Good day. My name is Corey, and I will be your conference facilitator today. At this time, I would like to welcome everyone to Boise Cascade First Quarter 2024 Conference Call. Please note all participants are in listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. It is now my pleasure to introduce you to Chris Forrey, Vice President, Finance and Investor Relations, Boise Cascade. Mr. Forrey, you may begin your conference.

Good morning, everyone. I would like to welcome you to Boise Cascade's First Quarter 2024 Earnings Call and Business Update. Joining me on today's call are Nate Jorgensen, our CEO; Kelly Hibbs, our CFO and Treasurer; Troy Little, 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. Please review the warning statements in our press release, on the 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, Chris. Good morning, everyone. Thank you for joining us for our earnings call today. I'm on Slide #3. Total U.S. housing starts only increased 1%. However, single-family starts increased 27% compared to the prior year quarter. Our consolidated first-quarter sales of $1.6 billion were up 7% from the first quarter of 2023. Our net income was $104.1 million or $2.61 per share compared to net income of $96.7 million or $2.43 per share in the year-ago quarter. Both of our businesses delivered strong financial results during the quarter, which were influenced by seasonal factors and the relative strength of new single-family housing starts. In addition, our expanded capital spending program is progressing consistently with our expectations as we provided meaningful returns to our shareholders through share price gains, dividends, and share repurchases. I want to thank our associates across the company who continue to execute our strategies that position us to serve and support each of our stakeholders. Kelly will now walk through our segment financial results and provide an update on capital allocation in more detail after which I'll provide our outlook before we take your questions. Kelly?

