Our performance is more in line versus vastly outperforming that target, so you will see a pullback in the total amount of bonus dollars just by nature of that performance, which you’d expect. I think that shareholders, management, the board is all in alignment on that one. So that will be a bit of a tailwind versus the prior year, just from a dollar amount perspective.
Dave Rush: The only thing I’d add is our highest variable cost, obviously, is our labor. The field and the team have done an exceptional job keeping labor as a percent of gross profit, which is our key metric, right in line with our operating within the parameters of what we set for ourselves in this level of sales and activity. Our tools for managing that cost are as good as they’ve ever been in my 25 years with the company. The key factor for us in managing SG&A is how well we manage our labor down at the field level, and they’ve done exceptional at that since the beginning of the year.
Rafe Jadrosich: Thank you. It’s very helpful.
Operator: We have our next question from Keith Hughes with Truist.
Keith Hughes: Thank you. The question on the windows and doors segment was down 2%. You talked about some product costs declining. Can you talk about that a little bit more, which product? Is that selling price declining or inputs or any kind of details of that?
Dave Rush: Good morning, Keith. If you recall, Keith, this time last year or in the first quarter last year, we were just coming out of normalization of supply chain. Windows and doors were getting delivered timely again. The National Builders focus on completions in that first quarter was at a higher level just to catch up. That kind of was the pig in the python for us last year in higher millwork and window and door sales in the first quarter than normal. I would tell you this first quarter was normal. So we had to roll over those numbers from last year where it was a bit more tilted towards completions, where this year was more normal with respect to completions. There has been some deflation in the category, and specifically, I think, with millwork on the millwork side.
That has affected it modestly. I think we saw pretty close our volumes did exactly what we expected our volumes to do, and it was more along the lines of some of the deflationary impact along with rolling over that higher degree of completions last first quarter. That really explained the difference.
Keith Hughes: Okay. Thank you.
Operator: And we have our next question from Adam Baumgarten with Zelman & Associates.
Adam Baumgarten: Hey, good morning, guys. Can you talk about what you’re seeing from a non-commodity pricing perspective? And maybe specifically on the manufactured product side?
Peter Jackson: So you’re talking about customer pricing or vendor pricing.
Adam Baumgarten: Your pricing to customers.
Peter Jackson: So it’s — as you would expect and why we play in those categories, that is less price sensitive on the manufacturing side because once you get locked in with the designer and you get locked in with somebody who’s going to meet delivery schedules and whatnot. That becomes more important factor. Now as commodities have fluctuated and the fact that they are a component of manufacturing that affects the price as commodities go up or down, and they’ve been going down for lumber slightly. But you know what we’ve been able to do is offset some of that with our efficiencies that we’ve been able to gain throughout since the merger with our automation investments and our continual improvement in actual board foot per labor hour produced has been a nice offset to some of those challenges. But as a whole, Value Add continues to hold in there better than commodities, which, of course, is in line with our strategy.
Adam Baumgarten: Okay. Got it. That’s helpful. And then just on the 3% to 4% impact from weather you saw in 1Q, how should we expect that to be recouped? Is it mostly in 2Q? Or is it going to span over a few quarters?
Peter Jackson: Well, I was happy to say Q2, up until Houston got varied or flooded out. Generally, it takes about quarter to a quarter and a half to catch back up. It doesn’t unfortunately just whipsaw back the other direction, but that’s probably a reasonable way to think about it, three to four months.
Adam Baumgarten: Got it. Thanks. Best of luck.
Peter Jackson: Thank you.
Operator: And our next question comes from Stanley Elliott with Stifel.
Stanley Elliott: Hey, good morning, everybody. Thank you for the question. Can you talk a little bit about what you are seeing on the services piece, so very strong numbers up 17%. Is this kind of a reflection of your efforts to take it into new markets? Is this existing more services with some of your existing customers? And then I guess, secondly, how should we eventually think about this either an attach rate or pull through on some of the other things you’re doing on the manufacturing side?
