Builders FirstSource Reports Fourth Quarter and Full Year 2023 Results

Builders FirstSource, Inc. reported its results for the fourth quarter and full year ended December 31, 2023.

BFS Highlights

All Year-Over-Year Comparisons Unless Otherwise Noted:

• For the fourth quarter, net sales were $4.2 billion, a 4.7% decrease, primarily driven by a decline in core organic net sales of 1.3% and commodity deflation of 5.0%, partially offset by growth from acquisitions of 1.6%.
• For the fourth quarter, net income was $350.7 million, or $2.83 earnings per diluted share, compared to net income of $384.5 million, or $2.62 earnings per diluted share, in the same period a year ago. The 8.8% decrease in net income was primarily driven by lower net sales.
• For the fourth quarter, Adjusted EBITDA decreased 1.6% to $685.5 million, primarily driven by lower net sales. Adjusted EBITDA margin increased by 50 basis points from the prior year period to 16.5%, attributable to higher gross margin, partially offset by reduced operating leverage. The Adjusted EBITDA margin has remained in the mid-teens or better for 11 consecutive quarters.
• For the twelve months ended December 31, 2023, cash provided by operating activities was $2.3 billion, and cash used in investing activities was $0.7 billion. The Company’s free cash flow was $1.9 billion.
• The Company repurchased $1.8 billion of shares in 2023, reducing its total shares outstanding by 12.2% in 2023.

“I’m proud of our fourth quarter and full year results, which demonstrated the strength of our broad product portfolio and continued execution by our resilient team members. Despite a challenging operating environment in 2023, which saw a significant reduction in single-family starts, we delivered a high-teens EBITDA margin. We accomplished this through operational rigor and by closely partnering with our customers to help address their pain points through use of our value-added solutions, solidifying our position as the easiest to do business with across the industry,” commented Dave Rush, CEO of Builders FirstSource.

Mr. Rush continued, “As we turn to 2024, we are excited about the opportunities in front of us. As we outlined at our recent Investor Day in December, we remain focused on our consistent strategy of growing our value-added products and services, investing in digital innovations, operating efficiently, and compounding long-term shareholder value.”

Peter Jackson, CFO of Builders FirstSource, added, “Our fourth quarter and full year results demonstrate the effectiveness of our operating model through the cycle. Our fortress balance sheet, strong cash flow generation, and ability to prudently deploy capital to the highest return opportunities, including acquisitions and share repurchases, continues to position us for long-term success. We are leveraging our sustainable competitive advantages and strong financial position to drive future growth and value creation for our shareholders.”

Fourth Quarter 2023 Financial Performance Highlights

All Year-Over-Year Comparisons Unless Otherwise Noted:

Net Sales

• Net sales of $4.2 billion, a 4.7% decrease, primarily driven by a decline in core organic net sales of 1.3% and commodity deflation of 5.0%, partially offset by growth from acquisitions of 1.6%.
• Core organic net sales declined 1.3% driven by Single-Family decreasing 3.5%, while Multi-Family and Repair and Remodel (“R&R”)/Other increased 4.3% and 4.2%, respectively. On a weighted basis, the decline in Single-Family reduced sales by 2.5%, while the increases in Multi-Family and R&R/Other increased sales by 0.5% and 0.7%, respectively.

Gross Profit

• Gross profit was $1.5 billion, a decrease of 1.4% compared to the prior year period. The gross profit margin percentage increase of 120 basis points to 35.3% was primarily driven by productivity and Multi-Family strength, partially offset by core organic margin normalization.

Selling, General and Administrative Expenses

• SG&A was $974.4 million, an increase of $15.8 million, or 1.6%, primarily driven by variable compensation and additional expenses from operations acquired within the last twelve months, partially offset by a reduction in expense related to customer reserves. As a percentage of net sales, total SG&A increased by 150 basis points to 23.5%, primarily attributable to reduced operating leverage.

Interest Expense

• Interest expense increased $4.6 million to $46.8 million, primarily due to higher debt balances and interest rates.

