BlueLinx Holdings Inc. Aktie

Ladies and gentlemen, thank you for standing by, and welcome to the BlueLinx Holdings Second Quarter 2026 Earnings Conference Call. [Operator Instructions] 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 Second Quarter 2026 Earnings Call. Joining me on today's call is Shyam Reddy, our Chief Executive Officer; and Kelly Wall, our Chief Financial Officer and Treasurer.

At the end of today's prepared remarks, we will take questions. Our second 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. We encourage you to follow along with the detailed information on the slides during our webcast.

Today's discussion contains forward-looking statements. Actual results may differ significantly from those forward-looking statements due to various risks and uncertainties including the risks described in our most recent SEC filings.

Today's presentation includes certain non-GAAP and adjusted financial measures that we believe provide a helpful context for investors evaluating our business. Reconciliations to the closest GAAP financial measure can be found in the appendix of our presentation.

Now I'll turn it over to Shyam.

Thanks, Tom, and good morning, everyone. Our second quarter results once again demonstrate our ability to deliver profitable sales growth in a challenging market environment, validating the strength of our channel and product strategies.

Our disciplined execution led to volume growth at solid margins across key customer channels and multiple product types. We believe our results reflect market share gains since we're operating in another year of single and multifamily housing start declines and tepid repair and remodel activity.

During the second quarter, net sales increased more than 4% year-over-year, driven by Disdero specialty product sales, higher volumes in key specialty product categories and improved pricing across multiple product categories. We also continue to experience favorable pricing and volumes for lumber and structural products.

Specialty gross margin was 18.7%, excluding the benefit of an import duty related item and structural gross margin was 10.9%, both of which reflect the strength of our customer value proposition and effective inventory management.

Our channel strategy continues to fuel our branded specialty product expansion, both geographically and SKU-wise with strategic suppliers,

engineered wood, siding, millwork, industrial, outdoor living and other specialty products represented approximately 70% of net sales and 80% of gross profit in the quarter. The momentum from the multifamily channel efforts, builder pull-through programs and national accounts focus, all key commercial growth strategies continue to drive our financial results and generate value for our entire customer base.

Specifically, these initiatives are helping us drive volume growth and share gains by converting projects and customers to the strategic brands and products we carry, thereby strengthening our position as a preferred commercialization partner for suppliers. The virtuous cycle is leading to stickier relationships with both. Suppliers want partners who can help them grow across multiple channels and markets in a fast-paced dynamic landscape, and that's what we're doing.

Our value-add services and enhanced capabilities enable us to execute our strategic initiatives at scale and to accelerate both customer and supplier growth objectives no matter the market conditions. Our disruptive go-to-market approach is unlocking commercial growth opportunities for both customers and suppliers, thereby differentiating us in the marketplace. We have driven volume growth and share gain in key customer channels such as multifamily and key national accounts, demonstrating another quarter of key channel growth.

We've also expanded our geographic footprint faster than before with key suppliers like Huber, Louisiana Pacific, Georgia-Pacific, Royal Westlake and RDI. We even have national distribution rights for Georgia-Pacific on key specialty product lines that support our multifamily efforts. A new partnership with Trex was also announced that gives BlueLinx distribution rights in 11 markets located in our Central, North and South regions. This recent award on the part of Trex, the national distribution rights we have with Georgia-Pacific and the accelerated expansion rights provided by our other key strategic suppliers demonstrate the merits of the commercialization accelerant we are providing to key vendors via our channel focus.

Our results also demonstrate the benefits of disciplined inventory management and strong execution. Our ability to quickly align inventory levels with changing market conditions reflects the strength of our operating discipline and commercial capabilities. As market conditions improve, we expect these capabilities to help support even stronger cash flow generation.

We are also making meaningful progress on our AI and digital transformation initiatives, several of which are designed to enhance commercial activities, fine-tune our inventory management capabilities and generate e-commerce sales. We also remain committed to supporting the advanced digital platforms of our largest customers to accelerate channel growth. Finally, our financial position remains strong with $655 million in available liquidity at the end of the quarter, providing us with the flexibility to reinvest in the business and to pursue strategic growth opportunities.

Now for a few more highlights on our second quarter results. We generated net sales of $814 million and adjusted EBITDA of $35.6 million or a 4.4% adjusted EBITDA margin, a significant improvement on a year-over-year basis. Disdero, which we acquired in Q4 2025, contributed nearly $25 million of net sales and $2.7 million in adjusted EBITDA.

Adjusted net income was $9.1 million or $1.15 per diluted share. The strategic sales and product expansion efforts are what led to these higher volumes and increased net sales at solid margins. For example, multifamily and national accounts continue to perform well with volumes up 11% and 2% year-over-year, respectively. Our builder pull-through program supported by strategic customer partnerships also contributed growth across key channels and specialty product categories.

In addition, our differentiated value proposition, combined with geographic and SKU expansion with key suppliers drove meaningful year-over-year growth across multiple product lines that are aligned with our channel growth strategy. The newly announced Trex relationship demonstrates the merits of our strategy, and we look forward to validating it for them in supporting our customers' commercial objectives. We're especially proud of our solid gross and EBITDA margin performance in spite of cost inflation, freight challenges and a competitive pricing environment. For example, diesel fuel costs and flatbed freight rates are up 50% and nearly 17% on a year-over-year basis, respectively.

We've also dealt with approximately 60 cost increases from suppliers through Q2 2026 compared to around 20 through Q2 2025, yet we performed well for another consecutive quarter. These results reflect disciplined execution of our product and channel strategies, supported by operational and business excellence initiatives that relate to effective pricing and cost pass-through, strategic value-add services, exceptional customer service, branded product expansion and disciplined inventory management.

Overall, our Q2 results reflect continued momentum and solid financial performance despite low consumer confidence, persistent inflation, economic uncertainty and geopolitical volatility driving weakness in the housing and repair and remodel markets. Our strategy is working, so we remain focused on executing it through the cycle and positioning BlueLinx for accelerated growth when the industry recovers. I want to thank our associates for the dedication they bring every day to our customers, suppliers, one another and the communities we serve.

Now I'll turn it over to Kelly, 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 specialty products and structural products delivered solid sales growth and gross margins in what continues to be a challenging new home construction and repair and remodel market.

Net sales for the second quarter of 2026 were $814 million, up over 4% year-over-year. Total gross profit was $140 million, and gross margin was 17.2%, up from 15.3% in the prior year period. As Shyam mentioned, second quarter results included a $7.2 million duty-related benefit. Excluding this benefit, gross margins for Q2 of 2026 were 16.3%. SG&A was $107 million, up $12 million from last year's second quarter.

This increase was mainly due to the acquisition of Disdero in Q4 last year, fuel and third-party freight expenses and employee-related expenses. Given the challenging demand environment and continued pressure on operating costs, consistent with prior quarters, we remain focused on disciplined expense management and identifying additional opportunities to improve efficiency. Net income for the quarter was $6.4 million or $0.81 per diluted share. Adjusted net income was $9.1 million or $1.15 per diluted share, up approximately 64%.

Our effective income tax rate for the quarter was 43%, including the impact of discrete items. Adjusted EBITDA was $35.6 million, up approximately 33% from the second quarter of 2025 due to the benefit of the duty-related item, increased sales, including Disdero, improved overall gross margins and disciplined expense management.

Not including the duty-related item, Q2 2026 adjusted EBITDA was $28.4 million or a margin of 3.5%. Naturally, we are very pleased with the year-over-year increase in adjusted EBITDA in both the first and second quarters. Turning now to the second quarter results for Specialty Products. Net sales for Specialty Products were $564 million in the second quarter, up nearly 4% year-over-year. This increase was driven by Disdero sales and higher volumes in EWP and industrial as well as increased pricing in nearly all product types, partially offset by volume pressures in millwork due to cheaper alternatives and aggressive local market pricing, though we were able to improve pricing in Q2 on a year-over-year basis.

Gross profit from Specialty Product sales was $113 million, up over 12% year-over-year. Specialty gross margin was 20%, up from last year's 18.5%. Excluding the $7.2 million duty-related item in Q2 of 2026, specialty gross margin was still up 20 basis points from last year to 18.7%. Sequentially, specialty gross margins improved 60 basis points when compared to Q1 of 2026.

In the current third quarter, we expect Specialty Products gross margin to be in the range of 18% to 19%, with daily sales volumes flat compared to the second quarter of 2026 and higher than the third quarter of 2025. Now moving on to Structural Products. Structural Products had a strong quarter. Net sales were $250 million for Structural Products in the second quarter, up nearly 6% compared to the prior year period.

This increase was primarily due to higher lumber pricing and volumes when compared to last year, offsetting volume pressures in panels. Gross profit from Structural products was $27 million, an increase of 40% year-over-year and structural gross margin was 10.9%, up from 8.2% in the same period last year. Sequentially, structural gross margin was the same as Q1 2026.

We expect Q3 structural product gross margin to be in the range of 8.5% to 9.5%, with daily volumes to be higher than the second quarter of 2026 and also higher than the third quarter of 2025. Now turning to our balance sheet. Our liquidity continues to be very strong. At the end of the quarter, cash and cash equivalents were $318 million, roughly in line with Q1 2026. When considering our cash on hand and undrawn revolver capacity of $337 million, available liquidity was approximately $655 million at the end of the quarter. Total debt, excluding our real property financing leases, was $377 million and net debt was $58 million.

Our net leverage ratio was 0.6x trailing 4-quarter adjusted EBITDA, and we have no material outstanding debt maturities until 2029. Additionally, given the strength of our balance sheet and continued strong liquidity, we remain well positioned to support our strategic initiatives. These strategic initiatives include continued growth with our large national customers and in the multifamily channel with this focus also benefiting our traditional regional customers, demand pull-through efforts to drive strategic product sales that benefit our customers, continued specialty product expansion with key suppliers, Trex being a great example, our business and digital transformation efforts and other organic and inorganic growth initiatives.

Now moving on to working capital and free cash flow. During the second quarter, we had operating cash flow of $11 million and free cash flow of $9 million, both a significant improvement over the second quarter of 2025, primarily due to higher adjusted EBITDA and more effective inventory management. Turning now to capital allocation. During the quarter, we incurred $2.8 million of CapEx, primarily related to investments in our facilities, technology and fleet. For the second half of 2026, we expect CapEx will be higher than the prior year as we continue to invest in our business to address facility maintenance and improvements as well as drive our channel and support our product strategies and business and digital transformation initiatives.

Also, during the second quarter, we repurchased $2 million of our common shares. And as of quarter end, we have a total of $54 million remaining under our share repurchase authorizations. Our guiding principles for capital allocation remain consistent with prior quarters. We intend to maintain a strong balance sheet, which enables us to invest in our business through economic cycles, expand our geographic footprint, pursue a disciplined inorganic growth strategy as demonstrated by our acquisition of Disdero and opportunistically return capital to shareholders through share repurchases.

We also plan to maintain a long-term net leverage ratio of 2x or less. Overall, we are pleased with our strong second quarter results, especially given the challenging market backdrop. We were particularly pleased to see an increase in net sales, earnings and free cash flow year-over-year. That said, we remain measured in our expectations for the balance of 2026 as housing conditions are expected to remain soft. Operator, we will now take questions.

[Operator Instructions] Your first question comes from the line of Reuben Garner with The Benchmark company

Congrats on the strong results, guys. Maybe to start the check announcement last month or a couple of weeks ago, any way to frame up the size of your decking business kind of before this? And where you think that this could go now that you have access to, obviously, the leader in the space?

Yes. So I appreciate the question. The -- it's too early to say to frame up, we've never talked numbers about any given category other than to say our outdoor living products category is a key strategic specialty growth area for us. I would say that the Trex opportunity of being the #1 branded decking product out there with significant share gives us a much more sizable opportunity than we've had before. And with respect to the 11 markets, those markets are great markets for us.

They align well with our distribution footprint. And given the channel strategy, we believe we can drive outpaced growth for Trex in those markets and across our entire consolidated outdoor living products category. The one thing I want to note is we are a brand new distribution partner for Trex.

The announcement was made not 3 or 4 weeks ago or 3 weeks ago, and we are prepared to start loading product in this month, which I think is an incredibly quick turnaround time for a 2-step distribution partner and more importantly, validates the strength of our operational excellence initiatives and our processes for honestly being the best commercialization partner for any given vendor in our space.

That's great. And then the gross margin performance, very impressive and encouraging in the environment. I guess, can you just walk through how you're handling this? You mentioned 60 vendor increases. There's obviously been transportation and energy costs rising, like what has allowed you guys specifically to kind of works through all that? Are you -- is it pricing action surcharges? Are there costs that you have taken out that have helped to offset this? Just walk through kind of what's allowed you to perform that way.

Yes. So let me start with operational excellence, which is driven by our Centers of Excellence in Atlanta with supported out in the field as we have for example, regional directors of operations in the field to support the branches around basically landed cost excellence combined with people in Atlanta to do the same thing. So I would say at a high level, it has to do with managing are the inflationary cost impact through strategic pricing initiatives, which is both in the context of price increases and surcharges.

We take a bespoke approach. In other words, we have proactively worked with our customers to see what makes sense for them. And then it comes down to operational execution or speed of execution, which we have a very disciplined approach to doing so quickly in the field. So that's on the cost side from an inflation standpoint.

From a supplier perspective, that comes down to execution as well. We -- we work very closely with our suppliers to make sure we're fully aware of the price increases well in advance and we collaborate or we work with our customers in order to execute as quickly as possible to push those price increases through. As you can imagine, with 60-plus distribution centers, multiple MSAs that we operate in that cover different kind of local market environments that the seamless execution by having people work together efficiently and effectively make for a good operating model and passing cost increases through.

But look, at the end of the day, Reuben, the most important thing is you have to be able to sell value, right? You can't just push cost increases through outside of supplier increases in particular, which hit the whole market, including our competitors. But with respect to the other cost increases without having a value-added service proposition that people are willing to pay for in light of the inflationary pressures they're all facing.

So suffice it to say, if you look at the landscape out there, I would pause it that we are able to push these -- we are able to price effectively because of the value we provide, which is allowing us to grow and drive margins in an otherwise challenging market, not just from a macro standpoint, but also from a declining housing start perspective as well.

Then the other component there is what we've seen on the structural side, right, at a 10.9% gross margin in the quarter, that's up materially from prior periods. And as we talked about in the first quarter call, we've seen an increase in the market pricing for both lumber and panels that we've benefited from quite well as not only are we pricing effectively there, but we're managing our inventory so that we have supply available in the market to meet our customers' demands there as they're coming to us for more volumes. And then just to kind of reiterate Shyam's point, right, our efforts on the business and digital transformation front have been a key part of this, specifically our transportation management system that we put in place which is helping us manage our freight cost in a significantly higher fuel and third-party freight cost environment.

