Builders FirstSource (BLDR) Earnings Transcript

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DATE

Tuesday, Feb. 17, 2026 at 8 a.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Peter Jackson
• Chief Financial Officer — Pete Beckmann

TAKEAWAYS

• Net Sales -- $3.4 billion for the quarter, down 12% due to lower core organic sales and commodity price deflation, partially offset by contributions from acquisitions.
• Gross Profit -- $1 billion, marking a 19% decrease compared to the same quarter in the prior year.
• Gross Margin -- 29.8% for the quarter, a reduction of 250 basis points primarily driven by lower starts environment.
• Adjusted EBITDA -- $275 million, down 44%, reflecting lower gross profit and reduced operating leverage.
• Adjusted EBITDA Margin -- 8.2%, a decrease of 470 basis points from the prior year period.
• Adjusted EPS -- $1.12, a decline of 52% year over year with approximately $0.04 per share added from share repurchases.
• Operating Cash Flow -- $195 million for the quarter, down by $179 million mainly due to lower net income.
• Free Cash Flow -- $109 million for the quarter and $874 million for the year; full year free cash flow yield was approximately 8%.
• Return on Invested Capital -- Operating cash flow return was 13% for the year.
• Net Debt to Adjusted EBITDA -- Approximately 2.7x, with no long-term debt maturities until 2030.
• Capital Expenditures -- $86 million in the quarter, with $227 million deployed on acquisitions.
• Facility Consolidations -- 25 facilities consolidated in 2025, totaling 55 over two years, while maintaining a 92% on-time and in full delivery rate.
• Productivity Savings -- $48 million realized in 2025, primarily from targeted supply chain initiatives.
• Digital Platform Activity -- Nearly $7 billion in processed quotes through 2025, a year-over-year increase exceeding 130%.
• 2026 Guidance: Net Sales -- Projected in the range of $14.8 billion to $15.8 billion, assuming flat single-family and multifamily starts and a 1% rise in repair and remodel activity.
• 2026 Guidance: Adjusted EBITDA -- Expected between $1.3 billion and $1.7 billion, with an adjusted EBITDA margin of 8.8% to 10.8%.
• 2026 Guidance: Gross Margin -- Full-year outlook in the 28.5% to 30% range due to a below-normal starts environment.
• 2026 Guidance: Free Cash Flow -- Anticipated at approximately $500 million, reflecting a projected $300 million working capital swing and lower EBITDA.
• 2026 Guidance: Q1 Net Sales -- Expected between $3 billion and $3.3 billion; Q1 adjusted EBITDA targeted at $175 million to $225 million.
• M&A Activity -- Four acquisitions completed, including Builder's Door & Trim, Rystin Construction, Lengefeld Lumber, and Pleasant Valley Homes, which expand value-added and modular housing offerings as well as geographic reach.
• Acquisition Track Record -- 40 acquisitions since the BMC merger in 2021, amounting to over $2.3 billion in annual sales.
• SG&A Cost Actions -- $100 million targeted, including $75 million in reductions and $25 million in cost avoidance, mainly in SG&A.
• Install Business -- Represented 16%-17% of total sales and outpaced the decline in single-family, with margins in line with installed categories.
• Share Repurchase Authorization -- $500 million remaining.
• Commodity Price Assumption -- 2026 guidance is based on average commodity prices of $365 to $385 per thousand board foot, below the $400 long-term average.
• Capital Deployment in 2025 -- Nearly $2 billion allocated to return-enhancing opportunities aligned with strategic priorities.

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RISKS

• Net sales declined 12% and gross profit fell 19% for the quarter due to weaker housing starts and commodity deflation.
• Adjusted EBITDA margin dropped to 8.2% and adjusted EPS decreased by 52% year over year in the fourth quarter.
• 2026 guidance assumes continued softness with net sales and gross margin outlook reflecting below-normal starts and ongoing affordability challenges.
• Pete Beckmann noted that insurance and rent are inflationary items for 2026, with increases embedded in SG&A expectations.
• Free cash flow is expected to decrease to $500 million in 2026 due to a $300 million negative swing in working capital and lower EBITDA.
• Higher-than-expected insurance cost true-ups pressured fourth quarter performance; Q1 guidance incorporates weather-related headwinds impacting $30 million to $40 million of sales.

SUMMARY

Management reported a significant decline in fourth quarter and full-year metrics, with sales and profitability pressured by falling housing starts, weak consumer confidence, and commodity price deflation. Executives emphasized that productivity initiatives, disciplined capital allocation, and technology investments helped sustain healthy margins and cash flow despite the challenging environment. Facility consolidations, targeted cost reductions, and an active acquisition strategy are intended to support operating flexibility and long-term growth as market conditions evolve. Digital initiatives and modular construction capabilities represent new areas of investment, with scale and integration cited as strategic advantages. Capital structure remains secure, with no significant debt maturities until 2030 and ample share repurchase flexibility.

• Facility consolidations and cost actions have included $100 million in SG&A-related measures and consolidation of 25 facilities, while maintaining a 92% on-time and in full metric.
• Recent acquisitions, including Pleasant Valley Homes, expand the company’s presence in modular housing and enhance geographic reach, aligning with a broader prefabricated component strategy.
• Digital platform adoption has grown rapidly, processing $7 billion in quotes and increasing over 130% year over year, reflecting heightened integration of technology into sales and operations.
• Management stated, "There is share growth in here in terms of what we're going after, and we're balancing it against some of the erosions that we've seen that we're lapping as part of 2025."
• Guidance for 2026 reflects ongoing headwinds, but incremental margin leverage is expected as volumes return and fixed cost investments support operating efficiency.
• Management commented that insurance and rent inflation are embedded in 2026 outlook due to lease structure and actuarial expectations, posing ongoing cost pressures.
• Pete Beckmann reaffirmed that normalized earnings power remains at $2.1 billion to $2.4 billion EBITDA and 30%-33% gross margins under a scenario of 1 million to 1.1 million starts.

INDUSTRY GLOSSARY

• Value-Added Solutions: Customized building components and services, such as trusses, wall panels, and turnkey installations, designed to improve homebuilder efficiency and profitability.
• Modular Housing: Factory-built residential structures delivered as pre-assembled modules for on-site installation, intended to reduce cost and construction time versus traditional stick-built methods.
• On-Time and In Full (OTIF): A supply chain performance metric indicating timely and complete delivery of orders.
• HUD-Compliant Homes: Manufactured housing units that meet the construction and safety standards established by the U.S. Department of Housing and Urban Development.
• Installed Business: Company-provided installation services of building products and components, typically bundled with product sales.

