With a combined revenue of $21 trillion and $2.1 trillion in profits, the 2026 Fortune 500 is the definitive list of America's largest companies.

Fortune 500

Almost $20 trillion in revenue—and a record-breaking $1.87 trillion in profits. Introducing the 2025 Fortune 500, the definitive list of the biggest companies in America.

Industries included in the sector are building materials, forest products, metals, and packaging.

Fortune Sector Leaders: Materials

The Fortune 500, in its 70th year in 2024, ranks the biggest U.S. companies by revenue.

The Fortune 500, in its 69th year in 2023, ranks the biggest U.S. companies by revenue.

Industrials came out on top this year, with 22 companies featured on the list.

100 Fastest-Growing Companies

This year’s Fortune 500 marks the 68th running of the list.

This year’s group delivered stellar revenue and profit growth, but it underperformed the broader stock market.

This year’s Fortune 500 marks the 67th running of the list.

Formed in 1998, Builders FirstSource is the largest supplier of structural building products, value-added components, and services in the U.S.

This year's Fortune 500 marks the 66th running of the list.

Net sales at Builders First Source, a Dallas-based supplier of construction materials, fell 5.8% in 2019, but profits were up 8.1%; both metrics reflected the impact of falling commodity prices.

This year's Fortune 500 marks the 65th running of the list.

This year's Fortune 500 marks the 64th running of the list.

Everybody loves an up-and-comer: 2018's top three-year performers in revenues, profits, and stock returns.

This year's Fortune 500 marks the 63rd running of the list.

This year's Fortune 500 marks the 62nd running of the list.

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Builders FirstSource is a manufacturer and supplier of building materials, manufactured components, and construction services to homebuilders, contractors, remodelers, and U.S. consumers. Its manufactured products include wood floors, wall panels, stairs, windows, doors, mouldings, wood siding, roofing, insulation, cabinets, and much more. The company also offers software products for drafting, estimating, quoting, and designing home services for retailers, distributors, manufacturers, and homebuilders. Founded in 1998, the company was originally named BSL Holdings, but changed its name in 1999.

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Builders FirstSource (BLDR): Company Profile, Stock Price, News, Rankings

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Builders FirstSource

builders firstsource

Good day and welcome to the Builders FirstSource third quarter 2025 earnings conference call. Today's call is scheduled to last about one hour, including remarks by 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 phone at any time during the call. We do ask that you limit yourself to one question and one follow up. I'd now like to turn the call over to Heather Kos, Senior Vice President, Investor Relations for Builders FirstSource. Please go ahead.

Good morning and welcome to our third quarter 2025 earnings call. With me on the call are Peter Jackson, our CEO, and Pete Beckmann, our CFO. The earnings press release and presentation are available on our website at investors.bldr.com. We will refer to the presentation during our call. 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 directly comparable GAAP measures. You can find the reconciliation of these non-GAAP measures to the corresponding GAAP measures, where applicable, and a discussion of why we believe they can be useful to investors in our 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 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 from forward-looking statements and projections. With that, I'll turn the call over to Peter.

Thank you, Heather, and good morning, everyone. Over the past several years, we have transformed into a stronger organization powered by our leading network of value-added solutions, a relentless focus on operational excellence, and superior capital deployment. These strengths, combined with our scale and a team dedicated to exceptional customer service, have driven margin expansion, reinforced our industry leadership, and extended our track record of success. By focusing on the factors within our control and leveraging our competitive advantages, we are competing effectively today and are well positioned to outperform our competitors as the market recovers. Let's turn now to Slide 4. Our third quarter results reflect the strength of our strategy and disciplined execution in a weak housing market. We continue to execute effectively and sustain healthy profitability despite a low starts environment, underscoring our operational disciplines and improvement since 2019.

Let's take a minute to step back and talk about the market. Single-family construction remains soft. Builders manage the pace of starts given affordability concerns, consumer uncertainty, and elevated new home inventories. Demand remains tempered despite Fed rate cuts in 2025. As a reminder, Q4 is one of our slower quarters due to seasonality. Our builder customers have addressed these challenges by offering smaller and simpler homes as well as incentives such as interest rate buy downs. That creates an environment where there are less sales dollars per start and every start is more competitive. On the affordability front, we're working closely with them, leveraging our broad product portfolio and bundled solutions to drive cost efficiencies while upholding the highest quality standards. In the multifamily market, activity is expected to remain muted through year end, in line with our previous thinking.

However, we have seen green shoots in quoting activity as our customers see improving financing costs. As a reminder, our first sale tends to lag a multifamily start by roughly nine to 12 months. We continue to view multifamily as an appealing and profitable business for us, supported by a substantial mix of value-added products and attractive fundamentals. On Slide 5, we highlight some of the key initiatives under our strategic pillars. In the third quarter, we invested more than $20 million in value-added solutions to expand our product offerings in key markets. This included opening a new millwork location in South Carolina and expanding or upgrading plants in seven states. We remain disciplined in how we deploy capital. Our consistent, strong free cash flow through the cycle gives us the flexibility to invest in organic growth, pursue strategic M&A, and return capital to shareholders.

This capital deployment is strengthening our competitive position and driving long-term value creation. Operational excellence is crucial to how we run the business as we develop talent, improve agility, and embed technology into our operations. We generated $11 million in productivity savings in Q3, primarily through targeted supply chain initiatives. Turning to Slide 6, we are prudently managing discretionary spending and maximizing operational flexibility. In response to lower volumes over the last year, we have taken steps to align capacity across our facilities, manage headcount, and control expenses. We are reducing variable costs today while also investing in needed capacity to ensure we are positioned to scale quickly with the expected recovery in demand. Year-to-date through September, we have consolidated 16 facilities, including eight in the third quarter, while maintaining an on time and in full delivery rate of 92%.

