Good day, and welcome to the Q2 2025 UFP Industries, Inc. Earnings Conference Call and Webcast. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Mr. Stanley Elliott, Director of Investor Relations. Please go ahead.

Good morning, everyone, and thank you for joining us this morning to discuss our second quarter results. With me on the call are Will Schwartz, our President and Chief Executive Officer, and Mike Cole, our Chief Financial Officer. Will and Mike will offer prepared remarks and then we will open the call for questions. This call is available simultaneously to all interested investors and news media through the Investor Relations section of our website ufpi.com. A replay of the call will be posted to our website as well. Before I turn the call over, let me remind you that yesterday's press release and presentation include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that could cause actual results to differ materially from expectations. These risks and uncertainties also include, but are not limited to, those factors identified in the press release and the company's filings with the Securities and Exchange Commission. I will now turn the call over to Will.

Good morning, everyone, and thank you for joining us to discuss our second quarter results. Our second quarter was largely a continuation of the conditions we saw in our first quarter. And while the market environment continues to present its challenges, I'm proud of our team's resilience and their unwavering focus on what we can control. We continue to make the necessary investments to lower our manufacturing costs, improve throughput, and enhance customer service levels. We will continue to make investments to bring new products to market in areas where we have the right to win. We'll continue to evaluate the portfolio in ways that we can take out structural costs. All of our efforts are designed to position us to achieve our long-term strategies and deliver value to our shareholders. Turning to the quarter. Second quarter sales matched our expectations for low single-digit unit volume declines across each segment. Pricing remains competitive given the lack of visibility and softer demand in several of our end markets. Consistent with what we discussed on our last earnings call in April, we continue to see this dynamic playing out for the remainder of the year. All of this contributed to our earnings per share of $1.70 for the quarter and adjusted EBITDA of $174 million. Generally, results remain pressured from weaker demand, competitive pricing, higher input costs, and a less favorable sales mix. Southern yellow pine and spruce prices were 18-13% higher on average for the quarter. With the exception of our site-built business, it appears that most of our business units are beginning to see a stabilization in sales and profit margins on a sequential basis. Operationally, we remain focused on maximizing capacity within our existing footprint and streamlining our cost structure. The strategic initiatives we've previously outlined, including managing our manufacturing footprint, reducing SG&A costs, and exiting underperforming businesses, are progressing well. We have made great progress on our $60 million cost-out program and are on track to realize the full savings exiting 2026. As part of this program, we recently announced plans to shift manufacturing for certain edge products to be more efficient, which will eliminate profit losses and position us to be more competitive and profitable. We have also completed the divestiture of a small industrial components business and have sold or are in the process of selling certain real estate assets, which could provide upwards of $15 million in one-time gains in our third quarter. These are not easy decisions, but necessary. We are also making targeted investments in areas that will drive our longer-term strategy to grow above market rate. We remain committed to our plan to invest $1 billion in growth cap over the next five years and have identified runways in each of our segments. We would prefer M&A in most cases and would be willing to pivot these investments to M&A, but only when the right opportunities materialize and valuations meet our expectations for returns. Within this framework, our commitment to innovation, automation, and expanding our value-add product offerings remains a top priority. We see promising results in our Deckorators brand, with our first-of-its-kind SureStone product technology. The introduction of new products in our packaging segment and others, we will continue to invest in these areas organically and through strategic acquisitions where appropriate. New product sales totaled $129 million or 7% of sales. We continue to see a pathway for new products to become 10% of sales over time. We are excited about the innovative products we've launched as well as those in our pipeline. Last quarter, we highlighted the launch of new decking boards and trim products featuring our proprietary SureStone technology. The momentum we discussed last quarter around our SureStone products, including the launch of our Summit product, continued in the quarter. On our call last quarter, we shared that we have secured 1,500 new retail locations. We continue to make progress on adding capacity to reach all of these stores ahead of the 2026 decking season. We've added new traditional two-step distribution for