Income Tax Expense

• Income tax expense was $92.9 million, compared to $99.3 million in the prior year period. The effective tax rate in the fourth quarter increased 40 basis points year-over-year to 20.9%.

Net Income

• Net income was $350.7 million, or $2.83 earnings per diluted share, compared to net income of $384.5 million, or $2.62 earnings per diluted share, in the same period a year ago. The 8.8% decrease in net income was primarily driven by lower net sales.

Adjusted Net Income

• Adjusted net income was $439.3 million, a decrease of 6.7%, primarily driven by lower net sales.

Adjusted Earnings Per Diluted Share

• Adjusted earnings per diluted share was $3.55, compared to $3.21 adjusted earnings per diluted share in the same period a year ago. The 10.6% increase was primarily driven by share repurchases, partially offset by lower net sales.

Adjusted EBITDA

• Adjusted EBITDA decreased 1.6% to $685.5 million, primarily driven by lower net sales.
• Adjusted EBITDA margin increased by 50 basis points from the prior year period to 16.5%, attributable to higher gross margin, partially offset by reduced operating leverage.

Full Year 2023 Financial Performance Highlights

All Year-Over-Year Comparisons Unless Otherwise Noted:

Net Sales

• Net sales of $17.1 billion, a 24.8% decrease, primarily driven by a decline in core organic net sales of 17.3% and commodity deflation of 11.1%, partially offset by growth from acquisitions of 3.6%.
• Core organic net sales declined 17.3%, driven by Single-Family decreasing 24.1%, while Multi-Family and Repair and Remodel (“R&R”)/Other increased 20.3% and 0.7%, respectively. On a weighted basis, the decline in Single-Family reduced sales by 18.9%, while the increases in Multi-Family and R&R/Other increased sales by 1.5% and 0.1%, respectively.

Gross Profit

• Gross profit was $6.0 billion, a decrease of 22.4% compared to the prior year period. The gross profit margin percentage increase of 110 basis points to 35.2% was largely driven by Multi-Family strength, partially offset by core organic margin normalization.

Selling, General and Administrative Expenses

• SG&A was $3.8 billion, a decrease of $137.7 million, or 3.5%, primarily driven by lower variable compensation due to lower core organic net sales and a reduction in expense related to customer reserves, partially offset by additional expenses from operations acquired within the last twelve months. As a percentage of net sales, total SG&A increased by 490 basis points to 22.4%, primarily attributable to reduced operating leverage.

Interest Expense

• Interest expense decreased $6.3 million to $192.1 million, primarily due to the loss on extinguishment of $27.4 million related to debt redemption recognized in the second quarter of 2022, partially offset by higher debt balances and interest rates.

Income Tax Expense

• Income tax expense was $443.6 million, compared to $822.5 million in the prior year period, and the effective tax rate for the year decreased 60 basis points year-over-year to 22.4%.

Net Income

• Net income was $1.5 billion, or $11.94 earnings per diluted share, compared to net income of $2.7 billion, or $16.82 earnings per diluted share, in the same period a year ago. The 44.0% decrease in net income was primarily driven by lower net sales.

Adjusted Net Income

• Adjusted net income was $1.9 billion, a decrease of 38.5%, primarily driven by lower net sales.

Adjusted Earnings Per Diluted Share

• Adjusted earnings per diluted share was $14.59, compared to $18.71 adjusted earnings per diluted share in the same period a year ago. The 22.0% decrease was primarily driven by lower net sales, partially offset by share repurchases.

Adjusted EBITDA

• Adjusted EBITDA decreased 33.8% to $2.9 billion, primarily driven by lower net sales.
• Adjusted EBITDA margin decreased by 230 basis points from the prior year period to 17.0%, primarily due to lower net sales and reduced operating leverage.