With our industry-leading scale, experienced leadership team, and a track record of operating proactively through the cycle, we are confident that we can continue to deliver exceptional customer service. Moving to slide 7, our disciplined capital allocation strategy focuses on maximizing shareholder returns through organic growth, M&A, and share repurchases. In the third quarter, we deployed over $100 million toward return-enhancing opportunities aligned with those priorities. Drilling into M&A on slide 8, we remain focused on pursuing acquisitions that expand our value-added product offerings and advance our leadership position in desirable geographies. We have developed substantial and proven muscle memory to grow through M&A and have a track record of successful integration. In the third quarter, we acquired St. George Truss Co., a truss manufacturer serving builders in southern Utah and southern Nevada. In October, we acquired Builders Door and Trim and Ryston Construction.

Together, the two companies form the leading provider of door and millwork capabilities in the Las Vegas area, closing a key product gap in the region and strengthening our ability to deliver comprehensive solutions to our customers. We've made 38 acquisitions representing over $2 billion in annual sales since the BMC merger in 2021, the equivalent of a top 10 LBM player, demonstrating our ability to execute and integrate seamlessly. With the industry still fragmented, we see significant opportunity ahead. We remain confident that inorganic investments will remain an important driver of long-term growth. Let's now turn to slide 9 and discuss the latest updates on our digital and technology strategy. We are accelerating the adoption of our digital capabilities and deploying scalable customer-centric solutions that will strengthen our operational agility and support long-term growth. Our BFS digital tools deliver meaningful benefits to our homebuilder customers and align BFS is a key technology partner in the industry.

Despite the weak market, we have seen continued adoption with our target audience of smaller builders. Since launching in early 2024, our digital tools have processed over $2.5 billion of orders and over $5 billion of quotes, representing increases in excess of 200% year-to-date. Importantly, we're seeing that digital is not just about incremental sales, it's a catalyst for broader company growth. The efficiencies and capabilities enabled by our digital tools, including artificial intelligence, accelerate the pace and elevate the precision of our quoting and sales operations. While it's evident that our initial business case around digital did not predict the timing of our outcomes very well, we remain convinced of the tremendous shareholder value that the digital tools will unlock for us.

Continuing on the technology front, I'm pleased that we continue to make steady progress on our comprehensive implementation of SAP. After the launch of two pilot markets in July, we gained valuable insights from these initial pilots and we'll be applying those learnings as we prepare for the next phase. During Q3, we also successfully converted to SAP for our centralized accounting functions as well as for all of our internal and external financial reporting. Although these conversions are never easy, we are working through the details and are excited about the growth and efficiency opportunities to come with this new software. Recognizing one of our incredible team members each quarter is one of the best parts of my role.

Today, I want to spotlight Harold Fuqua, driver at our Lebanon, Tennessee yard who recently celebrated 40 years with BFS. Harold is known for his dependability, strong work ethic, and love of the Tennessee Volunteers. His dedication shows in his commitment. He's often at the yard before 4:00 A.M. and in the way he shares his experience. Having trained more than 100 drivers over the years, he's also earned a reputation for driving over the region's toughest hills with skill and care. I'm honored to recognize Harold and so many others across BFS whose hard work and commitment continue to move us forward. I'll now turn the call over to Pete to discuss our financial results in greater detail.

Thank you, Peter, and good morning, everyone. We continue to execute our strategy in a down market, responding to near-term challenges and carefully managing costs while preserving our ability to invest for the future. Our financial agility, supported by a healthy balance sheet and strong free cash flow through the cycle, enables us to deploy capital prudently to fuel organic growth, pursue strategic M&A, and return capital to shareholders. These investments are bolstering our competitive position as we invest for the future. Let's begin by reviewing our third quarter performance on slides 10 through 12. Net sales decreased 6.9% to $3.9 billion, driven by lower core organic sales and commodity deflation, partially offset by growth from acquisitions.

The core organic sales decrease was driven by a 4% decline in single family due to lower starts, activity, and value per start, as well as a 20% decline in multifamily in line with our expectations amid muted activity levels against stronger prior year comps. Additionally, repair and remodel decreased 1% given consumer uncertainty. As we've noted on recent calls, there are a few key factors reconciling single family starts to our core organic sales. First, as a reminder, there is a roughly three-month lag from a start to our first sale. Second, the value of the average home has fallen as size and complexity have decreased over time, creating an additional sales headwind. Third, margins remain pressured throughout the supply chain as affordability concerns continue to be paramount.

Based on this, we believe our third quarter share was flat to up slightly as we continue to be the industry leader and a trusted partner to our customers. For the third quarter, gross profit was $1.2 billion, a decrease of 13.5% compared to the prior year period. Gross margin was 30.4%, down 240 basis points, primarily driven by below-normal starts environment compared to an approximately 27% gross margin in 2019. Our Q3 gross margin reflects the substantial investments we have made in value-added solutions and our continuous improvement. Adjusted SG&A of $790 million increased $7 million, primarily due to acquired operations, partially offset by lower variable compensation due to lower sales. As Peter touched on previously, we are focused on carefully managing our SG&A and are well positioned to leverage our costs as the market grows.

