Builders FirstSource(BLDR) - 2025 Q2 - Quarterly Report

Part I — Financial Information Item 1. Financial Statements (Unaudited) The unaudited condensed consolidated financial statements for Q2 and H1 2025 detail decreased net sales and income, increased assets from acquisitions, and significant financing activities Condensed Consolidated Statements of Operations Net sales for Q2 2025 decreased to $4.23 billion from $4.46 billion year-over-year, with net income falling to $185.0 million and diluted EPS at $1.66 Consolidated Statements of Operations Highlights (in thousands, except per share amounts) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $4,234,064 | $4,456,340 | $7,891,560 | $8,347,692 | | Gross margin | $1,299,041 | $1,462,684 | $2,414,282 | $2,762,538 | | Income from operations | $311,287 | $489,483 | $495,728 | $863,080 | | Net income | $185,031 | $344,090 | $281,335 | $602,871 | | Diluted EPS | $1.66 | $2.87 | $2.50 | $4.95 | Condensed Consolidated Balance Sheets As of June 30, 2025, total assets increased to $11.46 billion from $10.58 billion at year-end 2024, primarily due to acquisitions, with total liabilities rising to $7.29 billion from increased long-term debt Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $87,020 | $153,624 | | Goodwill | $3,988,853 | $3,678,504 | | Total assets | $11,464,555 | $10,583,086 | | Long-term debt, net | $4,669,983 | $3,700,643 | | Total liabilities | $7,286,463 | $6,286,616 | | Total stockholders' equity | $4,178,092 | $4,296,470 | Condensed Consolidated Statements of Cash Flows For H1 2025, net cash from operating activities decreased to $473.4 million due to lower net income, while cash used in investing activities significantly increased to $1.06 billion due to acquisitions Consolidated Statements of Cash Flows Highlights (in thousands) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $473,368 | $769,271 | | Net cash used in investing activities | ($1,059,473) | ($315,625) | | Net cash provided by (used in) financing activities | $519,501 | ($444,233) | | Net change in cash and cash equivalents | ($66,604) | $9,413 | Notes to Condensed Consolidated Financial Statements (Unaudited) The notes detail key accounting policies and events, including three acquisitions totaling $891.9 million, issuance of $750 million in new senior notes, and amendment of the revolving credit facility to $2.2 billion - During the first six months of 2025, the company completed acquisitions of Alpine Lumber, Cluss Lumber, and Truckee Tahoe for a combined total of approximately $891.9 million, net of cash acquired[35] Net Sales by Product Category (in thousands) | Product Category | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Manufactured products | $1,803,373 | $2,035,238 | | Windows, doors and millwork | $1,958,766 | $2,145,328 | | Specialty building products and services | $2,023,106 | $1,996,410 | | Lumber and lumber sheet goods | $2,106,315 | $2,170,716 | | Total Net sales | $7,891,560 | $8,347,692 | - Goodwill increased from $3.68 billion at year-end 2024 to $3.99 billion as of June 30, 2025, with the $310.3 million increase attributable to acquisitions completed during the period[45][46] - On May 8, 2025, the company issued $750.0 million of 6.75% senior unsecured notes due 2035[53] - On May 20, 2025, the company amended its Revolving Facility, increasing commitments from $1.8 billion to $2.2 billion and extending the maturity to 2030[61] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the 5.0% decrease in Q2 net sales to core organic decline and commodity price deflation, partially offset by acquisitions, with gross margin percentage falling due to normalization Recent Developments Key developments in H1 2025 include three strategic acquisitions totaling approximately $891.9 million, a new $500 million share repurchase plan, and issuance of $750 million in senior notes - Completed acquisitions of Alpine Lumber, Cluss Lumber, and Truckee Tahoe for an aggregate price of approximately $891.9 million, net of cash acquired[79] - The board authorized a new $500.0 million share repurchase plan on April 30, 2025, replacing the prior plan[81] - In the first six months of 2025, 3.4 million shares were repurchased for $403.6 million[82] - Issued $750.0 million of 6.750% senior unsecured notes due 2035 and amended the Revolving Facility to increase commitments to $2.2 billion[83][84] Current Operating Conditions and Outlook The U.S. housing market shows a near-term slowdown, with Q2 2025 single-family housing starts decreasing 8.4%, though the long-term outlook remains positive due to the market being underbuilt - U.S. single-family housing starts for Q2 2025 were 0.3 million, an 8.4% decrease compared to Q2 2024[87] - The long-term housing outlook is considered positive as the industry remains underbuilt, though near-term demand is pressured by macroeconomic uncertainty like interest rates and inflation[88] Results of Operations For Q2 2025, net sales fell 5.0% to $4.2 billion due to an 8.5% core organic decline, with gross margin percentage decreasing to 30.7% due to normalization - Q2 2025 net sales decreased 5.0% YoY, driven by an 8.5% decrease in core organic sales and a 1.5% decrease from