Nate Jorgensen: Ketan, it’s Nate. Maybe just to add to Kelly’s comment is as you think about a marketplace that maybe has some hesitancy in terms of both on price and demand, again, the dependence on auto warehouse services only increases. So as you think about how that shows up for BMD, in terms of sales volume and margin performance out of warehouse, that’s a clear tailwind for us as well. So I think we’re well set up to do what we need to do in BMD, again, kind of no matter what the demand environment is as we go through the quarter.
Ketan Mamtora: Got it. That’s helpful. And on EWP prices, you talked about the price erosion moderating. So is it fair to say that after Q2, we are sort of stable at those Q2 levels? Or it’s hard to tell at this point?
Kelly Hibbs: Yes. So where we were going with that comment, Ketan, was — we just put up sequential declines of about 4%, and we expect that to moderate. So somewhere between 0 and negative 4% is kind of our current expectation.
Ketan Mamtora: And beyond that, you would expect it to sort of stabilize or difficult to say at this point?
Kelly Hibbs: I’d say it’s difficult to say. It will be depending upon market demand in that sort of environment.
Nate Jorgensen: Ketan, it’s Nate. I mean, with the EWP, it’s – the market supply and demand is really what kind of sets the framework for pricing. So it has maybe less to do with input costs more around what the market environment is. So to Kelly’s point, hard to see the second half from here, but as long as starts remain stable and steady, I think that will be favorable for the EWP pricing environment as well.
Operator: And our next question comes from Kurt Yinger of D.A. Davidson.
Kurt Yinger: Great. Thanks, and good morning, everyone. I just wanted to start off on kind of competitive dynamics between I-joist and open web at this stage. I’m just curious, is it harder than you would have thought maybe getting some of those builder customers to convert back after some of the availability-driven kind of shifts in usage. And I know it’s a complex topic and a lot of different inputs, but at a high level, how would you kind of describe the pricing differential for a builder customer at this stage between the 2 products? And how does that kind of factor in?
Nate Jorgensen: Kurt, it’s Nate. Yes, I would just say on the EWP, the I-joist comparison to [indiscernible] is that — so it’s not a new phenomenon. That’s obviously been in place for a number of years. And I think there are times when I-Joist systems are preferred relative to play to fortress is and vice versa. I think when I look at kind of the competitive dynamic and environment today, I think I-joists systems set up well against play to fortresses, both in terms of cost as well as lead times. I think the other component that we’ve talked about is that when it comes to the builders, they are looking to drive cycle time out of the equation. And so when you look at an I-joist system versus either dimensional lumber or play to fortress, it’s typically the speed on the construction side is superior and allows, again, the builder to drive down cycle time.
So — which is an important part of how they think about value today and going forward. So I think I-joist system EWP is well set up to compete against both dimensional lumber and Open Trusses. And again, I think that dynamic about how do we add speed and simplicity to the job site continues to be an important part of what the builder is expecting.
Kurt Yinger: Got it. And as we think about builders, trying to address affordability challenges, perhaps building smaller homes, taking complexity out. Is there any sort of current or medium-term impact do you think that has on kind of the EWP business or the relative attractiveness of those products? I mean, obviously, a smaller home potentially has some sort of volume implication. But beyond that, is there anything that kind of jumps to mind in terms of how that impacts your Wood Products business?
Nate Jorgensen: Yes. Good question. I think the — yes, I think to your point on if the footprint is smaller, that will obviously have an influence in terms of the amount of EWP or structural materials in general that can be sold. So I think that’s in place. And again, the builders are looking to take cost out. I think there are times, Kurt, that when the builders have — for them, if they want to look at how do they lower cost, sometimes going vertical is the right answer, given the cost of land. And so if they go vertical in terms of adding a second story that creates an opportunity for EWP, obviously given that second floor construction. So yes, so I think EWP I think, is going to be an important part of it. But as we look at the trade-offs, in terms of lower square footage, that will show up in our EWP as well as the other products and services that we distribute as well.
Kurt Yinger: Got it. Okay. That’s super interesting. And then just switching gears to BMD. Kelly, I thought you mentioned kind of lower gross profit dollars on EWP sales within BMD in the quarter which, I guess, is a little bit surprising considering the double-digit sales increase. So is that just a dynamic where based on how you’re kind of transferring pricing and kind of the bleed in terms of sales prices there, there’s a little bit of a timing mismatch may be pressuring margins? Or is there something else driving that?
Kelly Hibbs: It’s not only to do-a-transfer pricing, anything like that. It’s all market-based. It’s just a function of the market. And as we’ve seen and experienced some of the pricing pressure, we see some of that in Wood Products. And then obviously, you see that in distribution as well.
Kurt Yinger: Got it. Okay. Makes sense. And then just lastly, I mean, Jeff, we’ve kind of seen 5 consecutive quarters now where BMD gross margins are right in that 15% ZIP code outside of what we’ve seen in OSB and maybe a little bit of EWP. Is there anything else that you’re kind of keeping an eye on that maybe gives you concern that 15% could have some downward pressure to it? Or are you feeling pretty comfortable with those levels, given kind of the current state of the market?
