BlueLinx Holdings Inc. (BXC) on Q1 2022 Results - Earnings Call Transcript
Operator: Greeting, and welcome to the BlueLinx Holdings’ First Quarter 2022 Results Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ryan Taylor, Vice President of Investor Relations. Thank you. You may begin.
Ryan Taylor: Thank you, operator, and good morning, everyone. Welcome to the BlueLinx Holdings’ first quarter 2022 earnings call. Presenting today are Dwight Gibson, President and CEO of BlueLinx; and Kelly Janzen, our Chief Financial Officer. Our first quarter news release and Form 10-Q were issued yesterday after the close of the market along with our webcast presentation. 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. In addition to our Q1 earnings, we also announced yesterday that our Board of Directors increased our share repurchase authorization to $100 million, with $60 million to be repurchased via an accelerated share repurchase plan. Dwight and Kelly will provide more details on that news during our call this morning. As a reminder, today's discussion contains forward-looking statements, actual results may differ from those forward-looking statements due to various risks and uncertainties, including the risk 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. At the conclusion of our prepared remarks, we will open the line for questions. And with that, I'll turn the call over to Dwight.
Dwight Gibson: Thanks, Ryan, and good morning, everyone. Thank you for joining us on the call today. This is an exciting time in the history of BlueLinx. As we continue to exceed expectations during one of the most dynamic periods in the history of the U.S. housing industry. I'm extremely proud of the BlueLinx team. Our continued strong execution contributed to record first quarter profitability. Our operating priorities continue to be focusing our sales mix and higher margin specialty products, making disciplined purchasing, and pricing decisions and rigorous management of commodity inventory. These efforts have contributed to outstanding performance for six consecutive peers as compared to our historical results. Over the past six quarters, we've averaged net sales growth of 39%, adjusted EBITDA of $117 million, and adjusted EBITDA margins of 10.5%. We believe our results over this extended period demonstrate our ability to capitalize on the robust demand to navigate supply constraints and to successfully manage historic volatility in wood-based commodity prices. We believe the progress we've made over the past 18 months has significantly increased our baseline performance, even in a normalized environment. While we are encouraged by our improvement, we are equally excited about our potential, as we have identified additional opportunities to drive greater efficiency across our business and increased capacity growth sales of our higher margin specialty products. We are closely monitoring the impact of higher mortgage rates, broad based inflation and ongoing volatility in wood-based commodities. Even with these headwinds, we currently believe fundamentals for the U.S. housing industry remain healthy, underpinned by low levels of unemployment, strong demand for new homes and record levels of home equity, which is contributing to strong repair and remodel activity. We ended Q1 in a strong financial position with low net leverage and available liquidity of $421 million. We also have strong cash generation in April, further strengthening our financial position. April sales volumes were consistent with Q1 with specialty gross margins above 23% and structural margins into high single-digits. Following a detailed review of our multiyear capital allocation plans, our Board of Directors increased our share repurchase authorization to $100 million. Based on our analysis, we believe the expected future cash generation profile for our business, even in a slower growth and market environment is significantly undervalued by the market. In our view, the disparity between our view of the business versus the market's view creates a compelling investment opportunity. Thus, we decided to commit $60 million to repurchase shares in an accelerated timeframe. This represents just under 10% of our average market cap value over the past year. These actions demonstrate confidence in our current performance, opportunities for continued improvement and our long-term growth strategy. We are committed to delivering shareholder value through strong business execution and disciplined capital allocation. Taking a closer look at our first quarter highlights. Net sales increased 27% driven by specialty product sales, which grew 36% year-over-year. Gross profit was $291 million or 22.3% of net sales. Nearly two-thirds of our gross profit was generated from sales of specialty products, consistent with our strategy to grow that part of our business. And we generated over $200 million of adjusted EBITDA, which is 15.5% of net sales, both all-time highs on a quarterly basis for BlueLinx. Our financial results reflect benefits from our focus on commercial excellence, continued operational improvement and driving high levels of employee