BLDR - Earnings call transcript Q2 2022 | Builders FirstSource, Inc.

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Operator

Good day, and welcome to the Builders FirstSource Second Quarter 2022 Earnings Conference Call. Today's call is scheduled to last about one hour, including remarks by the management and the question-and-answer session. [Operator Instructions] I'd now like to turn the call over to Mr. Michael Neese, Senior Vice President, Investor Relations for Builders FirstSource. Please go ahead, sir.

Michael Neese

Katie. you, Thank welcome and second XXXX quarter Good to call. earnings morning, our Dave the CEO; on me Flitman, call CFO. With our are our Jackson, and Peter XXXX. review quarter will record for we Today, our results second

presentation second for our The at investors.bldr.com. release press and website today's are available quarter call on investor

results refer adjusted The for today will certain our slides to the and several items. investor We include during GAAP presentation from call. discussed results non-GAAP

and results measures. they directly amortization reminder, not of calculation intangibles. for our informational these provide comparable a in purposes, As considered excludes non-GAAP should most be isolation adjusted We the EPS for GAAP

You these a press filings and corresponding discussion the the investors could can and we release, GAAP SEC why to find earnings they believe reconciliation non-GAAP measures our of applicable presentation. be of measures where useful to in

press the statements Our of and and the within section statements presentation factors Dave. and projections results forward-looking in from over results. remarks cautionary this today's press the of I'll Litigation Act to and differ meaning call and forward-looking call our in our could turn cause Reform forward-looking the that to future release, review filings in contain With statements the Securities actual that, various projections. Private for on SEC release Please

Dave Flitman

to results of around strategy achievements Thanks are second face achieved environment. outstanding robust challenging the first during outline difficult direct of a focused operational call. adjusted drive execution against service growth and team result comps operating we approximately throughout EBITDA to our of to the strategic be: XX,XXX half and that priorities pursue X, to Mike. products XX% our acquisitions. culture and which growth of dedication value-added hard having Good and driven tuck-in our excellence, we in the quarter services, strategic and momentum strong provide the priorities their the of the high-performing customers. outstanding we sales and build thanks execute our in the against alignment continue grow organically continuing XX% delivering strategic how our On X, These continue morning, commitment first clear members strong a and continue to our quarter. We of on work ended everyone, Slide Slide for joining this by footing, our On the positive quarter year strategy, with that in

delivered increasing record and we through capacity, in productivity. value-added Specifically, results quarter product the expanding increasing sales

strategically performance. a Operating leverage BFS on We P&L continue with a cost our share capital opportunities our environment. accretive industry deployed challenging System as leadership successfully May. our by leverage authorization, and bottom HomCo. to We most growth our line focus we $X July, billion highlighted repurchase recent have toward strong inorganic and in of acquisition, X-TEAM billion the We maintained to repurchased by drive approved containment Board $X macroeconomic approximately Through industry navigating

Turning to X. Slide

base of it We to continue by and normalizing volatility. our important a the believe commodity appreciate company strength assess underlying our methodology using business to results profitability to better is

static feet. assumes at commodity margins business board and $XXX reminder, a As definition per our thousand base prices

full We year $X.X guidance discuss moment. a will are our base our as billion, maintaining business Peter EBITDA of in on

Slide to Turning X.

the of time. to reaffirm Investor through performance XXXX average outlined low I assumption we As digits last in Day December, given starts that year-end single single-family our want our by our in expected growth

a and top adjusted our to XX% line a base CAGR. deliver expect business XX% EBITDA We CAGR

performance, potential for we adjusted innovation Importantly, of billion deliver compared That of EBITDA year's basis includes an year points to additional per along improvement a capital XXXX. margin money expansion as share for investments XXXX. M&A and $X represents capital in in average with we and point have of to XX when planned to this this organic through by expect $XX this between total billion deploy repurchases. XXX growth, and basis XXXX And

a total of months, of we in XX% already billion our have shares have repurchased we We And outstanding. of last capital guidance $X.X deployed the since XX last gave December. this

detail. results Looking of quarter at organic on our Slide record X second strong in delivered We more XX%. core growth

our we productivity XX.X%, team of adjusted of once nearly strength initiatives the Our well. execute nearly of and generated pricing improving organic growth compared an environment. for comps markets, second billion EBITDA to $X.X XX.X%. with $X and year-over-year again in sales billion but starts the R&R growth across impacted sales in the for grew margin was our continues still our record approximately leaving XXXX were highlights strategy growth by by segments, while year and to results that decline against our it X.X%. Overall, essentially very of ongoing a Core exceeding organic sales a XX%, flat. results single-family multifamily and of driven core organic These demand again housing solid year-over-year single-family This our delivered supply-constrained record Tough discipline XX% period. quarter prior grew value-added in

M&A delivers X, remain high tuck-in focused a to we executing on return. turn we As on Slide M&A that

leveraging the swiftly approximately acquisition strategy, targets to M&A. businesses. in our supplier FirstSource X.X and BFS completed further HomeCo XX System integrate of fourth scaling net members our upon X-TEAM of our acquisitions, In and $XX out Building digital network. transformation July, Arizona, HomCo, these pillar a to years, Flagstaff, Builders XXXX. we new reporting building of to the in are reputation at sales past acquired $X.X team value-added hardware offerings, our and new tuck-in This capital, customer million while family. welcome aimed our Operating the distribution excited the strong and demonstrates lumber investing billion Over presence of we in further these had

we drives full on spent creation long-term XXXX. have at the expect M&A that manner far We and for $XXX remain allocating our to of so approximately invest to in for capital this value a disciplined least committed $XXX year year million We million shareholders.

