BlueLinx Holdings Inc. Q3 FY2024 earnings call

• Gross margins: Specialty products had over 19% and structural products had 11% despite price deflation. Drove volume growth in key categories like millwork, engineered wood products, lumber, and panels. - Digital transformation: Phase 1 on track to complete by Q3 2025, with subsequent phases to enhance capabilities. - Hurricane impact: Erwin, TN distribution center damaged by Helene, but employees safe; insurance to cover financial impact, expect to rebuild by late 2025. Tampa and Lakeland locations impacted by Milton but fully operational. - Market outlook: Housing market volatile with low existing home turnover and affordability issues; expects housing recovery in back half of 2025 as mortgage rates come down.

Specialty Products: Net sales were $519 million, down 7% year-over-year. Gross profit from specialty product sales was $100 million, down 9% year-over-year, with a gross margin of 19.4%. Specialty products accounted for approximately 70% of net sales and about 80% of gross profit for the third quarter. Structural Products: Net sales were $228 million, down 9% compared to the prior year period. Gross profit from structural products was $25 million, a decrease of 11% year-over-year, with a gross margin of 11%.

• Anticipate improved pricing in specialty and structural products in back half of 2025. - 2024 capital investments expected slightly lower than $40 million, focused on facility, fleet, and technology improvements. - Committed to share repurchases with $61 million remaining on authorization. - Long-term net leverage ratio target of two times or less.

• Price deflation persisting longer than expected due to soft housing recovery and excess manufacturing capacity. - Uncertainty in housing market with low existing home turnover and high mortgage rates. - Impact of hurricanes on facilities, though insurance will cover financial impact of Erwin damage.

Q: What was the primary driver of volume improvement in EWP and millwork categories?

A: Strong focus on share gain strategy tied to national accounts, multifamily, product line expansion, branded products, and new geographic territories. Also some seasonal benefit.

Q: Have you seen sequential moderation of price declines in EWP and millwork?

A: Yes, saw slight sequential improvement in first four weeks of Q4, up low single digit, giving confidence in price improvement in back half of 2025.

Q: How did structural margins rebound?

A: Took a reserve in second quarter, which flipped in third quarter as inventory was sold, leading to 11% gross margin for structural products on positive volume growth.

Q: How much of specialty deflation is manufacturer list price vs competitive dynamics?

A: Primarily EWP and millwork, with some carryover from lumber and panel deflation; seeing improvement in millwork private label products sequentially, expecting improvement in back half of 2025 in EWP, millwork, and some specialty lumber/panels areas.