NYSE:BCC Boise Cascade Q3 2023 Earnings Report $87.62 +0.14 (+0.15%) As of 11:47 AM Eastern This is a fair market value price provided by Polygon.io. Learn more. Earnings HistoryForecast Boise Cascade EPS ResultsActual EPS$3.58Consensus EPS $3.47Beat/MissBeat by +$0.11One Year Ago EPS$5.52Boise Cascade Revenue ResultsActual Revenue$1.83 billionExpected Revenue$1.85 billionBeat/MissMissed by -$18.31 millionYoY Revenue Growth-14.90%Boise Cascade Announcement DetailsQuarterQ3 2023Date10/31/2023TimeBefore Market OpensConference Call DateTuesday, October 31, 2023Conference Call Time11:00AM ETConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Quarterly Report (10-Q)SEC FilingEarnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Boise Cascade Q3 2023 Earnings Call TranscriptProvided by QuartrOctober 31, 2023 ShareLink copied to clipboard.There are 10 speakers on the call. Operator00:00:00Good morning. My name is Chris, and I will be your conference facilitator today. At this time, I would like to welcome everyone to Boise Cascade's Third Quarter 2023 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer period. Operator00:00:20It is now my pleasure to introduce you to Kelly Hibbs, Senior Vice President, CFO and Treasurer of Boise Cascade. Mr. Hibbs, you may begin your conference. Speaker 100:00:32Thank you, Chris, and good morning, everyone. I would like to welcome you to Boise Cascade's Q3 2023 earnings call and business update. Joining me on today's call are Nate Jorgensen, our CEO Mike Brown, Head of our Wood Products Operations and Jeff Strom, Head of our Building Materials Distribution Operations. Turning to Slide 2. This call will contain forward looking statements. Speaker 100:00:55Please review the warning statements in our press release, presentation slides and in our filings with the SEC regarding the risks associated with these forward looking statements. Also, please note that the appendix includes reconciliations from our GAAP net income to EBITDA and adjusted EBITDA and Segment Income to Segment EBITDA. I will now turn the call over to Nate. Thanks, Kelly. Good morning to everyone. Speaker 200:01:20Thank you for joining us on our earnings call today. Speaker 100:01:23Call. I'm Speaker 200:01:24on Slide number 3. Our consolidated 3rd quarter sales of $1,800,000,000 were down 15% from Q3 2022. Our net income was $143,100,000 or $3.58 per share compared to net income of 219,600,000 for $5.52 per share in the year ago quarter. Total U. S. Speaker 200:01:43Housing starts declined 6%, driven by decrease in multifamily housing compared to prior year quarter. However, single family housing starts increased 7% compared to the same period in 2022. Both of our businesses again delivered solid operating and financial results. I want to thank our associates for their continued focus, hard work and loyalty as we continue to navigate ongoing economic uncertainties. As recently announced, we completed the acquisition of Roscoe, and I'm pleased to welcome their outstanding team to Boise Cascade. Speaker 200:02:13We We will provide additional details on this transaction following the discussion of our financial results. Kelly will now walk through our segment financial results, provide an update on our capital allocation and discuss the Brockwell acquisition in more detail, after which I'll provide our outlook before we take your questions. Kelly? Speaker 100:02:30Thank you, Nate. Wood Products sales in the 3rd quarter, including sales to our distribution segment were $515,200,000 compared to 500 $95,300,000 in Q3 2022. Wood Products reported segment EBITDA of $122,900,000 down from EBITDA of $177,300,000 reported in the year ago quarter. The decrease in segment EBITDA was due primarily lower EWP and plywood sales prices as well as lower LVL sales volumes. These decreases were offset partially by lower wood fiber costs and higher plywood sales volumes. Speaker 100:03:08BMD sales in the quarter were $1,700,000,000 down 15% from Q3 2022. Lower pricing across product lines negatively impacted BMD's year over year revenue comparison. However, BMD's gross profit and EBITDA margins were again strong during the Q3. BMD reported segment EBITDA of $104,900,000 in the 3rd quarter compared to segment EBITDA of $161,200,000 in the prior year quarter. The decline in segment EBITDA was driven by a gross margin decrease of $48,400,000 In addition, selling and distribution expenses increased $6,000,000 Turning to Slide 5. Speaker 100:03:47On a year over year basis, 3rd quarter volumes for I joists were flat, while volumes for LVL were down 5%. On a sequential basis, volumes for LVL and I joists increased by 6% and 2% respectively. Sequential pricing for LVL and I joists was down 4% and 3%, respectively. Our strong volumes in the Q3 and consistent lead times to our customer base our great testament to our Wood Products team and their ability to respond to stronger than expected demand in 2023. Looking forward to the Q4, October volumes are modestly below 3rd quarter monthly average levels with recent declines in our order files indicative of the expected seasonal slowdown in construction activity. Speaker 100:04:32As such, in Q4, we would expect sequential volume declines, but meaningful year over year increases. On EWP pricing, we currently expect modest single digit sequential price declines in the 4th quarter. Turning to Slide 6. Our Q3 plywood sales volumes in wood products was 390,000,000 feet compared to 329,000,000 feet in Q3 2022. Our plywood sales team was effective in finding market opportunities, including the sale of incremental volumes related to the acquisition of the Chapman and Havana Mills. Speaker 100:05:06Prior year volumes were also negatively impacted by downtime taken to replace an existing dryer at our Chester, South Carolina Plywood facility. $392 per 1,000 average plywood net sales price in Q3 was down 20% from Q3 2022 and up 5% sequentially. Thus far in the Q4, plywood price realizations are modestly above our Q3 average. Moving to Slide 78, BMD's 3rd quarter sales were $1,700,000,000 down 15% from Q3 2022 driven by sales price and sales volume decreases of 14 and 1% respectively. By product line, commodity sales decreased 20%, general line product sales decreased 5% and sales of EWP decreased 21%. Speaker 100:05:57Gross margin dollars decreased by $48,400,000 in Q3 compared with the same quarter last year. As expected, lower margins on EWP were the principal driver of the decline in margin dollars with the impact of a declining instead of a rising price environment negatively impacting results. However, BMD's overall gross margin percentage held strong at 15.2%, Down Only 20 Basis Points from the 15.4% reported in Q3 2022 as we avoided the negative impacts from a declining commodity pricing environment that we experienced during 2022. BMD's EBITDA margin was 6.3% for the quarter, down from the 8.2% reported in the year ago quarter and down 20 basis points sequentially. BMD sales pace thus far in Q4 2023 is seasonally weaker or approximately 6% below daily sales averages in 3rd quarter. Speaker 100:06:55However, with inventory management a clear focus for the industry in 2023 and a restored supply chain, we view inventory in the channel as appropriately position across most product lines. As such, we'd expect Q4 takeaways to generally align with market activity as opposed to the destocking events of last year. And as we have indicated before, reliance on 2 step distribution is expected to remain strong when customers look to manage inventory volume and price risk. We anticipate lower EBITDA margins in the 4th quarter resulting from deleveraging of fixed costs as sales decline, Brosco acquisition related costs and the potential of gross margin degradation from product price erosion. Moving to Slides 910. Speaker 100:07:44These slides show the generally stable pricing environment for lumber and panel pricing during Q3 2023 compared with the downward trajectory during the prior year quarter. While future price volatility is likely, we will maintain our approach to having inventory on hand to support our customer base. I'm now on Slide 11. We had capital expenditures of $99,000,000 during the 9 months ended September 30, 2023 with $31,000,000 of spending in Wood Products and $68,000,000 of spending in BMD. In Wood Products, we continue to progress with our multiyear capacity expansion projects in the Southeast U. Speaker 100:08:24S. In BMD, Our execution of organic growth continues, including our Kansas City and Denver door shops and the purchase of a distribution center in West Palm Beach, Florida. Our full year 2023 expected range for capital spending is now $190,000,000 to 210,000,000 We have yet to finalize our capital spending plans for 2024, but would expect it to be would expect it to exceed $200,000,000 as we work towards completion of previously announced growth projects and also have a good mix of maintenance, resilience and additional growth projects ahead of us. Speaking to shareholder returns, we paid $141,000,000 in regular and special dividends shareholders during the 9 months ended September 30, 2023. And last week, our Board of Directors approved a $0.20 per share quarterly dividend and a $5 per share special dividend. Speaker 100:09:19Including the expected 4th quarter amounts, full year 2023 dividends will be approximately 3 $47,000,000 In addition, share repurchases are another manner in which we can return cash to our shareholders and we have approximately 2,000,000 shares available for repurchase under our share repurchase program. In summary, our balance sheet remains very strong and our approach to capital allocation is unchanged. We will continue to invest in our existing asset base and organic growth projects, pursue M and A that aligns with our strategy, remain committed to our fixed dividend through the business cycle and opportunistically return additional capital shareholders as appropriate via special dividends or share repurchases. Turning to Slide 12, We are pleased to have completed the acquisition of Brosco on October 2 for a