And then also our pricing initiatives where we're -- through the use of data and better tools, we're better able to assist our regions and branches in pricing more effectively and more quickly, which is allowing us to pass through these vendor cost increases as well as price the value add that we're bringing to the market effectively.

Great. And then last one for me. I think the press release said daily sales volumes higher year-over-year, also higher sequentially. Just to clarify, is that -- I mean, is it simple as I would assume, there's no reason pricing is lower in the third quarter than the second. So revenue is expected to be higher in 3Q versus the second quarter? And if so, that's a pretty reasonable acceleration in year-over-year revenue growth. Can you just walk through kind of what gives you the confidence a lot of companies and especially with exposure to new housing construction are kind of a little more modest in the back half. So just talk about what's driving that detail.

Yes. I mean what we're seeing is total revenue would be down from -- sorry, would be up, you're right, from Q2 to Q3. And again, I think it's just as we continue to execute our strategy, we're driving volume growth certainly relative to the overall market, but also back on the pricing front as we continue to price more effectively, that's benefiting us as well. And then on the structural side, we are -- you can see in our press release, expecting margins to kind of come back down in the back half of the year to something that's more aligned with traditional levels, but they have been elevated in the first part of the quarter, which is also going to help with that as well as we move forward.

Your next question comes from the line of Jeffrey Stevenson with Loop Capital.

I was wondering if you could walk me through how Specialty Products volumes trended throughout the quarter and what product categories, in particular, came in better than worse than anticipated? And following up on Reuben's question, both average daily sales volumes are expected to be up both year-over-year and sequentially. Is this really driven by your share gain initiatives helping you drive above-market growth given continued residential demand headwinds?

Yes. Let me just -- let me take the first part of the question. So from a category standpoint, we saw pressure in millwork volumes, which isn't surprising given tepid R&R activity as well as panels, which has been a challenging market just given oversupply, if you will. But for the most part, those were 2 of our more challenged categories.

When I think about our share gain efforts, we are focused on multifamily. We are focused on driving national accounts business at scale, which ends up benefiting our entire customer base. And last, but not least, we are executing or implementing strategic builder pull-through programs in alignment with key channel partners that are driving sales in very specific specialty product categories.

All of the above is what leads to the share gain and then otherwise down or challenging market. So I -- whether the market is great or terrible, I'm confident that our teams can execute successfully on getting more and more of the pie because of the strategic approach we're taking to helping our customers grow their business and also being the best commercialization partner for our suppliers.

And if you take a look at the evidence that supports that we've talked about growing from 0 to 20-plus markets with LP in 18 to 20 months. We've gone national with Georgia Pacific as it relates to key product lines that support the multifamily business. We've expanded substantially with Huber in multiple markets in a very short period of time.

We launched with [ True Exterior ] and 14 markets at once, tracks in 11 markets. Generally speaking, if you look at historic trends, it's rare that you can expand in double-digit markets all at once with key suppliers are in a relatively short time. And I would say that our commercial -- our channel strategy is what's driving that accelerated geographic and SKU expansion with respect to key product lines and our suppliers.

So -- at the end of the day, we are all -- we are focused on winning at the local market and regional levels and continue to gain share because of the focus -- and then of course, the operational excellence initiatives, the business excellence initiatives on value-add services and our transportation management system, the alignment, the e-commerce and AI are all serving as amplification or accelerants to the general business efforts that are underway.

Yes. And Reuben more specific about what we're seeing in kind of the current quarter -- sorry, Jeff, what we're seeing here in the current quarter. We are -- year-over-year, volumes are up for both specialty and structural kind of low single digits. And on the pricing front, same thing, right? We're seeing specialty pricing up low single digits and then structural is actually up kind of in the mid-teens level. And then sequentially, we're continuing to expect overall volumes while they are down slightly at the beginning of the quarter, we're seeing that trend reverse out, and we expect that the overall trends will be slightly positive sequentially from Q3 to Q4.

And then as a reminder, typically, we have -- I'm sorry, from Q2 to Q3, -- and as a reminder, typically, our third quarter is higher, right, seasonally than Q2, and we don't have any reason to expect that, that would change. And as I look at some of the specific kind of categories on the volume front, all of our categories are up flat to up, some of them kind of high single digits in certain key categories, again, across both specialty and structural as we start the third quarter here.

Very helpful. So I appreciate that. And one category where you've seen deflation pressure over the last kind of 1 to 2 years has been EWP. And I wondered if you could update on the competitive environment there and your competitor talked to kind of third quarter price increases. I just wondered, should we expect pricing to stabilize and inflect higher in that category?

Yes. So the competitive landscape hasn't changed per se, but -- and where I would emphasize kind of our strength is on margin and volume growth due to the builder pull-through programs that were -- we've established with key channel partners to drive growth and participate more -- participate more opportunistically across the country. So that's been a win for us.

I would say that the deflationary impact. If you compare us to others out there has had less impact on us. And I would say that it's because of the value-add services we're providing that justify the price maintenance by and large, relative to maybe others out there. So look, at the end of the day, it's a very competitive environment. There are products coming in from overseas, for example, LVL, EuroLVL that puts pricing pressure on local market -- locally market produced EWP.

But at the same time, because of our value-add services, creative pricing programs, channel partner relationships that are driving honestly, profitable sales growth for end builders is ultimately enabling us to, quite frankly, not only gain share, but also maintain margins and not be adversely impacted as much as you might expect with EWP pricing that others may be experiencing.

That's helpful, Shyam. And then last one for me, just SG&A step up sequentially due to the Disdero acquisition and higher fuel and third-party freight costs, among others. And -- should we expect this to be a run rate moving forward or just kind of any handholding on kind of SG&A in the back half of the year would be helpful.

Yes. I think on the SG&A front, last quarter, we mentioned that we'd expect each quarter to be kind of in that $100 million to $105 million with the middle 2 quarters being higher and then Q1 and Q4 being lower. We came in at $107 million in Q2. Again, higher fuel costs, freight costs, higher employee costs as well relative to our original plan tied to our overperformance and our compensation structure internally are that as well as higher health care costs, which is a trend that we're continuing to see. So as we kind of carry that forward into the back half of the year, what I would tell you, Jeff, is that we'd expect to average about $105 million in SG&A for both quarters with Q3 being slightly higher than Q4, which is the typical thing you see seasonal.

Yes. And I'd also like to point out. We don't talk about -- we don't see formal breakdowns per se. But when we think about volumes, you have you have out of warehouse and you have direct and then you have others that come out of reload.

Again, due to our channel strategy and the efforts we've employed in order to drive growth and gain share. All of the above have increased our out of warehouse volumes, which obviously drive SG&A costs at the warehouse level. So on the one hand, the SG&A costs are higher. There's just a commensurate increase to the disproportionate growth out of warehouse with respect to volumes when compared to direct, which quite frankly, have been pressured as we continue to lean on our channel share gain, very specific elements of the channel strategy.

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

You had mentioned a couple of examples, right, of vendor relationships that you'd expanded pretty quickly. I'm just curious in the context of track -- what's kind of the time line or kind of the direction that you would expect ramping up to a reasonably sized base of business or kind of initial expectations for run rate contributions?

Yes. So again, it's too early to talk about numbers, but I can tell you that given the sophisticated processes we put in place around product launches, here at BlueLinx, we are moving very quickly with POs being issued by the end of this week and product being loaded in this month and with the sales and profit hitting the '26 P&L in Q3 and Q4, but ultimately, it's going to take time to ramp up as we go out and we convert the convert business.

Fortunately for Trex. It's an incredibly well branded product that's sold in all these markets. And given how we execute, I'm confident we'll be able to not only execute quickly but convert quickly. But it's really 2027 impact as it will take time for us to really get known in the marketplace. Like I said, we're a new supplier, a new distribution partner for Trex.

And after some strong relationship building over the last year. We put ourselves into position to earn their trust and then make us a key partner of theirs. And like I said, I said over and over again, I believe in our team's ability to execute to a point where we're able to convince not only our long-term partners, but our new partners that we are the best commercialization partner out there and us be in a position to expand in new markets on a much faster clip than we may have been able to do a few years ago.

But I can't give you specifics yet, because we're obviously only a few weeks in. But I mean, we're -- again, we're issuing POs and loading product in very quickly and will be on our road to a long-term partnership with Trex which I'm really excited about.

Okay. That's helpful. But I mean, 2027 is probably when this becomes more of a conversation in terms of what's going through the P&L late.

That's right. I mean just in the early days, right, we'll have a significant working capital investment, then we'll -- we have general views around turn days and obviously return on working capital -- but like I said, I mean, it's going to take time. So there'll be some investments upfront, but look at 2027 as the real year of execution.

Quite frankly, I think it's to Trex's credit moving this early with their new distribution footprint is great because it gets us in place to not only hit the ground running this year, but be a partner to them before we start developing and negotiating programs with our customers heading into '27. So we've got a head start, and that's as a new partner, that's a great place to be.

Yes. Agreed. Okay. And I apologize, and this is going to be probably maybe an impossible question, but I'll ask it anyways. When you think about these larger vendors with kind of strict dual distribution models, is there a rule of thumb in terms of distributor A, distributor B, kind of general market share? Or is it I guess, really market dependent.

So it's all about local market execution, right? Our supplier partners aren't going to go with -- they're only going to go with distributors in markets who they believe can help grow their overall business right. We can take their full capacity across the entire country or where they're otherwise serving and make sure they have the right distribution partners to go execute on their sales growth strategies quite frankly, because we're essentially an extension of their business.

We provide the sales teams, the value-add services, the local market contacts in order to drive commercialization of their products. At the market level, it's really head-to-head competition with our competitors and where we compete there is around value-add services, we do take, for example, take off services or innovative programs to mixed.

For example, we are trying to go up into the right as it relates to our structural specialty minutes. We're shifting our specialty. But again, as we try and serve the whole house needs of any given end user vis-a-vis our customers and channel partners, having the structural and the specialty gives us the ability to sell into the whole house and ultimately provide a much better value proposition for our customers as they compete for business from their customers.

And so those are the kind of nuances at the local market level that give us the ability to win business. We provide whether it's bundling of various products and having created pricing around those bundled product offerings that help our suppliers compete against their competitors who might carry multiple product lines, right? That's how we win at the local market level. So I don't think it's A, B, C or D per se. It's really -- they've got their partners. And then we're out in the market competing on value, and I think our results show that we're able to effectively compete on value, maintain pricing, maintain margins and while at the same time grow business and an otherwise tough top market.

Now look, our channel strategy, and as I think about multifamily, as I think about leveraging the national accounts to drive a better value proposition across the country and ultimately, every customer benefits, Trex being a good example, right, because every customer in those 11 markets are going to benefit from that that product offering as they do from the products we offer from LP or Huber and so on.

So that plus multifamily and obviously, these builder pull-through programs ideally -- and again, these double-digit market launches and SKU expansion efforts show that our value to suppliers continues to get stronger and stronger. And ultimately, the goal would be to be able to carry our suppliers' products across the entire country because that will most effectively support the channel strategy, and we continue to make significant progress on that front.

Okay. Okay. That's great color. And I mean maybe the last part answers this next question. But what are kind of the primary second order effects with what I'll call kind of upgrading the vendor base, right? I mean does that help you maybe attract another vendor in a different category that you're been pursuing or open the door to new kind of dealer partners, just beyond these wins in isolation, can you just talk about kind of what that means for the BlueLinx platform.

Yes. The answer is yes, absolutely. It just -- it validates not only our strategy, but it strengthens our value proposition via brand association, top-tier brand association. And then as you think about programs that are out there -- I'm sorry, if you think about how big builders and other builders build, whether it's -- they're building 15 to 20 homes or they're building hundreds of homes. And then if you think at multifamily, if you look at multifamily, they have specs in place, right?

And so to the extent that we can drive high value-add branded product offerings, whether it be with LP, Trex, Huber, Roseberg and Georgia Pacific and so on, what that does is it people want to be with winners, right? Suppliers want to be with winners, and we're winning. And it will continue -- and by the way, as we look at, for example, the True Exterior rollout with Royal Westlake, that's another example. So these -- it's just wins to get more wins and then they take us further down the road of serving the whole house needs of our customers' customers. And if we can do that and continue to do it well, then obviously, it will enable more greater dealer business and national accounts business and lumber yard business and so on at the local, regional and national level.

Okay. That makes sense. And just lastly, from an internal perspective, what type of investments or kind of human capital, what are kind of the focus areas ahead of kind of that rollout, right? Do you need to add specific salespeople, things like that. Is that something to be aware of from kind of a spend perspective? Just talk about a little bit on a high level if you could.

Yes. So the answer is yes, but it also depends as you go down into each market. So there are markets where we have existing resources that can be leveraged. There are investments we will make both CapEx and OpEx as determined through our sophisticated product launch process that's being done in direct collaboration with Trex in order to ensure not only a smooth rollout, but to maximize the economic opportunity that this relationship will create for both of us.

And quite frankly, what's great about it is they've had its existing distribution relationships in those 11 markets that we can baseline against in order to kind of set the mark from a growth perspective. But the answer is, yes, we will hire where it makes sense, outdoor living specialists who will be focused on the Trex product lines.

We will also have -- we will make investments with our own teams as it relates to significant training to make sure they're up to speed on those product lines in collaboration with Trex that will be sending dozens of people to the Trex's headquarters in one of their mills very quickly to make sure we can hit the ground running and quite frankly, exceed their expectations as it relates to us.

So yes, they're all kinds of G&A expenses. But from a head count perspective, it will be very targeted and thoughtful and tied to the growth strategy on a market-by-market basis. We'll also leverage the product management team and the category specialists we have in Atlanta, which is a shared resource, who will work directly with on-the-ground resources to accelerate sales being driven by not only the product managers, but our territory managers who are to have very strong customer relationships in the field.

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

Thanks, Bella. Thank you again for joining us today, and we look forward to speaking with you in November as we share our third quarter 2026 results.

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

Ladies and gentlemen, thank you for standing by, and welcome to the BlueLinx Holdings First Quarter 2026 Earnings Conference Call. [Operator Instructions] 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 first quarter 2026 earnings call. Joining me on today's call is Shyam Reddy, our Chief Executive Officer; and Kelly Wall, our Chief Financial Officer and Treasurer. At the end of today's prepared remarks, we will take questions.

Our first quarter news release and Form 10-Q were issued yesterday after the close of the market, along with our webcast presentation, and these items are available in the Investor section of our website.

We encourage you to follow along with the detailed information on the slides during our webcast. Today's discussion contains forward-looking statements. Actual results may differ significantly from those forward-looking statements due to various risks and uncertainties, including the risks described in our most recent SEC filings.

Today's presentation includes certain non-GAAP and adjusted financial measures that we believe provide helpful context for investors evaluating our business. Reconciliations to the closest GAAP financial measure can be found in the appendix of our presentation.

Now I'll turn it over to Shyam.

