BLDR - Earnings call transcript Q3 2017 | Builders FirstSource, Inc.

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Operator

Good morning and welcome to Builders FirstSource's Third Quarter 2017 Earnings Conference Call. Today's conference is being recorded and will be archived at www.bldr.com. And it is now my pleasure to introduce Ms. Jennifer Pasquino, Senior Vice President, Investor Relations.

Jennifer Pasquino

Thank you. to FirstSource welcome earnings quarter and call. conference morning the third Builders XXXX Good

participants on session, at is will are instructions available FirstSource this Officer; www.bldr.com. the all Executive in today on the copy we that me question-and-answer time, Joining call Builders mode. whole presentation slide Investor or Crow, Chief at of Officer. referenced and conduct Relations listen-only follow of Jackson, of not in the Officer; a call Floyd President Chief the Peter website reproduction part, Operating written is prior Builders this and authorization the in a and this will FirstSource. Later, Financial Any A is At time. without on Chad of permitted Chief Sherman, section call,

reminder, X, November after As recorded call press XXXX. market Builders conference close a being release issued yesterday. a the is today, this FirstSource

on copy, If you a have don't find you our website. it can

are pleasure Litigation filed this explanations with of are uncertainties the begin, we my to press Reform Securities of equivalents to our future most Form XX-K any XXXX X-K expectations. prospects, forward-looking of time, make turn yesterday, and their to our company's discuss recent company forward-looking Mr. in our on remind financial reconciliations the I filed for and financial statements are publicly the obligation during we both The Sherman. Act or concerning could more statements results, statements under Form adjusted Floyd that Please call. revise of it in SEC risks Before to over on from website. which is business GAAP this to of Private other and call Such cause provided conference to materially will those to non-GAAP undertakes no call, industry this The certain We've strategies measures subject non-GAAP release financial which risks. earnings the information results differ results actual refer on measures reports considered At the to and may course would like trends. company the statements. you detailed update and

Floyd F. Sherman

Welcome against call and you quarter longer-term quarter who start over I as our third Chad morning. a an good on third and earnings our to brief of as priorities, to our then Thank update will well XXXX XXXX update the turn results will our initiatives. with our execution on provide growth call.

our take our discuss our more closing outlook, After regarding financial in Finally, results detail. Peter comments we'll will your questions.

on start page Let's X.

quarter. in that residential homebuilding $X.X the XXXX grew excluding excluding sales XXXX, and closed of locations, volume and result XXXX. in grew the very repair the approximately Our in had of in third and end closed impact sales X.X% over X.X% Sales fewer market commodity over for locations, per approximately as Therefore, quarter day the end new X.X% the of our of inflation per day the market. sales. by sales one growth the price the on our day, was X.X% day per sales third the We discuss were quarter billion. we'll pleased in quarter We're quarter, benefited remodel approximately a

hardworking Thanks locations. States, to relatively about our Southeast damage and of on toll associates, sales to region with slowdown, XX operation XX% Hurricanes our impacted Excluding drilling was Irma minimal annual in of are the physical our their Harvey took Houston, up R&R the United full Florida, and quickly economy X%. oil concentrated. and returned lower Alaska, whose to be continues growth where prices we only our to by the

quarter and by of million that for after and by affected. were closed EBITDA we during $XX were And sales $X in to the storms company's in days $XX several the impacted regions many these approximately the million million. estimate sales our stores given the However, storm,

sheet slide XX.X% prices. in XXXX of quarter, increased to and commodity turning XX.X% our Higher prices X, QX. contributing Now in the most good since prices experience rapidly year-end we respectively, to and are to which lumber sales. Framing continued occurred lumber rising

caused However, rapid price growth compression. fluctuations some profit short-term margin

manufactured higher off I'm manufacturing the in to products business report with growth faster than in the quarter sales are prices volume run. continuing X.X% in However, our to the good growth long for pay end are investments the our capacity pleased of that in single-family market. in

outlook approximately overview X.X bright. XXX,XXX seen levels the for on housing historic starts, the million just new XX% about of the an we growing market macro below to page single-family troughs. Moving to starts. of housing with being This annual those X historically residential markets, now in continues be remains recessionary to with reached average, We've have approximately

years of are future are of and the estimating mid-single-digit there us we housing lapping our approximately market of XXXX family growth our I'll market. over the still single-digit are homebuilding to growth. the very reminder, single-family XXXX the ahead strength and balance believe mid-to-high multiple of look the continued turn XXXX, now Chad We discuss priorities growth will strong in XX% are of and who a at for in range. growth it confident bringing As in full-year XXXX of the fourth in starts the single growth quarter

