Builders FirstSource Reports Record First Quarter 2022 Results

Builders FirstSource, Inc. reported its results for the first quarter ended March 31, 2022.

First Quarter 2022 BFS Highlights

All Year-Over-Year Comparisons Unless Otherwise Noted:

• Net sales of $5.7 billion for the quarter increased 36.1% driven by double-digit core organic growth, commodity inflation and acquisitions.
• Net income grew 270.6% to $639.6 million, or $3.56 per diluted share, and adjusted net income increased 136.5% to $700.8 million, or $3.90 per diluted share.
• Adjusted EBITDA increased 119.8% to a first quarter record of $1.0 billion driven by commodity inflation, double-digit core organic growth, acquisitions and strong demand in the residential housing market.
• Strong quarter-end balance sheet with a net debt to LTM Adjusted EBITDA ratio of 0.9x and liquidity of $1.2 billion.
• During the quarter, the Company repurchased approximately 3.6 million shares of its common stock for approximately $286 million.

Dave Flitman, President and CEO of Builders FirstSource, commented, “We started the year out strong achieving another quarter of record net sales, gross margin and Adjusted EBITDA, while also producing strong core organic sales growth of 15%. In addition, we continue to make progress investing prudently in our operations and delivering outstanding service to our customers as we work to overcome the supply chain constraints that persist throughout our industry. Our efforts to broaden our value-added products, which saw core organic sales up 31%, alongside our strategic investments in digital, are helping our customers get their jobs done quickly, on time and cost-effectively. The success we have achieved is directly attributable to our hard working and dedicated team members who go above and beyond each day to help us maintain our position as an industry leader.”

Mr. Flitman continued, “We are excited to welcome the Panel Truss and Valley Truss team members to the Builders FirstSource family and look forward to their contributions to grow our value-added products business. Looking ahead, we believe the housing industry remains resilient and underbuilt, and we have seen strong underlying demand in new housing construction into the second quarter. Furthermore, we are maintaining our focus on allocating resources to outpace market growth in our higher margin value-added products while investing further in our digital solutions platform to advance our goal of transforming the homebuilding industry. For 2022, we have increased our expectations for growth and significant free cash flow generation. We remain committed to deploying capital to high return internal investments, accretive bolt-on M&A and share repurchases.”

Peter Jackson, CFO of Builders FirstSource, added, “We are pleased with our remarkable first quarter results as well as our continued M&A momentum. We remain committed to a balanced approach to capital deployment through 2022 and beyond as we leverage our strong cash flow to pursue additional accretive investments in our operations while executing against our share repurchase authorizations. We expect to generate free cash flow of $2.0 billion to $2.4 billion in 2022, reflecting disciplined working capital management and our ability to capitalize on our industry-leading product portfolio. We look forward to building on a very successful quarter as we continue to focus on our value-added products, share gains and returning additional value to our stakeholders.”

Builders FirstSource Financial Performance Highlights – First Quarter 2022 Compared to First Quarter 2021

Net Sales

• Net sales for the period were $5.7 billion, a 36.1% increase versus prior year quarter. Core organic sales increased by 15.0%, commodity price inflation contributed 12.8% to net sales and acquisitions contributed net sales growth of 8.3%.
• Core organic sales in value-added products grew by an estimated 30.8% compared with the prior year period.
• Demand for single family housing continues to drive top-line growth. For the quarter, our core organic growth for Single Family increased 16.6%, 9.5% for Repair and Remodel (R&R)/Other and 10.2% for Multi-Family.

Gross Profit

• Gross profit was $1.8 billion, a 71.3% increase compared to the prior year quarter. The gross profit margin percentage increased 670 basis points to 32.3%, primarily driven by disciplined pricing in a volatile, supply-constrained marketplace, as well as effective and timely sourcing of materials.

Selling, General and Administrative Expenses

• SG&A was $968.6 million, an increase of approximately $147.0 million, or 17.9%, compared to the prior year period, driven primarily by variable compensation due to the increase in net sales and profitability. As a percentage of net sales, total SG&A decreased by 270 basis points to 17.0%.

Interest Expense

• Interest expense increased by $9.5 million to $41.3 million compared to the prior year period. The year-over-year increase is primarily due to higher outstanding debt balances.

Income Tax Expense

• Driven by higher profitability, income tax expense was $182.9 million, compared to $43.5 million in the prior year period. The effective tax rate in the first quarter was 22.2%, up 210 basis points versus the prior year period.

Net Income

• Net income was $639.6 million or $3.56 earnings per diluted share, compared to net income of $172.6 million, or $0.83 earnings per diluted share, in the same period a year ago. Adjusted net income was $700.8 million, or $3.90 adjusted earnings per diluted share, compared to adjusted net income of $296.3 million, or $1.42 adjusted earnings per diluted share, in the prior year period. The 136.5% increase in adjusted net income was primarily driven by the increase in net sales and gross margin partially offset by higher income tax and SG&A expense. Adjusted earnings per diluted share excludes amortization and one-time expenses related to merger and acquisition activity.

