BlueLinx Announces Third Quarter 2022 Results
BlueLinx Holdings Inc., a leading U.S. wholesale distributor of building products, announced today results for the third quarter 2022.
Third Quarter 2022 Highlights
(all comparisons are versus the prior year period)
- Delivered net sales of $1.1 billion, an increase of 9%
- Grew specialty product sales 13% to $724 million, or 68% of total sales, consistent with growth strategy
- Increased gross profit 24% to $189 million and gross margin 210 basis points to 17.9%
- Reported net income of $60 million and increased diluted earnings per share 35% to $6.38
- Grew adjusted EBITDA 27% to $100 million and increased adjusted EBITDA margin 130 basis points to 9.4%
- Generated $143 million of operating cash and $130 million of free cash flow
- Reduced net leverage to 0.7x and increased available liquidity to an all-time high of $576 million
- Completed previously announced $60 million accelerated share repurchase program on September 15, 2022
- Acquired Vandermeer Forest Products on October 3, 2022
“Our third quarter results were highlighted by 9% year-over-year sales growth, 35% diluted EPS growth and 27% adjusted EBITDA growth,” said Dwight Gibson, President and Chief Executive Officer. “Specialty product sales grew 13% year-over-year to $724 million, or 68% of total sales, and gross profit from specialty product sales increased 3% to $151 million, or 80% of total gross profit. We generated $143 million of operating cash, a record level, which further strengthened our balance sheet. And we ended the quarter with net leverage of 0.7x, cash on hand of $229 million and available liquidity at an all-time high of $576 million.”
Gibson continued, “From a capital allocation perspective, we have invested in high-return opportunities aligned to our growth and value creation strategy while maintaining a strong financial position with significant liquidity. Through the first nine months of 2022, we have invested $19 million in capital expenditures and repurchased 9% of our outstanding shares for $66 million. And on October 3, 2022, we acquired Vandermeer Forest Products including its main branch facilities for $67 million. This strategic acquisition provides a platform for growth in the Pacific Northwest, enables us to serve all 50 states and is well-aligned to our specialty products growth strategy. Even after acquiring Vandermeer, our net leverage remained below 1 times and, as of the end of October, we had over $560 million of available liquidity, including cash on hand and our undrawn revolver.
We believe our scale, strategic supplier relationships, key customer relationships and strong balance sheet are advantages that position us to successfully navigate a more challenging macro environment. Operationally we are focused on optimizing productivity, lean inventory management and increasing our specialty products sales mix, while maintaining a disciplined approach to capital allocation,” concluded Gibson.
Third Quarter 2022 Financial Performance
In the third quarter, net sales were $1.1 billion, an increase of $90 million, or 9% year-over-year. Gross profit was $189 million, an increase of $36 million, or 24%, year-over-year, and gross margin was 17.9%, up 210 basis points year-over-year. The increase in sales and gross profit reflects 13% growth in specialty product sales and 2% growth in structural product sales.
Net sales of specialty products, which includes products such as engineered wood, siding, millwork, outdoor living, industrial products and specialty lumber and panels, increased $83 million, or 13%, to $724 million in the third quarter. This growth was primarily driven by strategic pricing actions with volume relatively flat year-over-year. Gross profit from specialty product sales was $151 million, an increase of $4 million, or 3%, year-over-year and gross margin was 20.9% compared to 23.0% in the prior year period. The decline in gross margin reflects easing of supply constraints across many specialty product categories, particularly millwork.
Net sales of structural products, which includes products such as lumber, plywood, oriented strand board, rebar, and remesh, increased $7 million, or 2%, to $336 million in the third quarter and gross profit from sales of structural products increased $32 million, up from $6 million in the prior year period. The increase in structural sales and gross profit was due primarily to an increase in the average composite price of framing lumber year-over-year. Gross margin on structural product sales was 11.3% in the third quarter, up from 1.7% in the prior year period. The improvement in gross margin reflects the benefits of our disciplined approach to managing structural inventory.
Selling, general and administrative (“SG&A”) expenses were $92 million in the third quarter, essentially flat versus the second quarter of 2022 and $16 million, or 20%, higher than the prior year period. The year-over-year increase in SG&A was due primarily to higher delivery costs and increased strategic investments in the Company’s workforce as well as key growth and productivity initiatives.
