Ladies and gentlemen, thank you for standing by, and welcome to the BlueLinx Holdings' First Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode, and today's call is being recorded. We will begin with opening remarks and introductions. At this time, I would like to turn the conference over to your host, Investor Relations Officer, Tom Morabito. Please go ahead.

Thank you, operator, and welcome to BlueLinx's first quarter 2024 earnings call. Joining me on today's call is Shyam Reddy, our President and Chief Executive Officer; and Andy Wamser, our Chief Financial Officer. At the end of today's prepared remarks, we will take questions. Our first quarter news release and Form 10-Q were issued yesterday after the close of the market, along with our webcast presentation, and these items are available in the Investors section of our website, bluelinxco.com. We encourage you to follow along with the detailed information on the slides during our webcast. Today's discussion contains forward-looking statements. Actual results may differ significantly from those forward-looking statements due to various risks and uncertainties, including the risks described in our most recent SEC filings. Today's presentation includes certain non-GAAP and adjusted financial measures that we believe provide helpful context for investors evaluating our business. Reconciliations to the closest GAAP financial measures can be found in the appendix of our presentation. Now I'll turn it over to Shyam.

Thanks, Tom, and good morning, everyone. We are pleased with our first quarter 2024 results, especially as we recovered from challenging weather conditions in January. I'm extremely proud of my teammates for their continued grit and teamwork in an uncertain housing market and challenging interest rate environment, and for their dedication to serving our customers and our suppliers at the highest levels despite the market industry headwinds. I am also excited about aligning my executive leadership structure with our corporate strategy to accelerate our strategic commercial growth initiatives. Mike Wilson, previously our Chief Product Management Officer, a 30-year industry veteran with significant sales leadership experience has been appointed into a newly created Chief Commercial Officer role that is focused on driving profitable sales growth through our regional, local and national account teams. Before turning to the first quarter results, I want to briefly remind everyone of our corporate growth strategy and our vision to become the most technologically advanced 2-step distributor of building products in the U.S. so that we can become the provider of choice for both our customers and our vendors. We are focused on growing our core business in 5 key Specialty product categories that are sold into multiple layers of a home construction cycle from start to finish. They are engineered wood, siding, industrial products, millwork and outdoor living. By making investments in people, value-added services and working capital, to name a few, we are more effectively positioning the company to grow our Specialty product business with existing customers and new customers nationally and in strategic markets across the country. These categories, which are valued by our customers and tend to be 2-step distribution friendly, are expected to generate sustainable higher net sales and gross profits over the long term. We are also committed to allocating capital to M&A and greenfield to expand our geographic reach and to support our Specialty product sales growth initiatives. While we continue to evaluate acquisition opportunities and pursue those that meet our valuation expectations, we are moving forward with our greenfield initiatives and expect to start our first one by the end of the year. In addition, our growth strategy will continue to be supported by 3 strategic enablers: operational, business and digital excellence, all of which are designed to enhance the customer experience. Now turning to our first quarter results. We generated net sales of $726 million and $39 million in adjusted EBITDA, or a 5.3% adjusted EBITDA margin. Adjusted net income was $19 