Ladies and gentlemen, thank you for standing by, and welcome to the BlueLinx Holdings Third 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 the BlueLinx Third Quarter 2024 Earnings Call. Joining me on today's call are Shyam Reddy, our President and Chief Executive Officer; and Andy Wamser, our Chief Financial Officer and Treasurer. At the end of today's prepared remarks, we will take questions. Our third 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 the webcast. Today's discussion contains forward-looking statements. Actual results may differ significantly from these 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 contexts 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. Our Q3 2024 results demonstrated solid gross margins of over 19% in our specialty products business and 11% for structural products, despite the impact of continued price deflation. We partially offset this deflation in both by driving volume growth in key specialty product categories such as millwork and engineered wood products, as well as structural lumber and panels. I'm very pleased with the entire BlueLinx team for their continued hard work and dedication to deliver these results, despite the difficult deflationary pricing environment. We remain focused on growing our key specialty product categories at a higher rate than our structural product business, so that our product mix shifts over the next several years. We also continue to execute successfully on our local and national market share gain strategies as seen by our multi-family growth, expansion of product lines with key national accounts, our expansion of branded product lines into new geographic markets and launches of new product lines among others. Our digital transformation efforts are moving forward on schedule with Phase 1 on track to be completed by Q3 2025. We believe that subsequent phases will further enhance our operational and commercial capabilities and we anticipate that our continued focus on modernizing the business with new technology will ultimately enable us to differentiate ourselves in the marketplace, so that we can accelerate our profitable sales growth and operational excellence initiatives. We also continue to explore and evaluate greenfield and M&A opportunities to expand our geographic reach and to support our specialty product sales growth initiatives. The first greenfield will be announced by the end of this year. Before turning to our third quarter results, I want to briefly address the effects of hurricanes Helene and Milton on our facilities. Our most impacted location was in Erwin, Tennessee, which is on the Tennessee North Carolina border, an area hit hard by Helene. Most importantly, our employees and their families are safe and we continue to appreciate their relentless dedication to our suppliers, customers, each other and their communities. The damage to the distribution operations was significant and the financial impact will largely be covered by insurance, which Andy will speak to in a moment. We are absolutely committed to rebuilding in Erwin and we expect this distribution center to be up and running later in 2025. In the meantime, we are servicing all of our customers by leveraging nearby distribution centers. In terms of Hurricane Milton, our Tampa and Lakeland locations were in the path of the storm, but were impacted only for a week. They're fully operational along with all other branches in Florida. Now turning to our third quarter results. We generated net sales of $747 million and adjusted EBITDA of $36.6 million for a 4.9% adjusted EBITDA margin. Adjusted net income was $16.7 million or $1.95 per share. Specialty products accounted for approximately 70% of net sales and about 80% of gross profit for the third quarter. Specialty product revenues declined 7% year-over-year due to continued price deflation versus the prior year. Price deflation has persisted longer than we anticipated due to slower demand related to the soft housing recovery combined with excess manufacturing capacity, both against the backdrop of a very competitive environment. However, while we still expect to see a year-over-year improvement in pricing in 2025 as the market recovers, we believe it will likely be in the back half of the year. As I mentioned earlier, we drove solid volume growth in key specialty product categories such as millwork and engineered wood products. We also delivered solid gross margin performance of 19.4% in specialty products, which was above our expected range. Although our specialty margins were partially due to the tariff benefit, our focus on business excellence continues to deliver solid specialty gross margin performance quarter-after-quarter. Our disciplined approach positions us very well for the housing and building products market recovery that has yet to come. Although structural product revenues declined 9% due to significant price deflation in lumber and panels, we drove positive volume growth across the board. As Andy will highlight, for the quarter, average lumber and panel prices industry were down 12% and 19% year-over-year respectively. Regardless, we once again leveraged our strategic and disciplined approach to inventory management and our centers of business excellence to deliver strong 11% gross margins for structural products on positive volume growth. Lastly, on the quarter, our financial position remains strong and our significant liquidity leaves us well positioned to achieve our vision, execute on our profitable sales growth strategy and take advantage of share gain opportunities as the market rebounds. We also continue to have flexibility to return capital to shareholders. During the third quarter, we repurchased $15 million in shares, bringing the total amount repurchased to over $138 million since the beginning of 2022, once again demonstrating our commitment to returning