Thank you, Nate, and good morning, everyone. Wood Products sales in the first quarter, including sales to our distribution segment, were $468.9 million compared to $437.4 million in the first quarter of 2023. Wood Products reported segment EBITDA of $95.6 million, up from EBITDA of $93.2 million reported in the year-ago quarter. The increase in segment EBITDA was due primarily to higher EWP sales volumes and higher plywood sales prices. These increases were offset partially by lower EWP prices and higher wood fiber costs. BMD sales in the quarter were $1.5 billion, up 9% from the first quarter of 2023. BMD reported segment EBITDA of $83.6 million in the first quarter compared to segment EBITDA of $76.8 million in the prior year quarter. The increase in segment EBITDA was driven by a gross margin increase of $22.9 million, resulting primarily from higher sales volumes and improved margins on general line and commodity products. The gross margin improvement was offset partially by increased selling and distribution expenses and depreciation and amortization expense of $16.5 million and $4 million, respectively. We expect total company depreciation and amortization in 2024 to be approximately $140 million. In addition, our anticipated effective tax rate remains at 25%. Turning to Slide 5. On a year-over-year and sequential basis, first-quarter volumes for LVL were up 31% and 16%, respectively, and I-joist volumes over the same comparative periods were up by 46% and 5%. Our EWP volume growth exceeded the underlying single-family housing start increases for both comparative periods. Sequential pricing for both I-joists and LVL was down 4% due to continued pricing pressure in the market. Looking forward to the second quarter, production builders have maintained optimism in spite of increasing mortgage rates, and we expect our EWP volumes to increase sequentially. On pricing, we expect sequential price erosion to moderate during the quarter. Turning to Slide 6. Our first-quarter plywood sales volume in Wood Products was 372 million feet compared to 406 million feet in the first quarter of 2023. As expected, plywood volumes decreased during the current quarter as we shifted a higher proportion of our internally produced veneer into EWP production given improved demand for EWP. The average plywood net sales price in the first quarter was $378 per 1,000 feet, up 3% from the first quarter of 2023 and up 1% sequentially. Thus far in the second quarter of 2024, plywood price realizations are consistent with our first-quarter average. However, we expect downward pricing pressure as we move through the second quarter given uncertainty in the panel markets. Moving to Slides 7 and 8. BMD's first-quarter sales were $1.5 billion, up 9% from the first quarter of 2023, driven by sales volume increases of 12%, offset partially by sales price decreases of 3%. By product line, commodity sales increased 1%. General line product sales increased 16%, and sales of EWP increased 12%. Gross margin dollars increased $22.9 million when compared to the same quarter last year as higher margin dollars on general line and commodity products were offset partially by lower margin dollars generated on EWP. In addition, BMD's overall gross margin percentage was 15.1%, up 30 basis points from the 14.8% reported in the first quarter of 2023 and down 10 basis points sequentially. EBITDA margin was 5.6% for the quarter, flat with the year-ago quarter and up 20 basis points sequentially. BMD sales pace thus far in the second quarter of 2024 has moderated slightly from the strong levels experienced in March, but is still approximately 5% above first-quarter daily sales averages. Although commodity markets have created hesitancy in the marketplace currently, we anticipate our daily sales pace will strengthen as we move through the quarter, given a healthy single-family environment and seasonally better weather. Second-quarter EBITDA margins will be sensitive to the ultimate sales pace for the period and the trajectory of product pricing. Moving to Slide 9. This slide shows the weak pricing environment for lumber over the last five quarters. As such, recent capacity reductions in certain geographies have been announced, and there is speculation of additional production curtailments if weak pricing persists. Moving to Slide 10. The late first-quarter increase in composite panel prices was driven by OSB due to strength in single-family starts and supply limitations. As we enter the second quarter, sharp price declines in OSB have created cautious behavior across panel markets in general. For our distribution business, periods of uncertainty trade both risk and opportunity. Despite the uncertainty in commodity markets currently, we will maintain our long-standing approach to having inventory on hand to support our customer base. I'm now on Slide 11. We had capital expenditures of $34 million in the first quarter with $19 million of spending in Wood Products and $15 million of spending in BMD. Our capital spending range for 2024 remains at $250 million to $270 million, with the pace of spending to accelerate as we move through the year. Speaking to shareholder returns, we paid $11 million in regular dividends to shareholders and completed the repurchase of approximately 206,000 of our common shares for $27 million in the first quarter. We have approximately 1.7 million shares still available for repurchase under our share repurchase program. In addition, our Board of Directors recently approved a $0.20 per share quarterly dividend for shareholders of record as of June 3, payable June 17. In summary, our balance sheet remains very strong, and we are committed to our balanced approach to capital allocation that includes ongoing investment in our existing asset base, organic growth projects, and returns to our shareholders. Looking forward, unless a meaningful M&A transaction occurs, we would expect to return additional capital to our shareholders during the balance of 2024 via special dividends or share repurchases or a combination of the two. I will turn it back over to Nate to discuss our business outlook.

Thanks, Kelly. I'm on Slide #12. Current industry forecasts for 2024 U.S. housing starts are generally consistent with actual housing starts of 1.42 million in 2023 as reported by the U.S. Census Bureau. Home affordability remains a challenge for many consumers due to the cost of housing combined with elevated mortgage rates. However, with low unemployment and an undersupply of existing housing stock available for sale, new residential construction is expected to remain an important source of supply for homebuyers. Recent pressures on multifamily starts are expected to continue due to increased capital cost for developers, combined with cooling rents and elevated supply. Regarding home improvement spending, the age of U.S. housing stock and elevated levels of homeowner equity have provided a favorable backdrop for repair and remodel spending. In 2023, year-over-year growth rates in renovation spending moderated due to economic uncertainty and higher borrowing costs. Our home improvement spending is expected to remain healthy compared to history; however, recent industry forecasts project mid-single-digit declines in 2024. Ultimately, macro environment factors, the level and expectations for mortgage rates, home affordability, home equity levels, and other factors are likely to influence the near-term demand environment for the products we manufacture and distribute. As Kelly mentioned, we remain well-positioned to invest in our existing asset base and organic growth projects in both businesses, as reflected in our robust 2024 capital spending plans. Our longer-term view on housing fundamentals remains favorable, supported by demographic trends and underbuilt housing stock. As such, we remain clearly focused on the execution of our strategies and have great conviction around the investments that continue to grow the company. Thank you for joining us today and for your continued support and interest in Boise Cascade. We would welcome any questions at this time. Corey, would you please open the phone lines?