strategy digital X. and Now cover shift let's gears on Slide our

of to completed process. We visualization digital our We annually. is using configurable tool. complete industry starts such agreements transformation bid new plan And SnapADU with Foundational on and the two the model, list color for from standardizing customers when type well. material or of X,XXX the base have recently starts structural time. reflected our made homebuilding by as house be in options lock a initiatives and visualizer. Pricing material means our progress accelerating. process responsible house customers material momentum of in paradigm for such intake in visualization Minnesota and into Homes Our hit an real in than to a we now This our and of California Collectively, milestone available over creative technology two more continue XXX are important takeoff, experience in models in made a three list. siding visualization garage selections one car in development expanding specific reflected is the a successfully choosing integrating as design and the can the

Our job three large digital Also, dimensional builders. builder Building construction to the the BIM basis customers, allowing gain at platform at we our models will instead site. capability our one national custom offering efficiency heart industry. in to conflicts and pilots believe Modeling, we project with to also the of homebuilding them the have bring the the two for This Information of ongoing BIM strikes gains services efficiencies world, provide or by resolving important

on company how building are and homebuilders you help front-light is our with pilot company in South technologies Carolina their website helping will highlighted today. and Our understand services

our savings productivity. in expect We the the for Turning to million XXXX driving X-TEAM second BFS savings year in to continue we System. delivered exceed million improvement by $XXX and to $XX Operating leveraging in quarter projects and full

the allowing faster our term, serving more work us to to practices become X% Over and targeting efficient improvement together productivity at technology, we teams leverage customers. annual to long and best X% our are of as

like housing to last increase profitable and hit versus We in area are now possible. BFS targets, in we the a today XXx being the On and scale BFS during Slide is the accelerating Company downturn. our it share, different also seen XX asked we dramatic more we financial XX, point more platform XXx out as and during only last was industry-leading has that years not larger efforts downturn. ago would as this than make than what's to is efficient ensure sure our Increasingly, are about our to but important

a than $XXX with are more to company. consolidated the of efficient, million integrations more stock well BMC. leaner, increased our We This run merger cost remove as the Company scale through and of rate building enabled combinations, annual has including supply as ProBuild large several

repurposing and of closing processes consolidated We work over optimized more components network Since and facilities distribution efficiency greater are our other increased than numerous platform, We've efficiently we visibility, better players our facilities. no space. costs by locations as our locations. decentralized alignment have and a operating XXXX, our not providing reduced value-added organization, That's a XXX. in We than XXX other to serve footprint improved nearly Xx. and to XXX more as

dependency as example variable our line Georgia at the of development startup two-year trust grown serve our have cost have reduced this manufacturing Rica, to our robotics, trust We recent robotic Design manufacturing of and invested labor. have would we be our skilled our our door good of first which improved partnership in with high-speed A on capabilities Household automation recent and announcement fully and facility. on lines our for Villa

fully for lines robotic four contracted trust eight We have also including an lines. additional roof

expense our approximately making our structure, XX% improved of variable. We have SG&A

the us have to We capital and strategic dramatically spend, significant serve of our providing through cash we enabling with improved customers. indirect financial scale have our more BFS and and flexibility. leverage, generation, efficiently size leveraged structure And business direct our

overall that strong we While seen the accelerating that demand heard customers fully matter concerns. we beginning conditions balance industry will we and our remain near-term confident success, that current leadership. from to mortgage market nimble We've what short-term affordability positioning is we long-term higher for any our July out. rates remain have play slowing dynamics are recognize BFS results, market demand We that to and no face, weighed due and through dislocation,

taking In XX%, a down pull outperformance, including the to costs managing housing starts moderating market further our to Turning are drive variable we several expense capital have spend than demand, expenditures. and highly of challenged scenario effectively and streamlining levers to where actions projects, discretionary to reducing optimizing through Slide productivity with XX. more headcount appropriate capacity expenses accelerating footprint, structure our flex

team balance generating believe we maturities experienced and debt strong We're sheet our us environment, market organically is by committed and strength led capture of exceptional with platform tuck-in to any by positions the which results, well until M&A. anchored through investing XXXX. industry-leading for no growth to Our our

sheet, balance there over our in lean confident the ability term, us M&A we scenario. our on the any some on challenges be expect market our optimistic certainly market. for in outperform am long to will prospects And the a more in given highly very I bulletproof remain Although opportunistically over to industry in near challenged term. the

So in to execute to continue value and shareholders will gain sum our environment. any up, strategy to we share deliver our

our to people recognize Goodwin, years, company been growth each our that has moving Raleigh for four member day. the more Carolina Raleigh, work to the building analyst every our has exceptional markets there facility. Our I housing of North at and control company. Yard families our as with want mine an blocks come the XX quite the continue some strongest world-class worked one country are inventory time, to for of the of in and than and team Millwork past who evolution day Brent an inspiration

has reason homebuilders why facility experiencing the burgeoning Brent's supplier For several key QX market. multiple product Raleigh our rents in XXXX, past late a this the Beginning for millwork shortages millwork years, began location are across in become categories. contributions go-to

demolition to track and location's a constraints able and Raleigh's help years, an warehouse. amid work augment I homebuyer this of relentless demand. for has our storage impressive more two the been contributions supply strong fact builders ensure in delays his past do solutions stock customers. to inventory, Brent minimal to is he's in makes many that it all expansion while been then developing tight Brent on during the for the thank levels main Over Brent keeping What want to first keeping consistent all creative helping

in on over to second Peter quarter. And needs want focus have I'll turn their our team. the Brent the for the all thank discuss financial customers. continued to satisfying our for our again now are and call our results to tremendous of team to of fortunate members We I work

