BMC Stock Holdings, Inc. (NASDAQ:BMCH) Q3 2019 Earnings Conference Call - Final Transcript

Nov 05, 2019 • 08:30 am ET


BMC Stock Holdings, Inc. (NASDAQ:BMCH) Q3 2019 Earnings Conference Call - Final Transcript


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Good morning, and thank you for standing by. You are joining BMC's Third Quarter 2019 Earnings Conference Call. This call is being recorded today, Tuesday, November 5, 2019. Carey Phelps, Vice President of Investor Relations for BMC, will now provide the Company's opening remarks.

Carey Phelps

Thanks, Steven. Good morning, and welcome. After my opening statement, Dave Flitman, our Chief Executive Officer, and Jim Major, our Chief Financial Officer, will discuss our key priorities and our operating results for the third quarter of 2019. In addition to our prepared remarks, a slide deck is available on our website at

This is also where you can find today's press release, which was issued earlier this morning. The results discussed in this call will 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. The reconciliation of these non-GAAP measures to the corresponding GAAP measures and a discussion of why we believe they are useful to investors can be found at the back of the press release and in the slide presentation.

Our remarks in the press release, PowerPoint 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 in a material way from forward-looking statements and projections. With that, I'll turn the call over to Dave.

Dave Flitman

Thanks, Carey. Good morning, everyone, and thank you for joining us. Our efforts to execute our strategy are paying off and we are driving consistently improving results this year. In our press release this morning, we reported core organic growth of 3.6% and continued to outperform single-family starts in our markets which were up 1.1% in the quarter but remained down 6% year-to-date.

Share gains in our value-added product categories were even stronger and led to 7.4% core organic growth in structural components and 5.9% core organic growth in Millwork, Doors and Windows. Combined, our value-added products, services and higher-margin segments currently contribute approximately 47% of our net sales. With an improved product mix and the accelerating success of the BMC Operating System, gross margin improved 200 basis points from a year ago to 26.4%. Net income was $33.6 million for the quarter and adjusted EBITDA was $74.7 million.

Despite commodity price deflation impacting our top-line, adjusted EBITDA margin improved 20 basis points year-over-year to 7.7%. And finally, cash flow from operations grew 16% to $69.1 million for the quarter as our cash generation combined with our already very strong balance sheet underpins our flexibility as we drive strategic growth. In fact, so far, we've added nearly $200 million in annualized net sales from acquisitions completed in 2019 with the vast majority of these sales coming from value-added offerings. The purchases of these companies