Our first call comes from Susan Maklari of Goldman Sachs.

This is Charles Perron in for Susan. Maybe first, talking about EWP, obviously, it's encouraging to see that the market dynamics are positive for the volume outlook for the coming quarters. But when you think about I-joist specifically, you've seen obviously, OSB prices rising significantly through the first quarter, obviously being quite elevated right now. You've talked about pricing erosion on EWP moderating, which is encouraging, but how should we think about the input cost and basically the margin dynamic, especially for I-joist in the near term, considering those dynamics together?

Yes. Sure. Charles. So yes, we feel really good about our I-joists position in the marketplace in general. And then specific to your question around cost, yes, OSB and web stock is a meaningful input cost for I-joist. As we've spoken before, though, we do have a kind of a 13-week average pricing mechanism at which we procure our OSB. And so we kind of lagged on the way up, and we also lagged on the way down and feel good about our ability to kind of continue to manage our cost base across the EWP in general.

Okay. Yes, that's helpful. And then sticking to that point about the commodity price moving. When you think about BMD specifically, how do you approach holding inventories in this environment where you see this price weakness? And what is your ability to some extent to predict that margin for the segment, let's say, is it above the historical average of 3 to 4 that you've mentioned in the past?

Yes. Let me start off, and then Jeff or Nate can jump in as needed. We are currently in a period of exploration. OSB prices have dropped significantly, although they remain high compared to historical averages. However, the decline has been quite sharp. Plywood prices have remained stable, but there is a slight weakness, particularly in the southern regions, which seems to align with the trends in OSB. We will be actively engaged in the marketplace every day and have a clear understanding of our current conditions and cost structure. We will not become overly attached to our inventory; instead, we will focus on selling and managing it effectively. Our commitment to our customers remains strong. Jeff, do you have anything to add?

Yes. I would just add that overall, we saw this coming, and we worked really hard to lighten our position before it hit. So obviously, you'd always like to have a little bit less when print comes on as big as it is, but we're pretty well positioned for it.

Okay. That's very helpful color there. And maybe one last one. On the balance sheet. You guys repurchased some stock this quarter, which was encouraging to see considering your leverage. When you think about capital allocation going forward, is this something that we should expect more going forward? Or should we think about the dividends to remain your favorite way of distributing capital to shareholders?

Yes. No, I’d say it this way, Charles. So we’re committed to our approach. We’re very committed to our expanded capital program. I’d reiterate that we do expect to provide additional shareholder returns, assuming there’s no meaningful M&A surfaces. And then our playbook includes both share repurchases and special dividends, but it wouldn’t be appropriate in this forum to really communicate more than that in terms of timing and sizing and how that plays out exactly. But our expectation is we will be returning additional capital to shareholders, absent M&A in the balance of the year.

Our next question comes from the line of Mike Roxland at Truist.

Nate, Kelly, Jeff, and Chris. I would like to follow up on the last discussion. Jeff, you mentioned that you anticipated the decline in commodity prices, which prompted you to reduce your positions. Can you comment on where the backlogs stand or how bookings for OSB, lumber, and plywood compare to normal levels?

I would say that on the lumber side, you can get what you need relatively quickly without any issues. In OSB, I'll tell you during the run-up, it was very, very difficult to get. And now there's definitely more available and people are looking for a home for it.

Got you. But in terms of your own inventory levels and how much you have in stock relative to a normal level of inventory for lumber, are you at that utilized level? Did you take it down below given that you had some foresight that the turn was coming?

No, we're actually in really good shape. There's been no real reason to take any kind of position on the lumber studs. And so we say we're going to have it in stock and be ready, and we do. So I think we're in a really good position there. On plywood, I think we have plenty. We're in a good spot there. In OSB, which definitely had a big run, it was tough to get. And you could tell it was slowing down a little bit. We really did work hard. So overall, I'd say we're kind of right where we should be, and it's kind of a normal level.