M. Chad Crow

our Starting progress on Thank on profitable expansion our Floyd. share our improved page and efficiencies. including operational priorities, morning. market against X, Good I would like increased share focus XXXX you, to

We significant are new associates growth to drive still initiatives, net XXX investments making including year-to-date. sales our additional

demand extended we plan look expansion drive to open There increase to lead this and homebuilders the opportunities long-term our significant to will for investments these Year-to-date, and shortages to as to remains initiatives. plans with homes The especially plants ways truss reach of these our additional efficiently, later to the products with penetration well-publicized times. year labor higher-margin continue more into have rise value-added and for continue next. products. build locations committed force sales are will three new and results We opened that

We our in across incremental implementing also on increasing are best drive operational organization to the focus practices order efficiencies.

connectivity, underway make are these office our and back and investments. customer should infrastructure, in existing initiatives rewarding particularly capabilities logistics automation logistical Our

on focus million as fund cash sheet. guidance XXXX will flow generating and to million ratio as to allow X $XX is yearend. well the million times $XXX continued our these $XXX We continue by free generated with cash us the balance reducing of quarter, initiatives leverage our Our in deleverage of line generation cash to in which of to

leaders. train only in our are we and retain the we are to to people strong the associates as Finally, continuing our and develop attract, future and best as committed industry

value-added page housing our on will along to the the plans and creating over growth time generate to years, cash enable returns further historical and averages out believe continue XXXX to value. double us categories, over expand EPS profitability Moving between build shareholder $X accelerate that our X, next with $X.XX. period in on four approximately to flow, it an the and market with growing to EBITDA billion long-term we We our and as to product operational that result $X primary focus excellence focus and cash in six

to to intended expand On the next products higher that have of market market is faster differentiated growth positioned and We initiatives top margins to improved accelerating grow years. our strong margin profit are our We cash executing several than advantage platform a national plan of to conditions. take to manufacturing we over the that, leverage well flow. continue value-added capabilities footprint and and

identified grow exposure products, In footprint to to with we increasingly profit and pricing and growth. addition to model, meaningfully have as efficiencies our for operational market geographic and value-added management, the and unparalleled distribution our size, us our end we system such share. opportunities initiatives growth market leverage back and growing accelerate unlocking opportunities opportunities excellence see provides This margin strength, with office including to enhancements, coupled capture logistics,

we on a efficiencies, of opportunities. a cash approach and growth creates reinvestment As that believe generation our result and realistic have operational focus we

Our times of balanced debt EBITDA. maintaining in to allow investment growth ongoing acquisitive target investments approach growth, long-term to increase and leverage to achieving X.X is while times our organic us and to X.X reduction designed and

to the make few announced would call we Before like I I related comments Peter, executive turn transition in over to the a to August.

the Peter more to as am down in we I Floyd will platform will positioning year. and I instrumental that to into pleased would advantage at remain company in will will opportunity, Builders, business tenure was the the to Over his the turning we the employee on results turn I currently he call XXXX we XX-year the contributions will and growth aware, stepping the at execute of years. and through As CEO be Builders take you building Floyd the advisor the in now as like Floyd review potential are an adversity thank growth our company's Sherman as business board the March to also have end have, to financial of FirstSource, over remain his strategy coming for detail. and who today.

Peter Jackson

on on briefly results I Thank our current page morning, year-to-date Good you, everyone. touch XX, will results first then discuss quarter slide and Chad. the on Starting XX.

XXXX included have speak the a figures quarter to to I normalize day our had basis. year, than per we one-time and closure reminder, in integration, on sales of other We adjusted a As third less sales will one day for costs. prior results so

including compared third excluding quarter we the of quarter, reported third increase $X.X locations to and benefit net impact XXXX, price an commodity estimated X.X% from inflation. a of the closed X.X% sales For billion, of the