Thanks, Tom, and good morning, everyone. We are off to a good start in 2026 as our first quarter results reflect our ability to compete effectively and deliver positive performance despite market headwinds, unforeseen cost inflation and competitive pricing pressure.

Our disciplined approach to executing our channel and product strategies enabled us to manage margins and to continue growing volumes across multiple product categories and key customer channels.

During the first quarter, revenues increased 3% year-over-year, driven primarily by Disdero Lumber company's specialty sales and higher volumes in our key specialty product categories, which helped offset ongoing pricing pressure in specialty and structural products and margin pressure in specialty products.

Specialty and structural gross margins were 18.1% and 10.9%, respectively, reflecting the strength of our customer value proposition and effective inventory management. Our specialty product strategy continues to deliver results with engineered wood, siding, millwork, industrial, outdoor living products and other specialty products representing 70% of net sales and approximately 80% of gross profit in the quarter.

While overall market conditions remain soft, our deliberate alignment of key supplier branded product expansion with strategic channel growth initiatives is enabling us to drive better commercial outcomes and allocate working capital more effectively.

Last week's announcement of Westlake Royal's Truexterior Siding and Trim products in 12 BlueLinx markets including 6 of the country's top 50 MSAs reinforces our commitment to this alignment. As you can see, our commercial strategic focus and our customer value proposition are accelerating our product and geographic expansion efforts with key vendors.

We continue to see positive momentum across our commercial growth vectors, the multifamily channel, builder pull-through initiative and national accounts business, all of which are key elements of our channel strategy. These efforts are helping us drive incremental volumes, convert projects and customers to key brands we carry and strengthen our position as a preferred growth partner for suppliers.

While multifamily sales typically involve longer inventory cycles and lower gross margins due to direct sales and competitive pricing, this channel remains an important source of demand and a critical component of our long-term growth strategy to support total housing starts at scale.

Operationally, our results also reflect disciplined inventory management. Our ability to quickly adjust inventory levels to market conditions demonstrates the strength of our commercial execution and operating discipline. As market conditions improve, we expect these institutional capabilities to support stronger cash flow generation.

From a strategic accelerant perspective, we continue to make meaningful progress on our AI and digital transformation initiatives with particular focus on enhancing our master data platform and optimizing our Oracle Transportation Management system. We also remain committed to supporting the advanced digital platforms of our largest customers and leveraging AI-driven solutions to improve productivity and efficiency across the organization as we continue to explore and develop AI and digital tools for commercial sales, operational excellence and e-commerce.

Finally, our financial position remains strong with $659 million in available liquidity at the end of the quarter, providing us with the flexibility to reinvest in the business, pursue growth opportunities and continue navigating a challenging market environment.

Overall, we believe our disciplined execution, resilient operating model and focused strategy position us well as we move through 2026.

We also returned capital to shareholders by repurchasing $3 million of shares in Q1 and the total current availability under our share repurchase authorization is nearly $56 million as of quarter end. This demonstrates our commitment to returning capital to our shareholders and our continued confidence in the company's long-term growth strategy.

Now for a few more highlights on our first quarter results. We generated net sales of $731 million and adjusted EBITDA of $23.5 million for a 3.2% adjusted EBITDA margin, a significant improvement on a year-over-year basis.

Disdero contributed nearly $21 million of the net sales and over $2 million in adjusted EBITDA. Adjusted net income was $1.7 million or $0.21 per share. Specialty product net sales increased nearly 7% year-over-year due to solid volumes across the board with the Disdero's product portfolio and our engineered wood products and siding leading the way.

Unfortunately, price deflation and margin compression in several categories offset the benefit of our net sales and our volume increases in the business.

Although structural product revenues decreased nearly 5% year-over-year due largely to price declines in lumber and panels, we were able to offset the impact by driving higher lumber volumes and gross margins. As a result, we delivered higher structural gross profit on a year-over-year basis.

Our strategic sales and product expansion efforts led to higher volumes and increased net sales at solid margins. 18% volume growth in multifamily and over 3% volume growth with key national accounts demonstrated another quarter of key channel growth tied to disciplined execution of our strategy.

Our builder pull-through programs tied to partnerships with strategic customers led to key channel and specialty product growth. Our differentiated value proposition led to geographic and product expansion with key suppliers with meaningful year-over-year growth across multiple product lines that align with our channel growth strategy.

For example, our EWP and Siding volumes and sales were both up low single digits on a year-over-year basis despite consistently declining housing starts. As I mentioned a minute ago, the addition of Westlake Royal's Truexterior Siding and Trim products significantly adds to our Specialty product assortment while demonstrating another example of geographic and branded SKU expansion with a key supplier.

We also delivered solid gross margin performance despite difficult market conditions, cost inflation and a competitive pricing environment with Specialty products at 18.1% and Structural products at 10.9%.

Our focus on the product and channel strategy fueled by our operational and business excellence initiatives such as effective pricing, value-add services, strong customer service, branded product expansion gains and disciplined inventory management all helped drive this performance.

The macroeconomic backdrop for building products distribution continues to depress demand for projects tied to new builds and repair and remodel activity. Historically low levels of consumer confidence and persistently high inflation, economic uncertainty and geopolitical volatility are also suppressing the cyclical housing tailwind from materializing, which I expect to continue through 2026.

These soft market conditions have led to lower volumes in certain traditional customer channels and highly competitive market pricing.

At the same time, however, the K-shaped economy continues to provide opportunities in certain parts of the country across all customer channels, another reason why our scale and geographic footprint helps smooth out our overall performance.

In any event, we have overcome market challenges by increasing volumes and maintaining solid margins via intentional growth tied to our channel and our product strategies. We're also actively managing our cost structure, passing along cost increases, optimizing inventory and prioritizing high-margin categories to optimize performance in an otherwise challenging market that we don't expect to abate anytime soon.

Overall, we are off to a good start in 2026 as demonstrated by our solid financial performance for the quarter. We will continue to execute our strategy through the current cycle, which will position us for better than market growth when the housing recovery occurs.

To wrap up, I want to thank all of our associates for their commitment to our customers, our suppliers, each other and the communities we all serve.

Now I'll turn it over to Kelly, who will provide more details on our financial results and our capital structure.

Thanks, Shyam, and good morning to everyone. Let's first go through the consolidated highlights for the quarter. Overall, both Specialty products and Structural products delivered solid volumes and gross margins in what continues to be a challenging macro environment.

Net sales for the first quarter of 2025 were $731 million, up over 3% year-over-year. Total gross profit was $116 million and gross margin was 15.9%, up from 15.7% in the prior year period.

SG&A was $96 million, up $2 million from last year's first quarter. This increase was mainly due to the addition of Disdero, offset by $1.9 million of business interruption insurance received in the quarter.

Given the difficult demand environment and continued pressure on wages and other operating costs, we remain focused on rigorous expense management and on identifying opportunities to further improve efficiency.

Net loss for the quarter was $1.5 million or $0.18 per share, primarily due to higher net interest expense and higher depreciation and amortization. Adjusted net income was $1.7 million or $0.21 per share.

Our effective income tax rate for the quarter was not meaningful given the level of our pretax income and the impact of several small discrete items. Adjusted EBITDA was $23.5 million, up approximately 20% from the first quarter of 2025 due to increased sales, including Disdero, improved overall gross margins and disciplined expense management.

While we are very pleased with the year-over-year increase in adjusted EBITDA in the first quarter, we do not expect similar performance over the balance of 2026, reflecting ongoing demand pressures and a still soft housing environment. These pressures include affordability constraints and elevated mortgage rates, muted consumer confidence, ongoing political uncertainty and interest rate volatility dampening the typical spring selling season and continued cost inflation and the challenges associated with passing those costs on in a soft market.

Turning now to the first quarter results for Specialty products. Net sales for Specialty products were $512 million in the first quarter, up nearly 7% year-over-year. This increase was driven by Disdero sales and higher volumes in most product categories, partially offset by year-over-year pricing pressure in nearly all categories.

Gross profit from Specialty product sales was $93 million, up over 3% year-over-year. Specialty gross margin was 18.1%, down from last year's 18.7%. Excluding a $2.4 million duty-related benefit in Q1 of 2025, gross margin was down 10 basis points from last year. Sequentially, Specialty gross margins were flat when compared to Q4 of 2025.

For the second quarter of the current year, we expect Specialty product gross margin to be in the range of 17.5% to 18.5%, with daily sales volumes higher than the first quarter of 2026 due to normal seasonal patterns and lower than the second quarter of 2025.

Now moving on to Structural products. Net sales were $219 million for Structural products in the first quarter, down nearly 5% compared to the prior year period. This decrease was primarily due to lower pricing for both lumber and panels when compared to last year, offsetting the higher lumber volumes we generated.

Gross profit from Structural products was $24 million, an increase of 12% year-over-year and Structural gross margin was 10.9%, up from 9.3% in the same period last year. Sequentially, Structural gross margin increased 90 basis points. This increase was primarily driven by higher lumber and panel market pricing with lumber and panel prices 16% and 4% higher versus the fourth quarter.

We expect Q2 gross margin for Structural products to be in the range of 9.5% to 10.5%, which has been positively impacted by sequentially higher lumber and panel prices from the end of 2025 through early Q2 of the current year. We also expect daily sales volumes to be higher than the first quarter of 2026 due to normal seasonal patterns and slightly lower than the second quarter of 2025.

Turning now to our balance sheet. Our liquidity continues to be very strong. At the end of the quarter, cash and cash equivalents were $319 million, a decrease of $67 million from Q4, largely due to the seasonal changes in working capital.

When considering our cash on hand and undrawn revolver capacity of $340 million, available liquidity was approximately $659 million at the end of the quarter. Total debt, excluding our real property financing leases, was $377 million, and net debt was $58 million.

Our net leverage ratio was 0.7x trailing 4-quarter adjusted EBITDA, and we have no material outstanding debt maturities until 2029.

Additionally, given the strength of our balance sheet and continued strong liquidity, we remain well positioned to support our strategic initiatives. These strategic initiatives include continued growth with our largest customers and in the multifamily channel with this focus also benefiting our traditional dealer customers, demand pull-through efforts to drive strategic product sales that benefit our customers, continued Specialty product expansion with key suppliers, our business and digital transformation efforts and other organic and inorganic growth initiatives.

Now moving on to working capital and free cash flow. During the first quarter, we had negative operating cash flow of $57 million and free cash flow of negative $60 million, primarily due to the seasonal changes in working capital ahead of the spring building season.

Turning now to capital allocation. During the quarter, we incurred $2.6 million of CapEx, primarily related to investments in our facilities, technology and fleet. For 2026, we plan to manage our CapEx in a manner that reflects current market conditions and allows us to maintain a strong balance sheet.

Our remaining capital investments will focus on facility maintenance and improvements, further replacement of trucks and trailers and the technology improvements that support our business and digital transformation.

Also, during the first quarter, we repurchased $3 million of shares. From the end of the quarter through April 21st, we have repurchased additional shares, bringing the total dollar amount purchased year-to-date to $5 million. As of today, we have a total of $54 million remaining under our share repurchase authorizations.

Our guiding principles for capital allocation remain consistent with prior quarters. 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 inorganic growth strategy as demonstrated by our acquisition of Disdero and opportunistically return capital to shareholders through share repurchases. We also plan to maintain a long-term net leverage ratio of 2x or less.

Overall, we are pleased with our solid first quarter of 2026 results, particularly in light of current market conditions, but remain more muted in our expectations for the remainder of 2026, given that the housing environment remains soft.

Operator, we will now take questions.

[Operator Instructions] Your first question comes from the line of Jeffrey Stevenson with Loop Capital.

This is Zack Pacheco on for Jeff. First, maybe just how much restocking ahead of the spring selling season contributed to the strong Specialty products volume growth during the quarter in categories maybe such as EWP?

So when you say restocking, are you talking about on the part of our customers?

Yes.

Okay. Yes. So I wouldn't necessarily characterize it as some unusual restocking or even historical restocking. Our EWP growth is tied to very specific product and channel efforts that we're driving in key segments.

So for example, our builder pull-through programs that are being aligned with strategic dealer customers are driving EWP growth in some markets, for instance. And we've wrapped around creative pricing and rebate programs to differentiate ourselves from our competitors.

So even in a soft market, we're able to grab share because if you look over the last 5 years and even over last year to this year, single-family housing starts continue to decline and repair and remodel activity continues to be either volatile or soft or projected to continue to be soft over time.

So it really has more to do with very specific actions we're taking to gain share or otherwise grab a greater share of the existing wallet even if the overall market is shrinking due to soft market conditions.

Okay. Very helpful. And then secondly, just any color on the impact of UFP's acquisition of MoistureShield on the business? And I guess, the opportunity to grow and expand with the Deckorators line of products?

Yes. One more, just to add to my last point, too. There are very -- there are specific larger -- as part of our channel strategy, we're focused on larger customers as well, so we can grow faster at scale to not only support their growth efforts, but also drive product expansion efforts. We have been expanding stocking programs with certain key partners. So there is a twofold answer to your prior question.

On the second question, I'm sorry, repeat? Oh, yes, the Deckorators acquisition of MoistureShield, I think. Yes. So honestly, I think that's a great positive story for us.

Deckorators is viewed as the #3 largest outdoor living or decking product supplier. It's obviously a very well-known branded product carried throughout the country. So between it and MoistureShield, we now have -- we've expanded the branded assortment within our portfolio that's viewed as a top-tier brand.

So it fits squarely within our Specialty mix shift strategy, if you will, in terms of growing one of our key 5 Specialty product categories.

Your next question comes from the line of Reuben Garner with The Benchmark Company.

I was wondering if you could kind of discuss what favorable changes kind of happened in the gross margin profile since your guide, I guess it was middle of February on the Specialty side, I think you were looking for 17% to 18% margins.

The month of March, you probably would have had to deal with some transportation, diesel-related inflationary pressures and yet you were able to come in above that range. Can you talk about what the positive factors were? And was there any price cost or incremental price cost pressure in that March period that you were able to overcome with other factors?

Yes. It's Kelly. I think first, I'll talk about Structural because that was the biggest driver of our margin improvement in the quarter. So on the Structural side, we finished the quarter at a 10.9% margin.

That's up 160 basis points from last year. And we've benefited significantly through the quarter with a rising commodity pricing environment for both lumber and panels, mostly on the lumber side. But if you go back to the end of Q4, that increase in commodity pricing really has continued into the end of April and it's kind of flattened out a bit and come back some here in the last week or so.

But in a rising commodity pricing environment, we're able to expand margins just by virtue of the fact of market pricing being higher than the inventory levels that we're carrying. So that was a large driver of the margin improvement on the Structural side, which we weren't anticipating that prolonged kind of consistent increase in the commodity pricing that we experienced.

On the Specialty side, it's continued efforts really to serve our customers and price in the value-added services that we've been providing really across all categories. We had price increases quarter-to-quarter in all categories except for one.

