Earnings call transcript Q4 2022

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Operator

Good day, and welcome to the Builders FirstSource Fourth Quarter 2022 and Year End Earnings Conference Call. Today's call is scheduled to last about one hour, including remarks by management and the question-and-answer session. [Operator Instructions]

I would now like to turn the call over to Mr. Michael Neese, Senior Vice President, Investor Relations for Builders FirstSource. sir. ahead, go Please

Michael Neese

CEO; and full full everyone. investors.bldr.com. on With year are release our presentation recently the Brittney Today, investor our fourth will and results. we me to website The quarter our call review appointed our Rush, and XXXX quarter Dave available Peter good you, at Jackson, Welcome CFO. and morning fourth our on and year Thank are earnings press call. earnings

from the slides presentation will during several We refer call. investor our to

today results adjusted comparable they directly isolation The informational non-GAAP and for in certain include most and discussed GAAP results GAAP non-GAAP measures. items. should purposes, these considered the results not be We provide from for

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

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

turn With that, call the over I'll to Dave.

David Rush

Thank you, Mike. call. for everyone, and our Good morning joining thanks

in which years from has and the team leaders to come for the I'd organization. thank results, career as finance to me the Directors been background various thank opportunity of great in lead roles my trusting the having I the to inspiring. and XX financial this from want spent into I CFO. BFS like get we support Before to their first of serve to Builders for all of a for also the CEO field FirstSource Board controller of members

for both with most of a Office. our roles integrations I BMC Regional strong the enterprise-wide had initiatives success responsibility Management and industry and experience basis years Strategic variety been will shareholders. ProBuild of fortunate a on creating for recently BFS, my including XX knowledge believe Oversight, my build our operational to as EVP of of primary and Over long-term value I've our leadership to have be

results. let's to headlines undoubtedly factors will turn Now, the this business to Macroeconomic create continue year.

seasoned we However, great are platform, exceptional position with environment. and win any our leading and in balance strong in team, a industry to sheet

we in years industry. We changes have through to a decisive similar required. XX field which have currently me and great gives are confidence the one action as today, They team leadership average in quick macroeconomic manage been over with facing the with business to experience ability environments our

scale, deal low in to to We outcompete our our us have we market. providing the maintained leverage and with our with very to footprint, flexibility any scenario continue leverage portfolio product and maximum

Let's turn to a priorities our X strategic moment. long-term on for Slide

and a As operational focused build culture, growing and alter tuck-in navigate no through changing strategy, expanding landscape, products on need excellence, we organically value-added services, we our high we remain our to driving to acquisitions. in and continuing strategic long-term performing see

XX.X%. emphasis billion, EBITDA supported $XX.X share see line product sales The net $X.X value-added billion. increasing margin adjusted growth and basis and XXXX in adjusted cost priorities On XXXX year buybacks resulted combination our mix and disciplined of profitability adjusted on our EPS. of improvement XX% in increased you Top management was full year full XXX to to points our can continued Slide key of X, the EBITDA record strategic growth,

cap improvement We're million growth On extremely margin savings in can including $XXX variable Slide variety $XXX a productivity we cost controlling our exceeding for This for future we value-added We ongoing balancing the a deliver SG&A sales, reductions efficiency, projects and One other delivered and that core footprint, remain importance to need capacity. XX% year, higher the efficient and of the of utilization, drive expenses. leverage of in includes products. our Operating X, X.X% pleased BFS see million you focused Team and capacity in on organic increase System. our target optimization across nearly as our

have incident approximately proud during through second to consecutive we year-over-year, rationalized Importantly, I'm year not performing which maintaining XX% culture our our marks we locations improvement. markets. last over year continue improved main by any XX lowering while demonstrate rate the how and by high exiting recordable extremely the of coverage safety of

better initiatives to We attract also and and DEI continue enhanced performing training employee high improved invest retain benefits talent. to in

in on our Turning with tuck-in strategy XXXX. on we X, in acquisitions completing continue growth, organic core to profitable execute M&A acquisitions six aligned focus Slide addition our to to

M&A pipeline our slowed current the we acquisitive to environment, in has continue macro in while disciplined be Although the approach. remaining

customers, key geographic are with enhancing better our technological in footprint We expanding committed to our diversify our leverage and market end emphasis capabilities. to our markets our exposure, serve a value-added portfolio particular on

the This products extends Noltex This recent is acquisitions location manufacturer providing truss the millwork leading the and Door five expands single in Truss, Supply position fourth markets Pima a footprint evidence & area our multi-family across earlier in tuck-in state. Phoenix to in which value-added month, this including quarter, acquisition our by building throughout and our the further we Texas. components acquired

relationships welcome to nature our fragmented years. both supports longstanding their per for invest track our of to year family. in M&A on and $XXX still Pima profitable BFS and next the We customer highly to ambition Noltex several industry of with average record The million excited growth the are

to allocation looking and growth approximately investments, Moving billion repurchases organic XXXX deployed to billion to XXXX, track towards capital goal from capital tuck-in the share our at XXXX deploying for and XXXX. $X remain $XX achieve and M&A established of on to X Investor of $X.X Slide in billion Day we we at aggregate our

continue will ahead. which currently our year suggests challenging closely to We monitor sentiment, customer a

affordability quarter. daily into in has challenge to first which sales, continue a During be slowdown headwinds. and the average fourth the quarter, we rates mortgage saw continued Higher

Slide experiencing. benefits the we our model one such for of dynamic outlined environments flexible business operating On we're as the X, currently

and actively wherever we are as business we demand. the conditions decisively indicate, As discussed, managing acting we we see decelerating are have

on through match Our effectively with focus costs managing structure volumes. costs expense to our is variable

are to optimizing has when increasing an reducing home and several maximize the and We without corner. our been affordability spend rates impairing over turns recovery past back, the capacity significantly. prices realize have ability the this years as discretionary Stepping we increased concern

attainable the cycle We times by to efficient. and more productivity making homebuilding make are digital working value-added and in more products, reduce capabilities investing housing and

