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Financial report summary
?Risks
- RISKS RELATED TO OUR BUSINESS AND INDUSTRY
- Our business and the industry in which we operate are highly dependent on general and local economic conditions, the housing market, the level of new residential and commercial construction activity and other important factors, all of which are beyond our control.
- A continued downturn in the housing market could materially and adversely affect our business and financial results.
- Our business relies on commercial construction activity, which has faced significant challenges and is dependent on business investment.
- A decline in the economy, a deterioration in expectations regarding the housing market or the commercial construction market, a failure to integrate acquisitions, especially within our distribution operations, and/or a general decline in operations or financial results of any of our segments could cause us to record significant non-cash impairment charges, which could negatively affect our earnings and reduce stockholders’ equity.
- Our industry is highly fragmented and competitive, and increased competitive pressure may adversely affect our business, financial condition, results of operations and cash flows.
- Product shortages or the loss of key suppliers could affect our business, financial condition, results of operations and cash flows.
- Changes in the costs of the products we use in our business, an inability to increase our selling prices or a delay in the timing of such increases can decrease our profit margins.
- Our success depends on our key personnel.
- We are dependent on attracting, training and retaining qualified employees while controlling labor costs.
- Higher labor and health care costs could adversely affect our business.
- Variability in self-insurance liability estimates could adversely impact our results of operations.
- Increases in union organizing activity and/or work stoppages could delay or reduce availability of products that we use in our business and increase our costs.
- Increases in fuel costs could adversely affect our results of operations.
- Because we operate our business through highly dispersed locations across the United States, our operations may be materially adversely affected by inconsistent practices and the operating results of individual branches may vary.
- In the ordinary course of business, we are required to obtain performance bonds and licensing bonds, the unavailability of which could adversely affect our business, financial condition, results of operations and/or cash flows.
- Increasing scrutiny and changing expectations from stakeholders regarding our ESG practices may impose additional costs on us or expose us to new or additional risks.
- RISKS TO OUR BUSINESS FROM EXTERNAL THREATS
- A major public health issue could adversely impact the U.S. economy as well as our business, financial condition, operating results and cash flows.
- Our business is seasonal and may be affected by adverse weather conditions, climate change, natural disasters or other catastrophic events.
- We may be adversely affected by disruptions in our information technology systems.
- In the event of a cybersecurity incident, we could experience operational interruptions, lose confidential and proprietary information that harms our business, incur substantial additional costs, become subject to legal or regulatory proceedings or suffer damage to our reputation.
- Terrorist attacks or acts of war against the United States or increased domestic or international instability could have an adverse effect on our operations.
- RISKS ASSOCIATED WITH OUR GROWTH STRATEGY
- We may not be able to continue to successfully expand into new products or geographic markets and further diversify our business, which could negatively impact our future sales and results of operations.
- We may be unable to successfully acquire and integrate other businesses and realize the anticipated benefits of acquisitions.
- Our continued expansion into the commercial construction end market could affect our revenue, margins, financial condition, operating results and cash flows.
- Our distribution businesses and continued expansion into other new lines of business could affect our revenue, margins, financial condition, operating results and cash flows.
- Our customers could purchase materials directly from manufacturers or other sources.
- We may be subject to claims arising from the operations of our various businesses for periods prior to the dates we acquired them.
- LEGAL AND REGULATORY RISKS
- Changes in employment laws may adversely affect our business.
- Our business could be adversely affected by changes in immigration laws or failure to properly verify the employment eligibility of our employees.
- Our results of operations, financial condition and cash flows could be adversely affected if pending or future legal claims against us are not resolved in our favor.
- The nature of our business exposes us to product liability, workmanship warranty, casualty, negligence, health and safety incidents, construction defect, breach of contract and other claims and legal proceedings.
- Federal, state, local and other laws and regulations could impose substantial costs and/or restrictions on our operations and could adversely affect our business.
- Changes in laws, regulations or rules, or a failure to comply with any laws, regulations or rules, may adversely affect our business.
- We are subject to environmental regulation and potential exposure to environmental liabilities.
- RISKS RELATED TO OUR INDEBTEDNESS
- We have debt principal and interest payment requirements that may restrict our future operations and impair our ability to meet our obligations.
- Restrictions in our existing credit facilities, senior notes, and any future facilities or any other indebtedness we may incur in the future, limit our ability to take certain actions and could adversely affect our business, financial condition, results of operations, and the value of our common stock.
- Our use of interest rate hedging instruments could expose us to risks and financial losses that may adversely affect our financial condition, liquidity and results of operations.
- If we default on our obligations under the instruments governing our indebtedness, we may not be able to make payments on our debt and our business and financial condition could be adversely affected.
- Adverse credit ratings could increase our costs of borrowing money and limit our access to capital markets and commercial credit.
- Our indebtedness exposes us to interest expense increases if interest rates increase.
- We may require additional capital in the future, which may not be available on favorable terms or at all.
- RISKS RELATED TO OUR SECURITIES
- The price of our common stock may fluctuate substantially and your investment may decline in value.
- Our internal controls over financial reporting may not be effective, which could have a significant and adverse effect on our business and reputation.
- Future sales of our common stock, or the perception in the public markets that these sales may occur, may depress our stock price.
- Jeff Edwards has significant ownership of our common stock and may have interests that conflict with those of our other stockholders.
- Provisions of our charter documents and Delaware law could delay, discourage or prevent an acquisition of us, even if the acquisition would be beneficial to our stockholders, and could make it more difficult for our stockholders to change our management.
- We pay dividends to holders of our common stock, but may reduce, suspend, or eliminate dividend payments in the future.
- If securities analysts do not publish favorable reports about us or if we, or our industry, are the subject of unfavorable commentary, the price of our common stock could decline.
Management Discussion
- Net revenues increased 4.1%, or $108.8 million, while gross profit increased 12.4% to $930.7 million during the year ended December 31, 2023 compared to 2022. The increase in net revenue was primarily driven by the 33.3% growth in same branch multi-family sales, selling price and product mix improvements and the contribution of our recent acquisitions. The 7.7% increase in our price/mix metric for our Installation segment was primarily due to a higher mix of multi-family and commercial jobs. Gross profit margin grew faster than revenue as we continued to prioritize profitability over sales volume. Specifically, gross profit outpaced sales growth due to higher selling prices and resulting leverage gained on material costs compared to the prior year. Certain net revenue and industry metrics we use to monitor our operations are discussed in the "Key Measures of Performance" section below, and further details regarding results of our various end markets are discussed further in the "Net Revenue, Cost of Sales and Gross Profit" section below.