million or $2.14 per share. And as Andy will detail in a moment, adjusted EBITDA and net income were favorably impacted on a net basis by a couple of notable import duty items. But even after removing this favorable impact, we were pleased with our results. Specialty products accounted for approximately 70% of net sales and just over 80% of gross profit for the first quarter. We also delivered solid gross margin performance with Specialty products coming in at 20.7%, inclusive of the import duty items and Structural products at 10.6%. Excluding this favorable impact, our gross margin performance with Specialty products came in at 19.4%. Our continued focus on business and operational excellence contributed to these positive results. During the quarter, we experienced deflation in Specialty product sales that accounted for the overall sales decline. With both categories, volumes were adversely impacted by the extreme weather patterns experienced in January, where nearly half of our locations were closed for between one and 5 days during the month due to unusually cold weather and winter storms. Volumes recovered in February and March as business ramped back up with particular strength in our Specialty products. Lastly, our financial position remains strong, and our significant liquidity leaves us well positioned to execute on our corporate growth strategy as well as maintain the flexibility to opportunistically return capital to shareholders. Now turning to our perspective on the broader housing and building products market. While industry sources had initially been indicating a renewed sense of optimism for the overall market, especially in the second half of the year, headwinds remain meaningful in building products due to the Federal Reserve's current posture regarding rate cuts. In the meantime, the U.S. housing market remains volatile as reflected by March housing starts sliding to an adjusted annual rate of $1.32 million, down 15% from February. Single-family housing starts dropped roughly 12%, while large multifamily starts fell 21%. Permits also fell about 4%. In addition, after 4 months of sequential improvement, builders' confidence in April was 51 and remained flat compared to March. Interest rate cuts also seem further out. So mortgage rates that are currently over 7% may remain stubbornly high throughout the year. Although they are lower than the 8% peak last year, they are still well above the 20-year average and back to the levels last seen in the fall in 2023. More importantly, they haven't stabilized, which is critical to accelerating buy-sell activity for housing. Repair and remodel spending continues to be lower than the elevated levels of 2022 and 2023 when a lot of projects were pulled forward and is expected to decline further in 2024. At the same time, existing home sales are at their lowest level in nearly 30 years, which is problematic because a significant amount of repair and remodel activity occurs when families sell their homes and buy new homes. It is important to note that while single-family housing starts have been showing strong numbers the past few months, that strength has mostly been driven by the large builders that can use their size and scale to buy down mortgage rates, offer more attractive deals to consumers and buy direct from manufacturers to support their production schedules. 2-step distributors like BlueLinx tend to correlate more closely with smaller and custom homebuilders and therefore, do not participate as much in the large production builder market. Given the macroeconomic environment we described, we expect this pattern to continue for the remainder of 2024. Although, the near-term outlook remains uncertain and muted, we clearly believe in the long-term prospects of the housing and building product sector, which underlies our growth strategy. The shortage of homes supported by demographic shifts, aged housing stock, necessary repair and remodel activity and high levels of home equity should continue to benefit the building products industry and BlueLinx. Now I'll turn it over to Andy, who will provide more details on our financial results and our capital structure.