our SureStone decking board as well as the pull-through from our marketing efforts and contractor support that is exceeding expectations. Sales of our decking board portfolio featuring our SureStone technology increased 45% year over year. We continue to upgrade existing manufacturing lines and plan to expand capacity again later this year. Our Buffalo facility remains on track for a Q1 2026 opening, leaving us with roughly $250 million of new capacity in place for next year's decking season. Our M&A pipeline remains very active with a number of strategic investment opportunities presenting themselves across the portfolio. It's no secret that activity has picked up across our space, and our M&A team remains active and focused. We continue to explore deals of various sizes with a focus on how they align with our core business. Our teams have prioritized capital requests with an emphasis on what will deliver the best growth, margin, and return opportunities for the business while maintaining our strong balance sheet. Our experienced management team and dedicated employees are committed to driving profitability and sustainable growth for UFP Industries. We remain confident in our long term. Our strong balance sheet and cash flow provide us with the ability to pursue a diverse return-focused capital allocation strategy of growth, dividends, and share buybacks as a means of driving shareholder value. Turning to our segments. Retail sales declined 3% from year-ago levels largely on a 7% decline in volumes. Pricing actions at the end of the first quarter contributed 4% but the benefits to margins were largely offset by higher material costs. Part of the unit decline was from us intentionally exiting less profitable lines of business, as well as the customer shift we previously discussed in our Deckorators business. We will start to see the anniversary of the Deckorators customer shift in Q3, making for more favorable comparisons through the remainder of the year. Additionally, we believe the restructuring we've made at Edge and growth investments in SureStone position us well moving into next year. Packaging sales declined 2%, largely due to a 4% decrease in pricing. Recent acquisitions contributed 2% to the quarter while our organic sales were essentially unchanged from year-ago levels. Markets remain highly competitive. But the sales and margin declines continue to flatten out sequentially. Share gains in our Palette One business and geographic expansion in our protective packaging business contributed to growth as we opened our Jeffers Ville facility. In our structural packaging business, we continue to introduce a number of innovative and proprietary solutions like our recently launched ULOC 200 tool-free fastening aimed at making our customers safer and more efficient. Construction sales decelerated in the quarter along with a broader outlook for residential construction. Construction revenues declined 4% from year-ago levels on a 2% increase in volumes driven by another quarter of double-digit unit growth in our factory-built business. This was more than offset by a 6% decline in pricing in the quarter, reflective of the competitive environment. Our factory-built business continues to benefit from affordability versus other residential construction and favorable industry trends in the modular construction markets, and in adjacent markets like RV and cargo where our new products are resonating with customers. Our site-built business was impacted by weak builder sentiment, a softer spring selling season, and higher inventories of new and existing homes. This dynamic has created a pause for many of our builder customers while adding a competitive dynamic price to the marketplace. Infrastructure and data center projects have been a bright spot for our concrete forming business, which saw double-digit volume increases. Turning to our outlook. We expect the business conditions that impacted our first half of the year results will carry over for the remainder of 2025. News around duties on Canadian lumber and other tariffs has only created additional headwinds. That said, we still believe we are uniquely positioned given the natural hedge of our portfolio between fixed and variable-priced lumber products. From an impact standpoint, we'd note that the industry imports less than 20% of lumber from Canada. We'd also note that Southern yellow pine is domestically produced and represents roughly two-thirds of our fiber purchases. Historically, periods of higher lumber prices have generally led to levels of profitability as we use our scale to buy lumber better than our peers. All of this uncertainty is contributing to a lack of visibility beyond the first half of 2025. Regardless of the outcome, we remain confident in our ability to navigate any potential tariff impacts. Longer term, we are well positioned to take advantage of favorable trends across many of our growth runways. We remain committed to our long-term targets. One, 7% to 10% unit growth. Two, 12.5% EBITDA margins. Three, maintain our strong return on capital profile. And four, maintain our conservative capital structure. Before I close, I want to thank our 15,000 plus employees for their hard work and their commitment. I always say, tough times, tougher people. The uncertain times will pass, and we will come out on the other side stronger. And with that, I'll turn it over to Mike.