capital to shareholders. Now, let's turn to our perspective on the broader housing and building products market. Earlier this year, industry sources indicated a renewed sense of optimism for the overall market, especially for the second half of 2024. Since then, however, low existing home turnover and home affordability issues among other factors anchored the housing market and kept it from moving forward into recovery mode. Of course, one of the critical factors standing in the way of the start to the housing recovery is the Federal Reserve's positioning regarding rate cuts. Partially fueled by the recent rate cuts from the Federal Reserve, mortgage rates are currently above 6.5%. Although they are lower than the 8% peak last year, they are still above the 20-year average of about 5%. It's also important to note that the Federal Reserve interest rate cuts do not necessarily result in lower mortgage rates. In fact, since the Federal Reserve cut rates on September 18, mortgage rates have actually increased, moving from just below 6% to once again now being above 6.5%. Rate cuts are merely the first domino to fall in the cascade of market forces that need to materialize to drive housing starts and repair and remodel activity. For example, many homeowners are currently in low interest rate mortgages. So, although we expect these initial interest rate cuts to help kick-start the housing recovery, we believe that sustained reductions in interest rates over time are necessary to bring mortgage rates down to the long-term averages and continue the housing recovery over the coming years. Stated another way, closing the gap between homeowners' existing mortgage rates and what's currently available in the market will be key to sustaining the housing recovery after it starts, which we believe won't occur until the back half of 2025. The U.S. Housing market remains volatile as reflected by September total housing starts coming in at an adjusted annual rate of $1.35 million down 0.5% from August and down 0.7% year-over-year. Seasonally adjusted single-family housing starts increased 2.7% from August and increased 5.5% year-over-year. Large multifamily starts were down 4.5% from August and down 15.7% from September 2023. In addition, builders' confidence was 43 in October, up 3 points year-over-year and up from 41 in September 2024 for the second month in a row after declining over the previous four months. While there was a slight improvement, it is still down for 51 in the March-April timeframe, which continues to reflect the volatile and uncertain market conditions we're currently in. Looking at the components, present sales conditions was 47, up from 46 last October, expected sales in the next six months was 57, up from 44 last October and traffic of prospective buyers was 29, up from 26 last October. Repair and remodel spending continues to be lower than the elevated levels of 2022 and 2023, years during which pull forward and expansive R&R occurred during pandemic-related conditions as people spent more time in their homes. Also, as interest rate increase impacts began accelerating in 2023, existing home sales sank to their lowest levels in 30 years, a trend that has continued into 2024. As a result, a significant amount of repair and remodel activity that occurs when families sell their homes and buy new homes isn't happening due to current weak sales velocity dynamics. For the first eight months of 2024, the turnover rate for homes is only 2.5%, the lowest level in over 30 years and new listings are at our lowest levels in at least a decade. Despite the increases in housing starts on a sequential and year-over-year basis, we continue to see large public builders gaining a greater share of single-family housing starts in a high-interest rate environment because they're using their size, their scale and their balance sheet to buy down mortgage rates, offer more attractive deals to consumers and buy directly from manufacturers to support their production schedules. Two-step distributors like BlueLinx, however, tend to correlate more closely with smaller and custom home builder activity and do not participate as much in the large production builder market. We expect a single-family start trend to continue for the remainder of 2024. However, as mortgage rates come down and get closer to the 20-year averages, we anticipate that more small and custom home builders will re-enter the housing market, which will help fuel our business. Although the near-term outlook remains uncertain, we continue to believe in the long-term prospects of the housing and building products sector. As many of you already know, 1.8 million homes need to be built every year for the next 10 years to meet the housing demand, which doesn't even include any forecasting tied to expected immigration. This considerable shortage of homes on top of supportive 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 in the years to come as interest rates and home prices continue to come down. We took all of these macroeconomic drivers into account when we developed our share gain strategy to drive profitable sales growth across the enterprise, which is already starting to bear fruit. Focus and clarity will continue to be critical in the successful execution of our strategy. 