We sales with homebuilding market Irma, and Harvey and the that closed that are in in volume market and multi-family declines given many the pleased of days regions for impact in and were in our several market-driven grew X.X% with the of remodel storms. during the approximately other. growth X.X% residential Hurricanes the after single-family, these and estimate our despite We repair new end end stores

decrease run-up year-over-year expansion margin was profitability. commitments respectively. percentage will short-term from third to are XX% company the margin will commodity stabilize, commodity provide we falling of prices commodity attributable our gross the go-forward volatility short-term basis percentage margin XX.X%, Framing and the rising prices. when commodity commodity due prices, a benefit cause customers the good points that lumber was and X.X% increased higher third inflation prices sheet largely XX from when approximately gross The our prices pricing in XX.X% I compression as quarter, Rapid the enhancing the XXXX. versus rapid in expect on to are quarter markets. and percentage prices in down Our of the basis

our by adjusted decreased compared in XXXX, basis the interest More XXXX. reduction a adjusted $XX.X million per was on for additional expense million XXXX. income Our just $XX.X be driven sales million extend points company or $XX.X the and in maturity average facilities. million expect by million lower reduction growth diluted NOL and while income in Tax transactions was expense our against full largely The including associates cash than result long-term deferred our on to multiple $X.X XX% year-over-year a These largely increased Adjusted absorbing new SG&A compared cash $XX quarter I for to expense compared tax to over our percentage our to income all longer expense, allowance tax share discussed. its basis. to maturity. net interest share was the address million net was The basis sales assets. the [$X.XX] to quarter profile, valuation carryforwards. of not $XX to structure. per of reduced initiatives, and of due third to XX no extended tax by cost in million federal leverage executed debt or have company given its pay achieved Adjusted issues annual reserve go-forward by expense although attributed of $XX to weighted a (sic) of quarter increased capital Interest the cash taxes the expense a expense interest investments annually year-over-year company maintaining of can the diluted XXXX, does as the year-over-year reduction transactions income $X.XX

short-term on prior compared profit in Third gross commodity the growth Sales inflation and growth growth quarter quarter adjusted to to offset generated in million investments impact $XXX $X.X year. EBITDA by million grew margins. initiatives

from XX.X%, $XX.X Offset X.X%. $X.X growth savings, impacted commodity we Additionally, assets compared increase million results, X.X% increase market related other. XX% impact in EBITDA the of growth, inflation by markets. was short-term end largely in inflation as or Year-to-date depreciation adjusted million and accruals. X.X% net XX approximately billion, that amortization percentage due year-to-date by $X.XX to and year-to-date $X by it by share points in generally about by remodel a term or our turn year-over-year the sales estimate percentage please was by attributable and by XXXX. hurricanes To to costs $XX.X Commodity absorbing single-family acquired now that page and year-over-year multi-family XXXX. market. year-over-year depreciation again period, of gross a negatively the diluted ProBuild basis. expense $X.XX in XXXX, a the EBITDA long were to inflation, volume in SG&A by sales residential million commodity year-to-date X.X% XX. compared to previously in good basis company's income largely to and closed offset was the reduction to points benefit can repair of Year-to-date profit in the locations. Switching to realized. grew margin investments sales income The $XXX.X driven diluted increase million year-to-date net mentioned. on in Year-to-date margin estimated $XX.X driven approximately lumber financial Adjusted have was adjusted and sales EBITDA homebuilding gross initiatives an The XX tax commodity million while to amortization sales driven million. in on decrease we operating price decline excluding a sheet are $XXX.X The income We our cost of grew million a growth although improvement will per The new approximately the in benefited ProBuild products X.X% share and assets decreased of interest declines $XX.X and discussed basis estimated the end compression. and decrease per on was in the the hurricanes we reiterate, largely leverage Year-to-date the that impacts the was lumber largely results compression decline XXXX. to cause making margin inflation on compared net

our Turning on working used XX% and XXXX. to efficiency, in to driven be and drive X% run expect of debt XX, generation We is page between will be will long focus believe estimated this incremental the down free we growth EBITDA continued cash term. flow by in capital to sales a which

shelter of our through cash sales. review from us business expenditures our in further planning paying expect tax in NOL We to invest we to Upon assets X% team, federal XXXX. with taxes capital expect at approximately current our tax

year-and-a-half, $XXX markets executed million As a transactions result of the should interest opportunistic be capital in approximately reduced last in XXXX. by the cash

guidance We we million million. one-time end approximately of low to although and conversion the ProBuild expect more our the integration of million, costs cash to reconfirming are $XX And approximately $XXX as flow range. result, $XXX full-year of perhaps a

generated investing capital in half $XX.X Due typically second company of in working business quarter. and needs operations generates the year of was million $XXX half in the capital of needs. [first line expectations our The quarter year to cash uses and cash activities of third in to operations year and to operations with investing Our from first the of cash annual in $XX.X flow and million investing This the used seasonal was in working the cash the in seasonal XXXX. million due and $XXX for full guidance from (sic) the cash first million positive half], year-to-date.

