target CapEx of $200 million-$225 million for the year, but long and variable lead times may continue to impact timing. Our capital investments are primarily focused on expanding our capacity to manufacture new and value-added products, primarily in our packaging segment and Deckorators and ProWood business units, achieve efficiencies through automation and enhanced working conditions in our plants in all segments, and increase our transportation capacity as we transform this function from a cost to a profit center. Finally, our financing activities for the year included $16 million of dividends and $33 million of cash paid for share buybacks. Turning to our capital structure and resources, we continue to have a strong balance sheet with $145 million in surplus cash in excess of debt compared to $410 debt last year. Our total liquidity was $1.7 billion, consisting of surplus cash of $423 million and availability of $441 million under our credit facility and $535 million under a shelf agreement with certain long-term lenders. The strength of our cash flow generation, conservative managing our capital structure and prudent return driven approach to capital allocation continues to progress with an abundance of capital to grow our business and also to return to shareholders through up and down cycles. We'll continue to pursue a balance and return driven between dividends, share buybacks, capital investments and M&A. Specifically, our board approved a quarterly dividend of $0.25 a share to be paid in June. We have a share repurchase program approved by our board of directors, providing us with authorization to purchase up to 2 million shares until February of 2024. Through April, we've bought back 550,000 shares at an average price of $78.45. As I mentioned earlier, we're planning for total capital expenditures of $200 million-$225 million this year, and we continue to pursue a healthy pipeline of M&A opportunities with companies that are a strong strategic fit and enhance our capabilities and competitive position while providing higher margin return and growth potential. That's all I have on the financial, Smith. Thank you, Mike. Now I'd like to open it up for questions. Thank you. As a reminder to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. One moment while we compile the Q&A roster. Today's first question will come from the line of Stanley Elliott with Stifel. Your line is open. Hey, everyone. Thank you, guys for taking the question. Impressive in the environment. I guess I'd like to start off on the packaging business. I mean, we've seen PMIs, you mentioned them being down kind of 46-ish, we had five quarters or so sub 50. They've kind of rebounded here. You know, should your packaging business track that, maybe on a lag? Do we think that,, some of the outgrowth initiatives initiative you will have, in terms of like, gaining share and gaining customer wallet can actually help that part of the business perform better? Yeah, I would say it's the latter, Stanley. I think it, to me, it's just a data point to consider. I think our team, the market was soft in the first quarter, no doubt about it. I expect it probably will be a little soft, but we see signs of improvement and I think that's the important thing. Most important is what you outlined at the end there, which is our ability to gain market share and provide new innovative solutions we expect will help us kind of regardless of market size. Then kind of switching gears, you mentioned, well, I thought I heard positive commentary around the Deckorators product, if that's. Would love to hear a little bit more about that. Then, more broadly, how are you all thinking about the retail business? You know, the news that's constantly talking about the consumer getting stretched, and I do think the big box channel is positioned to outgrow, other distribution networks. If you could kind of like, elaborate on a little bit those two would be great. Sure. On the Deckorators side, obviously we're excited about the future that certainly the mineral-based composite, which I talk about a lot, is something that we're excited about, a lot of potential new products for that technology. And I think the Rapid Rail system, among other things that are being added, to the extent that we can tie those together with our decking sales and get more of a share of the combined total, that's a big plus for the Deckorators and the Deckorators brand. I think if I look at retail in general for your second part of your question, you know, there is a slight reduction, 2.8%, I think over the next basically year, is what's being predicted in the repair remodel index. I like the customers that we have, and I like the approach we have. I really think with the combination of both ProWood and Sunbelt and the strategies that our retail group has, that we should be able to take share. I would expect getting growth from share. As long as the market holds reasonably well, we should be very, very good. I think the challenge to everything is what happens if the consumer loses confidence. Right. I guess one last quick one, if I could. You mentioned, commentary around January, then February and March. Could you share or care to share anything around how April is looking thus far? Yeah, I think it's kind of, if you kind of look at it, the trend is a positive trend from March. I sense that that is continuing, at least at this point. Great, guys. Thanks for the time and best of luck. Thank you. Thank you. One moment for our next question. That will come from the line of Reuben Garner with The Benchmark Company. Your line is open. Thank you. Good evening, everybody. Matt, thank you for the MGK lyrics. I appreciate that. Maybe if we could start off with the a follow-up on the retail side. Matt, you mentioned, inventory in the channel, I think, was better balanced. Can you go into more detail on that? We've heard in a few building product categories that maybe, or inventory at retail had gotten too low and things are maybe starting to normalize in the other direction. Curious if you're seeing that and if it's different by kind of product category. Yeah. The reference that I made was to the Edge product line, Reuben, but I think there's probably a fair amount of accuracy to the comment about just generally carrying a little less inventory, not quite as heavy as they were. That makes it a lot easier for us to manage, and as Mike alluded to, for us to be able to help manage our safety stock levels back to a more normalized kind of situation. Cautiously optimistic there. Okay. kind of a broader question about pricing. You guys have sort of distanced yourself, I think increasingly so in recent