BMC Stock Holdings, Inc. Announces 2018 Second Quarter Results

ATLANTA, July 30, 2018 (GLOBE NEWSWIRE) -- BMC Stock Holdings, Inc. (Nasdaq:BMCH) (“BMC” or the “Company”), one of the leading providers of diversified building products, services and innovative solutions in the U.S. residential construction market, today announced its financial results for the second quarter ended June 30, 2018.  A reconciliation of non-GAAP financial measures to comparable GAAP financial measures is provided in the “Reconciliation of GAAP to Non-GAAP Measures” section of this press release.

Second Quarter 2018 Highlights (Comparisons are to Prior Year Period)

• Net sales of $998.5 million, an increase of 12.6%, including significant growth in Structural Components and Ready-Frame® sales
• Net income of $40.4 million, an increase of $22.8 million
• Adjusted EBITDA (non-GAAP) of $78.8 million, an increase of $19.3 million or 32.3%
• Adjusted EBITDA margin (non-GAAP) of 7.9%, an increase of 120 basis points
• Diluted earnings per share of $0.60, an increase of $0.34
• Adjusted net income per diluted share (non-GAAP) of $0.64, an increase of $0.30
• Cash provided by operating activities of $27.7 million, an increase of $12.6 million

Commenting on BMC’s second quarter performance, Dave Keltner, Interim President and Chief Executive Officer of BMC, stated, “Based on the strength of our innovative product offerings combined with the team’s solid execution and commitment to the BMC Operating System, we delivered strong results for the second quarter, including significant year-over-year growth in net income, diluted earnings per share, Adjusted EBITDA and cash provided by operating activities.  In addition, Adjusted EBITDA margin improved 120 basis points to 7.9% for the quarter.”

Keltner continued, “Within the organization, the team is energized and we are driving an expectation of continuous improvement.  We are making key investments in automation and are continuing to implement the BMC Operating System to improve our processes and increase our efficiency, capacity and customer service levels.  We are pleased with the success recorded to date, and through these efforts, we expect to drive sustainable growth and value for all of our stakeholders.”

Second Quarter 2018 Summary of Financial Results

During the three months ended June 30, 2018, the Company generated strong improvements in net sales, net income, diluted earnings per share, Adjusted EBITDA and operating cash flow.

Second Quarter 2018 Financial Results Compared to Prior Year Period

• Net sales increased 12.6% to $998.5 million, driven in part by strong 21.2% growth in the Company’s Structural Components product category.  The Company estimates that net sales increased 7.9% from higher selling prices of lumber & lumber sheet goods, 2.4% from other organic growth and 2.3% from the acquisition of W.E. Shone Co. (“Shone Lumber”).  The Company also estimates that net sales to single-family homebuilders and remodeling contractors increased 15.7% while net sales to multi-family, commercial and other contractors declined 4.8%.  Net sales of Ready-Frame® were $60.1 million, an increase of 32.7%.
• Gross profit increased 13.2% to $239.6 million.  Gross profit as a percentage of sales (“gross margin”) was 24.0%, as compared to 23.9% for the second quarter of 2017.
• Selling, general and administrative (“SG&A”) expenses increased 7.6% to $169.8 million.  Approximately $3.4 million of this increase related to SG&A expenses at Shone Lumber, which was acquired earlier this year. Approximately $7.4 million of the increase related to higher employee compensation, benefits and other employee-related costs, and the remaining increase related primarily to a $0.7 million increase in diesel fuel costs.  SG&A expenses as a percent of net sales improved 80 basis points to 17.0%, compared with 17.8% for the second quarter of 2017.
• Depreciation expense, including the portion reported within cost of sales, decreased to $12.4 million, compared to $13.5 million in the second quarter of 2017.
• Merger and integration costs decreased to $0.5 million, consisting primarily of system integration costs, partially offset by a gain from disposition of property due to the integration.  This compared to $6.3 million in the second quarter of 2017.  During the three months ended June 30, 2017, the Company recognized $2.8 million of expense related to the discontinuance of the ERP system previously utilized by Building Materials Holding Corporation prior to the December 2015 merger.
• Amortization expense was $3.8 million, compared to $4.1 million in the second quarter of 2017.
• Interest expense decreased to $6.0 million, compared to $6.5 million in the second quarter of 2017.
• Other income, net, increased to $2.9 million, which was derived primarily from state and local tax incentives and customer service charges, compared to $1.0 million in the second quarter of 2017.  This increase was primarily due to an increase in income from state and local tax incentive programs.
• Net income increased to $40.4 million, or $0.60 per diluted share, compared to $17.6 million, or $0.26 per diluted share, in the second quarter of 2017.
• Adjusted net income (non-GAAP) increased to $43.4 million, or $0.64 per diluted share (non-GAAP), compared to Adjusted net income of $23.0 million, or $0.34 per diluted share, in the second quarter of 2017.
• Adjusted EBITDA (non-GAAP) increased 32.3% to $78.8 million, compared to $59.6 million in the second quarter of 2017.
• Adjusted EBITDA margin (non-GAAP), defined as Adjusted EBITDA as a percentage of net sales, expanded 120 basis points to 7.9%.
• Cash provided by operating activities increased $12.6 million to $27.7 million.

