BMC Stock Holdings, Inc. Announces Record 2020 Third Quarter Results

BMC Stock Holdings, Inc. (“BMC” or the “Company”), one of the nation’s leading providers of diversified building materials and solutions to new construction builders and professional remodelers in the U.S., announced its financial results for the third quarter ended September 30, 2020.

Third Quarter 2020 Highlights

– Net sales increased 13.1% to a record $1,090.3 million

– Gross profit increased 7.2% to a record $273.1 million

– SG&A expenses as a percent of net sales declined 190 basis points to 17.9%

– Net income increased 33.6% to $44.9 million

– Adjusted EBITDA1 improved by 32.9% to a record $99.2 million

– Adjusted EBITDA margin1 increased 140 basis points to 9.1%

– Diluted earnings per share (“EPS”) increased 32.0%, or $0.16, to $0.66

– Adjusted net income per diluted share1 increased 44.8%, or $0.26, to a record $0.84

– Total liquidity was approximately $648.5 million, which included $286.2 million of cash and $362.3 million of borrowing capacity under the revolver, with no debt maturities until 2024.

“BMC delivered record third quarter results, including double-digit net sales and net income growth, and record gross profit, Adjusted EBITDA1 and Adjusted Net Income1,” said Dave Flitman, President and CEO of BMC. “These strong results were driven by strong demand in our single-family homes and pro remodel segments and higher lumber pricing, combined with solid execution against our four-pillar strategy, including our BMC Operating System-led productivity and cost savings initiatives. The double- digit sales growth led to sales in the third quarter exceeding $1 billion for the first time in our Company’s history. In conjunction with this momentum, we remain vigilant about keeping our associates, suppliers and customers safe as the pandemic continues to evolve.”

Mr. Flitman continued, “Looking ahead, I am even more excited about the strategic combination with Builders FirstSource, which remains on track to close in late 2020 or early 2021, and I believe it will deliver meaningful shareholder value in the years to come.”

Third Quarter 2020 Financial Results Compared to Prior Year Period

– Net sales increased 13.1% to a record $1,090.3 million, primarily driven by growth from price inflation of 10.0%, acquisitions of 3.5% and Core Organic Growth of 0.6%. These increases were partially offset by a decrease of 1.0% from closed facilities.

– Gross profit increased 7.2% to $273.1 million. Gross profit as a percentage of sales (“gross margin”) was 25.0%, compared to 26.4% for the third quarter of 2019. The 140 basis point decline in gross margin was driven by a decrease in the gross margin in the lumber and lumber sheet goods and structural components product categories, and a higher percentage of net sales being derived from lumber and lumber sheet goods. Gross margins in our lumber and lumber sheet goods and structural components product categories were lower due to a significant increase in commodity costs, which increased at a faster rate than our average selling prices.

– Selling, general and administrative (“SG&A”) expenses increased 2.4% or $4.6 million to $195.1 million. This increase was primarily related to an increase of approximately $8.5 million from costs incurred in relation to the merger transaction with Builders FirstSource and $7.6 million related to SG&A expenses of recently acquired businesses. Excluding merger related costs and SG&A from recently acquired businesses, SG&A expenses declined by $11.5 million or 6.0%, primarily related to decreases in employee wages, benefits and other employee-related costs, lower fuel costs and targeted reductions in other costs. SG&A expenses as a percent of net sales declined 190 basis points to 17.9%.

– Depreciation expense, including the portion reported within cost of sales, increased $1.4 million to $15.4 million, compared to $14.0 million in the third quarter of 2019.

– Amortization expense was $5.0 million compared to $4.6 million in the third quarter of 2019. This increase was primarily due to the amortization of intangible assets at recently acquired businesses.

– Interest expense was $5.7 million compared to $5.8 million in the third quarter of 2019.

– Other income, net, which was derived primarily from state and local tax incentives, interest income and customer service charges, was $3.3 million compared to $3.5 million in the third quarter of 2019.