Capital Structure, Leverage, and Liquidity Information

• For the fourth quarter, cash provided by operating activities was $611.7 million, down $359.7 million compared to the prior year period, while free cash flow was $515.3 million, down $324.4 million compared to the prior year period.
• For the twelve months ended December 31, 2023, cash provided by operating activities was $2.3 billion, and cash used in investing activities was $0.7 billion. The Company’s free cash flow was $1.9 billion.
• Liquidity as of December 31, 2023, was approximately $1.3 billion, consisting of $1,270.0 million in net borrowing availability under the revolving credit facility and $70.0 million of cash on hand.
• As of December 31, 2023, Adjusted EBITDA was $2.9 billion and net debt was $3.1 billion, resulting in a net debt to Adjusted EBITDA ratio of 1.1x, compared to 0.7x in the prior year period.
• The Company repurchased 1.6 million shares of its common stock in the fourth quarter at an average price of $131.74 per share for $208.9 million, inclusive of fees and taxes. In 2023, the Company repurchased 17.8 million shares of its common stock at an average price of $100.49 per share for $1.8 billion, inclusive of fees and taxes. The Company reduced its total shares outstanding by 12.2% in 2023.
• On February 21, 2024, the Company’s Board of Directors authorized the repurchase of up to $1.0 billion of the Company’s outstanding shares of common stock, inclusive of the approximately $200 million remaining in the prior share repurchase plan authorized in April 2023.
• Since the inception of its buyback program in August 2021, the Company has repurchased 87.1 million shares of its common stock, or 42.2% of its total shares outstanding, at an average price of $70.27 per share for a total cost of $6.1 billion. As of December 31, 2023, shares outstanding were 121.9 million.
• The Company completed two acquisitions during the fourth quarter. In 2023, the Company completed seven acquisitions with aggregate sales in 2022 of approximately $540 million.

Operational Excellence Productivity

• In 2023, the Company delivered approximately $175 million in productivity savings related to operations excellence and supply chain initiatives.
• The Company expects to deliver $90 million to $110 million in productivity savings in 2024.

2024 Total Company Outlook

For 2024, the Company expects to achieve the financial performance highlighted below. Projected Net Sales and Adjusted EBITDA include the expected benefit of price, commodity, and margin impacts for 2024.

• Net Sales to be in a range of $17.5 billion to $18.5 billion.
• Gross Profit margin to be in a range of 30% to 33%.
• Adjusted EBITDA to be in a range of $2.4 billion to $2.8 billion.
• Adjusted EBITDA margin to be in a range of 14.0% to 15.0%.
• Free cash flow in the range of $1.0 billion to $1.2 billion, assuming average commodity prices in the range of $400 to $440 per thousand board feet (mbf).

2024 Full Year Assumptions

The Company’s anticipated 2024 performance is based on several assumptions for the full year, including the following:

• Within the Company’s geographies, Single-Family starts are projected to be up mid-single digits, Multi-Family starts down 20% to 30%, and R&R is projected to be up low single digits.
• Acquisitions completed within the last twelve months are projected to add net sales growth of 1% to 1.5%.
• Total capital expenditures in the range of $400 million to $500 million.
• Interest expense in the range of $190 million to $200 million.
• An effective tax rate of 23.0% to 25.0%.
• Depreciation and amortization expenses in the range of $525 million to $575 million.
• Two more selling days are projected to add 0.7% net sales growth in 2024 versus 2023.

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About Builders FirstSource

Headquartered in Irving, Texas, Builders FirstSource is the largest U.S. supplier of building products, prefabricated components, and value-added services to the professional market segment for new residential construction and repair and remodeling. We provide customers an integrated homebuilding solution, offering manufacturing, supply, delivery, and installation of a full range of structural and related building products. We operate in 42 states with over 570 locations and have a market presence in 47 of the top 50 and 88 of the top 100 MSAs, providing geographic diversity and balanced end market exposure. We service customers from strategically located distribution and manufacturing facilities (some of which are co-located) that produce value-added products such as roof and floor trusses, wall panels, stairs, vinyl windows, custom millwork, and pre-hung doors. Builders FirstSource also distributes dimensional lumber and lumber sheet goods, millwork, windows, interior and exterior doors, and other specialty building products. www.bldr.com

Contact:

Heather Kos – Senior Vice President, Investor Relations – investorrelations@bldr.com

Source: Builders FirstSource, Inc.