Good day, and welcome to UFP Industries Q1-2026 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. Thank you for joining us to discuss UFP Industries' first quarter 2026 results. Joining me on our call are Will Schwartz, our President and Chief Executive Officer, and Mike Cole, our Chief Financial Officer. Following our prepared remarks, we will open the call for questions. 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 include, but are not limited to, the factors identified in this release in our most recent annual report on Form 10-K and in our other filings with the Securities and Exchange Commission. Today's presentation will also include certain non-GAAP measures. For reconciliation of these non-GAAP measures to the corresponding GAAP measures, please refer to our earnings press release and our website, ufpi.com. I will now turn the call over to Will.

Good morning, everyone, and thank you for joining today's call to discuss our financial results for the first quarter of fiscal year 2026. We'll start by sharing our thoughts on the quarter, what we are seeing in the marketplace, and provide some thoughts on how we see the business performing for the balance of the year before opening the call for questions. Many of these same dynamics that we saw through much of 2025 continued into our first quarter. After seeing some stabilization through much of the quarter, macro headwinds and competitive pressures increased volatility as the quarter progressed. We were also adversely affected this quarter by a longer-than-normal winter season, and so the normal seasonal uplift during the month of March failed to materialize. In addition to the impacts of softer demand, our results were impacted by higher medical costs than the previous year. This abnormal activity throughout March contributed to roughly 60% of the year-over-year decline in profitability in the quarter. Business conditions have since leveled out, but given the ongoing geopolitical uncertainty and broadening inflation, particularly around higher transportation costs, we are approaching the remainder of the year with a slightly more cautious outlook. Our Q1 results are reflective of the current operating environment. Net sales of $1.46 billion were down 8% from Q1 of 2025, representing a 7% decrease in units and a 1% decrease in price. Our adjusted EBITDA margin for the quarter was 7.6% and earnings per share for quarter was $0.89. Despite the temporarily challenged environment, we will continue to be focused on refining and growing our core business. We will focus on controlling costs, and we plan to use this period of uncertainty to be more opportunistic and leverage our strong financial position. With approximately $2 billion in liquidity, we intend to pursue meaningful M&A while returning our free cash flow to shareholders through opportunistic share repurchase and dividends. As we've said before, we continue to target above-market growth with an emphasis on returns and we continue to make strategic investments that contribute to the long-term success of our business. In the immediate term, new product sales remain consistent at 7.5% of sales on a trailing 12-month basis. We also have a sharp eye towards strengthening our core business for the long term, deploying capital for greenfield investments in M&A, introducing innovative products, and structurally lowering our cost base. On the cost side, we are actively mitigating higher costs and remain on track to deliver the remaining $25 million of our $60 million cost-out program by year-end with the potential to capture incremental savings beyond our initial targets. While Mike will share additional color on the results, we were also pleased to announce two post-quarter end acquisitions that align with our disciplined strategy to deploy capital toward high-quality strategic fits. Before I get into the details, I'd like to start by welcoming the employees of Moisture Shield and Berry Pallets into the UFP family. These companies were a strategic financial fit, but equally important, they aligned well with our future. In our Decorators Business Unit, we announced the acquisition of Moisture Shield decking operations from Old Castle APG. The acquisition adds a wood plastic composite plant in Springdale, Arkansas, which meaningfully expands our capacity, adds redundancy to our operation, and enhances our ability to bring unique products to market. Additionally, this acquisition eliminates the need to spend capital on a new greenfield as demand for our product has outpaced capacity. We anticipate that this acquisition gives us the needed footprint to double our wood plastic composite decking manufacturing capacity by 2027. Additionally, the acquisition also brings the rights to MoistureShield's cool deck technology, a proprietary heat mitigating technology which reduces heat transfer by up to 35%. We believe this would fit alongside our decorator's decking line, including integration into our SureStone technology boards. In our packaging segment, we also welcome to the UFP family, Berry Pallets, a new pallet manufacturer in the upper Midwest that expands our geographic reach and strengthens the density of our pallet network. These opportunities to increase the scale and synergy of our business only create value if we integrate it well, and that's exactly why earlier this month we announced Patrick Benton will transition from his role as president of UFP Industries Construction Segment to the newly created Executive Vice President of Operations Integration position. Patrick has spent his career running some of our most profitable plants and business units, and he knows firsthand what it takes to drive efficiency, reduce cost, and accelerate the path to strong returns. In his new role, Patrick will apply that operational discipline across our growing portfolio of acquisitions, ensuring we move faster from close to contribution and that every business we bring into the UFP family performs to its full potential. Now moving on to segment highlights, beginning with retail. Our largest business unit, ProWood, continues to make progress on lowering our cost positions and improving our manufacturing process. Some of this progress was overshadowed by the levels of inflation we saw in the quarter, as well as the later than usual winter conditions. ProWood is an industry-leading brand, and we continue to add more value across our portfolio. A great example