Thanks, Shyam, and good morning, everyone. Let's first go through the consolidated highlights for the quarter. Overall, we delivered solid first quarter results, highlighted by strong margins in both our Specialty and Structural product categories. Net sales were $726 million, down 9% year-over-year. Total gross profit was $128 million and gross margin was 17.6%, up 90 basis points from the prior period. As Shyam mentioned, we experienced a net positive impact of different import duty related items in the quarter. The impact was related to positive changes in retroactive rates for antidumping and countervailing duties for certain products we imported. This was partially offset by classification adjustments for certain goods imported by the company as separately entered shipments. These items netted out to a benefit of approximately $7 million to our adjusted EBITDA. While the items are separate and not considered one-time, we do not expect them to be as material in future periods. More details on these items are available in our 10-Q. SG&A was $91 million, consistent with last year's first quarter. Net income was $17 million or $2 per share, and adjusted net income was $19 million or $2.14 per share. Tax expense for the first quarter was $5.6 million or 24.1%. For the full year 2024, we anticipate our tax rate to be in the range of 24% to 28%. Adjusted EBITDA was $39 million or 5.3% of net sales following our normal seasonal patterns and includes the favorable tariff and duty adjustments. Not including these adjustment items, adjusted EBITDA would have been $32 million or 4.4% of net sales. As a reminder, we tend to have higher adjusted EBITDA margins in the second and third quarters, but relatively lower margins in the first and fourth quarters of the year. Turning now to first quarter results for Specialty products. Net sales were $504 million, down 11% year-over-year. This decline was driven by price deflation across several Specialty product categories. Given current market conditions, we expect price deflation in our Specialty products to continue with a view that they will moderate on a year-over-year basis as we move through 2024. Gross profit from Specialty product sales was $104 million, down 2% year-over-year. Specialty gross margin was 20.7%, up 190 basis points from last year, primarily due to the duty related items. Not including these benefits, Specialty gross margins were strong, 19.4% in the first quarter. Through the first 4 weeks of Q2, Specialty product gross margin was in the range of 18% to 19%, with daily sales volumes sequentially higher when compared to the first quarter of 2024 and higher than the equivalent period last year. As a reminder, it's important to note that industry-driven price deflation in our Specialty products should continue to have an impact on both our top line and cost of goods sold during the year. So far this year, we've seen average Specialty pricing down roughly 10% compared to the same time last year. And even though margins are stable, gross profit dollars are lower. This dynamic creates a near-term market headwind, and we hope to see this improve as the year progresses. Now moving on to Structural products. Net sales were $222 million, down 3% compared to the prior year period. This decrease was primarily due to framing lumber volumes when compared to the elevated levels from last year. Gross profit from structural products was $24 million, a decrease of 12% year-over-year, and Structural gross margin was 10.6%, down 110 basis points from the same period last year. In the first quarter of 2024, average lumber prices were about $403 per 1,000 board feet and panel prices were about $615 per 1,000 square feet, a 2% decrease and a 23% increase, respectively, compared to the averages in the first quarter of last year. Sequentially, comparing the first quarter of 2024 with the fourth quarter of 2023, these prices were both up 5%. Our strong Structural margin continues to reflect a tremendous job our team does in managing commodity cost volatility risk by leveraging consignment and utilizing centralized purchasing and pricing to keep inventory levels low. Through the first 4 weeks of Q2, Structural products gross margin was in the range of 10% to 11%, with daily sales volumes consistent with the first quarter of 2024. Looking now at our balance sheet. Our liquidity remains excellent due to the strong execution of our strategic initiatives and effective management of working capital. At the end of the quarter, cash on hand was $481 million, a decrease of $40 million from year-end due to normal seasonal patterns in working capital. When considering our cash on hand and undrawn revolver capacity of approximately $347 million, available liquidity was $828 million at the end of the quarter. Total debt, excluding our real property financing leases, was $348 million, and net debt was a negative $133 million. Our net leverage ratio was a negative 0.8x, and we have no material outstanding debt maturities until 2029. Our balance sheet and liquidity remain strong. And when combined with our solid EBITDA generation, we are well positioned to support our strategic initiatives, including our digital transformation efforts. These include investments in our highest return opportunities, such as organic and inorganic growth initiatives and opportunistic share repurchases. Now moving on to working capital and free cash flow. During the first quarter, we used operating cash flow of $31 million and had free cash flow of negative $37 million. The use of cash was primarily driven by normal seasonal patterns for working capital, which increased during the period. Turning now to capital allocation. During the quarter, we spent approximately $5 million in CapEx, primarily to improve our distribution facilities and our fleet. We also entered into finance leases for $8 million for fleet upgrades as well. For 2024, we expect capital investments to be approximately $40 million, focusing on facility improvements, further upgrades to our fleet and the technology improvements previously discussed. Our digital transformation will also have at least a $5 million impact on operating expenses this year related to software licenses as well as increased head count associated with this initiative. During the first quarter, we did not purchase any shares under our repurchase program, but we remain committed to our share repurchase efforts by continuing to be opportunistic in the market. Our guiding principles for capital allocation remain consistent. We intend to maintain a strong balance sheet, which enables us to invest in our business through economic cycles, pursue a disciplined M&A strategy and expand our geographic footprint as well as return capital to shareholders. We also plan to maintain a long-term target net leverage of 2x or less. Overall, we are pleased with our first quarter results, highlighted by our strong margins, especially in light of January's challenging weather conditions and uncertain housing environment and the market deflation on Specialty products. Our strong balance sheet and liquidity positions us well to execute on our strategy and provide returns for our shareholders.

