BLDR - Earnings call transcript Q2 2018 | Builders FirstSource, Inc.

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Operator

Good morning, and welcome to the Builders FirstSource Second Quarter 2018 Earnings Conference Call. Today's call is being recorded and will be archived at www.bldr.com. 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 second Builders XXXX Good

whole Builders or prior bldr.com. the is the And in at a is Sanghvi, call Executive Builders market on call FirstSource call, the me Any the Joining today website reproduction on this without referred section Jackson, of of Relations. copy FirstSource this Financial of slide Investor Builders presentation closed after Officer; not available being August reminder, written a in authorization is Chad Chief recorded FirstSource. this Officer; as Relations permitted issued call X, of Binit release yesterday. on VP is part, A conference of Investor Peter press today, Chief Crow, the XXXX.

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

or to from begin, cause The company business Private statements statements and filed of undertakes no expectations. which differ forward-looking any we information the this adjusted call. Securities conference I uncertainties, to call, recent risks. statements. are would those revise with update results more forward-looking will on we statements XXXX Act reports subject discuss and refer to actual the are future most could filed with to our results Litigation other Before financial The and you company's Please like course certain SEC the materially on XX-K the SEC company to trends. publicly of under for that, Such this obligation and industry the risks prospects, make during may considered remind Reform concerning strategies results,

both Crow. release is turn financial measures non-GAAP of to Mr. X-K website. Chad it earnings over in GAAP the filed of our Form of measures my non-GAAP which reconciliations are yesterday, pleasure our explanations time, call At our detailed on to the provided this have and equivalent in financial We press to

M. Chad Crow

good quarter Welcome brief quarter over progress our we earnings and second growth I will with an morning. Jen, will as our After strategic against to your regarding initiatives. update our second performance Then, as Peter, call. Thank you, our our a closing start well on detail. our financial update the who be discuss comments in questions. results to happy to more outlook, turn will will take I on call

initiatives page I'm performance X. Let's commodity challenges, in continue pleased we including through managing on our volatility. as price start growth the with while very to deliver quarter successfully profitable

and response Our factors results capturing highlight discipline flexible our relationship management. market growth value-added to in as strong cost well changing as share team's on strategic and ongoing focus through customer products

X.X% $X.X volume, grew approximately end a market. price Our increased the on XX.X% inflation X.X% billion successfully and over the this family year-over-year including sales XXXX. growth quarter for of X% in Approximately commodity was solid passing achieved by sales single of from homebuilding

prices slide prices ended showed XX% over at in to of lumber good Framing the before Commodity retreating quarter recent rising sheet the and weeks. X. sharply the XX%, and most year. Turning the quarter, prices the up of quarter in beginning large respectively, fluctuations

of commodity pricing through compression. margin manage inflation, we profit As short-term period gross caused this agreements our

improvement EBITDA commodity result margin was respond again, dollars, percentage setting maintaining reacted The challenges while substantial management. in prices the for cost our expansion to mitigated and, ease. as stage Our EBITDA cost the margin disciplined to impact the ability total EBITDA and these quickly margin and team leverage on a showed year-over-year and through

than products growth housing quarter, continued manufacturing market. residential capacity in pay the in considerably in second our of to products, overall growth off investments with growth faster manufactured also in XX% increased value-added leading double-digit Our to overall the the

our to invest continue growth initiatives. will in We

increase to quarter, these second ongoing of opportunities As market and our the higher share results show products. overall the margin provide significant both in our platforms penetration us

and committed initiatives growth. force believe our on We also pipeline in these business and future management positioning over our sales talent. our focusing our for initiatives the developing invested adding are last accelerated have We to to exceptional remain several years

We continue to X capacity on to manufacturing to to capacity plan plants, truss including execute XX expand our lines new our millwork facility year, in and existing this additions strategic value-added and plants, new new many faster X to higher XX facilities network of continue these to the them by across invest order adding in grow housing country. the than We'll located manufacturing margin strategically further in products our market overall more. existing

products by labor-saving should the for customers, continue our faced providing demand labor With incremental rise, challenges to our us opportunities. continuing being

market of page remains to demand approximately for on bright. we new has industry million trends, and Moving with seen have other below activity approximately employment levels. XXX,XXX annual outlook rates homebuilding historic troughs. with U.S. The being very This approximately remained economic formation among Homeownership the X previous average started remains housing improvement recently remain reached just supportive. overview market. that show with starts now Demographic buyers starts. The housing pre-crisis to those levels underlying young now long-term but below recessionary X.XX in single reaching higher and very demand, an have conditions household the and is family of the residential trending XX%

growth family high-single ahead. mid- ongoing continue growth market in We years year to anticipate with in homebuilding digit single the the this to