Adjusted EBITDA was $434 million, down approximately 31%, primarily driven by lower gross profit. Adjusted EBITDA margin was 11%, down 380 basis points from the prior year, primarily due to lower gross profit margins and reduced operating leverage. Our ability to maintain a double digit EBITDA margin in a weak market is a testament to the strength of our transformed business. Adjusted EPS was $1.88, a decrease of 39% compared to the prior year. On a year-over-year basis, share repurchases enabled by our strong free cash flow generation added roughly $0.10 per share for the third quarter. Now let's turn to our cash flow, balance sheet, and liquidity. On slide 13, our third quarter operating cash flow was $548 million, a decrease of $182 million mainly driven by lower net income. We generated free cash flow of $465 million.

Our current 12 months free cash flow yield was approximately 8% and our operating cash flow return on invested capital was 15%. Our net debt to adjusted EBITDA ratio was approximately 2.3x while our fixed charge coverage ratio was roughly 6x. We have no long-term debt maturities until 2030. Our maturity profile enables us to remain operationally and financially disciplined while preserving a flexible balance sheet for accretive capital deployment. Moving to third quarter capital deployment, capital expenditures were $83 million and we deployed $19 million on acquisitions. We currently have $500 million remaining on our share repurchase authorization. We remain comfortable with our net debt levels and will continue to execute our capital allocation priorities in a disciplined manner on the path to maximizing value creation. On slides 14 and 15, we show our 2025 outlook and assumptions.

On a year-over-year basis, our latest forecast assumes single family starts down 9% for the year, multifamily starts down mid-teens, and R&R end market to be flat. The 2025 multifamily headwind of sales of $400 million-$500 million and EBITDA of less than $200 million has largely been digested and remains on track. As a result, we are guiding net sales in the range of $15.1 billion-$15.4 billion. We expect adjusted EBITDA to be $1.625 billion-$1.675 billion. Adjusted EBITDA margin is forecast to be in the range of 10.6%-11.1%. We expect our 2025 full year gross margin to be in the range of 30.1%-30.5%. Reflecting our strong execution in a below normal starts environment, we expect free cash flow of $800 million-$1 billion.

Our revised guidance assumes average commodity prices in the range of $370-$390 per thousand board foot versus the long-term average of $400. Moving to slide 16, we recognize that 2026 is coming into focus as we approach year end. Like we did last year, we have laid out a scenario analysis to demonstrate how we are positioned to generate resilient financial performance across a range of potential housing market and commodity conditions. As you can see, we have included a new scenario that provides a perspective on our performance in a normal housing environment. I want to emphasize that this is not guidance, but these scenarios should help clarify our range of performance expectations for 2026 and demonstrate the strength of our best-in-class operating platform. In closing, we are closely monitoring the current environment and remain agile to mitigate downside risk in the near term while also investing strategically for the future. I am confident in our ability to drive long-term growth by executing our strategy, leveraging our exceptional platform, and maintaining financial flexibility. With that, I'll turn the call back over to Peter for some final thoughts.

Thanks, Pete. I want to close by emphasizing the transformation of BFS as illustrated on slide 17 today. We are an exceptionally improved organization, one powered by our value-added solutions and digital tools, a relentless focus on operational excellence, and a disciplined capital deployment strategy. These improvements, combined with our scale, have positioned us to accelerate growth as we return to a normalized starts environment. By controlling what we can control and leveraging our competitive advantages, we will continue to deliver exceptional long-term shareholder value. Thank you again for joining us today. Operator, let's please open the call now for questions.

Certainly at this time, if you would like to ask a question, please press the star and one on your telephone keypad. You may withdraw yourself from the queue at any time by pressing star two. Again, we do ask that you limit yourself to one question and one follow-up. We'll take our first question from Matthew Bouley with Barclays. Your line is open.

Morning guys. Thank you for taking the questions. I want to start on the framework, the scenarios for FY 2026. If I'm looking at it right, it seems like you're implying kind of maybe a mid to high 9% EBITDA margin at the midpoint versus this year, obviously 10.6%-11.1%. Is that because you're, I guess, implying exiting this year, you know, between 29%-30% on gross margin and the expectation is that that should continue kind of given, you know, Builders negotiating back with suppliers or is the SAP implementation part of that. Just, I guess, what are some of the moving pieces behind that margin outlook in 2026? Thank you.

Hey Matt, it's Peter. I think you're right for the most part. It's not an SAP thing. It is a sense of both where we have gotten to at the exit of 2025, but also our read on the competitive environment and the dynamics are. It's basically a leveling out, we're about to the bottom. We're thinking based on everything we're seeing on the margin side. That question is out there in terms of which way the market will go as we signaled with the sort of up and down version of the scenarios. We try to give a middle of the road view on where we think it's going to end up. Overall, I think we're being successful. We're seeing the stabilization. I think we're getting close to the bottom. The real question comes when does the turn happen? The sooner the better, we're ready to go, but we need a little cooperation.

Yep. Absolutely makes sense. Thank you for that. Just sticking with that slide, wanted to ask on the normalized EBITDA guide. Obviously it jumps out a little that it's a different number than what you gave at the investor day a couple years ago. I guess the revenue number would look to be the main difference there. I'm wondering if that's a comment on sort of the market share growth that you were assuming at that time. Maybe the starting point on market share is a little bit different because of the decline in the market we've just had in the past year or just anything else you can kind of give us on what you think may be a little structurally different, you know, leading to that level of profitability at $1 million-$1.1 million. Thank you.

