BLDR - Earnings call transcript Q2 2020 | Builders FirstSource, Inc.

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Operator

Good morning, and welcome to Builders FirstSource’s Second Quarter 2020 Conference Call. At this time all participants are in a listen-only mode. [Operator Instructions] Today’s call is being recorded and will be available at www.bldr.com. It is now my pleasure to introduce Mr. Binit Sanghvi, Vice President, Investor Relations.

Binit Sanghvi

Kevin. you, Thank welcome Earnings and Builders Second FirstSource Good Call. to XXXX Conference Quarter morning, the With call Officer. on and me the Peter Executive Crow, Jackson, Officer; Chief Chief Financial today are Chad on A the the Relations bldr.com. of copy section at is Builders website slide referenced Investor FirstSource of the available this presentation on call

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

financial Crow. earnings to We our explanations website. over will of their reconciliations are on non-GAAP in which filed call available yesterday, our X-K now the Chad to our Form I have non-GAAP equivalents financial press provided GAAP detailed and in turn release measures of measures both of

Chad Crow

Thank you you, joining Binit. morning, Good and thank for us.

regional as during to quarter, safety, operational a team’s decade, significant how our and of of crisis. been over past preparedness A the proud the outlined and unprecedented well us as our portion managers a We giving effectively a excellence collective us have our leadership several perspective. financial senior of hardwork and local from are address to to dedication with for Last environment incredibly our understanding months. well we over manage

deliver ensure proactively We all operations local that continue critical at possible and changing keeping market managed to customers, rightsize to through we the our our members as the delivered the the to to effectively around. Our and strong and services as level occasion team pandemic. while products many a safely team to adjusting necessary our working to rose and of ever our landscape results quickly business all where

to and improving housing rebound a towards continue shift fundamentals products are and our In experienced starts, record low we living in to mortgage were sharp appropriately support and suburban the for positive rates, the regions. resourced improvement with the we sales, sequential we services. and demand June, COVID unemployment, that of dramatic quarter high uncertainties acknowledge as The we demand. slowing the us in Our momentum remain the as in all homebuilding focus execution The quarterly take initially locations so highest of furloughed pleased Many back of homebuilding. our to Northeast, in markets Midwest, resilient, to are to of been now have adjusted history. quarter the are on Northwest we advantage all able allowed Order placed the have our and states EBITDA in the around our lifted, us as employees. recovered housing restrictions strong limitations we to work that macroeconomic second capture enter ended recovery Those volumes all moved hotspots gives We were certain we back almost year. produce been through and bring we the fundamentals country. half

our to outperform ability situated we of partner our exceptionally remain our through that we believe take customers. However, July. continued that well industry, inorganic to our homebuilding the our to are look as organic enhance in opportunities into national footprint, we within and across We advantage tailwinds, ability with growth

last ambitions to liquidity to of million total X.X billion, since support sheet ending our the have XXX the up in with We our balance growth quarter May. update

our term strengthen to sheet, ratio our as the to for long cash time balance times the achieving of of EBITDA especially future surpass were the quarter. strong pleased end dry of flow the same times targeted to of X.X M&A. low end at of X.X continued powder net We provide Our debt up adjusted financial

on Moving It been note on to is fluctuating period to strategy, our have the year-to-date slide strengths to able platform we during of this our update of that four. important demonstrate and particular demand. team

manufacturing direct deliver in force. breadth exceptional sales to EBITDA XXXX three markets. of of a unmatched product record of our scale in adjusted higher is national also portfolio result ability our The the all of end and half first capability footprint, our supported demand Our and

sales, and first volume benefits each same was X% an contributed product the sales from tuck-in nearly and Despite X%, Value-added the to reaction years investment. as realize acquisitions reported EBITDA of net execution market Thanks year. categories past which period inflation X% led the an additional increased of our sales of the day continue increase grew year. to six last strategic volume to to to quick the the volatility market again disciplined of sales in compared we year, Commodity first team's over from our year-to-date five approximately one in approximately dynamic conditions. X% by X%. by local adjusted the selling in X% grew the by our estimated months, we six For months which of completed

track. Our on remain operational initiatives excellence

previous with company have of has associates best with. include markets. business XX and with process our more organization on of Where level. covering distribution and back the along we being rollout tools been initiatives provided marketing Key and particularly margin are and enabling pricing to software, management calls, and to on The faster practices a agile pricing customized accurate throughout mentioned process more we enhancements. do investments analytics, in strategy implemented information, implemented, efficiencies, major making in As Information tools, execute our our successful now are local our optimization and pricing easier System us logistics and these office our

speed, of sales XX% distribution in our approximately and uptime has covers terms reliability. our improved system optimization delivery and measurably Our of network

BFS our My higher continues portal, to designed and complement customer rates. see innovative class is Builder customer first face-to-face service Our adoption to

plant to offsite to our includes and new added use growth value flow of that added our acquisition our enhanced range opportunities. our Through industry store of manufacturing to systems in such differentiated our added and organic Our machinery technological our investment This capabilities South trust dozens plans high commissioned and strategic capacity add of our expansions will our cash of as core intend investing Carolina. operations, footprint, remain component facilities lines value both to plants, and and partnerships truss through consistent with facilities, Spartanburg, continue to of-the-art portion a execution state existing offering geographic our long and of we newly continue We expanding plan, margin in integrated Greenfield strategy. capacity leading customers. related network value facility value-added

particular, continually Our believe and which invest throughout capabilities in ability FirstSource. a customers value is we to caliber high service the differentiator our in our service commitment to cycle, Builders for

