Peter Jackson: What I would tell you, Tyler, not any more than usual. Again, where we differentiate ourselves is in the value-added solution and the value-added space and that’s for a reason. Anybody can do commodities, anybody can deliver lumber. It’s hard to differentiate yourself in a straight distribution model. So we do see competition in that arena for sure. We try to leverage our relationships with those customers where we do other stuff for them very well and use that as a way to continue to maintain share on the commodity side versus just getting into a price war, so we do see competition in that regard. We choose to compete where we want to compete in that regard. But we’ll always do a high percentage of lumber. We’re good at doing lumber.
We’re good at meeting schedules and making sure the lumber is there when the customer wants it and we get recognized for that and where we get that recognition is where we play. But in short, a lot more competition on the commodity side than the non-commodity side and our reputation on the value-added space carries us a long way.
Dave Rush: The only thing I’ll add, I think it might be embedded in your question is share. I think one of the variables that we struggle with is what’s the real share number. Generally, we would use single-family starts as a proxy for the market and then we would compare our sales against that. In general, that’s a really tricky thing right now because I think there are some meaningful differences between a start, unit and a sales dollar. Homes are smaller. The costs of those homes of what being put into them are simpler and cheaper. And we’ve seen some not insignificant cost reductions or pricing reductions in terms of what we’re getting from our vendors and what’s selling into the market, whether it be commodities, which is the obvious one, but also EWP or millwork or any of the other ones we’ve talked about, those all represent sort of gaps or deltas between those two units of measure.
And then you layer on a little bit of the timing related stuff, whether it be how complete these homes are and what we’re selling or the weather or whatever, it certainly has made that whole discussion and that analysis really challenging. But back to Dave’s point, I think the only place we think we’ve maybe struggled or battled is in that commodity, the low end where smaller competitors are more willing to get down and dirty.
Tyler Batory: Okay. Very helpful. And then a quick follow-up on the R&R side of things, down 5% in the quarter, I think weather probably impacting that. What are you seeing here in the second quarter and there’s a lot of differing views on the R&R end market out there? Just share your confidence in terms of your growth outlook this year in that end market?
Dave Rush: So, as it relates specifically to the first quarter, we’re higher concentrated in R&R in the Northeast. And the Northeast was the area of the country for us that was a great — more greatly impacted by weather. I think 20 to 23 days had serious weather in the quarter. That’s where we felt it. In general, I think R&R will be — it’s kind of two-edged sword, right? The bigger projects are facing some of the same kind of cost of money pressures that the small custom builder is facing, but the regular smaller projects, I think, are going to be along the same line as what you would expect.
Tyler Batory: Okay, that’s all from me. Thank you.
Dave Rush: Thank you.
Operator: And we have our next question from David Manthey with Baird.
David Manthey: Thanks. Dave, Peter, good morning. My first question is on the Digital, so the revenue uptick is good to see. Could you share with us any data on the number of net users today versus a year ago or the end of last year, just to give us an idea of how that’s ramping? And then is there any prototypical customer type that’s implementing the system? Or is it just based on personality and choice?
Dave Rush: Morning Dave. Yes, we’re excited about digital. I don’t unfortunately have user numbers. I might be able to get them for you, but I don’t have them off the top of my head. It’s going up. We’re seeing that. They were, gosh, I don’t know 500 or 700 leads that we took out of IDS. We’ve got a lot of customers as we do our adoption and our rollout around the country that are coming on board. While most of them are mid to smaller-sized builders, the profile, I think, that you’re talking about are those that are leaning into digital and technology to be able to make themselves more efficient and more professional and better with their customers. I think you’ve got — sometimes it’s generational. Candidly, sometimes it’s not.
