Builders FirstSource Reports Second Quarter 2020 Results

August 3rd, 2020 by Editor

Dallas-based Builders FirstSource, building products, prefabricated components, and value-added services supplier for the professional market segment for new residential construction and repair and remodeling released its second quarter (2020) financial results, which include a 2.2% increase  the quarter’s net sales compared to the prior year period. Core organic sales declined 2.1%, excluding acquisitions and commodity impacts, and acquisitions contributed net sales growth of 2.5%. The company’s estimated sales volume, which includes both core organic and acquisitions, grew by 0.4% while commodity inflation increased sales by 1.8%.

Builders FirstSource’s adjusted EBITDA increased 11.2% to a record $162 million, or 8.3% of net sales driven by disciplined cost management, with the net income being $78.9 million ($0.67 per diluted share) and the adjusted net income came in at $79.2 million, or $0.67 per diluted share. The company had a strong quarter-end balance sheet with a net debt to Adjusted EBITDA ratio of 2.3x and liquidity of $1.2 billion.

“We are incredibly proud of our team’s ability to overcome the challenges presented by the COVID-19 pandemic and produce record-setting second quarter EBITDA results. During the quarter, we carefully monitored local business conditions in order to safely and effectively deliver critical products and services to our customers, all while preserving as many jobs as possible,” said Builders FirstSource CEO Chad Crow. “As we look at our markets, improvement in housing data, record low mortgage rates, and shifts toward suburban living are all encouraging and continue to support demand for our integrated services. To that end, in June, we experienced a sharp sequential rebound in sales. Going forward, we remain confident in our ability to outperform the market as well as mitigate business disruptions outside of our control related to the COVID-19 pandemic.”

Compared to the second quarter of 2019, the company’s $1.9 billion net sales for the second quarter ending June 30, 2020, showed a 2.2% increase compared to a year ago. Core organic sales declined by 2.1% and commodity price inflation added 1.8% to net sales.

Acquisitions contributed net sales growth of 2.5% attributable to the five acquisitions completed during the prior four quarters. Value-added product sales volume grew by an estimated 0.4%, led by 3.3% growth in Builders FirstSource doors, windows, and millwork product category partially offset by a decline of 2.6% in its manufactured products.

Gross margin was $517.3 million, which remained flat compared with the prior year. The company’s gross margin percentage decreased to 26.6% from 27.2 % in the second quarter of 2019, though the decrease was attributed to the expected normalization in lumber and lumber sheet goods product category gross margin percentage compared to the prior year period.

“Our proactive actions and focused execution at the onset of the COVID-19 pandemic allowed us to operate effectively throughout a challenging environment. During the first half of the year, we actively enhanced our financial flexibility, liquidity, and cash flow to better position our business for continued success. We are pleased with our progress in de-leveraging and fortifying our balance sheet as we reduced our net leverage ratio to 2.3x, which is below the low end of our targeted range,” said CFO Peter Jackson.

Net sales year to date were $3.7 billion, a 5.6% increase compared to the first half of 2019, largely driven by the impact of acquisitions of 3.0% while core organic growth contributed 0.6%. Commodity inflation and one additional selling day increased sales by 1.2% and 0.8%, respectively.

Estimated sales volume grew 3.6%. Demand increased across three customer end markets and the company grew in all of product categories with the exception of Gypsum, Roofing and Insulation.

The gross margin increased $23.6 million for a total of $982.7 million, though it’s gross margin percentage decreased to 26.3% in the first half of 2020, down from 27.1% in the first six months of 2019, an 80 basis point decrease.

Mr. Crow concluded, “Our first half results demonstrate a positive overall homebuilding environment, supported by tailwinds and rising demand across our diverse, national footprint. We are focusing our efforts on disciplined cost management while we work to efficiently meet customer demand, manage the impact of accelerating commodity inflation and generate additional cash flow in the third quarter. We are exceptionally well-positioned to execute on organic and inorganic value-enhancing growth opportunities that advance our long-range plan, and help us win in our markets. I especially thank our fifteen thousand team members for the milestones achieved and the ongoing safety-first emphasis in an unprecedented environment.”

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