We are now ready to take questions.

Congrats on the nice quarter. I was hoping you could provide us some more color on the cadence of Specialty volume growth as we move through the first quarter, because previously you reported that average daily sales volumes were down 10% in January due to adverse weather. I wondered if you experienced any meaningful improvement throughout the quarter and into April where you indicated volumes are up sequentially?

Yes. Great question. So as Shyam mentioned in his comments, we did see an improvement in February and March with some of the Specialty volumes. As we ended the quarter, we were able to fully offset, I would say, that January performance. And so it was up modestly, I would say, from a volume perspective, so that would be low-single digits. As we look into April, the first sort of 4 weeks of the month, I would say that volumes were up, I'd say, mid-single digits in Specialty, but it looks softer certainly in Structural. So that was generally the trend that we saw at least as it relates to Specialty.

At the same time, even with the increase in volumes, we are also demonstrating our commitment to effectively managing margins through our pricing excellence teams and data-driven approach to managing our business both locally and nationally.

Yes, I wanted to ask next about your 2024 Specialty products pricing outlook. Previously, you indicated you saw meaningful deflationary pressures, primarily in EWP and millwork, but you expect segment pricing to moderate as the year progresses. Has there been any changes in your Specialty pricing outlook or are things going largely as you anticipated?

Yes. Look, as long as the demand curve continues to be a little suppressed, we expect the deflationary environment to continue. So far, it's remained stable relatively recently. But the optimistic outlook we had heading into the year is a little bit more muted just in light of the Fed's posture. But over time, as the demand curve gets better, we feel like pricing will improve. But right now, we're seeing meaningful deflation or we've seen consistent deflation in millwork and EWP being the lion's share of it, with deflation in all categories other than panels. Volumes are up, though, in all categories other than lumber, which was in a meaningful way down, and that's primarily due to, I think, the weather events we experienced early in the quarter.

Jeff, maybe just one thing to add. So when we talk about the Specialty pricing deflation, it's again on a year-over-year basis. So as we talk about it moderating throughout the year, we're talking about it moderating from a year-over-year perspective. So as we get to Q4, that's our general expectation in terms of where we should lap this deflation if current pricing holds, which it has been for the last, I'd say, several months.

And then lastly, just obviously, your financial position is very attractive right now, and you mentioned you're likely going to move forward with the greenfield by the end of the year. Can you provide any more details? Or previously, you talked about Western markets is where white space was. And should we expect something in that region?

Yes, I would say that's a good way to think about it. I mean we've got a lot of white space out there, and there are a number of markets we've identified from the perspective of housing starts and permits and good demographic trends in the future that would justify or provide a great location for us to launch a greenfield. We're in the process of identifying real property opportunities, whether they be existing sites or opportunities to develop land preferably with existing sites so we can hit the ground running and then move forward. So the idea would be to commence something or start something later in the year, get that done right and then accelerate our greenfield development as we continue to fine-tune our greenfield machine. But very excited about the opportunities ahead of us with respect to those markets.

Your next question comes from the line of Greg Palm of Craig-Hallum Capital Group.

On one of the previous questions around price, helpful commentary on the year-over-year. In terms of sequentially, are you saying that pricing has bottomed? Is it expected to be at these levels? Is it expected to improve sequentially? Can you just give us a little bit more color?

Yes. So we wouldn't expect the Specialty deflation sort of hold where it is in Q1. But when we think about it then sequentially, we saw price deflation throughout 2023. So as it continued to decrease as we move throughout the year, the year-over-year will then become less as we get to Q2, Q3 and then it should lap then in Q4.

So a headwind on a year-over-year basis, but maybe sequentially, as we go throughout the year, it may improve a little bit versus what you saw in Q1?

I don't think it's going to sequentially improve. What I'm saying is that our expectation right now is that it stays the same sequentially. But when we think about it year-over-year, it will sequentially improve.

That's right, the lines start to get closer together. But generally speaking, we feel like it has moderated. If demand increases at some point when rates start to settle and we enter more normalized times, we would expect pricing to change based on demand. But right now, we feel like it has moderated.