quarters from commodity price action. I was wondering if you could talk about some of the value-added areas, maybe some areas where pricing is holding in, better than it historically has, or areas where there's more pressure than others. Anything that jumps out to you, for some of the things that, areas where you've moved into more value add versus the commodity piece, that would be. Yeah. I think, we talk a lot about converting customers from sticks and panels to more designed, engineered, manufactured products. We see that both on the industrial side and on the concrete forming side as examples. Those are areas where we can help drive that process. I would say the other key portion of this is to try to make sure that we are at least paid reasonably for a lot of the products that we do put a lot of effort and energy into, treated lumber being one, where, we probably haven't been fairly rewarded for the value of that product. We continue to try to make improvements there in that model, and that'll be important to future value add sales. With respect to some of the other commodity type business, we're trying to de-emphasize that where we can, but we also recognize that some of it is the bread and milk that we need in order to get the rest of the value-added products to the customers. I know each of the business units in each of the segments is very, very focused on trying to maximize the value add. Developing new products is an area for us to help enforce that and to help that to grow as well. We're coming at it from a lot of different angles, and we expect that to continue to improve. Understood. Congrats on the results in a choppy period, and good luck going forward. Thank you, Reuben. Thanks very much. Thank you. One moment for our next question. That will come from the line of Ketan Mamtora with BMO Capital Markets. Your line is open. Good afternoon. Mike- Hey, Ketan. To start off, to start off, can you talk a little bit about, you know, your comments in the prepared remarks where you said, site build was a bit of a pleasant surprise? You know, curious if you can provide some additional color in the context of, the sharp drops that we saw in building permits and starts late last year. As we cycle through that, so far as consumption of materials is concerned,, so if you can elaborate on that would be helpful. Yeah. Let me try to make sure I understand the question well. Basically, if I looked at it and, you can kind of tell what our expectations were, with when I said, you know, January was in line, February was below, and March was back in line again. I think I would take a look at site build in a similar vein and say that, you know, we provided incremental margin information last year. We talked about what that might look like, and I would say to the credit of the site build management team and all the people on that team, they've been able to outperform even though, sales have been less than certainly they wanted, but they're in line with what our expectations were. I think what we're talking about at this juncture is the way March rebounded from what, the low was in February. It appears that there's more strength in that market. We feel much better about that today and feel very confident in our annual numbers, where had they all looked like February, we would have been less confident. I know I'm taking you on a long walk around the block, Ketan, I think that's hopefully that answers what you're trying to get at. No, that's certainly helpful. Matt, has the, you know, has that part of the market become, just generally more competitive so far as you can tell, given, you know, lumber has come down, demand has eased? You know, curious if the competitive dynamics have changed at all? I think there's a couple components to the competitive dynamics. One is the situation which we were fortunate to have a little bit of over the last few years, which was the demand far outstripped supply. There was actually a positive pricing element to our sales. That premium, I'll call it, is gone. That by itself creates competitive dynamic. Then with pricing being lower, that's gonna create a competitive squeeze as well. I think if I look at some of the services we offer in our value-based engineering, some of the other component services and the customer relationships that our team has been able to forge, I think we still become a preferred supplier. There is a value in making sure that our customers know we can deliver when we say we are. I think that's a big benefit for us. No, that's helpful. Final question, from M&A standpoint, obviously the balance sheet is in very strong shape. You know, curious where you see kind of most opportunities? You know, you talked about reviewing a number of, you know, opportunities. Where would you say, you know, you think there is the most potential? That's a great question. Each one of the business units has identified targets that they feel are very important to their future growth. That's creating what I think is a terrific competition for capital, trying to find the transactions that make the most sense that can bring the biggest impact over time. We've talked a lot about the industrial and packaging space, which for us is really total packaging now. We also would look at areas such as concrete forming, where there's some opportunities to convert more value-added sales. On the retail side, there's some very good opportunities there for mixed materials and other things. I don't think there's a shortage of opportunities, Ketan. Our challenge is making sure that we maintain our fiscal conservatism as we evaluate these opportunities. As I mentioned in my remarks, I think probably the bigger challenge is people thinking that the hockey stick that they are planning going forward is real when it may or may not be. Got it. No, that's very helpful color. I'll jump back in the queue. Good luck for the rest of the year. Thanks, Ketan. Thank you. Thank you. One moment for our next question. That will come from the line of Kurt Yinger with D.A. Davidson. Your line is open. Great. Thanks, and good afternoon, Mike. Hi, Kurt. Just looking at the retail gross margin, I mean, absent any big changes in lumber pricing going forward, is the Q1 kind of 12.6% number kind of a reasonable run rate? Then any kind of mix impacts to be aware of in Q2, maybe like a little bit heavier on the pressure treated side that could weigh that down or how do you think about that? Yeah. The biggest drivers within gross margin, Kurt, is if we get a market that stays, you know, pretty well deflated like it is now and we don't get a lot of sequential volatility, you know, the big drives for taking the lumber market swings