Bluelinx Holdings Inc (BXC) 2025 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the BlueLinx Holdings' fourth quarter and full year 2025 earnings conference call. (Operator Instructions) and today's call is being recorded. We will begin with opening remarks and introductions. At this time, I would like to turn the conference over to your host, Investor Relations Officer, Tom Morabito. Please go ahead.

Thank you, operator, and welcome to the BlueLinx Fourth Quarter and Full Year 2025 Earnings Call. Joining me on today's call is Shyam Reddy, our Chief Executive Officer; and Kelly Wall, our Chief Financial Officer and Treasurer. At the end of today's prepared remarks, we will take questions.

Our fourth quarter and full year news release and Form 10-K were issued yesterday after the close of the market along with our webcast presentation, and these items are available in the Investors section of our website, bluelinxco.com. We encourage you to follow along with the detailed information on the slides during our webcast.

Today's discussion contains forward-looking statements. Actual results may differ significantly from those forward-looking statements due to various risks and uncertainties, including the risks described in our most recent SEC filings.

Today's presentation includes certain non-GAAP and adjusted financial measures that we believe provide helpful context for investors evaluating our business. Reconciliations to the closest GAAP financial measure can be found in the appendix of our presentation.

Now I'll turn it over to Shyam.

Thanks, Tom, and good morning, everyone. 2025 embodied grit and determination. Our fourth quarter and full year results demonstrated our ability to grow the business in the face of another year of challenging market headwinds and competitive pricing conditions.

Our relentless focus on the company's profitable sales growth strategy, targeting both single and multifamily end markets with differently disruptive product and service expansion initiatives led to flat net sales and higher volumes at solid margins in 2025 when compared to 2024.

Our strategy is working as it enabled us to successfully navigate a market that saw 2025 single-family housing starts down 7% year-over-year. In essence, our disciplined execution of the strategy led to share gains across multiple product lines and customer channels.

In terms of M&A, our acquisition of Disdero Lumber Company is going well and performing as expected, which I will speak to in a moment.I'd like to offer a few highlights from 2025. We delivered solid full year results, thanks to the team's commitment to our product and channel strategies and our business excellence initiatives.

As a result, we competed effectively in challenging end markets to win business and achieve solid gross margins of 18% in specialty products and 9.2% in structural products for the year. Our operating cash flow highlights the effectiveness of our disciplined approach to managing inventory in a challenging market environment. Our results reflect the effective commercial and inventory management capabilities we have as demonstrated by our successful efforts to address the inventory build ahead of a normal spring-summer selling season that never emerged.

As market conditions improve, those capabilities are expected to translate into materially stronger cash flow. Our fourth quarter results were also solid for the same reasons, but we did have an extra week in the quarter that increased top line volumes and SG&A.

Revenues rose slightly year-over-year, driven by higher volumes and the addition of Disdero specialty product sales in our financial results, which helped offset continued pricing pressure in structural products that lasted through the end of the year.

Specialty and structural gross margins were 18.1% and 10%, respectively, reflecting the strength of our customer value proposition and effective inventory management.Our product strategy remains designed to grow our 5 key higher-margin specialty product categories, engineered wood (inaudible) mill work, industrial and outdoor living products, though our efforts are now more deliberately aligned with the channel growth strategy to yield greater success.

Despite market softness and multifamily sales that generate incremental structural product sales, the specialty products growth strategy led to approximately 70% in net sales and over 80% of gross profit for both the fourth quarter and full year 2025.

While our product mix shift objectives remain on track, we are emphasizing strategic channel growth when assessing new product launches and managing working capital, which we believe gives us a competitive advantage. We continue to grow our multifamily channel, fine-tune our builder pull-through efforts with key customers and expand our national accounts business to more effectively drive sales across key product categories.

Our focus on strategic value-added services that align with specific customer needs is also differentiating us in the market, thereby enabling us to gain share and grow in challenging market conditions. We expect the multifamily end market to deliver strong long-term growth as multifamily housing stock is more affordable, which is why we remain committed to investing time, energy and resources into this channel to augment our institutional sales efforts that ultimately support single-family housing starts and repair and remodel activity.

Recent year-over-year housing data has reinforced the strategic merits of investing in our multifamily channel, which grew volumes 19% for BlueLinx in 2025. From a strategic perspective, it along with our builder pull-through efforts provided effective pathways for converting customers to key brands, including onCENTER EWP and Allura fiber cement siding and GP Gypsum products.