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, both our Specialty and Structural Products businesses delivered strong gross margins despite the impact of price deflation. Both businesses experienced solid increases in volume but were offset by price declines. Net sales were $747 million down 8% year-over-year. Total gross profit was $126 million and gross margin was 16.8%, down 40 basis points from the prior period. As we've noted in previous calls, our first and second quarter 2024 results for Specialty Products reflected an estimated net benefit for import duty-related matters incurred in prior periods. During the third quarter of 2024, the estimate was updated resulting in additional net benefit of $3.5 million. More details on these matters are available in our 10-Q. SG&A was $92 million up $1 million from last year's third quarter. The increase was mainly due to higher technology expenses associated with our digital transformation, partially offset by lower fleet-related logistics costs. Net income was $16 million or $1.87 per share. During the quarter, we recognized a $2.2 million adjustment of the settlement charge recorded in the fourth quarter of 2023 to settle our defined benefit pension plan. This was partially offset by the estimated net losses at our Erwin, Tennessee branch that was damaged by Hurricane Helene that Shyam mentioned earlier. Adjusted net income was $16.7 million or $1.95 per share. Tax expense for the third quarter was $5.6 million or 26%. For the fourth quarter of 2024, we anticipate our tax rate to be in the range of 24% to 28%. Adjusted EBITDA was $36.6 million or 4.9% of net sales and includes the favorable duty-related matters. Not including these matters, adjusted EBITDA would have been $33 million or 4.4% of net sales. Turning now to third quarter results for Specialty Products. Net sales were $519 million down 7% year-over-year. This decline was driven by price deflation across Specialty Products. As Shyam mentioned, given current market conditions, we expect to see improved pricing dynamics in 2025 but likely not until the second half of the year. Gross profit from specialty product sales was $100 million down 9% year-over-year. Specialty gross margin was 19.4%, down 40 basis points from last year, primarily due to price deflation largely offset by the duty-related items and increases in volume. Not including this benefit, specialty gross margins were still solid at 18.7% in the third quarter in-line with our expectations. Through the first four weeks of Q4, specialty product gross margin was in the range of 18% to 19% with sequential daily sales volume slightly lower when compared to the third quarter of 2024 and higher than the equivalent period last year. Now moving on to Structural Products, net sales were $228 million down 9% compared to the prior year period. This decrease was primarily due to lower lumber and panel pricing when compared to last year's levels. Gross profit from structural products was $25 million, a decrease of 11% year-over-year and structural gross margin was 11%, down 30 basis points from the same period last year. Both benefited from a $2.4 million inventory write-down at the end of the second quarter of 2024 due to market conditions in the panel and lumber markets which resulted in lower cost of products sold in the third quarter when the associated inventory was sold. In the third quarter of 2024, average lumber prices were about $3.85 per 1,000 board feet and panel prices were about $515 per 1,000 square feet, a 12% decrease and 19% decrease respectively compared to the averages in the third quarter of last year. Sequentially comparing the third quarter of 2024 with the second quarter, lumber prices were roughly flat and panel prices were down 14%. Through the first four weeks of Q4, structural products gross margin was in the range of 9% to 10% with daily sales volumes improving slightly from the third quarter. 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 $526 million, an increase of $35 million from Q2, largely due to normal seasonal patterns in working capital. When considering our cash on hand and undrawn revolver capacity of $346 million, available liquidity was approximately $873 million at the end of the quarter. Total debt excluding our real property financing leases was $351 million and net debt was a negative $176 million. Our net leverage ratio was a negative 1.2 times given our positive net cash position, and we have no material outstanding debt maturities until 2029. Our balance sheet and liquidity remains 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 prospects such as organic and inorganic growth initiatives and opportunistic share repurchases. Now moving on to working capital and free cash flow. During the third quarter, we generated operating cash flow of $62 million and free cash flow of $54 million, primarily driven by net income and improved working capital. Turning now to capital allocation, during the quarter, we spent $8 million in CapEx primarily tied to our digital investments and to improve our distribution facilities. For 2024, we expect capital investments to be slightly lower than the $40 million previously anticipated. The investments will continue to be focused on facility improvements, further upgrades to our fleet and the technology improvements previously discussed. As a reminder, our digital investments will also have at least a $5 million impact on operating expenses this year related to software licenses, as well as increased headcount associated with the initiative. As Shyam mentioned during the third quarter, we repurchased $15 million of stock and we had $61 million of repurchases remaining at quarter end on our current share repurchase authorization. We are committed to our share repurchase efforts and plan to remain 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, expand our geographic footprint and pursue a disciplined M&A strategy, as well as return capital to shareholders. We also plan to maintain a long-term net leverage ratio of two times or less. Overall, we are pleased with our volumes and gross margins in both specialty and structural products. Price deflation continued to impact results and we are optimistic that pricing will improve along with the overall housing environment in 2025. Our strong balance sheet and our liquidity position us well to execute on our strategy and continue to opportunistically return capital to shareholders.