engagement, which are core levels for sustainable profitable growth. In support of these initiatives, we have invested in robust project management capabilities and deployed standard processes and tools for key operational and commercial activities, such as inventory management, safety and pricing. And earlier this year, we deployed a balanced scorecard with clear KPIs, focused on people, process and performance to increase accountability. From a strategic perspective, we are focused on increasing our mix of specialty product sales, growing our private label business and expanding our value-added service capabilities. On the supplier side, we are working with select vendors to partner on key specialty products in categories, such as engineered wood, millwork, siding, outdoor living and industrial products. Our ultimate goal is to drive profitable sales growth and expand gross margins through the combination of, and engage in accountable workforce, commercial excellence and continuous operational improvement. I believe the actions we have and continue to take to improve our business make BlueLinx stronger and more resilient through economic cycles. And I'm confident in our future. I believe we will perform well even in a slower growth environment. Given the dynamic nature of the U.S. housing industry, I'll now shift gears and provide our view of industry as we see it today. All things considered, we currently believe fundamentals for the U.S. housing industry remain healthy, underpinned by low levels of unemployment, strong demand for new homes and a low supply of available homes. We acknowledge that rising mortgage rates increased home prices and broad based inflation are impacting affordability for some buyers. It is also true that low levels of unemployment and increasing wages provide some support for qualified buyers to remain engaged in the market. Meanwhile, rent prices have risen rapidly up approximately 15% over the past 12 months, influencing some renters to consider buying a home even with rising mortgage rates. Broadly speaking, we believe the aspiration of purchase a home remains high, while supply for available homes remain near historically low levels. And we believe the low supply of available homes will continue to drive investment in both existing and new homes. We also believe that high levels of home equity, housing turnover and aging housing stock will continue to support growth in repair and remodel activity. As a point of reference about 45% of our annual sales are tied to the repair and remodel market, with 40% tied to residential new home construction, and about 15% related to the commercial industry. We expect demand in all three market categories to remain stable. For us, market stability represents an opportunity to accelerate our mix shift to specialty products. If supply constraints ease, we believe it will provide us the opportunity to expand sales volume with key vendors and gain share in specialty product categories with our best customers. And we are poised to gain share based on improvements we've made in the business and initiatives we are executing to further optimize our performance. That said, like many parts of the economy, we are still experiencing supply constraints with few signs of abatement in the near-term. The majority of our specialty products remain on vendor allocation. This includes product categories, such as engineered wood, siding, millwork, outdoor living, and industrial products. We continue to focus and expanding relationships with key suppliers who align with our strategy. As we look to increase net sales and specialty product categories, expand our value-added capabilities and extend our geographic presence. We are making progress in this area with Q1 unit sales volume of 6% in siding and 2% in millwork on a year-over-year basis. And sequentially sales volumes increased 8% in total across our specialty product offerings. In structural products, our focus remains on efficiently serving our best customers, while effectively mitigating risk from ongoing commodity price volatility. To this end, we remain relentless in managing our structural product inventory with greater emphasis on optimizing cost price dynamics, as opposed to growing volume. As a result of this approach, we cycled out of higher profit structural inventory in approximately six weeks when wood-based commodity prices declined toward the end of Q1. In addition to supply constraints and fluctuations and commodity pricing, we have effectively managed rising input costs, a competitive labor market and extended lead times on imports, which represents approximately 20% of our overall vendor supply. To summarize, we expect to continue capitalizing on strong demand while vigilantly monitoring and controlling commodity risk. And in parallel, we are executing our long-term strategic initiatives to drive sustainable profitable growth. That concludes my opening remarks. At this time, I'll turn the call over to Kelly for a more detailed discussion of our financial results and capital structure. Following that, I’ll provide closing remarks before we take your questions. Kelly?