Yeah, it's a good question. Although I guess I'll start by pointing out it's a bit of apples and oranges. Investor Day, obviously we're laying out our plans for the future based on where we were in the day. Initiatives, productivity, all the things that we outlined in that meeting, this is simply an attempt to say based on where we are in 2025 and some basic level assumptions about what we think is going to play out over the next year in terms of back, if we saw, if we magically made this thing go back to normal over the next year, what would the numbers look like? In light of that, big differences, the market, as you pointed out, dramatically different. The average size of the home, the average content of the home is markedly different. Your point about share, that's a fair comment.

I think the impact on deleveraging a business, given some of those dynamics in terms of the overall size of the markets, that can play in here too. Don't forget, this is not apples to apples in terms of the end year of Investor Day either. There's a timeline, just a metric snap the line difference here. Hopefully this is a good reference point for you to see. Look, this market is weak. It's not normal for us to be at the level we are today. It doesn't take much in terms of recovery to get us to numbers that are meaningfully better based on the outputs of what this business is capable of. We're ready for that turn. We're excited about it to come. That's maybe the best summary of the differences.

Yeah, appreciate all that. Thanks for the color there, Peter, and good luck, guys.

Pick our next question from John Lovallo with UBS. Your line is open.

Good morning, guys. Thanks for taking my call, my questions as well. The first one is the midpoint of the outlook implies 4Q sales of about $3.42 billion, adjusted EBITDA of about $341 million, which would imply a sequential or quarter-over-quarter decremental of only about 18%. I think year-over-year would be about 38%. Both of these are better than what we've experienced over the past few quarters. Can you help us just understand what's driving the improvement there?

John, thanks for the question. I would say the general, the essence of your comment is reasonable. We don't disagree with it. I think that there's a couple of factors at play. You've got a little bit of a lapping effect where the comps year-over-year are less dramatically down, but we're still in a market that's challenged. Pete, I don't know if you have anything to add on that.

Yeah. As Peter said in his prepared remarks, Q4 is a seasonally lower quarter for us. Sequentially, we will see a step down from Q3. That's expected. As Peter mentioned on the lapping in the year-over-year, we are closing the gap. We saw Q4 last year starting to compress and we're now lapping, getting closer to that lapping period.

Okay, understood. The $3.42 billion in implied fourth quarter revenue would be down about 11% year-over-year. Can you help us just kind of bridge that 11% in terms of organic sales, M&A, commodities, and within the organic piece, what are the expectations for single family versus multifamily versus R&R?

The M&A will continue to be a good boost for us as we've shared in our sales growth really every quarter. In our assumptions it's roughly 5%. That'll continue. The margin pressure and headwinds that'll show up in the form of pricing will continue to be a headwind in Q4, but as we outlined, maybe a little less significant and we are getting closer to what we feel is a bottom. On the organic side, we still have a starts assumption out there that's 920,000 single family starts, which has step downs on a quarterly basis. Still a mid teens double digit decline in the fourth quarter. That's really the big makeup and the headwind that we're seeing in the numbers.

We'll take our next question from Charles Perron-Piche with Goldman Sachs. Your line is open.

Good morning, everyone. Thank you for taking my question. First, I just want to go back to the scenarios. I just want to understand how multifamily plays in it. I think multifamily starts are up 17% year-over-year today through August. I think the mix is skewed towards larger buildings which are, I think, outside of your scope. More broadly, how do you think about this multifamily recovery? How is it embedding in your scenarios for next year given the green shoot noted in your prepared remarks? What could that mean for the margin considering the larger amount of value-added content in that segment?

Yeah, multifamily right now is 8%-9% of our sales. We don't have a, call it a swim lane or a row called out for multifamily. In 2025 we were going down mid teens for multifamily. In 2026 we're looking at a flat environment for us. Even though the overall starts number is showing a recovery, it's just that lag and expectation of the market that we participate in, in that four stories, wood structures and below, it's going to be more of a flat-ish because of the time it takes to transition that start into a first sale for us. That's the expectation of multifamily for 2026.

Okay, that's good color. Understanding the market dynamics are outside your control. You know, you've done a great job in the last few years here at the Builders FirstSource structure to protect profitability, I guess against the scenarios that you presented today. Are you considering incremental productivity actions as an asset, and maybe taking a step back, can you talk about your ability to service demand? Should we see a faster than expected pickup in productivity going forward?

Yeah, no, good questions. The storyline around our business is one of the day-to-day management, week to week, quarter by quarter at the location level, right? Yes, we're a national player, we coordinate as a team, but we run this business in a very entrepreneurial way based on the local market demand. What you've seen us do over the long-term, but particularly in the last year where we've seen headwinds on the sales line, we've looked at it at the local market. How do we make sure we're able to meet our customers' needs and leverage our existing footprint in the best way possible? That means really managing the variable portion of the spend, making sure we're aligning the hours and the location footprint and the trucks and all of it to what our customers really need. That won't change.

That will continue to be executed, meaning we will continue to react at that local market and you'll continue to see that. We  have kept our foot on the gas when it comes to productivity. The teams are engaged in a lot of different actions to try and make this business incrementally better this year than it was last year. Some of that, candidly, has been overwhelmed by the deleveraging. Even though we're more efficient on a per unit basis, the lack of units and the overhead that we sustain as a business of our scale means that some of our productivity numbers have gone red even though the teams are doing good things. I think that goes to your last part of your question, which is we are going to be exceptionally well positioned to take advantage of growth because what we've been able to do in terms of the work that we do at the local level is protect the capacity availability.