Thank you, Will. Net sales for our June were $1.8 billion, down 3.5% from $1.9 billion last year. Results were driven by a 3% decline in units and a 1% decline in pricing, with recent acquisitions providing a modest offset. The decline in selling prices primarily resulted from the weaker demand we've seen in the past few quarters, which has led to more competitive pricing on our site build, structural packaging, and pallet one business units when comparing year-over-year results. These headwinds resulted in a 15% decline in our adjusted EBITDA to $174 million while adjusted EBITDA margin fell to 9.5% from 10.7% a year ago. Pricing and cost pressure as well as lower volumes weighed on profitability this quarter. It's worth noting that $28 million of the $50 million decline in our gross profit was due to lower volume and price competition in our site-built business unit as macro conditions continue to weigh on new housing starts. Even with these headwinds, our trailing twelve-month return on invested capital remained resilient at 15%, which remains well ahead of our weighted average cost of capital. Operating cash flow was $113 million for the year. This includes a seasonal increase in our net working capital of $166 million we expect will convert to cash by the end of the third quarter. We also expect approximately $40 million of cash flow benefits from the big beautiful bill in the back half of the year as a result of bonus depreciation and the ability to expense certain construction costs associated with manufacturing facilities. Bottom line, our balance sheet remains strong, providing us with ample flexibility to pursue our financial and strategic objectives as we move through 2025 and beyond. Moving on to our segments. Sales in our retail segment were $788 million, a 3% decline compared to last year, due to a 7% decline in unit sales offset by a 4% increase in price. By business unit, we experienced a 7% unit decrease in ProWood and a 3% decline in Deckorators. The decline in ProWood volume is primarily due to softer demand as a result of higher interest rates and weaker consumer sentiment, as well as our ongoing efforts to exit lower margin product lines. Within our Deckorators business unit, our sales of railings declined 25%, and wood plastic composite decking was flat. While SureStone composite decking increased over 45%. Our railing sales declined due to the loss of placement with a large retail customer, which also impacted our wood plastic composite decking volumes. However, we gained market share with another major retailer. Initial stocking orders from this retailer for our SureStone decking and stronger demand from the pro channel have provided an offset. This shift positions us for a modest market share gain in 2025 as we add capacity to supply approximately 1,500 stores by 2026. We expect to realize the full benefit of this share gain in 2026 and remain focused on our long-term goal to double our composite decking and railing market share over the next five years. Our year-over-year gross profits and margins in retail declined, primarily due to lower volumes, higher material and manufacturing costs for composite decking, and operational challenges in our edge manufacturing locations. As we indicated last quarter, composite decking material and manufacturing costs are expected to improve with the new, more efficient manufacturing lines we're installing. We're taking the necessary actions to close our two Bonner facilities in 2025. These closures are expected to improve operating profit by $16 million in 2026. For clarity, the business conducted out of our Bonner Trim plant will be transitioned to other existing facilities to create efficiencies and lower our cost structure. We're exiting the coated siding business conducted out of the second facility, which has been difficult to scale. We anticipate these actions will result in between $15 million and $17 million of impairment and other one-time costs in Q3. Operating profits in retail declined by $6 million as a result of the decline in gross profit, offset by a $7 million decrease in SG&A. Looking forward, the continued enhancement and resiliency of our ProWood business growth trajectory and margin potential of our Deckorators business, as well as the restructuring of our edge business, provide optimism for improved results in 2026. Moving on to packaging. Sales in this segment declined 2% to $429 million, consisting of a 4% decrease in selling prices and 2% unit growth from recent acquisitions. Customer demand in this segment remains soft, and pricing remains competitive. However, we continue to gain share with key customers. We also had an unfavorable change in product mix this quarter, as our largest and most profitable business unit, structural packaging, declined 2% in volume due to soft demand, while our protective packaging and pallet one businesses enjoyed 85% unit growth. As a result of these factors, year-over-year gross profits dropped by $13 million for the quarter. Encouragingly, sequential gross profit trends suggest results may have stabilized, offering some cautious optimism for 2026. Operating profits in the packaging segment declined by $3 million to a total of $26 million for the quarter, due to the decrease in gross profits as SG&A was $10 million lower than last year. Turning to construction. Sales in this segment declined 4% to $552 million as a 6% decline in selling prices was partially offset by a 2% increase in units. The overall unit increase was due to significant volume increases in our factory-built, commercial, and concrete forming business units. These increases were partially offset by a 7% unit decline in our site-built business as demand for housing remains challenged due to affordability and sentiment. As a result, the market environment in our site-built business remains competitive and continues to pressure pricing as we protect our market share. Gross profit in the segment decreased by $25 million year over year due entirely to our site-built business unit. The decline in gross margin in the segment