Full Conference Call Transcript

Peter Jackson: Thank you, Heather, and good morning, everyone. Driven by focused execution and close customer partnerships, we successfully navigated 2025 despite ongoing housing affordability challenges, weak consumer confidence and depressed commodity prices. We remain committed to reducing barriers to affordable housing and driving a more efficient integrated supply chain. Our ability to perform effectively through each phase of the business cycle reflects the strength of our differentiated value-added solutions, industry-leading technology and unique operating model. Executing from a position of strength, we continue to invest in initiatives that expand our capabilities, enhance our footprint and position us to outgrow the competition as conditions improve.

I'm confident in our ability to manage through near-term uncertainty and build exceptional long-term value for our shareholders. Let's now turn to Slide 4. Our full year 2025 results reflect disciplined execution as we sustained healthy profitability despite a soft starts environment, underscoring our operational excellence and strategic investments. This included maintaining a gross margin above 30% and an EBITDA margin above 10%, a clear reflection of the durability of our transformed business. I'm grateful for the dedication of our team members and the ongoing support of our customers as we turn the page to 2026. Let me step back and offer some perspective on the market.

The housing market remains weak and is characterized by more headwinds than tailwinds as affordability challenges, muted consumer confidence and depressed commodity prices continue. This was apparent in November and December as our sales fell off more than expected as these cross currents impacted starts and led to a softer Q4. Economists are divided in their outlooks for 2026, with some calling for further declines in single-family starts and others expecting modest growth as macro conditions and regulatory policies remain uncertain. At the same time, prolonged softness in both residential new construction and repair and remodel have pushed OSB well below normal, resulting in a commodity composite below $350 per thousand board foot as we exited 2025.

Commodity supply is being curtailed, but not at a pace that we believe will meaningfully lift prices in the near term. Finally, inflationary pressures continue to impact costs, particularly in the insurance and rent categories. Despite these macro pressures, we remain committed to advancing our strategy with a sustained focus on growth, continuous improvement, smart investments, innovation and developing our people. We cannot control the macro, but advancing our initiatives will enable us to realize share gains, improve the way we operate and position us to accelerate growth with any level of recovery. Our single-family builder customers have addressed ongoing affordability challenges by offering smaller and simpler homes as well as incentives such as interest rate buydowns.

That creates an environment where there are less sales dollars per start and every start is more competitive on the affordability front. We are working closely with our customers, leveraging our broad product portfolio and bundled value-add solutions to drive cost efficiencies while upholding the highest quality standards. In the multifamily market, activity remained muted through year-end, in line with our previous thinking. We continue to see green shoots in quoting activity as our customers benefit from improved financing costs. As a reminder, our first sale tends to lag a multifamily start by about 9 to 12 months.

Given the current project pipeline, an uptick in our multifamily results will not appear until the back half of this year at the earliest. In response to the market weakness, we are prudently managing spending and maximizing operational flexibility, as shown on Slide 5. We are aligning capacity across our facilities, managing fixed and variable headcount and reducing capital expenditures. Pete will provide more detail later in his remarks. We consolidated 25 facilities in 2025, bringing our total to 55 over the past 2 years, while maintaining an on-time and in full delivery rate of 92%.

With our industry-leading scale, experienced leadership team and a track record of operating proactively through the cycle, we are confident that we can make the necessary adjustments and deliver exceptional customer service. On Slide 6, we highlight some of the key initiatives under our strategic pillars. In 2025, we invested more than $110 million on new, expanded or upgraded value-added operations across our footprint. We remain disciplined in how we deploy capital. Our consistent strong free cash flow through the cycle gives us the flexibility to invest in organic growth, pursue strategic M&A and return capital to shareholders. This capital deployment is strengthening our competitive position and driving long-term value creation.

Operational excellence is crucial to how we run the business as we develop talent, improve agility and embed technology into our operations. We generated $48 million in productivity savings in 2025, primarily through targeted supply chain initiatives. Moving to Slide 7. Our prudent capital allocation strategy focuses on maximizing shareholder returns. In 2025, we deployed nearly $2 billion towards return-enhancing opportunities aligned with our priorities. Drilling down into M&A on Slide 8. We remain focused on pursuing acquisitions that expand our value-added product offerings and advance our leadership position in desirable geographies. We have developed substantial and proven muscle memory to grow through M&A and have a track record of successful integration.

As a reminder, we acquired both Builder's Door & Trim and Rystin Construction in October, which together formed the leading provider of door and millwork capabilities in the Las Vegas area. In November, we acquired Lengefeld Lumber, a leading supplier serving Central Texas and Pleasant Valley Homes, a wholesale manufacturer of factory-built housing serving 10 Northeastern states. Pleasant Valley represents an expansion of our prefabricated component strategy to address challenges facing the homebuilding industry such as affordability and access to labor with a cost-competitive factory-built option, which reduces builder cycle times. The company sells HUD-compliant manufactured homes and high-quality semi-custom modular homes to land lease community developers, retailers and homebuilders.

We plan to use available factory capacity to offer high-quality semi-custom modular plans to our existing homebuilder customers with the potential to expand the offering to our homebuilder customers in other BFS markets in the future. And lastly, in January, we acquired the assets of Premium Building Components, marking our company's first truss and wall panel operations in New York. Since the BMC merger in 2021, we have made 40 acquisitions, representing over $2.3 billion in annual sales, the equivalent of a top 10 LBM player, demonstrating our ability to execute and integrate seamlessly. And with the industry still fragmented, we see significant opportunity ahead and are confident that inorganic investments will remain an important driver of long-term growth.

Let's now turn to Slide 9 and discuss the latest updates on our digital and technology strategy. We continue to differentiate by digitally enabling our team members, customer relationships and value-added product development to drive long-term growth through technology-driven platforms and services. The investments in automation, artificial intelligence and digital integrations highlight our commitment to creating a seamless experience for our customers to help streamline their operations. Since launching in early 2024, our digital platform has processed nearly $7 billion of quotes through 2025, representing a year-over-year increase in excess of 130%. This week at the International Builder Show, we will showcase the next generation of digital solutions for builders.

These solutions deploy emerging technologies to unlock rich insights and make every step of the homebuilding process easier, not only for our builder customers, but also for the entire ecosystem of suppliers and technology partners. We do not categorize digital as only being a driver of long-term growth for BFS. It is integral to how we do business every day. We are committed to digitally transforming the operations and continuing to invest in consumer-grade digital solutions designed to improve our team members' efficiency, engagement and performance. Our digital investments are particularly impactful in the sales organization, creating time to capture new market share, expand our product offerings and strengthen our customer relationships.