$XXX supporting digital in CapEx approximately example, XXXX, growth our and invested we million in For value-added strategy. product

our homes. digital automations. fleet, value-added our to will costs, and these help more initiatives and will total technology, we continue affordability, investments people forward, prioritize buy improve in to allow Together, Going lower

to providing service our accelerate while customers. deliver the position We value possible focus strategically and are will our our market best overall keeping on proposition, on and leading to committed to execute continue we our

let's Slide our the Now, of pioneering homebuilding digital discuss to XX turn the to industry. role in transformation

have product We digital homebuilding innovations drive technologies believe to long-term offerings. and enhance in will we and that our greater commitment investing a efficiency across

that plan On operations are integrating our teams. with development digital executing sales BFS the software we our homebuilders our side, through and

will the industry. as overwhelmingly have plan configuration, excited identification, In This to both our capabilities release material home digital began customers significant feedback pilot These and homes. to myBLDR.com and to Show. we such we include the easy-to-use introduce virtually conflict estimating innovative build January, design their communicating to key milestone our new affirming both, positive launching We're job events, intake both ordering, platform Event National tools of in homebuilder need reached markup, and and At a platform. this site and scheduling. received at for our the this in Builder BFS technology International our

BFS four This collaborate capabilities will with, solutions the allow customers pilot in provide and teams. sales a operations across to way launching our to markets. and assess, us We XX aligns are that customers new current myBLDR.com to our

with releases billion add scale will on and are an digital The remains XXXX on $X digital track our we end-to-end to throughout schedule incremental features strategy we in platform. as sales XXXX. build by overall and We gain homebuilding monthly new

program one to person Frank has Gloria. in announced California Southern impressive event, with the for I BFS is the XX but our members, out across Manager highlight our locations. there of Compliance team people our first like Hall today, our company Fame national would recognition represent XX who our and is culture. at and years. of of oversees best distinguished a Frank fleet the for of a machinery been month an Fleet and culmination Last employee frontline He predecessors its and These inaugural XXXX, our individuals annual we Class highlight

a want simply to hall Frank by contributions. confident shareholders. His team, for of of manager saying deliver environment. the team Frank takes in that behalf the we and win and of and conclude everything I leadership downtime. our keeping consistently with great fame emphasized tremendous quote, have knowledge Frank's inductees running the strategies for in is everything unrivaled. I long-term in On best challenging to pride mechanical our other our ability their results thank am minimal will I to

over our fourth detail. the turn I'll financial Peter quarter to now call to results greater discuss in

Peter Jackson

to I in that congratulate thanking for business. excellent Dave a want new year company. cap and his customers the fourth happier know We I I'm appointment also dedication service for couldn't delivering results members Dave appreciate our years many us in to day and of this your CEO. you and to and on our to out. sincerely the report team our as Dave him morning lead him I he worked want and for work join and solid delivering a Thank good everyone. in growth success. for performance. of I've hard financial to year be quarter to record off proud with to record will delivered we day continued

We proactive through environment the with manage operating a continued a mindset disciplined complex to approach. and

inflationary enhancements our we We in will made softer housing have over headwinds. the of that mitigate impact structural decade help and the expect past demand us the business

and Our ample and our to provides financial liquidity, grow significant low continue to cost strategically opportunistically business. leverage management firepower disciplined

this cover will with three topics you I morning.

our recap I'll results. First, fourth quarter

deployment, first I'll our discuss and provide an update Second, out guidance illustrative full capital year I'll quarter on scenarios. lay finally, and

Let's increased compared led sales fourth in Both remodel, other single-family nearly Other market by organic We difficult capacity growth XX% backlog. fourth to versus on multi-family increased decline a and demand X% Slide and and Multi-family strong to a to driven and in was quarter year. XXXX delivered attributable begin by was reviewing almost quarter XX%. XX. attributable decreased slowing billion growth and performance sales. by strong to mainly R&R as net comps. focus rental our resulting by $X.X repair, Core prior

X.X%, Value-added sales. impact past our acquisitions percentage roughly fourth by saw point of approximately of over quarter the The effect of compared towards days value-added category. trend quarters value-added of happy of sales revenue Core products. selling the growth increased choice quarter, to the our goal reflecting decreased great an products Two net being and these X% X our of fewer in of high over growth proof cumulative adoption contributed starts, XX%. valuable total product had success to category products unfavorable the the supplier sales. to organic net a on year another the growth by in which represented I'm of of in highlight macro very success our for points half

During comparable to mix Gross the XX.X%, of to period. billion basis was year roughly value-added products. increased the margin profit to fourth prior XXX increased gross or due quarter, mainly points $X.X the

expenses million, mainly and SG&A. from year the $XXX.X due Acquisitions to XX% XX% to companies represented of operating over acquired costs. last inflation in additional in increase grew other the SG&A

headcount and We a As actions footprint taking actions by focused in response XX%. rationalization, to basis a are sales market increased disciplined These percentage basis. XXX dynamics overtime. include to and appropriate spending cutting reductions, SG&A volume management on of remain cost on total discretionary by points net market and

in stated past, The volume actively expense is we that sales the SG&A sales our based commissions is bonuses. XX% operations. are have of XX% XX% remaining driven approximately is XX% of formulas, variable. we As like managing where of by and Within roughly things

resizing between volume operations capacity growth. are on and changes striking in for future We based balance right the protecting

million, approximately million, $XX EBITDA decline M&A. $XXX a in commodities was offset core organic due sales Adjusted primarily to of and declines partially by

XX%. year control. from net down and focused to was fast second in SG&A margin million, adjusted quarter $XXX.X margin net expense in of sales attributable our was EBITDA the in net income our and expense. a $XXX.X adjusted reflecting adjusted fourth represents higher prior EBITDA history million the Adjusted an execution Importantly, income decrease This quarter,

investments than change. The diluted our to more put during million $XXX prior nearly share the Adjusted this $X.XX share to of earnings was half per perspective, in in or accretive compared the $X.XX quarter. $X.XX $X.XX in repurchases repurchase year the increase reflects period. equates the To

balance turn sheet cash to flow, liquidity on our Slide let's Now and XX.

