Builders FirstSource Q3 Earnings Call Highlights

Key Points

• Third-quarter results reflected continued housing weakness: Net sales fell 2% to $3.9 billion, while adjusted EBITDA declined 28% to $311 million and margin contracted to 8.1%. Single-family sales dropped 6%, but multifamily rose 2% and repair-and-remodel was roughly flat.
• Cost controls and market-share gains helped offset lower volumes: Builders FirstSource remains on track for $115 million in 2026 cost actions, consolidated 45 facilities year to date, generated $23 million in quarterly productivity savings and gained an estimated 1–2 percentage points of single-family share.
• Management maintained its 2026 outlook despite elevated leverage: The company expects $14.2–$14.6 billion in sales, $1.075–$1.125 billion in adjusted EBITDA and $400–$450 million in free cash flow. Net debt to adjusted EBITDA was about 4.1 times, while acquisitions continued, including deals that expand its Southeast and Florida operations.

Builders FirstSource NYSE: BLDR reported third-quarter 2026 results that management said met its expectations despite continued softness in single-family housing activity, as cost actions, productivity measures and value-added offerings helped mitigate lower volumes.

Net sales fell approximately 2% year over year to $3.9 billion. Core organic sales declined 6% in single-family, increased 2% in multifamily and were roughly flat in repair and remodel. Adjusted EBITDA declined 28% to $311 million, while adjusted EBITDA margin decreased 290 basis points to 8.1%.

CEO Peter Jackson said mortgage rates moving back above 7% during the quarter and weak consumer confidence continued to constrain new-home demand. Still, the company maintained the midpoints of its full-year sales and adjusted EBITDA outlook, saying single-family starts were tracking with assumptions established in the prior quarter.

Margins pressured by volumes and operating leverage

Gross profit declined 11% to $1.1 billion, and gross margin fell 260 basis points to 27.8%. CFO Pete Beckmann attributed the decline primarily to lower housing starts and related market headwinds. He said adjusted selling, general and administrative expense declined by $5 million as lower variable compensation, reduced headcount and cost actions more than offset higher insurance, fuel and delivery costs as well as acquired operations.

Adjusted earnings per share were $1.51, down 25% from the prior year, as lower adjusted net income was partly offset by share repurchases. Beginning in the third quarter, Builders FirstSource changed its adjusted EPS and adjusted net income definitions to align them with adjusted EBITDA, including the exclusion of stock compensation expense, severance and other management-identified adjustments. Prior periods were recast under the revised definition.

Jackson said competitive conditions had stabilized following aggressive pricing earlier in the year, though the company remains watchful for changes if housing starts weaken further. Beckmann said the implied fourth-quarter gross margin would be slightly below the third-quarter level, reflecting seasonal factors, fixed-cost deleveraging and customers moderating activity to balance inventory with sales.

Cost actions and market-share efforts

The company said it remains on track to deliver $115 million of cost actions in 2026, or $140 million on a full-run-rate basis, with $25 million of the savings expected to benefit next year. The actions include facility consolidations, changes to incentive compensation, tighter discretionary spending controls and lower merit and overhead spending.

Builders FirstSource consolidated 45 facilities year to date and 100 over the past three years, while maintaining an on-time and in-full delivery rate above 90%, Jackson said. The company also generated $23 million of productivity savings during the quarter through supply-chain initiatives and manufacturing efficiencies.

Management said the company gained roughly 1 to 2 percentage points of single-family market share during the quarter. Jackson said share gains are pursued market by market, using the company’s product offerings, capacity, customer service and supplier relationships rather than relying solely on price competition. He said the company has seen somewhat greater share gains in lumber, while product bundling has also supported value-added offerings.

Regional performance was uneven. Texas and Colorado remained soft, while California, Florida and the Northeast showed relative strength, according to Jackson. Multifamily sales rose modestly, but developers remained cautious about new starts as the sector works through existing projects and occupancy remains below desired levels in many markets.

Cash flow, leverage and acquisitions

Third-quarter operating cash flow was $147 million, compared with $548 million a year earlier, reflecting lower net income and the absence of the prior year’s working-capital release. Free cash flow totaled $76 million. Builders FirstSource ended the quarter with net debt to adjusted EBITDA of about 4.1 times and approximately $1.5 billion in liquidity.

Beckmann said leverage remains above the company’s long-term target, but management is comfortable with its financial position and expects leverage to return to its target range as EBITDA improves. During the quarter, the company invested $71 million in capital expenditures and $91 million in acquisitions, while making no share repurchases.

The company acquired ICG and Gleckler and Sons during the quarter, expanding its ability to serve customers in the Southeast. Jackson said the Gleckler acquisition strengthens Builders FirstSource’s Florida business and product portfolio. Since the 2021 BMC merger, the company has completed 44 acquisitions representing approximately $2.5 billion in annual sales.

Jackson said acquisitions remain a long-term growth lever, though he described the current transaction environment as slower, with fewer owners seeking to sell. He said the company sees opportunities to acquire businesses at more modest valuations and believes its balance sheet supports smaller, strategically attractive transactions.

2026 outlook retained; 2027 scenarios not guidance

Builders FirstSource narrowed its 2026 outlook while retaining the midpoints of its prior ranges. The company expects:

• Net sales of $14.2 billion to $14.6 billion.
• Adjusted EBITDA of $1.075 billion to $1.125 billion.
• Adjusted EBITDA margin of 7.4% to 7.9%.
• Gross margin of 27.5% to 28.5%.
• Free cash flow of approximately $400 million to $450 million.

The outlook assumes single-family starts in the company’s markets will decline nearly 7%, multifamily starts will decline about 4%, and repair-and-remodel activity will be down 1%. It also assumes average commodity prices of $390 to $410 per thousand board feet.

Management also presented 2027 scenarios based on differing housing-start and commodity-price conditions, emphasizing repeatedly that the scenarios are not formal guidance. The analysis does not include cost actions beyond those already announced. Jackson said higher mortgage rates could cause some builders to slow starts, though the timing of any effect on Builders FirstSource is delayed because the company’s sales generally follow housing starts by roughly three months.

Looking longer term, Jackson said labor shortages and immigration enforcement-related disruptions in certain markets could support demand for off-site manufacturing and installed solutions. The company plans to provide additional details on its financial framework, technology investments and long-term targets at its Investor Day on Nov. 17.

About Builders FirstSource (NYSE:BLDR)

Builders FirstSource, Inc is a supplier of building materials, manufactured components and construction services for professional homebuilders, remodelers and other construction customers in the United States. The company provides products used throughout the residential construction process, from structural framing to interior and exterior finishes.

Its offerings include lumber and engineered wood products, roof and floor trusses, wall panels, prefabricated components, windows, doors, millwork, cabinets, roofing, siding, insulation, gypsum and related hardware.

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