It’s just the mentality around leveraging tools to take waste out of the job, make the job go quicker, connect with the home buyer a little bit more easily, more visually. But it’s such a — in our opinion, it’s such a compelling tool it’s got so much that can help the build or just get a little bit better every day. That game we’re all trying to play, creating efficiency, making it more transparent to the builder, to the trades and to the home buyer. So that — those are the types of customers, the ones that really take advantage of technology to do that, that we’re seeing early — but in general, I think our digital tool has become — is increasingly becoming the new way of doing business just because it’s so easy. It’s very modern, it’s very smooth.
And so far so good. We’re excited about the ramp-up trend and how it’s been progressing so far early days.
Peter Jackson: What I would tell you, juices me the most was the traffic we had at our booth at IBS. I’m never in my 25 years with going to IBS and seen the kind of excitement and the kind of traffic that went through our booth primarily because of our digital platform and showing what capabilities that it was going to present. The other — the other thing I would say is, think about it, if you’re a smaller builder, 50 to 200 homes a year, you don’t have the ability to invest in technology for yourself to get this to the level of platform that we’re developing. What we’re doing is leveraging our ability to make those investments develop that platform for our customers of that size so that they can play in that space and be efficient without having to make a huge upfront investment themselves. So that’s the rationale behind why we developed it and why we think it will be appealing for our customer base and if IBS is any indication, we hit it right on the head.
David Manthey: Okay. Thanks, guys. In the interest of time, I’ll just pass it on. Thank you.
Peter Jackson: Thanks, David.
Operator: And we have our next question from Jay McCanless with Wedbush.
Jay McCanless: Hey, good morning everyone. So my first question, Peter, I think you called out some pretty positive sales trends for the western US. Could you talk about how that’s trended in April and May, similar pattern to what you saw in 1Q?
Peter Jackson: Good morning, Jay. Yeah, pretty similar. I think that the — West got hammered out of the gate, and they bounced back really nicely. You know, a little more stable through the other two regions, but yeah, I think that’s been pretty consistent. We’ll have to see how this whole weather thing in Houston plays out, but for the time being, it’s pretty good.
Jay McCanless: Okay. Thanks. And then taking the lumber question, especially some of the more commodity goods a step further, is this a function of not only higher mortgage rates, but was there an oversupply of commodity lumber in the system to start the year? Just wondering if this is all rate-driven, if there’s some other mitigating factors we need to be monitoring.
Peter Jackson: We didn’t see a lot of unusual behavior in the market, now. Tough for us to see that from perspective, but it’s a strong — I would say, generally a strong and a stable market. So I don’t know how people made bets with regard to where stuff was moving.
Jay McCanless: Okay. Okay. Great. Thanks for taking my questions.
Peter Jackson: Thanks, Dave
Operator: And we have our next question from Ketan Mamtora with BMO Capital Markets.
Ketan Mamtora: Thank you. Peter, just one question. You’ve talked quite a bit about margin normalization and multifamily. On the core organic, the single-family piece, do you think at this point, we are sort of towards the end of that normalization, we are midway through? How would you characterize that? And are the competitive dynamics in that side of the business changing at all, given sort of pressure on EWP prices, given where lumber is today. Just curious to get your thoughts.
Peter Jackson: Thanks, Ketan, yes, I would tell you that we’re closer to the end in terms of how we expect margins to normalize. We’re still below normal in terms of volume. So that’s a pressure-filled environment. It’s always very competitive. It always has been. We expect it always will be on the commodity side. But that now needs to be a battle cry that we rise to, right? And it’s something that we’ve done for years and we feel good about. There’s a — there’s an expectation that the little player will always be more competitive, and we think that will continue to play out. But by and large, I think margins have performed well. There’s certainly been some aggressiveness from certain vendors, but in most cases, it’s in response to past moves. So more of a normalization, more of a rebound back — a mean reversion, if you will, rather than a, oh, we’re in trouble, we need to do something dramatic. Does that make sense?
Ketan Mamtora: It does. Thank you very much.
Operator: And it appears we have reached our allotted time for the question-and-answer session today. That will conclude today’s program. Thank you for your participation. You may now disconnect.