And thank you. We will now begin the question-and-answer session. And your first question comes from Jeffrey Stevenson with Loop Capital. Your line is open.

Hi. Thanks for taking my questions today and congrats on the nice quarter. So the positive volume growth in your Specialty Products business was encouraging to see during the quarter and just wondered what the primary driver of the volume improvement in categories such as EWP and millwork was that you cited. Was it healthy levels of new housing completion, seasonality benefits or something else that you would say?

Thank you for the question, Jeff. We are focused on gaining clarity in our strategy, particularly aimed at increasing our market share through national accounts and multifamily initiatives, which includes expanding our product lines, introducing branded products, entering new geographic territories, and launching new products related to EWP and millwork. In these channels, especially multifamily and national accounts that leverage our scale, we are able to achieve volumes that exceed market expectations despite challenging macroeconomic conditions and low demand with excess supply. Our year-over-year focus on multifamily is contributing to improved volumes in these categories, and we are also experiencing some seasonal benefits.

Got it. That's great to hear. And then I was just wondering if you've seen any sequential moderation of price declines in these key specialty categories, EWP and Millwork, which have elevated any kind of year-over-year deflation this year? And do you believe that pricing in these categories could stabilize, moving forward, especially if we begin to see some improvement in single-family housing starts in 2025?

Yes, Jeff, that's a great question. As we look at the pricing in specialty, we are seeing an improvement in the first four weeks of Q4, with low single-digit growth. This gives us confidence that we will see price improvement in the second half of next year, likely resulting in year-over-year pricing gains. It's encouraging to see this slight sequential improvement.

That's great. And then, obviously a rebound in structural margins as lumber and OSB prices rebounded off July lows. Do you believe the industry supply-demand dynamics have improved in both categories over the last 90 days? And if we do start to see some improvement on the single-family side, do you think prices could continue to move higher moving forward, just giving their at or below normalized levels right now?

In the second quarter, we experienced significant deflation in the structural market, leading to a notable decrease in panel pricing. This resulted in heavy inventory levels in the channel. Consequently, our structural margins during that quarter were artificially low at around 7.9%, primarily due to a reserve we had set aside. However, in the third quarter, that reserve was released, and margins improved to 11%. Year-to-date, our margins stand at approximately 9.8%. This suggests that there was likely an inventory imbalance in the second quarter, which seems to have normalized in the third quarter. We are confident about the current state of manufacturers and the supply in the channels. We maintain a low inventory level, keeping our structural supply to a low 20-day level, ensuring we are well positioned. Overall, we are optimistic about the industry's current situation.

Great. Thank you. And your next question comes from Greg Palm with Craig-Hallum Capital Group. Your line is open.

Yes, thank you. Good morning, everyone. Could you please provide us with an update on the competitive landscape? Chan, you briefly mentioned some share gains, but what are you observing in the market? What insights do you have regarding competitors, especially in areas where you are noticing specific share gains? Additionally, are there particular areas where you are optimistic about potential share gains moving forward? This information would be helpful.