Mike, it's Nate. Maybe just to add to Jeff's comments is in these kinds of environments where commodities have come off, and obviously, OSB is the most recent example, there obviously hasn't been seen in the marketplace, and I think our customers and suppliers as well look to us as a bit of a safe harbor. And so they're going to go short. They're going to be buying more heavily out of warehouses, maybe instead of railcars and trucks. It goes to trucks and units. And again, we're really well supported to deliver on that. So it's important that we remain in stock and we can provide that important service and value when our customers are in need of it and today represents that opportunity.

Got it. That's great insight. I have just one quick follow-up on BMD. You did an excellent job adjusting your mix to general line and EWP while reducing commodity exposure, considering the volatility in commodities we are currently experiencing and have seen in the past. What percentage of commodity are you ultimately aiming for? Will it be 30% of BMD or 25%? And over what time frame do you plan to achieve that?

Yes, that's a great question, Mike. In the first quarter, we were around 37% of the mix. Price will obviously affect how large that segment of our sales will be. Ultimately, I believe we will still be in the mid- to low 30s once we fully implement our strategy. However, as we've mentioned before, we are not exiting the commodity space. We excel in it and appreciate the strong return on invested capital it provides.

I'm just going to add to that. We absolutely have the commodity business. Now the last few weeks of print hasn't been fun. But if that share is going to go down a little bit, it's just because of the growth in the other categories. But the commodity business has been good to us, our customers rely on us, and we're going to start right in there with it.

Yes. And I guess I would just follow; we have a really good commodity sales team, great awareness of our data, and I look forward to kind of seeing how they navigate us through this near-term period we're working through.

Got it. One last question I'll just tie and I'll turn it over. Just, Kelly, you mentioned that your EWP volume growth this quarter exceeded the single-family start increases. Given that 80% to 85% of EWP correlate to single family, where do those additional volumes head, especially given the weakness in multifamily?

Yes. So our volumes were heavy to single, Mike. I guess I didn't quite follow the balance of that question. Can you repeat it, please?

Sure. You mentioned that your EWP volumes exceeded the increases in single-family starts. Given that 80% to 85% of EWP is allocated to single-family, what other categories saw growth that might have absorbed some of your EWP volume?

Yes. I can't point to it specifically; this is a bit anecdotal, for sure. But I feel really good about our ability to capture share given the nice job on the manufacturing side and then also having the benefit of having a leading national distributor, I think, shows up well and helps us capture share.

Our next question comes from George Staphos of Bank of America Securities.

This is actually Lucas Hudson on for George Staphos. He is currently traveling right now. So first and foremost, thanks for the details. My first question is, what is your outlook for repair-and-remodel? And is there more momentum in do-it-yourself projects or pro contractor? And what are the implications for BMD and Wood?

I think the overall theme is that while repair and remodel activity has decreased a bit, it remains historically above typical trends. The professional side of the repair-and-remodel market is still performing well and is quite stable, especially compared to the weekend do-it-yourself segment. Overall, I view the repair-and-remodel landscape positively. Factors like aging housing stock and homeowner equity continue to provide a solid foundation for growth. While we may be seeing lower activity than in the past 12 to 24 months, I believe there are still significant opportunities for our company across a variety of products and services.

That's great color. Just a quick follow-up as well. Was BMD revenue better than initially expected? And if so, what created that positive variance?

I would say BMD’s revenue probably came out pretty consistent with what our expectations were. I think the quarter started slower than we would have anticipated, and it finished very strong in March.

Our next call comes from the line of Ketan Mamtora of BMO.

First question, just following off on that. The strength that you saw in March, has that continued into April as well? Any additional color you can provide on that?

Yes, March was very strong. As mentioned in the prepared comments, the sales pace for BMD was slightly lower in April compared to March, but it remains at healthy levels. Regarding Wood Products manufacturing, we feel good about the momentum in EWP; it continues to be solid. It may be a bit weaker than we initially expected, but it is still strong as we move into May.

