Bmc software q1 earnings call

And we now have approximately 2, of our associates working from home and without disruption. Given the changes we were witnessing in the U. Consistent with these three near-term priorities, we have significantly stepped up our communications in all forms, companywide, including a weekly video update where I highlight our progress against these priorities to all of our associates.

As one of our company's core values, we are committed to ensuring the safety of our associates and their families as our No. Over the course of the past two months, we took numerous steps to protect our associates, customers and communities in which we operate. Our cross-functional coronavirus task force ensures that we are responding in real time with the development of the appropriate processes, protocols, training and communications to our associates and stakeholders.

These measures incorporate as the guidelines recommended by the CDC and include detailed cleaning and disinfecting processes, social distancing protocols, providing face coverings and other personal protective equipment, suspending travel and encouraging associates to work from home when possible.

We also implemented requirements for job site safety, signage at our locations and are partnering with our customers at job sites as necessary.

Additionally, the company launched a dedicated COVID resource Intranet page to keep associates up-to-date on company and health authority information, guidelines and policies. We also enacted several emergency pay programs in order to maintain continuity of pay for associates who present any symptoms or are unable to report to work because of a COVID disruption.

At any location where an associate received a positive diagnosis, a deep cleaning and disinfecting of the facility was implemented. Additionally, any associates who had prolonged close contact with an associate with COVID were placed on paid emergency leave.

Before starting work, we asked all managers to invest 10 minutes educating our team members on best practices we should be following to keep ourselves, our partners, our customers and our communities safe from COVID and help flatten the curve for everyone. Now let's turn to our cost savings initiatives across our company.

We are actively reducing our operating expenses in anticipation of the housing industry slowing significantly from where we started this year.

While it's hard to predict, and there remains a high degree of uncertainty, several industry experts and analysts have projected full year single-family starts could decline to a range of approximately , to , If starts drop that low, we are well positioned to use the dip as an opportunity to gain share in value-added segments, accelerate productivity and continue to acquire well-run businesses. As the economy recovers, we believe the long-term underlying industry fundamentals remain strong as we are coming off a period of more than a decade where single-family housing starts have failed to meet the demand of our growing population.

Since March 1, , our total permanent headcount was reduced by more than associates and another associates were placed on temporary furlough. Where we have enacted temporary curtailments, we continue to pay associates for an additional two weeks and guaranteed their benefits for an additional month. We have also reduced other costs. First, we remain focused on driving productivity and efficiency gains through the BMC Operating System.

We will continue to drive productivity throughout this year as we have stepped on the accelerator in this area. And a hiring freeze was implemented for all roles to protect the jobs of our current associates. All members of the BMC leadership team took a reduction in salary, and associate merit-based pay increases and the BMC k matching contributions were temporarily paused.

The Board of Directors also took a decrease in their cash compensation. We announced these initiatives in March. As the situation evolves, we are continuing to take appropriate actions to reduce our operating expenses and rightsize our company to position us for future growth. Before passing the call over to Jim, as I have done on previous calls, I'd like to highlight one of our many valued employees.

At BMC, small acts of kindness and doing the right thing go a long way, not only in strengthening relationships and boosting morale, but also in inspiring others who witness the acts to go above and beyond themselves.

This leads me to a recent story about one of our associates, Jesse Gonzales, from our Central Texas market. Jesse has been a valuable part of our company for 27 years. Through hard work and a series of business acquisitions, Jesse has gradually moved up through the ranks to become the Operations Supervisor for BMC's windows operation in Austin, Texas.

At the beginning of last month, as the realities of COVID on the Austin area began to set in, a driver from a key supplier arrived at our Austin facility to drop off an order of windows. However, a large load of windows ordered by a competitor was positioned on the truck in front of BMC's load.

Instead of sending the driver away, Jesse helped the driver unload the competitor's windows, unload our product, then reload our competitors' product back onto the truck. Jesse's unselfish efforts allowed us to service our customers without any issue. Moreover, immediately following the event, when Jesse was asked why he went to such lengths to help solve a problem that he had no hand in creating, the first words out of his mouth were, "Because we're all in this together.

I wanted to make sure the driver got home on time to see his family tonight. To wrap up, I'm very proud of our associates who helped us deliver double-digit net sales and adjusted EBITDA growth in the first quarter. We entered this crisis in a position of strength, and I'm confident that our actions, combined with our commitment to our associates, customers and suppliers, will enable us to exit this period of uncertainty with strong momentum as the economy recovers.

