BlueLinx Holdings Inc. 2026 Q2 Earnings Call

Welcome to the BlueLinx second quarter 2026 earnings call. Joining me on today's call is Shyam Reddy, our Chief Executive Officer, and Kelly Wall, our Chief Financial Officer and Treasurer. At the end of today's prepared remarks, we'll take questions. Our second quarter news release and Form 10-Q were issued yesterday after the close of the market, along with our webcast presentation. These items are available in the Investors section of our website. We encourage you to follow along with the detailed information on the slides during our webcast. Today's discussion contains forward-looking statements. Actual results may differ significantly from those forward-looking statements due to various risks and uncertainties, including the risks described in our most recent SEC filings. Today's presentation includes certain non-GAAP and adjusted financial measures that we believe provide helpful context for investors evaluating our business.

Reconciliations to the closest GAAP financial measure can be found in the appendix of our presentation. Now, I'll turn it over to Shyam.

Thanks, Tom. Good morning, everyone. Our second quarter results once again demonstrate our ability to deliver profitable sales growth in a challenging market environment, validating the strength of our channel and product strategies. Our disciplined execution led to volume growth at solid margins across key customer channels and multiple product types. We believe our results reflect market share gains since we're operating in another year of single and multi-family housing start declines and tepid repair and remodel activity. During the second quarter, net sales increased more than 4% year-over-year, driven by Disdero specialty product sales, higher volumes in key specialty product categories, and improved pricing across multiple product categories. We also continued to experience favorable pricing and volumes for lumber and structural products.

Specialty gross margin was 18.7%, excluding the benefit of an import duty-related item, and structural gross margin was 10.9%, both of which reflect the strength of our customer value proposition and effective inventory management. Our channel strategy continues to fuel our branded specialty product expansion, both geographically and SKU wise with strategic suppliers. Engineered wood, siding, no work industrial, outdoor living, and other specialty products represented approximately 70% of net sales and 80% of gross profit in the quarter. The momentum from the multi-family channel efforts, builder pull-through programs, and national accounts focus, all key commercial growth strategies, continue to drive our financial results and generate value for our entire customer base. Specifically, these initiatives are helping us drive volume growth and share gains by converting projects and customers to the strategic brands and products we carry, thereby strengthening our position as a preferred commercialization partner for suppliers.

The virtuous cycle is leading to stickier relationships with both. Suppliers want partners who can help them grow across multiple channels and markets in a fast-paced, dynamic landscape, that's what we're doing. Our value-add services and enhanced capabilities enable us to execute our strategic initiatives at scale and to accelerate both customer and supplier growth objectives, no matter the market conditions. Our disruptive go-to-market approach is unlocking commercial growth opportunities for both customers and suppliers, thereby differentiating us in the marketplace. We have driven volume growth and share gain in key customer channels, such as multi-family and key national accounts, demonstrating another quarter of key channel growth. We've also expanded our geographic footprint faster than before with key suppliers like Huber, Louisiana-Pacific, Georgia-Pacific, Westlake Royal Building Products, and RDI. We even have national distribution rights for Georgia-Pacific on key specialty product lines that support our multi-family efforts.

A new partnership with Trex was also announced that gives BlueLinx distribution rights in 11 markets located in our central, north, and south regions. This recent award on the part of Trex, the national distribution rights we have with Georgia-Pacific, and the accelerated expansion rights provided by our other key strategic suppliers demonstrate the merits of the commercialization accelerant we are providing to key vendors via our channel focus. Our results also demonstrate the benefits of disciplined inventory management and strong execution. Our ability to quickly align inventory levels with changing market conditions reflects the strength of our operating discipline and commercial capabilities. As market conditions improve, we expect these capabilities to help support even stronger cash flow generation.

We are also making meaningful progress on our AI and digital transformation initiatives, several of which are designed to enhance commercial activities, fine-tune our inventory management capabilities, and generate e-commerce sales. We also remain committed to supporting the advanced digital platforms of our largest customers to accelerate channel growth. Finally, our financial position remains strong with $655 million in available liquidity at the end of the quarter, providing us with the flexibility to reinvest in the business and to pursue strategic growth opportunities. Now, for a few more highlights on our second quarter results. We generated net sales of $814 million in adjusted EBITDA of $35.6 million for a 4.4% adjusted EBITDA margin, a significant improvement on a year-over-year basis. Disdero, which we acquired in Q4 2025, contributed nearly $25 million of net sales and $2.7 million in adjusted EBITDA.