Kelly Janzen: Thanks, Dwight and good morning everyone. Our Q1 results reflect improved execution and our ability to capitalize on market trends as compared to the prior year. Net sales were $1.3 billion, up 27% year-over-year led by specialty product sales, which increased 36%. Gross profit increased 61% to $291 million resulting in a 22.3% overall gross margin and all time high on a quarterly basis. As a percent of sales, SG&A was at 7% consistent with the prior year period. However, SG&A cost increased 21% year-over-year to $91 million. This was due primarily to higher variable compensation and to a lesser extent increased delivery and logistics cost. Net income was $133 million and diluted EPS was $13.19 per share more than double the prior year period. Our tax rate for the quarter was 26.2% in line with our expectations. Adjusted EBITDA was $202 million or 15.5% of net sales. This was also an all time high on a quarterly basis. And free cash flow increased $26 million over the prior year period. Our year-over-year growth and excellent profitability reflect the benefits from our emphasis on growing high value specialty product sales, alongside continuous operational improvements, while also demonstrating our ability to capitalize on favorable market conditions. Now, I’ll discuss the product categories for the first quarter starting with specialty products. Net sales were $768 million, up 36% or $205 million when compared to the prior year period. Gross profit was $184 million, up $76 million or 70% year-over-year. Our gross margin expanded 470 basis points to 24%, our second highest rate ever. The net sales growth and improved profitability were again driven by disciplined value-based pricing actions and also reflect a favorable shift in volume to strategic specialty categories, such as millwork, siding and engineered wood. Sales volumes and millwork and siding increased year-over-year with engineered wood volumes flat reflecting ongoing supplier allocations. Sequentially, net sales of specialty products increased 20%, including approximately 8% volume growth. And gross margins expanded 210 basis points. Through April, specialty products gross margin was in the range of 23% to 24% and sales volumes have stayed consistent with first quarter levels. Now moving on to the first quarter results for our structural products. Net sales increased 16% to $534 million as compared to the prior year period. The sales growth was driven by the steady price increases in lumber and panels during the quarter that started in the fourth quarter of 2021. Per random length, the average Q1 price for framing lumber was $1,244 per 1000 board foot up 26% from Q1 of last year. And the average price for panels was $1,232 per 1000 square foot, up 23% from last year’s first quarter as well. Gross profit was $107 million an increase of $35 million or 49% year-over-year. Gross margin expanded 450 basis points when compared to the prior year to 20%, representing our all time high gross margin for structural products. Sequentially, gross margin expanded 390 basis points. The structural profitability reflects the benefit of our continued discipline in our approach to commodity inventory management. As we continue to keep levels low, while leveraging consignment, as well as centralizing purchasing and pricing decisions. We anticipate structural margins to be lower in Q2 than what we experienced in Q1 given the recent steady decline in wood-based commodity prices from mid-March through late April. For the month of April, average commodity prices were down to $956 per 1000 board foot for lumber and $981 per 1000 square foot for panels, a decrease of 23% and 20% respectively from average prices in the first quarter. As a result, our second quarter to date gross margin on structural product sales is in the high single digit, while sales volumes have stayed consistent with first quarter levels. At this point, we have already cycled out the majority of our higher cost of commodity inventory and are now selling structural products that prices relatively consistent with current market pricing, which have recently stabilized. Thus to summarize our performance to date and the second quarter, sales volumes for both specialty and structural products have remained consistent with the first quarter. Gross margin on specialty product sales has been in the 23% to 24% range with structural product margins in the high single digit. It was a strong month of cash generation due to commodity deflation. And for the full quarter, we expect our Q2 tax rate to be in the range of 21% to 25% Turning now to working capital. During the first quarter, our networking capital investment was $181 million. This investment reflects strong demand in the U.S. home building industry and the impact of increased pricing for sales of wood-based commodity products. $157 million of the increase was concentrated in accounts receivable, while $24 million related to a net increase in inventory when considering payables related to primarily to specialty products. Total inventory as of April 2 was $563 million was nearly 85% related to specialty products. First quarter free cash flow improved by $26 million versus the prior year and represents our best first quarter cash performance over the last four years. During the quarter, capital expenditures were $2.5 million and related primarily to facility upgrades at our distribution branches. For the full year, we now anticipate investing up to $30 million in capital expenditures, up from our previous estimate of $25 million. These investments will be focused on continued facility improvements at several of our distribution branches, upgrading our fleet of rolling stock and enhancing our digital and technology capabilities. Looking now at the balance sheet. As of the end of the first quarter cash on hand was $74 million, total debt was $572 million and net debt was $498 million. Net leverage was reduced to 0.9x trailing 12 month adjusted EBITDA of $560 million as compared to net leverage of 2.5x from the end of the first quarter of 2021. When considering our cash on hand and undrawn revolver capacity of $346 million available liquidity was $421 million as of the end of the first quarter. And as of April 29, our cash on hand increased to approximately $150 million. As Dwight mentioned, our focused efforts in 2021 to improve our financial position combined with expected near-term cash generation has positioned us to return a meaningful amount of capital to shareholders in an accelerated timeframe. Specifically, our Board increased our share repurchase authorization to $100 million, up $75 million from our previous $25 million authorization instituted in the third quarter of last year. In the first quarter, we repurchased 81,331 shares under the plan in the open market for a total of $6.4 million. Given the pullback in equity markets through April, particularly as it relates to valuations of companies in the U.S. home building industry, we believe the opportunity to repurchase shares has become increasingly attractive. As such, we’ve chosen to repurchase $60 million under the authorization through an accelerated share repurchase agreement, which demonstrates our commitment to execute at a very opportunistic time. Under the terms of the ASR, we will fund the $60 million on May 5. At that time, we’ll receive and retire approximately 554,000 shares of stock. The ASR is expected to be completed within the next three to five months. These actions are consistent with our capital allocation framework and even after funding the accelerated share repurchase, we expect to have ample liquidity to invest in organic growth initiatives, as well as evaluate strategic acquisitions. As a guiding principle, we intend to maintain a strong balance sheet and financial flexibility that enables us to invest in our business through all economic cycles, while maintaining a long-term target net leverage of at or around 3x. As we invest for growth, we’ll evaluate both organic and acquisition opportunities that yield a risk adjusted return above our weighted average cost of capital and are consistent with our strategy to increase our mix of higher specialty products. We will maintain discipline in our approach to all growth investments, comparing those opportunities against the value of returning capital to shareholders. And we believe our share repurchase actions demonstrate our capital allocation discipline. In summary, we are focused on maintaining a strong financial position and delivering long-term value to our shareholders. At this time, I’ll turn the call back over to Dwight for closing remarks.