is due to these factors, as well as the less favorable change in sales mix as site builds have historically been our largest, most profitable business unit. Our operating profits declined by $16 million to a total of $36 million for the quarter, as a result of the decrease in gross profit, offset by a $10 million reduction in SG&A. As we manage through this cycle, we're focused on maintaining the right balance between cost control and advancing our long-term objectives. That means ensuring the company is appropriately sized relative to current demand while continuing to invest in the resources needed to drive growth, expand market share, further product innovation, strengthen brand awareness, and improve operational efficiency through technology. Our consolidated SG&A expenses declined by $18 million for the quarter, due to a $16 million decrease in bonuses and sales incentives and a $2 million reduction in our core SG&A. It's important to note that our core SG&A includes a $6 million increase in Deckorators advertising costs associated with our SureStone technology. Looking forward, we've targeted an annual run rate of EBITDA improvements from cost and capacity reductions of $60 million in 2026. Our plan for SG&A expenses next year, excluding highly variable sales and bonus incentives tied to profitability, is $554 million. This is $10 million lower when compared to 2024 and consists of $30 million of anticipated cost reductions offset by a $20 million increase in our Deckorators advertising spend as we invest in building the SureStone brand. In addition to the SG&A cost reductions, we've taken actions to reduce and consolidate capacity at locations that don't meet our expectations. We anticipate these actions will have a favorable impact on our gross profits. As I previously mentioned, the closure of our Bonner facilities and transfer of business to other locations is expected to eliminate operating losses totaling approximately $16 million in 2026. Based on the actions we've taken to date and opportunities for continued improvement, we believe we're well positioned to achieve or exceed our goal of $60 million in cost outs by 2026. Moving on to our cash flow statement. Our operating cash flow was $113 million for the quarter and includes $166 million of seasonal net working capital that we expect to convert to cash by the end of Q3. The strength of our cash flow generation and balance sheet have allowed us to continue to invest in growing the business while also being more aggressive on share buybacks. Our investing activities included $130 million in capital expenditures comprising $48 million in maintenance CapEx and $82 million of expansionary CapEx. As a reminder, our expansionary investments are primarily focused on three key areas: expanding our capacity to manufacture new and value-added products, geographic expansion in core higher-margin businesses, and achieving efficiencies through automation. Investing activities also include two small acquisitions, a wood packaging manufacturer located in Mexico that allows us to strengthen our business with certain multinational customers, and a supplier to the manufactured housing, RV, and cargo markets whose location is complementary to our existing footprint and allows us to execute strategies to reduce our operating costs while providing additional capacity for growth. Finally, our financing activities primarily consist of returning capital to shareholders through almost $42 million in dividends and $261 million in share repurchases. Turning to our capital structure and resources. We continue to have a strong balance sheet with $842 million in cash and total liquidity of $2.1 billion. Our liquidity includes cash and amounts available to borrow under our long-term lending agreements. With respect to capital allocation, we remain committed to a balanced and return-driven approach. As we've discussed in the past, our highest priority for capital allocation is to drive organic and inorganic growth that results in higher margins and returns. Our strategy also includes growing our dividends in line with our long-term and anticipated free cash flow growth. Repurchasing our stock to offset dilution from share-based compensation plans. We'll continue to opportunistically buy back more stock when we believe it's trading at a discounted value. With these points in mind, our board approved a quarterly dividend of 35 cents a share to be paid in August, representing a 6% increase from the rate paid a year ago. Last April, our board approved an incremental $100 million to our previously existing share repurchase authorization bringing the total to $300 million. As of July 25, 2025, there have been 2.6 million shares repurchased for almost $270 million at an average price of $103.55 under this authorization. Last week, our board of directors approved a new $300 million authorization that will be effective through July 2026. Regarding capital expenditures, we currently plan to spend approximately $300 to $325 million for the year. Finally, we continue to pursue a pipeline of M&A opportunities through our strong strategic fit while providing higher margin return and growth potential. As we pursue these opportunities, we'll remain disciplined on valuation. I'll finish with comments about our outlook. Our outlook remains unchanged from last quarter. We continue to expect low single-digit unit declines across our segments through year-end, reflecting ongoing soft end market demand and competitive pricing pressures. As expected, site builds are experiencing more pronounced headwinds, though strength in factory-built is helping to offset some of that pressure. We remain focused on gaining share in each business unit to help mitigate volume declines and support overall results. Navigating the current environment, we're taking action to reduce costs, right-size capacity, and exit underperforming or non-core businesses. While positioning the company to deliver above-market growth and margin expansion as market conditions normalize. With that, we'll open it up for questions.