Moving X. to page

profitability executing in track on create our shareholder plans incremental are to value. accelerate growth, We and meaningful further expand

penetration our increase and higher-margin platforms to continue force and our develop share sales us invest of opportunities products. growth These initiatives. significant provide our facility our increase manufacturing will expansion ongoing to in and value-add the We market

next return of generate Beyond profitability, operational over underway initiatives our starts years, excellence average housing historical several an we geared have will the the million $XXX to market and market of growth to growth. that additional expectations independent

approximately achievable capital our investments. investments of cash deliver $XXX core $X.XX EBITDA historical to We our and excellence with to strengths along flow averages. based between and is over double targets in an after million housing and the The billion on and initiatives EPS challenging strategic have free but $X XXXX generate as set business starts operational of growth reach plan $X

profitable generation, of cash return reinvestment ongoing high to balances achieve plan reduction strategic to growth leverage debt X.X opportunities and EBITDA. Our X.X target times our and

housing X. sales core Turning our would to enable growth initiatives. strengths, EBITDA. like and million Leveraging including to our manufacturing are bit to growth plans growth. million business best-in-class We existing in specific an that force, in detail call $XXX the provide footprint, on to scale this we our our to $XXX confident more a market us incremental capability I on slide and national generate capitalize core residential unmatched

and expand higher-margin our manufacturing than the growth, keep footprint market core products growing addition over to next capabilities In to our to national this continue value-added faster years. overall we several the

truss to millwork number do and locations years, indoor our call for facilities opportunities serve where national have including serve next these with X see needs of underway facilities our and X to plans XX the that investing we not over market a to Our expanding new footprint this the access products adequate X customers. in great currently year, higher-margin

and system Our margin strategic logistics, excellence $XX plan pricing operational to organization, EBITDA. contribute $XX incremental million further distribution efficiencies includes between back-office our expected a set and including that in million are annual enhancements and across efficiency optimization, of and initiatives

leveraged strategic and customer focused projects and these across implementing through value progress advancements. initiatives substantial, good made service These have creating on our when efficiencies are economic and for We organization the significant expansion with and strategic and economic is service differentiate competitors. XXX our locations our smaller unrivaled providing should opportunities value margin customers, offer further a and our profit that by connectivity

over projects that starting our will that more results these see should generate Peter, confidence to review give us in initiatives benefits the will We value call creation. our detail. I turn who from to the anticipated are financial now

Peter Jackson

Good everyone. Thank you, Chad. morning,

normalize and we reminder, from a integration sales other an reported X.X% XX.X% of $X.X X.X% a inflation compared including the quarter volume adjusted for and of We net figures costs. estimated As have growth. from benefit increase to commodity organic a one-time price XXXX, included second to billion,

Our over of in as in products $XXX.X by quarter grew highlighted, $XX.X family single increased X% XX.X%, second XXXX our of XXXX. growth X.X% the million second million underlying Chad solid the increased the sales XX.X% construction or value-added manufactured volume products. quarter And a approximately led by Gross margin end-market. new of in

XXX attributable the the quarter a sheet decrease XXXX. was points second goods basis of XX% The percentage XXXX prices percentage margin down the increased to on sharp in to lumber basis second respectively, was XX%, and in prices. increases year-end gross Our from year-over-year XX% margin Framing and quarter. end XX.X%, commodity from of

percentage due the to markets. we causes gross volatility compression the when are customers prices calls, commodity As we of provide short-term expansion falling short-term margin rising margin when pricing prices are percentage commitments and versus commodity in discussed have the prior inflation

our gross continued pass products. product and to Furthermore, team's through in to the of the combination a had impact a negative prices in high-margin on dollars I higher ability Additionally, the commodity am reaping growth with mix margin quarter, cost the on EBITDA percent. in versus pleased mitigate higher we benefits through impact strong and team's XXXX. discipline are basis, commodity products ability prices year-over-year of our on execution

the commodity started a prices albeit As we quarter, near the end ease, at high of to level.

profitability quarters. normalized price As return with the to benefit gross and coming this we lumber a should in percentage trend more enhanced further margin continues, in

net $XX.X quarter cost million quarter basis driven the $X.XX reduction share for robust The year-over-year interest cost a sales quarter $XX management. management. million slightly offset XX.X% by million second XXXX Adjusted was ongoing go-forward was or million operating XXX transactions lower largely was further in to as capital diluted to of in share This of per cash a the a per percentage rate driven strengthen structure, SG&A $X.XX in XXXX. on sales million for and expense ongoing and The compared rising or was was income basis. XXXX. executed compared result and increase $XX company the by growth the Our year-over-year $XX.X environment. the interest primarily of expense to our $XX.X by by of decreased points leverage our diluted reduction Interest or