And the one that we didn't see price increases, it was less than a 1% decline. So again, we're very focused on continuing to not only match products that our customers need, but also services that we're able to provide that allow us to drive margin, combined with just an increased focus on making sure that we're pricing effectively given the availability of products in the market.

Yes. And just to add to that, obviously, we're very pleased with the Disdero acquisition, which supports our Specialty mix shift strategy. As you may recall, it's 100% Specialty wood distributor that services high-end homes across the country.

So we've been able to leverage Disdero's strengths to, again, support our Specialty mix shift and provide not only from our earlier remarks, strong EBITDA contribution, but meaningful net sales at stable margins despite softness in the market -- stable higher margins despite softness in the market.

At the same time, pricing has stabilized and within our ranges, we've done a good job kind of managing those margins. But all of that said, in my remarks, I made it clear that we continue to face margin pressure within Specialty products, slightly due to competitive pricing in certain categories. But again, given our value-add services and our go-to-market strategy, we are mitigating against those risks.

And to add to the Structural commentary that Kelly shared, in addition to taking advantage of lower cost in a rising price environment in a relatively short period of time, we also -- and I say this every quarter, we have a very strong competitive inventory management system that's institutionalized here that allows us access to wood with -- from a favorable cost perspective when you've got macro level constraints that might make it difficult for others to get competitively priced wood.

So at the end of the day, that gives us a chance to, in some cases, enhance -- have -- sell wood at higher margins. So all of that comes together to give us a good margin profile that smooths out the performance over the course of the quarter.

You mentioned that pricing was stabilizing, but you still have a competitive environment in some categories. Can you talk about which specific product categories within Specialty are kind of more stable now than they were, say, in January, February and then which ones are still seeing kind of sequential competitive pressures?

Yes. I mean, look, EWP continues to be competitive. Fortunately, it has an inherent higher margin profile. But it's very competitive out there in terms of winning projects and so on.

We're making it up with good volume with key strategic customers, while at the same time, managing through the pricing competitiveness given our value-add services. So we're -- there's a little bit of -- even though pricing has stabilized and in some categories is up, in others, it's a little bit down, but we're managing through the price declines with more than adequate or sufficient volume increases tied to our value-add services to help us gain share.

So we're not giving -- we're able to manage through the competitive environment very successfully given the channel focus. But that's one. Siding continues to be pressured as well, especially on the fiber cement side.

And in some cases, as we drive multifamily growth, I've said quarter-over-quarter that multifamily tends to have a lower margin profile, especially as it relates to a chunk of it being direct business. But we still continue to believe that by operating at scale to solve for total housing starts as opposed to just single housing starts is really important to the long-term growth thesis for this company, primarily because affordability and other factors are making multifamily a really good solve for housing, at least over the next few years.

Okay. Last one for me. A little tricky to look at history over the last decade, a lot of moving parts, but I want to say that the first quarter is usually the low watermark for the year for revenue and margins. Is there any reason why this year that wouldn't hold true?

I mean, I know you can't predict the demand environment in the second half. But if there isn't a turn for the worst in the housing market, would that hold true this year? Or are there other factors at play?

Yes. That typically is what you'd see. I'd say one thing that's different at the start of this year is the performance from a margin perspective for Structural, I think is a big driver that could cause it maybe look a little different this year than it has in the past.

Our comments on the call, we said that we do expect the remaining 3 quarters to continue to be pressured by what is a weaker end market than what we had anticipated at our prior call.

But as we think about the rest of the year, typically, we would see higher earnings in Q3 and Q4 and then lower again -- sorry, in Q2 and Q3 and then lower again in Q4. So again, yes, Q1 is probably a bit higher than what we normally expect. But as we go through the course of this year, I expect it to return back to a more typical pattern.

Yes, I would agree with that. I mean, even if you look at Q1 selling activity and listings and the fact that despite there being a demand for housing, inventory levels continue to rise with very tepid buying activity.

So on the existing sales front, that's problematic. Obviously, you see the numbers when it comes to single-family housing starts, permits and multifamily. We're outperforming the market on multifamily. But as I said earlier, there's -- that profile is very different than the other and we had a low base to start from to begin with, although we're pleased with the performance.

But overall, the seasonal patterns hold true. I think they will continue to hold true given the way housing works in the country as it relates to school, when your kids are in school and summer vacations and so on, I don't think that changes. I do believe, based on what we're seeing not necessarily just from a macro perspective, the indicators heading into this summer selling or spring/summer selling season this year don't seem to be any different than they were last year.

So I continue to believe that we will have -- I don't think the conditions will abate over the course of the year. I think the earliest would be in '27, number one.

And number two, there's nothing that suggests that what we saw in Q1 is that anyone should extrapolate from it per se. It is pure consistent execution of our strategy. We are very disciplined around the cadence and the actions and the activities underway at BlueLinx in order to execute on this channel and product strategy to grow volumes at solid margin levels and continue to support our customers where they need to be given current market conditions.

That's what's leading to our performance, but the soft market conditions won't go away.

Last one. I'm going to sneak one more in. Are there any categories within Specialty where you're seeing price increases from the manufacturers that are sticking to you guys for whatever reason, but are difficult to pass on to your customers?

Yes. So I would -- we've been hit with more than supplier increases for more than 40 vendors, right? I mean, there are just -- and then there'll be multiple price increases that come through that we got to push through.

From a 2-step distribution standpoint, supplier increases are typically accepted. It's just there are notification periods and there are -- suppliers will give us notice, give us time to give our customers notice. And then, of course, the supplier cost and the price increases are pushed through.

And in many cases, they're announced to the market, right, on the part of our suppliers. So it's twofold from a communication standpoint. Depending on the customers and arrangements you may have in place, it may take more time to pass those price increases through.

But generally speaking, that can also be done in collaboration with your suppliers to minimize the impact to the business from a 2-step standpoint from a BXC -- BlueLinx perspective.

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

Congrats on the strong quarter, guys. Just wanted to go back to the TruExterior announcement and sort of a 2-parter here. First, is there any way for us to maybe size what the contributions from that expansion might look like as you get product on the ground and think about start selling that through over the next, call it, several quarters?

And then secondly, with that move, are there any kind of associated changes to existing siding kind of vendor relationships? And is this a situation where you're displacing someone else or sort of expanding into new markets for Westlake?

Yes. So first of all, at this point, all I can say is a couple of things I'm really excited about and want to recognize the team for. It's not too often that you can work with a key vendor to roll out 12 markets all at once, especially covering the number of MSAs in the top 50 that we're hitting.

That reflects a strong degree of confidence on the part of our vendor vis-a-vis us with Royal Westlake and in particular, its confidence in our channel growth strategy, which is helping drive this product strategy. So I just want to point that out with respect to our respective teams.

In terms of the go-to-market, we're -- this is a brand new rollout of a brand new product across multiple markets. So I don't have -- I can't give you any indication of how that's going to roll out through the year. What I can tell you is we have been very focused on proving, demonstrating our value proposition as it relates to rolling out new product lines in multiple markets in a very consistent, successful manner so that we can help our suppliers grow at scale like we want to grow at scale.

In other words, we want to be their best partner to commercialize their product lines. And I think the best way to do that is to go bigger faster.

So in support of that, we did a big load-in of product across multiple markets very quickly, which I would posit is highly unusual for 2-step distribution, but also consistent with the value proposition and competitive spirit we have, quite frankly. So over the coming months, our plan is to accelerate the sales activity of those product lines with the inventory we put on the ground in multiple markets in a very, very short time line.

As it relates to other -- how we view that product line vis-a-vis other siding categories, we view them as complementary. At the end of the day, siding is an incredibly -- Siding, Trim, et cetera, those -- that product line is a strategic growth category for us.

We think it's an important saw for both multifamily and single-family across multiple channels, whether they be home centers, pro dealers, independent dealers, lumber yards, co-ops, et cetera.

And so from that perspective, the wider Specialty product assortment we have to serve local market and regional market conditions while also supporting the bigger -- biggest customers at scale is what's ultimately going to be important to us. So we have no conflict.

We are selling multiple lines with multiple vendors and are pleased with the bundling opportunities and value proposition we can provide our customers, especially the ones that we have some dedicated focused efforts on with respect to scale. So it's an exciting launch for us.

Got it. Okay. I appreciate that color. And then just looking at the outlook on daily sales volumes being a little bit lower in Q2. I guess, first, does that include Disdero? And then second, maybe just bigger picture, I mean, have you seen any meaningful change in terms of kind of customer order patterns as you work through April? Or anything maybe surprising relative to what you would expect from normal seasonality?

Yes, Kurt. So as it relates to volumes, our view on volumes being slightly lower than last year, that does include the impact of Disdero as we think about that. And again, it is driven by just the end market demand as it relates to the building activity that we're expecting to take place this year versus last year, which continues to be down.

And kind of the general views on that has worsened, right, through the course of the last several weeks. So that's informing our view there. What was the second part of your question?

Just on Disdero, that kind of daily sales volume would include the acquisition?

It does. It does include the acquisition.

Okay. Perfect. And then just on competitive dynamics. I think it makes sense that those are intense. I'm just curious if that's maybe accelerating or intensifying, however you want to characteristic relative to what you saw late last year because the back half of '25 was very challenging.

I think a lot of channel partners kind of ran inventories into the ground at year-end. Seems like Q1 wasn't too bad. So I'm just trying to figure out if this is kind of a continuation of soft market, more people fighting over fewer orders? Or if maybe something has changed in the last couple of months?

I think it's a continuation of what we saw last year. And given activity, end market activity leading into the selling season this year, just queuing off -- teeing off the February, March numbers, not our numbers, but macro numbers, I don't expect anything different, which means depending on the market, it will be highly competitive, right?

So it's -- we call it -- we think of it as degrees of competitive activity. So you might have a market where industrials is not as competitive as another market because of what we coin knife fights that might be happening in that secondary or tertiary market.

In other areas of the country like the East, the weather was -- had a meaningful impact on business in the East because January and February were rough from a year-over-year weather perspective. But generally speaking, the East has solid housing-related activity, especially on the pro contractor R&R side.

So -- but then there are other states that are tough, right, just given what was done during the pandemic and coming off those pandemic highs that were years ago, Texas and Florida, for example. And so in those markets, we're seeing stabilization and opportunities for growth, but that doesn't -- that we're taking advantage of given our customer and channel -- our channel and product focus.

Again, it's very targeted to take advantage to really sell our value-add services and other value propositions, if you will, in order to take more share of whatever pie exists, but that does not mean that it is not competitive out there. We use our competitive value proposition to mitigate the adverse impacts of the highly competitive environment.

And as our results demonstrate, we feel like we're doing that fairly in a solid manner. And then, of course, Disdero has done a really good job of helping shift our Specialty mix and drive some good EBITDA contribution on top of solid margins, higher than what we would normally have margins on the Specialty side because it's a very good product line.

Right. Okay. That's helpful. And then just lastly on capital allocation, maybe less relevant today given some of the excess kind of cash has worked down a little bit. But how are you thinking about share repurchases relative to inorganic growth opportunities out there?

I guess, particularly given kind of where the stock is traded, what seems like some traction on some of the strategic initiatives. Has that relative attractiveness maybe changed versus the hopes of generating some more inorganic growth?

Yes, Kurt, I think we continue to take the same approach to capital allocation, right? We're committed to investing in the various initiatives that are delivering some of the results that you saw this quarter.

And then outside of that, M&A continues to be a focus of ours, right? We're going to remain disciplined as it relates to valuation. We're going to remain disciplined as it relates to what assets we're going to pursue, again, with the M&A strategy intended to grow our geographic presence in markets that we're not currently in as well as continue to drive growth in our Specialty products similar to what we did with Disdero on that side.

So what I'd say is that similar to what we mentioned on the last call, we are expecting free cash flow to be consistent with, if not a little bit lower than last year, and that still remains the same even with the strong quarter that we had in Q1. And then if we don't have opportunities to invest that cash in areas that drive the business growth and earnings going forward, then we'd look to buy back shares similar to what we did in the prior quarter.

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

Thanks, Bella. Thank you again for joining us today, and we look forward to speaking with you in August as we share our second quarter 2026 results.

Ladies and gentlemen, that does conclude today's call. Thank you all for joining, and you may now disconnect. Everyone, have a great day.

Ladies and gentlemen, thank you for standing by, and welcome to the BlueLinx Holdings' Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] 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 Fourth Quarter and Full Year 2025 Earnings Call. Joining me on today's call is Shyam Reddy, our Chief Executive Officer; and Kelly Wall, our Chief Financial Officer and Treasurer. At the end of today's prepared remarks, we will take questions.

Our fourth quarter and full year news release and Form 10-K were issued yesterday after the close of the market along with our webcast presentation, and these items are available in the Investors section of our website, bluelinxco.com. We encourage you to follow along with the detailed information on the slides during our webcast.

Today's discussion contains forward-looking statements. Actual results may differ significantly from those forward-looking statements due to various risks and uncertainties, including the risks described in our most recent SEC filings. Today's presentation includes certain non-GAAP and adjusted financial measures that we believe provide helpful context for investors evaluating our business. Reconciliations to the closest GAAP financial measure can be found in the appendix of our presentation.

Now I'll turn it over to Shyam.

Thanks, Tom, and good morning, everyone. 2025 embodied grit and determination. Our fourth quarter and full year results demonstrated our ability to grow the business in the face of another year of challenging market headwinds and competitive pricing conditions. Our relentless focus on the company's profitable sales growth strategy, targeting both single and multifamily end markets with differently disruptive product and service expansion initiatives led to flat net sales and higher volumes at solid margins in 2025 when compared to 2024.

Our strategy is working as it enabled us to successfully navigate a market that saw 2025 single-family housing starts down 7% year-over-year. In essence, our disciplined execution of the strategy led to share gains across multiple product lines and customer channels. In terms of M&A, our acquisition of Disdero Lumber Company is going well and performing as expected, which I will speak to in a moment.

I'd like to offer a few highlights from 2025. We delivered solid full year results, thanks to the team's commitment to our product and channel strategies and our business excellence initiatives. As a result, we competed effectively in challenging end markets to win business and achieve solid gross margins of 18% in specialty products and 9.2% in structural products for the year. Our operating cash flow highlights the effectiveness of our disciplined approach to managing inventory in a challenging market environment. Our results reflect the effective commercial and inventory management capabilities we have as demonstrated by our successful efforts to address the inventory build ahead of a normal spring-summer selling season that never emerged. As market conditions improve, those capabilities are expected to translate into materially stronger cash flow.

Our fourth quarter results were also solid for the same reasons, but we did have an extra week in the quarter that increased top line volumes and SG&A. Revenues rose slightly year-over-year, driven by higher volumes and the addition of Disdero specialty product sales in our financial results, which helped offset continued pricing pressure in structural products that lasted through the end of the year. Specialty and structural gross margins were 18.1% and 10%, respectively, reflecting the strength of our customer value proposition and effective inventory management.