of this is our TrueFrame Joyce product launched last month at JLC. As a reminder, this is the business unit's first proprietary product designed specifically for use in deck substructures. The value we add on the front end eases several common pain points for contractors, saving time and money. We have expanded production into four manufacturing plants and increased our sales efforts to capitalize on the demand pull. While still relatively small, this is a compelling product line extension in our core pressure treating and decking products. Similarly, we are pleased with the repositioning of our edge business and prospects for profitable growth. Our new AERIS trim made with Shearstone technology will begin shipping to customers late this quarter. Early demand indicators look quite favorable as contractors are gravitating to the same product features that has made our Shearstone decking offering so compelling. Turning to decorators, we continue to see strong momentum from last year carryover into our first quarter. Our shearstone decking sales increased 27%, and our traditional wood plastic composite decking increased by 4%, both from the same quarter a year ago. We believe both metrics remain ahead of the broader industry. We were pleased with the results of our efforts last year to enhance decorators' brand and intend to maintain that effort in 2026. In addition to our elevated sales volumes, our measures of consumer interest have more than doubled over the past year. These metrics include where to find a contractor, where to buy decorators, and sample requests both at big box retailers and through our website. The outperforming demand stated earlier combined with the measurable customer feedback gives us confidence in our stated plan to double market share over the next five years. We remain excited about the progress we are making within both our shear stone and wood plastic manufacturing facilities to increase capacity and meet growing consumer demand. Our first truck left Buffalo in mid-April, and we continue to ramp up production at both our shear stone production locations. We look forward to being fully operational in Q2, which will help us continue to work through the sales backlogs that we were not able to realize in the first quarter. Coupled with the recent MoistureShield acquisition, we are well positioned to capture growth entering 2026 and beyond. Despite near-term macro uncertainty, our confidence in the business remains strong, and we continue to expect $100 million of incremental decorators' growth this year. Our packaging segment continues to make progress despite an uneven macro backdrop. We are positioning the business for longer-term success by introducing new value-add products to our customers, investing in automation, and investing in new and lower-cost manufacturing. Quoting activity has remained strong, but customer takeaway remained mixed, which is reflective of the uncertainty across many end markets. The combination of higher commodity prices and a competitive market remain an overhang on profitability. That said, we are encouraged that our margins continue to stabilize sequentially and supports our view that we are closer to the bottom of the cycle. We continue to believe that our national footprint gives us geographic expansion opportunities and our design and engineering capabilities separate us from many of our smaller, more regional competitors who lack the manufacturing scale and financial position to compete with national customers. With the improvements we made to the business, we can deliver above-market growth and a recovery. Moving on to construction. The macro story in our construction segment has been fairly consistent for the past several quarters, but we continue to actively reposition our portfolio. A challenging new residential construction environment continues to weigh on results, overshadowing improvements across our other businesses. Residential builders remain cautious, managing home inventories carefully ahead of the spring selling season, while consumer confidence and affordability headwinds persist. We continue to make investments in automation and other initiatives to improve our cost position and throughput. One of these initiatives is the Frame Forward Systems brand that we launched in February at the International Builder Show. Frame Forward Systems positions our site-built business unit to move our wood framing business beyond commodity component sale to capture increased margin through a system-selling approach and to drive greater customer loyalty. While early, Frame Forward Systems has been very well received by the construction trade as we continue to raise the bar on off-site manufacturing to address the on-site challenges in the construction industry. similarly in our factory built business this business unit continues to actively add more value to our customers through partnerships expansion of distribution capabilities and by facilitating cross-selling with other parts of our business our concrete forming business continues to expand our product and services offerings to capture more of our customers wallets while helping them address labor challenges on the job site. Finally, our commercial business continues to build on new products, new customer relationships, and the benefits from prior restructuring actions to deliver improved results. Across our construction segment, we are actively finding ways to solve our customers' problems by helping address labor, quality, production cost, and reduce build time to help our customers win in the marketplace. place. Looking ahead, we remain committed to our long-term targets and believe the steps we are taking today will position us to achieve these results in the future. As a reminder, we are driving towards the following goals. A 12.5% EBITDA margin, 7 to 10% unit sales growth, some of which will come from M&A and new products, ROYC in excess of 15%, which is well ahead of our cost of capital, and lastly, to achieve all of this while maintaining a conservative capital structure. While the market dynamic has changed since our last call in February, it has not dampened our enthusiasm for our business longer term. As we've said before, we have confidence in our model and and our focus remains on the most attractive opportunities that enhance our core business. 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, I'll turn it over to Mike Cole.