With that, I'll turn the call over to Jim for a detailed look at our first-quarter results and our second quarter outlook. Thanks, Dave. I would also like to thank our associates for exceeding our customers' expectations during this challenging time.

We greatly appreciate their hard work and commitment. I'd like to discuss our solid first-quarter results, which came in higher than we expected on the adjusted EBITDA line. We delivered double-digit core organic growth in our value-added product categories and an increasing benefit from our acquisition program.

While total net sales increased Our net sales were stronger than expected in our value-added products and services and multifamily as well as what was generally a pretty mild winter. Sales of our millwork, doors and windows segment continued its strong growth from the fourth quarter and led our sales growth again for this quarter with an increase of We continued to gain share in this higher-margin segment.

Total net sales in structural components rose Turning to gross profit for the quarter. And we drove strong gross profit growth of 9. Our millwork, doors and windows segment generated relatively high gross margins in the quarter. Overall, gross margins were stronger than expected, driven by solid pricing discipline and a very strong mix of millwork sales, our highest gross margin product category. Gross profit as a percentage of net sales was The first-quarter gross margin was at the high end of our range we provided back in February.

The 40 basis point decline in gross margin was primarily driven by a decrease in the gross margin in the lumber and lumber sheet goods product category, which benefited from unusually high commodity price-related gross margins during the first quarter of Adjusted EPS increased 8.

Let's now turn to our cash flow. For , we expect that we will be solidly free cash flow positive as potential declines in sales and EBITDA are largely offset by corresponding reductions in our working capital investment.

Additionally, we do not have any significant long-term debt maturities until As of the end of the quarter, our net debt was at approximately 0. These expenditures were primarily used to fund purchases of vehicles and equipment to replace aged assets and support increased sales volume as well as facility, technology and automation investments to support our operations.

During March, we completely reevaluated our capex plans for the year and postponed future growth-related capital projects. Most of this capital will be deployed in safety, productivity, fleet, structural components and millwork. Turning to our share repurchase program. We started buying shares in March after we posted our fourth quarter earnings, but put the brakes on buying additional shares due to COVID Currently, we have no plans to repurchase shares this year unless something changes dramatically at the macro level.

Although we had a strong first quarter and strong business momentum, we knew the housing sector was going to come under pressure and show declines in housing starts versus last year. So last month, we issued a press release and withdrew our outlook for the year. Economic uncertainty remains high, but we would like to share with you what we are seeing in the business today and what data points we are focused on to guide our future actions.

In the final week of March and throughout April, most of our markets experienced negative impacts on the top line, ranging from a deceleration relative to their first-quarter growth rates to modest year-over-year decline. In a select number of states, including Washington, Pennsylvania and portions of northern California, we experienced more significant sales declines due to more restrictive stay-at-home orders that halted certain construction activities.

However, these three jurisdictions are in the process of reopening to building construction. We estimate our total core organic net sales for the month of April were down in the mid-single digits. On their recent earnings calls, most builders have reported significant declines in new home orders and varying levels of increases in order cancellations since the end of March and continuing into April. However, there are also some recent indications that declines in buyer traffic and new home orders are stabilizing.

While April housing start data is likely to be down significantly, I would remind investors that increases or decreases in demand for our products generally align to a three to six-month trailing average for starts more so than any one or two recent data points. Another census metric that takes on greater relevance when starts are volatile is houses under construction, which measures the number of active housing projects at a given point in time.

A seasonally adjusted number of single-family houses under construction reported at the end of the first quarter was flat versus the prior year, but remain near a year high. As we look to the remainder of the second quarter, we believe these healthy backlogs will help to moderate the near-term impact on our net sales relative to any negative housing start data that may be reported. Nonetheless, we do expect year-over-year core organic sales declines to continue to accelerate in May and June.

Assuming our customers are able to continue to build through their existing backlogs without further disruption or curtailment, we believe the year-over-year percentage decline in core organic sales for the entirety of the second quarter could end up in the low double digits to mid-teens. With all that said, we will remain in frequent contact with our customers nationally, regionally and locally to enable us to optimize each of our local businesses during this period of rapidly changing conditions.

Our team is highly focused on incoming cash flow, reducing our operating expenses and maintaining strong liquidity. We continue to drive operational improvements that are within our control. We believe we're in a strong position to weather this pandemic and navigate this challenging time.

So with that, let me turn the call back over to Dave. Thanks, Jim. As you can see, we've made significant changes to our ongoing business operations to prepare for a slower period in the housing sector.