to and free was fourth of as All-in or operating robust as million. profitability working $XXX Generally, of XX% flow increased Our $XXX see cost expenditures to delivered cash cash approximately quarter approximately attributable well as management, incremental capital due decremental capital mainly approximately flow we $XXX we Capital million, disciplined were sales. management. effective million. pricing working of

the generated For flow of free representing yield year operating XX.X% cash cash we free cash billion, approximately record flow flow. $X.X a of

ended capital was December invested on year XX. Return for XX.X% the

Our XXXX X ratio our base within target X EBITDA, times business and EBITDA was approximately of to debt adjusted times estimated XXXX to stated X.X net times. approximately well our X.X

availability consisting At billion $XXX million facility borrowing our billion of quarter our the hand. we revolving no approximately liquidity ABL, $X.X long-term of on Excluding $X.X XXXX. maturities until net was total under credit cash in and end, have debt

to Moving million XX.X fourth of stock we deployment, shares quarter, $XX.XX for during million price an at capital the average approximately per repurchase share. $XXX

an In stock we the in price quarter shares of approximately million for at have average addition, repurchased of first so far XXXX $XX $XX.XX. XXX,XXX

our million shares we repurchased we and $X.X in in than XX our [ph], shares XXXX billion authorization. third last almost more $XXX one million the have have repurchase of outstanding During we months. than more In XX total, for remaining

will we'll fortress housing a growth growth. for shares positioned which at attractive We remain us continue environment to us opportunities long-term value. maintain withstand We to of disciplined a and and well help capital sheet, slower an stewards keep look repurchase balance for and inorganic

Slide to methodology. XX, assess business to we believe is continue important Turning to a using results it base our

increased adjusted This the During approach XXXX, year-over-year. base normalizing strength and by profitability business EBITDA base our showcases business revenue grew volatility. commodity company XX% while of XX% underlying

in per assumes definition slowing fourth board starts. commodity $XXX reminder, As margins that business Overall, and delivered results I'm the our base commodity feet. quarter prices we despite static thousand a normalized at proud solid housing

I'm results record intense efficiency ongoing capital. differentiated reflect our we investments and and gain value-added that year initiatives, members, for that can our our products, continue our through value-added share, deploy confident the to execution. talented on full Additionally, team products, footprint, grow platform, leading in focus and

Now, I like discuss on to would guidance Slide XX. our

our economic sizes align with customers. the current have uncertainty amid uncertainty challenging market, at we all are in guidance time Given housing disclosures of mortgage in conditions general conditions, elevated expressed this public in Customers the rates and about their to the amending and types our starts year ahead.

of have As quarter only the provide decided a result, to on we guidance for Slide as shown XXXX XX. first

We guidance year will reassess year end full as progresses. business the base for actual

EBITDA assumes also adjusted with of would guide range. the XX.X% an in quarter, XX% to margin to range the to to expect quarter be of to to billion, first billion XX.X%. the of net be first that the gross I be in in the in the EBITDA margins million to million $X.X For $XXX $X.X sales range XX% $XXX and adjusted note range we

prior comparisons will in we be difficult the addition, starts expect profile, In year quarters. two to the given most first XXXX

year guidance and outlined Slide also includes Our assumptions, following the which release, on in XX. full the are earnings

expect to the will that total CapEx capital and includes related our the million. guidance $XXX OpEx our from of we We in platform financial Day. continued in to remind included XXXX Investor and in and are $XXX in infrastructure, in our December the increases ERP coming I'll invest continue value-added XXXX you migrate technology range integrated projections products, years. one in our expenditures and and investments to we This

million the of rate million number and in savings. effective We $XX $XXX selling the million, million, and expense tax $XXX million million Depreciation between expenses in productivity expect and expect range deliver amortization of between XX% to $XXX XXX the change interest no XX%. in an $XXX of to to days, we range in and

demonstrate but scenario We performance commodity in how about analysis housing analysis for year recognize of business help a EBITDA achieve potential of range we full outcomes that scenario that expectations not of important a margins to adjusted capability and we positioned Slide generate financial conditions. performance demonstrate to on are XXXX. to our potential across provide clarify here, think to XX, and are resilient I should will guidance range it's the we this markets full so providing reiterate our strong the year,

are well To in summarize, drive withstand we exceptionally positioned a to slowdown our forward. housing to strategic continuing goals while

We have a strong debt balance long-term sheet XXXX. and maturities until no

through further flow, operating cash fashion proactive solid steps We confident our continue will provides downturn necessary the operating which to this to are with relentless and a in financial free best-in-class are generate manage focus execution. a platform on taking flexibility. I'm

diligently deploy value. shareholder long-term We also work will maximize to and capital

that, to back me remarks. Dave for let over turn With the closing call his

David Rush

Thanks Peter.

thoughts. career believe the I enable ever firmly few the provide platform, is me with part us which my of Let will Having outperform it's a our final differentiated environment. in in BFS, any spent and greater strongest to been

a have generated opportunities strategy and XXXX year and have safety, clearly continue execute and to our increased significant demonstrated capital be you acquisitions operational to solutions, and strong team for invest Through our a win have joining excellence cash ability talented all us clear and challenging for today. we their expand to that on to we but our focused We I'm members to market. who profitability. that Thank remain drive in confident to productivity, return products industry, execute. in flow, shareholders. again to will any continuing we're We strategic cash it value-added execute

let's open for Operator, questions. the call now

Operator

our from with Stephens. Grooms Trey We'll first Instructions] question [Operator take

now is line Your open.

Trey Grooms

your morning to forward good role. everyone. congrats Dave, with working new Look Hey, on you.