out of it, given the amount of variable price, treated lumber, then it's really more mix changes. I think you know you're gonna see more treated lumber, like you said, in Q2, a little bit, you know, a little less of that than in Q3. While volumes pick up tremendously in Q2, right, the mix is more weighted towards treated lumber and could move margin down, but you have a lot more sales dollars, so profitability would be expected to be way higher. Right. Right. Okay. Perfect. That makes sense. In the packaging business, I mean, we kind of finally saw pricing flip to a headwind. Is that all flow through from lower lumber prices, maybe on just a bit of a lag or any other areas of pressure from a pricing perspective with customers? Yeah. What I would tell you is I think most of the lumber market flow through has been built in at this point. I think the question about how slow are the customers going to be is that some different runways may be, more of a longer-term slowdown. Others will bounce back, and that's the beauty of the balanced model of the customers that we have. What I would tell you is I think there's probably an increase in quoting activity right now as people who are not as busy as they were before are starting to take a look and trying to squeeze where they can. Again, I think, the benefits that we bring allow us to provide more value for the customer, but, there certainly will be that kind of normal pressure in the marketplace that hadn't existed in 2021 or 2022. Got it. Yep, that makes sense. Okay. Just on incremental margins, Mike, forgive me because I missed this. What was kind of the outlook for that within the retail segment for the year? We didn't provide one. We, we guided you, I guess, last time we spoke for Q1 results that would be well below last year. We, we knew that was going to happen given the dynamics with the lumber market and, but we had said that we felt like, once we get past Q1, I mean, we look at the full year, in Q2, Q3 and Q4, we would more than make up for whatever shortfall we had in Q1 because whatever we made in Q1 last year, we gave back and then some in Q2 and Q3. With a lumber market where it's at today, we definitely feel like that's the case. The shortfall that we have so far for the year, we're gonna more make up for the next nine months. Got it. Okay. Then, last quarter you talked about, I think, decremental operating margins 15%-20% for the year. You know, you guys, I guess, said that Q1 was pretty much in line with the expectations. Anything from a market or performance perspective here early in the year that, makes you feel like you could do a little bit better or come in at the low end of that range, or any thoughts around that? Well, I think, you know, we feel good about where we sit today. but the guidance that we gave is for the full year, and I think the guidance has to reflect some uncertainty still about, severity and duration of any recession. We're already in one today. You know, I think we still wanna be conservative in how we look at that. You know, those ranges, I think, are ones that we're still gonna still look to. I'd probably add, Kurt, that there are some opportunities for improvement. I know each one of the business units and segments see some different things that we can do to improve. Mike's right, there's other external factors that we can't control. We're gonna continue to work on the things that we can improve and hope the external factors take care of themselves. Right. Yep. Still early in the year. Makes sense. Then just last one for me. Mike, what was bonus expense here in Q1? You know, the bonus rate was about, we accrued to about 20% of pre-bonus operating profit. With that number, and you have the operating profit numbers, you can calculate, what bonus expense was pretty close. Got it. Okay. Thanks. Thanks for the detail, guys. Good luck here in Q2. Thanks, Kurt. Thank you. One moment for our next question. That will come from the line of Julio Romero with Sidoti & Co. Your line is open. Hi, this is Stephane Guillaume. Hello? Hi, can you hear me? Yes. Hi, this is Stephane Guillaume on for Julio Romero. How are you? Good. How are you? Good. Thank you. I guess my first question is, can you talk about your execution in retail and the progress the new segment president is making on creating synergies and scaling your products? Sure. I guess so, Will Schwartz, who just got into the role on 1 January is doing an excellent job. He's working with his team and helping to drive the business, and I think we're very optimistic about where that business is headed. Thank you. Can you also talk to pricing trends in the construction segment? Like, how much more do you foresee prices in that segment coming down before we see some stabilization there? Yeah, that's a really tough question. I try not to get into specific pricing, particularly by segment or by business unit. As we outlined before, I think the lumber market pricing and probably any premium from the demand far outstripping supply, those are already out of what I would say is pricing in Q1. For us, it really becomes what's the demand look like going forward. As long as the demand is in the range that we estimate it is, then the pricing we think will be somewhere in the range that it is. Thank you. I guess the last one from me. Can you speak to the potential impact on the regional banking crisis, whether to your EBITDA or to your customers, suppliers, et cetera? Yeah, well, I could probably speak for hours on it, but I don't think it'd be particularly useful for anyone since I don't have any specialized knowledge in the area. I think what it indicates is that, interest rate environment has caused some issues. It has ripple effects. From our standpoint, we're just looking to see what the next moves that the Fed makes are. At this point, very difficult to predict if it's a broader-based issue or just specific to a small number of banks. Thank you so much for taking my questions. Thank you. I'm showing no further questions in the queue at this time. I would now like to turn the call back over to Mr. Matt Missad for any closing remarks. Well, thank you again for joining us today. 2023 will be a challenging year. As we all know, with what might be the world's largest toddler birthday party in D.C., we'll still keep our eyes open. I know our team thrives on a good, a good challenge. While it snowed in Michigan this week, let's hope for sunshine in Q2 and throughout 2023. I know that no matter what the obstacles we face, our team plans to roll with the changes and come out ahead. Have a great day. Thank you all for participating. This concludes today's program. You may now disconnect.