Earnings Call Transcript - BCC Q4 2025

Operator, Operator

Good morning. My name is Rocco, and I will be your conference facilitator today. At this time, I would like to welcome everyone to Boise Cascade's Fourth Quarter 2025 Earnings Conference Call. Please note, today's event is being recorded. I would now like to turn the conference over to Chris Forrey, Senior Vice President, Finance and Investor Relations. Mr. Forrey, you may begin your conference.

Chris Forrey, Senior Vice President, Finance and Investor Relations

Thank you, Rocco, and good morning, everyone. We'd like to welcome you to Boise Cascade's Fourth Quarter 2025 Earnings Call and Business Update. Joining me on today's call are Nate Jorgensen, our retiring CEO; Jeff Strom, our incoming CEO; Kelly Hibbs, our CFO; Joe Barney, leader of our Building Materials Distribution Operations; and Troy Little, leader of our Wood Products 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 or loss to segment EBITDA. I will now turn the call over to Nate.

Nathan Jorgensen, Retiring CEO

Thanks, Chris. Good morning, everyone, and thank you for joining us for our earnings call. As I reflect on 2025, I want to begin by recognizing the dedication and perseverance of every Boise Cascade associate. Our people and shared values continue to be the foundation of our sustained success. We delivered strong operating results despite ongoing market headwinds with full year net income of $132.8 million or $3.53 per share. We continue to expand our distribution business, the most notable examples being the opening of our greenfield distribution center in Plano, Texas and the fourth quarter acquisition of Holden Humphrey. Our multiyear investments in support of our EWP production capabilities in the Southeast remain a strategic focus in 2025. We completed the Oakdale modernization project and are substantially complete with the addition of the new production line. The meaningful investments we have made in the last 3 years positioned us to deliver above-market growth in the years to come. Lastly, we provided meaningful returns to our shareholders again in 2025 to a 5% increase in our quarterly dividend and more than $180 million of share repurchases. Turning to fourth quarter results. Total U.S. housing starts and single-family housing starts increased 4% and 7%, respectively, compared to the prior year quarter. Our consolidated fourth quarter sales of $1.5 billion were down 7% from the fourth quarter of 2024. Our net income was $8.7 million or $0.24 per share compared to net income of $68.9 million or $1.78 per share in the year ago quarter. Fourth quarter 2025 results were negatively impacted by approximately $6 million or $0.16 per share after tax related to accrual for legal proceedings in our BMD segment that Kelly will address in his comments. As expected, sequential volume declines in both divisions reflected the seasonal softness in demand. In BMD, our team delivered steady gross margin sequentially. In Wood Products, prices stabilized while wood markets, like other commodities, continue to experience weak pricing due to soft demand. Despite market challenges, we delivered solid earnings for the quarter. As announced in December, I will retire next week after 10 years with Boise Cascade, including 6 as CEO, and it has been an honor and privilege to serve in this role. Jeff's transition into the CEO role reflects our deliberate and purposeful succession planning. I have great confidence in Jeff and the entirety of our leadership team to guide Boise Cascade's continued success and look forward to continued service on the company's Board. Kelly will now walk through our segment financial results, capital allocation priorities, and the first quarter guidance. Jeff will then provide highlights on our business outlook before we open the call for questions.

