Builders FirstSource(BLDR) - 2025 Q2 - Quarterly Results

Executive Summary and Highlights Builders FirstSource reported durable Q2 2025 results with a 5.0% decrease in net sales to $4.2 billion, driven by market challenges, margin normalization, and lower housing starts, yet maintained strong free cash flow and disciplined execution - CEO Peter Jackson highlighted the company's focus on controllable factors such as customer service, technology, and disciplined management to navigate the challenging market and strengthen its industry position for long-term value creation[1] - CFO Pete Beckmann emphasized the strength and adaptability of the operating model, which continues to generate strong free cash flow and preserve financial flexibility for disciplined capital deployment[1] Q2 2025 Key Performance Indicators (Y-o-Y) | Metric | Q2 2025 | Change (Y-o-Y) | | :--- | :--- | :--- | | Net Sales | $4.2 billion | -5.0% | | Gross Profit Margin | 30.7% | -210 bps | | Net Income | $185.0 million | -46.2% | | Diluted EPS | $1.66 | -42.2% | | Adjusted EBITDA | $506.1 million | -24.4% | | Adjusted EBITDA Margin | 12.0% | -300 bps | | Free Cash Flow | $255.0 million | -30.5% | | Shares Repurchased | 3.3 million | - | Financial Performance Analysis The company's Q2 2025 financial performance saw net sales decline 5.0% to $4.2 billion due to market headwinds and an 8.5% drop in core organic sales, leading to compressed profitability with gross margin at 30.7% and Adjusted EBITDA margin at 12.0% Net Sales Q2 2025 net sales decreased 5.0% to $4.2 billion, primarily due to an 8.5% drop in core organic sales across Multi-Family and Single-Family segments, partially offset by acquisitions Q2 2025 Net Sales Change Breakdown (Y-o-Y) | Component | Percentage Change | | :--- | :--- | | Core Organic Net Sales | -8.5% | | Commodity Deflation | -1.5% | | Acquisitions | +5.0% | | Total Net Sales | -5.0% | Q2 2025 Core Organic Net Sales Change by End Market (Y-o-Y) | End Market | Percentage Change | | :--- | :--- | | Multi-Family | -23.3% | | Single-Family | -9.1% | | R&R/Other | +3.0% | Profitability Q2 2025 profitability declined significantly, with gross profit falling 11.2% to $1.3 billion, net income decreasing 46.2% to $185.0 million, and Adjusted EBITDA dropping 24.4% to $506.1 million Q2 2025 Profitability Metrics (Y-o-Y) | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Gross Profit | $1.3 billion | $1.46 billion | -11.2% | | Gross Margin | 30.7% | 32.8% | -210 bps | | Net Income | $185.0 million | $344.1 million | -46.2% | | Diluted EPS | $1.66 | $2.87 | -42.2% | | Adjusted Net Income | $264.3 million | $420.4 million | -37.1% | | Adjusted Diluted EPS | $2.38 | $3.50 | -32.0% | | Adjusted EBITDA | $506.1 million | $669.7 million | -24.4% | | Adjusted EBITDA Margin | 12.0% | 15.0% | -300 bps | Operating Expenses and Other SG&A expenses increased 1.5% to $987.8 million, rising to 23.3% of net sales, while net interest expense grew to $72.0 million and the effective tax rate increased to 22.7% - SG&A increased 1.5% to $987.8 million, representing 23.3% of net sales, up 150 basis points from the prior year due to reduced operating leverage[5] - Net interest expense rose by $20.0 million to $72.0 million, primarily due to higher average debt balances[6] - The effective tax rate increased by 140 basis points year-over-year to 22.7%, mainly due to a lower stock-based compensation windfall benefit[7] Capital Management and Liquidity The company maintained strong liquidity of $1.6 billion and generated $255.0 million in free cash flow, while its net debt to LTM Adjusted EBITDA ratio increased to 2.3x, supported by strategic debt issuance and share repurchases - Total liquidity as of June 30, 2025, was approximately $1.6 billion, consisting of $1.54 billion in borrowing availability and $87 million in cash[13] - The net debt to LTM Adjusted EBITDA ratio was 2.3x, with net debt at $4.6 billion and LTM Adjusted EBITDA at $2.0 billion[13] - In Q2, the company repurchased 3.3 million shares for $390.9 million. Since August 2021, it has repurchased 48.1% of its total shares outstanding for $8.0 billion[13] - Completed a $750 million offering of 6.750% senior notes due 2035 and amended its ABL facility, increasing commitments to $2.2 billion and extending maturity to May 2030[13] Operational Excellence and Productivity The company achieved $5 million in Q2 2025 productivity savings, bringing year-to-date totals to $22 million, with full-year 2025 savings projected between $45 million and $65 million - Delivered approximately $5 million in productivity savings in Q2 2025[13] - Year-to-date productivity savings total approximately $22 million[13] - The company expects to achieve $45 million to $65 million in total productivity savings in 2025[13] Full Year 2025 Outlook and Assumptions Builders FirstSource projects full-year 2025 net sales between $14.8 billion and $15.6 billion, Adjusted EBITDA between $1.5 billion and $1.7 billion, and free cash flow between $0.8 billion and $1.0 billion, assuming continued market softness in housing starts Full Year 2025 Outlook | Metric | 2025 Guidance Range | | :--- | :--- | | Net Sales | $14.8B - $15.6B | | Gross Profit Margin | 29.0% - 30.5% | | Adjusted EBITDA | $1.5B - $1.7B | | Adjusted EBITDA Margin | 10.1% - 10.9% | | Free Cash Flow | $0.8B - $1.0B | Full Year 2025 Key Assumptions | Assumption | Projected Change/Value | | :--- | :--- | | Single-Family Starts | Down 10% - 12% | | Multi-Family Starts | Down mid-teens | | R&R | Flat | | Acquisition Net Sales Growth | +5.0% to +5.5% | | Total Capital Expenditures | $300M - $350M | | Interest Expense | $270M - $280M | | Effective Tax Rate | 23.0% - 25.0% | Company and Investor Information The company will host a Q2 2025 earnings conference call on July 31, 2025, and participate in September investor conferences, reinforcing its position as the largest U.S. building products supplier with approximately 585 locations in 43 states - A conference call to discuss Q2 2025 financial results is scheduled for Thursday, July 31, 2025, at 8:00 a.m. Central Time[15] - Management will participate in the Goldman Sachs Consumer/Retail Conference on September 3, 2025, and the Jefferies Industrials Conference on September 4, 2025[17] - Builders FirstSource is described as the largest U.S. supplier of building products, prefabricated components, and value-added services, operating approximately 585 locations in 43 states[18][20] Financial Statements The unaudited condensed consolidated financial statements for Q2 2025 show a year-over-year decline in net income, lower operating cash flow, significant cash used for share repurchases, and an increase in total assets and liabilities due to acquisitions and debt issuance Condensed Consolidated Statement of Operations For the three months ended June 30, 2025, net sales decreased to $4.23 billion, with net income falling to $185.0 million and diluted EPS to $1.66, reflecting a significant year-over-year decline Statement of Operations Summary (Three Months Ended June 30) | (in thousands) | 2025 | 2024 | | :--- | :--- | :--- | | Net sales | $4,234,064 | $4,456,340 | | Gross margin | $1,299,041 | $1,462,684 | | Income from operations | $311,287 | $489,483 | | Net income | $185,031 | $344,090 | | Diluted EPS | $1.66 | $2.87 | Condensed Consolidated Statement of Cash Flows For the six months ended June 30, 2025, net cash provided by operating activities decreased to $473.4 million, while investing activities used $1.06 billion primarily for acquisitions, and financing activities provided $519.5 million, offsetting share repurchases Cash Flow Summary (Six Months Ended June 30) | (in thousands) | 2025 | 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 | Condensed Consolidated Balance Sheet As of June 30, 2025, total assets increased to $11.46 billion and total liabilities rose to $7.29 billion, primarily due to long-term debt, while stockholders' equity slightly decreased to $4.18 billion Balance Sheet Summary | (in