Builders FirstSource Inc. (NYSE:BLDR)

The financial ratios and related metrics exhibit notable variations over the examined periods, reflecting changes in operational efficiency and working capital management.

Inventory Turnover

The inventory turnover ratio shows a decline from values around 9 in 2019 to a low near 5 in early 2021, indicating slower inventory movement during this phase. Subsequently, there is a recovery with a peak above 10 at the end of 2022, before decreasing slightly again in 2023. This pattern suggests periods of inventory buildup followed by improved inventory management and faster turnover.

Receivables Turnover

Receivables turnover follows a declining trend from near 12 in early 2019 down to about 6 in early 2021, evidencing slower collection of receivables during this time. A pronounced improvement occurs thereafter, reaching almost 16 by the first half of 2023, which indicates enhanced efficiency in receivables collection.

Payables Turnover

Payables turnover decreases from approximately 12 in early 2019 to around 7 in early 2021, indicating longer payment cycles to suppliers during this period. This ratio then increases sharply to nearly 19 by late 2022, suggesting faster payment to suppliers. The turnover ratio decreases slightly in 2023 but remains above earlier lows, highlighting more prompt payments compared to 2021.

Working Capital Turnover

The working capital turnover ratio demonstrates a downward movement from about 12-15 in 2019 down to around 5-6 in early 2021, indicating less efficient use of working capital. A recovery follows, peaking at nearly 14 by late 2022, then a moderate decline occurs into 2023, suggesting improved but fluctuating working capital utilization.

Average Inventory Processing Period

Days inventory outstanding increased from approximately 40 days in 2019 to a substantial peak near 71 days in early 2021, corroborating the slower inventory turnover observed. This measure improves substantially thereafter, reaching as low as 35 days by late 2022, before rising again moderately in 2023. This indicates variability in inventory management efficiency over the periods.

Average Receivable Collection Period

The receivable collection period increased from about 30-36 days in 2019 to a peak of 58 days in early 2021, reflecting slower cash inflows from customers. It then improves significantly, dropping to around 23 days by late 2022, before increasing moderately once more to mid-30 days in 2023, showing an overall return to improved collection practices after a period of extension.

Operating Cycle

The operating cycle lengthens markedly from the low 70s in 2019 to a peak near 130 days in early 2021, consistent with slower inventory turnover and receivable collections. Thereafter, the cycle shortens significantly to below 60 days by late 2022 but then increases moderately in 2023. This pattern reflects fluctuations in the overall efficiency of the company’s operations.

Average Payables Payment Period

The payment period to suppliers extends from about 30 days in 2019 to over 50 days in early 2021, indicating possible stretching of payments. Subsequently, this period shortens sharply to 20 days by late 2022, before increasing again to low 30s days in 2023. This demonstrates shifting payment strategies possibly balancing supplier relations with cash flow management.

Cash Conversion Cycle

The cash conversion cycle remains fairly steady around 40 days in 2019 and 2020 but spikes to almost 80 days in early 2021, indicating a strain on cash flows due to slower inventory and receivables turnover combined with longer payment periods. Thereafter, it improves towards shorter cycles near 38 days in late 2022 and fluctuates slightly upwards in 2023, suggesting efforts to better synchronize cash flow timing.

Overall, the data reflect a challenging period around early 2021, characterized by slower operational cycles and increased working capital demands, likely impacting liquidity. Following this, there is a significant recovery in operational efficiency and cash flow management, with improvements in turnover ratios and shorter processing periods, although some metrics show variability in the most recent quarters.

Cost of Sales

The cost of sales exhibited a general upward trend from early 2019 through mid-2021, increasing from approximately $1.19 billion in March 2019 to a peak of around $3.99 billion in June 2021. Following this peak, the cost of sales declined noticeably through the end of 2022, reaching about $2.87 billion in December 2022. In 2023, the figures stabilized somewhat, fluctuating between $2.5 billion and $2.95 billion. This pattern suggests a period of significant growth culminating in mid-2021, followed by a contraction and a subsequent stabilization phase.

Inventories, Net

Net inventory levels showed moderate fluctuations from 2019 until early 2020, remaining between approximately $560 million and $640 million. Starting in March 2021, inventories surged sharply to over $1.58 billion and continued to increase to a peak exceeding $2.07 billion in June 2021. Subsequent periods saw a decline in inventories through 2023, eventually stabilizing around $1.33 billion by September 2023. The sharp increase in inventory in early 2021, followed by a gradual reduction, could indicate adjustments in stock management or anticipation of demand that later moderated.