Thank you, Will. Net sales for the March quarter were $1.5 billion, down 8% from $1.6 billion last year. The change reflected a 7% decline in units and a 1% decline in pricing. Units declined due to continued weakness in residential construction activity, adverse weather, the exiting of select low-margin commodity sales, and softer demand for new pallets. Pricing was impacted by a 6% decline in lumber and continued price pressure in our site-built business. Adjusted EBITDA was $111 million, down $31 million year-over-year. An adjusted EBITDA margin was 7.6%, compared with 8.9% in the prior year period. The decline was driven primarily by site-built, where gross profit decreased by nearly $19 million, dollars, along with higher health care and transportation costs across the portfolio, which increased approximately $7 million and $3 million, respectively. Despite these headwinds, our trailing 12-month return on invested capital remained above our weighted average cost of capital at nearly 11 percent, demonstrating continued value creation through the current phase of the cycle. Turning to our segments, I'll begin with the retail. Retail sales were $531 million, down 12% year-over-year, driven by a 13% decline in units, partially offset by 1% higher pricing. ProWood units declined 15%, reflecting soft demand driven by adverse weather, weaker consumer sentiment, and the absence of storm-related demand. We also exited certain low-margin commodity sales starting in Q2 of 2025. Decorators delivered 2% unit growth as decking continued to outperform the market. Overall decking sales increased 16%, led by 27% growth in surestone, which was supported by capacity added at our Alabama plant. And wood plastic composite decking increased 4%. We continued to target above market growth in our decorators business unit. In April, we added wood plastic composite manufacturing capacity in Arkansas through an acquisition. Our new surestone plant in Buffalo just started shipping. and we continue to expand distribution across professional and retail channels, all of which is expected to support additional share gains in 2026 and beyond. Edge volume declined 20% as we closed our Bonner facilities and narrowed the portfolio to products we expect to meet profitability targets by the end of 2026, representing the significant actions needed to restructure the business unit. Retail adjusted EBITDA was down $1 million year over year. Gross profit and SG&A were both essentially flat, reflecting improved mix and continued cost control while we continue to invest in the decorator's brand. We remain focused on improving pro-wood distribution and increasing throughput and margins in decorators. With these initiatives and the edge restructuring substantially complete, the retail segment is well positioned for improved results in 2026. Packaging sales were $394 million, down 4% year-over-year, reflecting a 2% decline in units and a 2% decline in pricing Structural packaging volumes were flat, pallet 1 units declined 7%, and protective packaging units increased 5% as new greenfield locations continued to ramp up Across the segment, we continue to gain share with key customers because of our ability to provide value-added solutions and a comprehensive product portfolio on a national scale. Packaging adjusted EBITDA was $28 million, down $7 million year-over-year. The decline reflected lower volumes and higher input costs in Pallet 1, along with unabsorbed overhead as protective packaging greenfield operations continue to focus on achieving targeted volumes. We partially offset this gross profit impact with a $2 million reduction in SG&A, primarily from incentives tied to profitability. Construction sales were $465 million, down 10% year-over-year, with a 5% decline in price and a 5% decline in units. The change was driven primarily by a 14% unit decline in site-built, as housing demand remains pressured by affordability and weaker consumer sentiment, and larger builders are focused on lowering inventory. We are, however, seeing improving trends among multifamily customers. Factory-built units declined 7% as we exited certain low-margin commodity sales. While volume was lower, mix improved and supported higher profitability. And commercial and concrete forming each achieved mid-teens unit growth. Construction adjusted EBITDA was $26 million, down $12 million year-over-year, driven by market weakness and competitive pricing pressure and site build. The other three business units improved profitability through growth and more favorable mix, partially offsetting the