of focus our tightened During with the financial second we our growth In the the position acquisitions half industry. enhance flexibility to the cash focused strengthens liquidity. discipline a our to strategy first that on further half, deployment value-added advance and cash on are year, within disciplined we

prior and think over from team using of. reflect because members have July there said, result sleeves But to the we've we thousands the I because jersey the almost our a call rolled much wearing possible to and of even the the on moment Peter, was only today we what XXXX, accomplished this of great marks that to thing a And on become acquisition, to fact back which be chose up When to let's and anniversary what turn accomplished, both get is proud our hate as word forget I we I that done. we of were five-year company XX accomplished they did. I Before their wanted companies take ProBuild. acquisition

what of, I were is I said we fact the from do we did the think what that start. we proud to going am most

our plain recall, were you that and when integrate levered priorities would targets. lot over our times thought achieve delever, were did and start, And simple. we we said of a From people top If crazy, we survive. were deal to the never synergy we and the we six and closed,

the what in make And the five over thank invested transaction who us to to all as possible, thank those our for have five So accomplished you to ago team years. years all well. members, we past you

back over. for work. yours Everyone reflection to is time All Now, Peter.

Peter Jackson

you, Good everyone. Chad. Thank morning,

sale by quickly quarter review recognizing how quarter. to organic adapt Let underlying in to from an forward. sales an a me cost, billion of the acquisitions of organic quickly indication local then start and provide results, executed also We that record will deliver actively you impacts the our net with core $X.X work business. declining in performance second second manage and intend adjust sales commodity of team's Core to we had I excludes the going our X.X%. conditions the overview give market quarter and to to

disclosed, April, single-digit previously month sales during the a range. As core the high organic percent experienced in we decline of

However, what growth up than as up in recovery release we core initially smaller and June, stronger the order rebounded expected. quarter be reflecting showed to progressed a single-digits, a pent a demand. drop activity organic In we low believe

completed X.X%. our quarter, to over Commodity inflation another year price net tuck-in added sale. the acquisitions the five For past X.X% added

markets. As within a value in our outperform X.X%. added to for product increased by Demand sales total continued result, net respective categories our

of COVID-XX of the offset in disproportionately hardest hit country Although impact higher demand parts the in the was by most areas.

have just basis Since a our to products lumber gross expectation the had lumber panel to normalization margin our adjustments XX.X%, the decline to and XX% sharp our was discussed XX percentage team and over in point by lumber was disciplined previously we compared experienced categories. the the rapid commodity calls, our XX.X%, Our expected prior costs. goods end progressed. in May, sheet The as due year of and in period communicated of quarter execution of high we the inflation result mainly

to margins quarters pricing spike keep inflation the two the prices. commitments normalize margins that mechanics prior prices percentage cost mind in usually headwinds, we please of on one to causes to we discussed have our term our and as term for provide takes short Commodity the margin at new gross relative It short calls. customers. So

from of be quarter million magnitude the inflationary As decreased margin to the higher to margin to expense before typical and benefit of third percentage million same one pressured to lag. the on gross will a expect headwinds, the our in recovering quarter dollars normalized by speed Ultimately, more year. to period the temporary impact over result this Interest $X.X gross levels from last generated that we sale. compared two $XX.X we

one-time items as we balance related impact proactively due expense COVID in Interest flexibility the instruments net to and period, $X.X extinguishment by our outstanding to debt increased increased the light debt financial of year million uncertainty. Excluding in prior higher of and a liquidity

and million, $XXX.X improvement. to ago year a from million XX% $XX.X increased EBITDA quarter Second

significantly of the the like our Chad This interest period. is to critical and slowdowns partially would us a especially team, customers on year impacted Economic the quarter the by partially costs this second categories, primarily $X.XX driven six, Florida cost $X.XX product As measures demand our with quarter the execution our our by product or growth most local business, operating geographies X.X% per allowing through share, mainly highlight by which our for levels, both our management with $XX.X as X.X% diluted improving adjusted quarter. slide share to EBITDA travel focused in products quarter of services for $XX.X $X.X by the category, and diluted offset northeast, to remainder Adjusted partner of at with impacted expenses by history, reduction margin higher driven Northwest, margin expense. EBITDA improved prior disproportionately mentioned, of was entertainment XXXX. increase and net per was this income an demand The the in strength true in I million, in the recovered. our or in highest Midwest The supply the footprint. compared in results, the the by related to fuel On million, to offset the was compared demand the variable by million combined manufactured pandemic. of year-over-year was across to share corporate quarterly contributed compensation, and and the driven

sales of the offset products strategic quarter. manufactured our added value regions, contribution X% organic impacted those sales declined approximately the Overall for in our acquisition. by by increased Excluding

network We facility located country. are our strategically across of of expansion committed manufacturing continuing to the components the

state-of-the XX a during we As South in have are extending facility the Chad mentioned, pleased Spartanburg quarter, added to our manufacturing leading industry art position manufacturing facilities. Carolina to

capacity. growth will We expect of our our that XXXX invested expansion total production value-add of in XX% capital approximately initiatives our expenditures and be

core to second in Our decrease organic of single-family X% starts. compared overall U.S. quarter new declined end a estimated in sales single-family XX% the construction by an market

the in performed of strength the market, our grew than expected was and better in Core saw Multifamily to in market by we the of Although tariff began X%, limited due the certain relative growth COVID to impact in of parts core other country. the lap projects western by end period. part majority the large organic of some we and X% R&R in largely the the the growth of upper as impact by shutdown. the country in year the declined timing prior Midwest organic impacted unfavorable the

value generation. recent has to driving our factor Turning on our page flexibility creation in our eight, financial a cash strong key years been