Got it. That's helpful. And then, Kelly, when you talked about in BMD, daily sales being up 5% sequentially. Are there any shipping day differences that we should be mindful of between Q1 and Q2?

Yes, I would have included those in my calculations, Ketan, but there are 64 workdays in both the first and second quarter.

Got it. So if that's the case, that would still imply BMD to be down versus last year's second quarter if I'm just doing my math correctly?

Yes, that's fair. If we maintain the same sales pace we've had in April, that would be true. However, we will see how May and June develop as we continue to experience better seasonal weather and monitor the overall activity in housing. You are asking the right question there.

Got it. And then just one last one from me. On the margin side, we talked about some margin pressure, some price pressure from EWP, OSB going down here recently, plywood, maybe. But then you also have just seasonal sort of volume leverage in Q2. As we think about margins, how would you sort of weigh in those factors as it relates to Q1's 5.6% margin?

Yes. So April margins were healthy. They were good. May is going to be the discovery period here around commodity prices, as we've talked. So we do expect some pressure here in May. And to the extent of it, will depend on the duration of the weakness we've seen. But fundamentally, it doesn't change. While we might get some pressure here in the second quarter because of the commodity market, we still feel good about kind of the underlying earnings capability of BMD moving forward to be consistent with what we've been putting up lately.

Ketan, it's Nate. Maybe just to add to Kelly's comment; as you think about a marketplace that has some hesitancy in terms of both on price and demand, again, the dependence on our warehouse services only increases. So as you think about how that shows up for BMD, in terms of sales volume and margin performance out of the warehouse, that's a clear tailwind for us as well. So I think we're well set up to do what we need to do in BMD, again, kind of no matter what the demand environment is as we go through the quarter.

Got it. That's helpful. And on EWP prices, you talked about the price erosion moderating. So is it fair to say that after Q2, we are sort of stable at those Q2 levels? Or is it hard to tell at this point?

We recently experienced sequential declines of about 4%, and we anticipate that this will stabilize. Our current expectation is that we will see changes between 0 and negative 4%.

And beyond that, you would expect it to sort of stabilize, or is it difficult to say at this point?

I'd say it's difficult to say. It will be depending upon market demand in that sort of environment.

Ketan, it’s Nate. I mean, with the EWP, the market supply and demand is really what kind of sets the framework for pricing. So it has maybe less to do with input costs and more around what the market environment is. So to Kelly’s point, hard to see the second half from here, but as long as starts remain stable and steady, I think that will be favorable for the EWP pricing environment as well.

And our next question comes from Kurt Yinger of D.A. Davidson.

Great. Thanks, and good morning, everyone. I just wanted to start off on kind of competitive dynamics between I-joist and open web at this stage. I'm just curious, is it harder than you would have thought maybe getting some of those builder customers to convert back after some of the availability-driven kind of shifts in usage? And I know it's a complex topic with a lot of different inputs, but at a high level, how would you kind of describe the pricing differential for a builder customer at this stage between the two products? And how does that kind of factor in?

Kurt, it's Nate. I would say regarding the EWP, the comparison between I-joists and other systems is not a new issue; it's been around for several years. There are times when I-joist systems are preferred over other options and vice versa. Considering the current competitive landscape, I believe I-joist systems are well-positioned against traditional lumber options, particularly in terms of cost and lead times. Additionally, builders are focused on reducing cycle time. When comparing I-joist systems to dimensional lumber or other products, the speed of construction is often better with I-joists, enabling builders to minimize cycle time. This speed and simplicity on the job site are significant factors for builders in evaluating value now and in the future. Therefore, I believe the I-joist system is well-equipped to compete against both dimensional lumber and open trusses, with the emphasis on enhancing efficiency being a crucial expectation for builders.

Got it. And as we think about builders trying to address affordability challenges, perhaps building smaller homes, taking complexity out, is there any sort of current or medium-term impact do you think that has on kind of the EWP business or the relative attractiveness of those products? I mean, obviously, a smaller home potentially has some sort of volume implication, but beyond that, is there anything that kind of jumps to mind in terms of how that impacts your Wood Products business?

