Builders FirstSource (NYSE:BLDR) executives said the company delivered “disciplined execution” in 2025 despite what CEO Peter Jackson described as a housing market with “more headwinds than tailwinds,” citing affordability challenges, muted consumer confidence, and depressed commodity prices. Management noted that sales weakened more than expected late in the fourth quarter as builders delayed starts to work down inventory, contributing to a softer finish to the year.
Market backdrop and operating response
Jackson said November and December were weaker than anticipated as crosscurrents weighed on starts, and he noted economists remain split on 2026 outcomes, ranging from further declines in single-family starts to modest growth amid macro and regulatory uncertainty. He also pointed to commodity pressures, including OSB “well below normal,” with a commodity composite below $350 per thousand board foot exiting 2025, and said commodity supply curtailments have not been sufficient to meaningfully lift prices in the near term. Management added that inflation continues to pressure costs, particularly insurance and rent.
Fourth-quarter results and drivers
CFO Pete Beckmann said fourth-quarter performance came in below expectations largely due to a sharp late-quarter sales deceleration and higher-than-expected insurance costs. Net sales declined 12% year over year to $3.4 billion, driven by lower core organic sales and commodity deflation, partially offset by acquisitions.
Beckmann said core organic sales fell due to a 15% decline in single-family, a 20% decline in multifamily, and a 7% decline in repair and remodel as consumer uncertainty persisted. He reiterated several factors that reconcile single-family starts to the company’s sales performance, including an approximate three-month lag from start to first sale, lower value per start as home size and complexity have decreased, and pressure across the supply chain tied to affordability constraints. Based on these dynamics, he said the company believes share was “roughly flat” for the quarter and full year.
- Gross profit: $1.0 billion, down 19% year over year
- Gross margin: 29.8%, down 250 basis points, primarily due to a declining starts environment
- Adjusted SG&A: $751 million, down $13 million, mainly from lower variable compensation, partially offset by acquired operations
- Adjusted EBITDA: $275 million, down about 44%
- Adjusted EBITDA margin: 8.2%, down 470 basis points
- Adjusted EPS: $1.12, down 52%
Management emphasized the company’s longer-term margin profile versus prior cycles, with Beckmann noting the current gross margin compares to roughly 27% in 2019, reflecting investments in value-added solutions and continuous improvement.
Cost actions, productivity, and capital allocation
Beckmann said the company is “leaning further into” its downturn playbook with $100 million of cost actions, including $75 million of year-over-year cost reductions and $25 million of cost avoidance. He later clarified in Q&A that these cost actions are “100% SG&A related,” that most are already in place, and that benefits should accrue through 2026. Actions include deeper cuts to overtime and temporary labor, adjustments to incentive compensation plans, reduced merit and overhead spending, accelerated facility consolidations, and tighter discretionary controls.
Jackson said the company generated $48 million in productivity savings in 2025, primarily through targeted supply chain initiatives, and invested more than $110 million in new, expanded, or upgraded value-added operations. He also said the company deployed nearly $2 billion in 2025 toward return-enhancing opportunities aligned with its capital allocation priorities.
On acquisitions, Jackson highlighted several deals completed late in 2025 and early 2026, including Builder’s Door & Trim and Rystin Construction in Las Vegas (October), Lengefeld Lumber in central Texas and Pleasant Valley Homes in the Northeast (November), and the assets of Premium Building Components in New York (January). Jackson said that since the 2021 BMC merger, the company has completed 40 acquisitions representing more than $2.3 billion in annual sales.
On Pleasant Valley Homes, Jackson described it as an expansion of the company’s prefabricated component strategy, offering HUD-compliant manufactured homes and semi-custom modular homes. He said Builders FirstSource plans to use available factory capacity to offer semi-custom modular plans to its existing builder customers, with potential expansion to other markets over time. In Q&A, he added the company is not seeking to become a traditional retail modular seller, and said early analysis suggests modular could be produced “at or below” on-site costs, though the company is still in the process of proving out the economics.
Technology and digital strategy
Jackson said technology and digital tools remain central to the company’s strategy, including automation, artificial intelligence, and digital integrations aimed at streamlining the homebuilding process. He said the company’s digital platform, launched in early 2024, processed nearly $7 billion of quotes through 2025, representing year-over-year growth of more than 130%.
He also said the company made progress in its SAP implementation following the launch of two pilot markets in July, refining its deployment plan in the fourth quarter and positioning for continued rollout in 2026 and broader deployment beyond. In Q&A, Jackson said AI efforts have been focused pragmatically on tools that improve outcomes, particularly in estimating, to increase speed and capacity for customer-facing teams. He said the company has seen “very little” headcount reduction from AI so far and is primarily seeing benefits in pace and capacity rather than cost elimination.
Cash flow, balance sheet, and 2026 guidance
Builders FirstSource reported fourth-quarter operating cash flow of $195 million and free cash flow of $109 million. For the full year, free cash flow was $874 million, which management said equated to an approximately 8% free cash flow yield. Beckmann also reported net debt to adjusted EBITDA of about 2.7x and noted the company has no long-term debt maturities until 2030. The company ended the year with $500 million remaining on its share repurchase authorization.
For 2026, management guided net sales of $14.8 billion to $15.8 billion and adjusted EBITDA of $1.3 billion to $1.7 billion, implying an adjusted EBITDA margin of 8.8% to 10.8%. The company expects gross margin of 28.5% to 30% and free cash flow of about $500 million, with Beckmann attributing the year-over-year change primarily to a $300 million swing in working capital and lower EBITDA. Guidance assumes average commodity prices of $365 to $385 per thousand board foot.
For the first quarter, the company guided net sales of $3.0 billion to $3.3 billion and adjusted EBITDA of $175 million to $225 million, reflecting a challenging macro environment, elevated housing inventories, and winter weather in key markets. In Q&A, management quantified the weather impact as roughly $30 million to $40 million of sales in the last week of January that could shift into February.
Jackson said the company expects a heavier second-half contribution in 2026, in part because the second half of 2025 was unusually weak after builders pulled back starts sharply to manage inventory. He also said repair and remodel has been “stumbling along,” while multifamily has stabilized and the company is seeing “green shoots” in quoting, though management reiterated a 9–12 month lag from multifamily starts to the company’s first sale.
About Builders FirstSource (NYSE:BLDR)
Builders FirstSource, Inc is a leading supplier of structural and value-added building products and services to professional contractors, homebuilders and remodelers. The company provides a comprehensive range of materials and prefabricated components that support all phases of residential construction, from site development and framing to finishing and installation.
The company’s core offerings include lumber and lumber sheet goods, windows and doors, millwork, roofing and siding, and engineered wood products such as roof and floor trusses.
