Builders FirstSource (BFS) reported net sales grew 2.2% on a year-over-year (YOY) basis to $1.9 billion in the second quarter despite impacts related to the coronavirus (COVID-19) pandemic. Core organic sales for the dealer declined 2.1% YOY in the quarter while commodity price inflation added 1.8% to net sales on a YOY basis, according to the company’s second quarter earnings report.
“Our first half results demonstrate a positive overall homebuilding environment, supported by tailwinds and rising demand across our diverse, national footprint,” BFS CEO Chad Crow said in a public statement. “We are focusing our efforts on disciplined cost management while we work to efficiently meet customer demand, manage the impact of accelerating commodity inflation, and generate additional cash flow in the third quarter.”
Dallas, Texas-based BFS said acquisitions contributed net sales growth of 2.5%, attributable to the dealer’s five acquisitions in the previous four quarters. Value-added product sales volume grew 0.4% YOY, led by 3.3% growth in the windows, doors, and millwork product category. Sales for BFS’ manufactured products category decreased 2.6% when compared to the second quarter of 2019. Demand across the dealer’s three core end markets remained resilient amid the pandemic, with multi-family and single-family sales volumes declining by less than 1.5% each and repair and remodel sales volume expanding by 4.1%.
Net income for BFS also experienced growth during the second quarter on a YOY basis. The dealer reported net income of $78.9 million for the second quarter, an increase of $12.3 million compared to the second quarter of 2019.
“Our proactive actions and focused execution at the onset of the COVID-19 pandemic allowed us to operate effectively throughout a challenging environment,” BFS CFO Peter Jackson said in a news release. “During the first half of the year, we actively enhanced our financial flexibility, liquidity, and cash flow to better position our business for continued success.”
BFS reported interest expense decreased $2.6 million from the prior year period to $26.8 million in the second quarter. The YOY decrease is due to one-time charges related to debt financing transactions executed in the second quarter of 2019, according to the company.
The dealer reported a gross margin of $517.3 million in the second quarter, flat compared to the second quarter of 2019. The company’s gross margin percentage decreased 60 basis points to 26.6% in the second quarter. The decrease in gross margin percentage is attributable to the expected normalization of the company’s lumber and lumber sheet goods product category gross margin percentage compared to the previous year’s second quarter.
In the second quarter, adjusted EBITDA grew $16.3 million to $161.9 million, setting a quarterly record for the dealer. The increase was driven by cost management measures during the COVID-19 pandemic, according to BFS. Adjusted EBITDA improved to 8.3% of sales in the second quarter, an increase of 60 basis points on a YOY basis.
“We are incredibly proud of our team’s ability to overcome the challenges presented by the COVID-19 pandemic and produce record-setting second quarter EBITDA results,” Crow said. “During the quarter, we carefully monitored local business conditions in order to safely and effectively deliver critical products and services to our customers, all while preserving as many jobs as possible.”
Crow said in BFS’s end markets, an improvement in housing data, low mortgage rates, and shifts toward suburban living continue to support strong demand. In June, the dealer experienced a “sharp sequential rebound in sales,” according to Crow.
BFS ranked as the second largest company on the 2020 ProSales 100 list. The company operates around 400 locations in 40 states.