XX.X% operating of grew strong which improvement commodity fully Second largely driven management, to was inflation margin. $XX.X on gross leverage disciplined growth, and by The the or adjusted EBITDA quarter cost million. year-over-year impact $XXX.X offset million sales

on we basis. ability higher lumber positive in dollars benefits team's EBITDA realized the Additionally, a from pass to prices year-over-year our on

and share X.X company achieved funding expand in this reduction EBITDA XX.X% Please We per improvement growth growth, day times at healthy that very normalize. commodity our strategic slide to $X.XX after strong Switching in XX.X% results sales grew leverage XX. pleased a XXXX, to to as The in adjusted prices financial even per earnings growth, the value-added a sales year-to-date year-to-date capital report highlights. a investment. now I'm and including XX.X% year-to-date. turn benefit to expect

XX. page to Turning

believe We cash our in reduction. investments our by utilized generation to and this free strategic estimated incremental on be balanced efficiency, be supported We will initiatives growth focus XX% our of is run expect continuing flow working continuing to and sales. EBITDA capital fund which to approximately debt

at to X.X% our continue through to approximately business invest expect We capital in of expenditures sales.

our XXXX. million to expect paying NOL million all in taxes to cash We in $XX approximately current shelter us assets from tax but $XX

of transactions result the our reduced in interest million to cash a markets approximately XXXX. As capital be should executed we in XXXX, $XXX

systems million costs expect in $XX $XX as our million expect And after integration flow headwind range elevated of in likely albeit work. the we of lumber free in total, activities We million year prices net our at full XXXX, end investing million target to still generate experienced $XXX have to $XXX range one-time we lower we to from the the cash inventory. the given for continue

the use in cash used cash and capital million, This in guidance. including the was strategic cash yearend, investments, $XX.X and expectations achieving annual of operations ProBuild typically a of we leverage We the utilize expect our fund with remain X.X to and reducing $XXX.X was with second pay year. pattern half major investing first acquisition. XXXX below half our our Due year-to-date seasonal down investments. our of the growth to capital we target year in needs, of to line times debt million and to the in Cash confident the generate and generation in by working set with ratio

reducing continue price impact inventory. on inflation commodity leverage We despite of our ratio the

cash million, availability and which X.X net basis ratio of as net XXXX. June ample a our liquidity Our XX, the EBITDA sufficient our reduction debt representing Total XX adjusted at credit under on a was of facility XXXX from is XX, second $XXX to XXXX consisting quarter trailing than at was months times revolving times X.X needs. borrowing operating for more on hand March of

of how As we are to year look reconfirming XXXX team's confidence we third as our on XXXX. how housing with I the execution about are forward market the in well and quarter we color seeing would provide environment, thinking full like as

to range, range. single to X in family still the second half, market. volume of in normalized balance XXXX a multi-family incremental impactful line commodity margin For from as the margin high-single the of XXXX, started our the allowing mid- on gross approximately to grow conversion normalized X growth panel more year, remainder margin percentage points We in half move relief driven basis. the we to top lumber declines XX% inflation the as in in more has X% the the end EBITDA market percentage. through growth expect we nearly gross during From year of of second in digit Commodity inflation recent XXXX. to move starts closer And and a benefit sales the to margin prices of gross and to us full expect a we anticipate XX% the a rise of gross to be compression return year-over-year perspective, R&R to of should not XX%

We will growth our initiatives. investments, including our operational costs excellence in initial continue

$XX XXXX year-over-year EBITDA at will indicate that costs All expect in we combined, we $XX of for estimates which the in XX% in the expect million to to upper still Overall, growth XXXX. XX% full of incremental million that end out finish total to range. we and current year

tax effective in XX% for balance We expect act of tax of XXXX. to of the rate the the impact result approximately XXXX an

see prior-year on expect XX% range XX% QX margin X% be inflation. XX short-term we to the Gross margin coming XX the from For to basis specifically, pressure start to price points moves. as X% to over commodity up to by third commodity in the with is expected from sequentially be the quarter from relief to recent sales we

and our We leverage in focus growth on while investing efficiency will discipline, improvements our maintain cost reduction initiatives.

over growth between EBITDA XX% to We and be XXXX. the expect XX% QX

like XXXX. for Most back as through last Before this Jen you wish transitioning her I Sanghvi closing the with contributions his call endeavors. will We all in and to would of FirstSource And Chad. that, her be to responsibilities earnings the of she I retire joining Pasquino turn the for comments, She to best Investor turn Officer. to our be has future Jen since back will call end to in her Binit over Relations all Builders Chad to August. us of it decided I'll thank know,