Adjusted net income was $9.1 million or $1.15 per diluted share. The strategic sales and product expansion efforts are what led to these higher volumes and increased net sales at solid margins. For example, multifamily and national accounts continued to perform well, with volumes up 11% and 2% year-over-year respectively. Our builder pull-through program, supported by strategic customer partnerships, also contributed growth across key channels and specialty product categories. In addition, our differentiated value proposition, combined with geographic and SKU expansion with key suppliers, drove meaningful year-over-year growth across multiple product lines that are aligned with our channel growth strategy. The newly announced Trex relationship demonstrates the merits of our strategy, and we look forward to validating it for them in supporting our customers' commercial objectives. We're especially proud of our solid gross and EBITDA margin performance in spite of cost inflation, freight challenges, and a competitive pricing environment.

For example, diesel fuel costs and flatbed freight rates are up 50% and nearly 17% on a year-over-year basis, respectively. We've also dealt with approximately 60 cost increases from suppliers through Q2 2026 compared to around 20 through Q2 2025, yet we performed well for another consecutive quarter. These results reflect disciplined execution of our product and channel strategies, supported by operational and business excellence initiatives that relate to effective pricing and cost passthrough, strategic value-add services, exceptional customer service, branded product expansion, and disciplined inventory management. Overall, our Q2 results reflect continued momentum and solid financial performance despite low consumer confidence, persistent inflation, economic uncertainty, and geopolitical volatility driving weakness in the housing and repair and remodel markets. We remain focused on executing it through the cycle and positioning BlueLinx for accelerated growth when the industry recovers.

I want to thank our associates for the dedication they bring every day to our customers, suppliers, one another, and the communities we serve. Now, I'll turn it over to Kelly, who will provide more details on our financial results and our capital structure.

Thanks, Shyam, and good morning, everyone. Let's first go through the consolidated highlights for the quarter. Overall, both specialty products and structural products delivered solid sales growth and gross margins in what continues to be a challenging new home construction and repair and remodel market. Net sales for the second quarter of 2026 were $814 million, up over 4% year-over-year. Total gross profit was $140 million, and gross margin was 17.2%, up from 15.3% in the prior year period. As Shyam mentioned, second quarter results included a $7.2 million duty-related benefit. Excluding this benefit, gross margins for Q2 of 2026 were 16.3%. SG&A was $107 million, up $12 million from last year's second quarter. This increase was mainly due to the acquisition of Disdero in Q4 last year, fuel and third-party freight expenses, and employee-related expenses.

Given the challenging demand environment and continued pressure on operating costs, consistent with prior quarters, we remain focused on disciplined expense management and identifying additional opportunities to improve efficiency. Net income for the quarter was $6.4 million, or $0.81 per diluted share. Adjusted net income was $9.1 million, or $1.15 per diluted share, up approximately 64%. Our effective income tax rate for the quarter was 43%, including the impact of discrete items. Adjusted EBITDA was $35.6 million, up approximately 33% from the second quarter of 2025 due to the benefit of the duty-related item, increased sales, including Disdero, improved overall gross margins, and disciplined expense management. Not including the duty-related item, Q2 2026 adjusted EBITDA was $28.4 million, for a margin of 3.5%. Naturally, we are very pleased with the year-over-year increase in adjusted EBITDA in both the first and second quarters.

Turning now to the second quarter results for specialty products. Net sales for specialty products were $564 million in the second quarter, up nearly 4% year-over-year. This increase was driven by Disdero sales and higher volumes in EWP and industrial, as well as increased pricing in nearly all product types. Partially offset by volume pressures in millwork due to cheaper alternatives and aggressive local market pricing. Though we were able to improve pricing in Q2 on a year-over-year basis. Gross profit from specialty product sales was $113 million, up over 12% year-over-year. Specialty gross margin was 20%, up from last year's 18.5%. Excluding the $7.2 million duty-related item in Q2 of 2026, specialty gross margin was still up 20 basis points from last year to 18.7%. Sequentially, specialty gross margins improved 60 basis points when compared to Q1 of 2026.