Kelly Hibbs, CFO

Thank you, Nate, and good morning, everyone. BMD sales in the quarter were $1.4 billion, down 5% for fourth quarter 2024. BMD reported segment EBITDA of $56.4 million in the fourth quarter compared to segment EBITDA of $84.5 million in the prior year quarter. Gross margin dollars decreased $21.3 million compared to fourth quarter 2024. Additionally, BMD's fourth quarter EBITDA was negatively impacted by the $6 million charge that I will speak to in more detail momentarily. In Wood Products, our sales in the fourth quarter, including sales to our distribution segment, were $354 million, down 16% compared to fourth quarter 2024. Wood Products segment EBITDA was $12.3 million compared to EBITDA of $56.6 million reported in the year ago quarter. The decrease in segment EBITDA was due primarily to lower EWP sales prices and sales volumes, as well as lower plywood sales prices and higher per-unit conversion costs that were influenced by decreased production rates. Moving to Slides 5 and 6, BMD's year-over-year fourth quarter sales decline of 5% was driven by a 4% decrease in sales prices as well as a 1% decrease in sales volumes. By product line, commodity sales decreased 9%, general line product sales increased 3%, and sales of EWP decreased 14%. Sequentially, BMD sales were down 12% from the third quarter of 2025, a result of lower volumes attributable to seasonally weaker demand. Our fourth quarter gross margin was 15.1%, flat sequentially and down 70 basis points year-over-year. The year-over-year decline was driven by commodity price headwinds and EWP competitive pricing pressures. Margins on general line products were stable despite the subdued demand environment. BMD's EBITDA margin was 4.1% for the quarter, down from both the 5.9% reported in the year-ago quarter and the 4.5% reported in the third quarter. Sequentially, our EBITDA margin improved modestly when excluding the negative impact of the previously mentioned charge. BMD's fourth quarter EBITDA margin is below our typical earnings power. However, it represents strong performance considering current market demand and pricing conditions. This outcome demonstrates our team's effective execution across all product lines. In particular, we have prioritized growth in our general line products, leveraging our proven track record and extensive distribution network to offer a leading selection in this category. Now I want to spend a moment specific to the legal matter related to the $6 million charge recorded in BMD. This relates to a Lacey Act investigation involving plywood purchases at our distribution facility in Pompano, Florida. It's a legacy matter pertaining to certain hardwood plywood purchases made between 2017 and 2021, sourced from a former U.S.-based supplier and that supplier's importation of plywood. That investigation led to Boise Cascade receiving a subpoena for documents in 2024, and we have fully cooperated with federal authorities, specifically the Department of Justice. I wanted to be clear that we take this matter very seriously, consistent with our company values. We are committed to maintaining rigorous compliance standards across our businesses. In fact, years prior to being contacted by federal regulators, we had already undertaken steps to comprehensively review, invest in, and enhance our compliance programs. Steps taken included a new compliance management and oversight program, implementation of enhanced policies and procedures related to supplier due diligence and monitoring, and mandated education programs and training for our associates. In short, we have a comprehensive compliance program in place. The charge we recorded in the matter the Department of Justice is reviewing relates to a transaction at only one distribution facility several years ago, and we are confident that we have implemented effective processes to meet our compliance obligations. We will continue to cooperate with the DOJ to resolve this matter as soon as possible and move forward as a stronger company with an even greater vigilance toward trade policies and procedures. Lastly, I want to emphasize that this does not impact our operations, and we remain focused on delivering exceptional value to our customer and supplier partners. Turning to Slide 7. Fourth quarter I-joist and LVL volumes were down 16% and 7%, respectively, compared to the year ago quarter. Sequential I-joist and LVL volumes were down 16% and 8%, respectively, as seasonal declines in construction activity and a continued muted demand environment drove lower volumes. On a year-to-date basis, our I-joist and LVL volumes were down 8% and 2%, respectively, reflecting the decrease in single-family starts. As it relates to pricing, fourth quarter EWP sales prices declined about 10% year-over-year but were flat sequentially. Turning to Slide 8. Our fourth quarter plywood sales volume was 354 million feet compared to 371 million feet in fourth quarter 2024. Sequentially, our plywood sales volumes were down 9% from the third quarter of 2025 as anticipated due to the seasonal slowing in demand. The $329 per thousand average plywood net sales price in the fourth quarter was down 6% on a year-over-year basis but increased modestly compared to third quarter 2025. Tariffs have led to a notable decrease in South American plywood imports to the U.S., with Brazilian shipments falling over 40% year-over-year in the latter half of 2025. This reduction has contributed to recent pricing gains for Southern plywood. However, trade policy remains uncertain following last week's Supreme Court decision, so it will be important to watch how these developments affect market dynamics in the months ahead. I'm now on Slide 10, where we have presented a range of potential EBITDA outcomes for the first quarter, along with key driver assumptions. Notably, Winter Storm Fern had a considerable effect at the beginning of the quarter, causing widespread disruptions throughout our operations in Eastern U.S. Within BMD, nearly 20 branches were closed for at least one day, resulting in approximately 30 lost sales days. Additionally, our Southeast manufacturing facilities experienced closures lasting multiple days. And just this week, severe weather in the Northeast is again impacting our distribution operations. With that as a backdrop, I'll shift to our outlook. For BMD, we currently estimate first quarter EBITDA to be between $45 million and $55 million. BMD's current daily sales pace is approximately 6% below the fourth quarter sales pace of $22 million per day. While we expect our first quarter pace to improve as the quarter progresses, it will likely fall short of the fourth quarter pace. Gross margins are expected to be between 14.25% and 15%. For Wood Products, we estimate first quarter EBITDA to be between $25 million and $35 million. We expect EWP volumes to increase by high single to low double digits sequentially, reflecting seasonal strengthening and channel restocking in advance of the spring building season. EWP pricing is expected to range from flat to low single-digit decline sequentially. In plywood, we expect sequential volume increases in the high single digits. For plywood pricing, quarter-to-date realizations were 1% above our fourth quarter average, with the balance of the quarter market dependent. Increases in EWP and plywood volumes will also drive sequential decreases in our per unit manufacturing costs. Lastly, we expect our first quarter effective tax rate to be between 26% and 27%. I will now turn it over to Jeff to share our business outlook and closing remarks.