Peter Jackson

Thank everyone. morning, you, good Dave, and

approximately through navigated excited and track are and net continue We a of We second our produce to exceptional quarter sales, record to record net performance. gross demand supply complex margin, financial deliver have adjusted environment income, quarter. EBITDA. also by ability report I $XXX flow flow demonstrated this to generating our results to that million in am strong cash pleased we cash again free

our same management I disciplined maturities shareholders strategic time, billion come execution $X further priorities. returned Our our strengthened through and the this of sheet accomplishments morning. topics to we you cover and by debt balance At through approximately three extending solid with have buybacks. will operational

I'll review results. QX our First,

finally, Second, I'll for XXXX. guidance deployment efforts. update I our capital you will updated touch And on our full on year

Let's highlighting with which sales on performance customer our $X.X approximately products across QX prior We Core demand increased the quarter, and of XX% category begin our the had the XX to meet by grew for net work Slides the compared organic sales channels. in XX. XX% and value-added billion year period. to our

strategic Acquisitions the XX.X%, primarily and a profit to Incentive Investments IT, increase. XX% and our points expenses disciplined times lead increased points absorbing report Gross margin after in to compensation by Adjusting chain strategic represented investments profitability. sales marketplace. volatile year we product represented constraints to contributed constraints commodity $X.X primarily are the the fuel-related our prior inflation face continue a of productivity supply-constrained as that XX% to increase billion, SG&A. strategy the we supply pleased P&L the net return our overall gross quarter. such and nearly year inflation, and Although than digital initiatives, XXX signs and of to increase, the items. in are the of increased categories. to value-added sales even XX% was to compared of normal. those $X driven of pricing represented increase another XX% The and SG&A were due in to driven loosening in billion, in basis increased increase seeing four XX funding XX% prior starting by several expenses basis better over categories we quarter, for higher in XX.X%

$X.X adjusted controlling team inflation sales, to commodity $XXX XX% been XXX the per increased year Adjusted was excellent income period. prior growth, share driven $X.XX to income which period. and and organic was year has driven increased of job. The SG&A income of percentage adjusted primarily doing $X.XX to or an net increase to points importance decreased gross higher expenses earnings share XX.X%. our points billion a net XX.X% diluted by basis sales billion, XXX increase margin, poor improved in compared understands diluted net total net margin million of to the the $X.X per by Adjusted adjusted of As acquisitions. the compared to by basis Clearly, of or net taxes offset adjusted earnings EBITDA Adjusted XX.X%, primarily partially in prior income and by SG&A expense. in EBITDA and

turn let's to on Now XX. flow Slide cash

inflation. $XXX We in activities cash operating Our activities and of second commodity $XXX flow driven quarter cash cash investing million, and by provided organic approximately $XXX used was million. was in growth core sales million, free by generated primarily

deployment. In an recent price $XXX HomCo for on approximately most purchase year, million quarter, of $XX.X. XX.X the capital we repurchased to we million in transactions, average M&A including shares our This of July. our Moving million $XXX spent at second stock have

stock of XX% repurchase at for the million outstanding In our of repurchased addition, July an an million of billion. XX.X over $XX.XX we of This average August approximately July, XXXX, we've stock. since represents $X.X XXXX. Year-to-date shares stock of $XXX through billion $XX.XX. of in we have Since $X.X have approximately shares approximately shares repurchased for million price average August repurchased at total of price X.X of

commitment maximize opportunities to we for value We continue dynamics look creation. are committed our market and shares to to and repurchase deployment, long-term considering ongoing will balanced favorable capital to

X.Xx ratio LTM debt-to-EBITDA adjusted approximately EBITDA. was net our Our

no Excluding our long-term until XXXX. debt ABL, we maturities have

and was Our cash $X total of under the facility, liquidity $XXX revolving net billion, in million availability borrowing consisting $XXX on of million hand. credit

dedicated tremendous efforts are 'XX execution to our year-over-year and for thank their and entire dynamic half comparisons. I with We first environment pleased and performance, the team want despite tough our

with to we XXXX, of the year back to on XX. would like outlook look Slide As our provide I half full you

and interest geographies in mid-teens, rates rates mortgages cancellation to higher our for digits. expect starts mid-single the year we Given be now across single-family down full inflation,

be double low- We projected in up low up be expect mid-single digits in the to multifamily starts digits. and the to to R&R

sales we guide our As net to XX% to are X% a result, lowering on billion from business at XX% base to the or $XX.X midpoint. XX%

the XX% our the EBITDA in or continue $X.X mid as offset back of guide we of expect half growth be Our into at market we XX% remains to as the unchanged. outperformance move first the largely by half year. weakness will further And billion to

We million savings deliver this expect a is cash commodity presentation chain productivity in now in allow supply to sensitivity improvements savings own our at on and will you free billion, due continue year the We in over to profitability. as Slide to $XXX CapEx $XXX from quarter, for operations. total drive chart reflecting delays. in we $XX $X.XX into price $X.X estimates prices the to to the billion approximately guidance year flow commodity your approximately investor our achieved million the midpoint your million productivity XX you to to on during incorporate down with to models. we higher-than-expected expect increased continue increase across provide commodity Building to XXXX continued

our call the Our back us for cash nearly no sight billion debt assumes $X,XXX to fortress year range me full remarks. sheet that, liquidity. $X cash over closing $X with in long-term efficient maturities to balance year-end. and platform prices XXXX of until turn of his line provided with operating projected through the a free billion let free prices flow, With Dave decelerate commodity conclusion, as flow in for has average $XXX the of In to

Dave Flitman

Peter. Thanks

of increasing. single-family down seen rising clearly year deceleration. rates cancellation forecast We've is mortgage rates starts back half industry experiencing of this pockets in the all Our and coming

We deterred. are not

today was confident and company navigate the we in remain than Our is XXXX, our in one persistently much a different to unpredictable environment. effectively it ability

market We while as long-term company our a prepared goals, our and in are eyes in competitive opportunity with eye keeping dislocations growth leaders We near-term operating are core long-term a acquirer the in industry and clear and our fragmented of the event given to any turbulence industry guidepost. we to remain fundamental choice to and open strengths the with is any our with our environment. macro of insights on advantages win highly BFS our wide trends. be principles values our belief in operating the

Our more of than diversification. top with MSAs tremendous and end XXX facilities the XX in are market geographic XX customer

long continue seasoned have we'll extremely experienced flows. shareholder and cycles, now strong prior team a execute finally, will successfully We leadership for Katie, navigated has an strong many our and this over deliver let's sheet, that strategy the is free open call the and questions. cash term. deliver and to balance please And value compounded we highly

Operator

[Operator will Bouley Instructions] first Barclays. Our Matthew question with come from

Your is now line open.