leverage We pay to and times this by utilize expect down to our year-end. cash X to reduce ratio will debt

the XX, September hand, sufficient XX, XXXX credit than total consisting our cash availability and was Turning of liquidity which at to revolving operating million, net borrowing is page on needs. under for more $XXX facility

XXXX with We and maturity years. no X.X a debt long-term maturity maturities average profile have an debt weighted until of extended

first, expensive terms reduction, to repay allow to of and are committed We company bonds free future debt our flow. debt most cash the benefiting our the further

progress improving and balance made would times, sheet increasing times our September trailing our on consistent like I X.X ratio. which debt leverage XX, net year, of adjusted liquidity. to and as have update basis EBITDA XXXX to ratio our The flow deleveraging the on We a on a from with prior reduction cash XX-month was guidance. is focus improving X.X XXXX

resulting the margin versus provide higher the can long the compression business and margin percentage higher beneficial As when commodity Commodity gross customers and pricing EBITDA dollars. to our gross volatility cause rising to falling due are percentage when expansion term, is lumber a in pricing the are short-term and in prices reminder, short-term of inflation commitments goods sheet prices margin we market.

However, the commodity company's creating the benefits margin EBITDA and higher generally price operating in gross dollars. inflation results long term,

changed future have higher long-term the from benefit expect not goal We doubling in of and commodity the prices EBITDA. XXXX our

facilities, ultimately new professionals. We issues will initiatives sales margin additional reconfirming in to growth strategy reverse, not short-term will and sacrifice investment our that our

quarter expect half prior the on QX is feel fourth a sales compression coming per we year high-single to with flat the sales We short-term hyperinflation. recent digits day expected from relatively over growth and the commodity volume Gross to from inflation. continue be half basis commodity to margin be up in from margin about as to

on will more focus while flow $XXX of on cost not leverage, cash we approximately and sacrificing EBITDA fourth continue growth XX% investing Overall, see to generating X% even quarter. of to generation in expect million growth initiatives. We the to

the turn results. our Given over pleased on will to we with impacts these for business, comments. his the Chad financial call inflation closing commodity now I back are recent

M. Chad Crow

outlook Peter. you, the Builders about I'm Thank for FirstSource. excited

opportunities continuing path we housing and of show fund to we continue residential our to are leverage balance which line market We the growth and grow to our will sheet, The for deleveraging the and flexibility continuing believe strength, give to to continues our scale initiatives. are look profits. new on us top

call future the holds. for laid excited a to and I'll the flow EBITDA now cash to plan have double operator out the turn the prospects about over We Q&A. are and

Operator

go Bank. Nishu can we question first from our Thank Sood with take Please you. ahead. And Deutsche

open. is line Your

Nishu Sood

Thank you.

of about recovery pace areas. to first, in hurricane-affected the I so wanted And the sales ask

I kind back the you pre-event pace out Where the what sales pretty in we in quarter. getting laid are in of in happened third of Southeast? think well and the to terms Florida, Texas,

Floyd F. Sherman

down guys would were that then, two say slow we're the looks Our about week returned in but areas a for normal that, an days. after far it so did by back levels of it were incredible Obviously, six on impacted we've of like levels. was to were bouncing those I both back pre-hurricane. we for hurricanes, And or Nishu. we to job a probably shut average business where little

Nishu Sood

your anticipate some the rebuilding at And two Obviously, happening products you tailwind? of, major time efforts, it. same Got rebuilding. importance some would the in obviously, pretty events significant implies

As across product what your seen you benefit you in do even you've XXXX? any from the look anticipate portfolio, since events, that

Floyd F. Sherman

be definitely us. it'll a positive think I net for

I in start probably we'll think XXXX. seeing it

start know, a it markets, in the next over And to still markets, are you positive their shortages. these the us. as will net seeing some there's As there of a folks get I bounce think But doubt be of for for while couple we'll it no and XXXX in take do many will in insurance money. issue labor years,

Nishu Sood

second pretty prices, your that think effect I rising And prices the products. was just well sharp, lumber you value the on question discussed panel it. obviously rising and was on and the the about Got pretty the pre-fabricated question quarter. the of third on lumber proposition the effects My of

market that as proposition that relative site as that well, up products a rise, the pre-fab in to you're obviously on price prices the affect means how go of does framing? larger out the percentage – there obviously value lumber the would As