Naturally, this makes us an even more valuable growth partner to our suppliers, providing opportunities for geographic and product expansion with key partners. On the other hand, multifamily sales have longer inventory cycles and lower gross margins due to direct sales and a competitive pricing environment.

From a vision and long-term competitive perspective, we made significant progress in 2025 on our digital transformation journey to become the provider of choice for both suppliers and customers. These transformational investments are designed to rapidly grow our business at scale with both customers and suppliers by providing an exceptional experience that is highly efficient and effective. These investments will also enable us to drive operational excellence via productivity and efficiency improvements that enhance our gross margins and our EBITDA margins.

Phase 1 was completed in a timely manner and under budget. It included enhancements to our master data management platform and a new Oracle transportation management system. Although we successfully launched e-commerce pilots, we decided to place greater emphasis going forward on assisting several of our largest customers with optimizing their more advanced digital marketing platforms thereby aligning our e-commerce strategy with our channel growth strategy.

We currently view AI and current technological advancements as being the broad-based e-commerce solution going forward rather than traditional e-commerce platforms, though our thinking may change as the fast-paced tech environment evolves.

As we mentioned last quarter, we're especially excited about advancing our AI initiatives that enable productivity improvements and align with our sales growth strategy and that support our business excellence initiatives.

What began as a pilot with a small group in the company has expanded to give most salaried associates the ability to build agentic agents to streamline their work. We've also launched AI agents that help with modeling and data analytics, just to name a couple. We're even developing AI applications that support our core business such as value-add services, inventory management, commercial initiatives and training. We expect subsequent digital investment phases to further strengthen our commercial, operational and functional capabilities.

Modernizing the business with new technology will set us apart from the competition and accelerate profitable sales growth and operational excellence. From an M&A perspective, we are pleased with the progress we've made with the purchase of Disdero, a long-time Portland-based specialty distributor or premium, high-margin specialty wood products used in custom homes, decks and upscale multifamily projects.

This acquisition advances our key strategies, increasing our specialty product sales, growing multifamily sales and strengthening our Western US presence. We believe Disdero will be able to grow faster than it otherwise could by leveraging our national distribution network and strong customer relationships. Although it's early, we are pleased with Disdero's results and the execution of our integration plan.

Our financial position remains strong, with liquidity of $726 million at the end of the year, including $386 million of cash and cash equivalents. This financial strength gives us the flexibility to reinvest in business initiatives that allow us to increase sales, improve productivity, expand our geographic reach and provide better service to our customers and suppliers, all while providing us with the foundation to continue weathering soft market conditions. We were also able to opportunistically return capital to shareholders by completing $38 million in share repurchases in 2025.

Now for a few more highlights on our full year results. We generated 2025 net sales of $3 billion and $83 million in adjusted EBITDA for a 2.8% adjusted EBITDA margin. Adjusted net income was $7.8 million or $0.97 per diluted share. We were less profitable in 2025 compared to 2024 due to challenging market conditions and the SG&A impact of investments made to drive our commercial and digital transformation strategies. However, we are pleased that our strategic sales and product expansion efforts led to flat sales and higher volumes at solid margins.

Specifically, we experienced 19% volume growth in multifamily and 17% volume growth with some of our national accounts. Our builder pull-through programs executed in partnership with strategic customers led to key channel and specialty product growth. Our differentiated value proposition led to geographic and product expansion with key suppliers with meaningful year-over-

year growth across multiple product lines that align with our channel growth strategy. For example, our EWP sales were roughly flat and our EWP volumes grew by more than 7% on a year-over-year basis despite significant headwinds affecting housing starts. We also delivered solid gross margin performance despite difficult market conditions and a competitive pricing environment with specialty products at 18% and structural products at 9.2%.

Our relentless focus on the product and channel strategy fueled by our operational and business excellence initiatives such as effective pricing, strong value-add services, exceptional customer service, product expansion gains and disciplined inventory management helped drive these results.

Though the year demanded our associates remain focused on a profitable sales growth strategy, customer service and supplier expansion efforts, we did not lose sight of other important strategic levers to drive financial performance and shore up our financial position. For example, we purchased Disdero, refinanced our ABL and executed on certain cost-out and capital improvement initiatives.