Thank you. As a reminder, our first question will come from the line of Kurt Yinger with D.A. Davidson. Your line is open.

Great. Thanks, and good morning, everyone. Morning, Tara. How are you doing? I was just hoping to maybe unpack the sequential improvement in construction gross margins a bit. I know you talked about on a year-over-year basis site-built accounting for all of the decline in gross profit. But I guess, was that business additive to the 60 kind of basis point improvement versus Q1? Or is that entirely driven by factory build and commercial and concrete forming?

Mike, do you want to hit that?

Yeah. Happy to. Site-built had a very challenging quarter, Kurt. So I think the year-over-year decline was $28 million. Looking from Q1 to Q2, there were still volume pickups that benefited site build, but there's still price pressure that was coming through. So any improvement there was just simply due to seasonality, I think, in the concrete forming and commercial side as well as performance in factory-built. So, yeah, site build, we expect that trend to continue with site build through the balance of the year. With where demand seems to be, we expect continued pricing pressure to be a headwind for volume and pricing for the balance of the year, really.

Okay. And is that something you know, alluded to it in the prepared remarks in terms of talking about the natural hedging across the business around lumber pricing fluctuations. And historically, you guys have done a really good job managing through that. But is this kind of a unique environment where that poses more of a risk than we've seen in the past just given what you've alluded to in terms of competitive pressures?

Yeah. I think if you look at that, Kurt, certainly with the demand environment being weak and the pressures there, there's no question it's a little harder to pass those along in that area. So, yeah, I think you're fair in asking that question.

Okay. Perfect. Switching gears to Deckorators. Guess when you talk about kind of modest market share gain for this year, should we interpret that as kind of slight positive sales growth versus a market you expect to be flat? Or I guess how would you kind of have us frame what that means from an overall sales perspective?

Yeah. Certainly, we expect market growth modest. We've talked about the switch in customer mix. So first half of the year, there was some offset there that should be closer for the back half of the year with that transition. That side, the decking market for us, we've seen improvement, and we expect to continue that market share gain in the back half. Especially on the SureStone side.

Right. Right. And, I mean, you know, the 45% increase is very impressive. I thought it was also interesting that the wood plastic composite side was flat despite the shelf space. Can you maybe help us understand what drove the offset on the wood plastic composite side? And then also help us think about, of the SureStone gains, how much of that was the stocking benefits versus maybe what you're seeing on kind of the traditional pro dealer space?

Yeah. So I think it's twofold. I think you've really got to highlight the internal distribution piece. We've talked about that a lot. Our ability to distribute through our ProWood facilities. And we're winning share. Secondarily, if you go over to the SureStone side, it's a pretty good mix between the retail component, but as well as through the distribution component. We're seeing wins in both places. As we continue to ramp up that production and that store count, you'll continue to see that grow. I think you can't lose sight either of the fact that this is the first year we've really had a marketing campaign like we do, and so we're seeing the returns on that marketing campaign.

Right. Right. Okay. Makes sense. I'll jump back in the queue. Thank you.

Thanks.

Thank you. One moment for our next question. And that will come from the line of Reuben Garner with Benchmark. Your line is open.

Thank you. Good morning, everybody.

Morning, Reuben. Will, that marketing campaign that you mentioned, is that still geared towards the contractors, or has the kind of lower price point SureStone technology enabled or pushed you guys to market more directly to the consumer? Yeah. Good question. It's really driven this year towards the consumer. We've got to really explain the value in that technology and what makes that product different. And so when you see those advertisements, you really start to see the benefits that are associated with that technology. That's where that marketing campaign is focused this year. So it really hits both.

Got it. And then on the packaging side, I think you said all businesses except site-built were kind of either showing signs of stabilization or improvement sequentially. Can you talk specifically about what you're seeing in packaging? Any signs of acceleration there at all in the end market overall? I know it's been a challenging couple of years.