David Rush

Thanks, Trey. Trey. Hi

Trey Grooms

Sure.

how you're we as kind in business XQ about multi-family strong trending the and quarter. through these lines are and two very first, of XX? how thinking So multi-family progress talk R&R Can through about the R&R and, I segments, guess these and you

David Rush

Thanks, business. the try been question. allowed existing a to after generate XXXX XXXX Trey. Once to R&R. again with constraints our go I'll and more business. in those us on just capacity if through our That's to But focus segment and had we constraints capacity expand waned, that current primarily acquisition. it new customers year it's R&R start R&Rs ability in great of multi-family, because primarily care you taking

in allowed multi-family Trussway That even multi-family of Noltex, well recently as We one stronger prior time Truss and is did to a segment us with grow experiencing segment good at acquisition the a has when the actually they as their Panel and from have year. that years.

very a a having to it's the headwinds So of nice right now. single-family compliment offset bit little of

that's primarily in So we both grew how segments. those

Trey Grooms

Perfect. Thanks out laid and for in flow kind single-family of XXX,XXX that. in this memory you'd And billion right, out $X next question serves expectations think laid you that guess me it for I Peter, cash free start was over my if environment. I

how or off, is And cash then the us how expect free free First table still the flow you move flow cash do relative that to in that to, does to gave sensitivity expectation? deck? you

Peter Jackson

Yes, no, Trey. thanks,

a in starts the about we it's in answer on is billion reasonably the environment. stayed a XX% a cash lot including the north cash short your good and question $X commodity still market of year it There's so think scenario flow question. the full going free a down and So in we've steady assuming from away flow, to but that's scenarios, yes,

move working bit. know, our both can of things a those, quite those capital you As

good think about incremental still XX% we way us. roughly sales is to that Generally believe speaking, with working decremental a or that capital

do ability cash, So is dynamics underlying $X that think billion of as business' as kind doing, number right. core the what are what around still the are of well we commodities starts generate to north given doing,

Trey Grooms

it. Got

you encouraging. your If half last super sales Okay, piece in, the now and I quarter, perfect. sneak one know, value-added good could over the in that's That's one impressive.

in change? likely these to to single-family slows would be homebuilders the be would coming you Would value-added expect to there less products? or the business utilize or the expect quarters, appetite there As how further from more mix you

David Rush

such turned question. Trey, resiliency a little to a nice and and labor challenge you at least market incredible has It the component is bit, the consistent the had and housing to the on They're has in for The appreciate in. as it. we're offset shown especially even makes the headwinds sense side. I environment we've going labor that to Yes even value-added ask be challenge just starts current

move from people down. So even we haven't have starts seen components as their away gone

sales a We recent buoy been our going have mix, QX, and able overall be growing a through pace. achieved to our we're total in we value-added which think our has maintain in over continue XX% nice that sales through to that to to of acquisitions

Trey Grooms

Got it. my questions. Thanks for taking

Peter Jackson

I'd they're a they're area I only in but volumes it the my we does are value-add, the we favorable it when probably fourth but there, strong argue it seeing Trey, correlate in saying, is and were that's there, Truss the its still there. going XX%. mean, more to down heard still thing to somehow throw I correlation Dave were so down starts and was secular maintain right? going only certainly is starts though So in, I'd a think quarter some than comments, away it are throw There growth, is and degree for growth, even us, you right? we're thing we and seeing using yes, that don't Yes want starts, to that from like not

Trey Grooms

taking Yep. Got Good for pass sense. I'll question. the luck. it. Thanks Makes it on.

David Rush

Trey. Thanks

Operator

Barclays. We'll our Bouley next you. with question Matthew take Thank from

line Your is open.

Matthew Bouley

Thanks for guys. the morning welcome taking good call. earnings the Dave to questions Hey, and

QX gross So margins How gross that we what you. imply When QX? XX% about to commodity helpful? know, quickly scenarios versus be of at well beyond above margin first any for as still XX% the on, midpoint of would color the for does normalize it the kind year, sort Thank question margin EBITDA does and on non-commodity of that gross guide. you the seeing XX% of that margin look kind your of

Peter Jackson

an gets storyline open in of of what progress. Thanks, one with continues margin it We're but certainly to that for pleased where number be to. Matt. question The gross we've terms seen good far, so

in retrace strong of the beginning things gross have our is we've gross line. XX% as margin We certainly discussed beginning XX% well certainly past, well. guide the to mean stayed is normalize So I north gross margin. what we've It is in have historically supply roughly XX% the normalizes. what to our to right, chain normalized as you highlighted, margin performed said for QX plus

nice component the progresses, We're business, and of to which we're mix do as value-add performance which from back our the up we for anticipate continuing towards trend really normalized continuing we a see hope But and level. to year that expecting.

that know, to we're like, year. of full about pretty any the You provide optimistic looks what but for real now ready I'm not in terms guidance

David Rush

part only allows per the thing challenging Truss margin manufacturing. We've our Yes, is, us and how compete actually our I'd effectively initiatives merger. since hour actually other managed in foot Matt in around allow for some is even share to XX% That the improved add of through will improvement by we've man us productivity cost board of a environment.

the So kind can. the maintain margin trying best at and of from it we going to angles all we're

Matthew Bouley

Got it.

That very makes Okay, helpful. that's sense.

what more about of starts? at Kind is, Thank of question beginning how do you think resemble in on manufactured doors over value-add to I quarter. the one, XX% of had And the completions. more end Clearly the Second closely we've the to the decline those front of construction. this think see sort you millwork the timing seen products windows, point of tale should converging? tied in completions and reflecting you. had you My growing what XX% that's we

Peter Jackson

good Yes, a Matt, that's question.

into pretty already get quarter. convergence we've as seen we farther think that the much I

I as normalized, but still the the millwork a believe we somewhat sales Our really as And overall have door value-added positive said, business. component, and has the Truss for been in resilient. segment

fewer maintain that We fact from in there's can it encouraging but of is business will and the percentage sales continue. us have to We're because haven't very fewer we seen granted, Truss, believe away people going move overall starts. we that our to Truss,

Matthew Bouley

Thanks All Good Dave. Peter. luck right, it. Got thanks guys.