M. Chad Crow

Peter. you, Thank

FirstSource. am our by team quarter demonstrated our execute in and level. an stronger further solid capturing growth and at their deliver execution As setting customers for to continues laid we the an look building have second exceptionally plans results, with on to I our opportunities even value and future. value-creating to our to impressed out that groundwork Builders high substantial I to forward continue the

and, by national generate that We relationships, our market positioned a value I'll leveraging the our diversity execute all to we believe to even their again, and build for better continue operational returns strong our of hard to associates footprint, and call the an results never turn for strategy, Q&A. clear I work operator strong customers our now such and shareholders for delivering as once for excellence end want I over we future brighter initiatives. customer together. been to increasing have thank

Operator

Thank you.

from Matt Our comes question with Bouley Barclays. first

Unknown Speaker

Matt. Thanks for (XX:XX:XX) taking questions. for the on

M. Chad Crow

morning. Good

Unknown Speaker

timing products this manufactured guess, where your start outlined your that, wanted have And those growth. from expansion? any in I on more benefit you of projects to Was year? quarter that specifically the I stand the for do on there capacity

Peter Jackson

were smooth. the elongated that They're facilities So, ramp-ups do little the the change a year. over bit first when a that. that Generally, of a – associated there's this There's always pretty facilities the opening up you headwind say four are the year. significant to I wouldn't due inefficiencies with

year. in So, strategic the that's was this in opened the initiatives. you're part we the of what out from last seeing benefit we facilities called our year primarily investments But

Unknown Speaker

of is percentage? sort some was you the comment any that – in of about benefit And pricing level pricing growth then, give in any presumably there can there that there's there,

M. Chad Crow

inflation there. Yeah. X% There's in X% from or benefit around

Unknown Speaker

Thanks.

Peter Jackson

volume strong very very, growth. still So,

Unknown Speaker

gears sequentially should landscape? there's a competitive and seen And to in think switching a roofing, price couple an some of maybe to sales here. inflection those Have in those there, more segment, we gypsum Presumably, declines just about Or categories insulation. going minor the quarters obviously categories the specific how forward?

M. Chad Crow

categories. one Well, changing a would I those of players The in couple competitive of Yes, you're things. not certainly major say considered right. is we're and landscape the

from that say positioning, And obviously in that business. so, multi-family lot seen a commercial. gypsum, is tail-off then, competitive will our of business that I especially has that And and a little do, gotten a we in a we've tougher. also

Unknown Speaker

you. helpful. Thank That's

Operator

Our next with Nishu Bank. from Sood Deutsche question comes

Nishu Sood

Thanks. Deutsche Bank. from Yeah. This is Nishu Sood

about peaking indices and of after the to margin So, mid-XQ so, I by or prices were Lumber wanted declining the kind ask of in some gross outlook. then that.

your assuming you're But So, kind you're help on I bps based normally us to kind XX that margins? out obviously, much pretty Would mid-XQ – more to gross to bps normalized wouldn't forward. with than said back of Wouldn't just little XX contracts? XX of margins. those a guess, kind to XX that in on pricing we think it's to going what days going peaking the in of expect get I that though depends you see it trajectory

M. Chad Crow

Well, Nishu, June. in at price say I would the has that beginning peaked the

to prices three second And so, of quarter. falling had we the back of the in two weeks maybe half

prices. issues before second had orders falling, really quarter. And all in, six, backlog that given seven-week And experiencing prices transportation higher were in started a coming of we the at obviously the so no were benefit the which we

were on on buying still obviously additional what coming We weren't much prices saw the in so – fast. our order tail products inventory we because in. falling so And was July

when are that like buying prices You to be rapidly. falling typically don't

You'd a you rather wait till bottom. hit

the average on so And most that tail Combine pricing. have to our hand was slow cost on of our XX-day change. with we

spent of projects And was out the priced second July finishing quarter. in most so that were

And weeks, margins in But the we've the relatively started after saw it quarter. so improvement the net in to points. flat July, a we July. is of XX, that But second – remember basis marked minor margin of result that was up XX with last couple invoiced see all improvement

those now, explain we're So even I hope that like helps the a we and little expect bit lag accelerate. it. seeing But to of of certainly continue there. some trends and trends

Nishu Sood

little that it, has makes And lot more obviously, so inventory extreme this it so behavior makes it. Or of of purchases – entirely your or builders volatility dependent the I volatile, is it customer obviously, Got from got about a perspective. the well? the meant the purchase. it their – difficult you timing sense. the prices cycles? as just the on No, complex construction a are perspective? more change When it management mentioned. not made What as folks' the Do upon of obviously, price contracts timing amount locks and really does that

M. Chad Crow

to hard completed houses want them forth move and back time easily, done. money that houses them and It's is and for they and for

few was and last in a We were do agreements partners same. expect took and falling. customers we reset up seen to prices we get way to it the the we've no. shorts our the answer do on You contracts, – business the for and have because it short we our committed to committed price the who year stayed our And us asked