Yeah. I wouldn't call any signs of improvement. But certainly, sequentially, it feels like we've found stabilization. So I wouldn't highlight it as improving. It's still a very difficult market. Competitive market. And so that's the best way I can describe it at this point. I'd love to tell you that it's improving, but I think it's just stabilized. Which is good to see.

Okay. And I'm going to sneak one more in, just to clarify on-site build. So I think you did say pricing and profitability and don't know about demand because of the seasonal aspect, but I think you said that it was kind of still under pressure sequentially. Where does all of that stand relative to, like, March 2020? Like, if we round trip back to the previous highs in pricing and profitability, are they under pressure relative to that? Like, how does it look relative to previous cycles?

Yeah. I think that pricing has and margins, I guess, in particular, have largely normalized and come under a little more pressure than what we were seeing during the pandemic more recently now. Driven.

Okay. Thanks for the color, guys, and good luck going forward.

You bet. Thanks.

Thank you. One moment for our next question. And that will come from the line of Ketan Mamtora with BMO Capital Markets. Your line is open.

Thank you. Good morning, Will. Good morning, Mike. Good morning. Maybe just continuing on-site build, the margin pressure that you are seeing, the competitive market backdrop. I know you had mentioned that last quarter, we saw a big step down from the fourth quarter of 2024 into 2025. Have those kind of stabilized as you've gone through the second quarter and into the third quarter? Or did we see sort of another leg down given what the home builders are telling us?

Sure. Yeah. Volumes have moved up as you'd expect going from Q1 to Q2, so that's provided a benefit. But we have had more pricing pressure from Q1 to Q2. So when I look at the sequential bridge there in gross profits, there's still some pricing challenges from Q1 to Q2. And that's what we expect to continue through the balance of the year. But, yeah, you know, going back to Reuben's last question, though, I think we're in a down cycle. We haven't found the bottom yet. I don't think, on cycle, probably. But, you know, the good news is, you know, once this does normalize, you know, we do expect that, you know, EBITDA margins, gross margins will improve in future years. Once demand rebounds.

Understood. Okay. That's helpful. Then you know, just switching to lumber. And here in the last few years, you know, you guys have done a phenomenal job of kind of managing the volatility. We have, you know, duties on lumber outside of what happens with tariffs, but just these lumber duties are going to go up meaningfully here in the next several weeks. You know, positioning yourself? And I know that's only on what comes from Canada. But I'm just curious, how are you positioning yourself just as a large lumber buyer?

Yeah. Good question. And component of the total spend and what we bring in. Most of our... if those things come into play, we'll continue to look for opportunities to convert some of those products to domestic species. I think the hardest place and where most of the Canadian product goes is certainly to the site-built into the construction arena, and that's the most difficult arena we're in today or segment or business unit. I feel good about our ability to pass those along for the most part. I think we'll be able to utilize some of our manufacturing abilities domestically as well as some of the switch and sourcing to offset a lot of that, but we'll see how that shakes out exactly.

Got it. And then just one last one from my side on capital allocation. Pretty meaningful pickup in share repurchases, you know, this year. So I'm just curious, you know, as you look at the different options that you have and clearly part of a strong balance sheet, in terms of kind of back half and into 2026?

Yeah. So Ketan, I think we've been pretty consistent in our philosophy. So we've always preferred to grow. And so that I think the capital investment, you know, reaffirming what we plan to do on capital investments that's our target first. To be able to use capital and invest it in those areas. If M&A isn't there, we have the opportunity, I think, to invest, you know, several hundred million to a billion, I guess, if you look at each segment, you know, and trying to strengthen the core businesses there. We have a lot of capital we can deploy. But if the opportunities don't present themselves, the multiples are too high, you know, share buybacks are a great avenue, particularly at the current price. You know, we feel like it's trading at a discount to its intrinsic value. So that's been our approach, and we won't waver from that. We're going to continue to be return-driven. And we'll continue to be patient at waiting for those opportunities to present themselves.

Perfect. That's all I have. I'll jump back in the queue. Thank you.

Thank you. Yeah.

And one moment for our next question. That will come from the line of Jeff Stevenson with Loop Capital. Your line is open.