Jeff Strom, Incoming CEO

Thank you, Kelly. I want to start by welcoming the talented team from Holden Humphrey to Boise Cascade. We are excited to have completed that acquisition this past December and how it enhances our footprint and product offering in the Northeast region. As we move into 2026, maintaining focus and adaptability will be crucial to differentiating Boise Cascade and delivering value for our customers and supplier partners. In 2025, single-family starts fell short of 2024 levels by approximately 7% and are expected to be flat or modestly down in 2026. Homebuilders moderated starts in 2025 to avoid further buildup of finished home inventory as affordability remains a persistent challenge for prospective homebuyers. Throughout 2025, builders bridged the supply-demand gap with increased incentives and high single-digit declines in new home prices. Multifamily experienced growth in 2025, but starts are expected to level off in 2026 due to prohibitive capital costs for developers, combined with low rent growth and a decrease in permit activity. In repair and remodeling, activity has been limited by low home turnover and homeowners delaying major projects due to high borrowing costs and economic uncertainties. However, as economic policy becomes clear, consumer confidence improves, and interest rates decline, the project backlog positions repair and remodeling for a long runway of growth. The strong fundamentals for both new residential construction and repair and remodeling continue to support the industry's favorable outlook. Our recent investments position Boise Cascade to capture significant upside as the market turns. BMD once again demonstrated a value to the channel, delivering outstanding service across a broad range of industry-leading building materials. We are prepared for new opportunities and challenges that lie ahead in 2026, but one concept will be BMD's unwavering focus on creating solutions for our customers. In Wood Products, we are pleased that EWP price erosion abated in the fourth quarter and we aim to improve EWP realizations as the year progresses. The integration of our two business segments has never been closer. Enhanced channel visibility supports the alignment of our production rates and inventory strategies with end market demand. Cross-divisional efficiencies and our solid financial foundation are the cornerstones of our ability to execute our strategy and deliver long-term value creation. Looking ahead, we remain confident in the long-term demand drivers for residential construction, including the persistent undersupply of housing and aging U.S. housing stock and high levels of homeowner equity. Generational tailwinds support household formation growth while declines in mortgage rates should encourage buyers who have been waiting on the sidelines to enter the market. Finally, I'd like to thank Nate for his steadfast leadership and dedication to Boise Cascade. Nate's tenure as CEO began shortly before the COVID-19 pandemic, and his steady hand and tough leadership guided us through the wild swings in the market that followed. We are a stronger company today because of his leadership, and I'm pleased that Nate will continue to serve on our Board of Directors. The example Nate has set for me and many others at Boise Cascade is one of living our values. Nate's embodiment of these values has become a fundamental building block of our culture that has strengthened our relationships with associates, customers, suppliers, and shareholders. Nate, I wish you and your family the very best in retirement. Thank you for joining us today and for your continued support and interest in Boise Cascade. We welcome any questions at this time. Rocco, would you please open the phone lines?

Operator, Operator

And today's first question comes from Susan Maklari with Goldman Sachs.

Susan Maklari, Analyst

Let me add my congrats on a job well done over your tenure. And Jeff, I look forward to working with you. So my first question is focused on the general line within BMD. Can you talk about the share gains that you're continuing to realize there? And the ability to continue to grow even with the housing headwinds that we're seeing?

