Builders FirstSource Reports First Quarter 2024 Results

Builders FirstSource, Inc. reported its results for the first quarter ended March 31, 2024.

First Quarter 2024 Highlights

All Year-Over-Year Comparisons Unless Otherwise Noted:

• Net sales were $3.9 billion, a 0.2% increase, with core organic sales essentially flat, in line with expectations, and growth from acquisitions partially offset by commodity deflation.
• Gross profit margin percentage decreased 190 basis points to 33.4%, primarily driven by a timing shift in product mix toward lower-margin, early stage homebuilding products, as well as margin normalization, particularly in Multi-Family.
• Net income decreased 22.5% to $258.8 million, or $2.10 per diluted share compared to $2.41 in the prior year period. Net income per diluted share declined 12.9%.
• Adjusted EBITDA decreased 14.4% to $540.9 million, primarily driven by lower gross profit and higher operating expenses due to acquisitions.
• Adjusted EBITDA margin declined by 240 basis points to 13.9%. The Adjusted EBITDA margin has remained in the mid-teens or better for 12 consecutive quarters.
• Cash provided by operating activities was $317.2 million, down $337.2 million compared to the prior year period, while free cash flow was $227.6 million, down $326.9 million compared to the prior year period.
• Repurchased 0.1 million shares of common stock at an average price of $202.67 for $19.6 million, inclusive of applicable fees and taxes.

“Our resilient first quarter results reflect our differentiated product portfolio and scale, our team members’ consistent focus on executing our strategic priorities, and our operational efficiency initiatives,” commented Dave Rush, CEO of Builders FirstSource. “As we expected, a weakening Multi-Family market and higher mortgage rates driving affordability challenges were headwinds to start the year. Despite these macro challenges, we are building on our successes and driving growth through our value-added products portfolio and industry-leading digital platform. We are committed to advancing innovation and delivering exceptional customer service as a trusted and preferred partner to our customers.”

Peter Jackson, CFO of Builders FirstSource, added, “Our first quarter results demonstrate the effectiveness of our strategy and operating model amid a measured start to the year. We are maintaining our fortress balance sheet and prudently deploying capital to the highest return opportunities, which included acquisitions and share repurchases during the first quarter. Our $1 billion senior notes offering priced in February strengthens our financial flexibility to grow organically and remain acquisitive. We are leveraging our sustainable competitive advantages and strong financial position to drive future growth and value creation for our customers and shareholders.”

First Quarter 2024 Financial Performance Highlights

All Year-Over-Year Comparisons Unless Otherwise Noted:

Net Sales

• Net sales of $3.9 billion, a 0.2% increase driven by growth from acquisitions of 1.9%, partially offset by commodity deflation of 1.7%.
• Core organic net sales were flat with the prior year. Single-Family increased 4.3%, while Multi-Family declined 13.4%, and Repair and Remodel (“R&R”)/Other declined 4.7%. On a weighted basis, the increase in Single-Family raised net sales by 2.9%, while the decreases in Multi-Family and R&R/Other lowered sales by 2.1% and 0.8%, respectively.

Gross Profit

• Gross profit was $1.3 billion, a decrease of 5.2% compared to the prior year period. The gross profit margin percentage decrease of 190 basis points to 33.4% was primarily driven by a timing shift in product mix toward lower-margin, early stage homebuilding products, as well as margin normalization, particularly in Multi-Family.

Selling, General and Administrative Expenses

• SG&A was $926.3 million, an increase of $22.0 million, or 2.4%, primarily driven by additional expenses from operations acquired within the last twelve months. As a percentage of net sales, total SG&A increased by 50 basis points to 23.8%.

Interest Expense

• Interest expense increased $6.2 million to $48.3 million, primarily due to higher debt balances with the issuance of the 2034 notes.

Income Tax Expense

• Income tax expense was $66.5 million, compared to $91.3 million in the prior year period, primarily driven by a decrease in income before income tax. The effective tax rate in the first quarter decreased 110 basis points year-over-year to 20.4%, primarily driven by a stock-based compensation windfall benefit, partially offset by permanent and other differences.

Net Income

• Net income was $258.8 million, or $2.10 earnings per diluted share, compared to net income of $333.8 million, or $2.41 earnings per diluted share, in the same period a year ago. The 22.5% decrease in net income was primarily driven by lower gross profit and higher operating expenses, largely due to acquisitions, partially offset by lower income tax expense.

Adjusted Net Income

• Adjusted net income was $327.4 million, a decrease of 20.2%, primarily driven by lower gross profit and higher operating expenses due to acquisitions.

Adjusted Earnings Per Diluted Share

• Adjusted earnings per diluted share was $2.65, compared to $2.96 adjusted earnings per diluted share in the same period a year ago. The 10.5% decrease was primarily driven by lower adjusted net income, partially offset by share repurchases.

Adjusted EBITDA

• Adjusted EBITDA decreased 14.4% to $540.9 million, primarily driven by lower gross profit and higher operating expenses due to acquisitions.
• Adjusted EBITDA margin declined by 240 basis points from the prior year period to 13.9%, primarily due to lower gross profit margins and higher operating expenses due to acquisitions.

Capital Structure, Leverage, and Liquidity Information

• For the three months ended March 31, 2024, cash provided by operating activities was $317.2 million, and cash used in investing activities was $151.0 million. The Company’s free cash flow was $227.6 million, compared to $554.5 million in the prior year period due to lower net income and an increase in net working capital.
• Liquidity as of March 31, 2024, was approximately $2.4 billion, consisting of $1.7 billion in net borrowing availability under the revolving credit facility and $0.7 billion of cash on hand.
• As of March 31, 2024, LTM Adjusted EBITDA was $2.8 billion and net debt was $3.0 billion, resulting in the net debt to LTM Adjusted EBITDA ratio increasing to 1.1x, compared to 0.8x in the prior year period.
• In February 2024, the Company completed the issuance of $1.0 billion aggregate principal amount of its 6.375% senior notes due 2034 at an issue price of 100.0%. Net proceeds from the offering were used to repay indebtedness outstanding under the Company’s senior secured ABL facility and for general corporate purposes.
• In the first quarter, the Company repurchased 0.1 million shares of its common stock at an average price of $202.67 per share for $19.6 million, inclusive of applicable fees and taxes.
• The Company has approximately $980 million remaining in its share repurchase authorization.
• Since the inception of its buyback program in August 2021, the Company has repurchased 87.2 million shares of its common stock, or 42.2% of its total shares outstanding, at an average price of $70.42 per share for a total cost of $6.1 billion. As of March 31, 2024, shares outstanding were approximately 122.0 million.

Operational Excellence Productivity

• For the first quarter, the Company delivered approximately $40 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 Full Year Total Company Outlook

For 2024, the Company expects to achieve the financial performance highlighted below. Projected Net Sales and Adjusted EBITDA include the expected impact of price, commodities, and margins 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 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.
• Average commodity prices in the range of $400 to $440 per thousand board feet (mbf).
• Interest expense in the range of $205 million to $215 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 in 2024 versus 2023.

For full results click here.

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.