Liquidity and Capital Resources

Total liquidity as of June 30, 2018 was approximately $328.2 million, which included cash and cash equivalents of $14.3 million and $313.9 million of borrowing availability under the Company’s asset-backed revolver.  Capital expenditures during the second quarter of 2018 totaled $16.0 million.  These expenditures were primarily used to fund purchases of vehicles and equipment to replace aged assets and support increased sales volume, and facility, technology and automation investments to support our operations.

CEO Search
On January 10, 2018, the Company announced that President and CEO, Peter C. Alexander left the Company under mutual agreement with the Board of Directors.  David L. Keltner assumed the role of Interim President and CEO while the Board conducts a formal search for a permanent replacement.  Since that time, the Board of Directors engaged a leading executive search firm and launched a broad search effort to find the best candidate who will continue to cultivate the Company’s strong culture and drive the growth strategy forward.  The Board of Directors is confident in its ability to attract a proven, experienced executive and is entering its final round of interviews with a strong slate of candidates. During the search, BMC is aggressively moving forward with the execution of its growth strategies.

Conference Call Information

BMC will host a conference call on Monday, July 30, 2018 at 8:30 a.m. Eastern Time and will simultaneously broadcast it live over the Internet.  Prior to the call, an earnings release presentation will be posted on the Company’s investor relations website - ir.buildwithbmc.com - in the “Events and Presentations” tab under the heading “Presentation Archive.”  The conference call can be accessed by dialing 877-407-0784 (domestic) or 201-689-8560 (international).  A telephonic replay will be available approximately three hours after the call and can be accessed by dialing 844-512-2921, or for international callers, 412-317-6671.  The passcode for both the live call and the replay is 13681483.  The telephonic replay will be available until 11:59 p.m. (Eastern Time) on August 6, 2018.  The live webcast of the conference call can be accessed on the Company’s investor relations website at ir.buildwithbmc.com and will be available for approximately 90 days.

Non-GAAP Financial Measures

This press release presents Adjusted EBITDA, Adjusted EBITDA margin, Adjusted net income and Adjusted net income per diluted share, which are non-GAAP financial measures within the meaning of applicable SEC rules and regulations. For a reconciliation of Adjusted EBITDA and Adjusted net income to the most comparable GAAP measures and a discussion of the reasons why the Company believes that these non-GAAP financial measures provide information that is useful to investors, see the tables included in this press release under "Reconciliation of GAAP to Non-GAAP Measures."

About BMC Stock Holdings, Inc.

With $3.4 billion in 2017 net sales, BMC is a leading provider of diversified building products, services and innovative solutions to builders, contractors and professional remodelers in the U.S. residential housing market.  Headquartered in Atlanta, Georgia, the Company's comprehensive portfolio of products and solutions spans building materials, including millwork and structural component manufacturing capabilities, consultative showrooms and design centers, value-added installation management services and an innovative eBusiness platform. BMC serves 45 metropolitan areas across 19 states, principally in the South and West regions.

