Builders FirstSource (BFS) reported net sales of $1.8 billion in the fourth quarter of 2019, a 2.9% decrease year-over-year (YOY). Consistent with recent earnings reports, the decrease in sales is attributable to the deflation of commodity prices, according to the dealer’s fourth quarter earnings report. Net sales for the Dallas, Texas-based dealer decreased 6.5% YOY in the third quarter and 8.9% in the second quarter, both decreases were affected by lower product prices according to the dealer.
In the fourth quarter, BFS said the decrease in net sales was driven by deflation in commodity prices of approximately 10.6%. Lumber and lumber sheet good sales declined 16.1% YOY, primarily attributable to commodity price deflation. BFS said its remaining product categories, excluding gypsum, roofing, and insulation, achieved increased sales on higher volumes in the fourth quarter.
Sales volume in the fourth quarter, excluding deflation, grew by 7.7%, according to BFS. The dealer’s single-family market grew by 7.5% YOY, its repair and remodel market grew by 6.8% YOY, and its multifamily market grew by 13.3% YOY. Sales volume in BFS’s value-added product categories grew by 8.7% YOY, including 10.7% YOY growth in manufactured products and 6.9% YOY growth in windows, doors, and millwork.
For the full fiscal year, BFS posted net sales of $7.3 billion, a 5.8% decrease compared the 2018 fiscal year. BFS attributed the decrease to commodity price deflation. Sales volume in the fiscal year increased 6.5% YOY, driven by increased volumes across all categories, led by growth in the value-added product categories.
BFS posted a net income of $41.4 million in the fourth quarter, a 20% decrease YOY from the 2018 fiscal fourth quarter. The decrease in net income was primarily driven by the deflationary impact of commodity prices on net sales, according to the dealer. For the full fiscal year, net income increased 8.1% from 2018 to $221.8 million in 2019.
“We delivered another quarter of strong results to end 2019 with a solid foundation to further build on our record of success,” CEO Chad Crow said in a news release. “We continue to make strategic investments in our operations and acquisitions to drive enhanced growth in margin-accretive products and markets, while preserving our balance sheet strength to support value-enhancing initiatives.”
During the fourth quarter, BFS acquired Raney Components, a vertically-integrated distributor and installer of value-added products in Florida with annual revenue of $140 million. Since July 2019, the dealer has completed five tuck-in acquisitions, adding six truss and millwork facilities to supplement organic growth, which BFS estimates will generate approximately $240 million in annual value-added net sales.
BFS’s gross margin decreased 3.3% YOY to $476.6 million, again driven by the commodity price deflation’s impact on net sales. Gross percentage in the fourth quarter remained relatively steady at 27% compared to 27.1% in the prior year’s fourth quarter. For the full fiscal year, gross margin percentage increased 230 basis points to 27.2%. The increase in margin was primarily attributable to an improved product mix, the decline in cost of commodities relative to customer pricing commitments, and continued pricing discipline, according to BFS.
In the fourth quarter, adjusted EBITDA declined $15.7 million to $109.3 million, driven by lower gross margin dollars. As a result, adjusted EBITDA declined to 6.2% of sales in the fourth quarter from 6.9% in the same period a year ago. However, for the full fiscal year adjusted EBITDA grew $14.5 million to $516.1 million, or 7.1% of net sales, compared to $501.6 million, or 6.5% of sales in 2018. BFS attributes the adjusted EBITDA growth to higher gross margin dollars partially offset by increases in variable compensation related to growth in estimated sales volume and profitability.
BFS ranked as the second largest company on the 2019 ProSales 100. The dealer operates approximately 400 locations across 40 states.