Joe Barney, Leader of Building Materials Distribution Operations

Yes. This is Joe. So what I would tell you is that we really saw demand held up well across our general line products. In 2025, they were our biggest category. They hit an all-time high as far as our overall mix. So we've done exactly what we set out to do in growing our general line products. We continue to see solid growth with James Hardie, Trex, and Huber. In the fourth quarter, our home center business continued to be strong. We've got a lot of program business for the home centers as well as generalized special order business that we do. And we do really well with that business. We believe that's going to continue to grow. We see a lot of upside opportunity with the home centers. And we continue to improve and grow our door and millwork category, both in terms of improving our operational costs as well as growing overall revenue. And we really feel confident that we're going to continue to gain market share in that category.

Susan Maklari, Analyst

That's helpful. Regarding EWP, the public builders are focused on reducing their spec inventory in the fourth quarter before the spring selling season. As we look ahead to the upcoming season, can you discuss how the channel is positioned given that builders are aiming for low single-digit volume growth? What does this mean for the business, and is there potential for increased activity in the next few quarters?

Troy Little, Leader of Wood Products Operations

Yes, this is Troy. Yes. I mean, obviously, like you mentioned that we had the kind of destocking effect in Q4, but we're aligned with strong partners on the builder side and the dealer side. And so we did see some, if you want to say, more restocking starting at the beginning of Q1, that's kind of flowed through well into February, and we're feeling pretty good about where we sit year-to-date this month. So I think just those strong partnerships allow us access to the market when it does come back through that channel and with our partnership with BMD, that inventory itself is ready to roll.

Susan Maklari, Analyst

Okay. All right. And then I'm going to squeeze one more in, which is just, Jeff, as you do step into the CEO role, can you talk about any areas that you're specially focused on? And maybe within that, any thoughts on capital allocation and priorities there?

Jeff Strom, Incoming CEO

Yes. I'll just start with this one. I think when I look at things overall, our strategic priorities that we have that are in place right now, I think they've served us very well. And so maybe you might see a slight refinement there, things that we'll work on with more deep intentionality. But the initiatives we've put in place will be just to support that strategy as it is. So if you think about what we're spending, leveraging the integrated model has served us incredibly well. We're going to keep doing that and look for more efficiencies there. It increased earnings stability. I love the work that we've done. I think it's showing up very well right now. But there are opportunities to continue to invest and grow our business. And we're going to do that in both businesses, BMD and Wood Products. We're going to look for innovation and efficiencies to drive some costs out and then accelerate the pace of transformation. Again, that goes to technology. And we want to invest in employing technology there to help drive revenue and reduce costs. And then one slight addition that I'd add to that, I think, is we really want to become the employer of choice for our associates. And what do I mean by that? We want to attract the best talent. We want to get them in here to work for a great business with an amazing culture, and we want to keep them there. We want to develop them, we're going to invest in them and provide a great future. So I think those will be the changes. On the capital allocation, truly, I think our balanced approach has worked extremely well for us, and I don't see anything different going forward.

Operator, Operator

And our next question today comes from Mike Roxland with Truist Securities.

Michael Roxland, Analyst

Nate, congratulations on your retirement. It has been a pleasure working with you, and I appreciate all your insights over the years. Jeff, congratulations on your new role; I look forward to collaborating more closely with you. My first question is about EWP prices. They have stabilized quarter-over-quarter, and you are guiding for better prices sequentially in the first quarter. I understand there may be some seasonality included in that guidance. However, could you provide any additional details on what is specifically driving the stability in EWP prices after several quarters of decline, especially considering the ongoing weakness in single-family sales? Are you noticing a shift towards a more rational competitive landscape compared to before? Any insights you can share regarding EWP pricing would be appreciated.

Troy Little, Leader of Wood Products Operations

Yes, Mike, this is Troy. Yes. No, I'm pleasantly surprised in terms of the fourth quarter being flat relative to Q3. I think where we're at in the cycle, definitely, it's pretty competitive out there, but I think that's playing itself out. And as we move into Q1, we're seeing, quite honestly, we're pretty flat where we sit right now for the second half of last year. And so that remains encouraging. We obviously are out there looking for new business and defending what we have. But right now, we're not anticipating anything substantially on the downside. And like I said, where we sit in Q1, I'd say that's probably going to be fairly flat.

Michael Roxland, Analyst

Got it. And Troy, is it just a matter of what the competitive backdrop being your peers being more rational in terms of their pricing? I remember you guys highlighted a couple of quarters ago, a number of quarters actually going at this point that in select markets, you were seeing more EWP price erosions and because of peers being more competitive. Has that subsided? And that's why now pricing has stabilized?