And so to no was that. the answer

prices, the were the have mention fallen but of lot in prices they the at on commodity year. getting a I'll beginning And now they're where just recent to something weeks back else

they've as at to they easy lose a even it's point fallen as how much are so from. still have. to sight healthy they of high And level a though fall started Prices

another fall, or could back gosh, price we a framing just then they getting to OSB. be would and fact, $X,XXX historical and for both average In $XXX lumber

buying. on couple And are going that lot sidelines so There's again. are of start will the not next a to prices we positions like start folks buying bottom Inventory to feel to low, have and getting of have in out the folks been weeks.

in here like So find couple of it next floor weeks. going to a the feels we're

Nishu Sood

the higher part it. that encouraging question earlier that's we Got the obviously, the in strength – higher value-add, business. strength manufactured the what the products, following margins And of on about just up see and do to very obviously

sustainable? to So what of to Obviously, year. that. out laid understand for you've yeah, XX% XX% wanted is to sales extent the of sustainability the kind so the that And growth just

M. Chad Crow

a still value-add confident I'm to I think home what few seeing on creeping the We're what rates we with on headlines will getting standpoint, interest our recently prices – prices headwinds. And see those opinion, feed we're that's itself. up. in and I know side. sustain the my it But from and happy a been demand fairly the hearing into outweigh we're demand really housing tailwind negative right going liking expensive and from products. there's

Nishu Sood

it. me. Got to That's yeah, and, – for it congrats thanks And Jen. Great.

Peter Jackson

Nishu. Thanks,

Operator

question next Trey comes Our Morrish from Evercore. with

Trey Morrish

taking time questions. answer for my Thanks, to guys, some

So And revenue first, you you leverage to costs? Clearly, internal about that types year. top-line those I better could want to and really doing of over some drive commodity down the you're to talk the saw on the likely initiatives year of of amount due what pushing talk But tighten just SG&A to good inflation. belt was from part a side. of

M. Chad Crow

that on rolled optimization. those that's by starting that the system idle efficiency. it one-third increase – a then to We're We're yet. near system on heart, seeing to you basically, go our we're to that fleet percentage of we've up. $XX to adopted times on your see and between delivery and and dear of gap that I'll And on have an while in We've markets the is engine on what And it And decrease. annual are to Well, aren't targeted to overall to rolled management seeing that's a yearend. XXX have been road now of out see versus it new driver about want efforts. touch savings, million my $XX out dispatch optimization expect of locations delivery million have and XXX one delivery our and to-date, our that

are this really to diesel driver And hold wages us up, helping continue year starting increases. these taking taking they're and some up these has go and of like some so to – look gone although offset

think I you're a motivate the begin in that's information our seeing. of driver incentive great lot a to to hands in take see going when of and it these by part their so delivery QX day got our to of We're metrics. drivers And really implement optimization to starting hold. we're what program We've comes further operators to that managing

there. drivers percentage So, of area. that's trucks these back-office initiatives, is our efficiencies, overall dollar hard just to Obviously, really a in obviously of a are like the goal things drop. perspective. are If the see lot quicker SG&A one our during exact to we're little that, these a a if number on But day, to there, a efficiencies the some them yards, the there's on sales an more there's your savings hard things. of from put measure road as little turning Hard

of you're And certainly so, part what think that's seeing. I

Trey Morrish

gross Got margins. Thanks turning that. for it. to And then, back

some margins kind because to return do number? lumber sense in improvement assuming jump But think working expect buy your you more when of sequentially. gross it you think here, You see finds – modest of when higher point of through that ultimately firm at when you falls you're remains and and still sounds that lumber talked It what you'll the lumber they cost you bottom, about lot from it like new – some will ultimately XX% or you'll sounds like that a stabilization. see of some

Peter Jackson

and around it, with our have generally heard of We reset us of on amount the our the customers. you've in when we pricing talk I light then we hand inventory time know and lines about

time quarter of say, from The the level and down. quarter or to we range. happens be things So, the half turn whether out it's generally or that about three a four-month up a it'd would kind

Trey Morrish

Okay.

Peter Jackson

for us. So, quarter fourth

Trey Morrish

Okay. it. guys. very much, Thanks Appreciate

Peter Jackson

you. Thank

Operator

next question Keith comes SunTrust. Hughes Our with from

Keith Hughes

Thank you.

a in be the remainder would income the of the the being out flows other step-up quarter fourth As said questions year, we things we gross as all see, on margin Would the given equal, third in that inventory, statement? through look from previous on lumber you've the what to quarter. correct the

M. Chad Crow

that long they're as a we stay now, commodity stipulate of at as And that's sort yeah. where Yeah, reasonable prices assumption.