purchase price of $168,000,000 including estimated working capital at closing of 51,000,000 We funded the transaction with cash on hand. The acquisition price included the purchase of Roscoe's 2 full scale distribution centers in Hatfield, Massachusetts and Portland, Maine and provides us immediate scale in the Northeast with LTN September revenue and EBITDA of approximately 191,000,000 and $19,000,000 respectively. Speaker 100:10:36Along with interior and exterior doors, these facilities also offer moldings, railings, windows, stair parts and other general line products. The addition of these products are a nice enhancement to BMD's legacy general line product mix and we are excited to be able to offer an expanded product offering to our customer base in the Northeast. I will turn it back over to Nate to discuss our business outlook. Thanks, Kelly. Speaker 200:11:01I'm on Slide number 13. Current estimates for 2023 U. S. Housing starts are 1,400,000 units compared with actual housing start to 1,550,000 in 2022 as reported by the U. S. Speaker 200:11:12Census Bureau. Throughout 2023, home affordability has been a balance for consumers given higher mortgage rates and limited home price decreases. However, given a resilient economy and low levels of existing home inventory for sale, Demand for new residential construction has been stronger than anticipated. Homebuilders have also addressed affordability challenges facing homebuyers in various ways including smaller home sizes, fewer amenities, price incentives and mortgage rate buy downs. Economic uncertainties, escalating mortgage rates and home affordability are expected to continue to influence the near term demand environment. Speaker 200:11:49Consensus forecast for 2024 single and multifamily housing starts in the U. S. Generally range from 1,300,000 to 1,400,000 units, which is comparable to 2023. Regarding home improvement spending, industry forecasts project continued moderation in year over year growth and renovation spending and economic uncertainty may also negatively impact homeowners further investment in their residences. Despite these near term uncertainties, we believe the long term demand drivers for new residential construction and repair remodeling activity continue to be favorable, supported by strong demographic trends, low home inventory and the age of U. Speaker 200:12:25S. Housing stock. As such, we will remain clearly focused on the execution of our strategies and have great conviction around our investments to grow the company. Lastly, I'm very pleased with the early integration efforts related to the newly acquired Roscoe facilities. I want to express my gratitude to all of our associates throughout the organization, including our newest associates at Roscoe for keeping a sharp focus on our customers and working safely and effectively. Speaker 200:12:49Thank you for joining us Today for and your continued support and interest in Boise Cascade. We would welcome any questions at this time. Chris, would you please open the phone lines? Operator00:12:58Thank you. Stand by as we compile the Q and A roster. One moment please for our first question. Our first question will come from Susan Malkari of GS. Your line is open. Speaker 300:13:26Thank you. Good morning, everyone. Speaker 100:13:29Good morning, Sue. Speaker 300:13:31I guess, my first question is talking a bit about the demand environment. Appreciate the color that you gave in your prepared remarks. But can you talk a little bit about the divergence that I think we're seeing in terms current pace of starts flowing through your business and the ability to capture that reacceleration that we saw in starts as we move through this year. Operator00:14:03So Speaker 200:14:07Sue, it's Nate. Maybe just In terms of the repair and remodel activity, I think the and then also new home sales. Today, we still see good pace on our repair and remodel business. And so that I think that activity remains steady. And I think it It speaks to a couple of things, including really the importance of 2 step distribution in terms of supporting that marketplace. Speaker 200:14:32So We feel good about kind of the pace of that business. Obviously, the relationships that we have on the supply side in support of that business, and then again the alignment we have with that marketplace. So to me that would be probably the key item is again The basic consistency on repair and remodel remains pretty good. I would say in terms of the kind of Perry for new home construction and kind of maybe the resiliency that the team demonstrated, the Wood Products team and distribution team demonstrated in We were working closely with our customer base and making sure we have great clarity in terms of what their inventory positions are, what the pace of business was. And we were we made some early and I think important and effective decisions on putting our production capacity at levels to support a marketplace that frankly surprises the upside. Speaker 200:15:35And I think as we think about 2024, Sue, we'll have that same kind of planning and work and diligence to make sure that we're staying close to the marketplace and prepare to serve the marketplace, should there be an upside surprise or downside risk associated with that. Kelly, anything you would add just in terms of the backdrop on housing and the recurring remodel? Speaker 100:15:56Yes. Happy to Nate. So, yes, I guess maybe starting with single first and I know Sue you're very close to the builders and it seems like The national homebuilders are still relatively bullish and they continue to want to increase their land position and build out new single family. So that seems to be that that could be flat to actually somewhat up year over year 20 20 3 to 24. We'll see how that plays out. Speaker 100:16:27On multifamily, there does seem to be a bit of a pause, more concerns there around financing and potentially oversupply. And as you know, new single family is a bigger driver for us. In terms of R and R, We all typically think of R and R spending as it relates to sales of existing homes. And as we know, those are down a fair bit this year. But yet R and R has held up a fair bit, which I think speaks to the fact that people, Speaker 400:16:54I think they have a good amount of equity Speaker 100:16:56in their homes and maybe They purchased a home a year or 2 ago that maybe didn't quite have the amenities they wanted and so they're we're seeing maybe a little bit more R and R spending because of that dynamic. Speaker 300:17:08That's encouraging. Good to hear that. And maybe turning the conversation a bit, Any thoughts on how we should think about the margins in BMD as we kind of consider a world where wood product prices could be moving lower? And I guess with that too, any implications to those BMD margins from the Brasco acquisition? Speaker 100:17:34Yes. And so I guess, as we alluded to in our speaking points, certainly seasonally 3rd to 4th quarter here. We expect to see some compression as our sales come down and we're not able to leverage those fixed costs. So we'll have some deleveraging there. But we feel really good about what BMD has been able to do and what's been quite volatile last couple of years in terms of their margin profile. Speaker 100:18:02And we're executing upon what we said our strategy is, which is to make That product mix richer to have a higher margin profile and that would include things like the Brascaux acquisition. Speaker 300:18:16Okay. And I'm going to squeeze one more in, which is you mentioned the ongoing investments in a lot of your strategic initiatives, the door shops in Kansas City, Denver, the acquisition in Florida that you closed. Just any update on how those are progressing and any further details there? Speaker 100:18:36Yes. So we have a pretty good amount of spending ahead of us in the balance of this year and then we expect to have Again, a pretty sizable capital plan in 2024, but we're still working a number of things. So we won't speak to 2024 in any detail at this point. But yes, in BMD, for example, in the Q4, we did announce that we got the West Palm Beach. We bought a new distribution center there, which expands our presence in that market, which is great. Speaker 100:19:08We continue to build out The Denver Door Shop, it's not quite up and running yet, but it will be here soon. We're close on completing the Marion, Ohio relocation that we started a year or 2 ago. And then we're forever chasing rolling stock, that we hope to get landed here in the Q4. In terms of the other The couple other big projects in BMD, those being, Hondo, Texas and Walterboro, South Carolina, Those were greenfields. We bought bare pieces of ground and it takes a fair bit of time to get those sites prepared. Speaker 100:19:42So we still have a fair bit of spending ahead of us on those. And those will be a while yet to come up. In terms of Wood Products, Again, a fairly hefty spend here in the balance of this year and that's not uncommon, right? When we have some seasonally slower periods, some holiday periods, we take advantage of those times to complete some capital projects and we expect to do that again this Q4. And I would say that's pretty normal course stuff in terms of like some random stackers in the West for veneer. Speaker 100:20:16Chapman PLV line, which is great. Again, that's part of our capacity expansion in terms of being able to capture that veneer and put it into EWP. We've got a little bit of spending on a relatively small mass timber project in White City, Oregon. And then just some a lot of a fair bit of maintenance to do here in the Q4. So I'll stop there, Sue. Speaker 300:20:40Okay. Thank you for all that color. It was helpful. I'll turn it over now and good luck with everything. Speaker 100:20:46Thank you. Thank you. Operator00:20:48Thank you. The next question will come from Kurt Yinger of D. A. Davidson. Your line is open. Speaker 400:21:04Great. Thanks Speaker 500:21:05and good morning everyone. Speaker 200:21:07Good morning, Kurt. Speaker 500:21:08I just wanted to follow-up on Susan's