Troy Little, Leader of Wood Products Operations

Well, I wouldn't say it's stopped. It's definitely out there. It's an ongoing conversation. But I just think it's kind of where we've ended up. I mean costs throughout the last few years as prices have been coming down, our costs have been going up. So I just think maybe that's where we're at in the cycle.

Michael Roxland, Analyst

Got it. And for since I have you, just the 1Q guidance and what products assumed a nice increase in margin sequentially. Aside from pricing that we just spoke about and volumes, can you talk about maybe some of the other underlying assumptions in what products are likely to have such a notable increase in EBITDA margin sequentially?

Troy Little, Leader of Wood Products Operations

Yes, we have significant project work planned through the second half of 2025, but we've also experienced some market-related downtime. When volume decreases, it negatively impacts our cost structure. However, with the completion of these projects and the downtime behind us, we've been operating at a relatively high capacity this year despite some market challenges. Regarding our guidance, we have accounted for these factors. Additionally, we are concentrating on our site improvement plans at each facility, which we believe will provide incremental benefits.

Michael Roxland, Analyst

Got it. And one last question, I'll turn it over. On BMD, it looks like the EBITDA margin should be around 3.5% to 4% based on your 1Q guidance. What do you guys think would get back the business back to 5% margins, which I believe is something you've classified as more sustainable? What do you need to see from a housing perspective or a mix vantage point or elsewhere to get you back to that 5% bogey?

Kelly Hibbs, CFO

Yes. Good question, Mike. So certainly, first quarter is going to be a seasonally weaker period. And so the top line is only going to matter in terms of what kind of gross margin dollars we can generate. If we get into the seasonally stronger periods in the second and third quarter, my expectation would be we would be back to that 5% level. But you're right, in the first quarter, it would look softer. And I think it's important to also comment on the gross margin a bit there in terms of the guide of 14.25% to 15%. A couple of things to think about there. There's a mix that is a bit different. You'll see some less general line and EWP in the first quarter. It will be a little heavier on commodity in terms of our overall mix. And then additionally, within commodity, there's been a little bit of energy in the market of late, but there's been some confidence in the market that our downstream customers have shifted a bit more to direct. And as you know, direct drives a little bit lower margin. So it's kind of a mix overall and a bit of a mix shift within commodity that moves that gross margin percentage down a little bit lower than you might have expected in the first quarter.

Michael Roxland, Analyst

Got it. Very helpful, Kelly. Congrats, guys, and good luck in the first quarter.

Operator, Operator

And our next question today comes from George Staphos with Bank of America Securities.

Unknown Analyst, Analyst

This is stepping in for George Staphos. At IDS, we saw increased promotion of engineered I-joist products, including your offering, positioned as alternatives to open web systems. How meaningful are these products in helping you regain share from open web systems? And can you update us on how the competitive dynamics are evolving? Relatedly, given the early year move in lumber prices, how does open web pricing compare to I-joist today?

Kelly Hibbs, CFO

Absolutely. There are a few questions to address, so I'll cover several points. Regarding your observation about the booth and discussions on I-joists and our systems, this is not new territory for us. We have been heavily focused on software design and systems to ensure that our products arrive at job sites efficiently for quick installation and reduced cycle time. This has been part of our strategy for a long time. Additionally, concerning lumber pricing and its potential impact on the market, I can say that when builders switch to engineered wood, they typically do not revert to using lumber. On the open web side, there is competition, and lumber represents a significant input cost for manufacturers, which could create some cost pressures for them.

Unknown Analyst, Analyst

And then one additional question, I'll turn it over. For BMD margins, could you just walk us through the key factors that would drive results towards the high end versus the low end of your guidance range for this quarter? And what are the major moving pieces that we should be focused on?

Kelly Hibbs, CFO

Thank you. Just to clarify, were you talking gross margins or EBITDA margins?

Unknown Analyst, Analyst

EBITDA margins.

Kelly Hibbs, CFO

Yes. So a couple of things there. I would highlight. One, sales velocity really matters. Like I alluded to, we're 6% below our pace so far, our pace of fourth quarter was 6% below. So sales pace really matters to generate more gross margin dollars for us. And then also, mix shift. Mix shift is going to matter as well in terms of how much general line, how much commodity, how much EWP, and I would expect our mix to maybe rich in a bit as we make our way through the balance of the quarter. And then also, like I alluded to earlier, we've been fairly heavy on direct on the commodity side of the business. And so to get to that top end of the margin that I we alluded to there, I would say it's going to be a combination of all those things. Sales velocity, mix, and then also how much does our product flow out of warehouse versus direct?