Now let's turn to our perspective on the broader housing and building products market. The housing market remains soft, pressuring the building materials and distribution sector. Affordability challenges, low housing turnover and other factors continue to weigh on both housing and repair and remodel activity. We continue to view these pressures as temporary, especially given the persistent housing shortage and potential government policies that could unlock the housing recovery.

Long-term fundamentals remain strong for both new construction and repair and remodel work for the foreseeable future, providing a durable value proposition for BlueLinx shareholders. Despite lower housing starts and tepid repair and remodel activity in 2025, our product and channel strategies drove share gains supported by product expansion, builder pull-through and value-add service initiatives, multifamily efforts and national accounts attention.

Our focus on the company's largest accounts enabled growth despite low housing turnover and high interest rates. We believe that today's strategy and investments will accelerate momentum across all customer segments when the market improves.

Regardless of the near-term market backdrop, we will continue executing our profitable sales growth strategy to gain share at scale today, while continuing to make key investments in the business that will position us well for long-term sustainable, profitable growth.

Lastly, we are also monitoring the various proposals that the administration is exploring to help boost the housing market. While details are still being ironed out, we are optimistic that these proposals could start the housing recovery.

In summary, we delivered on our strategic priorities in 2025 as demonstrated by our specialty product expansion results, multifamily channel growth, key national accounts growth, margin performance, digital transformation, the Disdero purchase and our capital allocation initiatives.

As a result, we delivered solid results for both the fourth quarter and full year 2025. We believe in our strategy, and we'll continue to execute on it through the current cycle, which will position us for better-than-market growth when the housing recovery begins.

I'd like to wrap up by thanking all of our associates for their grit, resilience and dedication during a difficult housing market. Your commitment to our customers, suppliers and each other continues to drive more profitable specialty and structural product growth across our customer channels in challenging times while positioning us for long-term success.

Now I'll turn it over to Kelly, who will provide more details on our financial results and our capital structure.

Thanks, Shyam, and good morning, everyone. Let's first go through the consolidated highlights for the quarter. Before we get started, I would like to remind everyone that the fourth quarter of 2025 had 14 weeks versus our usual 13 weeks. As a result, our fiscal year also had 53 weeks versus the typical 52 weeks. Overall, both specialty products and structural products delivered solid volumes and gross margins within a challenging macro environment.

Net sales for the fourth quarter of 2025 were $716 million, up slightly year-over-year. Total gross profit was $113 million, and gross margin was 15.7%, down slightly from 15.9% in the prior year period. SG&A was $102 million, up $10 million from last year's fourth quarter.

This increase was mainly due to higher personnel expense, the addition of Disdero, the extra week in the fourth quarter and increased sales and logistics expenses driven by our strategic channel growth, including multifamily. Given the difficult demand environment, we remain focused on rigorous expense management and on identifying opportunities to further improve operational efficiency.

Net loss for the quarter was $8.6 million or $1.08 per share, primarily due to higher net interest expense, higher depreciation and amortization and M&A-related expenses. Adjusted net loss was $3.7 million or $0.47 per share, and we had an income tax benefit of 28% of the pre-tax loss. Adjusted EBITDA for the quarter was $13.9 million.

Turning now to fourth quarter results for specialty products. Net sales for specialty products were $505 million in the fourth quarter, up over 4% year-over-year. This increase was driven by higher volumes in nearly all product categories and modest price increases in millwork and siding as well as the addition of Disdero, partially offset by volume declines in millwork.

Gross profit for specialty products sales was $92 million, up 3% year-over-year. Specialty gross margin was 18.1%, down slightly from last year's 18.4%, primarily due to price deflation in certain product categories partially offset by the acquisition of the higher-margin Disdero business. Sequentially, Specialty gross margin increased 150 basis points from Q3 of 2025.

Based on the first seven weeks of Q1, we expect specialty product gross margin to be in the range of 17% to 18% with daily sales volumes lower than the fourth quarter of 2025 and higher than the first quarter of 2025, which was heavily impacted by severe weather.

Now moving on to structural products. Net sales were $211 million for structural products in the fourth quarter, down 7% compared to the prior year period. This decrease was primarily due to lower pricing for both lumber and panels when compared to last year, offsetting the higher volumes we drove in those categories during the quarter. Gross profit for structural products was $21 million, a decrease of 14% year-over-year and structural gross margin was 10%, down from 10.8% in the same period last year.

In the fourth quarter of 2025, average lumber prices were about $378 per 1,000 board feet and panel prices were about $438 per 1,000 square feet, a 12% decrease and a 20% decrease, respectively, compared to the average in the fourth quarter of last year.