And I don't know if I missed it, but did you say that you expect additional gains or positive impacts from some of those import duty related items that hit in Q1? And is anything built into that margin guidance that you provided on a quarter-to-date basis? Or is that excluding that?

So to be frank, we don't have a lot of visibility in terms of when we would get, I'd say, potential refunds from the antidumping countervailing duties. There's an expectation that it could be maybe a couple of million dollars. But again, I don't know when the timing of that could be, and that is not in our guidance. So they may happen by this year, but actually maybe push into next. So unclear at this point.

And those could be offset; I'm not really considering it.

And then as it relates to working capital usage in Q1, kind of normal seasonality. Just remind us, does that reverse completely in Q2? Does it take a couple of quarters for that to reverse?

There was a little more than a $30 million impact in the first quarter. We anticipate a slight continuation of this in the second quarter, followed by a reversal in the third quarter, and then an improvement by the year-end. This aligns with typical seasonal patterns, showing variation in the first quarter, some moderation in the second, and significant improvement in the third, followed by the fourth quarter at the end of the year.

Your next question comes from the line of Kurt Yinger of D.A. Davidson.

Just a point of clarification on the volume commentary in Specialty. When you referenced kind of mid-single digit improvement in April, was that a sequential number or on a year-over-year basis?

So that's talking on a sequential basis.

It seems that February and March may have shown an increase compared to the same months last year, which may help balance out the decline experienced in January.

Yes.

I mean, is it fair to say that with that kind of sequential improvement, you've seen that year-over-year improvement continue as well? Or maybe that's pulled back a little bit depending on seasonality and maybe a little bit of catch-up for January?

I would think we've been pleased with some of the volume numbers, I would say, from February, March into the first 4 weeks, and that sort of gave some indication in terms of what we've seen the improvement for April. I would say the one thing, though, that is the headwind is the Specialty deflation that we've talked about over and over. So when we think about from a gross profit basis, there's headwinds there, but we're pleased with some of the volumes. That being said, the caveat that is certainly the market is uncertain in terms of how we think about expectations for rates and what that means for starts. But long term, we're clearly optimistic in terms of what the market will hold over the longer term.

Yes. In relation to our market presentation, we have initiated several strategic efforts to expand the business in key markets within the five main Specialty product categories. We are also strategically leveraging our national account relationships to enhance that segment. As mentioned in previous calls, we have identified a sector, multifamily, where our presence has been limited. We are now allocating specific resources to develop that business in regions and local markets with significant opportunities, supported by strong vendor partnerships. Despite the market challenges, we are proactively addressing these issues.

And in the last 6 months, you guys have announced kind of some expanded partnerships with LP and Huber. Curious if you've gotten that product in place in those additional locations and have started to kind of ramp sales at expected run rate at this stage or whether that's something that could still kind of prove incremental over the next couple of quarters?

Yes. We continue to strengthen our relationships and drive sales. Once we establish inventory in those areas, sales begin to reflect in our financials. However, there remains significant opportunity for expansion into additional markets that are currently under discussion. As you know, expanding into new markets with our key vendors follows a schedule and requires time throughout the year. Overall, we are very satisfied with the new markets we have entered, including partnerships with our siding vendors like Allura and LP, along with Huber. We also have several relationships where we're broadening our product lines, which is generating enthusiasm among our teams in what is otherwise a challenging market. Furthermore, in relation to our typical customer base, we see potential growth opportunities in multifamily markets and home centers, where we may have not previously sold certain products. This indicates growth and product expansion possibilities both geographically and across different channels.

And Andy, you had touched on kind of the seasonally stronger EBITDA margin profile in the middle part of the year. I guess if we were to think about Q2 and that being the case, would we account for kind of that duty benefit and maybe strip that out? Or do you feel like that's a comment that could be taken through to kind of the number that you reported here in Q1?

Yes. You would need to exclude the effect of the duties. The reported figure was 5.3%, while it was 4.4% without the duties. I believe there will be a slight improvement from the 4.4%. That's what I would consider.