Yes, of course, we'll have some rehiring to do, but making sure that we have kept our ability to serve at a higher level while at the same time scaling operations in the near term is something that we're very good at and I think is going to be evident. It was evident during the COVID spike where we were better positioned and better able to respond than everybody else. I think that's even going to be more true as we make this next turn because of the thoughtful investments we've made around those markets where we knew we ran out of capacity last time. We've learned from those situations and made sure that we're going to be ready in the next time, around key markets and key opportunity areas. Excited about it. I think it's going to be really good for this business. Like I said before, we just need a little momentum coming our way.

Okay, that's good color. Peter, thank you for everything and good luck with the next quarter.

We'll move next to Mike Dahl with RBC Capital Markets. Your line is open.

Good morning. Thanks for taking my questions. Peter, it's really actually impressive how stable the gross margins have been year-to-date. Obviously stepped down versus last year, about 30.5%, 30.7%, 30.4%. Pretty remarkable stability above 30%, I guess. I've got a two part question here on the margin. It seemed like the margin came in better than your expectations in 3Q. Can you comment on what drove that? With your fourth quarter guidance still at the midpoint, implying kind of 100 basis point sequential step down, is that something you're already seeing in your exit rate into the fourth quarter or is there kind of a buffer against, you know, the market softening? It's competitive. Maybe things continue to weaken through the quarter, if you could address both of those, that would be great.

Thanks, Mike. Good questions. With respect to the margin performance in Q3, we did outperform what we had outlined. We did see a sequential step down. It just wasn't as significant as what we had originally thought and shared on the last call. Some of the outperformance is due to us buying better and us managing through our supply chain initiatives. That has really helped and bolstered. We have a professional team that continues to look for the way to maximize and improve our bias, so that was what we're contributing. The outperformance in Q3 with respect to Q4, we're still outlining that. I'll call it step down for the, call it exit quarter rate. We are seeing continued pressure across a weak market that we're operating in. The team across the business is doing exceptionally well, managing pricing and being extremely disciplined and getting the sale at our level that we feel is appropriate for what we're providing from a service standpoint. It is a weak market that we're operating in. That competitive dynamic is real and we're operating and navigating extremely well.

Okay, that's helpful, thank you. My second question, just understanding your position that what you're putting out there today as normalized is not necessarily apples to apples versus Investor Day. I want to drill down on. There still seems to be an implication that there's kind of that lower revenue per start dynamic happening. You know, I think there's kind of a debate on over some period of time is the content and size of home at least, is that a cyclical dynamic? Is it a structural dynamic if you're calling this kind of normalized? Are you taking a different view on, you know, you think that some of those pressures you've seen the last couple of years, that that is kind of, that is the new normal, even in kind of a recovery, you'd still expect those headwinds to persist?

Yeah. If I understand the question correctly, we're not trying to advertise or predict or bounce back to the old size and complexity of the home. We're just sort of acknowledging it where it is and drawing the line out from here. Could there be some recovery? Sure, yeah. No question. I think the challenge today, though, to be honest, Mike, is affordability is a real thing, right. It's not a made up media headline. It's what people are feeling, and that's going to take some time to recover back to maybe where it was five years ago. With that in mind, I think the step off point on the normalized within that scenario chart is a real good sense of where we are today. I think there's potential upside on the starts number. I think there's realistic expectation that we should see upside on the commodity number. You look at the results of some of these mills, boy, they're suffering right now at these prices. I think there's a lot that would indicate we can do better than normal. I also don't want to signal the wrong message to the broader investor community about what that says. That is just historical averages and kind of based on where we are today. To your point, where we are today is really size and complexity of the home. That's what's in there.

We'll move next to Rafe Jadrosich with Bank of America. Your line is open.

Hi, good morning. Thanks for taking my questions. You commented earlier that the market share was flat up slightly in the quarter. I'm wondering if you could just remind us on what you saw in terms of market share through the year and the broader competitive environment, and then what's embedded in the 2026 outlook or scenarios in terms of the market share assumption?

Yeah, thanks for the question, Rafe. With respect to the market share, we've provided in the past a bridge of our sales versus starts on a lag basis. In the prepared remarks, we remind everyone that it's roughly a three-month lag. When you look at the quarter, as we talked about, flat to up a little bit from a share standpoint. If you look back to Q2 starts, they were down year-over-year about 8%. We're still seeing a little bit of headwinds from the smaller home and complexity. It's pretty modest, but a little more on the cost basis side of things. When you factor those structural adjustments in, we're at a flat to up slightly. Now when we zoom out for the year-to-date, where we are year-to-date, it's pretty flat, it's pretty neutral. Starts are down about, I would say, 5% on a lag basis versus our 8% on sales. Taking into account some of those same structural adjustments, it comes out pretty flat. A testament to the team and how well we're managing our price in this weak market and maintaining a share level that we feel is appropriate.

I think that's really the basis for why some of our comments are around. We think we're getting to bouncing around the bottom here because of that combined sort of output. We see stabilization in margins, stabilization in share, which in my mind indicates this is kind of where it wants to be right now. That has tremendous opportunity for us obviously as the market starts to pick up a little bit, especially given our available capacity and scale. That's sort of the logic around that.

It's really, really helpful. Just on the value add, on a year-over-year basis, it has been down by more than lumber over the last few quarters. That spread, is that just the different end market exposure that's driving that? Is that competitive dynamics? I think the longer-term goal is for value adds that sort of outpace commodity. When could that start to get back to a point where value add is outpacing?

