Builders FirstSource Reports Record First Quarter 2021 Results

Builders FirstSource, Inc. reported its results for the first quarter ended March 31, 2021. In January 2021, the Company closed the BMC all-stock merger creating the nation’s premier supplier of building materials and services.

–Core Organic Sales Growth over 20%

–Record Adjusted EBITDA & Adjusted EBITDA Margin

–BMC Integration and Cost Savings Ahead of Plan

–Acquired John’s Lumber, Premier Building Distributor Serving Michigan

First Quarter 2021 BFS Highlights (includes BMC in Q1 2021 and not in Q1 2020) All Year-Over-Year Comparisons Unless Otherwise Noted:

–Net sales of $4.2 billion for the quarter increased 133.6% driven by the merger with BMC, commodity inflation, and strong organic growth

–Gross profit of $1.1 billion increased 129.8% driven by the merger with BMC, commodity inflation, and strong organic growth

–Net income of $172.6 million, or $0.83 per diluted share, and adjusted net income of $229.0 million, or $1.10 per diluted share

First Quarter 2021 Highlights Compared to Combined Non-GAAP Pro Forma First Quarter 2020

–Net sales of $4.2 billion for the quarter increased 54.1% compared to the combined pro forma prior year period

–Core organic sales increased 22.0%, excluding commodity and acquisition impacts

–Commodity inflation increased net sales 31.3%

–Acquisitions contributed to net sales growth of 2.4%

–Gross profit of $1.1 billion increased 52.1% compared to the combined pro forma prior year period

–As a percentage of net sales, SG&A decreased 270 basis points to 19.7%

–Net income of $172.6 million, or $0.83 per diluted share, and adjusted net income of $229.0 million, or $1.10 per diluted share

–Adjusted EBITDA increased 186.8% to $455.2 million, driven by strong demand in the residential housing market, commodity value, and disciplined cost management

–Adjusted EBITDA margin increased 500 basis points to 10.9%

–Strong quarter-end balance sheet with a net debt to LTM Adjusted EBITDA ratio of 1.2x and liquidity of $1.1 billion

Dave Flitman, CEO of Builders FirstSource, commented, “The positive momentum in our business continued with record first quarter results. We are working closely with our customers to reduce cycle times amid material availability constraints and capitalize on strong underlying demand in the single family residential housing market.” Flitman continued, “I very much appreciate the efforts of our more than 26,000 team members who are working tirelessly to provide best-in-class service for our customers in these unprecedented market conditions. We also look forward to welcoming the associates of John’s Lumber to the BFS team.”

Flitman stated, “Our integration efforts are ahead of plan and we remain confident in achieving the cost synergies related to our merger with BMC. The combined teams are working well together and through strong execution delivered record Adjusted EBITDA of $455.2 million, an increase of 187%, and record Adjusted EBITDA margin of nearly 11%. This performance was enabled by our tremendous core organic sales growth of 22%. Our very strong balance sheet underpins our strategic growth focus through reinvestment in the business and M&A, while delivering enhanced value to our stakeholders. We are continuing to build our world-class homebuilding distribution platform that positions us as a partner of choice.”

CFO Peter Jackson added, “The early returns on our recently completed transaction with BMC are reflected in our exceptional first quarter results. We experienced stronger-than-expected demand in single family starts across the country, and we are well positioned to support this sustained demand. We are responding effectively to rapidly evolving market dynamics to help our customers meet the surging demand for housing. As we move forward, we are well prepared to take advantage of favorable market conditions by utilizing our industry-leading scale, product portfolio, and cash generation.”

Builders FirstSource Financial Performance Highlights – First Quarter 2021 Compared to a Combined Non-GAAP Pro Forma First Quarter 2020

Pro Forma Net Sales

–Net sales for the first quarter ending March 31, 2021 were $4.2 billion, a 54.1% increase compared to a combined pro forma year ago. Core organic sales, which excludes acquisitions, commodity price fluctuations and differences in selling days between periods, increased by 22.0% while commodity price inflation added 31.3% to net sales.

–Value-added core organic sales grew by an estimated 22.1%, led by 41.5% growth in our Manufactured Products category. Robust demand nationally was somewhat hindered by material availability constraints.

–Demand improved in single family starts during the quarter. Single family, repair and remodel / other grew estimated combined core organic sales by 29.6% and 5.4% respectively, while multi- family declined 3.1%.

–Acquisitions, excluding the BMC merger, completed during the prior four quarters contributed net sales growth of 2.4%.

Gross Profit

–Gross profit was $1.1 billion, an increase of $366.6 million or 52.1% compared with the combined pro forma prior year period. Our gross margin decreased 40 basis points to 25.6%, primarily due to a one-time purchase accounting adjustment.

Selling, General and Administrative Expenses

–SG&A was $821.6 million, an increase of approximately $214.4 million or 35.3% compared to the combined pro forma prior year period, driven primarily by the effects of purchase accounting for the BMC Merger, including $83.2 million of amortization expense of acquired intangibles, one-time charges, as well as higher variable compensation related to the increase in profitability and acquisitions. Excluding these variables, underlying SG&A decreased by 2.6%. As a percentage of net sales, SG&A decreased by 270 basis points to 19.7% due to the effect of higher net sales and continued expense control.

Interest Expense

–Interest expense decreased by $25.4 million to $31.8 million compared to the same combined pro forma period last year. The year over year decrease includes higher one-time charges of $28.0 million related to debt financing transactions during the first quarter of 2020, compared to $4.5 million in the first quarter of 2021.