Dwight Gibson: Thanks, Kelly. In closing, it’s an exciting time for BlueLinx. We are off to a strong start in 2022 with record profitability in Q1 and a good April. We have exceeded expectations for six consecutive quarters demonstrating our ability to capitalize in a dynamic market environment and raising the base level performance of our business. We’re increasing accountability, emphasizing growth in our specialty products and driving continuous improvement throughout the business. Our financial position is strong. We are investing in our business to improve efficiency and increase capacity to deliver sustainable profitable growth. And we are repurchasing $60 million of BlueLinx shares, demonstrating confidence in business strategy, continued improvement in our execution and commitment to delivering shareholder value through disciplined capital allocation. As we look to the future, I believe we are in an opportunity rich environment to create long-term value for all stakeholders. And we are steadfastly committed to that goal. Our aspiration is to be the preeminent building products distributor in North America, and we believe we have a long runway of growth ahead of us as we leverage our scale and product breadth to expand relationships with our best customers and key vendors. At our Investor Day in June, our executive leadership team will share details about our plan to accelerate growth, drive productivity and increase shareholder value. If you’d like to attend, please RSVP using the QR code provided in our presentation or reach out to Ryan. That concludes our prepared remarks. At this time, we’re happy to answer any questions.
Operator: Thank you. We will now conduct a question-and-answer session. Our first question comes from Greg Palm with Craig-Hallum. Please proceed.
Greg Palm: Yes. Thanks. Good morning, everybody. And congrats on the really good results here.
Dwight Gibson: Good morning. Thank you.
Kelly Janzen: Thank you.
Greg Palm: I wanted to start with supply chain. I’m just curious if your thoughts around when some of the supply chain challenges might ease. If you’ve thought about how long that lasts given where we are. And then more importantly as those supply chain challenges do start to ease, what’s your view on pricing at that point? Do you think pricing can be maintained at current levels? You think that pricing needs to come in at all? Just want to get some high level thoughts on what you’re seeing out there?
Dwight Gibson: Yes. So, we really see the supply environment continuing to be tight for the balance of the year. A lot of our supplies that we stay connected to are investing to increase capacity. But there is a lag between when those investments happen, when you actually see more products available in the market. So we think the balance of the year will be more of the same. And as we’ve said in past calls, and as Kelly has mentioned, we still think that we are able to manage and hold price and the expectations around, particularly in the specialty side being in the 20% range we think are solid.
Greg Palm: Okay, good. And if you look back at the last year or so, I mean, obviously, it’s been a string of positive really impressive results. I know it’s been a strong backdrop, but do you think you’re gaining shared at all? I mean, do you feel like you’re maybe getting your hands on more supply than some of your peers? Or would you really characterize just as a really good environment with strong pricing and overall execution?
Dwight Gibson: Yes. I mean, we’re focused on the things we can control, which is really our performance. So we’ve really been leaning into just driving greater execution, managing our inventory, building deeper and better relationships with our supplies and our customers. The supply environment continues to be challenging. So we want to make sure we’re getting our fair share of the right kinds of products. But gaining share in this market’s a challenging thing. So we’ll continue just to really focus on shifting our mix, building good deep sticky customer relationships, and be prepared for more volume as it becomes available.