$XXX year-to-date to than was aggressive the to cash, it we by at cash or acquisition. discretionary of to without just a EBITDA. The to positive liquidity, XXXX, around better on cash in representing onset our growth quarter, XX-month our cash. first value-added half and At an call, half adjusted preserve prior we liquidity XXXX by a CapEx since a capital spending Since clear free about produced resuming priorities, versus drivers leverage, including key increased our flow of times reflecting million last April, ample in the vigilance lowest reduction more quarter X.X additional free performance. million. had the levels around With the of It improved clarity end and churn net an On working and are cash During in represent pandemic in operating of CapEx billion market, investment $XXX the basis, last discussed the including trailing acquisitions, capital flow. which to improved the $X.X year impact XX% flow initiatives. our to on initial ProBuild we actions our primarily objective primary focused preserve approximately of growth our continued

remains pipeline robust term. focused Our on long deal and for the are investing we

through outlet our resilience to results to cycles growth. and Turning reflect on nine, half managing experience first our slide the our business our generate of

national positive a Based first overall demonstrate our July. Our also for environment, half are by continued supported we diverse footprint, and demand this across on introducing homebuilding tailwind rising positive results which the an a outlook backdrop, quarter. into third

anticipate to flat year-over-year year-over-year EBITDA approximately the at million. third core growth mid-single organic in the adjusted expect sales be $XXX range We for We to be digit quarter.

proven Amid be provides a localities of basis to while in resilient all housing our has guiding we assumption are inflation where we balanced New take demand growth reflects upside our opportunities. all macro nearly operate, the which for core contribution to growth outlook. in uncertainties, coming our sales positioning and well Keep core specific quarters. sales as from performance excludes acquisitions the mind, to of outlook advantage potential as the our organic commodity in business the

have we few industry. been in past managing months, commodity the rapid our Over inflation incurring the

quarter percentages the normalized percentage levels to be margin third gross be for earlier, margin margin low prices. third when quarter levels below to mentioned the our over inflation. of demonstrated the decline to we headwind We due as anticipate that our compared a gross more in expect commodities XX% temporary are I normalized As XX% our we range stable our have is at in This past. to

gross increasing that on during along inflation pressure or when quarter in a see will margins of pressure a with similar margin spiked. inflationary period the experienced we note I'll mid-XXXX two margin We dollars. gross

subsided, our of average we swing. the since generated our of XXXX, line how which that approximately period. $X margin commodity we in above manage margins XXXX, gross have with cash quarter XX%, Back second XXXX. margins flow, upon that tend the the beginning and business normal end through As year we is with to consistent XXXX, the build inflation with cash through is during and billion Since recovered operating deflationary fully to level normalised through nearly our we expect of generation

the expect $XXX to With $XXX million million of will be the the now underway interest cash XXXX. in be the range to to our capital projects million expect expenditures again, our full year growth range $XXX $XXX full to year. continue in We for million for we

remain beyond make that our advantages efficient. the business Looking and delivered more We productive structural intact. XXXX, of customers solutions our

and have before. ever We integrated with than deeper more customers relationships our

a much commodity of are than more We supplier lumber.

acquisitions, to savings valued of builders, many a the market partner on communicated to previously just term offerings focus and solid position, critical them the supplemented which our affirm uniquely financial believe, our accelerate portion targeted and growth. labor in of and maintain We margin are by With profitable market business higher highly delivering plan underlying range our to our track expansion, and value-added achieved sophisticated These a growth our supply represent objectives initiatives time of positioned very streamlined operational delivery growth. are our XXXX. materials, helping building targets, remain chain. we be We by to underlying long we capture excellence accomplish therefore long through largest

for confidence in have of value come. the business to building materials We products years our the in to choice and be and full added supplier months

strong open Our our Builders market our position, geographically unmatched customers product to and diversified thank any team with up partnerships manufacturing we customers for environment. would strong competitive FirstSource our for communities. offerings, Q&A the like capabilities and coast-to-coast advantages especially to Operator, company, in dedication their call national our I financial now can are

Operator

can Thank go that you. [Operator Bouley now question, from comes to Barclays. of our Matthew Instructions] first We

Matthew Bouley

for a and results. question congrats with on Morning the everyone. Start on the Thanks guide QX. question, for taking off the

informing July housing how are start are I range sort was single in what guide? the just I June got color are that Peter, that of just underlying that You're from and low expectations up saying, that think I mentioned organic the digit, digit is mid-single trended, and guess core growth I organic any

Peter Jackson

performance little talked was timeframe finish earlier sort The We the up wondering June, might not from it'll in let Yes. July right look obviously for up. off that done like country, But about the don't that if yet. no anything start looking like range the a demand and we're I’m of not were from market. surprisingly have there And pocket, already trend same the of have is in And an potential we sort shut you know, bit been amount with be as Things homebuilding have the of you of pretty of that air down. pent very maybe in better. telling had strength as overall come everything There's some tremendous recovery when things sustainability the what pleased Chad resilient. the back. optimism. heard, you've is many around builders a heard, there much

So that growth open, the space. single little mid-single better. terms still, in be quarter for It's we're giving that that's bit will in rationale where that a could number of really ourselves third digits family land it

where were balance land could but seeing. what on As there's be order feeling it worse, and it volatility COVID about pretty enough we're always, the good in to we rates

Chad Crow

Yes, and I'll just add.