Forward-Looking Statements

This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements in this document may include, without limitation, statements regarding sales growth, price changes, earnings performance, strategic direction and the demand for our products. Forward-looking statements are typically identified by words or phrases such as "may," "might," "predict," "future," "seek to," "assume," "goal," "objective," "continue," "will," "could," "should," "would," "anticipate," "estimate," "expect," "project," "intend," "plan," "believe," "target," "prospects," "guidance," "possible," "predict," "propose," "potential" and "forecast," or the negative of such terms and other words, terms and phrases of similar meaning. Forward-looking statements involve estimates, expectations, projections, goals, forecasts, assumptions, risks and uncertainties, many of which are outside BMC's control. BMC cautions readers that any forward-looking statement is not a guarantee of future performance and that actual results could differ materially from those contained in the forward-looking statement; therefore, investors and shareholders should not place undue reliance on such statement. There are a number of risks and uncertainties that could cause actual results to differ materially from the forward-looking statements included in this communication.  These factors include without limitation:

• the state of the homebuilding industry and repair and remodeling activity, the economy and the credit markets;
• the impact of potential changes in our customer or product sales mix;
• our concentration of business in the Texas, California and Georgia markets;
• the potential loss of significant customers or a reduction in the quantity of products they purchase;
• seasonality and cyclicality of the building products supply and services industry;
• competitive industry pressures and competitive pricing pressure from our customers and competitors;
• fluctuation of commodity prices and prices of our products;
• our exposure to product liability, warranty, casualty, construction defect, contract, tort, employment and other claims and legal proceedings;
• our ability to maintain profitability;
• our ability to retain our key employees and to attract and retain new qualified employees, while controlling our labor costs;
• product shortages, loss of key suppliers or failure to develop relationships with qualified suppliers, and our dependence on third-party suppliers and manufacturers;
• the implementation of our supply chain and technology initiatives;
• the impact of long-term non-cancelable leases at our facilities;
• our ability to effectively manage inventory and working capital;
• the credit risk from our customers;
• the impact of pricing pressure from our customers;
• our ability to identify or respond effectively to consumer needs, expectations, market conditions or trends;
• our ability to successfully implement our growth strategy;
• the impact of federal, state, local and other laws and regulations;
• the impact of changes in legislation and government policy;
• the impact of unexpected changes in our tax provisions and adoption of new tax legislation;
• our ability to utilize our net operating loss carryforwards;
• natural or man-made disruptions to our distribution and manufacturing facilities;
• our exposure to environmental liabilities and subjection to environmental laws and regulation;
• the impact of health and safety laws and regulations;
• the impact of disruptions to our information technology systems;
• cybersecurity risks;
• our exposure to losses if our insurance coverage is insufficient;
• our ability to operate on multiple Enterprise Resource Planning ("ERP") information systems and convert multiple systems to a single system;
• the impact of our indebtedness;
• the various financial covenants in our secured credit agreement and senior secured notes indenture; and
• other factors discussed or referred to in the "Risk Factors" section of BMC's most recent Annual Report on Form 10-K filed with the SEC on March 1, 2018.

Certain of these and other factors are discussed in more detail in the “Risk Factors” section of BMC’s 2017 Annual Report on Form 10-K, as supplemented by BMC’s Quarterly Reports on Form 10-Q.  All such factors are difficult to predict and are beyond BMC's control. All forward-looking statements attributable to BMC or persons acting on BMC's behalf are expressly qualified in their entirety by the foregoing cautionary statements. All such statements speak only as of the date made, and BMC undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, unless otherwise required by law.