Sequentially, structural gross margin increased 70 basis points from Q3. And comparing the fourth quarter of 2025 with the third quarter of 2025, lumber prices were down nearly 8% sequentially, and panel prices were down about 1%.

Based on the first 7 weeks of the current first quarter, we expect Q1 gross margin for structural products to be in the range of 9% to 10%, with daily sales volumes down versus the fourth quarter of 2025 and up compared to the first quarter of 2025, once again, due to the severe weather experienced last year.

For the full year, net sales were $3 billion in 2025, flat compared to 2024, largely due to volume growth in several categories and the Disdero acquisition, offset by lower price deflation in both specialty and structural products. Specialty sales were up slightly in 2025 due to higher volumes and the Disdero acquisition, partially offset by price deflation in several categories such as EWP and millwork. Structural product sales were down slightly as similar to specialty, higher volumes were offset by price deflation.

Total gross profit was $452 million for the full year, and gross margin was 15.3%, 130 basis points lower than the prior year period. SG&A in 2025 was $381 million, up 4% versus the prior year period due to the acquisition of Disdero, the extra week in fiscal 2025, increased sales and logistics expenses driven by our strategic channel growth as well as investments we've made in head count and technology to drive our strategy and long-term earnings growth initiatives.

For 2026, we expect our SG&A expense to increase slightly as a percentage of sales due to the addition of Disdero and increase in strategic sales head count and additional material handlers to deliver on expected volume growth and overall inflation in wages and other expenses, such as fuel and health care costs.

Net income was $219,000 for the full year and diluted EPS and was $0.02 per share. Adjusted net income was $7.8 million and adjusted diluted EPS was $0.97 per share. The full year tax rate was not meaningful given the level of our pretax income and for the full year 2026, we anticipate our tax rate to be approximately 25% of pretax net earnings before $3 million to $4 million of permanent nondeductible items impacting the tax rate. And for the full year, adjusted EBITDA was $83 million.

Turning now to our balance sheet. Our liquidity remains very strong. At the end of the quarter, cash and cash equivalents were $386 million, a decrease of $44 million from Q3, largely due to the Disdero acquisition, which, as a reminder, was purchased with cash. When considering our cash on hand and undrawn revolver capacity of $340 million, available liquidity was approximately $726 million at the end of the quarter.

Total debt, excluding our real property financing leases, was $381 million and net debt was a negative $5 million. Our net leverage ratio was a negative 0.1 time adjusted EBITDA, given our positive net cash position, and we have no material outstanding debt maturities until 2029.

Additionally, given the strength of our balance sheet and continued strong liquidity, we remain well positioned to support our strategic initiatives. These strategic initiatives include: continued growth with our largest customers and in the multifamily channel with this focus also benefiting our smaller customers. Demand pull-through efforts to drive strategic product sales that benefit our customers, continued specialty product expansion with key suppliers our digital transformation efforts and other organic and inorganic growth initiatives.

Now moving on to working capital and free cash flow. During the fourth quarter, we generated operating cash flow of $62 million and free cash flow of $56 million, primarily due to effective working capital management particularly as it relates to driving our inventory levels lower to be in line with the current demand environment, partially offset by the cash impact of lower earnings in the quarter. For the full year 2025, we generated operating cash flow of $60 million and free cash flow of $33 million.

Turning now to capital allocation. During the quarter, we incurred $5.4 million of CapEx, primarily related to our digital investments, normal replacement of aging components within our fleet and the typical maintenance and investment in our branches.

For 2026, we plan to manage our CapEx in a manner that reflects current market conditions and allows us to maintain a strong balance sheet. Our remaining capital investments will focus on facility improvements, further replacement of trucks and trailers and the technology improvements previously discussed.

Also, we did not repurchase any shares during the fourth quarter. For the full year 2025, we repurchased shares totaling $38 million. At year-end, we had $58.7 million remaining under our previous share repurchase authorization.

Our guiding principles for capital allocation remain consistent with prior quarters. We intend to maintain a strong balance sheet, which enables us to invest in our business through economic cycles, expand our geographic footprint and pursue a disciplined inorganic growth strategy as demonstrated by our acquisition of Disdero and opportunistically return capital to shareholders through share repurchases.

We also plan to maintain a long-term net leverage ratio of 2x or less. Overall, we are pleased with our solid fourth quarter and full year 2025 results. particularly in light of current market conditions. Operator, we will now take questions.