the seen traffic up. and is very, weeks, positive. orders in new very up, are the commentary from recent builders You've The

little and Rates bit a it's still there of resilient, been so surprisingly, a Just tailwind. seems lot to low. are be

In to for our a desire move downtown with from less in on more I areas. them space. people cases country are commutes factor going many becoming think allows which everything further people, now, right of

opposed looking create them people space in to for looking long think as aging there's lot parents them, put to, facilities. term I to a with care probably of

going people more right much. condition of dynamic aren't the traveling tailwind as living on right given lot think that now, A they've to there's I their of with just now. -- are thought lot So a

there's always and or we is our said, for right different then and leave as good pretty feeling legroom guide about be now. ourselves things quarter up no shaping upside any little about with try So a guidance really to we're this and how downside Peter are forecast, or measured potential

Matthew Bouley

lag, the Perfect. it's the two The than the back clearly mentioned for this quarter the guess you normalization. And quarter QX to guide bottomed years. where XXXX in second margins Thank you you can better on progress that. side, one to then And see margin over of I gross

get is progress this. saw that that that any that, might you ahead faster my pace Or margin inflating of think made, you've of what so we should might question any reason than we there all at And too hey, time? think ourselves lumbers is is, the what it on not and look, be it not with let's is, the recovery be not

asking So, of how pace think should guys. really we about that normalization? just about Thanks,

Chad Crow

movie most to the back, before, and in Well, I'll start up, out time flatten then once period our the a one with and we and, higher we be few so got out set of margin lines compression, could get to going but to prices then a compressed quarter when things we right? add are tailwinds Peter but. XXXX was like be or example. a is start of this it paid can We recent some quarter pricing We've seeing of for we QX see just up deflation, really get we and get the nice housing it. seen saw

Peter Jackson

better get managing to quite for to ourselves efficiently pushing possible certainly as quarters. one two we're and our faster price so doing up than and better ready And sign about

it the goal I about internally, ourself. that's that's our think But think to So for now. right way certainly for probably

Matthew Bouley

both. thank Okay, you

Operator

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

Mike Dahl

the commentary in challenging Echo a time. questions. here my taking for around results best thanks Hi,

we The Peter, we of how comment acquisition impact I the there look I made off think, if contribution. we’re on optics first question – related, potentially you but at manufactured I I around had products, think about a the not we're if where that is growth mixed some mean on on

I and digits high have the may volume lagged down have of single would which the ish, manufactured business. think the rest been products

good. So

color on growth July additional relative on but mix over And just Just provide you want those manufactured to of the June in clarify you've products? trends also if could course and seen that. then then impacts, some the

Peter Jackson

absolutely. Yes,

components. You sort that of products in decline right, heard is the nature manufactured that organic it in of that, the digit mid-single

we around mix yes, biggest the higher hit fact got numbers for was of, a basis, did a reason manufactured the we mixed a amount and on we the that a see was that of other markets in into hardest. higher the product that The So where dug decline. the

business of it's in of northwest opportunity was for manufactured front that's were Florida like, But, covered. the delays an think, specific markets representative So as a us example, the of of area is and partnerships. sort unfortunate Northwest, those I value mix it's percentage proven We've great much We've products proposition, a a percent us. for the business -- higher those a of in markets. great higher

then in very So to when issue, hard disproportionately, it it that's business. continues about organic up of good why that country, be markets, those sell it In more shows continues work the in structural we core as the where in versus not just grow. number. overall we feel market a other But the still parts It's business. it or to every so and successful

Chad Crow

agree construction, geographical add. dropped brakes? part also under started, first Like kept We what were were thing component just I the that got there right. component the you've I'll we with the already builders hit a But it said, is in areas presence. was when new shipping homes strong and where and shut consider Peter to lose Yes, down have to of business, home we very we

orders as So so pandemic, around tell moving dropped that you week that's of into depths in, over to March, as the it I'll well. first far the we new truck XX%. of of pandemic, the as coming the part

they where where coming than of double a higher truss they solid the were and equivalent to the March into level were orders the are digit beginning plants at Our a pandemic, now before year to back ago. a

have I -- zero concerns have our I about components. So

Mike Dahl

really nice for great that reinstated reinstated. Thanks That's around term hear. color. to My to see second the and question long that it's is guidance,

there's think some on hand, On uncertainty still the prior other there. admission, I

really results through this towards year. key over if to takes tracking that guide, And get XXX So still the is get term million that like plus the at look two long you're question that the like EBITDA in to to XX% next XXX. growth goal two QX EBITDA of years seems it we XXX

be kind in business? market internal at of would changed based was your framework what and that? around What then So high included of potentially level kind has all initiatives component growth M&A

Peter Jackson

exciting. earlier of of then forward this about year fundamental all, it's not and to now First is I’m we structure looking And changed. thought it, what

time. We there past, that in have about are we we're go the that -- I pull We you through certainly when and levers core addition when of look – mark. what know as can pull, models looking the at we different underlying as have a talked and would number I together to Right. over business to not back sort we describe variety this at in this going a of of

Of course, single family. to be by going influenced heavily we're

effective. a been on in lot of going who has been control we're be really that’s commodity, to to also we've course, Of are. making we're impacted that executing sort have by Investments of very to our fate in that core the we ability the we But ways. own a business core strategy value-add

have being And a perform. we terms M&A go our what operational of we of targeted below after even this pipe leverage very believe opportunity liquidity our very, tremendous excellence healthy to be ratio, opportunities. with to Now and continues to

We continue to make progress.

to see and better have knows We better quarter. each continue results operation get how and to an to to wants that

very -- we're we our pulling are run of numbers while really, looked together prudently we I feel XXXX and for by the good quarter at what We as conservative So, think, can we things were be, us. sort last and at coming guidance where doesn't mentioned, just about perfectly that absolutely to to I everything as XXXX. us -- there. doesn't have work going think line number. and get how attainable we to that the We hit together for is And we're of to sight have it is area where

good and We at. doing what have we're to continue working

Mike Dahl

you. great. That's Thank

Chad Crow

you. Thank

Operator

Keith comes mute. Keith, of from question next you're Our Hughes on SunTrust. perhaps

Keith Hughes

I Sorry, had hear now? me you Can Yes. connection to problem.