Peter Jackson

Well, you increases have think, both on I sides.

shortages side. inflation increases the inflation the on see from the You as the as the well labor side, lumber and the on labor

it's outweighs The impact think, long more overall I of to net-net. homebuilders desire it in be we pretty think the run. efficient, a balanced

Nishu Sood

you. Thank Great. it. Got

Operator

Please ahead. Mike And we you. go can go to Barclays. next Dahl with Thank

Your open. line is

Michael Dahl

my Hi. Thanks taking for questions.

the rolling some and been quarter into just and I second you these the incremental around of the the out some outlined investments how are Looking the whether quarter third year, update earlier discussion? on at give impact the in have not and you fourth had us quarter could of in since know there an or investments, growth these

Peter Jackson

Sure. Yeah.

growth in two total in areas, we've of year, those $X.X the made about incremental $X investments focused Again, about year-on-year in we've third facility the in so got we've this areas making almost million in the in So, million investment. those facilities feel of quarter positive, progress solid, We progress that we're the areas. salespeople added. expansion, both like very those has very additional and been and value-added

Michael Dahl

or asked of that seeing that spend is guess we're the timing does more you've investments? simply the some represent a issue additional around on over opportunities I initial the should have is, come identified I last the Okay. what that months, spend of it through, few

M. Chad Crow

growth. We and It initiative. years sales Well, going people We're to hard we aging into couple keep new it's I'll bench comment strength the the next pushing going to think industry. an to workforce, to our on very force is important develop that the recruit need. push over we're

is so and as other we which tapping the obviously as doing bulk new piece to mentioned, have as the facilities of keep on no intentions and probably the And that's the that as an you're of investment Peter going force, we're training brakes seeing standpoint. recruiting large And manufacturing sales well. opening cost the far of then

and So, I This we've going for that not planned the question year seen months. short necessarily to guess, keep something new this we're last your is few the is opportunities had to we something the in doing. was no, answer

Peter Jackson

ramped Just third of it of the perspective full the that last load. quarter you're from the in lapping ramp beginning at up timing the year, so seeing a earnest to up

Michael Dahl

obviously, term. the your a the dealing and that's some been that, rapid profitability in Okay. inflation some understanding My of disruption Got near in you've next environment terms it. question, in difficult of with causing moves

when you we realistically of margin to quarter type we Given range? seeing into of return early more the do think you I the see XX% a as what should you're today, hear on look fourth commentary, gross XXXX,

Peter Jackson

going gross always more see to recovery into at are margin we as going think back and on we to far where we're Well, feel I confident but difficult forecast, based QX the where normal levels. look a QX volatile, to are movements commodity we today I nice think we think

back, it in very range higher love but to fully little that feeling think get while run. We'd takes in I long Although QX, we're the good. a QX commodity prices

Michael Dahl

Right.

thanks. Okay,

Operator

Thank you. can we to ahead. go Please next Trey And with Stephens, Grooms go Inc.

line Your is open.

Trey H. Grooms

Hey, morning. good

Floyd F. Sherman

Trey. morning, Good

Trey H. Grooms

with you Floyd, retirement, the been First you, off, great your want and you on the it's best. over I to years wish congratulate we working

Floyd F. Sherman

I it. you. appreciate Thank

Trey H. Grooms

great also, as Chad, with XX) you, working well. (XX: it's And

Floyd F. Sherman

It's also been working guys. great with you

M. Chad Crow

What's that, Trey?

Trey H. Grooms

Thank you.

I'll move Okay. on to questions.

I the but mean, do don't been mean, usually several sit we – you as what's know just first, your and as I the that ball, of guys are it today, well lumber you relates have you just as in from lumbers, Understanding, expectations folks there have of that you've guess, move also a I into with anybody, on understanding where said, your good I as to and as finger talk there's what as look crystal So a got anybody. feel happen kind as prices? to, months I attention lot you but the on you things around, but, industry of next guys lumber going the the but things pulse

M. Chad Crow

from feels I'll framing standpoint, in, want say may and the to would lumber jump on, I but it add pretty Floyd solid.

to going prices they much we're now. right where hold think, I see are pretty

lumber commodity in volatile the XXXX. most a prices of and speaking, pullback generally the have OSB see some for some probably most healthy categories OSB. pretty it. That's our of They're those. you and as typically I elevated But think, we'll think, panels slack may I see product on

Floyd F. Sherman

say. Chad Yeah, had and with agree to would I what

Trey H. Grooms

just just And you window just kind into also manufacturers, could around doors, of outside just your market your lumber, well. if as that things for us of the are And year, guys we're inflation and to Okay. moving out But sort thing. lumber, on there's price seeing lot you drywall, I increases it. and Appreciate Thanks. in raws that. are their other around providing a know et there, of of – then of give expectations customers, folks as and cetera. thoughts next any outside the that Thanks

about should that. we color how thinking Just on directionally any be

M. Chad Crow

those general, X% in X% we'll see the probably with think, you range. already and suppliers. we've most in on I next product – We'll discussions to mentioned price started of categories year increases probably

Trey H. Grooms

to X% X%.