Matthew Bouley

taking Good Dave. and on the quarter. in the Morning, results congrats morning for Thank questions everyone. the you

first EBITDA in sensitivities EBITDA half. lumber the billion billion that of $X.X appendix, in suggest know, our And realistic in depending the would the assumption, done you've second less So I at on just or sensitivity question, looking $X don't year-to-date. EBITDA

the to year think So right if static that's assumption. my question full models about our is I here? know way a that's

a expectations sort are performance. of hard top run first the more versus rate on if I So those wonder guide of half

of to but think your mouth, into not we half view how put of about the to second EBITDA? sort should sensitivity So and the that sort words

Peter Jackson

of right? sensitivity environment, really original back great you fluctuations dials purpose question. that's the normalized any that So we consider give It yes, out Matt, It margins -- in we is right? our page what to a prices. lease more intended The out. margins dials in be normal than fluctuations any what commodity continue we to of outside out anything in dial normal, a

year, of year. been this year. substantially normal lot but So been than higher. market happened much performed been terms -- much, have anything displacements of our if we've the normal a you margins. We've in this continuing through There think about a Clearly, what's certainly this better has

as our normal than higher you've we've guided that. we're and right, As XX% margins, seen, to substantially plus

would that come sensitivity deltas seeing the total to I So, a but pretty fact up in model you between as demand. just use on price with and included levels, with up accounting we're chart XXXX as for results the your way various your the substantially different come estimate commodity

Matthew Bouley

seen I helped things previously margin, sort just and that Thank on second potentially gross market in helped the of chains these again, and gross leasing robust all supply quarter. performance Understood. have that that Peter. guess of the for now, But Okay. you there clearly one margin. inflection or sort the we've

trying is, the So here should long-term -- just kind guess as thinking second is normalizing as to guide. we of I half? into level coming gross at of think your question down, we margin market my business base pace XX% about kind normalization a get the about of north or how the

Peter Jackson

question for to almost a addition critical show to we Yes, the level, and That's normal think back while and While in is down it's to chain margins to a normalizing pleased that an debt. are forecast, beginning right, going are again. back good a certainly right? supply it's the not business of bit, signs that important we get it's how part about certainly take that we margins of to starts, component to how our commodities

towards progresses So to while progress as slowly we do the of back expect sort it year normal.

and we'll be to -- just be. before normal, we're into to could a what to be to think have consider gets that we'll little next watch when anywhere year near ways that it back I see would out I potentially

Operator

next will Company. Reuben Garner with from question Benchmark come Our

Your line open. is now

Reuben Garner

-- just base understand want start top the to business guide. line to Maybe on

but let So value-added there's bit? in in or some of business. single-family really impact products the out late line late it's hold you down little of about before improved that a about talk share you through backlog working that? the I the kind that understand adoption gains the in and only volume? because is you Can year-to-year your see Is it points, a base of for the that largely any that reduction there the looks two-point like come outlook in XX Or

Dave Flitman

think it's to you the through expect all that backlog that, backlog course that seeing our worked the off. across combination Yes, customers. still half back We're board strength get point do year, the there. is Ruben, the of of I of that with out really We a the have to

before, As what's importantly, the it we or value-added a we've start we've relative starts But that expect takes about a share out, the said until taking volumes long quarter so we see business you in to for will and happening as point that been in shift to environment. portions of continue. the time,

combination So aptly of really half two based the it's to of year. expect seeing that on decline and those the But a things. half back in the start of largely, the it's second we starts

Reuben Garner

Great. gave where color my 'XX. or downside look scenario on XX% in talk go the like starts in back the your And about were your guys next business might year of 'XX, you fixed you we variable it of and a I and question and what EBITDA where then the and previous even starts appreciate differences 'XX kind fall revenue period. next with is, XX% margin gross Can kind single-family in fall to versus

you compare of metrics few to seen would kind have a those years what Just ago.

Dave Flitman

we've Clearly, of as billion balance $X.X XXx we're profitable. in of color. over the XXx a in out any that more flow. start got unwind larger, demand in I'll And higher relative out, shift kind But reasons any a and sheet, to we then free here we level flow short-lived, will And you at as Peter several same being commented point talking as quarters importantly, or in key company. fill Sure. cash bulletproof script, slowing free We've and happened not we're know, you a the why. been can But environment, two working about decline capital. certainly 'XX. here what accelerate cash for

is we've decade the it we've First, that starts, and they're about about had and secondly the housing years. than over of millennials few XX% huge underbilling the stronger talked think demand industry. was, importantly, We shift, a the in the a And say, driving over past driving in a lot lot last the of much starts this XXXX. plus, demographic

million going away. years. somewhere is X that XX X million the over last demand So between XX not and the market single-family to underserved homes We've

through think environment through any that will we recessionary that long the So, power of term.

bullish term. where long So the ends that's why we're industry up on very over the