David Rush

Matt. Thanks

Operator

you. with Capital thank our We'll Ketan question BMO Markets. Good, next from take Mamtora

is line open. Your now

Ketan Mamtora

Thank you.

guys about there's some you First becoming business multi-family question, the y'all. recognizing give R&R? uncertainty It that is thinking how area are like around, you greater sense lot a and that of can seems of a focus still us for

David Rush

I Ketan. Multi-family buoy will XXXX. be for certainly in question. a us Yes appreciate the

was sure how not the going for headwinds. are some I tremendously and there the amount was XXXX Harvard We multi-family has not may seeing though. out. seeing in in that some quite of play at start XXXX waned Housing bid What concern to Conference XXXX is we're activity

still we're slightly optimistic there. So

made care On supply capacity chain the go thing fully for with facing. were explore were and that hard when having struggles constraints was again, existing and was prior front, years difficult business supply opportunity us that after in to the the It we customers. new R&R of that we chain that taking

So we that will lessened. rededicate kind have that our focus conditions on those of growing share now

Ketan Mamtora

on quite single-family level, is sort either helpful. That's investor it. it And fall you there engineered is a Can side, that? with like approach price some Peter, question, wood your obviously ability Got concern then my pricing gains least philosophically, or second at the Dave how seems about starting sort down. of also sharply, of talk manufactured to to at high onto hold component you'll

David Rush

Yes, that's a great question.

marketplace. add little hold cost to through and for to Peter? after time ability million plants; go that's you a gain be to a in we that's margin invest you We productivity longer flexibility of share think I $XXX available. our automation in answer, significantly want bit able we're for to Anything has created a to in where believe on there, little all our That for that the low cost advantage the marketplace. provider the did almost us to for and us a the bit where of gives little Truss

Peter Jackson

offer part That's puts the we've made discipline. combine in worked in this what of Yes think same to to to hold being position point about customer, fair our that and a so pricing we manage pricing go amount at a certainly basis able lot hard a a and a expect we while investment cost pricing on to margin we've total talked management for. how and benefit we rigor business to how we I are, about and on this us about forward efficient think great the time an getting and with important

we're as optimistic now, through. each quarter's So see numbers especially right you come certainly

David Rush

believe supply that normalize up and that ran do I demand will product the normal margins dynamics, first the simply for based we're margin already on seeing that. and

example. seeing as definitely for example, lumber sheet with You've goods it, an and

better The other providing on we customer allow respond as think do to can the but is, that. what cycle to quickly try some as we'll we and on should to deeply to our as far then lumber of by tried we've won't win our in as have, is see that and what customers, win as to better times be and goods we're time service, create. products them to sheet of control, for But able some costs, I going margin reduced hold cycle industry

Ketan Mamtora

perspective. I'll helpful jump luck in queue. back the That's in Good XXXX.

David Rush

Ketan. Thanks,

Operator

And We'll next Barclays. with you. David from take thank question Manthey our

is, Your line I with apologize, Baird.

Your line is now open.

David Manthey

add And congratulations me you, Dave. you. thank let to my Yes,

David Rush

Thanks.

David Manthey

you downside through the your question, this sheet assume First but share future? in downturn from a change a repurchase yet XXXX could or all views unwinding, we in scenario? balance there you with or the at potentially your as any in level the lot is on debt discuss comfort I delever move M&A

David Rush

great Yes, thanks Dave. a That's question.

still sheet feel balance to are the lean and it. we that ones. short allocation on really good think the is, priorities So right going capital our around answer in we about the We're

is, XXXX. got The timeline You that reran no we a one perspective. from ABL really, we've structured debt know, just no till

start, of about sheet. the maturity very of balance new We good got we've plenty strength liquidity. the feel So

working market. we as the in layer expect fact sort a release noted, some in that, the of You the would of slowing you further event capital on to

feel in all scenarios. that we tailwind that, that be So aggressive these then still will of more cash, a the there overlay opportunities, to of good business about of The in so nice even expect generating terms And available some is cash. right? do be is, downside

While continue M&A the of multiples has has reasonable total we market, targets of still down BFS been slowed should by for think the us, source of and deal execute of part certainly a growth opportunities we be going nice the see as to And Noltex in on we're at terms to family. number that it those. evidenced

as nice value really continue stay up are to think we've do to we to intrinsic -- for opportunities to And through think that. disciplined, there's we now, to shares. going So repurchase demonstrated going we be, we're the in there as us be real going of there's

good that the we're in to more internally have M&A, we'll extent the capacity don't or do continue to targets leverage seeing we So to M&A well. not as

Peter Jackson

The year at thing or still above only M&A. on on million of is Investor $XXX only, are front the that the our laid out I'd add we dedicated per plan we Day to M&A

that it target. as the now long-term, don't hitting any have slows over even over concern we So

David Manthey

you expectations, And the Okay. this get growth maybe to that. on update we or terms about revenues, not next capital the Thank but and for of READY-FRAME could say specifically, talk in just over just one of you outlook could locations, anything years? an three second, year, number

David Rush

so, valuable you Yes, know, READY-FRAME part value-added a of portfolio. our is product

concepts. terms the You we then We post-merger know, digital nicely we but digital bigger in important of really that at certainly use of components, nicely to that out the of think into not offsite integrating ideas, solution, offering able into allows area to at that the are what enter fabrication looked you it But the particular, expand. in of that in all really we're we've dovetails an it with deliver value-added know one opportunities precision doing to the products. think people READY-FRAME

we put sure the in making have making markets, we're into new to continue it is term. it capacity, good we We Growth feel it. still positive managing about sure long and

David Manthey

you. Okay, thank

David Rush

Dave. Thanks,

Operator

Truist. Keith next with our question Hughes take will We from

Your open. line is

Keith Hughes

Thank you.