Yes, that's a good question. I believe that a smaller footprint will certainly impact the amount of engineered wood products or structural materials that can be sold. Builders are actively seeking to reduce costs, and sometimes building upwards is a viable solution due to land costs. Adding a second story offers opportunities for using engineered wood products since it involves upper-level construction. Therefore, I anticipate that engineered wood products will play a significant role. However, as we evaluate the trade-offs of reduced square footage, we expect this to also affect our engineered wood products as well as the other products and services we offer.

Got it. Okay. That's super interesting. And then just switching gears to BMD. Kelly, I thought you mentioned kind of lower gross profit dollars on EWP sales within BMD in the quarter which, I guess, is a little bit surprising considering the double-digit sales increase. So is that just a dynamic where based on how you're kind of transferring pricing and kind of the bleed in terms of sales prices there, there's a little bit of a timing mismatch maybe pressuring margins? Or is there something else driving that?

It's not only to do with transfer pricing or anything like that. It's all market-based. It's just a function of the market. And as we've seen and experienced some of the pricing pressure, we see some of that in Wood Products. And then obviously, you see that in distribution as well.

Got it. Okay. Makes sense. And then just lastly, I mean, Jeff, we've kind of seen five consecutive quarters now where BMD gross margins are right in that 15% range outside of what we've seen in OSB and maybe a little bit of EWP. Is there anything else that you're kind of keeping an eye on that maybe gives you concern that 15% could have some downward pressure to it? Or are you feeling pretty comfortable with those levels, given kind of the current state of the market?

Yes. Sure. There’s always competition out there is one thing I’ll say. So you have to keep your eye on that on what’s going on. But if you think about what we’ve done over the past few years and the growth that we’ve done and the capacity we’ve added, that’s all about general line and some of the millwork items, which are the higher-margin ones. And so our focus and growth on that is what’s been holding it steady. But there’s a little pressure on the millwork side. And there’s always competition and everything else. But from where we sit right now, we feel good.

Our next question comes from Reuben Garner of Benchmark.

Sorry to harp on this, but I think it's pretty critical right now. And I just want to clarify, on the inventory side, I understand you guys become more valuable in these sorts of environments. You're suggesting that your customers maybe go shorter on inventory when there's uncertainty like this and commodity downside. Is that something that has already played out and is done in the first quarter? Is it something that's ongoing and impacted your business in April and you're expecting it to continue to impact the business? Can you just kind of clarify where we stand on that sort of channel destock?

I don't think it's just destocking; rather, if you can minimize risk, it makes sense to only purchase what you need when you need it. That's what's happening now. For instance, on the OSB side, with prices slowing down, people are hesitant to make direct purchases; they prefer to get what they need quickly. As a result, we are currently seeing our warehouse business pick up.

Okay. And then I guess, on the general line side, last time we kind of saw a jump in rates and some uncertainty kick in the distribution channel, including yourselves got pretty conservative and destocked in some certain categories. I guess how are you thinking about that? It looks like general line had a pretty strong first quarter? Is it different this time? Are there trends that are hanging in, in some of those areas that are different than the commodity side and aren't maybe as rate sensitive as you thought? Can you just kind of update us on your thoughts there?

Yes. And in general line, the one big difference I'd say that we saw this year compared to last, in the winter buy and the price increases that were announced in some products. Before, people were hesitant to step in; they just didn't know. And this year, there was confidence of what was going to happen this year in the market. And so when those things came along, people jumped in and they purchased them. So as far as destocking goes, we don't see that. In fact, in some of the winter buys, we're starting to see people step back in and buy some more. So the general line has really been pretty stable.

Okay. Great. And then pricing, are there certain categories within BMD outside of the commodity that are facing more pressure than others? It sounds like you had some successful increases; anything going in the other direction?