Operator

ahead . Yes. Please go

Keith Hughes

would Okay, you if talk what some for cycle, you, about you doing to point tuck-ins? than Miss you nature, at products, of about And what you open things acquisitions, that could sorry. in talk look again. acquisitions? what regions, larger this do time On tuck-ins, a something be to

Chad Crow

cycle clearly. that. than ones, be something yes, But seen can XX. always or open always of to. would do point small large both been XX at one In many the in we equity and this may At ways, be We're open a It easier using cycle we're certainly we've one sure, to in have that's point that's proven. we've always open lot But be something more liquidity. the this to.

Keith Hughes

smaller Is that these you [Indiscernible]? on question, try tuck-ins. region there a Second

Chad Crow

of regions for we up for? tuck-ins It Keith. were like you sort You broke a sounds what about second, asking think there might

Keith Hughes

correct. Yes, That's what regions.

Chad Crow

Well, at holes and see can you map footprint. our look whether there's the in

think go our just of part as as inclined a much I But after of more to regional. the add. motivation company mix value So, high is We're mix. with importantly product

So combination two In it's the part my penetrated view as the of mind. of But under as those in kind value country of is western on versus just factors. we're my add said, the I in general, critical a east.

Keith Hughes

Okay. Thank you.

Chad Crow

Thank you.

Operator

question comes next Trey Inc. from of Stephens Grooms Our

Trey Grooms

morning. good Hey,

Chad Crow

Good morning, Trey.

Trey Grooms

wondering, geographically, of I that held think So clearly. just kind better definitely in

pandemic, of can value changes like, an days things giving earlier demand have the as products, And in your it mentioned. exposure. impact geographic During added was some that there see there pretty vary your the just you widely, you sounds do when

mix? strength of geographic question So geographically now what things can areas and touch means to now is, starting that or kind kind you're that I on you again. value-added Where that my seeing move for relative guess, and of are weakness the

Peter Jackson

Yes. Sure.

So, got just past back it particular, as to for areas on march Florida. Northeast controls. Pacific in saying I bounce right, Midwest, us to and the have slowdown a started company. that the would stabilized strict continue impact upper Northwest upper When very Michigan think They we saw has biggest Michigan and truly the Northwest recap suffering saw were there's say, bit. to quite quickly. kind I Those in area would then Northeast, say, Pacific definitely what highlighted were initial to the in the the and still the way were area, would no the Midwest we as all impact, in has script, it. we I and I of comes around I also is mean, recovery, very back. say later the a obviously,

population more in the think has slower. I general states has and suffered

yet. for there middle lot to exposure not the In tourism, underway, the think of a Florida, declines lot uncertainty, I to but a back they've is So perhaps some up that of they're seen businesses. levels the recovery still certainly core their of in of normal certainly given concern, the

but And good the us. When relative to road Northeast. There so products, go. at in for for on manufactured of they looking real it's to been again, Florida those haven't is strength some corridors are there far the areas get the exposure still, But back, they're obviously, so are us. important

important products. But back couple recovery products. sort time of that, So markets overall be can of we're a at back. it that to value-added know of think the snap in that see if the than will normal it's you'll a more growth those I manufactured confident to and progression a a will look But over in be rather quick you

we you were If those exclude target digit. regions, up single low

So overtime. in is the and the numbers rest of would starts to still it as be country some even concerns the suppressed of expect still growing we the with

Trey Grooms

all as the a for up. Thanks guess it. follow All color. right. I Appreciate it. Got And

SG&A was you guys top put given So done. a strong But we've But said, you we'd be lower some line, lower that of have with ship. would what of know, I that focusing especially that kind a sales culture may of as cost on and on have line guys abate. tight up and then the tailwinds of understand a we everything just thought, percent the it running

you So had through I in that to benefit there see that or pandemic, you over quarters? to months guess, guys could SG&A last from the any is pulled up and coming levers this continue in several the continue

Peter Jackson

little cutting job costs, just broadly for as making And disciplined. manage did was delaying a obviously, wages, Trey. that, highlight company is the with just day. We each through cuts and some the to extra about saw ourselves sort our went we that, right, executives. messaging, being and some give things folks. it, what team some on teams salary to some coaching the sort breathe just more appropriate, we would how to that the a testament you say were shutdown we playbooks reminders did great live when sure a people of of glad resizing concern our just I out flexibility it really setting, discipline a we that a in and talked this to of business that I'm When

increases is that then, locations. of And nature very made. resizing of with necessary flexibility. pause went specific wage we've we we ourselves were salary recovery delaying and we increases, restored of just the merit we executives. the did the to Since Sorry, through give period. the we seen, for that to reinstituted, we've Clearly very the very, sort thought those business well that all Those cuts things were that as that the cuts

strategically. try to hurting making So we ourselves retain we staffing, sure weren't the

ability aggressive, wasn't these believe get compete, a in we ton want fat to didn't of ability being too Our our win, by undermine that ourselves There we've a markets. to we cut. to allowed that to because don't

saw that in end will in think back, what was some So day at expenses. terms of of of I that the around real come you obviously comm the the flexibility some core