decline. As we manage through this cycle, we're balancing cost discipline with continued investment on our long-term strategy. We remain focused on aligning our cost structure with current demand while continuing to fund growth initiatives, product innovation, brand awareness, and technology-enabled productivity improvements. Consolidated SG&A declined over $3 million year-over-year due to lower incentive compensation tied to profitability. For 2026, our key cost structure targets are $25 million in cost savings from capacity consolidations, reducing cost of goods sold, and keeping us on track to achieve the $60 million cost-out goal we announced last year. Core SG&A of approximately $570 million, including decorators' advertising and excluding the following incentive-related items, bonus expense of 17% to 18% of pre-bonus operating profit, sales incentives of about 3% of gross profit, and $21 million of vesting expense for prior year stock-based incentives. an effective tax rate of 25 to 26 percent, and total depreciation, amortization, and other non-cash expenses of approximately $200 billion. Turning to capital resources and capital allocation, the company continues to maintain a strong balance sheet. At the end of March, the company had $714 million in surplus cash and no borrowings under its credit agreements for a total liquidity of approximately $2 billion. Our surplus cash was approximately $200 million lower than at year end, driven by a typical seasonal working capital build that we expect to convert to cash by early Q4. We believe our diversified business portfolio generates meaningful and consistent free cash flow to support organic growth and M&A. Last year, we converted 80% of adjusted EBITDA into free cash flow. Our highest capital allocation priority is to invest in opportunities, organic and inorganic, that grow our core businesses and increase margins and returns over time. Our focus areas are expanding geographically in core, higher-margin businesses where we have sustainable competitive advantages, expanding capacity for new and value-added products, and driving operational excellence through automation, consolidation, and enhanced productivity. Consistent with this framework, in April we completed one acquisition and announced a second that we expect to close in May. On April 6th, we purchased the net operating assets of Moisture Shield, Inc. And on April 28th, we announced our plan to acquire the net operating assets of Barry Pallets. These transactions are aligned with our capital allocation strategy to strengthen our core portfolio, expand capacity in the geographies we serve, and improve margins. We also intend to return capital by growing our dividend in line with long-term free cash flow and repurchasing shares primarily to offset dilution from stock-based compensation. We will evaluate additional repurchases opportunistically when we believe our shares are trading below intrinsic value. and will preserve our balance sheet strength to fund growth. With these points in mind, the Board approved a quarterly dividend of $0.36 per share, a 3% increase from a year ago. We have a $300 million share repurchase authorization in place through July 2026. Year-to-date, we've repurchased 30 million shares at an average price under $90 per share. We currently expect $250 million to $275 million of CapEx, about $50 million lower than our February target, due to the moisture shield transaction. And we continue to build our M&A pipeline around targets that fit strategically, offer higher margin and return potential, and present opportunities to meaningfully scale our core businesses. As we pursue these opportunities, we'll remain disciplined on valuation. I'll conclude with our outlook. We expect the current market environment to persist through 2026. Based on current headwinds and visibility, we believe demand for the balance of the year is trending toward the lower end of our prior guidance, which assume flat to slightly down unit volumes across our segments based on mix. With respect to input costs, we expect continued pressure from energy and transportation. While pricing actions are underway to offset these items, the benefit is expected to take time to flow through the income statement this year. Positively, we believe market share gains, capital investments, and operating improvements should help offset headwinds in markets tied to new residential construction. For example, we continue to target $100 million of growth in decorators' ducking and railing sales. With that, we'll open the line for questions.

Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, press star 1-1 again. One moment while we compile the Q&A roster. Our first question will come from the line of Kurt Yinger with T.A. Davidson. Your line is open.

Great. Good morning, everyone. Good morning, Kurt. I just wanted to start off on ProWood. I know that, you know, you lost some lower margin business last year. But it also sounds like kind of that slow progression into spring, you know, impacted the March period. I guess with the commentary that April's maybe leveled out a little bit, would you expect to see some better volume trends there?

Yeah, I think that's fair to say, Kurt. If you look at it, there's, you know, the factors and points that we referenced in some of the commentary, whether it's kind of carryover of really a very slow storm season from last year, a lot of that tail drags into 2026, into the first quarter. We didn't have that, obviously. You combine that with unusual weather patterns and then the change in business mix, some of those volumes that you talked about. So, yeah, I think if you take some of that noise out, it really matches up well to some of the guidance we've talked about for single-digit down, and I think that carries forward.

That's helpful. And then on the decorator side, you know, obviously still a very good quarter in terms of decking sales growth. Can you just talk about how that matches up maybe internally versus your plan? And then as we think about, you know, the need to hit accelerating growth to get to that $100 million target, with Buffalo Online, you know, does that really help ramp things up in Q2, or is it maybe more of a back half kind of phenomenon in terms of when a lot of that starts to flow through?

I heard it's a combination of both. I think what you're reading into Q1 exactly aligns with the amount of production that we had. So with those CapEx improvements coming online, Selma fully operational, but as described, we shipped our first truck mid-April out of Buffalo, so that's a quick ramp up. But really, as you get to Q3, Q4, we'll be able to capitalize on a lot of backlogged orders. So our first quarter sales matched up to what we had to sell. So we were We're very happy. It's right on track, and those CapEx advance – it's right where we expect it to be at

Great. And then just last one on the transportation and energy side, you know, without maybe putting too fine a point on it, could you just help us kind of frame maybe what type of headwind you expect that to be relative to, you know, what you were kind of budgeting at the start of the year? And then also talk a little bit about kind of the process of passing that additional cost on. Is it something that, you know, a portion of your contracts with customers might be embedded with just a time lag or something that's more negotiated? Just help us understand that dynamic a little bit.

Yeah, that's a hard one. The month of March is where we really felt the impacts. And certainly when the conflict started, we didn't know how prolonged that would be at the point that we realized we were a month in that looks like this is going to have a longer lasting effect. We started those conversations with customers. And fortunately for us, because of the relationships we have, they understand, you know, we're not the only ones in that game. It's a cost out of our control. And so those are starting to go into place, are already in place in most cases, and will continue as in the different markets that we serve. But, yeah, as it looks right now, it looks like that's going to continue to be a bit of a headwind, but we've got it covered in the form of covering those costs and continue to work through it with customers.

Is it fair to say then that, you know, we kind of see that headwind in Q2, and then, you know, the back half, you feel like you're pretty well set and offsetting it? barring you know another kind of material inflation shock or is is it maybe going to be really the latter part of the year where you think i think that yeah i think as you described it i

think it's a very fair assessment of it most of those are already in place at this point those offsets but we continue to work through things through the quarter but by the back half of the year for certain i wouldn't expect to be taking hits as a result of those increased fuel costs

Thanks a lot for the color. Appreciate it.

Thanks, Eric.

One moment for our next question. And that will come from the line of Jeff Stevenson with Lube Capital. Your line is open.

Good morning, Jeff. Hey, Jeff.

Good morning. Thanks for taking my questions today. You know, first, I was wondering if you could provide, you know, some more color on how the moisture shield assets fit into your long-term decorator strategy and then the opportunity to leverage your decorators' products at existing moisture shield distribution partnerships that you previously were not working with?

Yeah, you hit the nail on the head. There's a combination. That was certainly an opportunity that we were happy to be able to take advantage of. We needed additional capacity. We've been challenged there. We needed a secondary plant. And so we had budgeted. it was reflected in the capex expectation for another plant that eliminated that need so we got immediately a product that's really really good a manufacturing plant that satisfies that additional capacity need but i'll tell you the cool deck technology and being able to apply that across the decorators portfolio of products also is extremely exciting and then lastly coming with it as you described some other distributor partners that we think are extremely valuable and potentially we can expand on that. So it was a win all the way around.

That's great to hear. And then, you know, at a high level, you know, how should we think about the margin cadence over the next several quarters in your retail business, you know, given the full load-in of your low-end summit decking products across the 1,500 retail stores and then the new decorators capacity coming online here in mid-April. just, you know, any more color there would be helpful. Yeah, and let's go back to the last

quarter. We kind of re-pivoted on that 1,500 stores. It's a little different. So, store count, where products flow in from distribution centers, et cetera, and that's why we really explained the $100 million of additional decorator sales that we expected to get. You'll see that continue to build throughout the year. So, describing back to the last question, we've only been limited by the production that we've had. So as that additional capacity comes on, Jeff, you'll see those sales build and revenues grow. So super excited about that. Okay, great. Thank you. One moment. One

moment for our next question. And that will come from the line of William Carter with Stiefel.