Keith Hughes

a isolate made I'm assumptions in to million the... but I've just trying there,

M. Chad Crow

agreed. Yeah,

Keith Hughes

a on Second the something actually here or we I SG&A, that to of lumber question. this going into leverage slow – it's and degree I'm question, up going in or kind of of on continue the lot to the second see guess to other? – or Is a kind Will quarter. leverage that half will – the sort of one

Peter Jackson

Yeah. mean, moderates, extent the in the business, QX the if QX, that if about a on as would think position of but impact we about commodities I will That favorable will the is moderate. you probably that – talk to off that be back a bit. still, one of offset.

Keith Hughes

How up to one to long XX to very the (XX:XX) new X including year. for take – a of for does get Okay. the capacity of we where we And – statement full additive it truss you referred where in rate just this about facilities, prepared margins company? the or those

M. Chad Crow

three-year two then, one and in three You're a years right on about and to breakeven on usually about overall things. being profitable usually it's payback looking after about obviously, year those

Keith Hughes

Okay.

pacing four it's As about going at be years, you look is that, we'll that to the see?

M. Chad Crow

sounds Yes, about right.

Keith Hughes

Okay. quickly And how then, How the about on? come will those work? mill

M. Chad Crow

and some and shorter are that's quicker. little facilities, And but you're opening new immediate running year, I with obviously, too. when older in upgrading yeah, of our also – plants replacing equipment just an the we benefit of are more some equipment payback, up some not efficient only expensive equipment. you're say maybe less Those And slightly probably within would a a equipment.

Keith Hughes

Okay. Thank you.

Operator

with Capital Markets. Our Mike RBC question next comes from Dahl

Michael Dahl

questions my environment. A following obviously taking products couple for on questions of up Thanks Hi. what's questions. been manufactured results lumber a and some nice of challenging the just in

there's break base – your you a like customer expanding growth was sounds first I Can much quarter. could mid-teens there? customer give same how so, The you growth of volume one that in the hoping was versus down is, it us sense of

M. Chad Crow

Could sure I you repeat I'm understand question? not it. the

Michael Dahl

in customers – growth effectively into of from new year base and the relationships? coming or more those manufactured of expanding this how volume So, products customer of same much products from buying like, that further your – new your penetrating was

M. Chad Crow

have I'm that information. Do you I have... not sure

Peter Jackson

Yeah. I don't by have of Maybe was growth on the through lion's customers it's through same customers. new that XX% – far, my the is I the – would say customers. additional remainder gut acquiring and say probably growth share the would

Michael Dahl

it. Got

Okay.

for has categories. looked Are Second Or sense that around experienced the there? specifics margin product margins? to that you in around margin of manufactured directionally margin a stronger into manufactured want to I products? the just question pricing at us volatility just product pressure on any trend But margin been don't you know of seeing least profile. there – the get what due like give the lumber could is in has year-on-year you've type you

M. Chad Crow

manufactured margin volumes pressure offset incremental is some plants there I trend the would the that. say efficiently to on on to price because been and But also has due these helped has lumber somewhat inflation. flat more running

I relatively margin a on flat basis. it's So, been would say

Michael Dahl

Thank miss you. we'll it. you. And, Got retirement. Enjoy Jen,

Jennifer Pasquino

Thanks, Mike.

Operator

John Baugh with Our next question Stifel. comes from

John Allen Baugh

gross if the touch decrease the quick is and likewise, the dissipating kind have did we was question question. were you. question. And Jen, And QX Thank be factors should flat. margin a why price. the in largely I says to margin what commodity of, manufacturing really of there, the a a – I enjoy What guess see release expectation just you commentary The relative margin outside due longer-term other and so, that when? improve? in press not curious I'm the your being If Should gross future. and did this inflation on any?

Peter Jackson

– saw through we we the of talked There's that a we decline hit to couple quarter. about mix bulk component, attributable of I commodities. the the also Clearly, decline So, those. a think on this again,

getting EBITDA we commodity more you return the basis, as and leveling A, dollars in as us; So, getting that with us. that rid the to bps. the or in the to, of challenge marketplace of kind the level. margin trend definitely price normal are about the a been that out on headwind; gets in increases gross we That's also, maybe dynamics expect normalization the and, gypsum discussions which that that XXX But seeing us a that is bps of over of great. for I've little the prices on up a in a there as one in a on bit talked We've of piece. to QX to XXX kind the couple There's – see see see, a of definitely for We pricing. for seen, into a There's increase year-over-year B, to has alluded an we're increasing and we're pricing catching rest regard year.

