BFS: 14.5% Growth in Q3 Manufactured Product Sales
Originally published by: Builders FirstSource — October 31, 2019
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Builders FirstSource (BFS) held their Q3 2019 earnings call on November 1, 2019. BFS Chad Crow says, "Our team delivered an impressive performance in the third quarter, producing above market growth in sales volume driven by increases across all of our product categories. We continued to see attractive returns from our strategic investments in manufacturing capacity, with double-digit volume growth in value-added products outpacing overall sales volume gains and elevating margins. In addition to our ongoing organic expansion in value-added products, we further strengthened our market position with the acquisition of three truss manufacturing facilities in Arizona and Nevada, expanding our overall geographic footprint to 77 of the top 100 U.S. metropolitan statistical areas. In addition, our operational excellence initiatives are delivering greater efficiencies and cost savings. Building on this strong momentum, our team’s disciplined execution delivered the 13th straight quarter of year-over-year increases in adjusted EBITDA, achieving a quarterly record of 8.1 percent of net sales, since our acquisition of ProBuild."
Some key observations by CFO Peter Jackson during the call included:
"We are committed to the expansion of our component manufacturing network, strategically located across the country. We continue to build upon the strength of our existing network and as Chad mentioned, we are pleased to have added Sun State Components to the Builders FirstSource family along with its three additional truss manufacturing facilities, bringing our total to 61...
...Adoption of our customer portal My BFS Builder is supporting increased online payments, allowing for faster and more efficient cash collections. While this achieves faster cash collections for us, customers also receive the benefit of having 24/7 access to key business information like orders, deliveries, invoices and statements. The speed, benefit and convenience of the portal are perfectly aligned with the dual-goal of efficient capital management and enhanced value to the customer."
Some key observations by Crow during the call include:
"Our market leading investments in value-added products and ongoing growth initiatives enable us to provide productivity solutions to help our customers meet the changing demands of homebuyers. In this environment, we are confident that we can continue our positive momentum to generate growth in our fourth quarter sales volume in the mid-single digit range, led by single-family activity…
...our customers are accelerating the adoption of our labor saving, high efficiency value-added products, providing significant ongoing opportunities to increase our market share...
Third Quarter 2019 Compared to Third Quarter 2018:
- Net sales were $2.0 billion, a 6.5 percent decrease compared to the same period a year ago. Lumber and lumber sheet goods sales declined due to the deflation in commodity prices as compared to the same period a year ago. This was partly offset by increased net sales in all remaining product categories, attributable to higher sales volume.
- The value-added product categories grew sales volume by 11.2 percent per day, including 14.5 percent in Manufactured Products and 7.7 percent in our Windows, Doors and Millwork categories.
- Gross margin was $541.1 million, an increase of 3.5 percent over the prior year. Our gross margin percentage increased 260 basis points to 27.3 percent from 24.7 percent in the prior year period. The margin percentage increase was attributable to the improved product mix, the impact of commodity cost relative to our customer pricing commitments, and our focus on pricing discipline. Outsized growth in the higher margin, value-added product categories was a key contributor to the mix improvement. [it should be noted that CEO Chad Crow added during the Q&A they expect their gross margin to remain above 26 percent for the foreseeable future]
Adjusted Net Income
- Adjusted net income was $84.0 million, or $0.72 per diluted share, compared to $77.8 million, or $0.67 per diluted share, in the prior year quarter. The increase was primarily driven by the improvement in gross margin.