Continuing on the technology front, I'm pleased that we have made steady progress in our comprehensive implementation of SAP after the launch of 2 pilot markets last July. We're applying the valuable insights we've gained from these initial pilots to prepare for the next phase. In Q4, we advanced the development of our solution and refined our deployment plan, positioning us for continued rollout in 2026 and broader deployment beyond. Although these conversions are always challenging, we are working through the details and are excited about the growth and efficiency opportunities to come with this business-driven transformation. Recognizing one of our incredible team members each quarter is one of my favorite parts of our earnings calls.

Today, I want to spotlight Charles Green, an inside sales representative at our Wilmington, North Carolina millwork location, who is celebrating an extraordinary 48 years with BFS. Charlie began his career in 1977 as a truck driver. After 13 years on the road, he transitioned into sales, where he quickly became a subject matter expert in the Wilmington market. Charlie developed a loyal following for his customer service, always checking in to make sure the job is done right and for making jokes. Here's one for you, Charlie. Why did the homebuilder get in trouble with the neighbors, for raising the roof? All right. So that one is probably not good enough for you, Charlie.

But your dedication to our customers, your teammates and the community reflects the values that are important to all of us at BFS. I'll now turn the call over to Pete to discuss our financial results in greater detail.

Pete Beckmann: Thank you, Peter, and good morning, everyone. Our fourth quarter and full year performance reflects disciplined execution in a weak housing market. We remain focused on managing costs, advancing key growth initiatives and harnessing technology for long-term success. As we get into the fourth quarter results, I want to discuss the reasons for our financial performance versus the guidance. Sales decelerated more sharply than expected late in the quarter as homebuilders aggressively delayed starts to work down excess inventory. Additionally, we incurred higher-than-expected insurance cost true-ups, which further pressured performance. In response, we moved quickly to accelerate cost reduction and network optimization actions. With that context, let's turn to our fourth quarter results on Slides 10 through 12.

Net sales decreased 12% to $3.4 billion, driven by lower core organic sales and commodity deflation, partially offset by growth from acquisitions. The core organic sales decrease was driven by a 15% decline in single-family, reflecting lower starts activity and reduced value per start and a 20% decline in multifamily, consistent with our expectations amid muted activity levels against stronger prior year comps. Additionally, repair and remodel decreased 7% as consumer uncertainty persisted. As we've noted on recent calls, there are a few key factors reconciling single-family starts to our core organic sales. First, as a reminder, there is roughly a 3-month lag from a start to our first sale.

Second, the value of the average home has fallen as size and complexity have decreased over time, creating an additional sales headwind. Third, margins across the supply chain remain pressured by housing affordability constraints. Based on this, we believe our full year and fourth quarter share were roughly flat as we continue to be the industry leader and a trusted partner to our customers. For the fourth quarter, gross profit was $1 billion, a decrease of 19% compared to the prior year period. Gross margin was 29.8%, down 250 basis points, primarily driven by a declining starts environment.

Compared to roughly 27% in 2019, our current gross margin highlights the meaningful investments we've made in value-added solutions and our continuous improvement initiatives. Adjusted SG&A of $751 million decreased $13 million, primarily due to lower variable compensation amid lower sales, partially offset by acquired operations. As we touched on earlier, we're leaning further into our downturn playbook with $100 million of cost actions, $75 million in year-over-year cost reductions and $25 million in cost avoidance. These actions include deeper cuts to overtime and temporary labor, adjustments to incentive compensation plans, reduced merit and overhead spend, accelerating the pace of facility consolidations and tighter controls on discretionary spending. This positions us to leverage our costs as the market improves.

Adjusted EBITDA was $275 million, down approximately 44%, primarily driven by lower gross profit. Adjusted EBITDA margin was 8.2%, down 470 basis points from the prior year, primarily due to lower gross profit margins and reduced operating leverage. Adjusted EPS was $1.12, a decrease of 52% compared to the prior year. On a year-over-year basis, share repurchases enabled by our strong free cash flow generation added roughly $0.04 per share for the fourth quarter. Now let's turn to the cash flow, balance sheet and liquidity on Slide 13. Our fourth quarter operating cash flow was $195 million, down $179 million, primarily due to lower net income.

For the quarter, we delivered $109 million of free cash flow and $874 million for the year, underscoring the strength and consistency of our cash generation profile. Our full year free cash flow yield was approximately 8%. Operating cash flow return on invested capital was 13%. Our net debt to adjusted EBITDA ratio was approximately 2.7x. We have no long-term debt maturities until 2030, supporting operational discipline and flexibility for accretive capital deployment. Moving to fourth quarter capital deployment. Capital expenditures were $86 million, and we deployed $227 million on acquisitions. We have $500 million remaining on our share repurchase authorization.

We remain comfortable with our net debt levels, and we'll continue to execute our capital allocation priorities with discipline to maximize long-term value creation. On Slides 14 and 15, we outline our 2026 outlook and assumptions, which are broadly consistent with the middle scenario we shared on our third quarter earnings call. Compared to 2025, single-family and multifamily starts are expected to be flat year-over-year with repair and remodel up 1%. As a result, we are guiding net sales in the range of $14.8 billion to $15.8 billion, adjusted EBITDA of $1.3 billion to $1.7 billion and adjusted EBITDA margin in the range of 8.8% to 10.8%.

We expect our 2026 full year gross margin to be in the range of 28.5% to 30%, reflecting the below normal starts environment. We expect free cash flow of approximately $500 million. The year-over-year change is driven primarily by a $300 million swing in working capital and lower EBITDA. In 2025, we benefited from a working capital release through disciplined inventory management and lower sales, but expect to invest in working capital in 2026. Our guidance assumes average commodity prices in the range of $365 to $385 per thousand board foot versus the long-term average of $400.

For Q1, we expect net sales to be between $3 billion and $3.3 billion and adjusted EBITDA to be between $175 million and $225 million, reflecting the challenging macroeconomic environment, elevated housing inventory levels and winter weather impacting key markets. The shape of the full year implies a heavier second half contribution as we lap the starts decline due to normalizing housing inventory levels. In closing, we are closely monitoring the current environment and remaining agile to mitigate downside risk in the near term while also investing strategically for the future.

Supported by a fortress balance sheet and strong free cash flow through the cycle, we continue to manage capital with rigor, drive for organic growth and productivity and pursue M&A. We remain well situated to compound value through our strategic initiatives. With that, I'll turn the call back over to Peter for some final thoughts.