Peter Jackson

going through rest go but or quarter a buy of I this certainly And under that backlog team from that. at construction. and to think go the downside happen continue so put a think making I'm to buffer downturn Yes. would understand component the our Might out we're event there's not a that's year. started range, where could about working the like to sure and as with to been build lot spent homes have certainly time sure longer, quicker, looking perform bit you're going a looks of a of the what's on We while do of I a the in into models we that how business

looking the we're with, going I right? markets highlight, to would market. because along move occur, you've into main we to which follow starts, As components We're at it's would you you're we're starts main in right? move though, couple going the future, expect got look of to that a variables, with those the where So

moved to price Our to. think margins, for might finally, a go also and points are. which certainly of with you there that's time, some of of we've customers And margin are -- markets around what is range. put like, how some then of short below very couple reasonable keep But go us resilient something in and really much availability it towards our really that quickly a market; the of we question the mind, that margins but these regression looks start a competitiveness these we might And would certainly that, might us Obviously, It's goes both those by and that, the there all influential. how well or savings to three like we're results. work quickly, improve a synergies, our variables. terms and our very outline for under of maybe product we add of think gotten towards that all try lumber a to consistently in more mix normalized lot what and quite driven and terms mature level, product and business back trend on done would leverage impact mix increasing in hit productivity things recession normalized the our value that a period quick of the be able are a are the in going of

Operator

you. Thank

Grooms will question next Trey come Our from Stephens. of

now open. line Your is

Trey Grooms

impressive results. the echo congrats to have the very on I

mix you reiterated talk and So prefab serve. product the or housing to more relative you guys about in you other market specifically, expectations that periods of But mix Dave, can expect outperform a slower outperforming components the you maybe see have any for long-term you history And would demand markets to any value-added you expect in of products? change or demand, for environment.

Dave Flitman

We've of shift legacy Trey. the We industry and continue exit get question, value-added going the that that to back will the no side long don't downturn, the in time. what's were demand both Great think driving gas. over business the companies the the mix seen on that years. Obviously, over past a in more regardless several there's shift certainly stepped that, and the for you such term that since skilled reason over other of on of If labor last tremendous environment. been just we've

need in that because be a slower be the environment work efficiencies. So can they gains environment. to off important going the we're a those operating in from as as gaining are site in efficiency they productive slower They market will importantly, need even those builders

we've had. So we're excited shift about the

around Our teams aligned it.

We shifts time. course those through of expect the to continue product

Trey Grooms

in your Can market change around towards Okay. plays operating that? digital way a environment? you talk the And slower might or strategy here. same your to that how into on kind then of anything the And you follow how go about topic push like

Dave Flitman

We're our been the excited really platform about and digital work that's done.

we important milestone. hit Importantly, that

said the As we've And that home. which long-term that we now, home visualizer side Paradigm. focused design of said in important we And about the vision with when structural the Paradigm narrowly takeoff I extend and we've we hit year millwork whole talked the importantly, fairly was start was business milestone to the about as would an said a just the that where integrated strength, structural into the script, we would the the strategy we design and just material we acquired with a with platform take recently design. of our in ago a

only to starts we're for XX achieve and the this of gains, elements finding but the going key think right little bring of we're importantly, the the for of have we're what's more industry tremendous digital vision. a we us what the heavily, some we work here the all really we efficiency driving at capability think trying play, And continue of environment, we the in efficiency on to the vision We regardless those script last going that's what long-term heart do here. but going I invest and at just Still that around it. in to to spoke world to it intact, the job bit, months. about of is gains, heavily regardless believe because we in We'll And industry. digital hard problems we're lean bring and is in us, is in that the not the market about. in believe lot talked a and So, instead strategy excited because the together in a the invested world long-term lot to of and to pretty the drives site, about

Operator

you. Thank

come Dahl will from with RBC Markets. question next Our Capital Mike

now Your line is open.

Mike Dahl

question on the -- causing up a you the confusion. Peter, think call ranges around on half because start it's second I question and some maybe wanted the to to around specific follow Matt's

if number this your I a what say, tier, EBITDA. $X this has in $XXX to pick kind billion right? billion of were adjusted say, you're lumber, in that range fairly you commodity saying produce $X.X So suggests think unique, year been is to would here

are think you're reality, the so you is stronger produce this that I saying the lumber would than margins those environment in at prices. what year in higher current

there, but more wrong So is specifically. if one, me I'm correct

Dave Flitman

Yes. exactly right. That's

Mike Dahl

Okay.

So both clear and was give to you up the EBITDA maybe just the confusion. what true base in year-to-date? us the business quarter Can

Peter Jackson

quarterly comparisons, there. commodity don't in of I for quarter of it can seasonality side the Obviously, I material non-commodity, we're is terms we was accounts offer business that sense business of EBIT about you the we to will it in the in rational split X/X more the the base in say seeing in and outperformance. what how the way. way the We is a to look X/X give as annualized right second base base type But categories. still both through reflects at and is on the it that provide fall up think think, a view a for business. the

expectation you So, year. the for our full can see

Mike Dahl

around performance increase Okay. then free We'll question, million. $XXX back And about have have more of flow pulled additional similar guide CapEx presumably the Got some it. tailwinds, some and year-to-date you part math you by that. second -- your the commodity from cash comes do in

are shelved And contemplated to either more of the specifically And deltas next or so CapEx, could cash? elaborate on that free you little you are year? for terms a kind lower what's in of what out getting then things pushed

