Builders FirstSource reported second-quarter net sales of $3.86 billion, down 8.8% year-over-year, as weaker housing starts and commodity deflation outweighed acquisition contributions.

Core organic sales decreased 7%, while commodity deflation reduced sales by another 2.7%. Acquisitions added 0.9%. Gross profit fell 16.3% to $1.09 billion, with gross margin contracting 260 basis points to 28.1%.

Adjusted EBITDA fell 34.9% to $329 million, while adjusted EBITDA margin declined 350 basis points to 8.5%. The Irving, TX-based distributor recorded a $3.9 million net loss, compared with $185 million in net income a year earlier. Free cash flow fell to $32 million from $255 million.

Demand weakened across each of the company’s major end markets. Core organic sales declined 8.1% in single-family construction, 9.7% in multifamily and 1.8% in repair and remodel/other.

Value-added core organic sales fell 11%, including a 12% decrease in manufactured products and a 10% decline in windows, doors and millwork. Specialty building products and services decreased 6%, while lumber and lumber sheet goods declined 1%. Value-added products represented approximately 46% of quarterly sales.

Builders FirstSource lowered its full-year sales outlook to between $14 billion and $14.8 billion, compared with its previous range of $14.6 billion to $15.6 billion. Adjusted EBITDA guidance was reduced to $1 billion to $1.2 billion from $1.1 billion to $1.5 billion.

The company now expects single-family starts in its markets to fall by a mid- to high-single-digit percentage, compared with its previous assumption of a low-single-digit decline. Its multifamily assumption was reduced from a low-single-digit decline to a mid-single-digit decrease. CFO Pete Beckmann said persistent affordability challenges and softer demand prompted “a more cautious view of the second half.”

Builders FirstSource identified another $40 million in annualized savings, increasing its 2026 cost-action target to approximately $115 million. It generated $28 million in productivity savings during 2Q and $34 million through the first half.

Recent developments include the June acquisition of Boise, ID-based finish carpentry installer Precision Design and Trim. In May, the company named Mike Hiller COO-designate to succeed Steve Herron upon his Dec. 31 retirement and appointed Coley O’Brien as Chief Human Resources Officer.

MDM Analysis

As MDM’s No. 2 Building Materials/Construction distributor, Builders FirstSource offers a sobering market signal. Weakness is broadening beyond single-family housing, with multifamily sales also falling nearly 10%, while repair and remodel remains comparatively resilient. The lowered starts assumptions suggest little near-term demand relief, particularly while borrowing costs and affordability constrain projects. Margin and cash-flow compression further illustrate the operating-leverage challenge facing distributors as volumes fall. Other suppliers should maintain conservative second-half forecasts, tightly manage expenses and working capital and continue emphasizing installation, manufactured components and other differentiated services.