BFS’ Net Income Up 50%, Component Sales up 9.6%

Originally published by: ProSales MagazineMay 9, 2019

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Builders FirstSource (BFS) posted a net income of $35.7 million in the first quarter of 2019, which is more than a 50% increase from the same period last year. The Dallas-based dealer’s adjusted net income of $39.8 million was a 44% increase year over year (YOY) from the first quarter of 2018, according to the company’s first quarter earnings report. BFS attributed the growth in net income to increased sales volume, improved profitability, and lower interest expense.

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The dealer posted net sales of $1.6 billion in the first quarter of 2019, a 4.1% decrease YOY. BFS estimated net sales per day declined by 2.5% primarily due to commodity deflation, which in turn depressed sales by 9.3%. Lumber and lumber sheet goods sales for BFS were down nearly 20% from a year ago primarily as a result of deflation in commodity prices. However, BFS achieved increased YOY sales in its value-added products, such as windowsdoors, and millwork (8.1% increase) and manufactured products (9.6% increase). Sales volume grew across each of BFS’s three customer markets: single-family sales volume grew 7.5% YOY, repair and remodeling sales volume grew 5.2% YOY, and multifamily sales volume increased 4.1% YOY.

“The execution of our strategic priorities is off to a strong start in 2019. We continued to invest in our industry leading manufacturing capacity, providing customers with value-added solutions to fulfill their most important homebuilding needs,” CEO Chad Crow said in a public statement. “Additionally, our operational efficiency initiatives are producing tangible results through a more agile and efficient operating platform.”

BFS’s gross margin in the fourth quarter increased $30.9 million YOY to $442.0 million in the first quarter of 2019 and the gross margin percentage increased 290 basis points YOY to 27.1%. The dealer attributed the increase in margin percentage to the decline in the cost of commodities relative to its customer pricing commitments and “continued pricing discipline.”

Selling, general, and administrative (SG&A) expenses in the first quarter of 2019 rose $11.2 million YOY to $370.1 million, primarily because of increase in variable compensation related to increased profitability.

BFS, which ranked second on the 2018 ProSales 100 list, measures itself in EBITDA—earnings before interest, taxes, depreciation, amortization, integration-related expenses, and other unusual costs. Adjusted EBITDA in the first quarter grew $18.3 million to $100.9 million, an increase of 22.2% YOY. BFS attributed the increase to the growth in sales volume and its increased gross margin percentage. Adjusted EBITDA improved to 6.2% of sales in the first quarter of 2019, an increase of 130 basis points for the first quarter in 2018.

According to the company’s balance sheet, as of March 31, 2019, goodwill accounts for $740.4 million of the dealer’s $3.2 billion in total assets.