Yeah, I think what you're seeing mostly in the value add is from the multifamily side of the business and that year-over-year lapping that we've outlined. Remember that multifamily is much higher index toward the value-added products. We saw the truss stepping down and that's been known and we've been communicating. The millwork is also now feeling it later in the build cycle from a multifamily standpoint, and that's also in that value-added product. You'll see both of those from a year-over-year basis as the largest contributor to that down percentage.

There's no question there's pressure across the board like that. I want to be real clear about that. Taking sales volume out of any of our value-added facilities by virtue of what it is that we do, we've invested in overhead in order to create efficiency. When you put product through the factory, that's a tough environment when it comes to the competitive world and making sure those facilities are full. I think we're doing an exceptional job. I'm very proud of the team. There is definitely headwind there. By the way, there is some pass-through product. There's some engineered wood in there that they've also faced a very similar situation in terms of headwinds on the top problem.

We'll take our next question from David Manthey with Baird. Your line is open.

Thank you. Good morning, guys. You really opened floodgates here with this 2026 scenario data. I would just say, as we look at that data, if we go from the 2025 midpoint to the normalized midpoint, it looks like a contribution margin of a little over 20%. I just wanted to check with you. If we think about long-term, kind of secular, are you still thinking contribution margins on volume would be something in the high teens long-term?

I think the contribution margin also depends on what margins are doing and where we're seeing margins go. When you jump right to the normalized, we move that up to the midpoint of our long-term normalized margins. It looks like a bigger step up in contribution from where we are today. As you look at the midpoint in 2026, that's an opposite scenario where we see a lot of that margin headwinds and pressure continuing. A lot of it's the lapping effect of what we're seeing on the slope through 2025. That flow through in contribution margin is largely dependent on which way are margins moving.

Right. Said another way, there's probably to normalization, there's some tailwinds that push that number up. What I'm asking is just secular. If you think about the model growing volume, I think in the past you said high teens, is that still in play or is that changed?

I'm actually drawing a blank on when we said that. I trust what you said is right. I would say mid to high teens is what we've, the way I think about it. I don't, let me say it a different way. We're not intending to change any of our prior messaging or change our tune on this. I think this is just an attempt to give a reference point as we think about what 2026 looks like.

Yeah. Okay. Staying on this theme, I guess as we're looking forward, when we look from the 2025 midpoint to the flat scenario 2026, you know, the contribution margin is actually, I think, slightly negative. I think, Peter, as you said, you're taking 2025 as a whole as opposed to 2025 as a starting point of sort of where we are today or year end 2025. Just so we, as we think about moving from here to there, could you talk about the major buckets of puts and takes in the model? Meaning you get productivity savings, you get some glide paths from acquisitions. The offsets there would be labor inflation, occupancy, freight. Could you just talk about the moving parts that'll flex that up and down into 2026 even on a flat start scenario?

Yeah, I mean you started rattling off most of them. With the flat environment, we are jumping off of a lower point for 2025 than what the whole of the year is mentioned. That was part of my other comments that I made on the margin and where the margin movement we are going to expect lapping of acquisitions. Acquisitions completed to date would be reflected in that number. There is a stub year period that would contribute. There are assumptions around inflation on costs, as you can imagine, of every year that would have that and some productivity to offset it. It's still in an environment where it's flat and we're focusing a lot of our resources on the ERP deployment. It's not going to be as strong as what we had shared a few years ago. That all contributed to what we're seeing for 2026.

Yeah, I think that, Dave, that's one thing I'll emphasize is that yes, the market is weak, but as we think about what we're doing as an organization, the transformation continues. Our investments in digital and technology are going to have tremendous payoff for the business. It's obvious that we're going to be able to empower our teams to grow, grow efficiently to do things that first of all others can't do, but to give us, that gives us an advantage as a partner and as a provider that we're committed to doing. There's certainly an investment associated with that, and we've been very transparent about it, I think. Really, that will continue in 2026. It's just a thing to keep in mind as you think about those numbers.

We'll take our next question from Keith Hughes with Truist. Your line is open.

Thank you. May have addressed this before, but I just wanted to be clear. If we look at the scenario analysis for 2026, the middle scenario of flat single family, most of the numbers in that range are below what you're reporting for this year. Is it the flow through from the starts at the end of the year that would be affecting that EBITDA? Is there something else going on?

Yeah, it's similar to some of the comments already. I would say that the biggest difference is around the exit margin levels where that's going to result for the full year of 2026. It is not that things are necessarily going to get a lot worse from where they are, but just recognizing that they got worse through 2025.

And just a long-term question, always consider multifamily lower, definitely a lower ticket for you just given a smaller unit. You're doing so much truss work and things. Now multifamily gets back to a growth vehicle. Is that necessarily an inferior start or less of an inferior start in single family versus what it was maybe five, six years ago?

That's a great question. I don't know if I know off the top of my head, dollars per start splitting multifamily versus single family. What I would tell you is it's very, it's appealing for us because of the value add exposure, obviously a lot of truss, a lot of millwork, but it's also a growth vector. We see that there's opportunity for us to do more in that space, particularly as we've been able to build our relationships with contractors, with developers. We think that will continue to be a source of strength for us. It is a tricky one when we talk about communicating it to you guys because everybody wants to look at the multifamily headline number and given our sort of subsection of that, that's been a little bit of a disconnect. We like the business, we like the profitability. I think it has not just a good profile, but also the potential to grow quite well.

We'll move next to Trey Grooms with Stephens. Your line is open.