On of well? much commodity versus quarter, us how units, that within as you would is the decline breakout first from kind be kind nice comment guidance the the and deflation give of can value-added for the revenue any

David Rush

would then terms the commodity of and well, breakdown, have pretty I prices on leveled in we're the based looking stable. say at been pretty Well, out what

is last So go get lot commodities sort we've comp in that basis the on in a trend second down it. It as Last to year-over-year QX, the peaked what on seen trend comp certainly down through know, of is commodities. best describe way a the started you worse quarter. so it of year, that a we probably headwind basis year year-over-year QX decline will meaningful. probably from And QX,

break good that the in little back context. down those you but sub in and won't most get gives the be will We the a guide difficult and QX year. hopefully of QX comps half So in easier components,

Keith Hughes

cash was with in out be you're repurchase I go on what targets question where we directly excess this of downturn you've you stock I generating? that's free it shares And on flow, cash played the limiting or on for. consider share are looking M&A yourself the borrowing to with guess Yes, cash flow going would as some now, is other buying on you through

David Rush

about I mean, appropriate broadly, capital we we think I is We're structured. sheet. that way Well, have an right, well balance think deploying the

by as two As we're idea little a one Certainly range a kind little in being not to window times long business, of extremely the a of base time. of intimidated above of or comfortable. for below we're our

deploy just think are management. of continuing certainly responsibility that's it's But good capital. think to we to We a management. committed I

to We've we're range. the We it's look we'll But stay committed. and work that lean good categories, ourselves put in. to and each of continue business there'll we put times in to in think to in those our confident well we a is sense think at it's might of we in be see of for Where And thing sort to a of opportunistic ourselves can what never got confidence think risk. when capable we're position do. lot we're where a that We responsible for one liquidity ability going make manage so moments, shareholders, it to going right?

Keith Hughes

Thank you. Okay.

David Rush

Thanks Keith.

Operator

We'll Zelman. Adam next take question with from Baumgarten our

now is line open. Your

Adam Baumgarten

everyone. good Hey, morning

on R&R either mix there negative a of and multi-family the meaningful on Is of any higher revenue? impact positive from business. question margins, a mix Just or

David Rush

generally It multi-family us It our expect in help us of margin areas. maintaining those good will margin a margin and a percentage R&R for follows our Adam, will traditionally bit Yes, in as tailwind of R&R a helpful a two single-family, to we hold business. margin. on overall on In normalize as our little product still that's result will been XX% favorable it's maintenance. only our overall is from business margin. profile of but a we a creates and Again, has our question. be other tailwind about higher only be smaller well they products combination because XXXX the of though, a

Adam Baumgarten

then can on an you by And update you us just are track XXXX? it. digital you ended got where on guys XXXX, billion Okay, maybe in you said solutions, in to on revenue deliver $X give

David Rush

digital love our about to Adam Yes, I'd milestone. talk

will development the of to of What and even in concept weren't XXXX, game So on revenue full markets. really We end platform we the it here digital development. in in marginal XXXX through we milestones. it opportunity. end year playing XXXX trying by with XXXX the is four XX be actually all monetize only a believe would a We're the achieved focused solution. of the and is across XX customers development We're piloting we're have the year, with the

XXXX, need us going the the any making with. And We billion to from going to pull of there, we business. we're as that sales by of our want through back, value We're of the going process. add redevelop, Anything day, We business full still is to years of believe we stand going of of to to. this believe fully concept what relates sales you in We're Because $X in do incremental through primarily to a where through Peter? in that. we easier we at learn we're development competition in goal to believe solution refigure, ahead recognition light are to go pull lot still. we're by end through it to the going change our

Peter Jackson

it. Perfect. nailed You

Adam Baumgarten

luck. Thanks, great. of Okay, best

David Rush

you. Thank

Operator

We Group. take Steven question from our Ramsey next will Thompson with

Your line is open.

Steven Ramsey

it like delivery years, chain on little are CapEx you like with, deliver embedded prior CapEx, out this push some there, guidance? a the spend, of any this year to morning. feel supply Hi, is there bit the on better can good caused deliver labor you start on than the Maybe last to has years? is Do delay seems likely and couple current all in delay CapEx now. more And of

David Rush

like to Yeah, thanks, little what a the relief we've has right. better. rolling It's in that in We categories. struggled There wanted. things have stock there no other you're get certain Steven, been not been nearly gotten

still I strain. So of, getting say a It's that's source better. would

will as So year's is year. and we're do, free that my certainly sense up year that will progresses. to a optimistic want lot CapEx be the than still last we achievable more There's to this continue

Steven Ramsey

the plan as to of advantage it's about do strength building want labor the for think if somewhat in out for taking downturn, on prepared And be a you fully then how so related not you long-term months? but helpful. Okay, for another question soaked CapEx to next XX and holding housing, up and even also in labor or to longer-term capacity

David Rush

Yes, firmly in so the capacity question one. we investing the in is good a But long-term. believe

bit labor relates So a around we aren't investments. little products. we're these changing fact, kind it our investments priorities some capacity, as through value-added trying of of specifically and to concerns address to And in

to the years. that to fully make over and two we have seven think sure on books add lines still robotic the Texas to trying going I we're in have more to through we're success And six working We next and and Georgia that three having with. some

way have in we in really concerns investments So both technology seeing and a future. to in as the and we're labor automations investments address today

will definitely stop. So not that

experiencing we're side and people. the best to guns of it and that we've change the core with A a what our over we really diligent this and come in other of on As and is players long-term relates to the we B because and business, short-term blazing going somewhat see that's to out about want either been marketplace now out protecting our as scenario the not

right now. how it So we're approaching of that's kind

Steven Ramsey

Excellent. Thank you.

David Rush

you. Thanks

Operator

question next we And take will Jay McCanless from with our Wedbush.

open in is line Your

Jay McCanless

morning. Good Congrats Dave. Thanks.