I believe the eastern region has performed quite well. Some markets, particularly in the west and south, have faced more challenges, a trend evident across the building products sector. However, our focus on driving sales in multi-family commercial projects and leveraging our scale with national accounts is helping us navigate these difficulties and capture additional business. A key advantage for us is our private-label products in Millwork and EWP, which allow us to remain competitive despite current deflationary pressures. This positioning helps us gain business and increase market share. We have also implemented strategies related to builders managing their inventory and housing completions. These include developing pricing and rebate programs that enhance our competitive edge. Additionally, we are increasing our focus on direct sales, which, while offering lower margins, comes with minimal service costs and contributes to EBITDA as other aspects of our strategy are successful. In the market, there is a consistent feeling of uncertainty across various customers and regions. The situation is unlikely to improve until sustained rate cuts reduce mortgage rates to 20-year averages, potentially boosting sales of existing homes, which are currently at historical lows. The uncertainty remains, with no supply chain constraints and significant excess capacity in the market. Therefore, we need to effectively use all available strategies to drive profitable sales.

I understand that many are anticipating a drop in interest rates, and I realize your business, particularly the two steppers, may be more vulnerable. However, what if we don't see those rate cuts and the housing market continues on its current path? The major production builders are gaining market share over the smaller companies. Would this shift impact your growth strategy or the way you allocate your resources?

We haven't discussed M&A and Greenfield yet, but our primary focus is on Greenfield opportunities. Although we have a strong pipeline for potential M&A deals, we believe that reinvesting in the business and returning capital to shareholders through share buybacks is a more advantageous move given the current market multiples. We plan to announce a Greenfield initiative soon and have a strategy to enter new markets to better connect with our customers and facilitate growth. Considering the market dynamics, we need to build 1.8 million homes annually over the next decade to meet existing demand, not even factoring in forecasts related to immigration. The key to meeting this demand is to focus on commercial and multifamily projects, which we are actively pursuing. We have enhanced our capacity to support this effort enterprise-wide. Additionally, we are looking at how to leverage our existing 60 distribution centers to deliver consistent service across all 50 states, while also continuing our Greenfield initiatives. By concentrating on new channel opportunities we have not historically focused on, we believe we can gain market share regardless of any challenges. We are also addressing the day-to-day challenges in our transactional and direct sales, which are all advantageous for our EBITDA and support our profitable sales strategy. Even though some smaller custom home builders are currently inactive, our comprehensive approach involving product expansion, geographic expansion, and adjustments within our key suppliers will help us capture more market share. We have identified several key areas to concentrate on along with our channel strategy, which will enable us to continue gaining share despite market challenges and underlying demographic trends that support our long-term outlook.

Yeah, makes sense. All right. I appreciate all the insights. Thanks.

And your next question comes from Reuben Garner with The Benchmark Company. Your line is open.

Thank you. Good morning, everybody.

Good morning, Reuben.

To begin with, I have a couple of clarification questions. Firstly, regarding the structural margin. After last quarter, you indicated that the margins at the start of the third quarter were around 8% to 9%, but they ended up being significantly higher. Did you experience a reversal of the setback you faced in the second quarter? Could you elaborate on how this transpired during the quarter? For instance, did lumber reaching its lowest point midway through the quarter enable you to achieve above-average margins towards the end, resulting in the 11% figure? Or was there a one-time factor contributing to the third quarter number?

Yes. Reuben, we took a reserve of about $2.5 million, specifically $2.4 million, in the second quarter, which reduced our structural rates to approximately 7.9%. As we sold that inventory in Q3, that reserve was reversed. So even though it appears that our structural margins were 11% in Q3, a more accurate normalized rate for the year-to-date is in the high 9s, around 9.8%, which aligns with our expectations for Q4 being in the 9% to 10% range.

Okay. And do you feel like you've had to walk away from any business or leave any business out there on the structural side to maintain these kind of margins we heard in the quarter that things were fairly competitive as lumber was bottoming out kind of midway through the quarter?