M. Chad Crow

seeing. I'll And But early I we're initiatives results jump about excited in I'm initiatives. because of talking love we these about some going, some just pricing the have

just is but customers. new a with expect in carry quarter kinks we our the I order platform do net we markets that, month, us We've out markets. improvement of XX giving are We on some July. And so in special don't special customer that. get information tool additional initiative, special two we're to us around a that out the in meaning basis in stratification. to out in customer worked for rolling more saw a profitability that pricing better margin. we month. by and we that a point special then, stock, items order plan BI lot come an we typically first And allows piloting got this new margin We've once to initiative And that started order on got rolling

getting information are profitability, or additional guys making hotshots having paying really we this basically are so, good by run there? they are I'm customers. EBITDA per And some margin. our what hey, a It's look margin. say, helps off their we more selling some to to to EBIT have makes we're out where it But educated in card so, really at can guy XX% to a or easier And at now look pieces customer That's of and reporting at all the the fingertips credit decisions. place down pricing we

XXX so so, challenge that liking results locations underway. stages, but some far. these out – the things And to are early in lot always of things still a is the really of and adoption Again, a but so like early rolling we're

John Allen Baugh

I'm for trying people concerned us two-hour kind the the intermediate then, I'm could Thank and to sound curious. cautious, you the I relative level. anything build maybe fairly and I Okay. on with that's That's don't with term cost of know you're of a seeing seem have horizon to – on sure or just you talk normal household bullish formation, near seeing a the to anything home. Chad, hearing but see issues, building you for from the potential We look And takes, puts about dynamic building to housing guess, you. discussion that back color. outlook. or But this helpful inflating are know I we outlook we in have Certainly, general. you're concerning getting under you And a about? building be

M. Chad Crow

of could the I be would send growth, enough The think slow thing the the would I rate to higher-end backwards, especially one homes, think don't us cost of it be homes.

pricey I it's pretty folks think to now prices some for may I and some come step think are where wait and markets down. there aside getting

that think Builders to adjust. down. will will happens, prices if come I have then

I think there's still there. demand

pricey we are you that it flattened I upper-end think year perform some the and that's in X% in there's an guess getting. it, healthy out, see would to the for world, at a or growth think X% I lot to again, had a any, of entry be can the even period and headwind we But in generate there's from of demand in family have – where if well mean those environment and a we that homes. of of we're very that any teeth cash say, single still time go the But still I increase we end even might not or, X% for homes all a some going if a does to a very us, if if level how heck, would environment.

bullish about am it. I yeah, So

John Allen Baugh

of – your you any on geographically how family there we skew about. then, Thank guess, (XX:XX:XX) And X% know start lastly, piece? kind Any single numbers you I single – talk family you. to color housing the national

Peter Jackson

mix. of that didn't part if next strong in us in the the We right a homes. We will that's build get So geographic starter a of the with do to the you growth this in back stool think trend expansion specific see the quarter see market of we to really leg to in the regard now positive terms a more rate. normalized anything

discrepancy we're number our number, the and we don't loss. we starts plan So the in a in and share markets the what component we see think that's between certainly seeing

John Allen Baugh

Great. Thanks, and good luck.

Peter Jackson

Thank you.

M. Chad Crow

So – only thing the and go ahead finish. sorry,

Operator

can You go ahead, sir.

Peter Jackson

with it thing I sales, a to So expansion add margin piece is it exposure the when follow-up gross we wanted definitely see. was idea of I guess in was the there's facilities. we commercial see an impacts that to some But the I the the rule a the multi-family it. that our gypsum thumb wanted and to is that on question also of and a and of of the the that I only regard to component add to was sort of mentioned There

leasing up was on about other to see question annual million with a The So to trust was there facilities million of range million. payback about how in continuing cost we $XX where an are multi-family, million $XX the going in creation plant were in facility, see to that the $X million some that on We the rule to benefits. the three-year new basis. and the two to about started see generally $X thumb range. would building in and the land that $X.X component and really breakeven assumed declines year but EBITDA, then the because revenues in those on

those have the excited the building as requirements expansions, with on cross hurdle up opportunities IRR locations. as sure around on select timing of well So to the the we right Always new an to open XX%, and definitely making the about truss plants.

looks a it operator? we like couple more So have questions,

Operator

question Yes, McCanless with Wedbush. our sir. next And comes Jay from

Jay McCanless

congratulations. Thanks, it? retirement. you stuff Jen, growth, lots commodity everyone. fun sure revenue guys double-check. fiscal just to XXXX are of portion total including for planned the I'm you've wanted expecting I of for What got

Peter Jackson

QX So, question? a it's

M. Chad Crow

year. Full

Peter Jackson

Full year?

Jay McCanless

Yeah.

Peter Jackson

about we impact, the commodity So X%. though, for year, – growth have haven't sales out out the to laid full X% laid we

Jay McCanless

percentage was just what I and X.X%, if on that went down in from spending XQ there. some X.X% know because the XQ, to the a going from shift wondering – to was was I didn't or CapEx

Peter Jackson

strategy. on a couple had projects. of we investment some our in Nothing yes, So timing fundamentally changed

these the is are seeing to facilities extending on plant (XX:XX:XX) line discussion. on We the build hurdles certainly time of The some building them.