commodity price deflation, partially offset by a 5.0% increase from acquisitions[92] Net Sales by Product Category - Q2 2025 vs Q2 2024 (in millions) | Product Category | Net Sales 2025 | % of Net Sales | Net Sales 2024 | % of Net Sales | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | | Manufactured products | $953.1 | 22.5% | $1,056.1 | 23.7% | (9.8)% | | Windows, doors and millwork | $1,030.0 | 24.3% | $1,114.9 | 25.0% | (7.6)% | | Specialty building products and services | $1,117.8 | 26.4% | $1,093.6 | 24.6% | 2.2% | | Lumber and lumber sheet goods | $1,133.2 | 26.8% | $1,191.7 | 26.7% | (4.9)% | | Total Net sales | $4,234.1 | 100.0% | $4,456.3 | 100.0% | (5.0)% | - Q2 2025 gross margin percentage decreased to 30.7% from 32.8% in Q2 2024, primarily driven by single-family and multi-family margin normalization[95] - For the six months ended June 30, 2025, net sales decreased 5.5% YoY, driven by an 8.4% core organic decline, 1.2% from commodity deflation, and 0.8% from one fewer selling day, partially offset by a 4.9% contribution from acquisitions[99] Liquidity and Capital Resources The company maintained a strong liquidity position of $1.6 billion as of June 30, 2025, with net excess borrowing availability of $1.54 billion under its expanded $2.2 billion Revolving Facility - Total liquidity as of June 30, 2025, was $1.6 billion, consisting of cash on hand and net borrowing availability under the Revolving Facility[110] Revolving Facility Availability (in millions) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Maximum borrowing amount | $1,850.7 | $1,714.3 | | Outstanding borrowings | ($233.0) | — | | Letters of credit | ($79.6) | ($83.3) | | Net excess borrowing availability | $1,538.1 | $1,631.0 | - Cash provided by operating activities decreased to $473.4 million for the six months ended June 30, 2025, from $769.3 million in the prior year period, largely due to lower net income[113] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company is exposed to market risks from interest rate fluctuations and commodity price volatility, where a 1.0% rate increase on the Revolving Facility would add approximately $2.3 million in annual interest expense - The company is exposed to interest rate risk on its Revolving Facility[120] - A 1.0% increase in interest rates would result in approximately $2.3 million of additional annual interest expense based on the $233.0 million outstanding borrowings as of June 30, 2025[120] - The company is exposed to commodity price risk, particularly for lumber products[121] - Delays in passing on material price increases to customers can negatively impact operating results[121] Item 4. Controls and Procedures Management concluded that as of June 30, 2025, the company's disclosure controls and procedures were effective at a reasonable assurance level, with no material changes to internal control over financial reporting identified - Based on their evaluation, the CEO and CFO concluded that as of June 30, 2025, the company's disclosure controls and procedures were effective at a reasonable assurance level[126] - There were no changes in internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[127] Part II — Other Information Item 1. Legal Proceedings The company is involved in various legal claims, including construction defect claims, for which a reasonable estimate of potential loss cannot be determined, though management believes the ultimate outcome will not have a material adverse effect - The Company faces a number of known and threatened construction defect legal claims, for which a reasonable possibility of loss cannot be estimated at this time[129] - Management believes the outcome of pending claims will not materially affect the company's consolidated financial position, cash flows, or results of operations[131] Item 1A. Risk Factors There were no material changes to the risk factors previously disclosed in the company's 2024 Form 10-K - There were no material changes to the risk factors reported in the company's 2024 Form 10-K[133] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During Q2 2025, the company repurchased approximately 3.4 million shares of common stock under a new $500 million share repurchase authorization, with $500 million remaining available - On April 30, 2025, the board approved a new share repurchase authorization of up to $500.0 million, terminating the prior plan[134] Common Stock Repurchases - Q2 2025 | Period | Total Number of Shares Purchased | Average Price Paid per Share | Approximate Dollar Value of Shares That May Yet be Purchased Under the Plans or Programs | | :--- | :--- | :--- | :--- | | April 1-30, 2025 | 3,358,899 | $118.25 | $500,000,000 | | May 1-31, 2025 | 1,055 | $120.64 | $500,000,000 | | June 1-30, 2025 | — | — | $500,000,000 | | Total | 3,359,954 | $118.25 | $500,000,000 | Item 5. Other Information No information is reported under this item - None[136] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including corporate governance documents, debt agreements, and required CEO/CFO certifications - Exhibits filed include the Indenture for the new 2035 notes, an amendment to the Credit Agreement, and CEO/CFO certifications (Sections 302 and 906)[139]