Hey, good morning guys. This is Ethan on for Trey. Thanks for taking the questions. Just going back to some earlier comments about share. You know, historically you guys were able to take share at maybe a couple hundred basis points above the market and obviously recognizing the current affordability challenge environment. How should we think about Builders' long-term ability to continue to take share maybe both in a flat market and on a longer-term time horizon?

Yeah, thanks, Ethan. Good question. I'm still a strong believer in our ability to take share. I think that the reality, if you go back over the past couple of years. We talk a lot about it, right. I think we've lost some share on the pure commodity side of the business. I think that we've gotten to the point where we're saying no to any more of that, and I think we've leveled that out. I think on the side where we gain the most share, it's primarily in the value add space. We have had and have better capacity, better capabilities, a better competitive position than anybody else in the space. When the market is running healthily, but also when it's running aggressively, we are an obvious source of relief for builders who are trying to solve problems. I think that's the storyline in the long run. We are still in an industry where guild trades, good labor is hard to find and increasingly retiring and becoming harder to find.

That's where our product portfolio, our offering, is uniquely suited to meeting the demands of the future. I think that gets accentuated when you think about digital. The magic of technology in our space is that it helps to take out waste and it helps to enhance efficiency. While sort of protecting the quality and the craft of what homebuilders do, we can assist, we can be a support structure for that. I think it positions us exceptionally well to be part of what is ultimately the maturing of an industry to meet some of the challenges that we face right now. That to me, that's share wins. I absolutely believe that we are positioned to do that. We're certainly better positioned to do it in a growth environment. That's evident in our performance over the last decade. I think, as you see, and even in this tough market, we can hold our own, we can do well. There are certain categories where we're doing very well. I'd say install continues to be a bright spot. There are certain aspects of value add. There are certain markets in value add where we're continuing to outperform the competition in the market is just a little tough to see with all the headwinds right now.

That's super helpful, thank you, Peter. Maybe diving more into the tech piece that you spoke on at the end of your comments there, can you talk more about the tech investments that you're making in the business and how specifically how these could provide maybe outsized incremental returns when demand recovers versus prior cycles?

Absolutely, yeah. The two main investments we're making right now are in the digital and technology space. That one we've been working on for quite a while now, that's Paradigm, increasingly AI. I think there's two aspects to it. Right. One is just the capability that it delivers our team to be the preferred partner, right. If you think about the speed at which we can turn around an estimate, the accuracy, the reliability of our delivery, all of that is really dependent on high quality communications internally and with the customer, clarity around what it is that the customer needs in our ability to provide it. That comes more easily when you have a wonderful tool and a structure around managing it like we have with Paradigm, the three dimensional digital twin. The capabilities that we're building around that, those will increasingly empower our team to win head to head in the marketplace. I see that as share gains is what it boils down to.

There's the second piece of that, and that's obviously the significant investment we're making that gets dialed out in your adjusted EBITDA number around SAP, right. The project, Elevate, as we call it internally, is an initiative around introducing more modern software solutions into our field operations. Management at the location level. It's a challenging project, all ERP implementations are but hopefully you've seen, we kicked it off this quarter. It didn't materially impact our numbers at the consolidated level. What it will do over time is accumulate in meaningfully improved efficiency. We see the opportunities for our folks to be more, again, more capable, more insightful, more able to partner with vendors, more able to manage the costs, more able to provide consistent and high level on time and in full performance. Those are the things that will over time contribute to productivity. We talk a lot about continuous improvement. Peter, where are you going to get all this money from? There's your answer. We see it, we see the opportunity. We have targets that we're going after. It'll take some time to deliver it as it always does with these types of large scale initiatives. I'm as confident as I ever have been that there is a pot of gold at the end of that rainbow and there are advantages that sort of derive from that capability technologically that will have a halo effect on the broader business as well.

Thank you, that's very helpful. Appreciate it.

We'll take our next question from Phil Ng with Jefferies. Your line is open.

Hey guys, relative to your guidance last quarter, good to see strong Q3 results better than expected and you revised the outlook higher, particularly on single family. I believe last quarter you had some insights on how perhaps your customers were pursuing land development and how they're managing production and whatnot. I guess what new insights have you kind of picked up from your builder customers and how much input do they provide for your base case scenario for 2026, and then just to dig into that a little bit more, how do you kind of envision the shape of the year unfolding in your base case for next year?

Thanks for the question, Phil. I won't be able to go down into the details about the shape of next year and that sort of thing. I can tell you what you're seeing in the results for this quarter from the publics in particular, that's what we've been hearing. You know, it's a mix, it's a struggle out there. There's certainly struggle from a bunch of different directions. Obviously, the political climate has gotten trickier because housing is continuing to be a high-profile political discussion. The good news, I would say, is that the Road Act and some of the stuff that's out there have good bipartisan support. People are trying to come up with solutions to take away some of the barriers that have restricted our ability to build affordably that have, I would argue, sort of crept into American society. That's good.

Anytime you've got a political discussion, I think it's tough for the builders. They've talked about that. I think that the affordability profile for them still continues to be a challenge. You see that they're still dealing with very elevated incentives on their side of the fence. You've seen a couple of key players acknowledging how hard that is, being forced to maybe even get more aggressive than they even want to be to clear some of the inventory. That new home inventory it's not problematic in terms of the overall amount of inventory available in the market, but it's certainly high for new. It's certainly high for new, and if not for the depressed existing, we would be paying even more attention to it. What you're seeing, I think, in the behaviors is a real pullback in the start's pace in order to make sure that those new homes, that new home inventory is being managed. That's our results, right?