Greg Palm: Okay. And then just lastly, in light of the buyback news, should we expect that that means you’re not necessarily pairing back on M&A. But just kind of curious if your capital allocation sort of priorities have changed at all, just given, a, the news, b, where the stock price is and c, certainly what the – either M&A or pipeline looks like or overall environment?
Dwight Gibson: No. I mean, our operating principles around capital allocation are unchanged, right? We’re focused on making investments that generate a return greater than our weighted average cost of capital. We always are excited about prioritizing organic investments that can increase our capacity and efficiency and scale of our business. And we’re going to continue to be thoughtful around things that could accelerate that which could be inorganic activities. And then, as available return share – return capital to shareholders. So those priorities are kind of enduring. And we believe that this was an opportune time to kind of return share to – return capital to shareholders. But we’re also continued to stay engaged and look for opportunities to drive our strategies forward.
Kelly Janzen: Yes. And you’ll hear in my prepared remarks that kind of how we think about capital allocation in more detail as we’re looking at the bigger picture as Dwight mentioned and our target leverage remains unchanged. So, feel really – I think it’s just us taking the next step and evolving, having a detailed plan around capital allocation as we’ve been discussing with you previously that we would – that we were in the process of doing.
Greg Palm: Yes. Makes sense. All right. Best of luck going forward. Thanks.
Dwight Gibson: Thanks, Greg.
Operator: Our next question comes from Reuben Garner, The Benchmark Company. Please proceed.
Reuben Garner: Thank you. Good morning, everybody and congrats on the strong results guys.
Dwight Gibson: Thanks, Reuben.
Reuben Garner: Let’s see, so where to start. So I wanted to get some more color on the specialty business, and specifically there are obvious risks in the market now with where mortgage rates have gone and your margin structure is very different than it’s been historically. If we did see any kind of soft patch or slow down or things go sideways. I mean, do you still – is the 20% margin number that you put out in the past, is that something you think you could do even if the market were to soften up? Or would you see risk to that level? I know it’s sort of a tough question. But just want to get your thoughts on kind of the downside to the margins if we were to see a soft period.
Kelly Janzen: Yes. Well, thanks Reuben for the question. So as you know, the last few quarters we’ve been well above the 20%, the 23%, 24% range. That 20% really comes down to actually incorporating our thoughts around if we saw some softening in the market or nor – I’ll say it differently, a little normalization. We believe we would be right around that rate. We believe we made fundamental differences and changes in our pricing structure to support that. Now that considers a softening, I mean, certainly we don’t know what’s going to happen in the future. But we feel pretty good about that number and that’s why we continue to support it and reiterate it.
Reuben Garner: Okay. And then, I heard private label mentioned earlier. Do you guys – are there plans to increase private labeling in some of the other specialty categories that you participate in? Or was that specific to kind of growing your engineered wood platform more aggressively in the coming quarters?
Dwight Gibson: Yes, it’s a great question. The answer is yes, and yes. We like our private label business, get on centers, kind of the number three EWP engineered wood brand in the marketplace. And we think there’s room to run there, working really hard to get more supply. And we think there’s other categories that we’ve been able to introduce some pretty cool products under private label brands, prime woods brands or polling brands and other things. So we think there’s other opportunities, core categories or core specialty categories to explore expanding and offering new private label products.
Reuben Garner: Okay. And on that note in your efforts to grow the specialty business, I think historically people – investors would’ve thought BlueLinx as maybe tilted heavily to new construction. But you guys have grown the specialty business quite a bit in some of those categories, like decking and siding are more tilted towards R&R. Do you have a sense or an estimate of what you’re kind of mix is between new construction in R&R now that you guys have changed so much in the last couple few years?
Kelly Janzen: Yes. Reuben, we did some work on this within the last year or so. And based on our data, we’re approximately 45% R&R, only 40% new construction. So we’re actually a little bit tilted toward R&R as a whole. And then the rest kind of commercial multifamily, et cetera. But that’s where we stand based on our kind of current view of that.
Reuben Garner: Perfect. And then a last one for me, I’m going to sneak one in if I could. So if you could help us the first month of the second quarter, the structural gross margins, I think you said they were high single digits. That’s sort of unbelievable for lack of a better word. How – has something changed in the market that allows you even in declining commodity price environments to put forth kind of stable or normal margin profile? I guess, said differently, I kind of thought that, even with your programs and different things you guys have in place to centralize that that with prices going from $1,400 to sub $1,000 over the course of a month, it would be tough for you to have a positive margin, much less to be sort of where you’ve historically been in stable markets.