Your line is open. Hey, thank you. Good morning. What I wanted to ask is on the kind of inflation, the energy pass through, I think just to make sure you are saying that when it's a headwind, and it's transitory like in March. Could you give us a sense of how big that transitory headwind particularly was in the first quarter, how long you live with the lag, and then if it's just we see diesel stop or whatever, then the lag goes the other way. Any other incremental color to get some clarity around that incremental headwind this year?

Yeah, absolutely. I think Mike's chomping at the bit to get a word in,

so I'm going to let him kind of jump in here. Yeah, it was about a $3 million headwind in March, Andrew, And it did increase in April. But the good news is that in April, as Will had indicated, that's when we started taking actions with our customers. And now through price surcharges and price increases on the products, depending on which approach the customers prefer, we're now beginning to pass that through. And so working through that process, like Will said, and I expect that's going to be completed here in pretty short order in Q2.

And I 100% apologize if you all answer this to Jeff's question because I actually cut out, but it's kind of something we were chomping at the bit to ask about. The MoistureShield locations, basically, if you look at the kind of the dealer locations for MoistureShield and kind of decorators where you are today, it's highly incremental in terms of incremental distribution points. So I guess the first thing is obviously MoistureShield is going to go more two-step. uh is it an easy conversation to pick pick that up for uh kind of decorators or sure stone um it obviously you'd also be the factory constraint that you you do kind of your kind of playbook for launching uh moisture shield and i guess long term what's the brand strategy here uh is it keep moisture shield is it kind of you know and make it more of the brand or just anything to help out

there thank you yeah good question and i'm going to start with the last question first or the last points. So the intent is to run the Moisture Shield brand for the remainder of the year. And in 2027, we'll start a transition moving that under the decorator's umbrella and starting to introduce some of those products into the mix, as well as the Cool Deck technology, applying that towards the whole portfolio of products where we deem fit. Yeah, we're excited. And we're working through that with those customers and partners that were part of Moisture Shield that weren't part of the decorators customer mix and we're working through that right now and but very very excited about the opportunities that presents to us thanks I'll pass it on thank you thank you

thank you one moment for our next question that will come from the line of Ruben Garner with

benchmark your line is open hey good morning thanks good morning good morning guys um let's Jesse, this may be too early days, but any plans from a branding perspective? Will the MoistureShield assets ultimately become decorators, wood plastic composite, or is there a need or a reason to keep the separate branding longer term?

Yeah, so Ruben, I think you probably cut out in the queue for asking the question. And, yeah, so we will transition that Moisture Shield brand under the decorator's umbrella at some point in 2027. So we'll carry it through the year, and then we'll start that transition process.

Got it. Sorry I missed that. And then a lot of moving parts the last couple of years with both demand and the supply you've been adding and now Moisture Shield. So can you give us an idea of what total wood plastic composite business you have today, what total surestone business you have today, and then, like, what the capacity is today and where it's ultimately headed in each of those so we can kind of level set it on a go-forward basis?

Yeah, so I'll work off of the 2025 numbers, Ruben. I think we finished the year in total decking and railing sales at about $245 million. I think of that 245, there was 165 million of decking, and of the 165 in decking, about 90 was mineral-based with a sure stone, and 75 million was wood plastic composite, and the balance there, 80 million was Rayleigh. Now, to your point about capacity, prior to this year, we had about 100 million, I think, in capacity of mineral-based or sure stone. We had about $100 million in wood plastic composite. We've now doubled as a result of the – or have the ability to double as a result of the moisture shield acquisition of wood plastic composite. So that's going to go from $100 to $200. And as a result of Selma and Buffalo, we go from $100 million of capacity to adding another $250. So we'll be at $350 million of capacity for surestone. And some of that will be, most of it will be for decking, but, you know, we don't want to forget about the term product that we're launching this year as well.

