Builders FirstSource Reports Second Quarter 2024 Results

Builders FirstSource, Inc. reported its results for the second quarter ended June 30, 2024.

Second Quarter 2024 Highlights

All Year-Over-Year Comparisons Unless Otherwise Noted:

• Net sales were $4.5 billion, a 1.6% decrease, with core organic sales down 3.8% as Multi-Family continues to trend downward, partially offset by growth from acquisitions and Single Family.
• Gross profit margin percentage decreased 240 basis points to 32.8%, primarily driven by ongoing normalization, particularly in Multi-Family.
• Net income decreased 15.0% to $344.1 million, or $2.87 per diluted share compared to $3.16 per diluted share in the prior year period, which is a 9.2% decline in net income per diluted share.
• Adjusted EBITDA decreased 12.9% to $669.7 million, primarily driven by lower gross profit, partially offset by lower operating expenses.
• Adjusted EBITDA margin declined by 200 basis points to 15.0%. Adjusted EBITDA margin has remained in the mid-teens or better for 13 consecutive quarters.
• Cash provided by operating activities was $452.1 million, up $60.8 million compared to the prior year period, while free cash flow increased 35.9% to $366.7 million, compared to $269.9 million in the prior year period.
• The Company repurchased 5.8 million shares of common stock at an average price of $170.01 for $989.6 million, inclusive of applicable fees and taxes.

“As we continue to operate in this complex environment, I am proud of our resilient second quarter results highlighted by maintaining a mid-teens EBITDA margin, which demonstrates the strength of our differentiated business model and the hard work of our extraordinary team members,” commented Dave Rush, CEO of Builders FirstSource. “While we continue to see weaker than expected Single-Family starts, slowing Multi-Family, and broader housing affordability challenges, we are executing our strategy by controlling what we can control, investing in value-added solutions, and driving adoption of our industry-leading digital platform. Our ability to solve industry pain points with our best-in-class product portfolio and delivering exceptional customer service makes us trusted partners to our customers as they navigate this uncertain macro landscape.”

Peter Jackson, CFO of Builders FirstSource, added, “We were able to effectively navigate a softer-than-expected housing environment during the second quarter by leaning into the pillars of our strategy and operating model. Leveraging our fortress balance sheet and exceptional financial flexibility, we executed nearly $1 billion of share repurchases and made three tuck-in acquisitions to enhance and expand our existing footprint. Looking forward, we believe our sustainable competitive advantages in our value-added solutions and strong financial position are enabling us to successfully manage volatility and deliver long-term value creation.”

Second Quarter 2024 Financial Performance Highlights

All Year-Over-Year Comparisons Unless Otherwise Noted:

Net Sales

• Net sales of $4.5 billion, a 1.6% decrease, driven by a 3.8% decline in core organic sales as Multi-Family continues to trend downward, partially offset by growth from acquisitions of 1.9% and commodity inflation of 0.3%.
• Core organic net sales declined 3.8%. Single-Family increased 1.1% and Repair and Remodel (“R&R”)/Other increased 1.5%, while Multi-Family declined 31.3%. On a weighted basis, the increases in Single-Family raised net sales by 0.7% and R&R/Other by 0.3%, respectively, while the decrease in Multi-Family lowered net sales by 4.8%.

Gross Profit

• Gross profit was $1.5 billion, a decrease of 8.3%. Gross profit margin percentage decreased 240 basis points to 32.8%, primarily driven by ongoing normalization, particularly in Multi-Family.

Selling, General and Administrative Expenses

• SG&A was $973.2 million, a decrease of $44.7 million, or 4.4%, primarily driven by lower variable compensation due to lower core organic net sales, partially offset by additional expenses from operations acquired within the last twelve months. As a percentage of net sales, total SG&A decreased by 70 basis points to 21.8%.

Interest Expense

• Interest expense decreased $1.0 million to $52.0 million, primarily due to interest income received during the period, partially offset by higher interest expense on higher average debt balances.

Income Tax Expense

• Income tax expense was $93.4 million, compared to $119.4 million in the prior year period, primarily driven by a decrease in income before income tax. The effective tax rate in the second quarter decreased 150 basis points year-over-year to 21.3%, primarily driven by a stock-based compensation windfall benefit.

Net Income

• Net income was $344.1 million, or $2.87 earnings per diluted share, compared to net income of $404.6 million, or $3.16 earnings per diluted share, in the same period a year ago. The 15.0% decrease in net income was primarily driven by lower gross profit, partially offset by lower operating and income tax expenses.

Adjusted Net Income

• Adjusted net income was $420.4 million, a decrease of 15.6%, primarily driven by lower gross profit, partially offset by lower operating and income tax expenses.

Adjusted Earnings Per Diluted Share

• Adjusted earnings per diluted share was $3.50, compared to $3.89 adjusted earnings per diluted share in the same period a year ago. The 10.0% decrease was primarily driven by lower adjusted net income, partially offset by share repurchases.

Adjusted EBITDA

• Adjusted EBITDA decreased 12.9% to $669.7 million, primarily driven by lower gross profit, partially offset by lower operating expenses.
• Adjusted EBITDA margin declined by 200 basis points from the prior year period to 15.0%, primarily due to lower gross profit margins, partially offset by lower operating expenses.

Capital Structure, Leverage, and Liquidity Information

• For the three months ended June 30, 2024, cash provided by operating activities was $452.1 million, and cash used in investing activities was $164.6 million. The Company’s free cash flow was $366.7 million, compared to $269.9 million in the prior year period due to a decrease in net working capital, partially offset by lower net income.
• Liquidity as of June 30, 2024, was approximately $1.7 billion, consisting of $1.6 billion in net borrowing availability under the revolving credit facility and $0.1 billion of cash on hand.
• As of June 30, 2024, LTM Adjusted EBITDA was $2.7 billion and net debt was $3.8 billion, resulting in the net debt to LTM Adjusted EBITDA ratio of 1.4x, compared to 1.1x in the prior year period.
• In the second quarter, the Company repurchased 5.8 million shares of its common stock at an average price of $170.01 per share for $989.6 million, inclusive of applicable fees and taxes.
• The Company’s Board of Directors recently authorized a new repurchase plan of up to $1.0 billion of the Company’s outstanding shares of common stock.
• Since the inception of its buyback program in August 2021, the Company has repurchased 93.0 million shares of its common stock, or 45.0% of its total shares outstanding, at an average price of $76.65 per share for a total cost of $7.1 billion. As of June 30, 2024, shares outstanding were approximately 116.5 million.

Operational Excellence Productivity

• For the second quarter, the Company delivered approximately $37 million in productivity savings related to operations excellence and supply chain initiatives. Year to date, the Company has delivered approximately $77 million in productivity savings.
• 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 $16.4 billion to $17.2 billion.
• Gross Profit margin to be in a range of 31.5% to 32.5%.
• Adjusted EBITDA to be in a range of $2.2 billion to $2.4 billion.
• Adjusted EBITDA margin to be in a range of 13.4% to 14.0%.
• Free cash flow in the range of $1.0 billion to $1.2 billion.

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 low-single digits, Multi-Family starts down 25% to 30%, and R&R flat to the prior year.
• Acquisitions completed within the last twelve months are projected to add net sales growth of 1.5% to 2.0%.
• Total capital expenditures in the range of $400 million to $500 million.
• Average commodity prices in the range of $380 to $400 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 second quarter 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.