(Operator Instructions)

Our first question comes from Jeffrey Stevenson from Loop Capital Markets.

Hi, thanks for taking my questions today. First up, Specialty Products gross margin reported a nice sequential improvement during the fourth quarter and the return to your previously discussed normalized 18% to 19% range. And I wondered if you could provide more color on what were the primary drivers of the sequential improvement you saw in segment margins during the quarter.

Yes. Hi, Jeff, it's Kelly. So I think part of the improvement, if you recall, when we talked last quarter, we had some onetime rebate related true-ups with one of our vendors, and that represented about half of the increase as (inaudible) normalizing for what we'd expect in a typical quarter. And I guess the rest here is just continuing to maintain discipline, right, as we continue to price into what continues to be a challenging market.

And what I would say is that as we move into 2026, right, kind of similar to the trend that we've seen in the back half of 2025 with kind of a mobilization or flattening, if you will, of the decline that we had seen over the last 2 or 3 years in that specialty product margin, we're expecting in 2026 to be relatively flat to the margins that we experienced in the fourth quarter.

Yes. And just to add, Jeff, obviously, with soft market conditions, it's a competitive pricing environment. But given how -- given our go-to-market strategy with respect to product and channel, we're really leveraging our value-add services on top of key investments we've made to support those channels to really maintain our pricing at acceptable levels that corresponds to the value we're providing, whether it be on project management, [takeoff] services and certain CapEx investments we're making to drive various product-related value-add services and so on.

So we're really proud of what we've been able to do over the last year in an incredibly challenging housing environment with respect to not only volume growth but maintaining those margins you were asking about.

No, that's great color. I appreciate all the detail. And maybe kind of following up on specialty product pricing, in addition to some of the initiatives you've done internally. We've heard from one of your competitors that EWP price has largely stabilized.

And we're likely at the bottom as far as sequential declines go unless the builders spring selling season comes in worse than anticipated. And I wondered if you would agree with that from what you're seeing in your business? And maybe you could talk about a broader pricing outlook in the segment as we move into the first half of '26.

Yes. I would say based on our conversations, well, between looking at macro level data and conversations with customers, suppliers, and other stakeholders, we absolutely agree with that. We do think it has stabilized. But coming back to our value proposition in the market, there are various creative programs that we have developed on top of channel focus with multifamily, for example, that puts us in a more competitive position as it relates to driving, for example, EWP volumes while maintaining solid margins and being above the fray when it comes to an incredibly competitive pricing environment due to market conditions. But to your question, yes, we agree with that statement.

Got it. Got it. Understood. And then lastly, just appreciate the update on kind of where things stand with your technology investments. And I wondered if you could provide additional thoughts on why you pivoted away from an internal e-commerce platform now that there's more AI opportunities. And then moving forward, you talked about a larger Phase 2 with things like warehouse management system. Is that still in the cards over the coming years, Shyam?

Yes. So to take your first question on e-commerce, I'm sure it's -- I'm sure you're in the same boat as us where you can't pick up a paper every day or listen to something on the news, where AI is rapidly changing the tech environment.

So for example, it's not out of the realm of possibility that people will be able to execute on e-commerce orders via ChatGPT or Claude or Perplexity or one of these other AI platforms or execute off (inaudible) which is all the big range over the last couple of weeks. You've got vibe coding that's taking place as well where people can very quickly spin up new applications in order to drive sales internally as opposed to relying on third-party platforms.

All of that is to say that I think it would be (inaudible) to spend millions of dollars investing in an e-commerce platform that's based on traditional motions that could be obsolete before we even got through Phase 1 of it. So the idea is to take a step back and invest on the digital e-commerce side in a way that aligns with our channel strategy and where we're driving sales.

So with our biggest accounts, being more aligned with them to drive accelerated sales off and off their platforms and to really accelerate growth from a digital commerce standpoint that way while continuing to evaluate the landscape and figure out ways to jump in as quickly as possible as the tech landscape changes. As it relates to WMS, we absolutely believe in WMS. In fact, we have executed on a very successful pilot that has shown promising results.

And so the idea would be to invest in a very responsible way over the coming 12 months to 24 months in other facilities beyond what we already have. So we have [bin] locations and a variety of other things that support operational excellence and a $3 billion top line distribution business.