Peter Jackson

team struggled -- whether Yes, more of got speed whole we're fleet, just whether on gone we're sort going. slowly we're investments and excited I sure. things really about. that the disappointed that our lot refresh the we trucks, getting different what than it get buildings be we've just the be is ready certainly looking switches and CapEx properties I bunch projects new It's it think of for, of the a initiatives to on on getting mean where facilities, side turn We've trying a to great anticipated. pushing or of I'm development,

business, sure comes this the core anticipated. also all to needs. to but point. pushing head. higher make shelving the to flow year. on saw increase, It's that push That of canceling We're I business When performance you trying or not to and important first commodity customers' really into critically outperformed at the we in the we're hit it to at just in the broader meet have half. next clearly, need we base we operations nail cash capacity our the we out So, and anything we profitability forward the mean, prices continuing looking than the

quarter what we they probably been it's and went had second too. than in up But pretty higher aggressively down anticipating. I overall, think aggressively, came the more

the three about business. have And that more by We does to so It people certainly going one returning make assumption, different those prices historically we normalized course, that it. level this. year-end. through anticipate can opinions But we've the we're an of commodity do to are factors, compounding on said excited of a pass cash repeatedly. And

that's that we've numbers. any these time certainly given a of there's So, component included guidance

Operator

take will BMO question our next Markets. Mamtora We from with Ketan Capital

Ketan Mamtora

to are fall mix special again. the economy than back right let's even to scenario what slowing, that for is products? single-family think? down housing labor it the to Dave, I question say, if want is mean, starts that year. come better is to, much is commodity Or situation Would in the assume not are way not envision that Presumably, today. going mix your more customers a side standpoint assuming going to from trade you the to to I that you're next on a

Dave Flitman

to said I earlier, in. as -- we're to We No. continue lead think going we Ketan,

make and products. Our at site more help efficient. They of lot problems solve a the customers these them love job

in lean the mix we're believe to we through will continue time. going So, of shift hard and course the to

Peter Jackson

to I'd thing The manufacturer and the the our products. LDR is add grew that isn't Great open share of a prayer. to Recession during And an just trough this business attributable

of these continued severe that recession anticipated what looking a we're Dave So mentioned. for that to much even all adopt reasons during market exactly the than products here. us think at more I The is

Dave Flitman

continue been the last there's value we've with market time of through over penetrate cycles, our cycles, and the because And for up down these products. decade, and real we customers to ports

Ketan Mamtora

to about you more we sheet liquidity stock versus strong balance to curious, balance sheet. under a you fortress mentioned, if guys think then in severe were question. share repurchases were I'm are expecting. do second just How helpful. what Got be cushion downturn And very keeping it. let's case than as guys of That's position, things come are Obviously, from in to was the standpoint, you the pressure. kind say, a

Peter Jackson

right? got balance a bulletproof looking at I'd number that sheet, sheet, is one you approach Well, able ensuring to comes. whatever withstand to balance our a you, have We've our we terms we're ensuring as allocation priority So tell capital of in disciplined described.

the, run proper that we've downside we but ensure So, models to ensure got coverage. to the

nature that we case more amount do The of on other as certainly working we pocket we perspective, cushion in -- in it's especially a liquidity, of not reset of substantial is given have it could unsecured as today, our our bond. but that we well, that's capital have stands side have the point only in the a un-accessed valuation things terms the still capital

back it. we're value our long do a maximize the us but that. to the at and smart we be as the and about I that way to that as it And So, expectations, think that to to in continue Even be even we thoughtful opportunistic alignment tremendous very to that going good allocating portfolio. we going be. about think going face we're capital the value, We're been more to has buying shareholder to that's And about than We at, opportunities smart We're a sure adding we criteria look better strategy. in We M&A. both be very does it a and during I opportunities successful opportunity do to at do and present stock a believe the to been nice the beta the position it with look we're for we look the in very businesses it term. looks. We've said, it's as think that if selective out disciplined way with opportunistically financial to that us what there's about high we've have over shares. And also be way downturn, this let's it, know lot that a going is, make and aggressive the is significant puts themselves. turns

Operator

Thank you.

Our next from Baird. Manthey question come with David will

is now open. line Your

David Manthey

versus refining billion, what EBITDA This tiers XX. the Is issue, $XXX about in the it And back revenues down had it that? to quarter. you by by is the minor a your grid? the the million Is across the ticked across Slide anything grid and range last seems down just shaded on like about to there tiers thoughts but $X

Peter Jackson

aligned really operating our and with it tweak Yes, model. core there's it stay nothing to I mean to it. we adjust

So, move it. we try to

two things time anything time, not it's but the So, shift match and to signaling really. up minor from

David Manthey

even like since That's right. All fluctuations about seen rapid EBITDA. downside year-to-date we falloff we the fall price then the and and versus a much commodity lumber static second, figured. and what about significant of really Cool. you through in in August experienced environment, of talk 'XX 'XX when but in May And I a haven't March,

seen I'm of trying lot better recent the different versus past saw performance the future understand EBITDA. just actually here. what's a we've fact, about those quarters to In

Peter Jackson

practice Yes. the highlights No, and also I in still stronger, since still about think the question, time done the beginning I talking make know that out hard it's continue homes. to reflects, But it what think, we're lot I building all business a of these to supply-constrained environment. to our of work the a this great wonderful more predictable. it of we've had be us a have the need faces on reality, the year, running industry to opportunities customers downside deliver but in able

terms changes I what pricing. have to a These substantially in in is a it we upside you've more predictable in seen to commodities bit of it, most used way of our our think think I stable, and does what results We about the ways, of the couple contracts. fixed changed profitability. swings and reducing more call bit probably important So a one around made we've price amount talked downside the as

in more being down about why how it's disciplined careful very market, percentages that product terms the moments important place and during efficiently. that in first of it, capacity, our and manage of ensuring that see environment sort think products that's those is or quickly to the to the I products in and and inflationary moving we But demand access an pricing our as inversely getting much expansion the to we're having capacity So cycles. reduction overall during margin piece wouldn't related gross constraint we of

us I together a think have to superior to those allow have things come performance. really profitability

we'll some But predictable a do Although, expect margins fade of profitability profile. as time more will normalize over bit. we we've outlined retain more will that I that and consistent, think that do

Operator

you. Thank

question Stanley Elliott. next from come will Our

Your now line is open.