And then last one, just on greenfields. Can you maybe talk a little bit about kind of the key considerations when you're evaluating some of these different locations and markets where you don't already have a presence? And when you talk about the west, is it markets that you completely don't serve today? Or should we think about that as more an expansion of where Vandermeer might already have some presence, but is serving customers from a long distance or something like that?

Yes. Let me start by noting that we operate in all 50 states. In areas where we have warehouses or distribution facilities that allow for cost-effective delivery, we clearly serve those nearby states. For states where we lack a close enough presence for economical operations, we utilize direct sales and sell out of reloads. This enables us to cover all states, with some states generating higher margins due to our local presence. In assessing the market, we focus on key factors such as construction starts, permits, and demographic trends that indicate potential growth when the housing market rebounds and interest rates decline, which informs our investment decisions for site locations. Additionally, we have a robust portfolio of private label brands in engineered wood products and millwork. Our efficient structural products operations, along with commodity panels and lumber, enable us to quickly establish new locations, leveraging both private label and structural business. Once we identify a warehouse with sufficient outdoor storage, we can invest in our own fleet, lowering our service costs compared to third-party freight, which shortens payback periods and enhances returns. Crucially, it’s about our expertise and operational excellence, supported by our ERP system, digital initiatives, and procurement strategies. We are also building strong partnerships with key vendors, who are eager to collaborate for mutual growth in these markets. There are many opportunities; it's just about identifying them. We have a targeted list of markets, and we need to ensure all criteria are met for site selection so we can successfully launch operations, which includes recruiting a general manager and other necessary talent.

And just one quick follow-up on that. Would you consider opening up a greenfield and leading with some of those private label products like EWP and Structural with an eye towards eventually having a more complete product line?

Yes, we can definitely start with our private label and Structural product lines. This positions us well to enter new markets more effectively than some others in two-step distribution since we have full control over our product mix. Additionally, we have discussed with vendors who offer other Specialty products and they are eager to help us expand in those areas. Even in markets where vendors already exist or have partnerships, we can still find ways to introduce our product lines, especially in sectors like home centers and multifamily developments where there is growth potential. We have various strategies for entering any new market. The advantage is we can quickly launch with our current products while also leveraging our vendor relationships to expand into new products. Ultimately, we'll need to begin operations first, and then I can provide more insights into our progress and plans.

Your last question comes from the line of Reuben Garner from Benchmark.

Let's discuss where to begin. Have you observed any changes in customer behavior in recent weeks regarding inventory levels in the channel, both on the Specialty and Structural sides? I'm curious if, in this rising rate environment, there is an increased dependency on your offerings as some customers may adopt a more defensive stance.

Yes. From my recent conversations with our team in the field, we're observing that customers are experiencing consistent business. Everything aligns with the typical seasonal purchases and volume increases expected as we approach the summer season. Additionally, we see a sequential improvement from Q1 to Q4 due to inventory builds. What we anticipated is manifesting in the profit and loss statements. Regarding your second question, I firmly believe in the importance of two-step distribution within the building products sector. Your observation reinforces that value, particularly in terms of just-in-time working capital management, which becomes increasingly important during uncertain times. Our business model supports this for our customers. We are being strategic with our purchases and aligning them with customer needs, ensuring they receive their orders just in time. If customers were previously ordering in larger quantities, they might prefer to order less now and incur slightly higher costs to safeguard their balance sheets and optimize their working capital. We can assist with this, along with our value-added services. Overall, I feel optimistic about this trend continuing for the remainder of the year.

Even if I exclude the $7 million, the Specialty gross margin remains above the 19% level for another quarter. I understand you mentioned starting the next quarter within the 18% to 19% range. Could you explain why this might change, given that over the last four quarters you've been in the 19% to 20% range? Are there any mix dynamics that could negatively impact that for you? Please clarify this run rate for us.