We have that. The idea is to take it to the next level and the recent pilot show that it makes great sense to do so. So that is the plan over the next 12 months to 24 months to make those targeted investments where it makes the most sense. The good thing is we're now further along in what that solution looks like than we were, call it, two years ago.

Great. Thank you.

(Operator Instructions)

Our next question comes from John McLean from the Benchmark Company.

Hi, guys. This is John on for Ruben. Congratulations on the quarter.

Thanks you.

So I just wanted to ask kind of 2.5 questions here. First one, just curious with kind of how the market landscape has been over the past few quarters and how it looks like it's going to head into this year. Could you maybe give us some additional color on how your customer conversations have shifted? Maybe they're viewing the value of your services differently in the way that they're operating day to day?

Sure, John. Good morning. Yes, I'd be happy to do that. So as I think about the market landscape over the last few quarters, it's not lost on me that beyond just housing starts, whether it be whether it be total housing starts or even single-family housing starts that beyond that, if you look at housing expenditures as a percent of overall GDP and where that sits, there's been quarter -- sequential quarterly declines over the last year.

And then if you look at housing burden, the cost of housing burden over the last four quarters, that has continued to go up. And then if you look at personal consumption expenditures, those are also -- as it relates to repair remodel and some other key indicators with housing, those are also very much down.

So all of that is to say besides what everybody talks about, there are additional macro force -- macro statistics that suggests an incredibly weak housing market. All of that said, the fact is we have grown share, and we have maintained top line year-over-year at solid margins because of our -- of the investments we've made to drive value-add services, whether that be on the multifamily side with channel focus as it relates to multifamily and certain key customers, we're able to drive greater conversions into our product lines, namely with EWP, for example, or on the siding front. With multifamily, we've converted one of the more popular -- another competitive supplier out there that we don't carry into [GP Dense] products.

So the fact is that we have taken our strategy and we've gone out to the marketplace with our customer base and our supplier base to show them that even in soft market conditions, we can actually grow their business. And we have done that, and we have proven it. And as a result, our customers and our suppliers are absolutely seeing the value of 2-step distribution as it relates to BlueLinx and what we can do to help them grow their business.

So on the customer front, it's helping them help their customers grow their business, especially in these tough times. And then for our suppliers, it's really a commercialization play. Like we are absolutely helping them commercialize their product, not only with traditional customers but also via the multifamily channel and growing their business at a time when they may not have thought it was -- or it was going to be more difficult. So that value-add opportunity that we provide those two constituent groups is very strong for us as our results have demonstrated in 2025.

And I would add 1 additional thing to that, which is if you look at the fourth quarter in particular, a number of our customers, if not all of our customers, we're very focused on managing inventory levels as tight as they could. And in that environment, that's good for 2 step, right? Because we sit here ready to kind of fill their orders, right, that they may not able to fill efficiently out of the inventory stock that they're currently carrying.

I mean, part of the margin increase that we saw on the structural side in the fourth quarter was due to that, right? We had a flat -- kind of relatively flat pricing market in terms of input costs. But with our customers at lower inventory levels, they were utilizing 2-step more than they did last year, and that's where we saw our volumes increase. We saw a similar thing across key specialty product categories as well.

Yes. And just to add on that. So absolutely and sort of whether it's a destocking or whether it's tough market conditions, 2-step can benefit just by buying -- we'll put aside just in soft market conditions. We -- customers will buy less, more often, right? That's 1 of the opportunities for 2-step distribution.

I would say, though, that if you look at us relative to what may take place at at other companies, our ability to meet that less more often desire on the part of customers while maintaining optimal inventory levels through our own working capital management capabilities, which I continue to feel are second to none, I think it's a pretty noteworthy competitive advantage we have because we were able to meet our customers' expectations, manage our inventory levels accordingly, end the year with a strong cash balance, especially compared year over year in light of a soft selling year and yet, we maintained good margins, right?

We didn't have to -- because we're able to match up or marry up the inventory levels with the customer demand while selling the value-add and other services we provide, we were able to maintain those solid margins, optimal inventory levels that didn't compromise our ability to grow volumes as demonstrated by the results and, of course, maintain pricing at appropriate levels to ensure year-over-year flat sales in an otherwise tough market.

Okay. That's fantastic. I really appreciate the deep dive there. Just -- so one other thing, and I know it's been a focus, and I know last quarter, you guys shared just really kind of the exceptional level of service you've been providing in the multifamily sector. It sounds to me like you really may have shifted there before others decided that was going to be more of a priority this year for the end markets.