Yes, I'll take the first part of that, and then Andy will follow up. So look, I mean, let's start with the underlying thesis, foundational approach we have, which is very principled around inventory management. And so we manage very optimal levels of structural inventory across the enterprise. And that in and of itself is what allows us to protect the balance sheet and maintain the margins we do. We don't walk away from business, but at the same time, we are not building it so they will come. And we do that in a very disciplined way with respect to every product category with structural in particular, having a heavy focus just in terms of turn days and days of inventory on hand, et cetera. And so I would think about it from that perspective as opposed to walking away from business. But in no way, shape or form are we walking away from business. We operate in the markets we have based on current competitive market dynamics and then manage through the inventory in a very responsible, disciplined way that not only supports our customers but puts us in a position to maintain healthy structural margins, which ultimately protect the balance sheet.

Yes. Just to add to that, as we talk about how in the commentary, net sales were down 9%, and that includes price deflation of 12% in lumber and 19% in panels. So as a result, I would almost say the opposite, we had a really high volume. I mean, so we were high-single digits in volume for the quarter in structural. So that clearly shows that we're not walking away. We're just dealing with the deflationary issue, I'd say, right now. But volumes being up high single digits in that category was a good result for the quarter.

Yes, it really is, and that was going to be my next question. It sounds like on both sides of the business, you had better than expected or better than market volume. Just to be clear, do you think some of this is a recovery in your customers with the smaller builders and some of the R&R markets you're exposed to? Or do you feel that it's just the initiatives that you've put in place that drive share gains?

I would like to indicate that some of the results may be linked to seasonal adjustments. However, I believe it predominantly aligns with our share gain strategy. As we focus on driving multifamily commercial sales and engaging in strategic direct business within certain channels, these efforts significantly contribute to our structural volume growth. Therefore, even with the current market conditions, where small and custom homebuilders are less active and larger builders are gaining market share, we still have strategies we can implement to increase our market share, retain business, and serve our customers. Coupled with our disciplined inventory management, we are able to maintain margins and grow our volume despite deflation.

Okay. Great. I'm going to sneak one more in, if that's all right. You mentioned inventory management. We've seen some categories, outdoor living, as an example, at the entry level, we've heard destocking at distribution. I know you guys run the structural side pretty tight. How are you thinking about inventory in some of your growth specialty categories as we head into kind of the seasonally weaker part of the year?

Yes. We have five key specialty product categories, with outdoor living being a significant part of our long-term strategy. Our goal is to manage inventory according to specific turnover targets to meet our customers' needs based on our forecasts. If customers are destocking, it ultimately benefits our business. The less inventory they keep, the more we need to hold to fulfill their demands. This also aids in managing working capital and cash flow for our customers. Currently, we're not experiencing the same destocking issues as last year when sales declined due to excess inventory after the pandemic. Today, the fundamentals indicate that two-step distribution still plays a valuable role, especially in outdoor living products like railing and decking, which are compatible with flatbed transportation. We offer a variety of colors to meet customer needs in this area. Outdoor living products remain appealing, particularly as interest rates decrease, encouraging people to upgrade from concrete to decks. Additionally, multifamily and commercial properties typically require outdoor decks with railing, which has been a successful area for our sales. This will continue to be a focus for us.

Great. Thanks for the details guys. Congrats again on a strong results and good luck.

Thanks, Erwin.

And your next question comes from Kurt Yinger with D.A. Davidson. Your line is open.

Great. Thanks and good morning everyone. In terms of the specialty deflation, how much of that would you say is kind of strictly manufacturer list price factors versus maybe competitive dynamics? And then as we think sequentially, we know EWP has continued to be pretty soft here. Any other categories that stand out where versus Q2 or the first half pricing may be getting a little bit more challenging?

Yes. Let me discuss the deflation regarding the improvements and areas of optimism we are seeing. Looking at the fourth quarter, I find it encouraging that millwork shows some positive signs in terms of price inflation, particularly in our private label products within that category. When I reflect on the year-over-year challenges we faced with deflation, it primarily affected EWP and millwork, especially during the third quarter. However, as Shyam pointed out, we had strong volumes in that period. Moving forward into the latter half of next year, I anticipate improvements in EWP, millwork, and some specialty lumber and panel segments.