Kelly Janzen: Yes. Well, Reuben, we continue to refine our approach around managing our commodity inventory. We don’t just – we continue to rethink and look at it and improve. We have weekly calls and we’ve have done that since the middle of 2020. But we continue to think it through. And I think specifically this quarter, we really even – brought it even further and upped our game around continuing to keep very lean inventory and still be able to serve our customers. And I think the number marks on the call as well, we said, specialty inventory is really closer to 85% now, 15% commodity, that’s a big improvement. Even from just a few months ago where we said commodities closer to 20%, 25%. So we continue to just refine and improve. And I think that’s shown we got off our inventory very quickly. And then the market did stabilized to be fair pretty quickly as well. So, yes, so right around our – the margin rate that we’ve typically set is a more normalized margin rate for us for the commodity business right now.
Reuben Garner: Great. Very helpful. Thanks guys and congrats on results.
Operator: Our next question comes from Kurt Yinger with D.A. Davidson. Please proceed.
Kurt Yinger: Great. Thank you and good morning, everyone. Just wanted to start off within the specialty segment on the comment regarding kind of shifting volume towards higher margin categories, could you maybe just add some color around what that looks like from a product perspective and how much of that is kind of market and customer driven versus your own internal initiatives?
Kelly Janzen: Well, I'll start and I'll let Dwight add on to this. Our general volume changes we're seeing are upticks in mostly siding and millwork where we're able to get a little more supply and to be able to kind of improve our share there. Specifically EWP is also I've been on mix shift over the last several months, however, where it's a little tighter from a supply perspective. So it's a little more flat than the other two categories we've spoken about. And then just as an overall perspective, like sequentially as like from Q4 to Q1, we saw an overall 8% volume across almost all the categories. So yes, it's just an intentional focus on these key categories as core for our business, as we continue to talk about focusing on the specialty products side of the product line. Dwight?
Dwight Gibson: Yes, I think Kelly nailed it. We're being really, really intentional and aligning the entire organization around the areas of the business that we want to drive or from a product perspective and also markets, right. So we've had some opportunities as we've gotten a little bit more volume to really lean into some program as expanding those, that availability across some additional branches and locations, which is contributing to what you see. And we're going to continue to kind of drive that with energy over the course of the year.
Kurt Yinger: Got it. Okay. That's helpful. And then just thinking about the impact of price on the specialty segment over the next few quarters excluding, maybe SEDAR and some of the other kind of industrial products that may be kind of tangential to commodities, any overall range you're thinking about in terms of average price inflation in 2022?
Kelly Janzen: Really no – we unfortunately don't have a good view of that. All I can tell you is that currently we've been able to sustain the price. We've seen continued price hikes from the end of 2020. We continue to sustain that pricing. And in fact, we saw a little bit more going into even in this past quarter. So from what we see, we don't see in abatement in the near-term, as it relates to pricing, of course, we're cognizant and monitoring the macro environment, just like everybody else is certainly. But we haven't seen it yet.
Kurt Yinger: Got it. All right. And then there's been a couple different comments in terms of operational improvements and commercial excellence focus. I was hoping you can maybe just provide a few examples of wins you've seen or been able to achieve there over the last couple quarters?
Dwight Gibson: Yes. So I'll talk about that in a couple different areas. One of the things that I've been really pleased to see is the team really understanding and making sure we have good opportunities relationships with some of our larger customers, particularly on the national account side and some of our larger regional customers. So we've been able to put together some programs that really speak to their needs a bit more specifically around certain products that we've been able to offer certain services that we've been able to offer in addition to the products that leverage our expertise and leverage our capabilities. And we've had some nice wins in most of our regions around that. And I'll talk – probably talk about that in a little bit more detail at our upcoming Investor Day. And then in just terms of how we're running the business, really, really driving standard processes and approaches that are best practice across all of our locations as it relates to how we manage our inventory, how we price, making sure there's consistency and clarity and good visibility around deviations and managing that appropriately. And then also around safety, just making sure that from a safety perspective, something we're very proud of and I think is a contributor to efficiency and capacity, making sure we're driving that in a consistent way across the organization. Then having metrics that are consistent and common that we hold people accountable to and make sure we're seeing progress. So lots of things on the commercial side, the operational side. And again, I still think we're in the early days of the work we're doing to continue to make BlueLinx the best it could be.
