BlueLinx Announces Fourth Quarter and Full Year 2023 Results

BlueLinx Holdings Inc., a leading U.S. wholesale distributor of building products, reported financial results for the three months and twelve months ended December 30, 2023.

Fourth Quarter 2023 Highlights

(all comparisons are versus the prior year period unless otherwise noted)

• Net sales of $713 million
• Gross profit of $118 million, gross margin of 16.6% and specialty gross margin of 19.4%
• Net loss of $18 million, or $2.08 earnings per share, primarily due to the exit of a defined benefit pension plan resulting in a one-time $30.4 million charge ($6.9 million cash) plus related income taxes
• Adjusted net income of $26 million, or $2.94 adjusted diluted earnings per share
• Adjusted EBITDA of $36 million, or 5.1% of net sales
• Operating cash generated of $76 million and free cash flow of $67 million
• Completion of $12 million in share repurchases under our share repurchase programs

Full Year 2023 Highlights

(all comparisons are versus the prior year period unless otherwise noted)

• Net sales of $3.1 billion
• Gross profit of $527 million, gross margin of 16.8%, and specialty gross margin of 19.3%
• Net income of $49 million, or $5.39 diluted earnings per share
• Adjusted net income of $103 million, or $11.41 adjusted diluted earnings per share
• Adjusted EBITDA of $183 million, or 5.8% of net sales
• Operating cash generated of $306 million and free cash flow of $279 million
• Available liquidity of $868 million, including $522 million cash/cash equivalents on hand
• Net debt of $64 million and net leverage ratio of 0.3x
• Completion of $42 million in share repurchases, or 6% of our shares outstanding

“Our fourth quarter and full year 2023 were highlighted by strong margin performance and significant free cash flow, clearly demonstrating our ability to generate solid results and manage our working capital effectively, despite the macroeconomic and housing market uncertainties the industry continues to experience,” said Shyam Reddy, President, and CEO of BlueLinx. “Specialty products continued its strong margin performance and accounted for 70% of net sales and 80% of gross profit for the year. Structural products also performed well and continue to complement our specialty products business. With strong liquidity and minimal net debt, we are well-positioned to execute on our long-term sales growth strategy and to return capital to shareholders.”

“We were pleased with our fourth quarter specialty gross margins of 19.4% which were higher than our expected 18% to 19% range, as well as our structural gross margins which were 10.6%, and above our 9% to 10% expectation,” said Andy Wamser, Chief Financial Officer of BlueLinx. “During the fourth quarter, we returned $12 million to shareholders, bringing the total to $42 million in share repurchases under our share repurchase programs for the year, or 6% of our shares outstanding.”

Fourth Quarter 2023 Financial Performance

In the fourth quarter of 2023, net sales were $713 million, a decrease of $135.2 million, or 16.0% when compared to the fourth quarter of 2022. Gross profit was $118 million, a decrease of $33 million, or 21.6%, year-over-year, and gross margin was 16.6%, down 120 basis points from the prior year period.

Net sales of specialty products, which includes products such as engineered wood, siding, millwork, outdoor living, specialty lumber and panels, and industrial products, decreased $105.0 million, or 17.7%, to $487 million. This decline was primarily due to price deflation across several product categories occurring during normalizing market conditions. Gross profit from specialty product sales was $94.5 million, a decrease of $30.1 million, or 24.2%, compared to the fourth quarter last year. Gross margin was 19.4% compared to 21.1% in the prior year period.

Net sales of structural products, which includes products such as lumber, plywood, oriented strand board, rebar, and remesh, decreased $30.3 million, or 11.8%, to $226.0 million in the fourth quarter and gross profit from sales of structural products decreased $2.6 million from $26.6 million in the prior year period. The decreases in structural sales and gross profit were due primarily to price deflation in the average composite price of framing lumber of 15%, partially offset by slightly higher volumes. Gross margin on structural product sales was 10.6% in the fourth quarter, up slightly from 10.4% in the prior year period, in part due to our continued focus on pricing discipline and inventory management.

Selling, general and administrative (“SG&A”) expenses were $84.5 million in the fourth quarter, a decrease of $7.5 million from $92.0 million for the fourth quarter of 2022. The year-over-year decrease in the dollar amount of SG&A was due primarily to decreases in variable compensation and delivery expenses.

Net loss for the current quarter was $18.1 million, or $2.08 per share, versus net income of $32.0 million, or $3.50 per diluted share, in the prior year period. The 2023 period reflects a one-time charge of $30.4 million related to the settlement of our defined benefit pension plan. We have been relieved of all responsibility for our defined benefit pension plan through the purchase of an annuity with a highly rated insurance company that will make all future benefit payments and assume all risks. Some of our union employees continue to participate in multi-employer pension plans, and those plans were not impacted. Adjusted Net Income was $25.8 million, or $2.94 per diluted share. As a result of lower shares outstanding due to the Company’s share repurchases in 2022 and 2023, adjusted earnings of $2.94 per diluted share included a $0.38 per share benefit (a non-GAAP measure).

Adjusted EBITDA was $36.5 million, or 5.1% of net sales, compared to $63.1 million, or 7.4% of net sales in the prior period.