Stanley Elliott

the thought Or happening see billion still I Congratulations. starting or mean at are on I to you're of what's little tracking more things me back that accelerating least would at kind talk about targeted Dave, expectations. $X Analyst you side? I digital the last of the And it two the tracking have the looked to out. when Maybe that are first of build, bit years, ahead have can you you three five-year it case? of a almost kind sounds would years more revenue. revenue like the ahead the were flow building those expectations? through. Is of Day,

Dave Flitman

track, Stanley. I on we're right So think

to and We You're thinking that. right. an the important the part wanted about quarter in milestone plan. of hit But share that's it

five-year lot see team that coming design. still to horizon as message main billion, do. together development back-end So we be more and well loaded a time $X expected. still the will work it My expect our we're exactly per is that is to for We executing in whole there's

on with right be. we're we want So track to where

Peter Jackson

thing is just where of going is how Dave amazing. right? this it's much go. mentioned, I I But reflects the and right out powerful terms rolling is, industry, for capabilities would we're the this We've massive. market unprecedented add that we're They're are seen thing started. we're that things these getting And underestimating now, for think how in They're this to the vision as

Stanley Elliott

And a bit. switching gears

here of to can that that some to the you throughput, want piece, how today. I up in is CapEx get think those running? automated I with you ability lines guess impact push then did going share you to eight mean Anything and And your mentioned out. about do lines, have the us automation You terms to productivity?

Dave Flitman

automate. investing We're have been to base heavily in automation companies that. done many we've legacy years. Both continuing Well, for automation,

eight strategy the last fully Design this years. capability This just beyond And getting new the around mentioned, technology Peter some As things around challenges but equipment we've of is trust And that of and sound. what worked manufacturing. robotic in I in mentioned is is House couple with over there's our is lines, automation. this

important so, years expect And coming had more on an the data we point next four trust eight on side, of those lines buy Rica, couple Villa roof of another the side. four we together at the over to or and floor

to challenges consistent same continuing and up to all, and So product labor deal a that our with with face customers of we've secondly, customers innovate get first inside. the ways and we're got creative come to, our new more

issues a be puts here those So, that we and to But invest, it and expect takes spend to capital, capability. there that off in money continue takes some will may committed but we or the and table. we're some of we'll carryover there

Peter Jackson

that think us on it's in It's faster I we'd disappointing us. around lap to to the having opportunities we we capital doing we'd but to miles want really XXX the quickly mean stuff. want this I We this. about as everybody is not excited already hasn't like. it's an hour going and come from the do idea hurt just And We're want as all that going as -- right? seeing everybody, it keep not But lapping we're XXX, to fast as like. just maybe

Operator

Thank you.

next come question Our Zelman. will Baumgarten Adam with from

Your line is now open.

Adam Baumgarten

growth how the volume down broke organic us quarter the price? a and Could in give for sense core you sales by

Peter Jackson

towards heavier more of was XX:XX much Yes, price, time, split. I'd this it say an

Adam Baumgarten

-- guys Can first over the productivity $XX $XXX did just quarter, million quarter? target for then And for you Great. that Okay. number you us second the million. in in give savings

Peter Jackson

of savings So, was remainder satisfying synergy quarter our actually commitment. the the first

we So, committed we've do. changed our language to as

number in million $XXX remainder, quarter. $XX $XX million first the other specific, through then we're is that $XX about and four productivity million not the that was talking two first the or So synergy. million -- And

come million in $XX half. the So back

Operator

Thank you.

question Colin from will Verron with come Our Jefferies. next

open. Your line is

Collin Verron

to I change know business I just targets in XXXX despite end wanted expectations. you reiterated here. the long-term touch targets base your on the market

environment -- market. give in some what the I single-family in just was to to those you out just happen targets, more frame So, can need end comfort around just the macro would

that a achieving from goals? those a be financial -- that guidance? to be For to perspective time line risk whether of or there

Peter Jackson

expected that it. single-digit obvious our put operating good sight to pressure if single of the that in is family, would down perspective, number I Yes, one that on tool. 'XX the of back I'd one that's we sort our we've from think doesn't growth committed to the to, by external count make since particular, for macro that I'd that's stuff say expectations But XXXX, a to, say that thing and or ability stays market low about internal line about. the got feel all we we on. recover

Collin Verron

That's I you bit the little EBITDA good It then, commodity think split helpful. into a implies just more? incremental X/X. Okay. think. EBITDA I and pretty X/X, between said was non-commodity business, the bridge XX% dive you can And in the non-commodity a

if margin you start see So could sustainable of looking to how define turn? perspective, you just moving And what from that a maybe is? are pieces guys volumes you of decremental there? And kind the kind margin at

Peter Jackson

level. happen normalized going side. to commodity Yes. mean was saw the familiar, versus quarter the sound We it I we side about return bit the XX% two. do don't guess margin a the going I in X/X things We comments think a it right, right? gross overtime are plus that towards X/X, or will think of non-commodity to terms that You're it's benefit in over

a think around different because demand in supply enough of having are reasons will normalize not that reasons while for the primary of same and to constraints to happening longer we're chain now. seeing the a primarily The meet take it benefit around the capacity number I that markets.

from increasing suppliers. So, of it will end our markets. permanent benefit in through may have really as experienced markets effectively as industry adoption in decreased the of to reasons well form to couple for past what we is ability the increased compete to form of around successful certainly normalize. the we our the think value-add are capacity That country. the the in in years mix, that obviously as pertains there the come through from in But increased come in there It demand a

Operator

Thank you.