Jay McCanless

turn? you about it? a seen of more on guys and negative have a lumber better. seems out on of I laid we The guys OSB wanted be turned maybe you lumber have holding see the earlier, Chad, to Or weeks in declines discussed weekly OSB think really should lumber? And thinking Does then, relative of how there versus the that also, impact assume to part what you that I framing couple we've that's because last bit know guidance prices little about you that we prices. And Framing and something touch are things this up couple then numbers weeks. as

M. Chad Crow

out is within and price category. commodity the X/XX-inch bottomed assumes in reasonable that kind component guidance our out lumber The of couple category. one the largest I next think a X% about The which a of the is largest that laid has the range. here we But Framing of could I and – of drives SKU stabilized weeks Yeah. here category. is of off it that be I composite, majority framing OSB, little the – think lumber

Jay McCanless

All questions. right. Thanks for taking my

Operator

Our Grooms Stephens. from next comes question with Trey

Trey H. Grooms

everyone. morning, Good Hey.

Peter Jackson

Good morning.

M. Chad Crow

Hey, Trey.

Trey H. Grooms

And good by We'll miss your Jen and as yeah, off luck with well, congratulating start you. I retirement. to just want

Jennifer Pasquino

Thanks, Trey.

Trey H. Grooms

one on So, just was rollout. the

understanding thing. looking geographic we're know, – you that sure plants hit that XX there the Is of markets a highlighted. have these talk out, investments – three three there focus geographic the that Peter, making a I those or I these right you over as sort roll think period aren't a you're Is that out mind you term. you But mentioned in mean, four-year or could I guys with you four-year and that those about? longer you with but

M. Chad Crow

country. more of concentrated it's of I The our we've pretty in part Trey, generically, out are west the western holes footprint the eastern largely. in geography part got – it's country. a mean, the Well,

Trey H. Grooms

Okay.

millwork combined? mostly it so plants? that that's right was truss on the Or And XXXX is and there I – understand truss

Peter Jackson

the facilities door The facilities. door blended new is truss and – expansion the and truss mostly The facilities is plants. milling between

Trey H. Grooms

it. up. the or maybe Peter, – it midpoint if of at versus guidance where the mentioned low could you year, end. that – help the it Got come end bridge for Where would may cash but Okay. would And it says Thanks shake us? flow you clearing have low range? higher the you it Can range free out kind the reiterated for of for that in then, that end

Peter Jackson

bit building with mean, you I this what imagine, struggling has price we're purchase can right? changed for The materials. at a and – the quite point Yeah. lumber and

to-date, and, So, our we've some substantial degree, inflation a seen to from on our pretty inventory headwind in AR. that

the in capital $XX million. about million to the working in out on adjusted receding So, the look EBITDA, sense end of expenditures as $XX $XX sales. the Capital $XX at million get to $XXX of XX% has, came in in a normalizing taxes It's of of $XX Cash laid to we some start now, sales million like (XX:XX:XX) to we we cash the we as bottom sort of a that that it we kind – incremental as that expenses it's range. of million range, mentioned integrated interest think little. that. million down sort Right

that So depending to as the you EBITDA this up the of gets with to capital variables X.X% you're kind ended year. lower and here – on year-end of the up true range. kind year-end we point where of end end That not end the working a we from the

Trey H. Grooms

the longer be looking is of of X% XX% capital Kind kind it still Is so what working term. of taking that clear for? And of kind we just fluctuations or out, some we're should piece? Right. these of

Peter Jackson

about pretty the lumpy is good Yeah. In kind that core X% piece, correct. feel the of to – barring fluctuations, yeah, that that XX% we still

Trey H. Grooms

Well, thanks All right. for...

Peter Jackson

(XX:XX:XX) of the about at day. the the cash end

Trey H. Grooms

it. Got

Okay. Well, thanks me putting for good you. Thank luck. in, and

Peter Jackson

you. Thank

M. Chad Crow

just up question Jay. previous from the follow I wanted on to

portion, category, commodity X/XX-inch framing more driven OSB and of product that that panel piece is little panels. clarification. is that. our lumber of XX% a is Just XX% Of of And the largest

I that think about of panel's X% category. it's

So, that. I clarify just want to

Operator

the questions. remarks. be I Crow, to further to will At over no this you turn call closing for time, back appears there Mr.

M. Chad Crow

our Well, the again quarters reach of ahead. questions, call today. in follow-up And on look you. We have progress Binit updating you the forward for initiatives Peter. you our if Jen, once please joining to Thank any thank out you or to

Builders FirstSource (BLDR) 8 Aug 182018 Q2 Earnings call transcript