Net cash generated from operating activities was $75.9 million in the fourth quarter of 2023 compared to $154.3 million in the prior year period. The decrease in cash generated from operating activities was driven by a decrease in net income for the current fiscal year compared to the prior fiscal year and less cash generated from changes in working capital in fiscal 2023, particularly for accounts receivable and inventory. Free cash flow was $67.3 million in the fourth quarter of 2023 compared to $137.5 million in the prior year period. We allocated $8.6 million to cash capital investments related to both distribution facilities and our fleet during the quarter.

Full Year 2023 Financial Performance

For the twelve months ended December 30, 2023, net sales were $3.1 billion, a decrease of $1.3 billion, or 29.5% year-over-year. Gross profit was $527.0 million, a decrease of $306.0 million, or 36.7% year-over-year, and gross margin was 16.8%, down 190 basis points. The decreases in sales and gross profit reflect declines of 23.9% and 39.7% in specialty product net sales and structural product net sales, respectively.

Net sales of specialty products decreased $687.4 million, or 23.9% to $2.2 billion in the twelve months ended December 30, 2023. This decrease was primarily driven by price deflation combined with lower sales volume across all product categories occurring during normalizing market conditions. Gross profit from specialty product sales was $420.8 million in the current year, a decrease of $219.6 million, or 34.3%, year-over-year and gross margin in the current year was 19.3% compared to 22.3% in the prior year. The decrease in specialty products’ gross margin percentage over the prior fiscal year was also attributable to the year-over-year price deflation and volume normalization.

Net sales of structural products decreased $626.4 million, or 39.7%, to $952.1 million in the twelve months ended December 30, 2023, and gross profit from sales of structural products decreased $86.4 million to $106.2 million. The decreases in structural products net sales and gross profit were due primarily to price deflation in the wood-based commodity markets represented by the declines in the average composite price of framing lumber and structural panels, which were down 47% and 32%, respectively, in addition to lower volumes. Gross margin on structural product sales was 11.2% compared to 12.2% for the prior year.

SG&A expenses were $355.8 million during fiscal year 2023, down $10.5 million, or 2.9%, compared to the prior year period. The year-over-year decrease in SG&A expenses was due primarily to decreases in variable compensation and delivery expenses, partially offset by $5.9 million of full-year incremental operating expenses related to our Vandermeer acquisition.

Net income was $48.5 million, or $5.39 per diluted share, versus $296.2 million, or $31.51 per diluted share in the prior year. The 2023 period reflects the aforementioned one-time charge of $30.4 million related to the settlement of our legacy defined benefit pension plan. Adjusted net income was $102.6 million and adjusted earnings diluted per share was $11.41 in the current year. As a result of lower shares outstanding due to the Company’s share repurchases in 2022 and 2023, earnings of $5.39 per diluted share included a $0.54 per share benefit (a non-GAAP Measure) and adjusted earnings of $11.41 per diluted share included a $1.15 per share benefit (a non-GAAP measure).

Adjusted EBITDA was $182.8 million, or 5.8% of net sales, compared to $477.7 million, or 10.7% of net sales in 2022.

Net cash generated from operating activities was $306.3 million for fiscal year 2023 compared to $400.3 million in fiscal year 2022. This decrease in cash provided by operating activities during fiscal 2023 was primarily a result of a decrease in net income for the current fiscal year compared to the prior fiscal year, partially offset by higher cash generated from changes in working capital in fiscal 2023, particularly for inventory.

Capital Allocation and Financial Position

During the full year 2023, we invested $27.5 million to improve our distribution facilities and upgrade our fleet, compared to $35.9 million in 2022. In 2023 and 2022, we used $42.1 million and $66.4 million, respectively, to buy back and retire approximately 1.4 million shares of our common stock, which equates to approximately 14% of the number of our common shares that were outstanding at the beginning of fiscal 2022. Currently, we have $91.4 million remaining under our $100 million share repurchase authorization that was approved by our Board of Directors in October 2023. We plan to continue being opportunistic in the market when repurchasing shares.

As of December 30, 2023, total debt outstanding was $585 million, including $300 million of senior secured notes that mature in 2029 and $285 million of finance leases. Available liquidity was $868 million which included an undrawn revolving credit facility that had $347 million of availability plus cash and cash equivalents of $522 million. Net debt was $64 million, resulting in a net leverage ratio of 0.3x on trailing twelve-month adjusted EBITDA of $183 million. Per the terms of our credit agreement, which does not include real property financing leases, our net leverage ratio was (1.0x).

First Quarter 2024 Update

Through the first seven weeks of the first quarter of 2024, specialty product gross margin was in the range of 18% to 19%, and structural product gross margin was in the range of 10% to 11%. Daily sales volumes for specialty and structural were down approximately 10% versus the prior year partially reflecting severe weather conditions in January.

For full results click here.

About BlueLinx

BlueLinx 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, and industrial products. With a strong market position, broad geographic coverage footprint servicing fifty states, and the strength of a locally focused sales force, we distribute a comprehensive range of products to our customers which include national home centers, pro dealers, cooperatives, specialty distributors, regional and local dealers, and industrial manufacturers. BlueLinx provides a wide range of value-added services and solutions to our customers and suppliers, and we operate our business through a broad network of distribution centers. To learn more about BlueLinx, please visit www.bluelinxco.com.

Contact:

Kimberlee Burrows – Sr. Communications Manager – bluelinx.communications@bluelinxco.com – (470) 443-9512

Source: BlueLinx Holdings, Inc.