Kurt Yinger: Okay. All right. Appreciate that, and then just my last one, kind of a bigger picture question. I mean, the balance sheet and liquidity has drastically improved over the last couple years. Your increasing investments back into the business when you speak with suppliers and customers, do you think that's had an impact on how they view BlueLinx as a partner? And when you think about the competitive landscape and trying to align yourself with the best brands and products, do you think the current state of the business puts you in a better position to attract those premium brands to the platform?
Dwight Gibson: Yes, I think the team has done a really, really good job of driving performance throughout the business. And we've also really continue to drive a high level of engagement with customers and with vendors. And that's been recognized, I've had the opportunity now to meet with almost all of our top customers and pretty much most of our top suppliers and visit them and spend time with them. And they've referenced that. And so we're excited about that. We feel good about that, but the work's not yet done. We still have – I think, meaningful opportunities to continue to grow our wallet share with the big customers and be even a bigger partner to the best brands in the industry. And that's what we're focused on.
Kurt Yinger: Got it. Okay. Appreciate all the color and I'll turn it over guys. Thanks.
Dwight Gibson: Thank you.
Operator: Our next question comes from Jeff Stevenson of Loop Capital Markets. Please proceed.
Jeff Stevenson: Hey, thanks for taking my questions today and congrats on the great quarter.
Dwight Gibson: Thanks, Jeff.
Jeff Stevenson: Sure. Yes. My first question was just around the decision to increase the share repurchase authorization to $100 million and include the ASR. Just wondering how that came about, because previously you held off buying back shares in the back half of last year, but the market volatility just make current valuation levels too low to ignore.
Dwight Gibson: Yes, again we are really, really trying to drive a thoughtful and disciplined approach to capital allocation as we've kind of talked about. And we felt that with the performance that we were delivering in the business and as we were, obviously ramping up our organic investments. We've kind of taken that up a fair amount over the past a few quarters. We'll continue to be really thoughtful and build a really nice pipeline. Sean has been doing a good job on the M&A side. And we also wanted to make sure that we would be opportunistic as we've said in the past and also move with pace once we decided to think about returning capital to shareholders and all those things came together, great engagement and support from our board. And we still think with the liquidity that we have in the year, what we expect over the next couple years, it doesn't restrict our ability to continue to invest in the business in other ways. So felt like the right thing to do and really excited about getting that out into the marketplace.
Jeff Stevenson: Great. That's helpful. And then I just wanted to touch on structural products volume growth, given your playbook of running lower inventory levels and using consignment to limit what commodity risk. Just wondering how volumes were in the first quarter and if we should expect them to lag on a year-over-year basis, moving forward giving the lower inventory levels.
Kelly Janzen: Yes. So we did – so the year-over-year volume change is a slight decrease. As really the last few quarters have been decreased as year-over-year. As we manage the inventory, we're keeping it lower, we're more focused on driving volume growth on our specialty side. We're absolutely supporting the commodity structural business and supporting our customers in the best way. But we have given a little bit up on the volume side to really manage and balance the risk associated with the commodity market.
Jeff Stevenson: Got it. And then shift into the specialty side. You had – increased both sequentially and year-over-year on the inventory side. Was this just an opportunity to ensure you had enough product on hand in a strong demand environment or there another reason for that?
Kelly Janzen: Well, year-over-year was a slight decrease with increases specifically in key categories, such as the millwork, siding that I had mentioned earlier. sequentially, we had a nice increase, an 8% increase and all that is really, it's just kind of shifting around depending on the allocation of supply that we have. The demand is good. The market is really good, still good right now for these products. And I think we're executing really well. So we're making the most of what we've got.
Jeff Stevenson: Okay. Thank you.
Ryan Taylor: Thanks Jeff. This is Ryan Taylor…
Operator: I would like to turn the call back over to management for some closing comments.
Ryan Taylor: Yes. Thank you so much. This is Ryan Taylor, VP of Investor Relations. That concludes our question-and-answer session for today's call. We really appreciate everybody joining us today. If you have any follow up questions, please feel free to reach out to Alexander or myself. We'll be happy to get back to you or schedule a time to talk. Thank you so much, everyone. We'll talk to you next time.
Operator: Thank you. This does conclude today's teleconference. You may disconnect your lines at this time and thank you for your participation. Have a great day.