What hasn't changed are the four pillars of our long-term business strategy. They include: growing our value-added products and segments and improving our business mix, delivering operational excellence and driving ongoing productivity through the BMC Operating System, building a high-performing culture for all of our associates, and finally, pursuing strategic expansion. We are continuing our conversations with private distributors, but we recognize that completing deals may be more challenging until the current level of economic uncertainty subsides as sellers evaluate their alternatives and look for a period of stability before making their long-term decisions.

Our pipeline of acquisition candidates remain strong, and inorganic growth continues to be a very important part of our business strategy. No one can anticipate something like we've experienced over the last two months, but we have responded aggressively and appropriately, and our balance sheet is built for times like this.

I am confident that BMC is well positioned to navigate this challenging period. I am also extremely proud of our associates. They've stepped up and are providing great customer service during a very challenging time in our country's history. Our associates remain fully engaged and are eager to drive value for our shareholders.

This year, enabled by the BMC Operating System and our strong balance sheet, we will continue to drive productivity and efficiency and strengthen and capitalize on our key differentiators, including our focus on innovation, our size and scale, our value-added products and services and continued improvement in our customer service levels.

Our team is energized and fully committed to continuing to drive long-term shareholder value. Thank you again for joining us today and be safe. Thank you. Please go ahead. Good morning. This is Ashley Kim on for Matt today. My first question is on pricing. With lumber prices coming back down, do you expect to hold on to some margin percentage? Or does the softer demand environment make it harder to hold on to pricing? This is Jim. And lumber prices have come down a bit from where they were in, I guess, late February, early March.

Although last couple of weeks, they've started to tick back up again. Given that lumber prices weren't that high for very long in Q1, I don't know that there's much upside per se on the margin line related to that volatility. So as you probably recall, we've enjoyed higher-than-average margins on commodities throughout most of So I still think in Q2, we're likely to be in a position where we have some negative year-over-year comparisons against those very high margins that we enjoyed in Q2 of last year within the commodity category.

That's helpful. And then on cycle times, have they become extended as a result of social distancing on job sites? And have you seen any impact on this on the top line? This is Dave. We've seen a little bit of impact by that. It's taken a little bit longer to work through. Actually getting the work done at the job sites just because of the local requirements, sometimes inspections are a bit backlogged and all that.

So we are seeing some slowdown in that activity, just more difficulty in getting the work done at the job site. This is actually Chris on for Mike. A first question is just on the puts and takes on the 2Q guide.

And any potential early thinking on the 2Q, 3Q volume progression? I mean how much of the recent order declines do you think are being captured in that low- to mid-teens organic growth decline? And given the timing lag, are you expecting that to accelerate into 3Q or roughly even progression? I'll start and then Jim can piggyback on. I mean as I commented earlier, we've had a very strong backlog and things were very strong when the brakes were slammed on there the second half of March.

And obviously, we've had three states that shut down construction. And so that really drives a lot of what we're seeing. But I'd just point to the fundamentals in the industry, the backlog that we've had and the strength of what we've seen there. As states turn back on now, there's so much uncertainty around the backlogs that were done, matching that up with the new home sales, which are obviously declining.

How much more in terms of starts are going to be out there? So we would expect, and we've already seen, particularly in the state of Washington and northern California since things halted so abruptly, we've had a flurry of activity here since they've started to ramp back up. The world is experiencing innovation and change at a rate never seen before.

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Dow 30 36, Nasdaq 15, Russell 2, Crude Oil Gold 1, Silver CMC Crypto 1, FTSE 7, Nikkei 28, Read full article. Zacks Equity Research. Given our solid first quarter results and our current outlook, we are on track to achieve our fiscal expectations.

We had a number of significant wins during the quarter that demonstrated our continued strength in selling the BSM platform. We saw multiple wins in the U. It's not only the growth in large deals, but the mix of our ESM wins that underscores our momentum. That's the fourth straight quarter in which we have seen deals in this range increase by double-digit percentage.

And we also saw our average selling price continue to grow. Looking at our global performance, we generated solid double-digit ESM license bookings growth in all major geographies. Not only did we have strong geographic performance, but we also had strong double-digit license bookings growth across all of our product disciplines within the ESM business. Six of the top 10 license deals were multi-disciplined license transactions, while five of those included all product disciplines.

This reflects the success of our ongoing realignment of our ESM sales team. Read the rest of this transcript for free on seekingalpha. Receive full access to our market insights, commentary, newsletters, breaking news alerts, and more. I agree to TheMaven's Terms and Policy.