I I lastly, then a and looking with And initial and any of, just and picture, but with know your – it's into little Great. a next spring, as you're I kind or but little having it's just you Okay. guys customers early, is guess, well, guess having again, bit conversations kind the the but builders thoughts new maybe market home in pieces and role, year this multi bigger are premature – and specifically us those discussions of some the just looking with playing conversations then give And around there, and of new going. your moving customers you any kind labor the ultimately and then next versus high-level a and rather. versus single-family this starter year into res move-ups, how could color they're is how of

M. Chad Crow

going to that good in feel the single-digit is be single-family. about still kind next demand of strong. year We high still like feels growth It

going think, to be I in it's year multi-family. another rough

X%, will will think probably X% tight. multi-family and still year-over-year, R&R looking X% to down XX% be be I steady, You're to another growth. fairly Labor

slowly more ways out as of side year, well it play labor every the – figured and we're the So should into figuring problem houses business sort build we've has truss out the Somehow, panel next to been. year of,

we So, in next the haven't our growth good few feel years. single-family We high kind over of about that of come really forecast off single-digit it.

Trey H. Grooms

That's super congrats you, Great. and pass you. I'll on. again, of helpful. it both Thank to And,

Operator

go Wedbush. we to with go you. McCanless Please Jay Thank can next And ahead.

open. is line Your

Jay McCanless

for I what echo questions. want accomplishment And said definitely Thanks and Trey Chad. my taking to both Great for Floyd for both guys. you,

M. Chad Crow

Jay. Thanks,

Jay McCanless

quarter? the the gross third could and sales The change breakout you of for single-family give the both first for me question I had, R&R

Peter Jackson

Yeah.

a about Alaska. growth XX% in we So, (XX: single-family, third in saw day, R&R per in the up X.X% X.X% about multi-family, on sales about down quarter, almost XX)

Floyd F. Sherman

that But states our in which XX increase. when back about adjustment to in operate we you R&R brings the of rest Alaska, X% make for the the a

Peter Jackson

Right.

Jay McCanless

Okay.

Peter Jackson

To a total (XX: volume XX). about growth X.X% up for

Jay McCanless

X.X% growth. on volume

any better, get and we better? to second from terms then (XX: crude in type actually six-month pricing that Alaska price starting And XX) is plays certain focus. certain we three-month, a watch lag to if into oil question. Is there That can there level so, could of price of Alaska Okay. hitting a my we level where get can oil lag, or for

M. Chad Crow

lag. Yeah. what's oil have That's point Jay. prices. the would tough sort some answer on the of don't be know there trigger that kind on I would question, of think I a we

As that answer good you get But little on a activities drilling know, for one. it up to again. don't takes bit of you time the I ramped a have

Sorry.

Jay McCanless

Okay.

apologize but of Okay. a And with also And bit you've if guys what XQ? about salespeople sales, payback the initiative, expecting much and period type you're that a then talk you in where this, the this it? of could missed I far last invested expenses these do percentage little I for with how thus And I had. maybe as expect question

M. Chad Crow

and we're at that I'll Year-to-date attack then invested Peter million the first let force. the about, sales in we've your that invested Year-to-date about think I second sales part one. it's in about $X address we've $X million first force. the it's

are of those far, in general cost. covering their about commission half guys So

good haven't been here about that So that. we with some long, all of them feel pretty

think our associates you're generated, certainly in they're think And but years of I So four worth in of three, – about. feel XXX million $XXX future new north certainly we sales pretty the when well, those business. are the good we net overall they've out guys probably investment looking it's

Jay McCanless

it. Got

Peter Jackson

versus performance anticipate back versus improved SG&A. And prior SG&A on year and do QX. then seeing We

as pool. cost our continue to get continue better really we comp that leverage have in we will fixed the our So to

Jay McCanless

taking Okay. Thanks questions. for my

Operator

Thank you. SunTrust. Hughes can to with And Keith Please go go next ahead. we

open. is line Your

Keith Hughes

question A also you. Thank on SG&A.

the nice per your in quarters year really leverage comments shown some last this really in all fourth. You've and

that number will given of kind that for XXXX, picked continue investments up to rough accelerate you've to your and turn done -what's leverage XXXX? some we view show As

Peter Jackson

Yeah.