Obviously, those projects have a longer time line than single family. But I was hoping you might be able to give us a rough estimate on when you kind of expect to see that increased activity, increased interest starting to flow through? We've heard from others that it's more like a late Q3, Q4 event for them.

I'm sorry, you're talking about multifamily? .

Yes.

Yes. So -- yes, yes, yes. So let me -- just to be clear, John, given the affordability crisis and housing, and you look at housing housing as a percentage of GDP and where it's been going over the last couple of years, especially over the last 4 quarters, it's clear that multifamily is going to be in my view, the (inaudible) to bending the cost curve as it relates to housing pricing, especially given the demand or the need to put people in homes, right, over the next 10 years. So whether it's good or bad, our strategy is designed to take more and more multifamily share and to grow our

multifamily business. So it's kind of all over the map. If you look at the forecasting, it changes from month-to-month and quarter-to-quarter. When people were running away from multifamily, we were going we were running into the fire because we strongly believe that if you build more faster in the -- against the backdrop of the current regulatory environment, you can help bend the cost curve and get more people into homes. And so we have designed our product strategy and our go-to-market strategy from a channel perspective to take advantage of the multifamily housing starts that are out there, number one.

Number two, if you look at kind of the way the financing market works, and the instruments that people typically use in order to finance multifamily housing, the rate environment is favorable as it relates to that from a short-term standpoint, given the the recent rate cuts because their instruments are based on short-term rates by and large.

By the way, that's similar with our -- if you look at our -- some aspects of our industrial business and the OEM market -- like manufactured housing, that's also supportive of kind of where you see that rate environment relative to where long-term rates may be.

So the long-winded answer to that question is, I do see multifamily continuing to improve over time, mainly because there's an absolute need for multifamily housing in the context of affordable housing crisis, number one. Number two, between the rate environment and our channel and product strategy, I'm absolutely convinced that we will continue to grow multifamily share over the coming years because we have built capabilities to support that share growth, which came to fruition in 2025 with 19% volume growth year-over-year.

Okay. And so I guess I might have thrown you off a little bit there on the initial question, but maybe if I could pin you down and just try and get an idea of -- like you said, you guys are running into the fire when everyone else was running out. I guess how much of a head start do you think that, that might have given you?

I think it's given us a huge head start because if you look at it -- okay, so 2 things. Number one, in order to grow that channel, it truly does it takes endurance, stamina and investments in key services that you might not otherwise find elsewhere. So for example, we have invested in enhanced capabilities when it comes to takeoff services, which is something that historically 2-step distribution has not had.

And we have those capabilities around takeoff services that allow us to respond to basically look at plans and be able to drive our product sales through those multifamily projects. in a way that we couldn't have otherwise done a few years ago, number one.

So that's just one example. The other is project management services and the working capital management associated with supporting multifamily projects where you have to keep -- we've got some -- we got -- we have ways of making the sales, but then managing the inventory through our warehouses with reload services and other working capital management levers that support those multifamily projects in a way that's good for our business.

That is not necessarily easy to do overnight, okay? So we've got that, and that supports the project management piece. We've also invested CapEx into specialized equipment that allows us to deliver 2 multifamily job sites, for example, in urban environments at 2 in the morning, right? That was a nuanced approach to our CapEx strategy that aligned with the channel strategy that gave us a head start.

And then last but not least, I would suggest that the personnel investments we've made between what we have at a corporate level, combined with field resources to drive business development in the multifamily channel distinguishes us from maybe others in the space.

And those BD resources, those resources out in the field, combined with the scalable capabilities that we're offering from the enterprise-wide basis allows us to bring our customers into the mix and have channel partners, get more closely aligned with those end developers and ultimately provide us a means by which we can convert jobs into our product offerings, whether it be siding, for example, or EWP or GP DE and so on.

So that's -- we have a head start because we have invested CapEx and OpEx to drive it. And then there are these value-add services that others don't necessarily have that are enabling or giving us a competitive advantage, I think. So I do believe we are ahead of the game.

Alright. Thank you so much for the color. Sorry if I took so much time up. I'll pass it on now.

Our next question comes from [Adi Madan] from D.A. Davidson.

Hi. It's Adi on for Kurt today. Thank you for taking my questions. And for all the details so far. A lot of my questions have been answered. But a couple of them are around the incremental costs maybe from the AI focus versus the traditional e-commerce platform. What do those like incremental costs even look like? And is there any rough time line you have in mind for rolling it out?