Yes. I think right now, I mentioned it early. There's always some EWP pricing pressure just for competition. And then the millwork side, there's been a little bit there. And a lot of that has been driven by some of the components and things that come in from offshore and just what the freight has done and things like that. But those would probably be the two biggest areas that we're seeing it right now.

Backup is Ketan Mamtora from BMO.

Just one quick one. Was there any sort of geographic variations, what you saw in Q1 or in April in terms of regions, East versus West? Anything to call out there?

Ketan, it's Nate. I don't think there were any significant geographic variations in terms of strengths or weaknesses in the first quarter. It seemed to be quite steady and consistent across our franchise.

Got it. Okay. And then just one last one on capital allocation. I'm just curious sort of, obviously, the balance sheet is very strong. But as you sit here today, there's still uncertainty around kind of housing, repair-and-remodeling. So how do you sort of approach it as far as share repurchases are concerned versus kind of maintaining even more dry powder? Can you talk about sort of puts and takes there?

Yes, we have a strong balance sheet to support our expanded capital program, and we plan to move forward with it. While there is some uncertainty in the marketplace, we still have sufficient resources to pursue acquisitions if they are viable. If opportunities do not materialize, I expect we will return more capital to shareholders. We have a lot of flexibility, and we will make decisions carefully. We will remain attentive to market conditions and M&A opportunities and will consider shareholder returns if it seems appropriate as the year progresses.

Our next question comes from the line of Susan Maklari from Goldman Sachs.

I just wanted to quickly ask about the M&A pipeline. And I guess both just in terms of what you're hearing from some of your key partners in BMD today, especially maybe across the general line as they kind of look out at their businesses over the next couple of years and think about growth? And then as well as just obviously, the initiatives you've got and the potential for further acquisitions?

Yes. I mean, I guess, certainly, at the dealer levels, still quite a bit of activity there, much more fragmented marketplace than where we sit in the channel. For us, we will be aware and be acquisitive if it's the right thing to do. But I think my view is, for us, it's going to be organic. It's going to be our focus, and it's going to be the main driver of our capital deployment here at least near term unless something surfaces that we're not working on today.

Yes, I think it's important that any mergers and acquisitions align with our strategy and values, reflecting who we are and our perspective on the marketplace. Additionally, we believe that any combination should create added value for both our customers and suppliers. These factors play a crucial role in our decision-making process, and we will continue to evaluate opportunities through this lens.

Okay. All right. That's helpful. And then just one more for me. When you think about the commentary that we've heard from the builders this earnings season, I mean they're pretty bullish, and a lot of them have actually taken up their expectations for full-year closings even with the move in rates that we've seen recently. I guess as you think about some of that coming through to your business, what do you think it could imply in terms of seasonality as we move through the next couple of quarters and just the potential for some continued strength to come through on that new home construction side?

Yes, you're correct, Sue, and you likely have more insight into the national builders than we do. They remain quite optimistic and are using their financial resources to help people buy homes. On average, their growth expectations seem to be in the mid- to high single digits. However, it's important to consider the broader market, which sometimes feels a bit weaker overall. We find ourselves in an interesting situation with various data points and perspectives that make it difficult to predict how the market will develop for us in the upcoming quarters.

Yes, I think, Sue, it’s Nate. The other thing I would comment on, I think the large production builders, national builders, public builders. I think they’re really well positioned as Kelly described given the strength of their balance sheet. They’ve got great clarity on the marketplace, and the customers they serve. And I suspect they’ll continue to grow share relative to their position as compared to others in the marketplace. So I think they’re obviously an important part of the marketplace today, and we think that will continue to grow over time, just given their strength from both a financial perspective as well as their great understanding of the marketplace and what their customers need and expect.

This concludes the question-and-answer session. I would now like to turn it back to Nate Jorgensen for closing remarks.

Great. Thank you. We appreciate everyone joining us this morning for our update, and thank you for your continuing interest and support in Boise Cascade. Please be safe and be well. Thanks.

Thank you for your participation in today's conference. This does conclude the program, and you may now disconnect.