thousands) | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Total current assets | $3,287,617 | $3,141,239 | | Total assets | $11,464,555 | $10,583,086 | | Total current liabilities | $1,834,631 | $1,777,276 | | 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 | Non-GAAP Financial Measures and Reconciliations The company provides non-GAAP measures such as Adjusted EBITDA, Adjusted Net Income, and Free Cash Flow, with detailed reconciliations, to offer a clearer view of operational performance by excluding specific non-cash or special items Reconciliation of GAAP Net Income to Adjusted Net Income For Q2 2025, GAAP net income of $185.0 million was adjusted for items like amortization and technology implementation, resulting in an Adjusted Net Income of $264.3 million, a decrease from Q2 2024 Q2 Reconciliation: GAAP Net Income to Adjusted Net Income (in millions) | Line Item | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | GAAP net income | $185.0 | $344.1 | | Amortization expense | $73.9 | $81.0 | | Technology implementation expense | $28.8 | $17.5 | | Other adjustments | $1.6 | $1.9 | | Tax-effect of adjustments | ($25.0) | ($24.1) | | Adjusted net income | $264.3 | $420.4 | Reconciliation of GAAP Net Income to Adjusted EBITDA Adjusted EBITDA for Q2 2025 was $506.1 million, reconciled from GAAP net income of $185.0 million by adding back items such as interest, taxes, D&A, stock compensation, and technology implementation expenses, representing a decrease from Q2 2024 Q2 Reconciliation: GAAP Net Income to Adjusted EBITDA (in millions) | Line Item | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | GAAP net income | $185.0 | $344.1 | | Interest, Taxes, D&A | $300.6 | $312.8 | | Stock compensation expense | $16.2 | $16.7 | | Technology implementation expense | $28.8 | $17.5 | | Other adjustments | $5.5 | $2.8 | | Adjusted EBITDA | $506.1 | $669.7 | Reconciliation of GAAP SG&A to Adjusted SG&A GAAP SG&A of $987.8 million for Q2 2025 was adjusted to $818.4 million, with key deductions including amortization and technology implementation costs, resulting in Adjusted SG&A as 19.3% of sales, up from the prior year Q2 Reconciliation: GAAP SG&A to Adjusted SG&A (in millions) | Line Item | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | GAAP SG&A expense | $987.8 | $973.2 | | Less: D&A, Stock Comp, etc. | ($168.6) | ($158.2) | | Adjusted SG&A expense | $818.4 | $814.6 | | Adjusted SG&A as % of sales | 19.3% | 18.3% | Interest Reconciliation and Free Cash Flow As of June 30, 2025, total net debt was $4.64 billion with a Q2 interest expense of $72.3 million, while free cash flow for the quarter was $255.0 million, derived from operating cash flow less net capital expenditures - As of June 30, 2025, total net debt was $4.64 billion, resulting in a Q2 interest expense of $72.3 million[44] Free Cash Flow Calculation (in millions) | Line Item | Q2 2025 | H1 2025 | | :--- | :--- | :--- | | Cash from Operating Activities | $341.0 | $473.4 | | Less: Capital expenditures, net | ($86.0) | ($173.3) | | Free cash flow | $255.0 | $300.1 | Supplemental Data This section details Q2 2025 net sales by product category, showing Value-added products as the largest segment at 46.8%, followed by Lumber & lumber sheet goods and Specialty building products & services Sales by Product Category In Q2 2025, most product categories experienced year-over-year sales declines, with Value-added products down 8.7% and Lumber & Lumber Sheet Goods down 4.9%, while Specialty Building Products & Services grew 2.2% Net Sales by Product Category (Three Months Ended June 30) | (in millions) | 2025 Net Sales | 2024 Net Sales | % Change | | :--- | :--- | :--- | :--- | | Manufactured products | $953.1 | $1,056.1 | (9.8)% | | Windows, doors & millwork | $1,030.0 | $1,114.9 | (7.6)% | | Value-added products (Subtotal) | $1,983.1 | $2,171.0 | (8.7)% | | Specialty building products & services | $1,117.8 | $1,093.6 | 2.2% | | Lumber & lumber sheet goods | $1,133.2 | $1,191.7 | (4.9)% | | Total net sales | $4,234.1 | $4,456.3 | (5.0)% |