Builders FirstSource, Inc. 2026 Q3 Earnings Call

Please go ahead, ma'am. Good morning, and welcome to our third quarter 2026 earnings call.

With me on the call are Peter Jackson, our CEO, and Pete Beckmann, our CFO. The earnings press release and presentation are available on our website at investors.bldr.com. We will refer to the presentation during our call. The results discussed today include GAAP and non-GAAP results adjusted for certain items. We provide these non-GAAP results for informational purposes, and they should not be considered in isolation from the most directly comparable GAAP measures. You can find the reconciliation of these non-GAAP measures to the corresponding GAAP measures where applicable, and a discussion of why we believe these could be useful to investors in our earnings press release, SEC filings, and presentation.

Our remarks in the press release, presentation, and on this call contain forward-looking and cautionary statements within the meaning of the Private Securities Litigation Reform Act and projections of future results. Please review the Forward-Looking Statements section in today's press release and in our SEC filings for various factors that could cause our actual results to differ from forward-looking statements and projections. With that, I'll turn the call over to Peter.

Thank you, Heather, and good morning, everyone. Our third quarter results reflect the disciplined execution by our team and the resilience of our platform. While housing market conditions remain challenging, we are focused on what we can control, delivering solutions that help builders operate more efficiently and investing in value-added products and technology to drive productivity and fuel growth. These efforts are reinforcing our leadership position and our role as the partner of choice for home builders. This environment underscores the importance of the operational excellence and differentiating capabilities at scale, which position us to outperform in any market. Let's turn now to slide 4. We delivered third quarter results in line with our expectations for sales and EBITDA, even as single-family activity remained soft. Our value-added offerings, cost actions, and ongoing productivity efforts helped cushion the impact of lower volumes.

I want to thank our team members for their relentless focus on our customers as we head into the final quarter of the year. Before turning to our strategic priorities, let me spend a moment on the market backdrop. Mortgage rates moved back above 7% during the quarter, and with consumer confidence still weak, affordability remains the main constraint on new home demand. Higher diesel and transportation costs are also adding pressure across the supply chain. Despite these headwinds, we are maintaining the midpoints of our full-year net sales and adjusted EBITDA outlook. Single-family starts are tracking with the assumptions we set last quarter, and economic forecasts have moved closer to our view since then. Pete Beckmann will walk through the details in his remarks. Demand this fall has been weak, and some builders will likely need to slow starts further to bring inventory in line with sales.

Our outlook already reflects this cautious view. In a market like this, builders lean harder on partners who can help them control costs and build efficiently, which plays to our strengths. We expect to capture share by delivering outstanding customer service, bundling our broad product portfolio to help builders with affordability, and applying technology in ways that make our sales teams more effective. Performance varied by region, with continued softness across Texas and Colorado, partially offset by relative strength in California, Florida, and the Northeast. In multifamily, sales were up modestly in the quarter, but developers remain cautious about new starts as the industry works through existing projects and occupancy stays below desired levels in many markets. Based on the current pipeline, we expect multifamily results to stay muted in the near term. Our priorities have not changed.

We will continue to constrain structural costs and grow faster than the market. Even in a weak year, builders are still starting a meaningful number of homes. The growing shortage of skilled trades is driving builders toward off-site and installed solutions, where our offerings and our scale position us as the partner of choice. Slide 5 highlights how we're managing through the downturn while protecting our ability to invest for the long term. We remain on track to deliver the $140 million in cost actions we outlined. As a reminder, $25 million of those savings will hit next year. So far this year, we have streamlined our organization, reduced overhead across the field support center and operations, and focused our investments in the initiatives with the clearest near-term value.

We have consolidated 45 facilities so far this year and 100 over the past three years while keeping our on-time and in-full delivery rate above 90%. With our scale and experienced team, we are well-positioned to manage through today's market and to benefit from meaningful operating leverage as it recovers. Slide 6 lays out the key initiatives underway across our four strategic pillars. This quarter, we gained share in a challenging market. We also generated $23 million in productivity savings through targeted supply chain initiatives and manufacturing efficiencies and made steady progress on our ERP implementation. Turning to slide 7, we deployed approximately $161 million in the third quarter towards return-enhancing opportunities that are aligned with our capital allocation priorities. Strong free cash flow generation through the cycle gives us the flexibility to invest in the business, pursue acquisitions, and return capital to shareholders over time.

M&A remains an important lever. As shown on slide 8, we focus on acquisitions that expand our value-added product offerings and strengthen our position in desirable geographies. This quarter, we acquired ICG and Gleckler and Sons, which enhance our ability to serve customers in the Southeast. Since the BMC merger in 2021, we have completed 44 acquisitions, representing approximately $2.5 billion in annual sales, the equivalent of a top six LBM player. The industry is still fragmented, and we see a long runway for M&A to contribute to our growth. Moving to slide 9, we see technology as an enabler of our self-help efforts, both in how we run our business and in how we serve our customers. Our goal is to help build a home building ecosystem where data flows efficiently from one step to the next.

When information moves cleanly between builders, trades, and suppliers, everyone works more efficiently, including us. Our investments are pulling pieces of that ecosystem together. In the third quarter, we led the Series A financing for Digs, whose AI platform brings a builder's construction documents into a single source of truth that follows the home from pre-construction through warranty. We also invested in Scaffold alongside several of the nation's largest home builders. Scaffold's AI connects trade contractors to the home builder systems they already use and keeps schedules and purchase orders current across all of them. We're also using technology to help make our own systems and teams more productive. We have piloted a new sales app with will call functionality, which has reduced the time it takes customers to place an order by up to 90%. That means faster service for our customers and more capacity for our teams.

It's one example of how technology supports the productivity savings we expect going forward. We'll share more at Investor Day about how technology is benefiting our business and our vision for the home building ecosystem. One of my favorite parts of these calls is recognizing a member of our team. Today, I want to recognize Kay Moberg, a pricing analyst at our Wasilla, Alaska location. In 1986, Ferris Bueller made skipping school look like an art form. That same year, Kay joined Spenard Builders Supply, one of our legacy companies, as a receptionist, and unlike Ferris, she has been showing up ever since. Her area manager calls her a beam of bright light, and she's always ready to jump in wherever she's needed. When she's not at work, you'll likely find Kay somewhere in the Alaskan wilderness hiking, cycling, hunting, or fishing.

Her teammates benefit from that too, because at inventory time, she brings in summer sausage and smoked salmon. I'm told nobody calls in sick on inventory day in Wasilla. Thank you, Kay, for 40 years of keeping our Alaska team well-supplied in more ways than one. I'll now turn the call over to Pete Beckmann to discuss our financial results in greater detail.

Thank you, Peter, and good morning, everyone. Our third quarter results met our expectations, reflecting solid execution and continued focus on cost management. Our cash flow generation and liquidity give us the capacity to pursue growth opportunities while maintaining financial flexibility. Turning to slides 10 through 12, net sales decreased approximately 2% to $3.9 billion, as lower core organic sales were partially offset by growth from acquisition. Core organic sales declined 6% in single family, increased 2% in multifamily, and were roughly flat in repair and remodel. Even in a softer single-family backdrop, we gained roughly 1-2 points of share in the quarter. As a reminder, our single-family sales don't move one for one with starts. First, there is a roughly three-month lag between a start and our first sale.