Inventory Turnover Ratio

The inventory turnover ratio decreased over the period from 2019 through early 2021, falling from around 9.0 to a low of approximately 5.1 in mid-2021. This decline indicates slower movement of inventory during this period. From mid-2021 onward, the turnover ratio improved significantly, reaching a peak of 10.5 in December 2022, before slightly declining but remaining relatively high through the third quarter of 2023. The increase in turnover ratio after mid-2021 suggests enhanced efficiency in inventory management or stronger sales relative to inventory levels.

Summary

Overall, the data reveal a cycle of rapid growth in sales cost and inventory levels until mid-2021, accompanied by a declining inventory turnover, which may reflect inventory accumulation or slower sales. Following this period, the company appeared to improve inventory management efficiency, as indicated by a rising turnover ratio and a reduction in inventory levels, even as cost of sales decreased and then stabilized. These trends indicate a shift from expansion and inventory buildup toward consolidation and improved operational efficiency in the most recent periods.

Net Sales

Net sales exhibited an overall upward trend from March 2019 through March 2021, increasing significantly from approximately $1.63 billion to over $4.17 billion. This peak was followed by a further increase reaching about $5.57 billion in June 2021. However, from that point onward, net sales showed volatility, declining sharply towards the end of 2021 and throughout 2022, with some recovery in mid-2023. The fluctuations suggest variability in demand or operational challenges during the later periods.

Accounts Receivable, Less Allowances

Accounts receivable grew steadily from roughly $649 million in March 2019 to about $1.74 billion in March 2021, which corresponds with the increase in net sales. Post-March 2021, receivables peaked near $2.4 billion by mid-2022, then declined substantially in the subsequent quarters toward $1.44 billion by March 2023. This pattern indicates an accumulation of receivables with the rise in sales, followed by improved collections or reduced sales in later periods.

Receivables Turnover Ratio

The receivables turnover ratio decreased from 11.8 times in March 2019 to a low of 6.26 in March 2021, reflecting slower collection efficiency as both sales and receivables increased. After March 2021, the ratio rebounded sharply, reaching a peak of 15.69 in December 2022, suggesting improved collection efforts or a contraction in credit sales. Through mid to late 2023, the turnover ratio moderated but remained above earlier low levels, indicating sustained enhancement in receivables management or shifts in sales terms.

Overall Analysis

The period under review shows a significant expansion phase up to mid-2021, characterized by rapidly increasing sales and accounts receivable, with a corresponding slowdown in turnover efficiency. Following this growth phase, the company experienced considerable variability in net sales and receivables, possibly influenced by changes in market conditions or internal strategies. The marked improvement in receivables turnover in late 2022 and 2023 suggests heightened focus on cash collection and working capital optimization despite fluctuating sales volumes.

The analysis of the quarterly financial data reveals several noteworthy trends and fluctuations in cost of sales, accounts payable, and payables turnover over the observed periods.

Cost of Sales

The cost of sales exhibited a general increasing trend from early 2019 through mid-2021, significantly rising from approximately 1.19 billion USD in Q1 2019 to a peak exceeding 3.99 billion USD in Q2 2021. Following this peak, costs fluctuated but remained generally high. Notably, after Q2 2021, there was a decline toward the end of 2022, dropping to roughly 2.87 billion USD, before slightly increasing again in 2023 with values stabilizing near 2.9 billion USD. This pattern indicates a strong growth phase followed by a period of correction or normalization in costs.

Accounts Payable

Accounts payable followed a somewhat variable yet overall increasing pattern through much of the period. Starting around 471 million USD in Q1 2019, payables climbed to over 1.31 billion USD by Q2 2021. Following this, the balance saw decreases through late 2022, falling to approximately 803 million USD in Q4 2022, before showing a moderate rebound in early to mid-2023 to just over 1 billion USD. This trend suggests fluctuations in supplier obligations, possibly reflecting changes in purchasing or payment strategies aligned with cost of sales movements.