question on BMD margins. I mean commodity prices have largely normalized, EW pre Prices come off a decent amount, volumes moderated, but segment EBITDA margin is still nicely above 6%. I guess as you look to 2024, absent the potential for a softer demand environment and maybe some fixed cost deleveraging, Is there anything that you see today as kind of a material risk to that margin profile? Speaker 100:21:43Yes. I mean, I think you hit on the material risks, Kurt, in your comments around Volumes and demand could flow through there. And then there's always price risk across commodities, across general line and we're seeing some modest price risk here in EWP. So I guess, Nate has an additional comment here. Speaker 200:22:10Yes, Curt, it's Nate. Just maybe the other thing to think about is, as we described in our opening remarks is that, I think as a channel, the marketplace continues to work its way through the year end and into early next year, I think the importance and the dependence on a warehouse support It continues to be high. So unit business, job packs and pieces. So as you think about margin profile and EBITDA margin for that segment of for those services are generally a little bit higher as compared to the direct. So I think that's probably the other component to think about is that mix of direct versus auto warehouse. Speaker 200:22:45We like both obviously and obviously given where we're at this time of year seasonality that auto warehouse component strengthens and we're well positioned to support that. Speaker 500:22:56Got it. And is that out of warehouse mix, Do you almost think that's kind of countercyclical to where in a weaker environment, people are more closely managing those inventories and More reliant on you guys versus feeling great about the end markets and that's less of a requirement. So in a softer demand backdrop that's actually kind of a maybe a tail continues to be a tailwind on the margin side? Speaker 200:23:25Yes, I think so. I think you said it well. I think people say look at risk reward both on demand and as well as on realizations pricing. Yes, I think that the dependence and importance of 2 step distribution remains very high. Probably the other component that we're I think excited about is we think about especially from some of our general line partners as they introduce new products and services. Speaker 200:23:48Generally, there's that is a bit of a transition In terms of people getting new SKUs and I think in terms of the growth opportunity that represents again I think a margin opportunity for us largely based upon customers wanting to again be served and supported on units and job packs and pieces versus on a truckload kind of direct basis. Got it. Speaker 500:24:12Okay. Thanks for that, Nate. And then just on the Wood Products cost side, I mean, I imagine web stock cost could be a bit of a headwind as higher OSB prices flow through, but we've also seen a fair amount of pressure on Western log prices. So how do you see those kind of items coming together in Q4? And where does that set you up at least at this stage going into next year? Speaker 400:24:39Yes. Good day, Kurt. It's Mike. So I think you're correct around web stock costs. And as I I think I've mentioned previously the way we cost our web stock into the finished product is not on a spot basis. Speaker 400:24:52We use a 13 week rolling average, so there's some buffering to the ups and downs that occur on the indices that you see every week. So clearly, over time, if the trend is up, then there is a bit of an impact, but it's not a tremendous impact immediately. As it relates to log costs, I think that's a geographical issue more than anything else. I would tend to say that the log cost profile in the Southeastern United States in general is sort of flat, sort of flat to flat. And then in the Pacific Northwest, we've had some ups and downs Recent times, it's been on the way down and you can see that in our data. Speaker 400:25:32I would say that Generally speaking, between now and the end of the year, we're in a very good position in terms of availability of logs. So we're not concerned about that. But at the same time, there has been a bit more pressure in general because of the lack of availability, particularly from federal lands. And so as I'll say the industry looks to put itself in a position to be able to have logs available. We've spent a few extra dollars for Buying logs that would be available over the longer term, a bit higher than the average that you see on a quarterly basis. Speaker 400:26:05But At the moment, I think you're very well aware that log costs have come down and at least between now and the end of the year, we don't see Massive increases coming on log costs in the West. And in our case, I should remind you, I guess, some of our log costs are linked to finished product pricing. And so given where that has gone, particularly for plywood, that certainly has We'll continue to do so between now and the end of the year, I suspect. Speaker 200:26:37Got it. Speaker 500:26:38Okay. Thanks for the color, Mike, and good luck here in Q4, guys. Speaker 100:26:41Thank you. Thanks, Richard. Operator00:26:44Thank you. And one moment for our next question. Our next question will come from Ketan Mamtora of BMO. Your line is open. Speaker 600:26:59Thank you and good morning. First question, can you give us some sense of how your order books are on the EWP side, outside of the seasonal component, which we understand sort of slows in Q4. But have you kind of noticed any change in terms of sort of the activity levels and just your order book? Speaker 400:27:25Yes, Ketan, I have a few words about that. Thanks for the question. So, yes, so I just forget about the seasonality, which is very important. I'm everybody on the call realizes that as we get to the end of the calendar year, we normally see a decline in order files as that relates to, generally speaking, Construction, Digby Single Family Construction. Our waterfalls have really been quite strong. Speaker 400:27:48And I think Nate referred to this earlier in his comments Around how we put ourselves in a position to meet demand, both in terms of inventory on the ground and also In terms of having people in veneer available. So while our order files are not as strong as they are, Not as strong today as they were perhaps like 3 months ago. They're still quite strong. And the way we manage that is we like to be able to ship relatively speaking, quite quickly to our customer base when the orders do come in. So, I think I'd summarize as saying that, Yes, the orders are not as strong as they were 3 months ago, but they're still all things considered quite good relative to some other times that have been Much more challenging than they are today. Speaker 600:28:37Understood. No, that's helpful. And then Switching to the BMD side and the Proscot acquisition, you guys have made a lot of progress on growing of the windows and the door, that side of the the millwork side of the business, I'm sorry. Can you talk to kind of what trends What you've learned as you expanded on that side of the business? And as you look at sort of further opportunity, Is this sort of an area where we should expect growth over the next several years? Speaker 700:29:15Keith, this is Jeff. I would tell you what have we learned. We've learned a lot as we've gone and with each one we've done, each one we've opened, we take some learnings from the past And gotten a lot better and improved what we're doing. It's a good business for us. It fits right with our customers. Speaker 700:29:30It's the same customers that we're currently serving now. And so we're continuing to move forward with it. With the Brosco acquisition, I can just tell you in a short period of time, there's a lot of learnings from them. They've been in the millwork business for a long time and We know we can take some of the processes that they have in place and roll them across our system. And then the future of it, what do we want to do? Speaker 700:29:48I can tell you this, We're still actively looking. It's a good business. We enjoy it and we know there's more to go. Speaker 600:29:56Got it. And then when I just look at the LTM performance, would you consider that as more kind of normalized or would you say that was still helped by elevated activity, let's say, the last 3 or 4 quarters. How would you characterize that? Speaker 100:30:14Yes. I think that's a pretty fair representation of what we think normalized will be. Like us, they would have experienced Some run up and then and more recently a little bit of rundown in terms of pricing, but we feel like that's a reasonable run rate to start from. And as Jeff said, We're pretty excited about not just can we offer more products to our existing customers through We can offer them a more full line of products as well. So we're excited about that and the team at Prosco is really good. Speaker 100:30:56So we're excited there. Speaker 600:30:58Got it. That's very helpful. I'll jump back in the queue. Good luck. Speaker 400:31:02Thank you. Thanks, Keith. Operator00:31:05Thank you. One moment for our next question. Our next question will come from Michael Roxland of Truist Securities. Your line is open. Speaker 800:31:20Thank you, Nate, Kelly, Mike and Jeff for taking my questions and congrats on a good quarter. Speaker 100:31:25Thank you, Mike. Good morning. Speaker 800:31:27Good morning. Just on your last call, you guys mentioned maintaining good products margins higher than you had Historically, you referenced a number of upgrades and replacements that have been ongoing for more than a decade now. So in terms of margin profile as you continue to deploy new dryers, pressers, etcetera. What's the margin you're ultimately targeting for that business and over what timeframe? Speaker 100:31:55Yes. So yes, that is The question set from last quarter and I would tell you, we're targeting mid double digit EBITDA margin in that business going forward. And some of the spending you referenced, some of that is frankly maintenance, right, dryers, LUCs, presses, those