BMC Stock Sales Up 6% in Q3, ReadyFrame Grew 43%

Originally published by: Seeking AlphaNovember 7, 2016

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BMC Stock Holdings Inc.,  Atlanta, GA, reported sales for the third quarter of $821.2 million, an increase of 97.2 percent compared to the previous year. Sales increased 6 percent compared to adjusted sales in the third quarter of 2015.

Profit for the quarter was $9.2 million, compared to a profit of $4 million the same quarter a year ago.  

For the first nine months, the company reported sales of $1.8 billion, an increase of 120 percent compared to the same period the previous year. Sales increased 13.2 percent compared to adjusted sales in the same period of 2015.

Profit for the period was $20.5 million, compared to a profit of $2.6 million the same period a year ago.

These results were primarily due to the merger of Stock Building Supply Holdings Inc. and Building Material Holdings Corp. in December 2015, as well as the acquisition of Robert Bowden Inc.

The following excerpts are taken from their quarterly investor call:

During the third quarter, total company net sales grew 6% compared to adjusted net sales last year. The solid level of performance was driven by continuing improvement and our strategic and margin-leading category, that being millwork, doors and windows, which grew 9.7%.

Adjusted EBITDA grew by $17.2 million to $58.2 million, and as a result, our adjusted EBITDA margin improved 180 basis points to 7.1%. During the quarter, we made significant progress on our integration efforts, realizing over $10 million in benefits and synergies during the quarter. This brings our annual run rate to $28 million in cost saving synergies. Notably we remain on track to achieve an annual run rate of $40 million to $50 million by the end of 2017.

Image result for bmc stock ready frameReadyFrame, our whole-house solution, which enables builders to build 20% to 30% faster with less labor, significantly less waste, and under safer conditions, continue to win business and gain traction during the third quarter. ReadyFrame grew at 43% over last year's third quarter to $28.6 million, representing about 3.5% of total company revenue.

During the quarter, we introduced the ReadyFrame solution in the Raleigh metro area and brought it to the last of our major markets, the DC Manassas area during October. As a result, ReadyFrame is now available in our entire footprint of major markets. And as the first and currently the only significant mover in this space, we are receiving very positive feedback from customers and believe this product will continue to experience strong year-over-year growth rates for some time to come.

From a macroeconomic perspective, despite some volatility in the month-to-month housing activity, we remain very confident in the overall fundamentals supporting the single-family segment and believe that there is still a good deal of support for a rising single-family housing environment for some time to come.

In addition, we believe that we can continue to outpace that growth over the next several years, as we expand our value-added offerings and become more recognized as a solutions provider in the markets we serve.

During the third quarter, we continue to execute our business plan and grew our strategic value-added categories and made significant progress on our merger integration. Net sales increased 6% to $821 million dollars compared to adjusted net sales in the third quarter of 2015. We estimate that net sales increased 2% as a result of the Robert Bowden acquisition completed in 2015; 1.6% from other volume growth; and 2.4% from commodity price inflation on lumber and lumber sheet goods.

Gross margin for the third quarter improved 140 basis points over last year to 24.7%. This increase was primarily driven by a higher percentage of total net sales being derived from millwork, doors and windows, which generally are sold in higher gross margins than our other product categories, as well as increased consideration from supplier agreements.

Net income for the third quarter increased to $9.2 million, or $0.14 per diluted share, including merger and integration costs of $4.7 million, and a loss on debt extinguishment of $12.5 million. The net income for the third quarter of 2015 was $4 million, or $0.10 per diluted share.

Adjusted net income for the third quarter this year was $21.3 million, or $0.32 per diluted share, up from $15.1 million, or $0.23 per diluted share in the prior-year. The September 30, 2016 diluted weighted average common shares outstanding used to calculate adjusted net income per share was 67.1 million shares, which now reflects the full impact of our follow-on offering during the middle of the second quarter of 2016.

Adjusted EBITDA for the third quarter improved $17.2 million or 42% to $58.2 million. And our adjusted EBITDA margin improved to 180 basis points to 7.1%. This represents our second consecutive quarter with adjusted EBITDA margins over 7% and demonstrates the emerging financial benefits of our merger, as well as our differentiated growth strategy.

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