Peter Jackson: Thanks, Pete. While it was a tough quarter, we are taking action to reset our cost profile while continuing to invest in technology and innovation. We have transformed BFS into a materially stronger company, one powered by our leading value-added offerings and digital solutions, a relentless focus on operational excellence and superior capital deployment. With our scale and experienced cycle-tested team, we expect to deliver solid results in the near term and tremendous upside when the market recovers. Thank you for joining us today. Operator, let's please open the call now for questions.

Operator: [Operator Instructions] We'll take our first question from Matthew Bouley with Barclays.

Elizabeth Langan: You have Elizabeth Langan on for Matt today. I just wanted to start off asking regarding the cadence of the year. Obviously, 1Q will be a little bit softer. You touched on some of the pressures around inventory and weather and noted that the back half will be a little bit stronger. Could you speak a little bit more about how you're thinking on the single-family side versus the R&R side in terms of what you're seeing right now in the market?

Peter Jackson: Sure. Yes. As you mentioned, the overlay for the year is pretty modest in all the categories, right? We're not expecting a lot of growth. The way that the year is shaped, when you look at it on a year-over-year comp basis, a lot of that has to do with the shape of '25. So the dynamic in '25 came in hot and the year ended very slowly on the builder side. They pulled back, had too much of the inventory of new homes as they got through the end of the summer and pulled back very, very hard on their starts volume at the end of the year, harder even than we expected.

So that left us with a sort of strong first half, weak second half baseline to enter in with '26. In our planning, what we're seeing is a very slow exit to '25. It's ramping well. We're seeing the behaviors that you would expect of builders building for a strong summer. And we would expect that to continue to ramp up as we get into the year to get to a healthy level. I think the easiest part about the second half of '26 is with even a reasonably good year. It doesn't have to be a great year. We'll be able to pretty dramatically outperform last year just because of how weak last second half was.

So that's sort of the frame. In general, multifamily has continued to bubble along. It has not turned dramatically, but also, I would say the worst of the downturn is over. It's just sort of stable at where it's at. We're hoping that as the rates continue to moderate, we'll continue to see those quotes turn into orders and start hitting the ground in that multifamily space. R&R, it's been sort of stumbling along. Again, I do think rates will help as we get into 2026. Certainly, there's more and more positive coming out of that space in terms of homebuyers being willing to invest and our positioning in that space where we are around the country.

Elizabeth Langan: Great. That was really helpful. And then this is probably more for Pete, but you gave some commentary around the pieces of the cost actions that you guys are planning to take this year. Could you give us a little bit more detail around like the timing of that and how you're expecting that to kind of shape in across the gross margin and SG&A?

Pete Beckmann: Yes. So just to clarify, the cost actions that we outlined are 100% SG&A related. Most of those actions are already in place and executed, and it's a matter of time to realize the benefits through the course of the year. We are not giving any really additional details around the specifics of each of those at this time, but just know that we're moving aggressively on the evaluation of our facilities and consolidations, consistent with what we've been doing in the last 2 years, but in a more immediate fashion. So if something is on the fence, we're moving forward with it at this time.

And as I said in the prepared remarks, about 3/4 of the adjustments are year-over-year reduction, whereas 1/4 of the cost actions is a cost avoidance.

Operator: We will move next with Mike Dahl with RBC Capital Markets.

Michael Dahl: I wanted to drill down into the gross margin dynamic a little bit. I mean gross margins even in a weak backdrop for the fourth quarter, they're drifting lower, but they're still very resilient. But then obviously, your guidance is still a wide range, including something that would be kind of notably worse at 28.5%. So I wanted to ask more about kind of what you're seeing on the ground that's driving that range of expectations. I know you said it's still competitive out there, but maybe you can speak to kind of some of the more recent dynamics and also when you think through the cadence, how that paces through the year?

Is that 28.5% or is it there because that's what you expect in 1Q? Or you're just giving yourself a buffer? Anything on dialing in 1Q a little bit better would also be helpful to understand that cadence.

Peter Jackson: Yes, sure. So as we think about gross margins overall, I think they've been pretty stable, pretty strong. The team has worked very hard to find that sort of equilibrium to ensure that we're not losing share that we're in a position to gain share, but at the same time, protecting profitability. So that's been an important precursor. And I think we've done a pretty good job. The question around the gross margin coming in at the beginning of this year really has to do with the uncertainty on the resets at the beginning of the year. So there's always a new contract period that triggers at the beginning of the year.

You have a sense of volumes and contract levels, but compounded by the delevered facilities because things slower in this time of the year, early Q1, in particular, is the slowest time of the year for us. You get a little bit more pressure and volatility on some of those gross margin numbers. So really, that's the storyline there. By and large, we're expecting a fairly stable year around gross margins right around just sub that 30% level, but that's the thing that we spend probably as much time as anything managing and making sure we're structurally aligned around. As you think about '26, obviously, that will continue.

Michael Dahl: Okay. Just a clarification. I mean, you're saying stable just under 30%, but then there's the low end of the guide is quite a bit below that. So I just want to be clear, like that is accounting for potential variability that you have not yet seen versus something that you're already experiencing. That's just a clarification. My second question was just making sure I understood the free cash flow dynamic a little bit.

It sounds like based on how you expect the comps through the year that maybe that's a, hey, since you expect there to be growth in the back half of the year, even though it's a comp dynamic at minimum, like that's why your working cap is going to swing pretty hard year-on-year. And then would it be kind of getting into next year, it would normalize again? Just want to make sure we understand that.

Peter Jackson: Yes. So I mean, I'll field the first one. I'd say my first reaction is yes. It's absolutely a band that tries to give you a sense of the ups and downs based on kind of how we're hearing folks talk about it. We are not seeing that deep downside now on gross margins that we're concerned about, but I want to make sure we're really honest about the dynamic right now in terms of the band of where it could be. But our guide is where we think it is, and that's what we're, I think, experiencing in terms of the trajectory of the year and where we're headed. And then Pete, on the cash flow?

Pete Beckmann: Yes. So Mike, your question on the cash flow. So the $500 million guide for 2026 does reflect an investment in working capital through 2026, exiting, as Peter mentioned, with the back half being higher on a year-over-year basis. So your exit point or the point in time in which cash flow is measured is going to be higher, at least in our guidance. So that's going to be the use of cash versus what we experienced in 2025 was a source of cash as we harvested the balance sheet in a declining market. So that's the biggest change with a little bit of impact from the lower EBITDA that we're guiding for 2026.