David Rush

Jay. you, Thank

Jay McCanless

Yes, you bet.

now your do a love three we to So what where builder negative this new people. on But these Slide you on been think seems But this, feedback kudos right they're out. to talk be lot would hear negative on EBITDA you getting to customers to customers, from XXXX your presentation, XX, where falls they single-family single-family very what hear you've from falling XX useful. ranges, when think XX of

Peter Jackson

jump on. one Dave on can that start I'll Yes, and

versus a how been, There's much of depending about what We type to markets. SPAC. harder place. the has the over all in, you're lot market how they're selling, exposure to lot is, answer differential your east house on the market rapid downturn you're west, in of a short talked has the this customer been So certain

pessimistic the people really I across it quite say optimistic and being, equally quite common. board would is all with So

try leaning one in out do lean to So what got our think to one If other what we trying they of out, leaning for is those other, might we numbers way to playing Powell or [ph] the some out. way of the if give right? potentially what a balance play few sense about you scenarios lean account or

tough as it's, that's a us. for imagine, you been So one can

David Rush

showing turned of you have Mortgage of I three different all XX, scenarios a up year from, builders it's were a as really light right? down it pick and Yes, the mean coming on and saw pessimistic. out December, reason there the rates the to in couple XX sudden again. as You dipped recently basis everybody started most points

by returned they the people rates rate mortgage do to like hard try know after. scenarios. that down that's is, thing they execute underlying were evidenced really how realized good they it were the narrow at it quickly different could narrow that felt the strong, So to the just and purchase a you on marketplace remains once home demand they range gave was But to why we one to we

over We've sure was that is home underlying make just got demand. just demand the additional it that So affordability there. long-term proof that to balance home, that we against

Jay McCanless

they And my second anything tightening up not generally been on we've up be off terms you. for that by a are little to hearing have just, you thank the they housing of or that pinch and did hold or a at, everyone kind depth of potential because more the May a good little on now or or it, related surprised you're lending tightened that three looking are years Got can such right little slowing that? bit? banks bit, in then have down feeling a on target land been two question that activity M&A

David Rush

more just latter think what it's the of part. said, you I

fairly get looking just not They're I think year to they're couple fence. good they run. had at off the and uncertain a ready environment now

more as look interest as out back the think the of and can I we looking they'll I XX that evaluate jump continuously in what and like, and mortgage plays think plays and the throughout the XX months see time course next as year out year rates we're we're people rates to certainty around there.

Jay McCanless

did cities had, then to Okay, you one quote, just, et whatever about of last think metric And great, if cetera, see request, activity, thanks. two you bid I of we the you want because know, a use, kind January about tale was February. of of looked mortgage given in we in to compared January January spike see did just rates? talk business you February higher Can how in what that rates like the and it, what

David Rush

Yes, ups than its this think it say ensure find point it's dealt. market down going broadly don't whatever trying close to staying to I is trend than year I to operationally mean, we at Yes, a slower certainly anybody, it's to help know and that's correctly downs. don't certainly a breaking is there's a we're I it's but are think own. erratic I been bit to has a what that you last market other there is It accurate. and described responding to very

Peter Jackson

want houses the scenario, is that speculative. only, they still not a for Yeah, to I'd add only in. not over is demand live thing XXXX, the extremely XXXX is positive long-term right? is Demand this It's and that they

choppy So going little even over pretty we our though get footing. the be good, haul to we a until it's feel still long

Jay McCanless

Thanks for my great. Sounds taking questions.

David Rush

Thank you.

Operator

The Benchmark will Company. Well, question Reuben next with Garner our take we from

is line open. now Your

Reuben Garner

everybody, role. on the congrats new Dave Good morning and Thanks.

David Rush

Thanks.

Reuben Garner

some I that that's capital just if question, wrong, in the wanted of of just kind maybe are $XX kind not equivalent. starts XX to $X don't I deployable anything repeat so, is you business. generation deployable big star the the cash this looked to against but clarify had the kind gives Day, still of and I if I the ask biggest what what thing reiteration at so that I technical free as Investor of though off clearly flow can I'm repetitive, So in even from such think one has you I kind is but X in so billion capital a probably range likely way? XX% to And of that going do one's billion the and a guess, environment to, difficulties, that And the cash that moved of, you the hopefully confidence

Peter Jackson

no, good question. that's Yes, a

the at at capital. billion So don't who end. XXXX and times a And guide way leverage end was of to a was, X leverage of for was the the $XX about at that onetime was that think at two $X remember, XX is those you deployable

commodities times a part when I'm the the, that's for short business gets So price about but regardless. our two talked us We base we've business, not a make but it, from lot is, is one an is this make money important EBITDA we money everybody the and The leverage a very sure answer lot to of perspective. more high.

our have And where So business. that's exactly future high flow lot one Investor it targets. a of you a becomes a the what bit execution our an get option we Day year against price, if of more cash experience into you in

low we're starts certainly being you're single what to regardless. that that about to as or see healthy far still even throughout currently And right years very incremental an well in expect remaining the strong growth that of our we of put we though we've be built we a top start. had single head ahead embedded of We flow family is number, able on as that position forecast, going to pace below starts delivery model. low single on start mentioned, cash have be being, us where make strong deliver amount cash necessary the for of growth into the with is into But talk our is free I nice forecast has the XXXX to to digit the had

Reuben Garner

strong on Congrats guys and board. results on Peter. luck Thanks good the

David Rush

Thanks.

Operator

with with Collin we'll And Jefferies. Verron take our next question

open. is line Your

Collin Verron

is XX% you Thank XX% to $XX.X $XX $XX I The sales that single versus billion range XXXX which base just of to is business billion versus largest talk morning. there outperformance to you about the Can the, just fiscal reported. about factors in Good your start billion, starts family get only sales that decline for the of end XXXX you you down taking my sales scenario wanted XX%. question. there the to market? a at year would

David Rush

yeah. yeah, Yeah,

So I the you're glad think way. a asking -- that's I'm that question

it's Starts of think The how year-over-year other are prior impact been numbers. right of it. being M&A in the acquisitions being performing variables to the the those we're think about single-family biggest the obviously versus in right? the starts. I the are impact terms certainly on impactful growth us, and year way We've acquisitive from

of margin in a in normalization headwind, The some will growth bit seeing there. as a well. are be embedded but a There's that we share that growth also of bit we've

So that's an offset.

we're and certainly quite business is to know, and offset of share, the strength through a model differentiated it. So, our the across proud that a able but being portion a thing you decline single-family us board of of core healthy for and, the

Collin Verron

in that color. guess savings, Can million just That's examples XXXX helpful here of Great. And type million. you're achievable some you I just those different is are how here expecting are question last improvements productivity the productivity just $XXX guys and my $XX in give environments? that on on executing those to you these volume

David Rush

slower It from hand-in-hand to increasing service reducing our what to housing and starts with standpoint related do competitiveness goes cycle times. customer need actually, it of we a

of is last months. the M&A around So over it synergies a done we've from we realized new XX lot that

specifically our initiatives. truck productivity, it more turnaround to of within related initiatives Some and our delivery is getting payroll less for some of

into I things. and them plants always practices Some our from way we as merger there. other continue of productivity up the parts are value-added a indirect as integrate There's man BFS mentioned board doing per has of productivity the to reviewing manufacturing best foot acquire hour There's around combination since country is spend. constantly the XX%. We're across That of gone there. savings opportunities plants

get confident to that in $XX to to our we, ability different that we, fund very we've will So eight million we're probably $XXX there. million initiatives and six got

Collin Verron

for Great, thank the you color.