Investor Relations Contact
BMC Stock Holdings, Inc.
Carey Phelps
(678) 222-1228

BMC STOCK HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(unaudited)

BMC STOCK HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(unaudited)

BMC STOCK HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(unaudited)

BMC STOCK HOLDINGS, INC. AND SUBSIDIARIES
Net Sales by Product Category
(unaudited)

Net Sales by Customer Type
(unaudited)

BMC STOCK HOLDINGS, INC. AND SUBSIDIARIES
Reconciliation of GAAP to Non-GAAP Measures
(unaudited)

Adjusted EBITDA, Adjusted EBITDA margin, Adjusted net income and Adjusted net income per diluted share are intended as supplemental measures of the Company’s performance that are not required by, or presented in accordance with, GAAP.  The Company believes that Adjusted EBITDA, Adjusted EBITDA margin, Adjusted net income and Adjusted net income per diluted share provide useful information to management and investors regarding certain financial and business trends relating to the Company’s financial condition and operating results.

• Adjusted EBITDA is defined as net income plus interest expense, income tax expense, depreciation and amortization, merger and integration costs, non-cash stock compensation expense, acquisition costs and other items.
• Adjusted EBITDA margin is defined as Adjusted EBITDA divided by net sales.
• Adjusted net income is defined as net income plus merger and integration costs, non-cash stock compensation expense,  acquisition costs, other items and after tax effecting those items.
• Adjusted net income per diluted share is defined as Adjusted net income divided by diluted weighted average shares.

Company management uses Adjusted EBITDA and Adjusted net income for trend analyses, for purposes of determining management incentive compensation and for budgeting and planning purposes.  Adjusted EBITDA is used in monthly financial reports prepared for management and the board of directors.  The Company believes that the use of Adjusted EBITDA, Adjusted EBITDA margin, Adjusted net income and Adjusted net income per diluted share provides additional tools for investors to use in evaluating ongoing operating results and trends and in comparing the Company’s financial measures with other distribution and retail companies, which may present similar non-GAAP financial measures to investors.  However, the Company’s calculation of Adjusted EBITDA, Adjusted EBITDA margin, Adjusted net income and Adjusted net income per diluted share are not necessarily comparable to similarly titled measures reported by other companies.  Company management does not consider Adjusted EBITDA, Adjusted EBITDA margin, Adjusted net income and Adjusted net income per diluted share in isolation or as alternatives to financial measures determined in accordance with GAAP.  The principal limitation of Adjusted EBITDA, Adjusted EBITDA margin, Adjusted net income and Adjusted net income per diluted share is that they exclude significant expenses and income that are required by GAAP to be recorded in the Company’s financial statements.  Some of these limitations are: (i) Adjusted EBITDA, Adjusted EBITDA margin, Adjusted net income and Adjusted net income per diluted share do not reflect changes in, or cash requirements for, working capital needs; (ii) Adjusted EBITDA and Adjusted EBITDA margin do not reflect interest expense, or the requirements necessary to service interest or principal payments on debt; (iii) Adjusted EBITDA and Adjusted EBITDA margin do not reflect income tax expenses or the cash requirements to pay taxes; (iv) Adjusted EBITDA, Adjusted EBITDA margin, Adjusted net income and Adjusted net income per diluted share do not reflect historical cash expenditures or future requirements for capital expenditures or contractual commitments; (v) although depreciation and amortization charges are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future and Adjusted EBITDA, Adjusted EBITDA margin, Adjusted net income and Adjusted net income per diluted share do not reflect any cash requirements for such replacements and (vi) Adjusted EBITDA, Adjusted EBITDA margin, Adjusted net income and Adjusted net income per diluted share do not consider the potentially dilutive impact of issuing non-cash stock-based compensation.  In order to compensate for these limitations, management presents Adjusted EBITDA, Adjusted EBITDA margin, Adjusted net income and Adjusted net income per diluted share in conjunction with GAAP results.  Readers should review the reconciliations of net income to Adjusted EBITDA and Adjusted net income below, and should not rely on any single financial measure to evaluate the Company’s business.

BMC STOCK HOLDINGS, INC. AND SUBSIDIARIES
Reconciliation of GAAP to Non-GAAP Measures (continued)
(unaudited)

The following is a reconciliation of net income to Adjusted EBITDA and Adjusted net income.