Peter Jackson: Just kind of a general reminder, as a rule of thumb, we're in that 9% to 10% incremental and decremental working capital number as it pertains in particular to that year-end trajectory, right? It matters for where we're comparing in that fourth quarter versus fourth quarter. So the more we grow, yes, we will invest, but the return is quite nice on that.

Operator: We will move next with John Lovallo with UBS.

John Lovallo: I wanted to talk about the incremental margins just on the business. I mean there's been a lot of productivity initiatives achieved over the past few years, and there's some more cost actions planned for this year. So how should we sort of think about the incremental margins for the business as volume kind of comes back here? I mean, should they be above the historical levels?

Peter Jackson: Well, generally, our incrementals are quite good on the way up, primarily because of the tremendous leverage we get in the business. For all of the pride we hold in the value-add space in particular, it requires a fixed overhead investment that we're at the point of leveraging when the market is growing and returning. So in general, yes, I think we do see higher than average when we're growing, particularly as the adoption of that value add tends to accelerate in a growing market.

John Lovallo: Understood. And I just wanted to get your thoughts on recent acquisitions, Sumitomo acquired Tri Pointe. I mean the Japanese in general have been pretty big proponents of off-site construction. Curious, other than them trying to diversify away from an aging population in Japan, I mean, do you see this as an opportunity for them to really start pushing forward with some of the off-site construction techniques that could benefit your business?

Peter Jackson: Well, I mean, I guess I'd start by saying we're huge believers in off-site fabrication. So I think all of us are looking for ways to add efficiency and productivity and speed into this industry in any way that we can. Clearly, the Japanese have done a good job in manufacturing over the years. And I think there are homebuilding operations in Japan that have leaned far more heavily into this off-site fabrication idea. I think the challenge in any of these is, can you do it efficiently. Now historically, the Japanese companies have had very long investment horizons. When they talk about doing something, they're not talking about a couple of years.

They're usually talking about a couple of decades. So we'll see. We'll see where they end up. I would say, in the near term, we have very good partnerships with all of the Japanese owned homebuilders in the U.S. We work closely with them. I think we've got some really interesting things we're doing with them. And I think we'll look for opportunities to partner in the offsite fabrication space as well. So at this stage, interesting, certainly something we want to keep an eye on, but we're believers in the idea.

Operator: We will move next with Charles Perron-Piché with Goldman Sachs.

Charles Perron-Piché: First, I just want to touch on volume versus price in this environment. The guidance seems to imply relatively flat market share assumptions for you in 2026. The builders have been talking extensively about their desire to lower the stick and brick cost this year. Can you talk about some of the discussions that you have with the builders today? How do you get price for the value-add services that you provide against a pretty competitive backdrop? And are you seeing any change in the appetite for value-add product today?

Peter Jackson: Well, there's been a lot of pressure across the board. I think that the builders are harvesting -- what the builders are telegraphing is primarily what they already got. I think they're seeing a full year's benefit of the negotiations that we had during the year. And I mean you can see our margins. It's been a challenging environment. At the same time, I think we've done a good job of finding ways to offer packaged solutions, integrated solutions, more value-add across the service and product profile that has helped us be that key partner to kind of protect our position, which in turn protects our price. I'm not going to make believe that price is easy right now.

It's certainly not. But ultimately, all of us are trying to figure out how to build homes more affordably. And I think we have an advantage in that regard in that we've got more options for builders to be able to solve that problem than anybody else. And our ability to execute that is superior to everybody else versus vis-a-vis our size, our subject matter expertise and the quality of our folks and the size of our team. So I think that there's certainly a challenge out there, but we've been fairly successful in keeping that balance. The one maybe subtlety, I'll refute one of the things or argue one of the points you made.

There is share growth in here in terms of what we're going after, and we're balancing it against some of the erosions that we've seen that we're lapping as part of 2025. So we are doing both, and I think it's critical that we continue to execute on that. That's the kind of thing that will position us in a very strong way coming into the recovery upcoming.

Charles Perron-Piché: Got it. Okay. That's helpful color, Peter. And then just switching to the acquisition of Pleasant Valley Homes this quarter. It sounds like it's a strategic move into modular housing. I think you talked about the East Coast mainly at their market. So when you think about the outlook for modular housing, how should you consider this opportunity as part of your growth strategy in general?

Peter Jackson: Yes. It's an exciting experiment for us. It's a great business. The Pleasant Valley folks are a great team. They build a really high-quality house. They've been successful bringing it to market in those Northeast states. I love their footprint. I think they've got a very ingenious approach to the way that they've executed their construction process. And we're interested in exploring whether or not there's a partnership there to be had with our builder customers. To be clear, we're not interested in being a traditional retail HUD and modular home seller. That's not the game that we're in. They certainly have a little bit of that business. We're going to leave that alone. We're happy that, that business exists.

But our vision is to reach out to our homebuilder partners around the country to say, where does it make sense for you to have access to manufactured modular high quality in your market that helps you fill particularly that sort of lower-end affordable home category in a way that builders feel like is an advantage to them. And in my sense of it, it works very much the way truss does, right? We own most of the truss plants in this country because we're really good at running them and at meeting the demand for multiple builders. So we keep our capacity filled by being a service provider for various builders.

I think that's one of the barriers with modular housing is people trying to go on their own and figure out to fill and maintain that capacity. We think we can do more of that capacity filling by really working with our partners and finding ways to do it in a way that benefits them and us. So it's worth exploring. Certainly, it's early days, but optimistic about where we think it will head.

Operator: We will move next with David Manthey with Baird.

David Manthey: The first question is on the complexion of the year. I get what you're saying relative to the 2 halves that you experienced in 2025, and it's always a little bit hard to parse out what exactly is base business. But it seems like based on your guidance, the first quarter is maybe like 21% of full year midpoint. And typically, even if you exclude last year over the past several years, it's been more like 23%, 24%. So what I'm trying to get to is how much of this is just typical builder conservatism on your part?

And how much of it is sort of maybe we are anticipating a little bit of acceleration even relative to normal seasonality through 2026?

Peter Jackson: It's definitely the latter for Q1. Yes. No, I don't want to pull any punches. We're ramping very quickly this year versus prior year or even 2 years prior because of how slow we came out of '25. But it's moving like it's doing what you would expect it to do in order to be able to hit our numbers, we're on track, but it does require a pretty aggressive ramp. I think it's maybe underappreciated how dramatically the big builders slowed when they realized they had too many units going into their year-end.