sorts of things. Those aren't those don't necessarily increase your profile, but they certainly sustaining your capabilities to support the customers. And so, we've really done a nice job of focusing that business Over the last number of years, and I think the strategy is playing out as we hoped. Speaker 800:32:39Got it. And just one thank you, Jack. Just one quick call. We see mid double digit. You're talking about 20%, 25% type EBITDA margins on a go forward basis or you know and if so, is that 2024, 2025, how to think about the timeframe? Speaker 100:32:56No, I wasn't speaking in the 20s, Mike. I was thinking the mid teens. Speaker 800:33:03Mid teens, okay. And Speaker 100:33:08we're above that today as you've seen. Speaker 800:33:11Got it. Thank you for that. And just one Quick question on EWP. Expecting EWP penetration in single family home construction, any share shift back for lumber Given weaker lumber prices, have you ever gained any share given where those prices are trending today? Speaker 400:33:33Hello, Mike. This is Mike. Speaker 800:33:36Hi, Mike. Speaker 400:33:37Yes. So I'm not sure I would say there's been a shift one way or the other, to be honest. I think the building approach that EWP in general caters to is not one necessarily that sees a lot of shift one way or another to that particular combination of lumber versus engineered wood products. It can have to do with availability as much as anything else. So as you would have seen or we all saw over the, say, the preceding few years when EWP was on allocation. Speaker 400:34:13Yes, there was a little bit, I think, of slippage of EWP or movement of EWP and lumber. But I think generally speaking, that's not something that happens to any great magnitude, but when there's nothing else available, lumber can be used in place of EWP. Our story For EWP, the quality, consistency and availability and speed of construction that it brings relative to other products and obviously the large one is lumber. Speaker 200:34:45And Mike maybe just add to Mike's comment. I think when you think about his last point, not just on the speed of construction, The homebuilders are really pushing for cycle time reduction on the job site. And so EWP is very much part of the answer there in terms of taking time out of the construction cycle. And as Mike described, we feel good about that trend and that opportunity continuing as we head into 2024 and EWP will Speaker 400:35:18Thank you, Keith. Operator00:35:20Thank you. And one moment for our next question. Our next question will come from George Staphos of Bank of America Securities Inc. Your line is open. Speaker 900:35:37Thanks. Hi, gentlemen. How are you? Sorry, joining late, so you may have covered some of this in your discussion. I'll try to keep it quick. Speaker 900:35:44One, some of your peers have talked about extend the lead times for their EWP business. Have you seen similar phenomenon and related point, and I think you might have covered this already. In terms of some of the price erosion that you're seeing in EWP, At this juncture, Mike, would you see it as just seasonal or is there something else that we need to be looking to? And then last question for me, Just and perhaps you discussed this already, where you're seeing momentum in terms of open web trusses versus I joists or for that matter, laminated lumber and single family construction. Are you seeing any further share erosion there or is your EWP gaining back share. Speaker 900:36:28Thank you guys. Good luck in the quarter. Speaker 400:36:31Yes. Thanks for the questions there, George. Let me have a stab at these. Maybe there'll be additional comments So, our lead times, I'd say moved up just a relatively small amount over the last over the building season. And that was primarily due to the way we positioned ourselves coming into the building season. Speaker 400:36:57And so, we had a lot of inventory on the ground And we kept people employed and we had good operating rates. And so we were able to meet the upswing in demand, I'll say, as well or better than anybody else in this particular sector. So, we didn't see the extension that maybe you are referring to from other manufacturers and we're still in a good position. So I think all in all, our strategy worked quite well and continues to work very well. You had a question around price erosion and the seasonality or not of this. Speaker 400:37:32Yes. So I don't really think it's a seasonal issue per se. I think it's more like specific locations require attention at certain times when there is opportunity that presents itself and we have discussions in specific markets around what market related pricing is. But as I'm sure you're aware, EWP doesn't really have the seasonality that a commodity does because EWP certainly doesn't follow that That's a cyclic nature. So I think to Kelly's point, we might see very, very modest like low single digit movement Going forward, but we certainly don't see that as anything more than that. Speaker 400:38:15The Open Web Trust question, So I think it would be fair to say that some of the momentum that Openware Trust saw was due to a lack of availability of EWP, specifically I joist, okay? And so Again, I'm sure you're aware, we are a very large producer of I joist and we continue to produce large quantities and we have it available. So if anything, I think the opportunity for us to garner additional sales It's actually quite positive at the moment because we have the availability. We're nationally oriented in terms of our capacity. And so I don't see open web trusses being any more of a, if you will, a threat than they were 6 months ago. Speaker 400:39:04In fact, maybe less when I think about it. Speaker 900:39:09Hey, Mike. One last one quickly and I'll turn it over. Did you comment on the call on when you expect the pricing in EWP to start inflecting higher? And if you haven't, no worries, but just want to make sure we got that on the record. Speaker 100:39:23Yes. We didn't comment forward beyond what we expect Sequentially in the Q4, George, which is modest price erosion. Speaker 900:39:31Okay. Thank you, guys. Thanks, Kelly. Talk to you in a bit. Speaker 100:39:34Thanks, George. Thanks, George. Operator00:39:37Thank you. One moment please for our next question. And we have a follow-up from Kurt Yinger of D. A. Davidson. Operator00:39:51Your line is open. Speaker 500:39:54Great, thanks. Just two quick ones on capital allocation. First, Kelly, could you remind us what kind of go forward maintenance CapEx is at this stage versus the more discretionary component within the $200,000,000 guide for this year? Speaker 100:40:11Yes. Sure, Kurt. So I think we think in terms of a normalized spend, we're probably in range given our growth of kind of $125,000,000 give or take, but it's going to be a few years probably before we Expect to moderate down to that level given some good opportunities that we have ahead of us. Speaker 500:40:32Got it. And is that pretty evenly split between Wood Products and BMD. Speaker 100:40:39No, I'd say it's probably a little bit heavier to Wood Products than it is BMD once we kind of normalize. Speaker 600:40:46Got it. Speaker 500:40:47Okay, great. And then just lastly, I mean, the stock has pulled back here a little bit. Does that change your appetite at all around share repurchase activity and what would you need to see for that to maybe move up in terms of capital allocation priorities? Speaker 100:41:05Yes. No, good question. So, I'll hit it like this, Curt, which is Stock repurchases are still very much in our toolkit for capital allocation options. And as I think you all know, we there's many times where you have restrictions on stock repurchases. If you're evaluating transactions and fortunately we've been able to do several nice transactions in the last couple of years. Speaker 100:41:34So Our opportunity set has been somewhat restricted at times. And so I guess at this point and assuming there's no restrictions, We will buy shares if doing so, we view that as being an attractive use of cash at that time relative to our other Capital Allocation Opportunities. Speaker 500:41:56Got it. Okay. Thanks for the color, Kelly. Appreciate it. Speaker 100:42:00Thank you, Kurt. Thanks, Kurt. Operator00:42:02Thank you. And I see no further questions in the queue. I would now like to turn the conference back to Nate Jorgensen for closing remarks. Speaker 200:42:13Thanks, Chris. We appreciate everyone joining us on the call this morning for their update and thank you for your continued interest and support of Boise Cascade. With that, please be safe and be well. Thank you. Operator00:42:24This concludes today's conference call. Thank you all for participating. You may now disconnect and have a pleasant day.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallBoise Cascade Q3 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K)Quarterly report(10-Q) Boise Cascade Earnings HeadlinesQ1 2025 Boise Cascade Co Earnings CallMay 7 at 11:01 AM | finance.yahoo.comBoise Cascade (BCC) Target Price Adjusted by DA Davidson Amid Pricing Concerns | BCC Stock NewsMay 7 at 9:48 AM | gurufocus.comThink NVDA’s run was epic? You ain’t seen nothin’ yetAsk most investors and they’ll probably tell you Nvidia is the undisputed AI stock of the decade. In 2023, it surged 239%. And in 2024, it soared another 171% on the year… But what if I told you there was a way to target those types of “peak Nvidia” profit opportunities in 24 hours or less?May 7, 2025 | Timothy Sykes (Ad)Boise Cascade Co (BCC) Q1 2025 Earnings Call Highlights: Navigating Challenges with Strategic ...May 7 at 5:59 AM | finance.yahoo.comBoise Cascade (NYSE:BCC) Stock Price Down 7% After Earnings MissMay 7 at 2:05 AM | americanbankingnews.comBoise Cascade shares drop after Q1 profit falls amid housing slowdownMay 6 at 7:57 PM | msn.comSee More Boise Cascade Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Boise Cascade? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Boise Cascade and other key companies, straight to your email. Email Address About Boise CascadeBoise Cascade (NYSE:BCC) Company engages in manufacture of wood products and distribution of building materials in the United States and Canada. It operates through two segments, Wood Products and Building Materials Distribution. The Wood Products segment manufactures laminated veneer lumber and laminated beams used in headers and beams; I-joists for residential and commercial flooring and roofing systems, and other structural applications; structural, appearance, and industrial plywood panels; and ponderosa pine shop lumber and appearance grade boards. The Building Materials Distribution segment distributes a line of building materials, including oriented strand boards, plywood, and lumber; general line items, such as siding, composite decking, doors, metal products, insulation, and roofing; and engineered wood products. It markets and sells its products to dealers, home improvement centers, wholesalers, specialty distributors, and industrial converters for use in the construction of new residential housing, repair-and-remodeling of existing housing, construction of light industrial and commercial buildings, and other industrial applications. Boise Cascade Company was incorporated in 2004 and is headquartered in Boise, Idaho.View Boise Cascade ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Archer Stock Eyes Q1 Earnings After UAE UpdatesFord Motor Stock Rises After Earnings, But Momentum May Not Last Broadcom Stock Gets a Lift on Hyperscaler Earnings & CapEx BoostPalantir Stock Drops Despite Stellar Earnings: What's Next?Is Eli Lilly a Buy After Weak Earnings and CVS-Novo Partnership?Is Reddit Stock a Buy, Sell, or Hold After Earnings Release?Warning or Opportunity After Super Micro Computer's Earnings Upcoming Earnings Monster Beverage (5/8/2025)Coinbase Global (5/8/2025)Brookfield (5/8/2025)Anheuser-Busch InBev SA/NV (5/8/2025)ConocoPhillips (5/8/2025)Shopify (5/8/2025)Cheniere Energy (5/8/2025)McKesson (5/8/2025)Enbridge (5/9/2025)Petróleo Brasileiro S.A. - Petrobras (5/12/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. 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There are 10 speakers on the call. Operator00:00:00Good morning. My name is Chris, and I will be your conference facilitator today. At this time, I would like to welcome everyone to Boise Cascade's Third Quarter 2023 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer period. Operator00:00:20It is now my pleasure to introduce you to Kelly Hibbs, Senior Vice President, CFO and Treasurer of Boise Cascade. Mr. Hibbs, you may begin your conference. Speaker 100:00:32Thank you, Chris, and good morning, everyone. I would like to welcome you to Boise Cascade's Q3 2023 earnings call and business update. Joining me on today's call are Nate Jorgensen, our CEO Mike Brown, Head of our Wood Products Operations and Jeff Strom, Head of our Building Materials Distribution Operations. Turning to Slide 2. This call will contain forward looking statements. Speaker 100:00:55Please review the warning statements in our press release, presentation slides and in our filings with the SEC regarding the risks associated with these forward looking statements. Also, please note that the appendix includes reconciliations from our GAAP net income to EBITDA and adjusted EBITDA and Segment Income to Segment EBITDA. I will now turn the call over to Nate. Thanks, Kelly. Good morning to everyone. Speaker 200:01:20Thank you for joining us on our earnings call today. Speaker 100:01:23Call. I'm Speaker 200:01:24on Slide number 3. Our consolidated 3rd quarter sales of $1,800,000,000 were down 15% from Q3 2022. Our net income was $143,100,000 or $3.58 per share compared to net income of 219,600,000 for $5.52 per share in the year ago quarter. Total U. S. Speaker 200:01:43Housing starts declined 6%, driven by decrease in multifamily housing compared to prior year quarter. However, single family housing starts increased 7% compared to the same period in 2022. Both of our businesses again delivered solid operating and financial results. I want to thank our associates for their continued focus, hard work and loyalty as we continue to navigate ongoing economic uncertainties. As recently announced, we completed the acquisition of Roscoe, and I'm pleased to welcome their outstanding team to Boise Cascade. Speaker 200:02:13We We will provide additional details on this transaction following the discussion of our financial results. Kelly will now walk through our segment financial results, provide an update on our capital allocation and discuss the Brockwell acquisition in more detail, after which I'll provide our outlook before we take your questions. Kelly? Speaker 100:02:30Thank you, Nate. Wood Products sales in the 3rd quarter, including sales to our distribution segment were $515,200,000 compared to 500 $95,300,000 in Q3 2022. Wood Products reported segment EBITDA of $122,900,000 down from EBITDA of $177,300,000 reported in the year ago quarter. The decrease in segment EBITDA was due primarily lower EWP and plywood sales prices as well as lower LVL sales volumes. These decreases were offset partially by lower wood fiber costs and higher plywood sales volumes. Speaker 100:03:08BMD sales in the quarter were $1,700,000,000 down 15% from Q3 2022. Lower pricing across product lines negatively impacted BMD's year over year revenue comparison. However, BMD's gross profit and EBITDA margins were again strong during the Q3. BMD reported segment EBITDA of $104,900,000 in the 3rd quarter compared to segment EBITDA of $161,200,000 in the prior year quarter. The decline in segment EBITDA was driven by a gross margin decrease of $48,400,000 In addition, selling and distribution expenses increased $6,000,000 Turning to Slide 5. Speaker 100:03:47On a year over year basis, 3rd quarter volumes for I joists were flat, while volumes for LVL were down 5%. On a sequential basis, volumes for LVL and I joists increased by 6% and 2% respectively. Sequential pricing for LVL and I joists was down 4% and 3%, respectively. Our strong volumes in the Q3 and consistent lead times to our customer base our great testament to our Wood Products team and their ability to respond to stronger than expected demand in 2023. Looking forward to the Q4, October volumes are modestly below 3rd quarter monthly average levels with recent declines in our order files indicative of the expected seasonal slowdown in construction activity. Speaker 100:04:32As such, in Q4, we would expect sequential volume declines, but meaningful year over year increases. On EWP pricing, we currently expect modest single digit sequential price declines in the 4th quarter. Turning to Slide 6. Our Q3 plywood sales volumes in wood products was 390,000,000 feet compared to 329,000,000 feet in Q3 2022. Our plywood sales team was effective in finding market opportunities, including the sale of incremental volumes related to the acquisition of the Chapman and Havana Mills. Speaker 100:05:06Prior year volumes were also negatively impacted by downtime taken to replace an existing dryer at our Chester, South Carolina Plywood facility. $392 per 1,000 average plywood net sales price in Q3 was down 20% from Q3 2022 and up 5% sequentially. Thus far in the Q4, plywood price realizations are modestly above our Q3 average. Moving to Slide 78, BMD's 3rd quarter sales were $1,700,000,000 down 15% from Q3 2022 driven by sales price and sales volume decreases of 14 and 1% respectively. By product line, commodity sales decreased 20%, general line product sales decreased 5% and sales of EWP decreased 21%. Speaker 100:05:57Gross margin dollars decreased by $48,400,000 in Q3 compared with the same quarter last year. As expected, lower margins on EWP were the principal driver of the decline in margin dollars with the impact of a declining instead of a rising price environment negatively impacting results. However, BMD's overall gross margin percentage held strong at 15.2%, Down Only 20 Basis Points from the 15.4% reported in Q3 2022 as we avoided the negative impacts from a declining commodity pricing environment that we experienced during 2022. BMD's EBITDA margin was 6.3% for the quarter, down from the 8.2% reported in the year ago quarter and down 20 basis points sequentially. BMD sales pace thus far in Q4 2023 is seasonally weaker or approximately 6% below daily sales averages in 3rd quarter. Speaker 100:06:55However, with inventory management a clear focus for the industry in 2023 and a restored supply chain, we view inventory in the channel as appropriately position across most product lines. As such, we'd expect Q4 takeaways to generally align with market activity as opposed to the destocking events of last year. And as we have indicated before, reliance on 2 step distribution is expected to remain strong when customers look to manage inventory volume and price risk. We anticipate lower EBITDA margins in the 4th quarter resulting from deleveraging of fixed costs as sales decline, Brosco acquisition related costs and the potential of gross margin degradation from product price erosion. Moving to Slides 910. Speaker 100:07:44These slides show the generally stable pricing environment for lumber and panel pricing during Q3 2023 compared with the downward trajectory during the prior year quarter. While future price volatility is likely, we will maintain our approach to having inventory on hand to support our customer base. I'm now on Slide 11. We had capital expenditures of $99,000,000 during the 9 months ended September 30, 2023 with $31,000,000 of spending in Wood Products and $68,000,000 of spending in BMD. In Wood Products, we continue to progress with our multiyear capacity expansion projects in the Southeast U. Speaker 100:08:24S. In BMD, Our execution of organic growth continues, including our Kansas City and Denver door shops and the purchase of a distribution center in West Palm Beach, Florida. Our full year 2023 expected range for capital spending is now $190,000,000 to 210,000,000 We have yet to finalize our capital spending plans for 2024, but would expect it to be would expect it to