So have positive I generally leverage. say would we seen

We will continue to see positive leverage.

Some long related XX% the of roughly we from leverage at our to in but we've That's seen benefits true, the anticipate also commodity run sales see incremental rate. mathematically to a is price. the

it's about variable So we do on expect to see XX% – SG&A.

and efficiency as initiatives time. improve drive So strategy over is us the that help And we part our we around operational leverage there. long-term really to business to leverage see expect increase focused forward of

yes. So,

Keith Hughes

Can can a Okay. we so of the call, And as down in getting highlighted like count, on EPS underlying $X.XX your to you us to we D&A, $X.XX work of interest few numbers plan from a metrics on to EPS. expense, the share slide today. things the give have terms EBITDA long-term that you such that, in it last

Peter Jackson

those at key initiatives got We're point what about details to more towards. models of Yeah. not over for down not you giving We've little about thinking right yet. yet. we're drive going to to through specific start more components ready the got we'll that the We're work down break some talk the to of those could points we're break the some but going quarters, components are now initiatives going a We bit few next internally, but working ready we've here. the you

Keith Hughes

Okay. Thank you.

Operator

And you. go to can John with next Thank we ahead. Please go Baugh Stifel.

is open. Your line

John Allen Baugh

Thank a Enjoy distinguished retirement. you. career. Floyd,

Floyd F. Sherman

Thank you, John.

John Allen Baugh

Questions.

if recall the or margin, I discuss think that you I there a the was of and slight QX pluses and get drag, which Could on both was was to other I and/or influence on primary margin gross gross year-to-date year-to-date? influences reference the for don't net the a quarter minuses, maybe. commodity or the that

Peter Jackson

see items numbers Yeah. in the being mean, the the major side. the the a mix & Goods you'll so Sheet lumber growth is on that quick side, there's I component, with Lumber

in investments footprint. value-added about terms Those business expanding talked and investments of in our talked expanding We've slight of force the bit basis. terms day, important two so the little growth of So the impact of those another a things per we've that's headwind; a the we hurricanes, sales a important less that obviously, and were was made, sales main the we on about the are think a headwind; also the part. go-forward

M. Chad Crow

add, just in the down And is plant I'll one of a window in quarter decent the well, as being shut drag higher which margin. category Window on our was Houston

Floyd F. Sherman

the in hurricane. and That got unfortunately, in area. Houston, caught very, addition Houston. water plant We, to high large in the in have impacted real very by Window a Well, was a millwork we really presence

And And It operations that to get the were true our millwork so Florida, Houston days we lost was considerable back. a in also really operation. took in millwork while impacted.

normal view. of my now and Chad said But in of things on track back know, we very loss October point power. from good faced back steam. earlier, the you issue was as We're full Florida, looked a As we're running in main

Peter Jackson

I... And

Floyd F. Sherman

with pleased very, see. I very I'm what

Peter Jackson

really in really ability unexpected comments growth events Floyd's growth and overcome Yeah. and profit business' sales the to disruptive quarter. underscore both those show a very

John Allen Baugh

the Obviously and settles or shift lot lumber gross down, are of of margins, future don't assuming moving to that like pre-fab or to in get would disruptions the of assuming the there being influences a we allow go components in Yeah. manufactured furthering have may equal, that that? up parts I in QX. other mix kind this guess, everything question, way

Peter Jackson

trade-up Well, improve time. any manufactured products, will a the over towards significant improved absolutely. absolutely our time, over We components on manufactured mix movement margin see profitability of

John Allen Baugh

then number today? And in additional, it of put sales sales net people people the just to gross XXX Okay. context, what's

M. Chad Crow

the We had the X,XXX of sales year, at force. about outside beginning

John Allen Baugh

D&A the Okay. And or my numbers question future is final any then on simply ProBuild changes? guide percentages

Peter Jackson

is this well the of it decline We're of out bulk future, through modest but now. in pretty There the a that rolled we're quarter.

John Allen Baugh

Thank Good luck. Great. you.