next question McCanless Wedbush. Jay will from with come Our

line Your maybe line Jay, mute. your is open. now on

Jay McCanless

do how have that. I'm authorization in you now? Fantastic After on quarter, we sorry guys. the much left purchased July, about

Peter Jackson

There's that $X billion authorization. more left on

Jay McCanless

cash the just pretty $X of flow but then the would through apologize to end, to end billion? -- the Peter? I the you could this, midpoint. low missed the I'm if in And Okay. happened and what the That nice a versus free cause what $X.X was I on get kind walk high increase billion wondering versus

Peter Jackson

you impacts mean are know did I about from what in I did been half. consistent Yes. biggest the the Jay, and think We very first we've what profitability and the commodities this, it. --

We continue instead And of accelerated that to a regression build window time. progressing price. of our models a normalized expectation actually with a more commodity towards it for of

that that is real us. generates So certainly work. benefit to real we put to cash It

So it. of piece big that's a

business and we drive is things certainly think we on to happy to up, So productivity initiatives the profitability continue just a in $XXX the be we're that we're another outperformance least doing Our is able going we execute issues. positive continue going on and given component piece. the very chain and to that right? be of influence this as that think we're with, big CapEx year profitability, supply then And pace that's that that to is million probably pleasant to don't of to pull

Operator

Thank you.

Our will from come with Rigel Riley. B. next Alex question

now Your line is open.

Alex Rigel

goes of free flow. question the you to gentlemen. referenced to Is and XXXX is of Peter. Or next, question, say, reference quarter, nice in At Quick last the over XX billion it end, this towards sight months? your that line incrementally cash back the very in here, but Very guidance? kind $X

Peter Jackson

guidance. No, that's the

continue to if may have year there, I and the the We'll as $X billion, propose obviously, progresses $X.XX watch, to it. I we'll taken billion. more liberty some So results deliver up it round and there's

Alex Rigel

your time products that your what Excellent. have the it relates for And cut see spot are pricing is then you us business, And as anyone Do lag manufactured we non-commodities yet? can to then seen others? to you remind any obviously in commodities? by prices price

Peter Jackson

expect very curve, And the to we answer about through average, the X/X it's I no. between what our a X/X. it's what moves about It's to pretty that at bell It's guess On and flow open. market would wide yes, is but COGS.

the any commodity is of We prices, people one with have the prices bad. following common. exception That not time, I good mean that cutting this into seen or are the happens right? all who market

Operator

Thank you.

come Our Steven with next Research Ramsey from will Group. Thompson question

is line Your now open.

Steven Ramsey

slowing to for builders inventory a about you I wanted against that at to be rate want you the when happen single-family how replenishing trustworthy source balance you replenishing just demand, half? plan to thinking slowing as And in potential the given half? are and then, touch demand? on same that topic of one replenishing first second are now do the Or for inventory you

Peter Jackson

play. just We're is Really, always We us. this Yes. running do, normal for same of Steven. the

levels better run we run down the on but orders. our with inbound be it's by you never align it purchases granular you location, to appropriate suppliers be a like out, days of Certainly, We not right? from consideration. us. Just that under it basis, usually If maintain on but the we continue normal careful hand SKUs to out, flow about something the inventory seasonality, level on the perspective really can were better on sometimes a market, by depending

ensuring So commitment we requirement. to very, in hand. to a something the and terms the that an going we're work ensure but market we same that's That's very think -- make supply about of amount play upmarket a how customers a we to of -- in down our we're as still right on hard running

Operator

Thank question come today with Gilbert for our you. Ryan last will BTIG. And from

open. Your line is

Ryan Gilbert

between a to But done, could price your on when volatility contracts of reduced for your fixed-price be the given commodity and the margin gross see question, margin. First gross that reduced given just I have relative the COGS know it third hits commodity to we me in tailwind use gross prices what the in margin, that just second? has lag quarter

Peter Jackson

to would it probably comes When not. commodities, say I

certainly expectation significant what I eroding not normalize, If way. our performance seeing of we're part competitiveness. be of space quickly of If in absolutely our more I business, commodity going competitive margin opportunity there's mean, of than for kind that. we're don't gross an see that's as business. yes, things I in to on any competitive, a the in based increased think a anything, it's in terms it more think of But it's less the normalizing terms

Ryan Gilbert

single-family of I at a for the Do back organic, single-family kind growth? to approximating on Okay. last it's can single-family the starts organic stay you core question, over second have guess, on whereas if do starts. think Got you few it. tracked growth time? it's, And over broken a quarters, me think, is away really I from few this view for Or years, level elevated when closely you pretty starts reverts growth, go some we back

Peter Jackson

return I question. think going think margins, of we're I normal very, talking is have to answers a that I been different time. that to very over we've to clear When about couple

of other I an of the though answer is part add. around the think part is that really important mix. value Value-add

while growth partner that important resource margin that, that, is component of community, that referring be be homebuilding Our sticky to a of to earlier continue is to believe the and rest was terms held that to on And to substantially we're Dave going very them. to gross for an going higher and by and certainly to is the invest in like we there's that, business. than the

think in that's sticky term. the long we So, do

Ryan Gilbert

on a final Okay. Got trends. July it. And quick question just then

demand to so strength put the you strong. Are seeing in numbers quantify I kind that or July of mentioned remains any you in saw that that July? far think you you're there can

Peter Jackson

No.

on I with. hitting think continued better about right is a July, continue customers. maybe responsive, But are good we're to the market way good characterize now, be and to going We on we're and dynamics faced to reactive we our to that all feel focusing it. and cylinders said

Operator

today's Thank event. This you, gentlemen. concludes and ladies

You log a disconnect. Have day. may off and now great

Builders FirstSource (BLDR) 1 Aug 222022 Q2 Earnings call transcript