Our product strategy remains designed to grow our 5 key higher-margin specialty product categories, engineered wood [indiscernible] mill work, industrial and outdoor living products, though our efforts are now more deliberately aligned with the channel growth strategy to yield greater success. Despite market softness and multifamily sales that generate incremental structural product sales, the specialty products growth strategy led to approximately 70% in net sales and over 80% of gross profit for both the fourth quarter and full year 2025. While our product mix shift objectives remain on track, we are emphasizing strategic channel growth when assessing new product launches and managing working capital, which we believe gives us a competitive advantage. We continue to grow our multifamily channel, fine-tune our builder pull-through efforts with key customers and expand our national accounts business to more effectively drive sales across key product categories.

Our focus on strategic value-added services that align with specific customer needs is also differentiating us in the market, thereby enabling us to gain share and grow in challenging market conditions. We expect the multifamily end market to deliver strong long-term growth as multifamily housing stock is more affordable, which is why we remain committed to investing time, energy and resources into this channel to augment our institutional sales efforts that ultimately support single-family housing starts and repair and remodel activity.

Recent year-over-year housing data has reinforced the strategic merits of investing in our multifamily channel, which grew volumes 19% for BlueLinx in 2025. From a strategic perspective, it along with our builder pull-through efforts provided effective pathways for converting customers to key brands, including onCENTER EWP and Allura fiber cement siding and GP Gypsum products. Naturally, this makes us an even more valuable growth partner to our suppliers, providing opportunities for geographic and product expansion with key partners. On the other hand, multifamily sales have longer inventory cycles and lower gross margins due to direct sales and a competitive pricing environment.

From a vision and long-term competitive perspective, we made significant progress in 2025 on our digital transformation journey to become the provider of choice for both suppliers and customers. These transformational investments are designed to rapidly grow our business at scale with both customers and suppliers by providing an exceptional experience that is highly efficient and effective. These investments will also enable us to drive operational excellence via productivity and efficiency improvements that enhance our gross margins and our EBITDA margins.

Phase 1 was completed in a timely manner and under budget. It included enhancements to our master data management platform and a new Oracle transportation management system. Although we successfully launched e-commerce pilots, we decided to place greater emphasis going forward on assisting several of our largest customers with optimizing their more advanced digital marketing platforms thereby aligning our e-commerce strategy with our channel growth strategy. We currently view AI and current technological advancements as being the broad-based e-commerce solution going forward rather than traditional e-commerce platforms, though our thinking may change as the fast-paced tech environment evolves.

As we mentioned last quarter, we're especially excited about advancing our AI initiatives that enable productivity improvements and align with our sales growth strategy and that support our business excellence initiatives. What began as a pilot with a small group in the company has expanded to give most salaried associates the ability to build agentic agents to streamline their work. We've also launched AI agents that help with modeling and data analytics, just to name a couple. We're even developing AI applications that support our core business such as value-add services, inventory management, commercial initiatives and training. We expect subsequent digital investment phases to further strengthen our commercial, operational and functional capabilities. Modernizing the business with new technology will set us apart from the competition and accelerate profitable sales growth and operational excellence.

From an M&A perspective, we are pleased with the progress we've made with the purchase of Disdero, a long-time Portland-based specialty distributor or premium, high-margin specialty wood products used in custom homes, decks and upscale multifamily projects. This acquisition advances our key strategies, increasing our specialty product sales, growing multifamily sales and strengthening our Western U.S. presence. We believe Disdero will be able to grow faster than it otherwise could by leveraging our national distribution network and strong customer relationships. Although it's early, we are pleased with Disdero's results and the execution of our integration plan.

Our financial position remains strong, with liquidity of $726 million at the end of the year, including $386 million of cash and cash equivalents. This financial strength gives us the flexibility to reinvest in business initiatives that allow us to increase sales, improve productivity, expand our geographic reach and provide better service to our customers and suppliers, all while providing us with the foundation to continue weathering soft market conditions. We were also able to opportunistically return capital to shareholders by completing $38 million in share repurchases in 2025.

Now for a few more highlights on our full year results. We generated 2025 net sales of $3 billion and $83 million in adjusted EBITDA for a 2.8% adjusted EBITDA margin. Adjusted net income was $7.8 million or $0.97 per diluted share. We were less profitable in 2025 compared to 2024 due to challenging market conditions and the SG&A impact of investments made to drive our commercial and digital transformation strategies. However, we are pleased that our strategic sales and product expansion efforts led to flat sales and higher volumes at solid margins. Specifically, we experienced 19% volume growth in multifamily and 17% volume growth with some of our national accounts.

Our builder pull-through programs executed in partnership with strategic customers led to key channel and specialty product growth. Our differentiated value proposition led to geographic and product expansion with key suppliers with meaningful year-over-year growth across multiple product lines that align with our channel growth strategy. For example, our EWP sales were roughly flat and our EWP volumes grew by more than 7% on a year-over-year basis despite significant headwinds affecting housing starts. We also delivered solid gross margin performance despite difficult market conditions and a competitive pricing environment with specialty products at 18% and structural products at 9.2%.

Our relentless focus on the product and channel strategy fueled by our operational and business excellence initiatives such as effective pricing, strong value-add services, exceptional customer service, product expansion gains and disciplined inventory management helped drive these results. Though the year demanded our associates remain focused on a profitable sales growth strategy, customer service and supplier expansion efforts, we did not lose sight of other important strategic levers to drive financial performance and shore up our financial position. For example, we purchased Disdero, refinanced our ABL and executed on certain cost-out and capital improvement initiatives.

Now let's turn to our perspective on the broader housing and building products market. The housing market remains soft, pressuring the building materials and distribution sector. Affordability challenges, low housing turnover and other factors continue to weigh on both housing and repair and remodel activity. We continue to view these pressures as temporary, especially given the persistent housing shortage and potential government policies that could unlock the housing recovery. Long-term fundamentals remain strong for both new construction and repair and remodel work for the foreseeable future, providing a durable value proposition for BlueLinx shareholders.

Despite lower housing starts and tepid repair and remodel activity in 2025, our product and channel strategies drove share gains supported by product expansion, builder pull-through and value-add service initiatives, multifamily efforts and national accounts attention. Our focus on the company's largest accounts enabled growth despite low housing turnover and high interest rates. We believe that today's strategy and investments will accelerate momentum across all customer segments when the market improves.

Regardless of the near-term market backdrop, we will continue executing our profitable sales growth strategy to gain share at scale today, while continuing to make key investments in the business that will position us well for long-term sustainable, profitable growth. Lastly, we are also monitoring the various proposals that the administration is exploring to help boost the housing market. While details are still being ironed out, we are optimistic that these proposals could start the housing recovery.

In summary, we delivered on our strategic priorities in 2025 as demonstrated by our specialty product expansion results, multifamily channel growth, key national accounts growth, margin performance, digital transformation, the Disdero purchase and our capital allocation initiatives. As a result, we delivered solid results for both the fourth quarter and full year 2025. We believe in our strategy, and we'll continue to execute on it through the current cycle, which will position us for better-than-market growth when the housing recovery begins.

I'd like to wrap up by thanking all of our associates for their grit, resilience and dedication during a difficult housing market. Your commitment to our customers, suppliers and each other continues to drive more profitable specialty and structural product growth across our customer channels in challenging times while positioning us for long-term success.

Now I'll turn it over to Kelly, 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. Before we get started, I would like to remind everyone that the fourth quarter of 2025 had 14 weeks versus our usual 13 weeks. As a result, our fiscal year also had 53 weeks versus the typical 52 weeks. Overall, both specialty products and structural products delivered solid volumes and gross margins within a challenging macro environment.

Net sales for the fourth quarter of 2025 were $716 million, up slightly year-over-year. Total gross profit was $113 million, and gross margin was 15.7%, down slightly from 15.9% in the prior year period. SG&A was $102 million, up $10 million from last year's fourth quarter. This increase was mainly due to higher personnel expense, the addition of Disdero, the extra week in the fourth quarter and increased sales and logistics expenses driven by our strategic channel growth, including multifamily. Given the difficult demand environment, we remain focused on rigorous expense management and on identifying opportunities to further improve operational efficiency.

Net loss for the quarter was $8.6 million or $1.08 per share, primarily due to higher net interest expense, higher depreciation and amortization and M&A-related expenses. Adjusted net loss was $3.7 million or $0.47 per share, and we had an income tax benefit of 28% of the pretax loss. Adjusted EBITDA for the quarter was $13.9 million.

Turning now to fourth quarter results for specialty products. Net sales for specialty products were $505 million in the fourth quarter, up over 4% year-over-year. This increase was driven by higher volumes in nearly all product categories and modest price increases in millwork and siding as well as the addition of Disdero, partially offset by volume declines in millwork. Gross profit for specialty products sales was $92 million, up 3% year-over-year. Specialty gross margin was 18.1%, down slightly from last year's 18.4%, primarily due to price deflation in certain product categories partially offset by the acquisition of the higher-margin Disdero business. Sequentially, Specialty gross margin increased 150 basis points from Q3 of 2025.

Based on the first 7 weeks of Q1, we expect specialty product gross margin to be in the range of 17% to 18% with daily sales volumes lower than the fourth quarter of 2025 and higher than the first quarter of 2025, which was heavily impacted by severe weather.

Now moving on to structural products. Net sales were $211 million for structural products in the fourth quarter, down 7% compared to the prior year period. This decrease was primarily due to lower pricing for both lumber and panels when compared to last year, offsetting the higher volumes we drove in those categories during the quarter. Gross profit for structural products was $21 million, a decrease of 14% year-over-year and structural gross margin was 10%, down from 10.8% in the same period last year.

In the fourth quarter of 2025, average lumber prices were about $378 per 1,000 board feet and panel prices were about $438 per 1,000 square feet, a 12% decrease and a 20% decrease, respectively, compared to the average in the fourth quarter of last year. Sequentially, structural gross margin increased 70 basis points from Q3. And comparing the fourth quarter of 2025 with the third quarter of 2025, lumber prices were down nearly 8% sequentially, and panel prices were down about 1%.

Based on the first 7 weeks of the current first quarter, we expect Q1 gross margin for structural products to be in the range of 9% to 10%, with daily sales volumes down versus the fourth quarter of 2025 and up compared to the first quarter of 2025, once again, due to the severe weather experienced last year.

For the full year, net sales were $3 billion in 2025, flat compared to 2024, largely due to volume growth in several categories and the Disdero acquisition, offset by lower price deflation in both specialty and structural products. Specialty sales were up slightly in 2025 due to higher volumes and the Disdero acquisition, partially offset by price deflation in several categories such as EWP and millwork. Structural product sales were down slightly as similar to specialty, higher volumes were offset by price deflation.

Total gross profit was $452 million for the full year, and gross margin was 15.3%, 130 basis points lower than the prior year period. SG&A in 2025 was $381 million, up 4% versus the prior year period due to the acquisition of Disdero, the extra week in fiscal 2025, increased sales and logistics expenses driven by our strategic channel growth as well as investments we've made in head count and technology to drive our strategy and long-term earnings growth initiatives. For 2026, we expect our SG&A expense to increase slightly as a percentage of sales due to the addition of Disdero and increase in strategic sales head count and additional material handlers to deliver on expected volume growth and overall inflation in wages and other expenses, such as fuel and health care costs.

Net income was $219,000 for the full year and diluted EPS and was $0.02 per share. Adjusted net income was $7.8 million and adjusted diluted EPS was $0.97 per share. The full year tax rate was not meaningful given the level of our pretax income and for the full year 2026, we anticipate our tax rate to be approximately 25% of pretax net earnings before $3 million to $4 million of permanent nondeductible items impacting the tax rate. And for the full year, adjusted EBITDA was $83 million.

Turning now to our balance sheet. Our liquidity remains very strong. At the end of the quarter, cash and cash equivalents were $386 million, a decrease of $44 million from Q3, largely due to the Disdero acquisition, which, as a reminder, was purchased with cash. When considering our cash on hand and undrawn revolver capacity of $340 million, available liquidity was approximately $726 million at the end of the quarter.

Total debt, excluding our real property financing leases, was $381 million and net debt was a negative $5 million. Our net leverage ratio was a negative 0.1x adjusted EBITDA, given our positive net cash position, and we have no material outstanding debt maturities until 2029. Additionally, given the strength of our balance sheet and continued strong liquidity, we remain well positioned to support our strategic initiatives. These strategic initiatives include: continued growth with our largest customers and in the multifamily channel with this focus also benefiting our smaller customers. Demand pull-through efforts to drive strategic product sales that benefit our customers, continued specialty product expansion with key suppliers our digital transformation efforts and other organic and inorganic growth initiatives.

Now moving on to working capital and free cash flow. During the fourth quarter, we generated operating cash flow of $62 million and free cash flow of $56 million, primarily due to effective working capital management particularly as it relates to driving our inventory levels lower to be in line with the current demand environment, partially offset by the cash impact of lower earnings in the quarter. For the full year 2025, we generated operating cash flow of $60 million and free cash flow of $33 million.

Turning now to capital allocation. During the quarter, we incurred $5.4 million of CapEx, primarily related to our digital investments, normal replacement of aging components within our fleet and the typical maintenance and investment in our branches. For 2026, we plan to manage our CapEx in a manner that reflects current market conditions and allows us to maintain a strong balance sheet. Our remaining capital investments will focus on facility improvements, further replacement of trucks and trailers and the technology improvements previously discussed.

Also, we did not repurchase any shares during the fourth quarter. For the full year 2025, we repurchased shares totaling $38 million. At year-end, we had $58.7 million remaining under our previous share repurchase authorization.

Our guiding principles for capital allocation remain consistent with prior quarters. 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 inorganic growth strategy as demonstrated by our acquisition of Disdero and opportunistically return capital to shareholders through share repurchases. We also plan to maintain a long-term net leverage ratio of 2x or less.

Overall, we are pleased with our solid fourth quarter and full year 2025 results. particularly in light of current market conditions. Operator, we will now take questions.

[Operator Instructions] Our first question comes from Jeffrey Stevenson from Loop Capital Markets.

First up, Specialty Products gross margin reported a nice sequential improvement during the fourth quarter and the return to your previously discussed normalized 18% to 19% range. And I wondered if you could provide more color on what were the primary drivers of the sequential improvement you saw in segment margins during the quarter.

Yes. Jeff, it's Kelly. So I think part of the improvement, if you recall, when we talked last quarter, we had some onetime rebate related true-ups with 1 of our vendors, and that represented about half of the increase as [indiscernible] normalizing for what we'd expect in a typical quarter. And I guess the rest here is just continuing to maintain discipline, right, as we continue to price into what continues to be a challenging market.

And what I would say is that as we move into 2026, right, kind of similar to the trend that we've seen in the back half of 2025 with kind of a mobilization or flattening, if you will, of the decline that we had seen over the last 2 or 3 years in that specialty product margin, we're expecting in 2026 to be relatively flat to the margins that we experienced in the fourth quarter.