Peter Jackson

you. Thank

Operator

And Thank McCall Global Securities. Matt next with you. can go to we Seaport ahead. go Please

Your line open. is

Matt McCall

Thanks. everybody. Good morning,

Peter Jackson

Morning, Matt.

M. Chad Crow

Morning.

Matt McCall

add both and to Chad. I'll many years, guys. to forward look you congratulations Floyd, my done, Well Now,

at the leverage sure variable up say few look I'm going your XX% to a the understand. guess Peter, to and So as you of kind that's these did should make we I follow that just way to view I of opportunity? on SG&A

Peter Jackson

investments, that's as internal and As generally Obviously, but, yeah, thumb, an an thumb. what operating of we by rule significant that's use. modified initiatives of rule

Matt McCall

with Okay. kind it. of I where going That's was

think the million new quantify million locations, got year you've and spend. this I sales incremental or adds, $X the you So $X

it? look the to so component the and got that a kind that XX% that in number to initiatives like to kind fixed at look components add growth growing. at is that's these of of is Is We've of to So it? the variable, way that the got kind we way to get true

Peter Jackson

to Yeah. approach model reasonable it. that's think We a

Matt McCall

question that's your continue. I like X,XXX sounds John's you think to people said going sales Okay. And, and base, Chad, to you to added XXX it sales people

kind we the assume perspective? look So out the year as something next model spend expectation and a just is I salespeople? $X was that total XXXX, from of million similar

M. Chad Crow

Correct.

Matt McCall

Okay.

good a you're that is to to think continue way about next said so to going year? And invest. You

good a You think opportunity? that's still

M. Chad Crow

Yeah.

year. I think to $X next million probably so, million $X

Matt McCall

What's locations the how out what's And – in looking XXXX? about then – locations. Okay. how about talked the been many we been to and missed addition that it, should think total you new sorry, but if I to-date

M. Chad Crow

slated of Well, to three half for this we've in plants back and for on truss plants, some plants truss this the other we've year year. truss working as productivity also and into the increase some three got new equipment and well next year efficiencies. the obviously the of And more invested year, opened and in next still those we've budgeting

been always that's focus, will of the to we on the manufacturing side our So and business. continue focus

So, few the no, something I you're new year would probably similar, over four looking three to next say years, a plants at

Matt McCall

and way that? four cost goes should year the we to Three you about Have line. new. about of – that I'm assuming it's this think talked the goods investment the total

Peter Jackson

cost the incremental component SG&A. and Well, that COGS, to also drivers and certainly, facilities those have down do it when are the management you the higher with in delivery manufacturing have SG&A of of facilities a but comes

Matt McCall

$X Okay. force? that to $X for people, Any for similar million that sales to million talked the quantification we about

Peter Jackson

million million basis. annual Year-to-date, an so to about I think it's million, probably $X $X on $X million $X to

Matt McCall

drag. And was family, from and is bit So had. right. of R&R. of Floyd's that you we end that to The should was that of number? an really had then, on The last going guys a are multi-family, point, an all-in? the All adjusted I Thank exposure to that pressure year. Alaska have you. was single question I kind To a Alaska helpful. growth perspective, said X% you of a question a to of market about How gave was Okay. see bit you R&R, to – little X% because next or think R&R Maybe market kind outlook comment

Peter Jackson

think Alaska to see I probably drag due still to some year next we'll number that

Matt McCall

Thank Okay. all. All right. you,

Peter Jackson

Thank you.

Operator

Sherman, right. All have it we to you can further it I you. Mr. And questions time. turn any no at appears Thank for remarks. this closing back

Floyd F. Sherman

since the make before future what very, excited I going are about I us in I'm Chad, feel producing rest like my promise to Okay. I'd us. that the for a you am in the have very we Peter, very know excited the you. on who team thank the throughout since the the to and about Chad, this of And closely call I and you supported to have be appreciation to to for And will deliver we be to of company. handing this Thank shareholder, over us ahead, all can going be I'm today. investing joining the the to tell I'd earnings like I that all last sincere before a will shareholder sure remain years call looking reign of community my of that's in years. express that front really

very like great I'd to organization, coming progress years. you and and our to And a great a of the addition, build thank I'm appreciation pleased forward have to look us to have my the the helped finish seeing extend associates In all with built who've what over and we week.

Operator

conclude today's And call. you, participation. Thank your does everyone, this for

a and at great have disconnect may You anytime day.

Builders FirstSource (BLDR) 9 Nov 172017 Q3 Earnings call transcript