David Manthey: Yes. Fair enough. Great. And then second is a little bit relative to this contribution margin, incremental margin discussion. When you think about your cost structure; over the past 3 years, you guys have really constrained operating expenses extremely well. And if we're looking at an acceleration and some growth in '26 and into '27, beyond just the variable compensation elements which would naturally flex, are there any other sort of catch-up items or things that were deferred previously that might come back into play? Or are we just looking at sort of that, as you mentioned earlier, Peter, the outsized kind of contribution margin relative to your long-term targets in the high-teens?

Peter Jackson: Yes, that's a great question. The way I would characterize it is, there was -- and I know we're not the only ones, but I'll be candid. There were expenses that were in this business during COVID and during those massive runs that we allowed to maintain because we were more focused on capacity and meeting customer requirements and expectations than we were on maximizing efficiency, just -- not put too fine a point on it.

Even from the BMC merger from other acquisitions we did, there were operations where we maybe had the opportunity to do a consolidation or we might otherwise have, but, boy, we needed every bit of that capacity in order to meet the demands, so we left them. And I think what you've seen are some pretty disciplined operators get a hold of this business in a slower period of time and get back to fundamentals. The plays that we're running, the actions we're taking in order to reduce costs and to be more efficient are very much in line with the playbooks we've had here at BFS for 20 years. So this is what we know how to do.

These teams are very, very good at it and what you've seen are consolidations, but being able to maintain on time and in full and customer satisfaction indexes in the market. You've seen consolidations of spans and layers, better efficiency, better utilization of either equipment or fleet, all of that with the payoff kind of through the business of being able to, at some point, match the volume adjustments, obviously, but also to be able to capture productivity. So I don't anticipate there being anything we're behind on. I would say even with the challenging market, we've stayed committed to investing in the things that really matter.

I think we feel good about the refreshed fleet in the rolling stock, but we're also investing in innovation like technology on the core IT as well as the digital side and our investments in AI. So we're committed to being ready stronger coming into this next recovery than we even are today, and we're better today than we were 2 years ago or 5 years ago.

Operator: We will move next with Rafe Jadrosich with Bank of America.

Unknown Analyst: You have [ Sean ] on for Rafe. First, so you talked about the weakening revenue environment throughout the quarter. Just curious, did you see a pickup in competition from peers versus earlier in the year? And then it sounds like you guys are doing a good job closing some facilities. But what are you hearing about competitors? Do you think the capacity in the industry is starting to normalize at this point? .

Peter Jackson: So in order, no, we didn't see anything really different in the -- at the end of the year with regard to competition. It was pretty consistent. And yes, we have seen a couple of other competitors shutting down facilities. The thing you got to keep in mind, though, is given our scale, we can shut down facilities, and basically, we're just adjusting our footprint in a market, right? We're maybe adjusting our shipping distances or overlap. When most of our competitors shut down facilities, they're exiting the market. So their decisions are a little more dramatic than ours are when it comes to their ability to serve. We have seen a couple.

We've also seen folks who have sort of said they were going to open things, all of a sudden put things on hold. So I think that you are seeing a rational reaction in the industry with regard to capacity, not just in our space, I think it's true in a variety of providers in homebuilding products.

Unknown Analyst: Okay. Great. And then switching gears, it sounds like you guys are still seeing growth on the installed side of the business. Can you talk about what the size of that was in 2025 and your expectations for 2026 growth in install? And then just a little bit on how margins are trending in that business versus the overall business?

Pete Beckmann: So I would say with the install business, it's largely on par with where we were from a percent of our overall business around 16%, 17% of overall. It outpaced, so it didn't decline as much as the single-family overall business. So it was outpacing the market, which means we're gaining more inroads with the install capabilities in our offering across the platform. And the margins for install are generally in line with the categories that you're installing. So that hasn't changed from what we've communicated previously. It's a good business. We see it as another growth lever for us, and we're going to lean into that.

And this is a natural extension from what we do with value-added products and the off-site fabrication. So it's a vector that we're going to continue to invest in and strengthen our capabilities.

Peter Jackson: And I think it's important to point out that the builders' desire to have a seamless job site. Someone else that can take responsibility for making sure that things are done properly, that reliability is critical. And I don't think that's changed in this market. Yes, there's certainly a finer pencil on everything that we do by virtue of the decline in the market and the affordability challenges. But with the labor situation broadly in our sector with the requirement for these operators, the building -- the homebuilders to really want to run a tight ship, I think our ability to do that alongside them is important reason why we've had continued success in this space.

Operator: We will move next with Trey Grooms with Stephens.

Trey Grooms: So I guess, first off, on working capital investments in second half this year versus what was the opposite in '25. Is that -- the way we should be looking at that, is that more of a view into your kind of expectations for '27 prepping your inventory levels for a more robust environment there as we kind of enter '27, is that the best way to kind of read that inventory management you're expecting?

Pete Beckmann: The way I would kind of adjust what you're thinking, Trey, is as you think about the sales pace as you exit '25 versus the sales pace that we're anticipating for 2026, even a higher sales per day is going to lead to a higher AR balance -- receivables balance, which is an investment in working capital and the value of commodities, assuming that we return to a more normal level by the end of 2026, it's a higher investment on its own for inventory, let alone any positions that we're taking for what we think to come. We generally don't have to take positions on inventory.

We manage it very consistently and regularly through the cycle because we have a platform and a network that's very large, and we can withstand any short-term swings and we're in a great spot. I hope that helps.

Trey Grooms: Yes, yes, it does. It's more of just kind of the way the year is expected to progress versus what we saw in '25 more than anything.

Pete Beckmann: Exactly. We're not confident in '27, Trey. It doesn't mean we're not confident in '27. It just means we don't have to load up.

Trey Grooms: Yes. Got it. Perfect. And then last one for me is, obviously, you guys are clearly under earning, if you would, I guess, right now given the macro. But you guys in the past have given us a view into your earnings power in a more normalized housing environment of, I think it was 1 million to 1.1 million starts and you guys are kind of expecting EBITDA in that $2.1 billion to $2.4 billion range, 30% to 33% gross margins, you've given us a lot of detail around that.

Is that still kind of the best way for us to be thinking about the earnings power of the business in that more kind of normalized environment or has there been anything that has swung your view into that one way or the other?

Pete Beckmann: No, I think you're thinking about it right. We haven't changed our thinking on it. We had that on our scenarios page last quarter, which we didn't have scenarios this quarter, so it's just not in the materials, but it doesn't change the way we're thinking about that earnings power with a normal environment and we're going to continue to look at that through the course of this year and share more expectations around that when we get to Investor Day.