Yes. And just to add, Jeff, obviously, with soft market conditions, it's a competitive pricing environment. But given how -- given our go-to-market strategy with respect to product and channel, we're really leveraging our value-add services on top of key investments we've made to support those channels to really maintain our pricing at acceptable levels that corresponds to the value we're providing, whether it be on project management, [ takeoff ] services and certain CapEx investments we're making to drive various product-related value-add services and so on.

So we're really proud of what we've been able to do over the last year in an incredibly challenging housing environment with respect to not only volume growth but maintaining those margins you were asking about.

No, that's great color. I appreciate all the detail. And maybe kind of following up on specialty product pricing, in addition to some of the initiatives you've done internally. We've heard from one of your competitors that EWP price has largely stabilized. And we're likely at the bottom as far as sequential declines go unless the builders spring selling season comes in worse than anticipated. And I wondered if you would agree with that from what you're seeing in your business? And maybe you could talk about a broader pricing outlook in the segment as we move into the first half of '26.

Yes. I would say based on our conversations, well, between looking at macro level data and conversations with customers, suppliers, and other stakeholders, we absolutely agree with that. We do think it has stabilized. But coming back to our value proposition in the market, there are various creative programs that we have developed on top of channel focus with multifamily, for example, that puts us in a more competitive position as it relates to driving, for example, EWP volumes while maintaining solid margins and being above the fray when it comes to an incredibly competitive pricing environment due to market conditions. But to your question, yes, we agree with that statement.

Got it. Got it. Understood. And then lastly, just appreciate the update on kind of where things stand with your technology investments. And I wondered if you could provide additional thoughts on why you pivoted away from an internal e-commerce platform now that there's more AI opportunities. And then moving forward, you talked about a larger Phase 2 with things like warehouse management system. Is that still in the cards over the coming years, Shyam?

Yes. So to take your first question on e-commerce, I'm sure it's -- I'm sure you're in the same boat as us where you can't pick up a paper every day or listen to something on the news, where AI is rapidly changing the tech environment. So for example, it's not out of the realm of possibility that people will be able to execute on e-commerce orders via ChatGPT or Claude or Perplexity or one of these other AI platforms or execute off [indiscernible] which is all the big range over the last couple of weeks. You've got vibe coding that's taking place as well where people can very quickly spin up new applications in order to drive sales internally as opposed to relying on third-party platforms.

All of that is to say that I think it would be [indiscernible] to spend millions of dollars investing in an e-commerce platform that's based on traditional motions that could be obsolete before we even got through Phase 1 of it. So the idea is to take a step back and invest on the digital e-commerce side in a way that aligns with our channel strategy and where we're driving sales. So with our biggest accounts, being more aligned with them to drive accelerated sales off and off their platforms and to really accelerate growth from a digital commerce standpoint that way while continuing to evaluate the landscape and figure out ways to jump in as quickly as possible as the tech landscape changes.

As it relates to WMS, we absolutely believe in WMS. In fact, we have executed on a very successful pilot that has shown promising results. And so the idea would be to invest in a very responsible way over the coming 12 to 24 months in other facilities beyond what we already have. So we have [ bin ] locations and a variety of other things that support operational excellence and a $3 billion top line distribution business. We have that. The idea is to take it to the next level and the recent pilot show that it makes great sense to do so. So that is the plan over the next 12 to 24 months to make those targeted investments where it makes the most sense. The good thing is we're now further along in what that solution looks like than we were, call it, 2 years ago.

Our next question comes from [ John McLean ] from the Benchmark Company.

This is John on for Ruben. Congratulations on the quarter. So I just wanted to ask kind of 2.5 questions here. First one, just curious with kind of how the market landscape has been over the past few quarters and how it looks like it's going to head into this year. Could you maybe give us some additional color on how your customer conversations have shifted? Maybe they're viewing the value of your services differently in the way that they're operating day to day?

Sure, John. Yes, I'd be happy to do that. So as I think about the market landscape over the last few quarters, it's not lost on me that beyond just housing starts, whether it be whether it be total housing starts or even single-family housing starts that beyond that, if you look at housing expenditures as a percent of overall GDP and where that sits, there's been quarter -- sequential quarterly declines over the last year. And then if you look at housing burden, the cost of housing burden over the last 4 quarters, that has continued to go up. And then if you look at personal consumption expenditures, those are also -- as it relates to repair remodel and some other key indicators with housing, those are also very much down.

So all of that is to say besides what everybody talks about, there are additional macro force -- macro statistics that suggests an incredibly weak housing market. All of that said, the fact is we have grown share, and we have maintained top line year-over-year at solid margins because of our -- of the investments we've made to drive value-add services, whether that be on the multifamily side with channel focus as it relates to multifamily and certain key customers, we're able to drive greater conversions into our product lines, namely with EWP, for example, or on the siding front. With multifamily, we've converted one of the more popular -- another competitive supplier out there that we don't carry into [ GP Dense ] products.

So the fact is that we have taken our strategy and we've gone out to the marketplace with our customer base and our supplier base to show them that even in soft market conditions, we can actually grow their business. And we have done that, and we have proven it. And as a result, our customers and our suppliers are absolutely seeing the value of 2-step distribution as it relates to BlueLinx and what we can do to help them grow their business.

So on the customer front, it's helping them help their customers grow their business, especially in these tough times. And then for our suppliers, it's really a commercialization play. Like we are absolutely helping them commercialize their product, not only with traditional customers but also via the multifamily channel and growing their business at a time when they may not have thought it was -- or it was going to be more difficult. So that value-add opportunity that we provide those two constituent groups is very strong for us as our results have demonstrated in 2025.

And I would add 1 additional thing to that, which is if you look at the fourth quarter in particular, a number of our customers, if not all of our customers, we're very focused on managing inventory levels as tight as they could. And in that environment, that's good for 2 step, right? Because we sit here ready to kind of fill their orders, right, that they may not able to fill efficiently out of the inventory stock that they're currently carrying.

I mean, part of the margin increase that we saw on the structural side in the fourth quarter was due to that, right? We had a flat -- kind of relatively flat pricing market in terms of input costs. But with our customers at lower inventory levels, they were utilizing 2-step more than they did last year, and that's where we saw our volumes increase. We saw a similar thing across key specialty product categories as well.

Yes. And just to add on that. So absolutely and sort of whether it's a destocking or whether it's tough market conditions, 2-step can benefit just by buying -- we'll put aside just in soft market conditions. We -- customers will buy less, more often, right? That's 1 of the opportunities for 2-step distribution.

I would say, though, that if you look at us relative to what may take place at at other companies, our ability to meet that less more often desire on the part of customers while maintaining optimal inventory levels through our own working capital management capabilities, which I continue to feel are second to none, I think it's a pretty noteworthy competitive advantage we have because we were able to meet our customers' expectations, manage our inventory levels accordingly, end the year with a strong cash balance, especially compared year over year in light of a soft selling year and yet, we maintained good margins, right? We didn't have to -- because we're able to match up or marry up the inventory levels with the customer demand while selling the value-add and other services we provide, we were able to maintain those solid margins, optimal inventory levels that didn't compromise our ability to grow volumes as demonstrated by the results and, of course, maintain pricing at appropriate levels to ensure year-over-year flat sales in an otherwise tough market.

Okay. That's fantastic. I really appreciate the deep dive there. Just -- so one other thing, and I know it's been a focus, and I know last quarter, you guys shared just really kind of the exceptional level of service you've been providing in the multifamily sector. It sounds to me like you really may have shifted there before others decided that was going to be more of a priority this year for the end markets. Obviously, those projects have a longer time line than single family. But I was hoping you might be able to give us a rough estimate on when you kind of expect to see that increased activity, increased interest starting to flow through? We've heard from others that it's more like a late Q3, Q4 event for them.

I'm sorry, you're talking about multifamily? .

Yes.

Yes. So -- yes, yes, yes. So let me -- just to be clear, John, given the affordability crisis and housing, and you look at housing housing as a percentage of GDP and where it's been going over the last couple of years, especially over the last 4 quarters, it's clear that multifamily is going to be in my view, the [indiscernible] to bending the cost curve as it relates to housing pricing, especially given the demand or the need to put people in homes, right, over the next 10 years.

So whether it's good or bad, our strategy is designed to take more and more multifamily share and to grow our multifamily business. So it's kind of all over the map. If you look at the forecasting, it changes from month-to-month and quarter-to-quarter. When people were running away from multifamily, we were going we were running into the fire because we strongly believe that if you build more faster in the -- against the backdrop of the current regulatory environment, you can help bend the cost curve and get more people into homes. And so we have designed our product strategy and our go-to-market strategy from a channel perspective to take advantage of the multifamily housing starts that are out there, number one.

Number two, if you look at kind of the way the financing market works, and the instruments that people typically use in order to finance multifamily housing, the rate environment is favorable as it relates to that from a short-term standpoint, given the the recent rate cuts because their instruments are based on short-term rates by and large. By the way, that's similar with our -- if you look at our -- some aspects of our industrial business and the OEM market -- like manufactured housing, that's also supportive of kind of where you see that rate environment relative to where long-term rates may be.

So the long-winded answer to that question is, I do see multifamily continuing to improve over time, mainly because there's an absolute need for multifamily housing in the context of affordable housing crisis, number one. Number two, between the rate environment and our channel and product strategy, I'm absolutely convinced that we will continue to grow multifamily share over the coming years because we have built capabilities to support that share growth, which came to fruition in 2025 with 19% volume growth year-over-year.

Okay. And so I guess I might have thrown you off a little bit there on the initial question, but maybe if I could pin you down and just try and get an idea of -- like you said, you guys are running into the fire when everyone else was running out. I guess how much of a head start do you think that, that might have given you?

I think it's given us a huge head start because if you look at it -- okay, so 2 things. Number one, in order to grow that channel, it truly does it takes endurance, stamina and investments in key services that you might not otherwise find elsewhere. So for example, we have invested in enhanced capabilities when it comes to takeoff services, which is something that historically 2-step distribution has not had. And we have those capabilities around takeoff services that allow us to respond to basically look at plans and be able to drive our product sales through those multifamily projects. in a way that we couldn't have otherwise done a few years ago, number one.

So that's just one example. The other is project management services and the working capital management associated with supporting multifamily projects where you have to keep -- we've got some -- we got -- we have ways of making the sales, but then managing the inventory through our warehouses with reload services and other working capital management levers that support those multifamily projects in a way that's good for our business. That is not necessarily easy to do overnight, okay? So we've got that, and that supports the project management piece. We've also invested CapEx into specialized equipment that allows us to deliver 2 multifamily job sites, for example, in urban environments at 2 in the morning. right? That was a nuanced approach to our CapEx strategy that aligned with the channel strategy that gave us a head start.

And then last but not least, I would suggest that the personnel investments we've made between what we have at a corporate level, combined with field resources to drive business development in the multifamily channel distinguishes us from maybe others in the space. And those BD resources, those resources out in the field, combined with the scalable capabilities that we're offering from the enterprise-wide basis allows us to bring our customers into the mix and have channel partners, get more closely aligned with those end developers and ultimately provide us a means by which we can convert jobs into our product offerings, whether it be siding, for example, or EWP or GP DE and so on.

So that's -- we have a head start because we have invested CapEx and OpEx to drive it. And then there are these value-add services that others don't necessarily have that are enabling or giving us a competitive advantage, I think. So I do believe we are ahead of the game.

Our next question comes from [ Adi Madan ] from D.A. Davidson.

It's Adi on for Kurt today. And for all the details so far. A lot of my questions have been answered. But a couple of them are around the incremental costs maybe from the AI focus versus the traditional e-commerce platform. What do those like incremental costs even look like? And is there any rough time line you have in mind for rolling it out?

So Adi, I really appreciate the question. But I think if I gave you a time line, it would be obsolete a week from now. So I honestly do not know. I will say that the incremental costs are also unknown. But suffice it to say that they would be in the scheme of things, kind of immaterial relative to traditional costs that would go into a regular e-commerce platform. With AI, as we've all seen, there are virtually 0 barriers to entry for -- at least for now. I mean, who knows what it's going to be when the investments catch up down the road that others are making, not us. So -- as it relates to e-commerce, I don't know, quite frankly. But I do know that the future looks bright.

Just if you look at -- if you just look at some of the recent announcement with some of the big Fortune 50 companies and their partnerships with some of the most prominent AI platforms, I mean, there's a world where people will just go into a ChatGPT or [indiscernible] and directed to buy something off one of their awards accounts, whether it be a Walmart+ or Amazon or something else, and people may never even go to the traditional e-commerce platforms anymore, which is why I don't know what the future looks like.

As it relates to our AI investments that we have made to drive -- which incidentally are aligned with our commercial strategy as well as just productivity improvements or giving our employees what I very affectionately describe as an Ironman suit have really enabled our folks to just be more productive. Do we have any measures on it? Absolutely not. It's too early to know. But as it relates to AI applications, we're -- as I said in my remarks, we've developed AI tools for people to assist with modeling.

So for example, in the traditional way, someone you would normally have to call an associate, one of our -- their teammates in FP&A to help them with the model. Now there's an actual AI application or AI agent they can use to build a model before they even have the conversation with our FP&A team, which is exciting.

From a benefits perspective, we have benefits chatbots that our teammates are able to use in order to answer standard benefits questions or get their arms around something before they might have a call with a benefit specialist. And then, of course, on sales, for instance, you can use our AI agents to help you build sales plans, sales execution plans, especially given the data, the access to data that folks have through access to data that folks have through our BI Intelligence -- or BI platforms via Microsoft.

So all of that is to say there really isn't any incremental cost as it relates to our employees using the AI platforms that are part of our Microsoft suite of products. But as the future continues to develop I don't know what that's going to be. I mean there's clear costs associated with software engineering and building connections into the systems that that we're still trying to figure out. But for now, we're just focused on making sure that our data architecture is well designed to be able to take advantage of that next frontier of technology.

Got it. So it's mainly when like an internal focus, yes, nothing external client facing just yet? .

Well, I wouldn't say -- so there are -- our folks can use the tools to make them better client-facing teammates. As it relates to someone from the outside accessing an AI -- an AI agent, for example, to place an order, that does not exist yet. But it is absolutely -- those are the kinds of things that we are -- that we think about. For example, just to give you an example, let's say someone sends in an e-mail asking for a quote, and we set up a box to take -- an inbox to take those quotes. There is a not-too-distant future state where a fax and e-mail, a message could get routed into an AI agent that takes that information, links with our ERP i.e. Agility and then puts forth a quote, generates a quote that 1 of our sales associates can review and then execute on, right? Whether it's picking up the phone and calling or or using the agents and then respond accordingly at scale so that we can process more faster. Those are absolutely the kinds of ideas that we are exploring but nothing in -- nothing in action yet. Let's just put it that way.