Income Tax Expense

–Driven by higher profitability, income tax expense in the first quarter of 2021 was $43.5 million, compared to $7.7 million in the combined proforma prior year period. The effective tax rate in the first quarter of 2021 was 20.1%, slightly lower than the estimated annual effective tax rate driven primarily by the periodic impact of stock-based compensation adjustments during the quarter.

Net Income

–GAAP net income was $172.6 million, or $0.83 earnings per diluted share, compared to a combined pro forma $30.8 million, or $0.15 earnings per diluted share, in the same period a year ago. Adjusted net income was $229.0 million, or $1.10 earnings per diluted share, compared to a combined pro forma $56.9 million, or $0.28 earnings per diluted share, in the first quarter of 2020. The 302.5% increase in adjusted net income was primarily driven by the increase in net sales described above and improved overhead leverage offset by higher tax expense.

Adjusted EBITDA

–Adjusted EBITDA increased 186.8% to $455.2 million, driven by solid demand across single family and repair and remodel/other customer end markets, commodity inflation and cost leverage.

–Adjusted EBITDA margin improved to a record 10.9%, which increased 500 basis points compared to 5.9% in the same combined pro forma period a year ago.

Builders FirstSource Capital Structure, Leverage, and Liquidity Information

–Cash used in operating activities was $200.5 million for the first quarter. Cash provided by investing activities was $131.4 million for the first quarter, including capital expenditures, net of proceeds, of $36.1 million. The Company’s free cash was an outflow of $237 million in the quarter, primarily based on the impact of commodity inflation on our working capital. The Company expects to build its free cash flow during the year.

–Liquidity as of March 31, 2021 was $1.1 billion, consisting of over $1 billion in net borrowing availability under the revolving credit facility and $19 million cash on hand.

–Adjusted EBITDA, on a combined pro forma trailing twelve-month basis, was $1.4 billion and net debt was $1.7 billion as of March 31, 2021. Our net leverage ratio declined to 1.2x.

Pro Forma Combined Unaudited and Adjusted Information, First Quarter 2021

The Company has provided supplemental unaudited financial data of the combined company in this press release. The below financial data combines Builders FirstSource and BMC historical operating results as if the businesses had been operated together on a combined basis during prior periods along with adjustments to reclassify certain BMC historical financial information to conform to Builders FirstSource historical financial information. This financial data is not intended to be, and was not, prepared on a basis consistent with the unaudited pro forma condensed combined financial information included in Builders FirstSource’s Pre-effective amendment to an S-4 filing dated November 17, 2020 with the U.S. Securities and Exchange Commission (the “Pro Forma S-4 Filing”), which provides the pro forma data information prepared in accordance with Article 11 of SEC Regulation S-X.

BMC Merger Integration

Operating in most of the nation’s largest and fastest growing regions, the combined company is exceptionally positioned for long-term value creation. Since closing the merger with BMC on January 1, 2021, Builders FirstSource has made substantial progress in integrating the two companies while delivering solid execution.

The Company’s increased scale, a strong balance sheet bolstered by robust cash generation, and anticipated annual run-rate synergies of $130 million to $150 million by the end 2023 are expected to provide greater resources to invest in growth, innovation and ongoing value creation for all stakeholders.

M&A Update

On May 3, 2021, BFS completed the acquisition of John’s Lumber, a premier building materials supplier serving the largest housing markets in Michigan. The acquisition adds another top 50 Metropolitan Statistical Area (MSA) to the Company’s portfolio and provides enhanced scale that will benefit our existing 14 locations in the state. John’s Lumber products include framing lumber and sheet goods, windows, doors, molding and trim, siding, decking, kitchen and bath, and installation services. The company generated approximately $49 million in total net sales for the trailing twelve months ended March 31, 2021.

2021 Outlook

For 2021, the Company expects significant improvement in its financial performance, including the following:

–Net sales to grow to a range of $16.0 billion to $17.0 billion or approximately 25% to 33% over 2020 combined pro forma net sales of $12.8 billion.

–Adjusted EBITDA to be in a range of $1.75 billion to $1.85 billion or approximately 64% to 73% over 2020 combined pro forma Adjusted EBITDA of $1.07 billion.

–Expected realized cost savings of $60 million to $70 million

–Free cash flow in the range of $1.3 billion to $1.5 billion

The 2021 outlook is based on several assumptions, including the following:

–Single family starts percentage growth across our geographies in the low double digits; multi-family starts percentage decline in the high single to low double digits; and R&R growth in the low to mid-single digits.

–Commodity price appreciation of 10% to 20% compared to the prior year

–Recently completed acquisitions net sales growth of 2%

–2 fewer selling day in 2021 versus 2020 or approximately 1%

–Depreciation and amortization expenses in the range of $540 million to $550 million, including approximately $325 million of amortization related to intangible assets acquired in the BMC Merger.

–Capital Expenditures in the 1.4% to 1.6% range of net sales

–Interest expense in the range of $110 million to $115 million

–An effective tax rate of between 23.0% to 25.0%

For the complete press release, click here.

About Builders FirstSource

Headquartered in Dallas, 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 40 states with approximately 550 locations and have a market presence in 47 of the top 50 and 86 of the top 100 MSA’s, providing geographic diversity and balanced end market exposure. We service customers from strategically located distribution and manufacturing facilities (certain 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 building products. For more information about Builders FirstSource, visit the Company’s website at www.bldr.com.

Contact:

Michael Neese – Senior Vice President Investor Relations – (214) 765-3804

Source: Builders FirstSource, Inc.