Peter Jackson: The biggest problem with our base business chart, Trey, is we're sort of close to the number. The edits away from the base business out of it as well is pretty modest. So you're right, it's far more about the current macro environment that's driving our outcomes, and that normalization that, you and Peter are talking about, is really the storyline for where we're headed.

Operator: We will move next with Ivy Zelman with Zelman.

Ivy Lynne Zelman: Just thinking through the acquisitions you made maybe just in general, first question, just how much multiple compression have you seen? And then just secondly, when you look at your CapEx for 2026, how much of that is related to investments for AI initiatives? And maybe walk us through what AI is doing to transform the business? Are you reducing headcount? Did you reduce headcount in '25, do you expect to reduce headcount? I can keep going, but I'll stop there, Peter. .

Peter Jackson: Yes. Well, welcome to the call, Ivy. It's nice to hear your voice. We've got a lot of stuff going on in that. I guess I'll start with AI and then circle back. I think that the investments we're making in the business around AI, we're trying to be very pragmatic in terms of keeping it focused on things that are going to drive outcomes that are going to make a difference in the business. I think that the idea of introducing Copilot and things that help in the back office, we're doing that, of course, and that's good, and I think it's positive.

I think the far more powerful opportunities are ones that we see when we face the operating team at the field level to drive customer-facing benefits. So things we're working on, particularly effective in the estimating space, where we've seen our ability to process plans more efficiently, our ability to speed up the estimating process to get turnaround times to customers more quickly. The goal really is to enhance the experience of the salespeople, to empower them with tools at pace that they haven't seen. We've seen very little in the way of cost reductions in terms of headcount reductions so far.

I think we're waiting like everybody else to see where the impacts come, particularly in the back office space. Does someone figure out the solutions that make it easy to adopt and apply in a business environment. I'd say we're far more benefited from pace and capacity to drive sales and to be more focused on growth and customer relationships. I think that's where we've seen the most benefit. In terms of investments, we've done most of what we've been up to internally. Consultants and third parties obviously being brought in to assist with that. But by and large, that's done by our internal team. Only a modest amount of that is capitalizable in any given period.

Both on the digital side and on the core IT side is where we are seeing that spend hit.

Ivy Lynne Zelman: Great. And then on the multiples for the companies you acquired?

Peter Jackson: Yes. So the multiples are kind of in our historical range in terms of the businesses that we've been acquiring in the recent time. Now there's no question that over the past few years, as we've made some of those acquisitions, the payback has been extended because the volumes have declined more than the models have. Now downside wise, I think we're still within the downside band, but it's certainly been..

Ivy Lynne Zelman: Within the range.

Peter Jackson: Yes, it's been within the range lately. I think -- as you know, we look at a lot of different deals and a lot of different opportunities. Our ability to lean in where we see real value, where our opportunities to capture synergies are meaningful and we can create value for shareholders, I think we've been -- I'd like to say we're undefeated in getting the assets that we want. So we still feel good about that. It's just a matter of maintaining that discipline in an environment where it's -- you're looking into the future to get your payback for some of these assets that are fighting through the competitive dynamics.

Ivy Lynne Zelman: No, that makes sense. And thinking of that for Pleasant Valley Homes, just to clarify, factory-built HUD modular versus manufactured housing, to clarify. And then just any cost differential that you can highlight to your builder customer. When you think about the Pleasant Valley Homes, what are the attributes that modular bring? I know everybody talks about it and the builders are using it, but really, are there any real cost savings relative to stick and brick on-site.

Peter Jackson: Yes, that's a great question. Yes. So what we do in that facility is both, right? It runs down a single line from an ability to run a similar size road transportable footprint, you're running HUD down the same line as modular, but they are semi-custom modular. So they're meaningfully modified from the traditional HUD. There's no steel chassis, like it's a traditional modular home designed to various specifications with a lot more variability than maybe the traditional models. It also allows us to customize in some modest ways that make it more applicable to consumer demand and need. So that's the powerful thing from our perspective.

The ability to be interchange on that line is what made this particular asset desirable for us and allowed us to experiment while not really harming or disrupting the core business. It's a good business. They make nice money, it's a nice business to add to portfolio, but to be able to do that in is pretty exciting. And for us...

Ivy Lynne Zelman: Is there any cost differential, Peter, relative to site built?

Peter Jackson: I think there is, and that's what we're in the process of proving out. When we've done the initial analysis, we believe we could do it at or below what it costs builders to do on the job site for these homes. It's all the advantages that we talk about, right? The efficiency of the line, the getting out of the weather, the ability to have flow, coverage, leveraging multiple layers of staffing, it's all of those things that we think are part and parcel to a well-run offsite fabrication that we can apply in a more comprehensive way.

Operator: We will move next with Sam Reid with Wells Fargo.

Richard Reid: Just wanted to drill down a little bit on your start assumptions for 2026, but more from the context of square footage per start or value per start. I know you alluded a little bit to rate buydowns potentially influencing that. But just contextualize kind of what's embedded in your guidance in terms of average square footage to the extent you've got a view there?

Pete Beckmann: Yes. Thanks for the question. So when we think about 2026 and the value per start, it's really a flattening out relative to 2025. So square footage about the same, not seeing a material change up or down, so just shooting the middle. Not seeing a lot of change in the inputs or substitutions within the house at this point, more of a leveling off basically across the line on most everything that we're seeing in those adjustments. So size of the home, the substitution products, the cost inputs as well as the pricing puts. Now we've had some of the overtime and the lapping. There's been some murmurs around some cost increases from certain manufacturers.

So we'll have to keep an eye on it as we think -- as we move forward on what that looks like. And cost increase is a good thing for us, and it benefits our overall, as we pass that through, where we had talked about it previously in the value per home shrinking as when we were seeing cost declines and manufacturers lowering the cost basis.

Richard Reid: All helpful color. Switching gears on the P&L. So wonder if you contextualize some of the SG&A expenses that are outside of your control? You alluded to some things like insurance and rent. And those are expense buckets that some of your peers have also called up -- called out as maybe being a little bit more inflationary than expected. Just maybe walk us through what's embedded in your guide around those expense buckets and anything outsized we should be mindful of?

Pete Beckmann: Yes. So rent, absolutely, an inflationary item that we are subject to, given the portfolio of our locations that are under a third-party lease agreement. Those increases are embedded in our expectations for 2026. As far as the insurances go, we have our expectation based on early analysis from the actuaries and others on where cost of benefit insurance as well as casualty insurance is going. But that's all subject to utilization and what we experienced through the course of the year, so we're trying to factor all those into what we expect for 2026 and mitigated as many surprises as we can. So we don't like the surprises and unfortunately, they show up usually at year-end.

