Builders FirstSource, Inc.

Good day and welcome to the Builders FirstSource third quarter 2021 earnings conference call. Today's call is scheduled to last about one hour, including remarks by Builders FirstSource management and the question and answer session. In order to ask a question, please press the star key followed by the number one on your touchtone phone at any time during the call. I'd now like to turn the call over to Mr. Michael Neese, Senior Vice President, Investor Relations for Builders FirstSource. Please go ahead, sir.

Thank you, Leo. Good morning and welcome to our third quarter 2021 earnings call. I hope you and your families continue to remain safe and well. With me on the call are Dave Flitman, CEO, and Peter Jackson, our CFO. Today, we will review our record third quarter results, discuss our ongoing integration progress and achievements, and cover our recent M&A activity. We remain bullish on the housing sector and believe we are well positioned for continued profitable growth in a highly fragmented market. We have provided results that include BMC in the third quarter of 2021 and standalone BFS in the third quarter of 2020. We have also provided pro forma results as if we own BMC in the third quarter of 2020. As a reminder, our adjusted EPS calculation excludes amortization of intangibles. The third quarter press release and supporting presentation for today's call are available on our website at investors.bldr.com. 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 direct comparable GAAP measures. The reconciliation of these non-GAAP measures to the corresponding GAAP measures were applicable, and the discussion of why we believe they are useful to investors can be found in the 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 Litigations Reform Act and projections of future results. Please review the forward-looking statement section in today's press release and in our SEC findings 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 Dick. Thanks Mike.

Good morning everyone and thanks for joining us. I'll cover three key topics on today's call. First, I'll provide a quick update on our record third quarter results, including our base business and our view of the current state of the housing market. Second, I'll provide an update on our recent tuck-in acquisitions that further strengthen our leading market position. And finally, I'll provide an update on the BMC integration, which is progressing exceptionally well and continues to track ahead of plan. As you can see on slide three, in the third quarter, our team delivered exceptional performance, continued to produce core organic growth, expanded margins, and delivered strong cash flow. Sales grew an impressive 63% to $5.5 billion. Embedded in our top-line performance, we also delivered core organic growth of 16.1%. Gross profit expanded 103% to a new quarterly record. Adjusted EBITDA more than doubled when compared to the prior year quarter to a record $976 million, with adjusted EBITDA margin expanding by 930 basis points to a record 17.7%. Finally, the increase of our EBITDA and margins helped us deliver approximately $1.1 billion in free cash flow while repurchasing 5.3% of our outstanding common shares. This strong performance underscores the strength of our industry-leading platform and the tremendous execution by our team members as we continue to outperform in our markets. despite the unprecedented supply chain challenges affecting the home building industry. Last quarter, in an effort to provide greater transparency into our underlying business performance, we provided an overview of the top and bottom line growth of our base business. As shown on slide six, for the full year 2021, We now expect our base business net sales to grow to $15.7 billion from $12.5 billion, or 26%, and adjusted EBITDA to grow to $1.8 billion from $1.1 billion, or 64%. Over time, we believe our base business will sustain and grow our double-digit EBITDA margin. and expect to deliver 11.2% EBITDA margin for the full year 2021. Demand for single-family housing continues to support our top-line growth, and we believe that growth will be sustained over time as demographics continue to develop favorably, coupled with more than a decade of under-building. For the Corps, on a pro forma basis, Our core organic customer growth was 27.5% per single family. Value-added core organic sales grew by an estimated 31.2%, led by 44.6% growth in our manufactured products category. Our team members are doing an outstanding job getting our customers what they need in a very challenging environment. Single-family starts increased approximately 5% in the third quarter on tough comparisons to a strong prior year period. However, we were encouraged to see our core organic growth remain strong as underlying demand leveled off during the quarter. In addition, looking beyond the effects of the pandemic in the third quarter of last year, single-family starts this quarter grew 21% when compared with the third quarter of 2019, which our core organic growth outpaced by 650 basis points. The country has averaged 1.2 million units of existing inventory in 2021, which is 14% below the five-year average and at roughly a third of historical highs. Single-family housing under construction also increased 31% in the third quarter. In fact, there are currently more single-family homes under construction across the country than there have been in more than 14 years, and the homebuilder backlog is currently at the highest level it's been in the last 15 years. This data is an encouraging sign for our business as we finish 2021 and look to next year, and we expect demand to remain robust. On slide seven, we are focused on executing our strategy of investing in growth. We have completed five tuck-in transactions in 2021 since merging with BMC, and believe each acquisition adds unique value to not only our portfolio of best-in-class solutions for customers, but also our geographic presence in attractive, economically sound, high-growth markets. Turning to slide 8, we were excited to welcome the California Trust Frame Team to the builder's first source family in the third quarter. CalTrust was California's largest independent trust manufacturer and has added substantial and profitable scale to our value-added products business on the West Coast. This acquisition adds to our value-added portfolio and provides access to new customers for our continued growth. Also during the quarter, we acquired the Apollo software assets from former construction technology startup, Katerra. The Apollo platform provides design collaboration workflow, construction budgeting and scheduling, and job site management capabilities combined with mobile functionality. A quick update on our paradigm acquisition. The BFS and Paradigm teams have come together nicely and are aligning on our digital strategy to drive efficiency in residential construction, which will create value for our home builder customers and revenue growth for us. Our teams have made a number of customer visits which have helped us validate the market opportunity associated with developing an end-to-end digital solution. And we are now working with several customers on pilots that will improve the pre-construction process, create more accurate material lists, bring our supply partners into a digital workflow, and better engage homebuyers in the process. We remain confident in our investments in both Paradigm and Apollo and our ability to drive long-term value through digital transformation. moving forward we will continue to reinvest in our business to accelerate organic growth while actively pursuing accretive tuck-in m a opportunities to improve our mix and build scale in key growth markets we firmly believe the strength of our balance sheet and cash flow generation will allow us to remain a disciplined consolidator in this industry Next, on slide 10, I'll provide a brief update on the BMC integration. As reported last quarter, synergies are tracking one full year ahead of plan and are projected to be in the range of $140 to $160 million by the end of 2022, exceeding our initial expectation. We delivered $36 million in cost synergies in the third quarter, and $74 million during the first nine months of 2021. We now expect 2021 cost synergies to be in the range of $90 to $110 million, a midpoint increase of $10 million above the expected outcome we reported in the second quarter. Our ability to achieve our synergy commitment in half the time underscores the cultural alignment of our two companies and the strength and collaboration of our leadership team. As we approach Veterans Day, I would like to take a moment to recognize and thank the veterans at BFS and their families. Earlier this fall, I had the honor of signing a statement of support on behalf of our company with the employer support of the Guard and Reserve, or the ESGR. I had the privilege of meeting BFS team member and U.S. Army veteran, Corey Basinger. Corey spent eight years in the Army and has been with BFS for nearly 10. He is our maintenance manager in Houston, where he oversees critical facilities and equipment processes, so he can seamlessly serve our customers. Corey received the Pro Patria and Above and Beyond Awards for his excellent leadership in supporting Guard and Reserve employees. in part due to his empathy, experience, and understanding of what it means to be a veteran. Thank you, Corey, and thank you to all of our veterans for your service. With that, let me turn the call over to Peter to go through a detailed look at our Q3 results and provide an update on our share repurchase program and our 2021 updated financial guidance.