Net income was $60 million, or $6.38 per diluted share, versus $47 million, or $4.74 per diluted share, in the prior year period. The $6.38 per diluted share included a $0.43 per share benefit as a result of lower shares outstanding due to the Company’s share repurchases in 2022.
Adjusted EBITDA was $100 million, or 9.4% of net sales, as compared to $79 million, or 8.1% of net sales in Q3 2021.
Net cash generated from operating activities was $143 million in the third quarter 2022 compared to $104 million in the prior year period. This was driven by a net benefit from working capital as well as the increase in net income. Free cash flow was $130 million in the third quarter of 2022 compared to $102 million in the prior year period.
Cash capital investments were $12.2 million in the third quarter of 2022, primarily related to investments to upgrade or enhance the Company’s distribution branches and fleet of rolling stock.
As of October 1, 2022, total debt was $573 million, including $300 million of senior secured notes that mature in 2029, $273 million of finance leases and an undrawn revolving credit facility. Cash and cash equivalents were $229 million and net debt was $343 million, resulting in a net leverage ratio of 0.7x on trailing twelve-month adjusted EBITDA of $527 million. At the end of the third quarter 2022, available liquidity was $576 million, including $229 million of cash and cash equivalents and $346 million of availability on the Company’s undrawn revolving credit facility.
Share Repurchase Update
On May 3, 2022, the Company’s Board of Directors increased its share repurchase authorization to $100 million, up $75 million from the previous authorization. Under this $100 million share repurchase authorization, the Company may repurchase its common stock at any time or from time to time, without prior notice, subject to prevailing market conditions and other considerations.
Through the end of fiscal third quarter of 2022, the Company had repurchased a total of 882,346 shares of its common stock for $66.4 million under the repurchase program, or an average price of $75.28 per share. This includes 801,015 shares of common stock repurchased for $60 million under the Company’s Accelerated Stock Repurchase Agreement, which was entered into on May 3, 2022, and completed on September 15, 2022, as well as 81,331 shares of common stock repurchased for $6.4 million in the open market during the first quarter 2022.
Vandermeer Forest Products Acquisition
As previously announced, on October 3, 2022, the Company acquired Vandermeer Forest Products (“Vandermeer”), a regional wholesale distributor of building products in the Pacific Northwest, for $67 million, of which $3.6 million was for Vandermeer’s Spokane, Washington distribution facility and related real estate. This acquisition was funded with cash on hand and is expected to be immediately accretive to earnings per share. Vandermeer’s trailing twelve-month sales as of the end of September 2022 were approximately $150 million.
Fourth Quarter 2022 Update
Excluding contributions from the Vandermeer acquisition, through the first four weeks of the fourth quarter, specialty product gross margin was approximately 20% and volume was down modestly from the third quarter 2022 reflecting historical seasonality and the current macro-economic environment. Structural product sales volumes were consistent with the third quarter 2022 with gross margin in a range of 9% to 10%. The Company will continue to evaluate market pricing for wood-based commodities and adjust accordingly at the end of each period.
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BlueLinx (NYSE: BXC) is a leading U.S. wholesale distributor of residential and commercial building products with both branded and private-label SKUs across product categories such as lumber, panels, engineered wood, siding, millwork, metal building products, and other construction materials. With a strong market position, broad geographic coverage footprint servicing over 40 states, and the strength of a locally focused sales force, we distribute our comprehensive range of products to approximately 15,000 national, regional, and local dealers, specialty distributors, national home centers, and manufactured housing customers. BlueLinx provides a wide range of value-added services and solutions to our customers and suppliers. We are headquartered in Georgia, with executive offices located at 1950 Spectrum Circle, Marietta, Georgia, and we operate our distribution business through a broad network of distribution centers. BlueLinx encourages investors to visit its website, www.BlueLinxCo.com, which is updated regularly with financial and other important information about BlueLinx.
Seth Freeman – VP Marketing & Communications – email@example.com
Source: BlueLinx Holdings, Inc.