Operator: We will move next with Collin Verron with Deutsche Bank.

Collin Verron: I just wanted to start on the M&A. How are you guys thinking about the opportunity for incremental M&A in 2026, just with leverage ticking up with EBITDA coming down, free cash flow seeing some of that working capital investment. And then you've also seen a well-capitalized distributor officially enter into direct competition for M&A. So I guess I'd just be curious to your near-term impacts there as well.

Peter Jackson: Well, we still think we have opportunity to do M&A. Admittedly, the market has been fairly quiet. It's certainly quieted down over the last, I would say, 3, 6 months by and large, that one big asset, notwithstanding. But we think there's still opportunities for us to continue to add high-quality assets that create value to the portfolio. The reality is having a well-capitalized player talking up the industry, I think, just reinforces we've got a good industry, and there's opportunity. I do think his strategy is a little bit different in terms of how he envisions being successful.

I think our ability and our focus on leaning in to support the core homebuilder and major remodeler customer with the subject-matter expertise and capabilities they need to be successful will be the winning strategy at the end of the day. And I think as long as we're sticking to our knitting and doing what we're good at, we will continue to deliver on that, and we know how to add assets very effectively to that pool and capture the synergies that go with. So I still think we've got plenty of track record for folks to look back on and believe in and that we're going to continue to deliver on that into the future.

Collin Verron: Great. That's helpful color. And then I just wanted to touch on the guide a little bit for multifamily. I know you're talking about flat starts in 2026, but there is a sizable lag there. And I mean the has been positive in '25. Can you just talk about your expectations for multifamily sales in '26 a little bit more explicitly, just given the lag and sort of your exposure to the high storey and below wood structures, which doesn't necessarily line up with the Census Bureau data?

Pete Beckmann: Yes. So it's a great question. As we think about multifamily, it does have that 9- to 12-month lag. As Peter mentioned in his prepared remarks, we've said that the last several quarterly calls. We're seeing some activity in green shoots that we've been quoting. I think we mentioned this on our prior earnings call. That's still the case, but it's waiting. It's pent-up and it's waiting to really take off and I think it's the cost of capital equation that those multifamily developers are waiting on. Now when you think about our sales from a multifamily standpoint.

We talked about it all year in 2025 where we really saw it level out, but we were lapping a stronger prior year comp throughout the year compared to 2024. When we think about 2026, even though we have flat starts, there's still some of that normalization that we had throughout 2025 from a margin standpoint and a few other categories that provide us with a headwind, and that's all embedded in our margin guide specifically. Otherwise, we're still excited, and we're pleased with the multifamily business. It's a great portion of what we offer and -- if we have an opportunity to grow in that area, we're going to continue to look for those opportunities to lean into.

Operator: We will move next with Ketan Mamtora with BMO Capital Markets.

Ketan Mamtora: Just a quick question around sort of Q1. Can you provide any color or context around sort of the activity levels that you are seeing as you've kind of started '26? And how much of an impact recent weather events are having in your guidance? Just trying to understand how much of this is sort of very unique to what happened in January?

Peter Jackson: It's both. Yes. No, we started slow. We're starting to see really nice as-expected ramp into January. That weather was as bad as advertised. It shut down big swaths of the homebuilding markets that generally go through those winter months. Texas, Carolinas, parts of Florida, it's just -- it was very disruptive. We didn't call it out because as we say in the past, it's good, it's bad. It's a number that we think over time will level itself out over the first half of the year, but it was certainly was impactful on us.

Pete Beckmann: Yes. So just to expand on that, it was about $30 million to $40 million in sales impact for the last week of January that may be lapped into February a little bit. So not a huge number on its own relative to our overall sales projections, but just something that will impact the percentages as we evaluate the year-on-year.

Ketan Mamtora: Got it. That's very helpful. And then just coming back to balance sheet and M&A. I'm just curious, as you think about these opportunities and you think about leverage in the short term, understanding that this is kind of a cyclically challenged time, how are you all thinking about sort of leverage in the short term for the right opportunity?

Peter Jackson: I would just reinforce, we've always said in the short term, we'll do the right thing strategically for the business knowing that we've got very firm and consistent cash flow throughout the cycle. So we don't generally look at it on a quarter basis. We try and look at it for the full year. In terms of really focusing on that leverage ratio because of the seasonality of our business and what we have going on we feel very confident where we are in terms of the strength of the balance sheet, the liquidity we have available and the way we're running the business and generating cash flow even in a relatively weak market.

So it certainly wouldn't deter us from buying the right asset and creating the right value. But that backdrop is always there. We're certainly focused on maintaining that discipline around how we think about capital deployment.

Operator: We will move next with Alex Rygiel with Texas Capital.

Alexander Rygiel: Any broader comments on Washington policy and how that is sort of being contemplated in your guidance?

Peter Jackson: Yes, it's been a really interesting dynamic over the past few months. With regard to the focus being placed on housing and housing affordability, the recognition of how important our sector is to sort of the spirit of our nation, right, in a way that really hasn't gotten this level of attention, at least to my memory. A lot of ideas floating around. I would say not all of them coming to fruition, not all of them having the same level of impact, but people are trying. And I think that the incremental benefits are promising. .

Probably the most interesting things to me is this alignment between what the federal government is describing as trying to drive alignment between funding -- transportation funding in particular, and local and municipal compliance with reasonable standards around regulation, right, whether it be codes or easements or density, whatever it is, the Fed is taking a little more heavy-handed stance when it comes to -- we're not going to give you a funding to build out a train station, if you're not going to put density around the train station because there's no point, things of that nature. I think it's interesting.

I think it reinforces what I've heard some state governors trying to do in terms of overcoming some of the more destructive components of NIMBYism. And I understand there's going to be a balance, right? There's going to be state and local control in all these environments. But some of it is to the point of problems. It is generating societal problems because the restrictions are too tight. And there is this awareness of it and movement in a way that I think is positive. I'm not going to tell you that it's been massive. I'm not going to tell you there's been a significant impact yet.

But the fact that we're having the conversations and incremental steps are occurring is incredibly encouraging versus where we were 2, 3, 5 years ago or can be really over the last 50 years.

Operator: And this concludes our Q&A session as well as the Builders FirstSource Fourth Quarter 2025 and Full Year Earnings Conference Call. Thank you for your participation, and you may now disconnect.

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