David Rush

Yes.

Operator

our with RBC question from Markets. Capital take And we will Dahl Michael next

line open. Your is now

Michael Dahl

taking on ups. for couple morning. A new Dave. Good Mike. Thanks the Congrats role. follow Thanks my questions,

quarter on bullet margin the the a expected for quarter. impacts commodity has saying, include EBITDA of On first the adjusted saying that slide and and there's price, a guide, benefit sales the point the comment

one as top Peter, know, from there a sharper a standpoint commodity you I is in articulated queue. line think earlier You headwind

XXX on can XQ little So possible margins, total? would to some out and to elaborate just still is base estimated split a versus there what means that if if comment be what you maybe business bit that benefit for XXX your it's at on then

David Rush

so challenge this the at Yes, biggest you business out there's think in holding base that so actually doesn't a, is, it level I that's probably about on I'm a that number. in not not terms that's, talking no of quarterly exist,

out comps there pieces. analytics. a the generally on going lot is and driven by break in is is ability right, some the You're a, it Unfortunately there year-over-year detailed to those

I insight. side top of to don't assumptions, terms have some We think in you they're but particularly helpful

starts the more is Unfortunately a the a, half those of first half first comp. commodities perspective ability apart, than in the pieces so to the or negative in lot from far break A from the year-over-year negative just second. comparison

be year. were that my for best numbers insight it's this offer I first So guide that our perspective the comment a the our or saying to when is probably we the, harder think guide from given going unfortunately half for comparisons the

Michael Dahl

benefits in yet to guess quite just, margins I comment Yes, it that there's XQ. haven't but says was margin, normalized okay. still speaks since the in there, Yes, maybe that

David Rush

Yes, got… I've

Peter Jackson

We just that have it's a that is say all. all in, trying really was footnote to

Michael Dahl

you. Yes, got I

is, the question two-parter on year Okay. And, a somewhat second full is my so just scenarios. kind and of but related,

correct And me has when say of sense if a in commodity point. you been but lumber and, point can there price a the [ph], and I'm so clarification, as that wrong blend you hit of OSP starting my

Okay.

s. you we're for of of So it hundreds, like blend? XXX where it, high mid-XXX at three year in mid you're at Is kind of and looking a price that a characterization year-to-date between that oscillating know, seems to blended reference frame then s maybe the just date, if on fair that's a

David Rush

year between talk I think the XXX that's but Randall to terms right base Yes, in it's I assumption bit mean, I early. range our has a is and XXX how the Langs, business below started, little just of if

Michael Dahl

on week-to-week Yes, lot on or day-to-day of on, changes basis. that a

a or spoken down if flex of you XX on so down range Okay. of the depending scenarios. terms And, going is then, margin you're versus bit up a to when Obviously when amount about and together think and XX, we dynamics putting in decent think right? SG&A down about the you've to gross this like, a range But you how pretty you SG&A number, down which flexing kind get there the or mostly Is EBITDA margin a progressively of swing to bigger and get margin normalizing of the in ultimate your the is in steady factor these models? different down scale on is in is lower factor gross line EBITDA scenarios? the swing mix the part as

Peter Jackson

a That's really good question.

about sorry, it's mid-XXs, sales variable. as the we're a know, low of XX% for percent in You and or XXs SG&A

that that's talking X% fixed in You're bucket. about

fall when potential how of being. through does the expect downturn decline pricing do can much and the on up And happens to impact so pretty answer you be like falls my the commodity rescaling through the the You guess Those margins both any the are harder I don't obviously sales the that, right. know, for more aggressive offset bottom impactful. end of off a two I and that they hard how comparable. margins, might you major with, it way on probably business. think I have you top actually think head about then components. very prices. line, What leverage seem all We that's the of know, but price you're we

Michael Dahl

Peter. Thanks okay. it, Got

Peter Jackson

Mike. thanks Sure,

Good.

We B. from will take Rygiel our last Riley. question - Alex

open. is line Your now

Alex Rygiel

you. Thank

average a You December Can of in quantify the and January. in slowdown daily sort you referenced that? sales

Peter Jackson

mean I pieces there's it. two to Well,

One than sales but of in them more from sales the us new seasonal of markets, lot winter of starts, of generating obviously do we that summer. We peak seeing orders sort on less a do houses. depth generating is XX% the of we're down the the normal seasonality. trend It's generally in see also speaking the than about in

pretty has So expect, as one decline QX. been the to consistent expect that lap peak might would we probably

Alex Rygiel

excluding commodity prices then And seeing suppliers reduce products their are yet? you

Peter Jackson

and it stick. couple categories but of where actions, than rumors a are like they're, looks to there More going happen it's probably will

most the no increases it's For increases. less or been part though,

David Rush

with going pay labor for still widespread they it around supply out people what as demand the Yes, at are are of do they're struggling going labor. normal But having well they're with and go going and day, hasn’t just they're share, run been the of It availability point. to costs at have. dynamics to whatever after to this end the to and

Alex Rygiel

much. very you Thank

David Rush

you. thank right, All

Operator

conference for conclude This you today's Thank participation. does your call.

at disconnect any may You time.

Builders FirstSource (BLDR) 28 Feb 232022 Q4 Earnings call transcript