BlueLinx Holdings, Inc. (NYSE:BXC) Q2 2020 Earnings Conference Call - Final Transcript

Aug 04, 2020 • 10:00 am ET


BlueLinx Holdings, Inc. (NYSE:BXC) Q2 2020 Earnings Conference Call - Final Transcript


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Mitchell B. Lewis

the second quarter, delivering net sales of $699 million and total adjusted EBITDA of $31 million, a 24% improvement from 2019 levels. We also generated a record gross margin of 14.4% driven by a strong performance in both our Structural and Specialty product categories.

Our second quarter results reflect dramatically shifting market demand as the quarter progressed. We began experiencing weakness in our sales volume towards the end of March due to the onset of lockdown restrictions and the vast uncertainty that permeated the country at that time. But as we noted in our earnings call in May, we were pleasantly surprised to see our sales volumes start to improve in late April. As we progressed into May and June, sales volume continued to improve across our business, with the housing industry staging a remarkable reversal from earlier predictions and indicators, while the repair and remodeling markets also contributed to what became an overall good market demand environment.

Our results were also supported by the continued execution of our sales strategies and processes that we began implementing in the back half of 2019. Ultimately, we were able to gain momentum to the point that our overall sales volume during the second quarter were relatively consistent with last year. And the momentum we experienced exiting the quarter was certainly stronger than the business activity levels we saw at the same time in 2019.

The wood-based commodity market also experienced a dramatic improvement as the quarter progressed. After the lumber and panel markets bottomed out in early April following the onset of the pandemic, prices reversed rapidly as demand for wood products was stronger than anticipated, while market capacity had been reduced. Kelly will discuss commodity prices in more detail, but while positive, the overall impact they had on our revenue during the quarter was only around $14 million or about 2% of our second quarter's net sales.

Our top financial priority as the pandemic began was closely managing the liquidity of the business. We reassigned associates to work on centralized teams, driving and monitoring all aspects of our working capital. We also established robust processes to authorize and closely scrutinize all credit, inventory procurement and routine operational expenditures.

Finally, we immediately instituted daily senior leadership meetings where we reviewed all aspects of our working capital, and these measures worked. Inventory is a great example, as it decreased by $65 million since the end of the first quarter. This positively impacted our bank debt as our ABL balance was reduced by $47 million compared to the second quarter of 2019, and we ended the quarter with $138 million in excess availability and cash on hand.

In addition to our efforts to enhance liquidity, we continued our relentless focus on operational improvement. In the second half of last year, we streamlined our regional structure, giving us the ability to react quickly and consistently to changes in the market. Our regional operations directors are staying close to all aspects of our logistics costs at