exceed $200,000,000 as we work towards completion of previously announced growth projects and also have a good mix of maintenance, resilience and additional growth projects ahead of us. Speaking to shareholder returns, we paid $141,000,000 in regular and special dividends shareholders during the 9 months ended September 30, 2023. And last week, our Board of Directors approved a $0.20 per share quarterly dividend and a $5 per share special dividend. Speaker 100:09:19Including the expected 4th quarter amounts, full year 2023 dividends will be approximately 3 $47,000,000 In addition, share repurchases are another manner in which we can return cash to our shareholders and we have approximately 2,000,000 shares available for repurchase under our share repurchase program. In summary, our balance sheet remains very strong and our approach to capital allocation is unchanged. We will continue to invest in our existing asset base and organic growth projects, pursue M and A that aligns with our strategy, remain committed to our fixed dividend through the business cycle and opportunistically return additional capital shareholders as appropriate via special dividends or share repurchases. Turning to Slide 12, We are pleased to have completed the acquisition of Brosco on October 2 for a purchase price of $168,000,000 including estimated working capital at closing of 51,000,000 We funded the transaction with cash on hand. The acquisition price included the purchase of Roscoe's 2 full scale distribution centers in Hatfield, Massachusetts and Portland, Maine and provides us immediate scale in the Northeast with LTN September revenue and EBITDA of approximately 191,000,000 and $19,000,000 respectively. Speaker 100:10:36Along with interior and exterior doors, these facilities also offer moldings, railings, windows, stair parts and other general line products. The addition of these products are a nice enhancement to BMD's legacy general line product mix and we are excited to be able to offer an expanded product offering to our customer base in the Northeast. I will turn it back over to Nate to discuss our business outlook. Thanks, Kelly. Speaker 200:11:01I'm on Slide number 13. Current estimates for 2023 U. S. Housing starts are 1,400,000 units compared with actual housing start to 1,550,000 in 2022 as reported by the U. S. Speaker 200:11:12Census Bureau. Throughout 2023, home affordability has been a balance for consumers given higher mortgage rates and limited home price decreases. However, given a resilient economy and low levels of existing home inventory for sale, Demand for new residential construction has been stronger than anticipated. Homebuilders have also addressed affordability challenges facing homebuyers in various ways including smaller home sizes, fewer amenities, price incentives and mortgage rate buy downs. Economic uncertainties, escalating mortgage rates and home affordability are expected to continue to influence the near term demand environment. Speaker 200:11:49Consensus forecast for 2024 single and multifamily housing starts in the U. S. Generally range from 1,300,000 to 1,400,000 units, which is comparable to 2023. Regarding home improvement spending, industry forecasts project continued moderation in year over year growth and renovation spending and economic uncertainty may also negatively impact homeowners further investment in their residences. Despite these near term uncertainties, we believe the long term demand drivers for new residential construction and repair remodeling activity continue to be favorable, supported by strong demographic trends, low home inventory and the age of U. Speaker 200:12:25S. Housing stock. As such, we will remain clearly focused on the execution of our strategies and have great conviction around our investments to grow the company. Lastly, I'm very pleased with the early integration efforts related to the newly acquired Roscoe facilities. I want to express my gratitude to all of our associates throughout the organization, including our newest associates at Roscoe for keeping a sharp focus on our customers and working safely and effectively. Speaker 200:12:49Thank you for joining us Today for and your continued support and interest in Boise Cascade. We would welcome any questions at this time. Chris, would you please open the phone lines? Operator00:12:58Thank you. Stand by as we compile the Q and A roster. One moment please for our first question. Our first question will come from Susan Malkari of GS. Your line is open. Speaker 300:13:26Thank you. Good morning, everyone. Speaker 100:13:29Good morning, Sue. Speaker 300:13:31I guess, my first question is talking a bit about the demand environment. Appreciate the color that you gave in your prepared remarks. But can you talk a little bit about the divergence that I think we're seeing in terms current pace of starts flowing through your business and the ability to capture that reacceleration that we saw in starts as we move through this year. Operator00:14:03So Speaker 200:14:07Sue, it's Nate. Maybe just In terms of the repair and remodel activity, I think the and then also new home sales. Today, we still see good pace on our repair and remodel business. And so that I think that activity remains steady. And I think it It speaks to a couple of things, including really the importance of 2 step distribution in terms of supporting that marketplace. Speaker 200:14:32So We feel good about kind of the pace of that business. Obviously, the relationships that we have on the supply side in support of that business, and then again the alignment we have with that marketplace. So to me that would be probably the key item is again The basic consistency on repair and remodel remains pretty good. I would say in terms of the kind of Perry for new home construction and kind of maybe the resiliency that the team demonstrated, the Wood Products team and distribution team demonstrated in We were working closely with our customer base and making sure we have great clarity in terms of what their inventory positions are, what the pace of business was. And we were we made some early and I think important and effective decisions on putting our production capacity at levels to support a marketplace that frankly surprises the upside. Speaker 200:15:35And I think as we think about 2024, Sue, we'll have that same kind of planning and work and diligence to make sure that we're staying close to the marketplace and prepare to serve the marketplace, should there be an upside surprise or downside risk associated with that. Kelly, anything you would add just in terms of the backdrop on housing and the recurring remodel? Speaker 100:15:56Yes. Happy to Nate. So, yes, I guess maybe starting with single first and I know Sue you're very close to the builders and it seems like The national homebuilders are still relatively bullish and they continue to want to increase their land position and build out new single family. So that seems to be that that could be flat to actually somewhat up year over year 20 20 3 to 24. We'll see how that plays out. Speaker 100:16:27On multifamily, there does seem to be a bit of a pause, more concerns there around financing and potentially oversupply. And as you know, new single family is a bigger driver for us. In terms of R and R, We all typically think of R and R spending as it relates to sales of existing homes. And as we know, those are down a fair bit this year. But yet R and R has held up a fair bit, which I think speaks to the fact that people, Speaker 400:16:54I think they have a good amount of equity Speaker 100:16:56in their homes and maybe They purchased a home a year or 2 ago that maybe didn't quite have the amenities they wanted and so they're we're seeing maybe a little bit more R and R spending because of that dynamic. Speaker 300:17:08That's encouraging. Good to hear that. And maybe turning the conversation a bit, Any thoughts on how we should think about the margins in BMD as we kind of consider a world where wood product prices could be moving lower? And I guess with that too, any implications to those BMD margins from the Brasco acquisition? Speaker 100:17:34Yes. And so I guess, as we alluded to in our speaking points, certainly seasonally 3rd to 4th quarter here. We expect to see some compression as our sales come down and we're not able to leverage those fixed costs. So we'll have some deleveraging there. But we feel really good about what BMD has been able to do and what's been quite volatile last couple of years in terms of their margin profile. Speaker 100:18:02And we're executing upon what we said our strategy is, which is to make That product mix richer to have a higher margin profile and that would include things like the Brascaux acquisition. Speaker 300:18:16Okay. And I'm going to squeeze one more in, which is you mentioned the ongoing investments in a lot of your strategic initiatives, the door shops in Kansas City, Denver, the acquisition in Florida that you closed. Just any update on how those are progressing and any further details there? Speaker 100:18:36Yes. So we have a pretty good amount of spending ahead of us in the balance of this year and then we expect to have Again, a pretty sizable capital plan in 2024, but we're still working a number of things. So we won't speak to 2024 in any detail at this point. But yes, in BMD, for example, in the Q4, we did announce that we got the West Palm Beach. We bought a new distribution center there, which expands our presence in that market, which is great. Speaker 100:19:08We continue to build out The Denver Door Shop, it's not quite up and running yet, but it will be here soon. We're close on completing the Marion, Ohio relocation that we started a year or 2 ago. And then we're forever chasing rolling stock, that we hope to get landed here in the Q4. In terms of the other The couple other big projects in BMD, those being, Hondo, Texas and Walterboro, South Carolina, Those were greenfields. We bought bare pieces of ground and it takes a fair bit of time to get those sites prepared. Speaker 100:19:42So we still have a