Yes. I mean, so we've been pleased with our Specialty margins, I would say, over the last year, I mean it's consistently have been in and around that sort of 19%. At some point, there can be a shift in some of our mix, and that can change. But as we try to give a forward look in terms of what we see for the month leading up to our call. And it's always been pretty consistent. We're not trying to sandbag in terms of being 18% to 19% and then we hit 19.4%. It's just sometimes the mix changes throughout the quarter, and it gets a little bit higher. So nothing, I would say, different from where we were before. Being set for the first month, it is still around that 18% to 19%. So I would expect that going forward.

Does the mix change based on the end market, meaning new construction seems to be outperforming R&R? Are your new construction products like no work and EWP higher-margin categories for you?

Yes. So the 5 key Specialty product categories are higher margin, and it's why we're focused on that and using our Structural business to really complement the overall growth strategy. And clearly, you can see from our Structural margins, we're very intentional about how we manage that side of the business. And then, of course, with our customers, leveraging that to continue to move our mix higher Specialty count. As it relates to each product, yes, we have the EWP that's on the early part of the cycle, then you have the outdoor living products on the end. Industrial tends to support, let's say, cabinetry and things that you would see later in the building cycle. But also that business is down in large part as repair remodel is down. As it relates to the one thing as there could be opportunities where there's more direct business, it's a good business for the company but has a lower cost to serve, the margins are lower, but it's good business and there are some Specialty products that we sell via direct. But overall, what Andy said is the case, and we have a very intentional strategy to sell into various layers, multiple layers of the home construction cycle with products that are 2-step distribution friendly that our customers value.

I'm going to sneak one more in, if I could. You mentioned the big builders in this environment, having the advantage in being able to buy down rates. Can you just talk to us about your mix of business between the big and small builders and what, if anything, you can do to try to capture more of the big builders mind share if this is an environment that's going to be kind of here for a while?

Yes, the production builders have an edge over smaller and medium-sized builders or custom homebuilders, who make up a significant portion of our customer base and the end users. The large builders have robust balance sheets, conduct large-scale builds, and offer incentives such as rate reductions and upgrades to attract home buyers, which smaller builders cannot match. Regarding our customer base, large builders can purchase directly due to their extensive production schedules and maintain direct programs with manufacturers, allowing them to bypass smaller suppliers. Consequently, our ability to engage with this segment is somewhat restricted. However, we recognize that large builders are central to our strategy, and we are investing in programs across various regions that collaborate with smaller and regional builders who construct homes in the range of 50 to 500. We've established builder pull-through programs in partnership with our customers. We remain committed to maintaining our channels but are open to collaborating with large builders to foster business for our customers, an opportunity we aim to develop further. We are in the process of hiring someone dedicated to strategizing, planning, and executing these initiatives alongside our regional and local market leaders where appropriate. In many of our key markets, large builders have a strong presence, so we intend to be more strategic in this space moving forward.

We have another question from Kurt Yinger of D.A. Davidson.

Since it hasn't been touched on yet, I did want to talk about capital allocation. I don't think a greenfield would be a significant capital outlay. Are you guys seeing the M&A opportunities out there that leave you optimistic that a deal of some size might materialize over the next couple of quarters? And how do you kind of balance that with the current balance sheet and potential to be more active with the share repurchase program going forward?

Yes. In the first four months of the year, I’ve met with several potential targets. We are continuing to strengthen those relationships and ensuring that we either have a place at the table or are the only ones there when a sales opportunity arises. Ultimately, our focus remains on acquiring companies at favorable valuations that are beneficial for the company, and that requires time for deal-making. There are opportunities we are actively pursuing, and it ultimately comes down to finding common ground. I can say that the chances for finding common ground today or in 2024 are significantly higher. The opportunities available to us are much greater than they were last year and even the year before, particularly due to our experience in product development during the pandemic.

That concludes our Q&A session. I will now turn the conference back over to Tom Morabito for closing remarks.

Thanks. Thank you again for joining us today, and we look forward to speaking with you in August as we share our second quarter 2024 results.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.