Jeff Strom, Incoming CEO

I'm going to add one thing to that. I think in BMD, we have done added a tremendous amount of projects and growth over the last few years. Some of those we continue to operationalize, and some of those are not additive. And so as we move forward and as we get better, they continue every day to progress and get better and that will add to it whether how they start to move or not.

Operator, Operator

Our next question comes from Ketan Mamtora with BMO Capital Markets.

Ketan Mamtora, Analyst

Let me also extend my congratulations to Nate and best wishes in your retirement. Jeff, I look forward to working with you. To begin with the distribution side, could you discuss the current status of your inventories, both for the general line and the commodity side, especially as we prepare for the spring season, considering that Q4 was quite weak?

Jeff Strom, Incoming CEO

Yes, Ketan, this is Jeff. On the inventory aspect, in general lines, during the fourth quarter, we were leaning out in the field. People ran those down. They absolutely relied on next-day service and exactly what they needed, didn't buy anything extra at all. At the end of the year, there were some price increases that were announced, so people bought into that ahead of the price increase a little bit, not as much as you would think. But I'd say, on general line inventories in the channel, they're still overall pretty lean for the most part, and people are relying on next-day distribution. As you would expect with us, we watch our inventory closely on ours, we were there to serve, and people knew we were there. Our inventories came down some in the fourth quarter like you would expect. And with the early buys and the winter buys throughout there, we're starting to see them build back up. So we're prepared and running for whatever is out there. And we still think the first half of the year is going to be a very heavy reliance on not a warehouse service.

Ketan Mamtora, Analyst

Got it. Okay. No, that's helpful. And then can you give us a quick update on how the doors in millwork business is doing and how that is holding up?

Joe Barney, Leader of Building Materials Distribution Operations

Yes, this is Joe. Our door shops are actually doing really well, making big strides. All of them across the country. We're currently even expanding our space in Brasco; our build-out should be ready to go in Florida probably by mid-summer. We're improving our capacity. We just improved some capacity in Boise, so we continue to make strides in our door shops. I said earlier that we really are focused on the growth of our pre-finished business indoor shops, reducing lead times, automating where we can. We're working on high-end custom doors so that our customers are focused on volume production doors that we can subsidize and adjust them in their business. But we continue to make strides in our door shops. We continue to improve our operational efficiency as well as our revenue gains.

Operator, Operator

And our next question today comes from Jeff Stevenson at Loop Capital.

Jeffrey Stevenson, Analyst

And as others have said, Nate, congrats on your retirement. So I was wondering if you could provide more color on the Holden Humphrey acquisition and the potential impact on your Northeast distribution business? And also, could there be more potential opportunities to expand existing relationships with key suppliers in the region such as Trex or James Hardie with this acquisition?

Joe Barney, Leader of Building Materials Distribution Operations

Yes, I'll jump in there. So Holden, which is now our Chicopee location, has gone really well. So it's meeting our expectations. I'll tell you that we're just getting started; January was a tough winter month. So we're really kind of just getting rolling there, but we are already seeing efficiency gains with our people and our products in conjunction with our Westfield location that's over there. With the addition of Holden, we gained access to the one-step business in the market, which is a customer segment we really have not serviced in the Northeast region. We also gained access to many general line product categories that we're excited about. These are new to us in that market as well. So now we also have the opportunity with those product categories to leverage those relationships and those products across the entire Northeast region.

Jeffrey Stevenson, Analyst

Great. No, that's good to hear. And last year, you indicated that there was some slowdown in the M&A pipeline due to macro uncertainties before the Holden Humphrey transaction. I just wondered if there's been any improvement in the M&A pipeline as we came to a close last year for bolt-on strategic acquisitions in key areas you're focused on and how you plan to balance M&A and share repurchases this year?

Kelly Hibbs, CFO

Yes, Jeff, this is Kelly. So yes, I would say the pipeline is still somewhat active. And so we will continue to look to be opportunistic in terms of growing inorganically via M&A if we find the right opportunity. And then to your point, at the same time, we'll also have a balanced approach to look to opportunistically buy share repurchases if we think the M&A activity is not there and if we think the opportunity is right.

Operator, Operator

And our next question today comes from Reuben Garner with Benchmark.