TBD. You of third a saw overall about being our benefit

time will normal? to to in of travel play been really And ever the obviously, will that certainly Will degree to back anticipate expense. but out. Then come some fuel we like TBD, ever remains, there's we some over get ones was that more volatility the we it Now bit that cost fuel. third, The used question time. back to?

and or it's one not this real changes maybe going through that normalize will time, go So that to structural normalize cuts. to we on away But didn't to right organization any make back wherever massive over either.

point being things Our this ready on and seems that played were we focus out making move pretty to forward. sure was At well. responding

Trey Grooms

best Thanks for of my luck. questions. Great. a And taking lot

Peter Jackson

Trey. you, Thank

Operator

from Bank. Clarke comes Seldon Deutsche of Our next question

Seldon Clarke

morning. from there more lineups from macro? in us numbers of just Thanks. a you some starts? can detail Understand guidance Can But your there. assumes of mentioned you -- some around give give what you you level, support what longer type of get Hey, terms the you there need will are good way can term high us

Peter Jackson

Yes.

out about were explicit We referring on pretty So, were to before. EBITDA million there. number start single when target family we we $XXX first that brought putting a million $X.X

levers back single that even starts one million we've and However, year, healthy get think we to family number. where a this just with have earlier that to to doesn't get can It environment. we we come said, have number enough

will is perhaps be So continued very, as to way much very opportunities the what anticipate we our as fate recovery think those we impactful really it and and about control own starts today.

reduce better get pricing getting M&A more be certainly just to greenfield and there, not we So value-added to grow we opportunity even And a to can family effective initiatives logistics capacity have with stated quite more room getting our excellence we've about management, what bit single and range. talked us. for that, whether a there our we would opportunities talked The in Certainly think back and the dependent efficient right, are strong that's become are the more of our work. We're it opportunities, opportunities disciplined. within in where that. and that operational on both distribution staying or to better that We've and committed got obviously, XXX% office. ways it us starts. growth about costs We the

Seldon Clarke

Okay.

sort come you that So Are optimism really seeing driving down. seeing an What's of M&A on -- valuations are opportunities? identified the increased you've side, there? increased more willingness the you or have

Chad Crow

And go lot last there clearly a out and we the There's quarters. were pause just pretty of there pipeline to few businesses work It's But after strong is up. down. shut been doing, them. we that back in have of a Well, a a were type of brought full things diligence Obviously, the balance right for what bit we full. was good now. sheet when

And got a -- so more we've are that's optimistic. we why little

more what to we a be acquisition in Now we've we'll coming standpoint. tone an from on got think do able optimistic the years

Seldon Clarke

that on what's could you Anyway, just expand a optimism? driving bit little

Peter Jackson

I'll without weighted over to seeing us think that for the there as around businesses look really our at that portfolio, is valuations our -- of an seeing that consistently any are And these and The bring continue accumulate I it using is The of internal the processes them think understand optimism are you are be our fit excited there's when our certainly one where market. capital seeing comes our bringing, They're and accumulation we about taking returns and of even ready return names, make vetted be are to to being list sort example we level, would through value-add the very we or expanded regional together from country. for at give is the -- experiencing of list put those nice right tuck-ins, we're pass are of advantages. -- but fit but cost would what top we may that focus. that and of the guess, sort sense, a we're we're product to that the our sense. you through M&A model those management That's teams say, So to years risk been I and an that with you naming value-add the we deals. not in now We're thing that brought by continue right? deals to great. footprint, we're great refining it model sure us requires leadership capabilities introduce we've we deals models that So average making our we where will competitive that opportunities accumulation of together and national factors way valuations opportunities. the accelerate start go. with The these the speaking into sort teams teams that our a great of targets, of We make bring

Seldon Clarke

Yes.

Appreciate Okay. That it. sounds good.

Peter Jackson

Sure.

Operator

Wedbush. comes from Jay McCanless Next of question

Jay McCanless

Good morning everyone.

Peter Jackson

Jay. Hey,

Jay McCanless

good Hey, morning.

the you're input you your then on costs thus lumber seeing before And when line spread a two in about question and between we What's from what then about lumber one inflation about commodity think talk talk guess, quarter? goods? framing top far got sheet on benefit as lumber? also a could I two-part the I follow-up. versus for maybe the So

Chad Crow

that prices towards out results, would the Keep run start. QX the is pretty you then saw dynamics, of So, in tailwind. fall I good a and slight our can I that maybe at the a you tell end. the good mind a beginning pretty quarter commodity in

a on not out, into to really today. lot impact hit starting you've [Indiscernible] if That's of through and May accumulate got sort averaged where it net-net the really started of So May. to

space, a quarters and as in in internally component that [Indiscernible] commoditized exposed that be of that's the being start of our response. look business. exposure XX% the of panels. of commodity and obviously mix the XX% But of most now most got Now about you lumber our being our that change pressure bit highly you of But panels. prices your increase Again, between right sort mix and broad-brush those probably the talked and we its the sales XX/XX a and a sales business our around probably its if at split prior commodities anytime to commoditized increase can overall

Jay McCanless

some Got And in it. how follow-up from cost quantify question, you XQ back guess, that helpful. guys much That's then one savings are you XQ? actions during in probably the saw did wondering my just going come --I to time

Peter Jackson

that are are quarter, I say some TV attributable phase to things back would people to Most were of and based unlikely already done will maybe the third the on over come in on million in second they take would right bounce the to back that back quarter. $XX time. time will come beat away I back actions that further based going say

in at estimate certain starting that are major those probably you -- I components. And I the Although you'll And I better as to markets. to up losing think could than it eat start can. away then, things

Chad Crow

add year-over-year Hey, due Jay, to of we'll acquisition. a sales commodity we course, QX of look due X% then, between another or I be now and to And little it's difficult our is to at impacted but growth want and right positively somewhere guess have X% your X%. so inflation probably will estimate, to kind just follow up to When QX, best question.

those I wanted sure So have components. to just make you

Jay McCanless

Thank Appreciated. Thank questions. you you. taking guys my for

Chad Crow

Thanks Jay.