Perfect. Very helpful. And then a question about, you mentioned, I think you used the term price mechanisms and maybe there being a lag for offsetting some of the inflationary pressures that you've seen. what exactly are those mechanisms? Are you using surcharges for fuel and transportation and they're delayed for some reason? Just walk me through that comment. Yeah, it's a combination. And so

you're exactly right. Fuel surcharges in certain situations, others want repricing, building that into the price. So each of those scenarios is different. So when we speak mechanisms, we have a lot of business that we quote each time. And so you obviously take that into account, the new updated costs, and what's reflected in the market. So it's just a combination of all of those, and each of the segments we serve have different pricing timelines. So site built is very different than retail, an example.

Understood. Thanks for the detail, guys. Congrats on the deals, and good luck going forward.

Thank you very much, Drew.

One moment for our next question. And that will come from the line of Keaton Mamtora with BMO Capital Markets.

Hey, good morning, Keaton. Good morning. So sticking with the flavor of the day, which is decorators. So just help me understand a little bit on Q1. Obviously, shear stone and wood plastic composite both grew quite nicely in Q1. Yet overall, decorators' sort of bucket was up 2%. So what are the other offsetting sort of factors there?

Yeah, railing was off 6%. I think we called that out in the in the in the release so that that was an offset and then the other the other product categories that are sitting inside the decorators business unit are decorative aluminum fencing deck accessories generally post caps balusters and then vinyl vinyl lattice is is also in the category. So those are areas that were softer, and obviously the decking sales themselves are obviously very strong.

I see. Okay, now that's helpful. So as I think about sort of decorators and now with Moisture Shield coming into the fold, Mike, is the right way to sort of think about as 100 million incremental sales you all talked about previously, and now we've got Moisture Shield for probably eight months of the year or something like that. So is that the way we should be thinking about decorators' growth in 26?

Yeah, that's exactly right. The $100 million that we originally talked about with the capacity coming online that goes a long way towards helping us achieve that, and now the incremental increase from the moisture shield transaction.

Got it. Okay, that's helpful. And then just switching to the construction side, in site build, are you seeing, you know, sort of continued price competition, you know, among players, or is that sort of largely leveling out at this point, given that, you know, we've been at it for a while now?

Yeah, that's the hardest part of the business for us today. Obviously, that business is very tough. And when you talk about even some of the cost inputs that we recognized in the first quarter, it's hardest to pass along. So that's reflective in margins, too, when you talk fuel increases, lumber costs going up during the quarter. And so it continues to be a very pressured market for us on the margin side.

Understood. But has the competitive dynamics changed at all? You know, since the start of this year, obviously the start of this year, there was expectation that things will, you know, that housing activity will get better. And then, you know, with sort of the geopolitical events, it sort of feels like things have become a little softer. Since then, has there been any change?

Yeah, I think your assessment is exactly right. From the start of the year until today, it has certainly not gotten better. And the geopolitical tensions, interest rate increases, consumer sentiment, all those factors in play, it's a tough environment.

Although we did expect a tougher front half in the year. We had tougher year-over-year comparisons. Obviously, housing was pretty tough coming into the beginning of the year. We had anticipated it being tougher, but, yeah, exactly. The recent events have made it even more so.

Yeah, okay, that's fair. And then just a final one from me on capital allocation. How are you thinking about M&A opportunities? And it seems like that pipeline is growing and you are seeing more opportunities versus kind of the other tools that you'll have on share repurchases. So how are you stacking those two at this point, and if you were to rank order?

Yeah, we are definitely more focused on growing. That's where we start. We talk about that a lot, but never losing sight of return. And I would tell you the pipeline is the best we've had in five-plus years. I think a lot of that is intent and action. You know, we've done a lot more prospecting. I personally have done more prospecting, allocated more time towards it for strategic opportunities to fit where we want to take the corporation. And so when you think about the liquidity, we want to put that to work, but it's got to be the right opportunities.

Understood. Very helpful. I'll turn it over. Good luck. Thank you very much.

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 for joining us this morning. while the operating environment remains challenging and visibility limited, we're confident in the strategy we have in place and the actions underway to strengthen our business. We're staying disciplined. We're focused on what we can control, investing thoughtfully in our core businesses and managing costs while remaining patient in how we deploy capital. I want to thank our employees for their continued execution and commitment and our customers and shareholders for their trust and

support. Thank you and have a great day. This concludes today's program. Thank you for participating. You may now disconnect.