So Adi, I really appreciate the question. But I think if I gave you a time line, it would be obsolete a week from now. So I honestly do not know. I will say that the incremental costs are also unknown. But suffice it to say that they would be in the scheme of things, kind of immaterial relative to traditional costs that would go into a regular e-commerce platform. With AI, as we've all seen, there are virtually zero barriers to entry for -- at least for now. I mean, who knows what it's going to be when the investments catch up down the road that others are making, not us.

So -- as it relates to e-commerce, I don't know, quite frankly. But I do know that the future looks bright. Just if you look at -- if you just look at some of the recent announcement with some of the big Fortune 50 companies and their partnerships with some of the most prominent AI platforms, I mean, there's a world where people will just go into a ChatGPT or (inaudible) and directed to buy something off one of their awards accounts, whether it be a Walmart+ or Amazon or something else, and people may never even go to the traditional e-commerce platforms anymore, which is why I don't know what the future looks like.

As it relates to our AI investments that we have made to drive -- which incidentally are aligned with our commercial strategy as well as just productivity improvements or giving our employees what I very affectionately describe as an Ironman suit have really enabled our folks to just be more productive. Do we have any measures on it? Absolutely not. It's too early to know. But as it relates to AI applications, we're -- as I said in my remarks, we've developed AI tools for people to assist with modeling.

So for example, in the traditional way, someone you would normally have to call an associate, one of our -- their teammates in FP&A to help them with the model. Now there's an actual AI application or AI agent they can use to build a model before they even have the conversation with our FP&A team, which is exciting.

From a benefits perspective, we have benefits chatbots that our teammates are able to use in order to answer standard benefits questions or get their arms around something before they might have a call with a benefit specialist.

And then, of course, on sales, for instance, you can use our AI agents to help you build sales plans, sales execution plans, especially given the data, the access to data that folks have through access to data that folks have through our BI Intelligence -- or BI platforms via Microsoft.

So all of that is to say there really isn't any incremental cost as it relates to our employees using the AI platforms that are part of our Microsoft suite of products. But as the future continues to develop I don't know what that's going to be.

I mean there's clear costs associated with software engineering and building connections into the systems that that we're still trying to figure out. But for now, we're just focused on making sure that our data architecture is well designed to be able to take advantage of that next frontier of technology.

Got it. So it's mainly when like an internal focus, yes, nothing external client facing just yet?

Well, I wouldn't say -- so there are -- our folks can use the tools to make them better client-facing teammates. As it relates to someone from the outside accessing an AI -- an AI agent, for example, to place an order, that does not exist yet. But it is absolutely -- those are the kinds of things that we are -- that we think about. For example, just to give you an example, let's say someone sends in an e-mail asking for a quote, and we set up a box to take -- an inbox to take those quotes.

There is a not-too-distant future state where a fax and e-mail, a message could get routed into an AI agent that takes that information, links with our ERP i.e. Agility and then puts forth a quote, generates a quote that 1 of our sales associates can review and then execute on, right? Whether it's picking up the phone and calling or or using the agents and then respond accordingly at scale so that we can process more faster. Those are absolutely the kinds of ideas that we are exploring but nothing in -- nothing in action yet. Let's just put it that way.

Got it. Yes, that makes sense. And maybe when you're looking at the M&A pipeline right now, how are you thinking about growing the acquisition to fill in the white space on the West Coast, specifically maybe to complement this Disdero buybacks?

Yes. It's absolutely an important piece of our strategy. So as we think about our M&A strategy, it's two-pronged, and that is grow our specialty product mix, which Disdero absolutely did. And secondly, support geographic expansion. Disdero actually accomplished both more so on the front end with respect to specialty specialty distribution.

And then as it related to geographic expansion, it just further strengthened our Pacific West Coast presence.

But those are absolutely two prongs. We've got a pipeline potential targets that we're regularly evaluating -- you only use shows like IBS and one-on-ones over the course of the year to continue nurturing those relationships and so that we can be opportunistic when the time comes.

Awesome. Thank you for taking my questions. Good luck for the -- quarter.

We have no further questions. I would like to turn the call back over to Tom Morabito for closing remarks.

Thanks, Julianne. Thank you again for joining us today, and we look forward to speaking with you in May as we share our first quarter 2026 results.

This concludes today's conference call. Thank you for your participation. You may now disconnect.