Got it.

I'm sorry.

No, I was just going to follow-up. I mean, on the specialty, maybe some of those products in specialty still tied to commodity pricing broadly. Is there any way to think about what maybe the carryover headwind from lumber and panel prices has been within the specialty segment this year?

Yes, there was definitely some of that. I would say that's the reason for our adjusted expectations regarding price increases, which we initially thought would occur at the beginning of next year. Now, it seems likely to happen maybe a quarter or two later. This change is largely due to the significant deflation we experienced from mid-May to the end of June, which is reflected in our profit and loss statement. On one hand, it's great that we've seen strong volumes in the third quarter, but the deflation has exceeded our expectations from six to nine months ago. However, as we look at the fourth quarter, we are encouraged by the prospect of modest price increases, and we expect improvements in the latter half of next year, which Shyam and I mentioned.

Yes. And from a market dynamic standpoint, obviously what has happened post-pandemic, there was a lot of new capacity that came online. So there's adequate supply in the marketplace, and you're seeing a lot of interesting things play out, whether it be mills being shut down or curtailments happening just because there's not enough demand due to the soft housing market and obviously, soft repair and remodel market as well. At the same time, when you ask about EWP and millwork, whether it be the channel strategy, so there are certain things we're focused on that are driving millwork and EWP sales along with some of the other product categories that are very friendly to those specific channels. There's also been some substitution in the marketplace due to market dynamics where folks have shifted from, let's say trusses to EWP, and we have taken advantage of some of those market dynamics to drive EWP sales, which I feel like given our private-label product, we can do more so competitively than some of the other folks, and that's helpful. We've also invested in certain markets in equipment that allows us to for example, pre-cut EWP to allow for more efficient installation of the EWP and thus allow for example, HVAC folks to run ductwork through the EWP. Again, that helps reduce labor costs on the part of the ultimate end-user and so on. So there are very specific things we're doing to drive these volumes given current market dynamics, and we will double down on those as the markets continue to evolve.

Got it. Okay. I appreciate the color there. And on the product-line expansions into new geographies, I mean, it does look like that's yielding benefits. How much opportunity kind of across the footprint remains there? And if we were to think about it from a product category perspective, are there any in particular where you think you're still relatively under-indexed in terms of kind of geographic coverage?

Yes, there are definitely markets. The answer is yes, which is a positive thing because it presents us with significant opportunities to grow in areas where we are underrepresented. As we move forward, we are taking specific actions to ensure optimal inventory levels across all key categories in every market, allowing us to provide a comprehensive service regardless of location. This approach enables us to fully leverage our scale. For instance, earlier this summer, we introduced a new product in collaboration with our supplier, Georgia-Pacific, ensuring that we had adequate stock in nearly all locations by a specific date. This initiative boosted our channel strategy regarding that product and enhanced our support for customers. The results were quite favorable. This strategy, alongside our other channel initiatives, will continue to drive our strategic priorities.

Right. Okay. That makes sense. And then just lastly, it sounds like quarter-to-date daily sales volumes up versus Q3. I mean presumably, given typical seasonality, that would be up year-over-year as well. Is that a fair statement in terms of what you've seen thus far through October?

Yes, that's a fair statement. Year-over-year, volumes are up mid-single in both categories, which is positive. However, it's important not to overinterpret the first four weeks due to the usual seasonal pattern, where our second and third quarters are typically our strongest, while Q4 and Q1 are generally weaker. Nonetheless, as of now, in the first four weeks, volumes are up mid-single, which is a good sign year-over-year.

Perfect. Thanks for the details.

Yeah, thanks, Kurt.

And that concludes our question-and-answer session. I will now turn the conference back over to Tom Morabito for closing remarks.

Thanks, Abby. Thank you again for joining us today, and we look forward to speaking with you in February as we share our fourth quarter and full-year 2024 results.

And ladies and gentlemen, this concludes today's call, and we thank you for your participation. You may now disconnect.