Dave Rush: Yes. I would say all of the above. We had a strong install business. We did $2.5 billion in labor and materials installed in 2023. So we had a nice base to work from. And our initial focus, as you would expect, was on the products that we are already good at in one market and leveraging that platform to other markets. And it’s the products that we’re most familiar with and the products that we distribute every day. So we’ve got off to a great start. A lot of that increase is from existing markets that are already doing install because those are the ones that had the base to work from. But we developed really nice playbooks, and we’ve had really good interest, which has been pull interest. So as people reaching out, I want to get into this business, how do I do it the right way versus us saying, hey, you need to get into this business, which is in my role, in my seat, that’s what you want to see.
And we’ve got really good people, really good plans, and we just think it’s the next evolution for us as a company in solving our customer pain points and doing it methodically and in a way that we don’t make mistakes. That’s key for me, to do it the right way and make sure that what we’re generating is customer value added solutions.
Stanley Elliott: And curious to kind of tagging on that if you were to share, are you seeing more of this uptick with some of the smaller builders, some of the more national builders, just trying to kind of get a sense for the flavor there?
Dave Rush: It’s a little — it depends on the product category first of all. The national builders certainly like the install solution wherever they can apply it. The custom guys like it, but they’re a little more specific to millwork or a little more specific to install windows probably not so much installed framing, right? So, it’s a really good play for the national builders. They seem to like that the best, but there are applications for both segments.
Peter Jackson: And to Dave’s point, we do see a higher level of adoption of our value-added products to the larger players just generally.
Dave Rush: Yes. And install is a natural evolution to the value add. It’s the next part of value add, not only do you get the components delivered to the job site, but you actually install the components that are delivered to the job site, that’s just a natural evolution of doing more for our customers.
Stanley Elliott: Perfect guys. That’s it for me. Thanks and best of luck.
Operator: And we have our next question from Collin Verron with Jefferies.
Collin Verron: Hey good morning. Thank you for taking my question. I just want to start on the gross margin side of things. You talked about the shift in timing towards early-stage homebuilding products being a gross margin mix headwind. Can you maybe quantify that headwind either sequentially or year-over-year? And how it compares to the headwind you’re seeing from multifamily normalization? And just following up on that, how you’re thinking about that mix through the rest of the year, just given what you’re seeing in starts, backlogs and conversations with your customers?
Peter Jackson: Yes. So I don’t think I can give you the detail — good morning, Collin. Thank you for the question. I’m not sure I can give you the breakdown necessarily exactly what you’re looking for. What I can tell you is on the mix side, it’s an expectation that we’re going to see a trend back to normal mix. I don’t think that’s much of a stretch, right? So what we’re seeing right now is more of our growth being in the pure commodities and the trust and the relationship between just those 2 categories, biases it towards the commodities. And commodities like I was saying before, is where we’ve had the most aggressive normalization. We’ve seen it across the board on the gross margins, right? We’ve seen gross margin normalization.
We’ve talked about it a lot. It’s not just multifamily, it’s single-family, too. A matter of fact, this quarter, the bulk of it was single-family normalization. Much of that is the mix, but a good chunk of that is also just what we’ve been messaging over the last year, and that’s — we have seen this normalization play out, we have seen it across the business. And this year’s margins are when you peel back that multifamily stuff, a step down from where they were. That was why we were so adamant last year that our mid-30s gross margin numbers weren’t going to hold on because we were seeing it play out. But that mix will certainly be a tailwind as we gain the later-stage building products, but we have, again, the lapping from the prior year. So that’s why our guide is in that 30 to 33 range because we think that those three variables will play against each other, and we want to try and give you the best insight possible to where we’ll end up.
Collin Verron : Okay. That’s helpful color. I guess I want to pivot towards the M&A pipeline. It sounds like it’s pretty robust. Any color to the size of potential deals out there in the market and what those potential targets look like from a product offering perspective.
Peter Jackson: We won’t get that precise, but I think our strategy has not changed, right? The way we look at the market, where we’re successful, where we can add the most value are all variables in the discussion. But I think that there’s — there are always a million rumors about what may or may not trade. I think for us, it’s imperative that we stay disciplined and we stay focused. What’s exciting is, as it stands today, we see a lot of assets out there that fit that screen, and now we just got to see if we can get them across finish line.
Collin Verron : Okay. Thank you for taking my questions.
Operator: And our next question comes from Tyler Batory with Oppenheimer.
Tyler Batory: Thank you. Good morning. A question on the competitive environment. Are you seeing some of the smaller players out there maybe trying to get more aggressive to take market shares? Is that having an impact on your performance and on your business?