Operator

from of Our next question comes Kurt Davidson. D.A Yinger

Kurt Yinger

you taking and everyone, appreciate my Yes. questions. Good morning

Chad Crow

Kurt. morning, Good

Kurt Yinger

start good yes, to - want off just morning. I

$XXX, have just the about to XX.X% were impact structurally you commodities higher target. But with price per just On that naturally sales? it’s the normalized. lumber of on would XXX of was we the thousand. of normalized moving outlook, arger and bucks if maybe guys a what I year think being type gross XX% to Obviously, margin lumber margin percentage gross came front, think maybe into kind And

Chad Crow

question. Yes. No, great

long and on We'll have quite important we're time. you how this based been that it It's quarters bit. question. we welcome. about spot. and it one to it We certainly how current see it's half plays no year. move a we one lasts a this modeled of It's As change point three meaningful a know, to an out. around that hope But sticks just There's

Kurt Yinger

so. wasn't bad either other it Well, XXXX side too on of the

Chad Crow

all. Not bad at

Kurt Yinger

it previous how which talk these categories could benefits like much past seems And about tools. from what to real And see And relatedly, some tangible opportunity there. of pricing quarters tools over my you second one, some start really or the couple address? those have you product you is I'm shortfalls wondering guys feel left

Chad Crow

marketplace. in information the when sales. win competitive and profitability you're is just being I I where being that describing want sort guess to areas I reiterate internally. And the efficient pricing Yes. around organized, thoughtful, of also best the have that's the our being really closing was you Sure. making we're because effort just and And decrease we're this need through salespeople stay change way and moments yourself through sure put increase the in good while I'm will the customers. to want can fit all a winning We giving you and from might prices, quotation slow, you're that so it's gaps. being in position fact filtered to the to academics the you in our prices come It's the those out not the in system or sure a price prefer and when vendor we're to bad need can as business. fact they well, to important compete And make the

So that's helps. Being probably the systematic always biggest component.

taken you've approach somehow a market that want the harms distorts yourself pricing. to don't You a or where in put position an

it's So that absolutely we beneficial. systematic approach think

been adapt and of it's tools, our I'm that of pull We've system, pretty to to year. way want implemented phases it, couple As been where teams been the the operations some with what very doing at back have both more this with going very, we architecture good progress together. all come the far a that the impressed over we've to our process they've seen so the manual. difficult to forward. half look very we IT approach markets a it for to The

fairly It So thus company. I can percentage the changes of is over time. overall modest a

new the pricing place. is think in put structure I

structure over those accumulate more expect of permanent the It we do broadly. us for and next to to some changes accelerate allow year So it we business the of the get to use the to as that continue

Peter Jackson

well. And it more can sold What of money. And give Why some and serve bucketing even more the also XX% breaking net proper your customers. just them then XX and add, customers that. can't real and improvement, tools this are So as margins market knowing knowing, points I've just a it part be old XX.X. that's a customers degree always basis to to those on margin habits. with return you're I'll expensive bear? understand And to getting is, margin which of sure making

to lot decisions a it's make So the giving information the quickly. much of them those more tools and just

Kurt Yinger

Makes of Thank lot sense. over. All Right. it guys. a turn I'll you right.

Peter Jackson

Kurt. you, Thank

Operator

Gilbert Ryan of from BTIG. comes question next Our

Ryan Gilbert

Hey, thanks, guys.

First question on the quarter is third guide.

on gross And We've quarter. the some the can adjusted margin improved kind year-over-year looking be at Operating that flat think the of XXXX on just then So, operating been markets to you're been typically and you But an margins I and triangulate you operating in margin. gross guide. basis? looking to why margin in there's I'm or margin to third meaningful has seen even margin XG It just compression guess, expecting inflation. back operating commodity prior flat and higher pretty trying pressure looks like EBITDA or years wondering that on basis.

Peter Jackson

Yes.

-- your certainly through term exposure these nature of us of commodities. increases. the a most short the of the a the of in unprecedented to think answer direct I fixed those velocity change And put are amount time. probably window question The contracts is price certain for

compensate to very XX for. a very, XX, up a That's thing month. difficult You're points

in we're quarter. third that So the recognizing just

higher. is a when the commodities we that's is and P&L that answer. of on point nice those through over flow that Your but value expect of gets short the to some line comes right leverage one our question absolutely bottom it's And a there to time, no positive

Chad Crow

could gross But over that XXX an margin year. about usually up the We pretty Peter make this operating be as basis QX quarters. in know. last from to margin said, hard at I than following overcome Yes. points we year in more looking decline standpoint. That's

Ryan Gilbert

Right. Completely understand.

given I'm Okay. wondering second hear just on And question you're good have then on in backlogs in wondering up? extending. progressing if how that get times quarter, coming cycle Definitely the negotiating on using the structural third are been double with the full. more you're to interested pretty components. those to year-over-year I'm components to back seeing times conversations builders builders digits that are cycle you, basis that, up trusses.