– Net income was $44.9 million, or $0.66 per diluted share for the quarter, compared to $33.6 million, or $0.50 per diluted share, in the third quarter of 2019.

– Adjusted net income1 increased to $57.2 million, or $0.84 per diluted share, compared to Adjusted net income1 of $38.8 million, or $0.58 per diluted share, in the third quarter of 2019.

– Adjusted EBITDA1 was $99.2 million, up 32.9% from the third quarter of 2019.

– Adjusted EBITDA margin1, defined as Adjusted EBITDA1 as a percentage of net sales, was 9.1%, up 140 basis points from the prior year period and was a record for the third quarter.

– Cash provided by operating activities declined $15.1 million to $54.0 million primarily due to changes in working capital.

Builders FirstSource and BMC Transaction

On August 27, 2020, Builders FirstSource, Inc. and BMC announced that they entered into a definitive merger agreement under which Builders FirstSource and BMC will combine in an all-stock merger transaction to create the nation’s premier supplier of building materials and services. Under the terms of the agreement, which was unanimously approved by the Boards of Directors of both companies, BMC shareholders will receive a fixed exchange ratio of 1.3125 shares of Builders FirstSource common stock for each share of BMC common stock. Upon completion of the merger, existing Builders FirstSource shareholders will own approximately 57% and existing BMC shareholders will own approximately 43% of the combined company on a fully diluted basis. The merger is expected to be tax free for U.S. federal income tax purposes. The transaction is expected to close in late 2020 or early 2021, subject to, among other things, the expiration or termination of the applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, as well as other customary closing conditions. The transaction requires the approval of shareholders of both Builders FirstSource and BMC.

Liquidity and Capital Resources

Total liquidity as of September 30, 2020 was approximately $648.5 million, which included $286.2 million of cash and cash equivalents and $362.3 million of borrowing availability under the Company’s asset-backed revolving credit facility. In addition, the Company has no long-term debt maturities until 2024.

Capital expenditures during the third quarter of 2020, net of proceeds from the sale of property, equipment and real estate, totaled $21.3 million which was down $0.1 million from the prior year period. These expenditures were primarily used to fund purchases of vehicles and equipment to replace aged assets and support increased sales volume and facility, technology and automation investments to support our operations. Cash provided by operating activities declined $15.1 million to $54.0 million primarily due to changes in working capital. For the first nine months, cash provided by operating activities increased $8.8 million to $207.2 million. The Company continues to focus on cash generation.

Stock Repurchases

During the third quarter of 2020, the Company did not repurchase any shares of stock. As of September 30, 2020, the Company had approximately $54.2 million of capacity remaining under the current share repurchase authorization, which expires in November 2020.

For the full third quarter results, click here.

1 Non-GAAP Financial Measures: This press release presents Adjusted EBITDA, Adjusted EBITDA margin, Adjusted net income and Adjusted net income per diluted share, which are non-GAAP financial measures within the meaning of applicable SEC rules and regulations. For a reconciliation of Adjusted EBITDA and Adjusted net income to the most comparable GAAP measures and a discussion of the reasons why the Company believes that these non-GAAP financial measures provide information that is useful to investors, see the discussion and tables included in this press release under “Reconciliation of GAAP to Non-GAAP Measures.”

About BMC Stock Holdings, Inc.

With $3.6 billion in 2019 net sales, BMC is one of the nation’s leading providers of diversified building materials and solutions to new construction builders and professional remodelers in the U.S. Headquartered in Raleigh, North Carolina, the Company’s comprehensive portfolio of products and services spans building materials, including millwork and structural component manufacturing capabilities, consultative showrooms and design centers, value-added installation management and an innovative eBusiness platform. BMC serves 45 metropolitan areas across 18 states, principally in the South and West regions.

Contact:

Michael Neese – Senior Vice President Strategy & Investor Relations – (919) 431-1796

Source: BMC Stock Holdings, Inc.