Got it. Yes, that makes sense. And maybe when you're looking at the M&A pipeline right now, how are you thinking about growing the acquisition to fill in the white space on the West Coast, specifically maybe to complement this Disdero buybacks?

Yes. It's absolutely an important piece of our strategy. So as we think about our M&A strategy, it's two-pronged, and that is grow our specialty product mix, which Disdero absolutely did. And secondly, support geographic expansion. Disdero actually accomplished both more so on the front end with respect to specialty specialty distribution. And then as it related to geographic expansion, it just further strengthened our Pacific West Coast presence.

But those are absolutely two prongs. We've got a pipeline potential targets that we're regularly evaluating -- you only use shows like IBS and one-on-ones over the course of the year to continue nurturing those relationships and so that we can be opportunistic when the time comes.

We have no further questions. I would like to turn the call back over to Tom Morabito for closing remarks.

Thanks, Julianne. Thank you again for joining us today, and we look forward to speaking with you in May as we share our first quarter 2026 results.

This concludes today's conference call. Thank you for your participation. You may now disconnect.

Ladies and gentlemen, thank you for standing by, and welcome to the BlueLinx Holdings Third Quarter 2025 Earnings Conference Call. [Operator Instructions] 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 2025 Earnings Call. Joining me on today's call is Shyam Reddy, our Chief Executive Officer; and Kelly Wall, 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 those forward-looking statements due to various risks and uncertainties, including the risks described in our most recent SEC filings.

Today's presentation includes certain non-GAAP and adjusted financial measures that we believe provide helpful context for investors evaluating our business. Reconciliations to the closest GAAP financial measures can be found in the appendix of our presentation.

Now I'll turn it over to Shyam.

Thanks, Tom, and good morning, everyone. Although soft market conditions are pressuring our margins, we are pleased with our overall sales growth efforts, our acquisition of a high-end specialty products distributor and our Portland greenfield expansion. I am especially proud of the team's efforts to grow our EWP volumes by low double digit percentages and our outdoor living product category by low-single digits during a challenging quarter.

On to our Q3 performance. Our third quarter results were highlighted by an increase in sales as we continued to positively execute on our product and channel strategies to grow through challenging market conditions. Net sales and volumes improved for specialty products as overall pricing for this business continued to improve, while our product and channel strategies drove volume gains.

Structural products also saw year-over-year pricing improvements for the overall business, which were offset by slight volume declines this quarter. When you adjust for the duty-related matter that Kelly will discuss later, our specialty product gross margins were relatively good at 17% in a tougher-than-expected quarter.

Importantly, we announced the exciting acquisition of Disdero Lumber Company, a specialty products distributor. Operating since 1953 and based just south of Portland, Oregon, Disdero is a value-added distributor focusing on premium and higher-margin specialty wood products. I will offer some additional details on this transaction in a moment.

We're continuing to create demand for our products through builder pull-through programs and value-add services, along with dedicated efforts focused on national accounts and multifamily opportunities. This strengthens our value proposition for customers and suppliers, helps us deepen our market presence and supports our product and channel expansion strategies. We believe that our strategy, when coupled with our strong balance sheet and liquidity position, provides resilience while positioning us well for better-than-market long-term success.

Market-driven price deflation for specialty products continues to stabilize with pricing flat for the third quarter versus being down high-single digits this time last year. We were able to offset the relatively neutral pricing impact in Q3 with volume growth in engineered wood products and outdoor living products, in particular, as our channel and product strategies continue to generate positive momentum to grow sales and gain share in these product categories despite housing starts being down year-over-year through August.

Our focused efforts are causing large national builders to convert from other well-known EWP brands to our high-quality onCENTER brand, which is a terrific win for our customers as we accelerate our demand creation efforts for their and our benefit. We're also supporting build-to-rent projects with our targeted builder pull-through programmatic efforts, a segment of the housing market that we believe will continue to gain momentum in light of housing affordability issues.

Pricing for the overall structural products business was up slightly this quarter, which partially offset the impact of volume declines. Strategically, we are maintaining our commitment to expanding our 5 main specialty product categories: engineered wood, siding, millwork, industrial and outdoor living across all customer segments. Although our mix shift strategy remains unchanged, we are prioritizing strategic channel growth when making decisions about new product launches and working capital investments.

We are also continuing our efforts to expand our multifamily business, our builder pull-through efforts and our national accounts business, all areas where we are seeing positive results. We expect to see solid rebounds in the multifamily segment, which efficiently addresses housing demand and affordability over the long run. Recent housing data shows year-over-year improvement, supporting our strategy for long-term growth in this channel.

Our multifamily focus is creating demand for our products in tough single-family market conditions, though these sales often involve longer inventory turnover and direct sales, which have lower gross margins. This channel also provides a smoother path for product conversions to the brands we carry, such as our onCENTER engineered wood products and Allura fiber cement siding.

Our digital transformation work remains on schedule with Phase 1 set to be completed this year. We have strengthened our master data foundation. We have converted more than 2/3 of our markets to our new Oracle Transportation Management system, and we have successfully processed e-commerce transactions in our pilot market. Our learnings from Phase 1 will inform future investments in our digital transformation journey.

We're also advancing our AI work to improving efficiency and boosting productivity. We've gone from piloting AI with a group of BlueLinx associates to providing most of our associates with the ability to build agents via the Microsoft platform to streamline their work and to help improve their productivity. We believe our technology modernization will help us stand out and accelerate profitable sales growth and operational excellence.

In addition, M&A and greenfields remain important elements of our profitable sales growth strategy, so we continue to explore and evaluate opportunities in both areas in order to expand our geographic reach and to support our specialty product sales growth initiatives. We are now coming up on 1 year since we announced our Portland, Oregon greenfield, which continues to perform very well. Last quarter, we significantly expanded our product offerings and doubled our warehouse space in that location due to better-than-expected demand.

Along these lines, and as we announced on Monday, we are very excited about the acquisition of Disdero Lumber Company, a specialty products distributor. Disdero focuses on higher-margin premium specialty wood products, which are used primarily in the construction of high-end custom homes and decks as well as upscale multifamily residential projects. With customers in nearly all 50 states, we are looking forward to growing this business, not only as part of our Western expansion, but also by distributing Disdero products out of several BlueLinx locations across our footprint.

We also plan to offer many of our core specialty products to Disdero's existing customers. The acquisition directly addresses several of our key strategies, such as shifting our product mix increasingly toward higher-margin specialty products, supporting growth in the multifamily channel and to expanding our business in the Western United States. We are also pleased that the highly experienced Disdero team will be staying on with BlueLinx. Combining Disdero with BlueLinx's long-standing customer and supplier relationships, nationwide scale and overall financial strength should result in a significant expansion of this successful business.

Now turning to our third quarter results. We generated net sales of $749 million and adjusted EBITDA of $22.4 million for a 3.0% adjusted EBITDA margin. Adjusted net income was $3.7 million or $0.45 per share. Specialty products continued to account for approximately 70% of net sales and over 80% of gross profit for Q3. Specialty product net sales increased slightly year-over-year due to strong volumes in engineered wood products and outdoor living products. Unfortunately, price deflation in EWP partially offset the benefits of our net sales and volume increases in this category.

Gross margins for specialty product sales came in at 16.6%, which, as reported, was below our expected range and due in part to a duty-related adjustment that Kelly will discuss in a moment. Excluding that duty-related adjustment, our gross margins would have been 17%.

Our commitment to business excellence ensures solid gross margins even in challenging markets. By leveraging our diverse customer base, broad geographic reach, product assortment, multifamily and builder pull-through capabilities and large scale, we can deliver greater value to our customers and suppliers and remain well positioned for long-term success.

It is important to note that while industry-driven specialty products price deflation in certain categories continues to adversely impact our top line and our cost of goods sold, the price declines overall continued to improve and were flat in Q3 compared to prices being down high-single digits this time last year. We are optimistic that specialty pricing volatility will continue to stabilize. Despite our success, higher profitable sales growth may be adversely impacted by tariffs, high mortgage rates and general economic uncertainty, which I will briefly discuss in a minute.

Structural product revenues decreased slightly year-over-year, largely due to price declines in panels, combined with modest volume declines in both lumber and panels. These volume declines were due to continued challenging market conditions. For the quarter, industry average lumber prices were up 6%, while panel prices were down 14% year-over-year. We once again leveraged our disciplined approach to inventory management and our centers of business excellence to effectively manage margins in our structural product categories.

Our financial position remains strong, and our significant liquidity gave us the flexibility to return capital to shareholders by repurchasing $2.7 million of shares in Q3. Combined with our new $50 million share repurchase authorization announced last quarter, our total current availability is $58.7 million.

Now let's turn to our perspective on the broader housing and building products market. As you all know, the housing market continues to be soft, which is impacting the building materials and distribution sector. Broadly speaking, housing affordability, elevated mortgage rates, short-term interest rates, construction labor availability, inflation, consumer confidence and other factors continue to affect the housing and repair and remodel markets.

The uncertainty being generated by government policies and the adverse impact of the macroeconomic environment on building materials should be short term in nature as the long-term fundamentals of housing are strong enough to drive demand when the market recovers. Currently, the U.S. is 4 million homes short on supply, which is clearly positive for the building products sector. And with the average age of a home at 40-plus years old, it's clear that homeowners will need to make improvements to their existing homes or buy new homes, which will drive greater repair and remodel activity.

August total housing starts, which is the latest data available due to the government shutdown, were down nearly 6% year-over-year, and single-family housing starts were down nearly 12% from August 2024. Builders' confidence and consumer sentiment levels are also down significantly compared to this time last year. By comparison, multifamily housing starts were actually much higher on a year-over-year basis, serving as a catalyst for our strategy. Although the total starts are down, our product and channel strategies are leading to gains in a contracting market due to sales growth tied to success with our product expansion, builder pull-through, multifamily and national accounts efforts.

While interest rates have been improving and thus helping with the affordability issue, consumer sentiment being down over 20% year-over-year remains a real concern. During the quarter, I spent a great deal of time meeting with customers and suppliers in markets all across the country, and the general tone continues to be one of near-term uncertainty, coupled with longer-term optimism. As we have said before, several sources have estimated that more than 1.5 million homes need to be built every year for the next 10 years to meet the anticipated housing demand, and that may be a conservative number.

Repair and remodel spending continues to be soft due to low existing home sales. Despite this softness, our strategic focus on national accounts is enabling us to grow this segment of pro business at scale. As housing activity increases, we believe the investments we're making today will accelerate our growth efforts in the repair and remodel pro business when it recovers.

Despite difficult market conditions and uncertain government policies, we believe the market will improve in the back half of next year if interest rates continue to decline and housing starts and repair and remodel activity improve as a result. Regardless, we will continue to emphasize our product and channel growth strategies and, in particular, our builder pull-through, multifamily, national accounts and product expansion efforts to grow in an otherwise challenging market. Our enterprise-wide product and channel strategies position us well for long-term success as they are designed to fully leverage our scale to drive profitable sales growth, not only in challenging markets like the one we're currently in, but more so when the housing market recovers.

In summary, although our Q3 results were solid given challenging market conditions, we are most proud of our continued success executing our strategic initiatives as evidenced by our specialty product expansion efforts, multifamily channel growth, national accounts growth, capital allocation initiatives, Portland greenfield expansion and the Disdero specialty products distributor acquisition. We look forward to finishing the year on a high note and to setting ourselves up for success in 2026.

I want to express my appreciation to all BlueLinx associates for their ongoing commitment to our customers, suppliers and one another. Our teams remain focused on driving profitable growth in both specialty and structural products sales, ensuring we are prepared for long-term success even as we navigate current market challenges.

Now I'll turn it over to Kelly, who will provide more details on our financial results and on our capital structure.

Thanks, Shyam, and good morning, everyone. Before I review the consolidated results for the third quarter, I'd like to offer a few more details on the Disdero acquisition. We purchased the company for $96 million. The acquisition was funded with cash on hand, and we expect it to be immediately accretive to adjusted EBITDA and adjusted diluted earnings per share.

When adjusting for the net present value of expected tax benefits related to the acquisition of approximately $8 million, the net transaction value is approximately $88 million. Pro forma for the funding of the acquisition, our net leverage remains within our previously stated targeted range and our available liquidity remains strong at approximately $680 million between cash on hand and the unfunded revolving credit facility.

For the last 12 months ended September, Disdero generated just over $100 million in net sales. Pro forma, after expected cost synergies and including the tax benefit, the purchase price was approximately 7x EBITDA. I would like to reiterate Shyam's thoughts that we are very excited about purchasing a specialty products distributor that fits squarely within the M&A component of our capital allocation strategy and believe it will significantly benefit both our customers and suppliers as we offer the Disdero products across the existing BlueLinx branch network and continue expanding in the Western part of the U.S. We are also excited about the talented and experienced group at Disdero that is joining the BlueLinx team.

Turning now to our third quarter results. Overall, our specialty products business delivered solid volume growth in a challenging macro environment, while structural products volumes were lower year-over-year. Net sales were $749 million, up slightly year-over-year. Total gross profit was $108 million and gross margin was 14.4%, down from 16.8% in the prior period. Our results for specialty products reflects an adjustment for import duty-related matters incurred in prior periods. During the third quarter of 2025, the adjustments resulted in an increase to cost of products sold of $2.2 million. Excluding this item, total gross margin would have been 14.7%.

SG&A was $89 million, down $3 million from last year's third quarter. This decrease was mainly due to lower incentive compensation expense in the current period related to our year-to-date financial performance, partially offset by increased sales and logistics expenses driven by our strategy to grow sales in the multifamily channel and expenses associated with our digital transformation initiatives.

Given the challenging demand environment, we continue to focus on rigorous expense management and opportunities to further operational efficiency. Net income was $1.7 million or $0.20 per share, and adjusted net income was $3.7 million or $0.45 per diluted share. We had an income tax benefit for the third quarter of $300,000 due in part to deductions related to stock-based compensation. For the fourth quarter, we anticipate our tax rate to be between 27% and 31%.

Adjusted EBITDA was $22.4 million or 3% of net sales and includes the unfavorable duty-related matter. Not including this adjustment, adjusted EBITDA would have been $24.6 million or 3.3% of net sales.

Turning now to third quarter results for specialty products. Net sales for specialty products were $525 million, up 1% year-over-year. This increase was driven by volume increases in engineered wood and outdoor living, partially offset by price declines in EWP and other categories. As Shyam mentioned, given current market conditions, we are optimistic that specialty pricing volatility will continue to subside in the coming quarters.

Gross profit from specialty product sales was $87 million, down 13% year-over-year. Specialty gross margin was 16.6%, down from last year's 19.4%, primarily due to price deflation in certain product categories as well as the duty-related adjustments of $2.2 million. Not including these duty-related items in the current and prior year third quarter, specialty products gross margins would have been 17% and 18.7%, respectively. Through the first 4 weeks of the current fourth quarter, specialty product gross margin was in the range of 17% to 18% with daily sales volumes down low-single digits from the third quarter of 2025 and flat with the fourth quarter of 2024.