fair bit of spending ahead of us on those. And those will be a while yet to come up. In terms of Wood Products, Again, a fairly hefty spend here in the balance of this year and that's not uncommon, right? When we have some seasonally slower periods, some holiday periods, we take advantage of those times to complete some capital projects and we expect to do that again this Q4. And I would say that's pretty normal course stuff in terms of like some random stackers in the West for veneer. Speaker 100:20:16Chapman PLV line, which is great. Again, that's part of our capacity expansion in terms of being able to capture that veneer and put it into EWP. We've got a little bit of spending on a relatively small mass timber project in White City, Oregon. And then just some a lot of a fair bit of maintenance to do here in the Q4. So I'll stop there, Sue. Speaker 300:20:40Okay. Thank you for all that color. It was helpful. I'll turn it over now and good luck with everything. Speaker 100:20:46Thank you. Thank you. Operator00:20:48Thank you. The next question will come from Kurt Yinger of D. A. Davidson. Your line is open. Speaker 400:21:04Great. Thanks Speaker 500:21:05and good morning everyone. Speaker 200:21:07Good morning, Kurt. Speaker 500:21:08I just wanted to follow-up on Susan's question on BMD margins. I mean commodity prices have largely normalized, EW pre Prices come off a decent amount, volumes moderated, but segment EBITDA margin is still nicely above 6%. I guess as you look to 2024, absent the potential for a softer demand environment and maybe some fixed cost deleveraging, Is there anything that you see today as kind of a material risk to that margin profile? Speaker 100:21:43Yes. I mean, I think you hit on the material risks, Kurt, in your comments around Volumes and demand could flow through there. And then there's always price risk across commodities, across general line and we're seeing some modest price risk here in EWP. So I guess, Nate has an additional comment here. Speaker 200:22:10Yes, Curt, it's Nate. Just maybe the other thing to think about is, as we described in our opening remarks is that, I think as a channel, the marketplace continues to work its way through the year end and into early next year, I think the importance and the dependence on a warehouse support It continues to be high. So unit business, job packs and pieces. So as you think about margin profile and EBITDA margin for that segment of for those services are generally a little bit higher as compared to the direct. So I think that's probably the other component to think about is that mix of direct versus auto warehouse. Speaker 200:22:45We like both obviously and obviously given where we're at this time of year seasonality that auto warehouse component strengthens and we're well positioned to support that. Speaker 500:22:56Got it. And is that out of warehouse mix, Do you almost think that's kind of countercyclical to where in a weaker environment, people are more closely managing those inventories and More reliant on you guys versus feeling great about the end markets and that's less of a requirement. So in a softer demand backdrop that's actually kind of a maybe a tail continues to be a tailwind on the margin side? Speaker 200:23:25Yes, I think so. I think you said it well. I think people say look at risk reward both on demand and as well as on realizations pricing. Yes, I think that the dependence and importance of 2 step distribution remains very high. Probably the other component that we're I think excited about is we think about especially from some of our general line partners as they introduce new products and services. Speaker 200:23:48Generally, there's that is a bit of a transition In terms of people getting new SKUs and I think in terms of the growth opportunity that represents again I think a margin opportunity for us largely based upon customers wanting to again be served and supported on units and job packs and pieces versus on a truckload kind of direct basis. Got it. Speaker 500:24:12Okay. Thanks for that, Nate. And then just on the Wood Products cost side, I mean, I imagine web stock cost could be a bit of a headwind as higher OSB prices flow through, but we've also seen a fair amount of pressure on Western log prices. So how do you see those kind of items coming together in Q4? And where does that set you up at least at this stage going into next year? Speaker 400:24:39Yes. Good day, Kurt. It's Mike. So I think you're correct around web stock costs. And as I I think I've mentioned previously the way we cost our web stock into the finished product is not on a spot basis. Speaker 400:24:52We use a 13 week rolling average, so there's some buffering to the ups and downs that occur on the indices that you see every week. So clearly, over time, if the trend is up, then there is a bit of an impact, but it's not a tremendous impact immediately. As it relates to log costs, I think that's a geographical issue more than anything else. I would tend to say that the log cost profile in the Southeastern United States in general is sort of flat, sort of flat to flat. And then in the Pacific Northwest, we've had some ups and downs Recent times, it's been on the way down and you can see that in our data. Speaker 400:25:32I would say that Generally speaking, between now and the end of the year, we're in a very good position in terms of availability of logs. So we're not concerned about that. But at the same time, there has been a bit more pressure in general because of the lack of availability, particularly from federal lands. And so as I'll say the industry looks to put itself in a position to be able to have logs available. We've spent a few extra dollars for Buying logs that would be available over the longer term, a bit higher than the average that you see on a quarterly basis. Speaker 400:26:05But At the moment, I think you're very well aware that log costs have come down and at least between now and the end of the year, we don't see Massive increases coming on log costs in the West. And in our case, I should remind you, I guess, some of our log costs are linked to finished product pricing. And so given where that has gone, particularly for plywood, that certainly has We'll continue to do so between now and the end of the year, I suspect. Speaker 200:26:37Got it. Speaker 500:26:38Okay. Thanks for the color, Mike, and good luck here in Q4, guys. Speaker 100:26:41Thank you. Thanks, Richard. Operator00:26:44Thank you. And one moment for our next question. Our next question will come from Ketan Mamtora of BMO. Your line is open. Speaker 600:26:59Thank you and good morning. First question, can you give us some sense of how your order books are on the EWP side, outside of the seasonal component, which we understand sort of slows in Q4. But have you kind of noticed any change in terms of sort of the activity levels and just your order book? Speaker 400:27:25Yes, Ketan, I have a few words about that. Thanks for the question. So, yes, so I just forget about the seasonality, which is very important. I'm everybody on the call realizes that as we get to the end of the calendar year, we normally see a decline in order files as that relates to, generally speaking, Construction, Digby Single Family Construction. Our waterfalls have really been quite strong. Speaker 400:27:48And I think Nate referred to this earlier in his comments Around how we put ourselves in a position to meet demand, both in terms of inventory on the ground and also In terms of having people in veneer available. So while our order files are not as strong as they are, Not as strong today as they were perhaps like 3 months ago. They're still quite strong. And the way we manage that is we like to be able to ship relatively speaking, quite quickly to our customer base when the orders do come in. So, I think I'd summarize as saying that, Yes, the orders are not as strong as they were 3 months ago, but they're still all things considered quite good relative to some other times that have been Much more challenging than they are today. Speaker 600:28:37Understood. No, that's helpful. And then Switching to the BMD side and the Proscot acquisition, you guys have made a lot of progress on growing of the windows and the door, that side of the the millwork side of the business, I'm sorry. Can you talk to kind of what trends What you've learned as you expanded on that side of the business? And as you look at sort of further opportunity, Is this sort of an area where we should expect growth over the next several years? Speaker 700:29:15Keith, this is Jeff. I would tell you what have we learned. We've learned a lot as we've gone and with each one we've done, each one we've opened, we take some learnings from the past And gotten a lot better and improved what we're doing. It's a good business for us. It fits right with our customers. Speaker 700:29:30It's the same customers that we're currently serving now. And so we're continuing to move forward with it. With the Brosco acquisition, I can just tell you in a short period of time, there's a lot of learnings from them. They've been in the millwork business for a long time and We know we can take some of the processes that they have in place and roll them across our system. And then the future of it, what do we want to do? Speaker 700:29:48I can tell you this, We're still actively looking. It's a good business. We enjoy it and we know there's more to go. Speaker 600:29:56Got it. And then when I just look at the LTM performance, would you consider that as more kind of normalized or would you say that was still helped by elevated activity, let's say, the last 3 or 4 quarters. How would you characterize that? Speaker 100:30:14Yes. I think that's a pretty fair representation of what we think normalized will be. Like us, they would have experienced Some run up and then and more recently a little bit of rundown in terms of pricing, but we feel like that's a reasonable run rate to start from. And as Jeff said, We're pretty excited about not just can we offer more products to our existing customers through We