That's what we saw coming. That's what we signaled to you. I think we've seen some stability at this low level, but I think all of us are wondering about the uncertainty. The uncertainty variable is something I hear from the builders a lot. Their concern, their consumer, their customer is uncertain. They don't know what to make of where tariffs are going to be, where jobs are going to be, what this AI thing is going to do. I think those are the themes that we hear that basically underpin some of these, what I would characterize as, [meh], market numbers for the last half of 2025 and the early part of 2026. There's still a lot of optimism about where the market is going to go, about what we're capable of doing, about the value that's being offered. With a little bit of help on a couple of areas, I do think there's room for growth, based on what we talk to the builders about.

Okay, super. I appreciate that if you guys want to be prepared and ready for recovery from a supply standpoint, capacity, when we kind of look at your normalized situation, call it 1 million, 1.1 million starts. What type of capacitualization does that imply? I know you guys kind of built this up during the pandemic. In the muted demand environment which we're seeing right now, is there more work to do on the capacity front? If I look at your deck where you show single family starts over a 10-year horizon, three out of 10 years, we're actually below your normalized levels. How do you kind of balance that dynamic going forward in terms of capacity and headcount and just cost going forward as well?

Yeah, that's a great question. The short answer is that the high level averages I would describe as useless, effectively, because you get small markets with low capacity and big markets with no capacity, looks like an average capacity, but neither is true. What I would tell you is this: the way we think about capacity is very local, market driven. Meaning as we looked at the result and what happened during the last five year window, so kind of five, six years, so 2019 through today, and seeing the arc of utilization of some of these facilities, we never got, in my opinion, to a dramatically high level of production. We still struggle. What that revealed, I think, were the opportunities for us to enhance capacity, to recognize where over time the shift has occurred in terms of where the starts are and where the starts need to be. Then where in those markets do we need to have a better footprint of capacity? That's what you've seen us invest in.

It's sort of a rifle shot approach to capacity additions in response to where we got pinched versus, oh well, there's a need, we'll just add it. We'll add it across the country or we'll peanut butter it. That's not how we think about it. In light of that, we have definitely filled in some of those holes. I would say where we had the biggest issues, we've moved the most aggressively, we're best positioned. There's a handful of stuff that we'll continue to do, but I do see it being less than it has been certainly over the last three or four years as we move forward until we get better clarity as to what the next leg of growth, where the next leg of growth is going to be.

Okay, appreciate the call. Thank you so much.

We will take our next question from Collin Verron with Deutsche Bank. Your line is open.

Good morning. Thank you for taking my questions. When you look at the factors that have made Builders track below lag, single family starts in your markets, do you think that that's fully stabilized at this point so you'll track more in line with lag starts in 2026, or are you anticipating more headwinds in 2026? Can you help quickly quantify what those might look like as we look at Builders single family sales versus starts.

Yeah, thanks Collin. I think what we've tried to outline for you is that we are tracking with lag single family starts at this point, taking into consideration the structural adjustments. If you're thinking about when on the face of the financial, that'll come true without having to do the additional adjustments. I think it depends on that stabilization of the home size and decontenting, which we're starting to see more of. What's a little more difficult right now is some of the cost basis and inputs that we're seeing from our manufacturers and suppliers that are being challenged with given different market dynamics and affordability items. We are going to continue to do our analysis the way we have. We'll be happy to share with you on future calls. We think that we're getting to a point where those structural adjustments are starting to get a little bit less impactful, but they're still in there for our reconciliation.

Great. That's helpful, color. I think you quickly mentioned some branch consolidation actions that you guys have taken. Any color on what the annual cost savings from these actions are, and just given the current demand environment, do you anticipate any further actions?

Yeah. We've taken out 16 facilities this year, 30 last year, so 46 over the last 21 months. It's something that we do as part of the fabric of who we are. We talked about that last quarter. We're constantly evaluating where we have excess capacity. We just talked about capacity with Peter on the prior question. We look at where we have excess and we're rationalizing that and keeping in mind first and foremost our customer, trying to make sure that we're taking care of our customer. Where we have additional facilities in a market that we can service more effectively from a single location versus multiple locations, we are going to continue to make those decisions. The capacity is across the board. It's multifamily truss plants where we saw multifamily pullbacks. We've talked about that.

Locations that are down from a start standpoint and we just don't need as much fixed costs. We're going to continue to evaluate this on a go forward basis all the time. It's just part of what we do. As we integrate acquisitions and we look at the best way to service our customers from the right locations where we have overlap, I hope that answers your question, but it's going to be something we will continue to bring up and address as we move forward.

We'll move next to Min Cho with Texas Capital Securities. Your line is open.

Great, thanks for squeezing me in here. Just two quick questions. It is nice to see the good progression on sales and bids through your digital tools. Can you provide any update on the pilot? Have you expanded home builders into the pilot and just kind of what they're using the most or getting the most value out of your expectations for the pilot kind of going into 2026?

Yeah, no happy to talk about it. What we have today is because it's an end-to-end platform, the participation rates in different aspects of the tool are pretty varied as you might imagine. I would say every piece of it is being used. That's good. Adoption levels obviously for the easy stuff are sky high. We have pretty much everybody using it for invoice review, delivery photos, and payments. There is a subset of that that's using it for things like estimates and quoting. There's a subset that's really engaged on the Home Configure aspect. The visualization tools customers are working through actually include an expansion of what is in the catalog within Home Configure for the consumer to select from. We've got a couple of customers that are leaning into that, using it as a virtual model home type of a tool set for rendering and drafting.

Builders FirstSource (BLDR) Q3 2025 Earnings Call Transcript

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