Now moving on to structural products. Net sales were $223 million for structural products, down 2% compared to the prior year period. This decrease was primarily due to lower panel pricing and lower volumes for both lumber and panels when compared to last year. Gross profit from structural products was $21 million, a decrease of 17% year-over-year, and structural gross margin was 9.3%, down from 11% in the same period last year.

In the third quarter of 2025, average lumber prices were about $409 per thousand board feet and panel prices were about $443 per thousand square feet, a 6% increase and a 14% decrease, respectively, compared to the average in the third quarter of last year. Sequentially, comparing the third quarter of 2025 with the second quarter of 2025, both lumber and panel prices were down about 9%. Through the first 4 weeks of the current fourth quarter, structural products gross margin was in the range of 8% to 9%, with daily sales volumes up low-single digits versus the third quarter of 2025 and down mid-single digits compared to the fourth quarter of 2024.

Turning now to our balance sheet. Our liquidity remains very strong. At the end of the quarter, cash on hand was $429 million, an increase of $43 million from Q2, largely due to improvements we drove in working capital and, in particular, our inventory balances. When considering our cash on hand and undrawn revolver capacity of $347 million, available liquidity was approximately $777 million at the end of the quarter.

Total debt, excluding our real property financing leases, was $380 million, and net debt was a negative $49 million. Our net leverage ratio was a negative 0.5x adjusted EBITDA, given our positive net cash position, and we have no material outstanding debt maturities until 2029.

Additionally, given the strength of our balance sheet and continued strong liquidity, we remain well positioned to support our strategic initiatives. These strategic initiatives include continued growth in the multifamily channel, demand pull-through efforts to benefit our customers, continued specialty product expansion, our digital transformation efforts and other organic and inorganic growth initiatives.

Now moving on to working capital and free cash flow. During the third quarter, we generated operating cash flow of $59 million and free cash flow of $53 million, primarily due to lower CapEx and effective working capital management, particularly as it relates to driving our inventory levels lower to be in line with the current demand environment.

Turning now to capital allocation. During the quarter, we incurred $6.4 million of CapEx, primarily related to our digital transformation investments, normal replacement of aging components within our fleet and the typical maintenance and investment in our branches. For the remainder of 2025, we plan to manage our CapEx in a manner that reflects current market conditions and allows us to maintain a strong balance sheet. Our remaining capital investments will focus on facility improvements, further replacement of trucks and trailers and the technology improvements previously discussed.

Also during the third quarter, we repurchased $2.7 million of stock, and we had $58.7 million remaining at the end of the quarter from our previous $100 million share repurchase authorization, combined with our more recent $50 million authorization. Year-to-date, this brings our total share repurchases to $38.1 million.

Our guiding principles for capital allocation remain consistent with prior quarters. 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 greenfield and M&A strategy as demonstrated by our acquisition of Disdero and opportunistically returning capital to shareholders through share repurchases. We also plan to maintain a long-term net leverage ratio of 2x or less.

Overall, we reported solid third quarter results in light of current market conditions, and we were pleased to have driven higher volumes in EWP and outdoor living within specialty products and delivered slightly improved pricing for structural products. And in addition, our strong balance sheet and liquidity enable us to execute our strategy and support our long-term success.

Operator, we will now take questions.

[Operator Instructions] Your first question comes from Greg Palm with Craig-Hallum Capital Group.

This is Danny Eggerichs on for Greg today. Maybe just digging into the Disdero acquisition a little bit more and how that came to be. Looking at the kind of acquisition multiple, the 7x post synergy, quite a bit higher than what your stock trades at. So maybe just rationalize that purchase price here versus buying back your own stock. How this going to be? What it brings to the table? And what makes you excited and willing to pay a bit more of a premium for Disdero?

Yes. So Danny, it's Kelly. Shyam will hit on what we see in terms of the excitement around Disdero going forward. But what I would point out is that this transaction is clearly in the specialty products space. The gross profit margins are in the high 20s. And then we see an opportunity not only on the cost synergy side of about $1 million, but we've got $1 million to $3 million of cost synergies that we –- or, excuse me, revenue synergies that we see over time as we roll their products out across certain of our branches.

So the fact that this is a higher-margin business that fits well within our strategy to grow specialty products and then the upside potential that we see in this business going forward is what helped us ultimately be comfortable with the purchase price we paid.

Yes. Okay. And is that kind of consistent with some of your M&A strategy going forward? You're fine with paying those kind of multiples as long as it brings some of these characteristics to the table? Or how should we think about it moving forward?

Yes. So yes. I mean, if you recall, when we developed the M&A strategy, the idea was, okay, let's get more focused on what's going to support the overall strategy of the business in order to leverage -- expand upon our scale. So first and foremost, geographic expansion. Some deals that would support that would obviously be inherently -- they would inherently minimize disintermediation or consolidation-related risk or integration-related risk.

Secondly, when you look at the specialty mix shift, we started going after primarily specialty products distributors, and Disdero fits right in that. Their specialty product offering is very much two-step distribution friendly, has high stickiness with customers and supports high-end builders and high-end repair and remodel projects through our customer base.

What we -- what this multiple does not take into account is -- are the commercial synergies that we expect to generate over time. We took a very conservative approach on our expression of the pro forma multiple post expense synergies. But once we start taking full advantage of the BlueLinx network in order to expand the Disdero business, that in and of itself will help accelerate our mix shift while also making the purchase price we paid for this business a pretty fair deal.

And to your question around -- look, as you shift the specialty mix, the multiple expansion associated with that over time makes sense for this business in the long run. So we will continue to look at specialty-oriented businesses given the long-term benefits we'll generate.

Okay. Got it. I appreciate that color. Maybe on SG&A. We saw some good operating leverage this quarter with OpEx taking a step down. So maybe how should we think about that moving forward? I know you mentioned there was some lower incentive comp, but there's still some ongoing expense management. And how should we think about it relative to the levels we saw in Q3?

Yes. I'd say that the levels in Q3 as a percentage of sales are lower than what we would expect going forward. We have continued investment in some of our initiatives around multifamily as well as our digital transformation efforts. With those and just kind of a continued flow-through of increased kind of merit costs and other things through the course of the year, we expect that SG&A as a percentage of sales will be slightly elevated year-over-year, year-end '25 versus year-end '24. And then we continue to take actions that are impacting the current quarter that will have some benefit into 2026.

The next question comes from Zack Pacheco with Loop Capital.

Maybe to start, just any more color you guys can provide on how specialty volumes trended throughout the quarter. Curious if you saw any deceleration in demand as the quarter progressed given single-family demand fundamentals continuing to soften during the back half of the year?

Yes. I think on the specialty volume side, we saw some -- a slight kind of increase led by our EWP product, engineered wood product. And so yes, we've seen that decelerate some in Q4, but we had a good quarter kind of year-over-year in Q3 on the volume side.

Yes. So just to highlight that a little bit more. So clearly, there's a seasonal decline as you come into the Q4 cycle because you're coming off season. But if you look at EWP broadly speaking and also outdoor living products, those were 2 specific areas where we were up year-over-year on volumes. And even though we were down on pricing year-over-year, it was still tempered at mid-single digits.

So if you look at our double –- low-double digit volume growth in EWP and single digit volume growth on outdoor living products as the market contracted in Q3 as we look at housing starts through August, it's a pretty remarkable story. Like if you look at our structural volumes, for example, they actually track the housing start decline. Yet on the EWP front, we were -- we went against that trend, which I think shows the merit of the various strategies we've employed to grow our private label business and otherwise grow the channel with respect to some of these strategic focus areas with builder pull-through programs, multifamily, also national accounts as well.

Okay. That makes sense. Yes. And then maybe just more generally speaking, what you guys are seeing from the regional and independent builders, again, assuming they continue to trail the large publics, given they're more sensitive to higher rates. But I guess on that, just any internal initiatives or thoughts on how to increase share with the large publics.

Yes. I mean, look, we have -- one of the ways -- one of the reasons we know we're gaining share or winning on the EWP front, in particular, is we've developed programs with large publics as well as regional builders. And in head-to-head match-ups, we're preserving existing business and winning new programs. And then if you think about that in the context of our overall pricing only being down kind of mid-single digits, which we believe is better than what we've seen publicly and what we're hearing privately relative to our competitor set shows that we are doing -- we're continuing to progress our efforts with these builders.

So although they are contracting to some degree, we are actually performing very competitively and picking up more of that overall wallet across multiple regions with some regions being higher than others. So for example, in the South, we've been fairly successful. In some regions like the Northeast, you have a much lower big builder or regional builder presence or more custom homebuilders. But again, given the economics up there, that market is actually doing well because custom homebuilders are still doing well.

The next question comes from Reuben Garner with Benchmark.

So if I'm understanding it correctly on a kind of a clean basis, the specialty gross margin was 17% in the third quarter. You're seeing a little bit higher than that to start the fourth quarter. What exactly is driving that uptick? I think -- and correct me if I'm wrong, but at least in recent history, the fourth quarter tends to have a lower gross margin profile in specialty than the third. Is there anything kind of unique that happened in the third quarter or to start the fourth that's driving that dynamic?

Yes. I think in the fourth -- or in the third quarter, we saw rebate and kind of deviation activity a bit lower than prior periods as well. And what we're seeing in Q4 is that at more normal levels going forward, right? So that uptick in Q4 is just as we are ending the year, right, and we're kind of recognizing those benefits to our cost of products on the rebate side, it's helping us get back in line with our -- the levels that we saw through the course of the year, we're trending towards.

Yes. And just from a strategic perspective, as we continue to try and differentiate ourselves from our competitors, we are really leaning into value-add services, whether they be much faster turns on EWP plans and takeoff services in order to drive sales of our own products and get greater stickiness with builders so we can pull our products to our customers and help generate business for them.

Obviously, on the multifamily side, too, from some of the value-add services we're providing, that's helping us grow. And so ultimately, all things being equal, the goal for us is to demonstrate the value and then get paid for the value because in the long run, that's obviously better for our customers as they grow their businesses more profitably.

Okay. And then kind of a bigger picture question. There's definitely been some movement in both probably some of your customers and suppliers, whether it's consolidation or just different ownership. Have you seen or do you see any opportunities, whether it's picking up new brands on one side or working with customers differently as they kind of evolve their businesses. Just curious if you're seeing any impact yet or what the likelihood is that, that comes in the months ahead?

Yes, absolutely. I do think that some of the consolidation you're seeing in the marketplace, especially with respect to suppliers, could open up some new opportunities for us. At the same time with customers, I mean, we're the value-add services we're providing, let's take multifamily, for example, many of our smaller customers and medium-sized customers, they don't have multifamily capabilities, whereas we do.

I mean we've made investments across the network on top of what we've done at corporate to really drive demand for our products through their business because we will not break channel, but we will -- we are determined to help our customers succeed. And to the extent we can leverage our -- the investments we make at scale to do that, the better off everybody else is.

So I think that -- and by the way, that multifamily channel also allows us to take advantage of some of the disruption you're referring to, whether it be on the customer side from a consolidation perspective or on the supplier side from a brand perspective.

Okay. I'm going to sneak a couple more in, if I can. Your inventory is pretty consistent with a year ago in terms of what percentage of revenue it is. There's been some talk of destocking across various categories within building products as things kind of softened throughout the year. How are you guys thinking about it? Have you been kind of staying consistent? Is there any categories, whether it's outdoor living or commodity or any others where you're staying invested because you believe that there's a recovery around the quarter? Can you just talk about your thoughts there?

Yes. Generally speaking, we are trying to adapt and adjust to the market. I mean we have a very strong philosophy here of not taking positions, no matter the category. I mean we are -- we have very strong -- I mean, we're constantly working with the business to make sure we have optimal inventory levels. Obviously, heading into the summer, the spring/summer seasonal upside of normal building products and housing.

I think we all built inventory to expecting more business than actually materialize, and that was -- I mean that's everybody, right? And so over the course of the summer heading into the fall, we have been very disciplined around our inventory management and taking into account what we had planned for. So we will not -- there is no build it and they will come. I mean I think we have a very smart strategic approach that's very disciplined around both specialty and structural inventory management.

Okay. Last one for me. Engineered Wood Products. have you seen the sequential price pressure there yet?

Yes. Well, it's stabilized, right? It's definitely stabilizing. And again, as we -- some of the things we're trying to do in order to demonstrate our value, right, is quicker turnaround times on EWP plan designs, for example. We're doing some other value-add services with key customers to help them for us to be a more powerful extension of their business. So there are a number of things we're doing to not only get on the front end of that stabilization of price, but also get paid on the margins for incremental value we provide that others don't. But yes, a long-winded way of saying, yes, it's stabilized, continue to see stabilization.

Great, thanks. Thank you and good luck through year-end. Congrats on the acquisition.

Thank you.

Thank you.

The next question comes from Adi Madan with D.A. Davidson.

Maybe first off with -- you kind of hit on this earlier, but what specifically drove down specialty gross margin sequentially on an adjusted basis? And specifically, what like go-forward impacts or have about this segment to end the year and into 2026?

Yes. We saw across primarily on the specialty side, just a net higher cost of products sold. The duty-related item we called out and we've also seen in terms of some of our rebate activity and a lower benefit in the quarter than prior periods. Again, we've addressed that and expect and are seeing that at a more normalized level in the first 4 weeks of the current quarter. And again, are experiencing margins in that 17% to 18% range currently and expect to achieve that in Q4 as well.

Okay. Got it. And maybe about the run rate SG&A on a go-forward basis? And are there any structural cost reductions underway that might have been baked into the 3Q numbers?

Yes. So no structural changes kind of baked into the Q3 numbers. We are taking some actions in Q4 that we expect to see benefits from that, some in Q4, but also mostly on an annualized basis next year. As a percentage of sales, as we go into 2026, I think for the full year, we expect some slight pressure kind of increasing that, but we're in the tune of kind of somewhere between 0 and 25 basis points.

Okay. Yes, that sounds good. And maybe lastly about capital allocation after the Disdero deal, are you more inclined towards share buybacks at these levels?

So we're going to continue to be opportunistic as we look at buying back shares. When we look at the acquisition of Disdero combined with last quarter's activity, that was about $100 million of capital that we put to work. So we'll be disciplined going forward. The level of activity may be lower here as we end this year and go into next year. But we continue to see the share repurchases as a key way for us to continue to return free cash flow back to our investors to the extent we're not putting it to work elsewhere.

Perfect. Sounds good. Good luck to end the year guys.

Thank you.

This concludes the question-and-answer session. I'll turn the call to Tom for closing remarks.

Thanks, Sarah. Thank you again for joining us today, and we look forward to speaking with you in late February as we share our fourth quarter and full year 2025 results.

This concludes today's conference call. Thank you for joining. You may now disconnect.