Chad Crow

are They're backlogs than bigger for anytime as in their ways normal. all got quickly of as as mean, mentioned, the sudden I possible. sure. tied, for houses they've those the ground Yes, and labor's looking surge to you a get

that our side of strategy just right And so into component business. the plays on the

optimistic why have that's that. no business, about concerns what holds the future I component earlier, I about said for very our So

Ryan Gilbert

if And was little on you lastly, what's going Thanks. I Okay. on in expand just Got it. if could. Florida. I could a bit just wondering

been has of most the think I demands down positive heard from there. pretty that, the and builders commentary the we've

other to out you has could call that you competitive So to or particular, than want earlier? in been there landscape a what change anything

Peter Jackson

who for thoughtful during certainly how gate I to this. others. aggressively important answer us footprint. guess, more have have downturn a some think about come certain term issue. There full particularly be bit the of of I I tourism as and But the Back see is a of And than nature more progression Very there underway. some I of very us that some aggressively customers of bit impacted want that the a required certain businesses. a to little there. markets. help markets, There And acted back kind a or absolutely decisions they the were markets do at were normal I good we impacted, strong is back But least there. those see recovery out the degree. All pause long don't a is in of gave those to to this less

ramps not certainly down operation. to Our how where the there. job back concern quickly to we matter strong It's are about It's folks just doing of a be great a it a again. consider would

Ryan Gilbert

very Got you Okay. Thank it. much.

Operator

Our Ramsay next question Research comes Thompson Steven Group. of from

Steven Ramsay

it How many morning. have of question on you still plans have year on openings. a this guess, I Good is for year? date? more Greenfield focus you M&A? to more Do done Or

Peter Jackson

Yes.

year -- end year I two. the So one had to-date, somewhere so timelines, provided we think that sort did one just open we of one or its

are We a have out. more couple being built that

As far when will as timing open. and they

to two to starting to to Again, It's more of get kind retail for to will for focus one that and time it's expect get forward. that timeline. areas year them that a end and continue fall a of work probably generally, because of year. continue going do facilities looking into So that a done ramp up, slow we kind but we season bit for this us on great

Steven Ramsay

in and see saw. have specific But over new any Maybe know drives family you the the visibility repair just guys exposure differently and guys little unique more that into didn't I have the you that market. Okay. And even volumes, single drivers some geographic then share broader our quarter the than trends for QX? if have you dip remodel resilient, on been a that QX maybe quite

Peter Jackson

Sure. Yes.

of commercial that the this. one already as kind you for our sure listeners But well. other let business thing I'll the the and I'm R&R includes know just you So know. other

more we doubled tale businesses far rate. tell where have where of X% than core commercial cities that that's sort and So I downturn see we a definitely the some can then and retail stronger, remodel at is R&R businesses offset. of two you that And there

footprint. So got we've retail that

ready a are homeowner example, markets really doing needs. the doing wonderfully, is well, and great well. business California those responding very Southern to is very, performing And

we years of market has That R&R some Midwest seen seeing some those do business script, got sort from the that's Again, of market commercial overall in been trends whatever Alaska But it, have part our Certainly mentioned projects reason. of where as well. the pretty headwind projects. have either part solid that R&R tailwind Even delayed done or past for has bit Alaska's we of As healthier. the a explorer. paused been that We've in is and space. it's a there been nationally the also leveled of out. in

Steven Ramsay

the for Thanks color. Great.

Operator

comes question the of next Reuben Our Benchmark from Garner Company.

Reuben Garner

for Thank Good you. my taking morning, everybody. question. Thanks

Peter Jackson

Reuben. morning, Good

Reuben Garner

Most of them been have answered.

I in the any had So there? in the in you difficulty the And issue demand quick just noticed cycle, sorry, recovery I But and driver then, I only growth on coming or guess, -- front? any see a in related had technical availability. of has other have availability specific you if we of you the or changes one limiting in acceleration any slower labor and a any commodity have quarters it, getting is the -- any products? way, missed limiting have had the difficulties. availability if some labor one Have growth most Do building you and products been main

Chad Crow

in Haven't Yes. noticed availability. changes any Good really labor questions.

lean you to the stayed run of us if because prices prices remain you as jump I orders and incentivizes and like are you have in a on home talked a about surprised a new would that back to. a recent From times we've running may and with availability that call. lean, lean, folks may standpoint, that not product the don't when Although little hit, bit pretty don't have cycle be running the get more. in surge to out We tighter were it extend kind little most pandemic want little earlier

where pandemic bills that kind and spotty a their So issues, has But side lead call with just the situation supplies this got but production It's would more on disruptive. we're limited. cut nothing significant I buying is on and that some having back the when at -- and right aggressive the some markets would some be having is us eye nothing something little we're a to supply point. closer demand in of say are in there hit times, been now trouble I we extended strong keep on where

Reuben Garner

Great. the everything. And on Thanks navigating through congrats luck quarter. again good and

Chad Crow

you. Thank

Operator

time, to this At gentlemen. or would the and like turn any for additional ladies remarks. I you Thank call Mr. to Crow closing over

Chad Crow

joining to future we results. for And you again our call look you forward today. Thank on updating our

If you Peter don't have any hesitate Binit. you. follow up please or questions, Thank to reach out to

Operator

call. Ladies you and participation. gentlemen, that concludes Thank for today's conference your

You disconnect. may now

Builders FirstSource (BLDR) 31 Jul 202020 Q2 Earnings call transcript