Reuben Garner, Analyst

Maybe to start, I know you guys are a little newer to giving the quarterly guidance. Curious what on your end kind of went better than expected to close the year, especially on the profitability front. Was that just conservatism a few months ago because we were in such an uncertain environment? Or were there things that you were able to kind of do internally that surprised you to the upside? And how should we think about kind of the way you guys are giving guidance going forward? I guess, in that vein, what would lead to a similar sort of outperformance in the start of '26?

Kelly Hibbs, CFO

Yes, Reuben, this is Kelly. So I guess overarching in terms of guidance, look, we're going to try to put out what we think is reasonable guidance we think we have a reasonable opportunity to be at the midpoint or a little bit above in terms of when we put out guidance. So I don't want to leave you with the impression that we sandbagged fourth quarter; we did not in terms of our guide. What we did see is we saw a little bit better activity than we thought in the back half of the year. BMD, in particular, I think was a bit above their guide. So a good amount of activity and good work in terms of cost control as we seasonally moved into November and December, we saw some really good cost control. So I don't think there's anything I would really specifically point out beyond that, Reuben. Jeff, anything you'd highlight?

Jeff Strom, Incoming CEO

No, I think the only thing I'd say is we foreshadowed that it was going to be warehouse-centric for the quarter. And it was, and it really was. And each month, it got more and more; December was the highest percent of sales out of the warehouse than we've had in a long time. So people really leaned on that more so than ever before, and they knew that we had the material on the ground and we did, and so where they served, and that helped us.

Reuben Garner, Analyst

Yes. I wanted to follow up on some comments you made earlier, Jeff, and I'd also like to hear from Joe. Regarding the increased reliance on warehousing, does this indicate that your customers are still being cautious as we enter the spring season for some general line products? Joe, you've noted the impressive outperformance; can you share what specific actions you are taking that are driving this exceptional growth in certain channels, like home centers? What exactly is contributing to that outsized growth for you?

Joe Barney, Leader of Building Materials Distribution Operations

So as far as driving the growth, I think what I would tell you is, again, I mentioned earlier that we have really focused on our general line mix and what we're doing with our general line product categories to grow there. So that's been a strategic focus for us. And as our mix shifts, we've been able to grow that product category, and we've seen our margins improve. We've done really well there. But that said, I think it's also important to note that we are not moving away from our volume and commodities. In fact, I think our commodity performance also combats margin compression. We are very good with the expertise of our people. We continue to build out systems and methods that give us early indicators in the market on trends that allow us to move quickly on commodities, often ahead of the market. So we continue to outperform there. Our door shops, again, the revenue growth that we're seeing there is helping us perform better. And we're going to continue to grow there. From an organic growth perspective, we've made investments across the country that we continue to see grow and perform as we improve from an operational standpoint, and we're able to grow revenue. We bring our lead times to meet customer needs. We're able to grow our revenue there, and we have great partners with us, and we are going to continue to invest and put resources there so that we can continue to grow that opportunity.

Jeff Strom, Incoming CEO

I'm going to add on to some of the things that you asked at. Every project that we have done over the last 2 years has been about growing our general line products and adding to the mix and going wider and deeper with them, and that has paid off in a big way. You ask if the customers are out there, are they cautious; and I would tell you they are. What we are at the builder show is right, it's going to be very similar to last year, only in reverse, slower first half of the year, better second half of the year. So there is some caution out there without a doubt. We have lots more SKUs on the ground that we've added, new SKUs that come in that we've been the supplier of. So we've absolutely had that. And then lastly, I'll tell you the net working capital focus that is out there goes across every dealer that we touch, and it has been really intense. So to get that net working capital down, they're relying on us.

Joe Barney, Leader of Building Materials Distribution Operations

And Reuben, if we see volatility in the commodity market that actually, there's opportunity and volatility for us in the commodity market. That volatility can create spreads that improve margins, give us the opportunity to improve margins, and it's actually a better environment than just balancing along the bottom all year, which is a lot of what we saw in 2025.

Operator, Operator

Great. And congrats, Nate, good luck in your retirement. And Jeff, looking forward to continuing to work with you in an even bigger way. That concludes our question-and-answer session. I'd like to turn the conference back over to Jeff Strom for any closing remarks.

Jeff Strom, Incoming CEO

Okay. Well, thank you very much for your interest in Boise Cascade. Please stay safe.

Operator, Operator

Thank you, sir. The conference has now concluded, and we thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.