can offer them a more full line of products as well. So we're excited about that and the team at Prosco is really good. Speaker 100:30:56So we're excited there. Speaker 600:30:58Got it. That's very helpful. I'll jump back in the queue. Good luck. Speaker 400:31:02Thank you. Thanks, Keith. Operator00:31:05Thank you. One moment for our next question. Our next question will come from Michael Roxland of Truist Securities. Your line is open. Speaker 800:31:20Thank you, Nate, Kelly, Mike and Jeff for taking my questions and congrats on a good quarter. Speaker 100:31:25Thank you, Mike. Good morning. Speaker 800:31:27Good morning. Just on your last call, you guys mentioned maintaining good products margins higher than you had Historically, you referenced a number of upgrades and replacements that have been ongoing for more than a decade now. So in terms of margin profile as you continue to deploy new dryers, pressers, etcetera. What's the margin you're ultimately targeting for that business and over what timeframe? Speaker 100:31:55Yes. So yes, that is The question set from last quarter and I would tell you, we're targeting mid double digit EBITDA margin in that business going forward. And some of the spending you referenced, some of that is frankly maintenance, right, dryers, LUCs, presses, those sorts of things. Those aren't those don't necessarily increase your profile, but they certainly sustaining your capabilities to support the customers. And so, we've really done a nice job of focusing that business Over the last number of years, and I think the strategy is playing out as we hoped. Speaker 800:32:39Got it. And just one thank you, Jack. Just one quick call. We see mid double digit. You're talking about 20%, 25% type EBITDA margins on a go forward basis or you know and if so, is that 2024, 2025, how to think about the timeframe? Speaker 100:32:56No, I wasn't speaking in the 20s, Mike. I was thinking the mid teens. Speaker 800:33:03Mid teens, okay. And Speaker 100:33:08we're above that today as you've seen. Speaker 800:33:11Got it. Thank you for that. And just one Quick question on EWP. Expecting EWP penetration in single family home construction, any share shift back for lumber Given weaker lumber prices, have you ever gained any share given where those prices are trending today? Speaker 400:33:33Hello, Mike. This is Mike. Speaker 800:33:36Hi, Mike. Speaker 400:33:37Yes. So I'm not sure I would say there's been a shift one way or the other, to be honest. I think the building approach that EWP in general caters to is not one necessarily that sees a lot of shift one way or another to that particular combination of lumber versus engineered wood products. It can have to do with availability as much as anything else. So as you would have seen or we all saw over the, say, the preceding few years when EWP was on allocation. Speaker 400:34:13Yes, there was a little bit, I think, of slippage of EWP or movement of EWP and lumber. But I think generally speaking, that's not something that happens to any great magnitude, but when there's nothing else available, lumber can be used in place of EWP. Our story For EWP, the quality, consistency and availability and speed of construction that it brings relative to other products and obviously the large one is lumber. Speaker 200:34:45And Mike maybe just add to Mike's comment. I think when you think about his last point, not just on the speed of construction, The homebuilders are really pushing for cycle time reduction on the job site. And so EWP is very much part of the answer there in terms of taking time out of the construction cycle. And as Mike described, we feel good about that trend and that opportunity continuing as we head into 2024 and EWP will Speaker 400:35:18Thank you, Keith. Operator00:35:20Thank you. And one moment for our next question. Our next question will come from George Staphos of Bank of America Securities Inc. Your line is open. Speaker 900:35:37Thanks. Hi, gentlemen. How are you? Sorry, joining late, so you may have covered some of this in your discussion. I'll try to keep it quick. Speaker 900:35:44One, some of your peers have talked about extend the lead times for their EWP business. Have you seen similar phenomenon and related point, and I think you might have covered this already. In terms of some of the price erosion that you're seeing in EWP, At this juncture, Mike, would you see it as just seasonal or is there something else that we need to be looking to? And then last question for me, Just and perhaps you discussed this already, where you're seeing momentum in terms of open web trusses versus I joists or for that matter, laminated lumber and single family construction. Are you seeing any further share erosion there or is your EWP gaining back share. Speaker 900:36:28Thank you guys. Good luck in the quarter. Speaker 400:36:31Yes. Thanks for the questions there, George. Let me have a stab at these. Maybe there'll be additional comments So, our lead times, I'd say moved up just a relatively small amount over the last over the building season. And that was primarily due to the way we positioned ourselves coming into the building season. Speaker 400:36:57And so, we had a lot of inventory on the ground And we kept people employed and we had good operating rates. And so we were able to meet the upswing in demand, I'll say, as well or better than anybody else in this particular sector. So, we didn't see the extension that maybe you are referring to from other manufacturers and we're still in a good position. So I think all in all, our strategy worked quite well and continues to work very well. You had a question around price erosion and the seasonality or not of this. Speaker 400:37:32Yes. So I don't really think it's a seasonal issue per se. I think it's more like specific locations require attention at certain times when there is opportunity that presents itself and we have discussions in specific markets around what market related pricing is. But as I'm sure you're aware, EWP doesn't really have the seasonality that a commodity does because EWP certainly doesn't follow that That's a cyclic nature. So I think to Kelly's point, we might see very, very modest like low single digit movement Going forward, but we certainly don't see that as anything more than that. Speaker 400:38:15The Open Web Trust question, So I think it would be fair to say that some of the momentum that Openware Trust saw was due to a lack of availability of EWP, specifically I joist, okay? And so Again, I'm sure you're aware, we are a very large producer of I joist and we continue to produce large quantities and we have it available. So if anything, I think the opportunity for us to garner additional sales It's actually quite positive at the moment because we have the availability. We're nationally oriented in terms of our capacity. And so I don't see open web trusses being any more of a, if you will, a threat than they were 6 months ago. Speaker 400:39:04In fact, maybe less when I think about it. Speaker 900:39:09Hey, Mike. One last one quickly and I'll turn it over. Did you comment on the call on when you expect the pricing in EWP to start inflecting higher? And if you haven't, no worries, but just want to make sure we got that on the record. Speaker 100:39:23Yes. We didn't comment forward beyond what we expect Sequentially in the Q4, George, which is modest price erosion. Speaker 900:39:31Okay. Thank you, guys. Thanks, Kelly. Talk to you in a bit. Speaker 100:39:34Thanks, George. Thanks, George. Operator00:39:37Thank you. One moment please for our next question. And we have a follow-up from Kurt Yinger of D. A. Davidson. Operator00:39:51Your line is open. Speaker 500:39:54Great, thanks. Just two quick ones on capital allocation. First, Kelly, could you remind us what kind of go forward maintenance CapEx is at this stage versus the more discretionary component within the $200,000,000 guide for this year? Speaker 100:40:11Yes. Sure, Kurt. So I think we think in terms of a normalized spend, we're probably in range given our growth of kind of $125,000,000 give or take, but it's going to be a few years probably before we Expect to moderate down to that level given some good opportunities that we have ahead of us. Speaker 500:40:32Got it. And is that pretty evenly split between Wood Products and BMD. Speaker 100:40:39No, I'd say it's probably a little bit heavier to Wood Products than it is BMD once we kind of normalize. Speaker 600:40:46Got it. Speaker 500:40:47Okay, great. And then just lastly, I mean, the stock has pulled back here a little bit. Does that change your appetite at all around share repurchase activity and what would you need to see for that to maybe move up in terms of capital allocation priorities? Speaker 100:41:05Yes. No, good question. So, I'll hit it like this, Curt, which is Stock repurchases are still very much in our toolkit for capital allocation options. And as I think you all know, we there's many times where you have restrictions on stock repurchases. If you're evaluating transactions and fortunately we've been able to do several nice transactions in the last couple of years. Speaker 100:41:34So Our opportunity set has been somewhat restricted at times. And so I guess at this point and assuming there's no restrictions, We will buy shares if doing so, we view that as being an attractive use of cash at that time relative to our other Capital Allocation Opportunities. Speaker 500:41:56Got it. Okay. Thanks for the color, Kelly. Appreciate it. Speaker 100:42:00Thank you, Kurt. Thanks, Kurt. Operator00:42:02Thank you. And I see no further questions in the queue. I would now like to turn the conference back to Nate Jorgensen for closing remarks. Speaker 200:42:13Thanks, Chris. We appreciate everyone joining us on the call this morning for their update and thank you for your continued interest and support of Boise Cascade. With that, please be safe and be well. Thank you. Operator00:42:24This concludes today's conference call. Thank you all for participating. You may now disconnect and have a pleasant day.Read morePowered by