Adjusted EBITDA

• Adjusted EBITDA increased 119.8% to $1.0 billion, primarily driven by solid demand across our key customer end-markets, commodity inflation, pricing and acquisitions.
• Adjusted EBITDA margin improved to 17.6%, which increased 670 basis points compared to the prior year period.

Builders FirstSource Capital Structure, Leverage, and Liquidity Information

• For the three months ended March 31, 2022, cash provided by operating activities was $179.8 million; and cash used in investing activities was $48.3 million. The Company’s free cash was an inflow of $131.5 million, primarily driven by sales increases from core organic growth and from the impact of commodity inflation.
• Liquidity as of March 31, 2022 was $1.2 billion, consisting of approximately $0.9 billion in net borrowing availability under the revolving credit facility and $0.3 billion of cash on hand.
• As of March 31, 2022, LTM Adjusted EBITDA was $3.6 billion and net debt was $3.1 billion, resulting in a decreased net leverage ratio from 1.2x to 0.9x.
• In the first quarter, the Company repurchased approximately 3.6 million shares of its common stock for approximately $286.0 million at an average stock price of $79.58. In addition, the Company repurchased approximately 4.3 million shares in April 2022 for approximately $266.9 million at an average stock price of $62.21. Year-to-date, the Company repurchased approximately 7.9 million shares of its common stock for approximately $552.9 million at an average stock price of $70.13.
• Since August 2021, the Company repurchased approximately 35.3 million shares of its common stock at an average price of $65.10, for approximately $2.3 billion. The Company has repurchased approximately 17% of its total shares outstanding.
• On May 9, 2022, the Board of Directors authorized a new share repurchase program of $2 billion, which replaces the previous authorization.

In January 2022, the Company completed a private offering of an additional $300.0 million in aggregate principal amount of 2032 notes at an issue price equal to 100.50% of par value. Net proceeds from the offering were used to repay borrowings on the 2026 facility and to pay related transaction fees and expenses. In February 2022, the Company amended the 2026 facility to increase the total commitments by an aggregate amount of $400.0 million resulting in a new $1.8 billion amended credit facility.

BMC Merger Integration & Ongoing Operational Excellence Productivity

• 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 delivered approximately $55 million in cost synergies to the P&L in the first quarter, fully recognizing the synergy commitments of the BMC merger.
• In addition, the Company believes it will deliver over $100 million in productivity savings in 2022.

M&A Update

• On April 1, 2022, the Company acquired both the Texas Panel Truss and East Panel Truss businesses (collectively, “Panel Truss”), for an aggregate of approximately $150 million, subject to certain closing adjustments. Panel Truss is a provider of building components to the single and multi-family markets throughout the South and Southeast. Panel Truss will provide BFS with additional component capacity in the Company’s high-growth southern markets to support new growth opportunities. The Panel Truss businesses had approximately $138 million in sales in 2021.
• On April 1, 2022, the Company acquired Valley Truss Co., Inc. (“Valley Truss”) for approximately $30.5 million, subject to certain closing adjustments. Valley Truss is a highly successful provider of building components to the single and multi-family markets in Boise, Idaho. Valley Truss will provide BFS with additional component capacity and expand the Company’s value-added offering to harness new growth opportunities. Valley Truss sales were approximately $26 million in 2021.

2022 Assumptions:

The Company’s anticipated 2022 performance is based on several assumptions, including the following:

• Growth across our geographies in single family starts in the mid-single digits, multi-family starts in the low to mid-single digits; and R&R in the low to mid-single digits.
• Recently completed acquisitions projected to add net sales growth of 5% to 6%.
• One fewer selling day in the fourth quarter of 2022 versus 2021 or approximately 0.3%.
• Depreciation and amortization expenses in the range of $440 million to $460 million, including approximately $180 million of amortization related to intangible assets acquired in the BMC merger. Total depreciation projected to be $190 million and total amortization projected to be $260 million for the full year 2022.
• Total capital expenditures in the range of $375 million to $400 million.
• Free cash flow in the range of $2.0 billion to $2.4 billion, assuming average commodity prices in the range of $700 to $1,000.
• Interest expense in the range of $175 million to $185 million.
• An effective tax rate between 23.0% to 25.0%.

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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 42 states with approximately 565 locations and have a market presence in 47 of the top 50 and 85 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 specialty building products. www.bldr.com.

Contact:

Michael Neese – SVP, Investor Relations – (214) 765-3804

Source: Builders FirstSource, Inc.