Hi. Thanks for taking my questions today. You reported a nice sequential improvement in Deckorators. Sales benefiting from the low end, or the load end of your new Summit decking product in 1,500 stores. Wondered whether the load-in is largely complete here in the second quarter and how much will spill into the back half of the year. And then on top of that, whether you've seen any changes in underlying composite decking demand or bidding activity due to macroeconomic uncertainty or sell-through demand trends remain largely stable.

Yeah. Jeff, yeah. To answer your first question, the store count and the load-in that we talked about really remained unchanged in Q2. That's what I would call a difficult time to do a swap out in the stores. That's the selling season. That could be very disruptive. And so the store count that we talked about at the end of Q1, approximately 400 out of the 1,500 remains fairly unchanged. The majority of that and the remainder of that number really takes place in the back half of the year. That coincides with the coming online. So, really, you'll see that capital investment that we talked about, the additional capacity. And our target date is really to have ourselves prepared and ready for that 2026 decking selling season. We'll be on shelf and ready to go. So that's the first question. I think the second part of your question really comes back to that we're really seeing a divide. You've got your affluent customer. You've got your average consumer. And so, really, the composite decking space is winning in that. That affluent customer continues to spend and grow and really is the - it's the average consumer that's downgrading or choosing to not participate or delay a project. So really, that space has been really good, and we continue to grab that market share.

Oh, that's great to hear, and thank you for that. And then step distribution for Deckorators. You know, obviously, the retail ones have gotten most of the attention, but you know, I just wanted to talk about the opportunity to expand your partnerships of distribution, driven by your increased investments and improving brand awareness and capacity, new product introductions, and then potential benefits of industry consolidation.

Yeah. Twofold. So and we've kind of hit on that in the past. You know? Some of the competition uses that and blocks out space, and that's been one of the question marks. How do we get our product to market? We're winning. I would tell you the SureStone technology, the marketing campaign, is certainly resonating and opening doors for us. But I cannot highlight enough in markets that we don't have a distribution partner that works well to get to those markets, that internal distribution piece we continue to invest and expand and that's growing rapidly. So it's twofold for us.

Understood. Thank you.

Thank you. One moment for our next question. And that will come from the line of Jay McCanless with Wedbush. Your line is open.

Will, if you don't mind repeating what you said about Southern Yellow pine. I think you said could you maybe talk about that other third and what type of if there are higher duties imposed with the new softwood agreement what that's going to look like for UFP.

Yeah. So you hit the number right. That's about two-thirds of our purchases. And 75% of our purchases are domestically sourced. So in addition to that. So you've got approximately 25% that are import products. Obviously, but important items also come from other places around the globe, Brazil included. We're working very hard to look at alternatives where those duties could come into play or tariffs. And what we could substitute, move to other species that wouldn't be affected. So all those things are in play right now.

Okay. That's great. Thank you. The second question I had, you know, it's great to hear the concrete forming benefited from some of the data center build-out we've all been hearing about. But is there any concern that some of those data centers might not happen? And what how are y'all thinking about that business? Can it continue to put up the same level of growth in the near term?

Yeah. We're confident in the infrastructure growth and feel like we're well positioned. The value-added solutions we provide, we think we're in a great space to win. We continue to build out the footprint of ability to get to those markets. I'm not overly concerned about that because it's a small component of a much bigger business. So that's one little piece.

Okay. And then, Mike, I wanted to that's good to hear on the depreciation side, the benefits that UFP is getting there. But I also wonder if this may be an opportunity with all these new pretty expanded deductions for packaging, potential to see an uptick in business just as people try to go spend this year and take advantage of that business? Are y'all seeing any early signs of that?

Not seeing any signs in it impacting our sales levels yet, Jay. So nice to see be able to see the cash flow pickup for us in the back half of the year. But, you know, maybe at some point, we would expect it to impact demand. So not seeing anything like that yet.

Got it. Okay. That's all I had. Thanks, guys.

Thank you.

Thank you. I'm showing no further questions in the queue at this time. I would now like to turn the call back over to Mr. Will Schwartz for any closing remarks.

Thank you to those joining us on the call for your time today. Despite this tough macro environment, we remain committed to our long-term goals for greater operational efficiency and to bring new high-value products to market. Most importantly, thanks to the hard work of the UFP team members who make these goals possible. Have a great day.

This concludes today's program. Thank you all for participating. You may now disconnect.