BMC Q1 Sales Up Double Digits, Cites Component Sales

Originally published by: BMC Stock HoldingsMay 8, 2018

The following article was produced and published by the source linked to above, who is solely responsible for its content. SBC Magazine is publishing this story to raise awareness of information publicly available online and does not verify the accuracy of the author’s claims. As a consequence, SBC cannot vouch for the validity of any facts, claims or opinions made in the article.

BMC Stock Holdings, Inc. (Nasdaq:BMCH) (“BMC” or the “Company”), one of the leading providers of diversified building products, services and innovative solutions in the U.S. residential construction market, today announced its financial results for the first quarter ended March 31, 2018.  A reconciliation of non-GAAP financial measures to comparable GAAP financial measures is provided in the “Reconciliation of GAAP to Non-GAAP Measures” section of this press release.

First Quarter 2018 Highlights (Comparisons are to Prior Year Period)

  • Net sales of $834.2 million, an increase of 10.1%, including significant growth in Structural Components and Ready-Frame® sales
  • Net income of $15.4 million, an increase of $11.6 million
  • Adjusted EBITDA (non-GAAP) of $47.2 million, an increase of $13.6 million or 40.6%
  • Adjusted EBITDA margin (non-GAAP) of 5.7%, an increase of 130 basis points
  • Diluted earnings per share of $0.23, an increase of $0.17
  • Adjusted net income per diluted share (non-GAAP) of $0.29, an increase of $0.18
  • Cash provided by operating activities of $23.2 million, an increase of $27.1 million

Dave Keltner, Interim President and Chief Executive Officer of BMC, commented, “2018 is off to a solid start with first quarter year-over-year growth in each of our key financial metrics, including net income, diluted earnings per share, Adjusted EBITDA and cash provided by operating activities.  In addition, sales in our higher-margin structural components category grew 23.6% as compared to a year ago, driven in part by the continued success of Ready-Frame®, our whole-house framing solution, as well as strength in roof trusses and floor trusses.

Keltner continued, “BMC is a leader in providing innovative solutions for our customers, who continue to enjoy solid demand but face persistent challenges from labor constraints and cost inflation.  Within our manufacturing and distribution facilities, we are rolling out the BMC Operating System and investing in automation to improve our processes and increase our efficiency, capacity and customer service levels.  With our customer focus and unique offerings and capabilities, we remain well-positioned to drive sustainable growth and value for all of our stakeholders.”

First Quarter 2018 Financial Results Compared to Prior Year Period

  • Net sales increased 10.1% to $834.2 million.  The Company estimates that net sales increased 6.8% from higher selling prices of lumber and lumber sheet goods, 2.8% from recent acquisitions and 0.5% from other organic growth.  The Company estimates that net sales to single-family homebuilders and remodeling contractors increased 14.2% while net sales to multi-family, commercial and other contractors declined 12.6%.  Net sales of Ready-Frame® were $50.2 million, an increase of 47.1%.
  • Gross profit increased 11.7% to $199.1 million. Gross profit as a percentage of sales (“gross margin”) was 23.9%, as compared to 23.5% for the first quarter of 2017.  Gross margin for the first quarter of 2018 reflects an approximately 100 basis point increase in gross margin within the lumber and lumber sheet goods product category, as compared to the prior year, which was primarily derived from a temporary decline in the cost of lumber sheet goods.
  • Selling, general and administrative (“SG&A”) expenses increased 7.6% to $160.2 million.  Approximately $4.5 million of this increase related to SG&A expenses at operations acquired within the past twelve months and approximately $3.5 million related to higher employee compensation, benefits and other employee-related costs.  The Company incurred $1.8 million in severance and executive search costs related to the departure of the Company’s former chief executive officer and the search for his permanent replacement.  The remaining increase related primarily to a $0.8 million increase in diesel fuel costs.  SG&A expenses as a percent of net sales improved 40 basis points to 19.2%, compared with 19.6% for the first quarter of 2017.
  • Depreciation expense, including the portion reported within cost of sales, decreased to $12.0 million, compared to $13.0 million in the first quarter of 2017.
  • Merger and integration costs decreased to $1.7 million, compared to $4.4 million in the first quarter of 2017.
  • Amortization expense was $3.7 million, compared to $3.8 million in the first quarter of 2017.
  • Interest expense decreased to $6.0 million, compared to $6.1 million in the first quarter of 2017.
  • Other income, net, increased to $2.0 million, compared to $0.3 million in the first quarter of 2017.  Other income, net was derived primarily from state and local tax incentive programs and customer service charges. 
  • Net income increased to $15.4 million, or $0.23 per diluted share, compared to $3.7 million, or $0.06 per diluted share, in the first quarter of 2017.
  • Adjusted net income (non-GAAP) increased to $19.6 million, or $0.29 per diluted share (non-GAAP), compared to Adjusted net income of $7.7 million, or $0.11 per diluted share, in the first quarter of 2017.
  • Adjusted EBITDA (non-GAAP) increased 40.6% to $47.2 million, compared to $33.6 million in the first quarter of 2017.
  • Adjusted EBITDA margin (non-GAAP), defined as Adjusted EBITDA as a percentage of net sales, expanded 130 basis points to 5.7%.
  • Cash provided by operating activities increased $27.1 million to $23.2 million.

Liquidity and Capital Resources

Total liquidity as of March 31, 2018 was approximately $310.5 million, which included cash and cash equivalents of $9.0 million and $301.5 million of borrowing availability under the Company’s asset-backed revolver.  Capital expenditures during the first quarter of 2018 totaled $10.2 million.  These expenditures were primarily used to fund purchases of vehicles and equipment to replace aged assets and support increased sales volume, and facility and technology investments to support our operations. 

Recent Acquisition

On February 27, 2018, the Company announced its intention to acquire the business of W.E. Shone Co. (“Shone Lumber”), a leading supplier of building materials in Delaware with a significant presence in the professional remodeling space.  This transaction closed on March 1, 2018.  With its attractive customer and product mix, Shone Lumber represents a strong addition to BMC’s capabilities in the Mid-Atlantic region.

CEO Search

On January 10, 2018, the Company announced that President and CEO, Peter C. Alexander left the Company under mutual agreement with the Board of Directors.  David L. Keltner assumed the role of Interim President and CEO while the Board conducts a formal search for a permanent replacement.  Since that time, the Board of Directors engaged a leading executive search firm and launched a broad search effort to find the best candidate who will continue to cultivate the Company’s strong culture and drive the growth strategy forward.     The Board of Directors is confident in its ability to attract a proven, experienced executive and has narrowed the field of candidates. During the search, BMC is aggressively moving forward with the execution of its growth strategies.