Payables Turnover Ratio

The payables turnover ratio demonstrated significant variability across the quarters. Initially, this ratio ranged between approximately 10.6 and 12.1 in 2019, indicating a relatively stable frequency of payment cycles. During 2020 and early 2021, the ratio declined to as low as 7.22 in Q1 2021, indicating slower payment cycles relative to cost of sales. A sharp increase then occurred in late 2021, peaking at 18.65 in Q4 2022, suggesting accelerated payments or reduced payables relative to costs. Afterward, the ratio decreased again through 2023, settling near 10.9 by Q3 2023. These fluctuations depict a dynamic management of payables, responding potentially to liquidity conditions and operational priorities.

Working Capital

Working capital demonstrates a generally increasing trend from 2019 through mid-2022, with a notable peak at the end of 2020 and mid-2022. After reaching highs above 2.7 million US dollars in mid-2022, it declines steadily through 2023, ending slightly above 1.5 million US dollars. This pattern suggests periods of strengthened liquidity followed by contractions in more recent quarters.

Net Sales

Net sales display a pronounced upward trajectory from 2019 to mid-2022, nearly tripling during this interval. The highest sales values are recorded around mid-2022, exceeding 6.9 million US dollars. However, after this peak, net sales decline significantly through 2023, dropping to approximately 4.5 million US dollars in the latest quarter. This volatility reflects a period of rapid growth followed by a material downturn in sales.

Working Capital Turnover

The working capital turnover ratio exhibits a declining trend from early 2019 through the end of 2020, moving from approximately 11.82 to its lowest levels near 7.45. Following this, the ratio increases notably during 2021 and early 2022, reaching values above 10 and peaking around 13.73 by the end of 2022 and into early 2023. Subsequently, there is a slight decrease but the ratio remains relatively high, indicating more efficient use of working capital during those periods.

Overall Analysis

The data reflects a cyclical pattern marked by initial growth in liquidity and sales, culminating in mid-2022, followed by declines through 2023. Despite reductions in both working capital and net sales in the latest periods, the improved working capital turnover ratio suggests enhanced operational efficiency in managing current assets relative to sales. This may indicate adaptive financial management amidst declining sales volumes.

Inventory Turnover

The inventory turnover ratio exhibited relatively stable performance during 2019, fluctuating between approximately 8.9 and 9.5 times. In 2020, there was a noticeable decline, with ratios dropping to as low as 7.67 but then partially recovering towards the end of the year. The year 2021 started with a significant decrease to a low of around 5.12-5.15, followed by a recovery trend through the end of the year, reaching over 8.6. In 2022, the ratio varied between roughly 6.7 and 10.5, indicating some volatility but an overall improvement, peaking in the final quarter. The first three quarters of 2023 show a slight downward trend from 10.21 to 8.47, but inventory turnover remained higher than the lows observed in 2021.

Average Inventory Processing Period

The average inventory processing period generally moved inversely to the inventory turnover ratio. In 2019, this metric remained steady between 39 and 41 days. During 2020, the period slightly lengthened, consistent with the decrease in turnover ratio, reaching up to 48 days. The most significant change occurred in early 2021, where the processing period expanded sharply to 71 days in the first half of the year, mirroring the low inventory turnover. This period then shortened notably in the second half of 2021 to around 42 days, reflecting the recovery in turnover. The processing period fluctuated throughout 2022, spanning from approximately 35 to 54 days, showing some irregularity but generally an improvement compared to early 2021. In 2023, the period stabilized between 36 and 43 days, indicating relatively efficient inventory management relative to the prior years.

Overall Analysis

The data indicates fluctuations in inventory management efficiency over the years. The significant dip in inventory turnover and corresponding increase in the processing period in early 2021 suggest operational or market challenges that impacted inventory liquidation speed. However, subsequent quarters demonstrate recovery and improvements, with turnover ratios increasing and days to process inventory decreasing. The variations during 2022 reflect some inconsistencies but on average show a return to more favorable inventory management metrics. Early 2023 maintains this improved trend, although slight reductions in turnover and minor increases in processing time suggest cautious inventory handling or evolving market conditions.

Receivables Turnover Ratio

The receivables turnover ratio exhibited variations over the analyzed periods. Initially, it showed relatively high values above 10 in 2019, with a notable decline reaching a low around 6.26 in the first quarter of 2021. Subsequently, there was a recovery and an overall upward trend, peaking at 15.69 by the first quarter of 2023 before a slight decrease towards the latest quarters. This pattern indicates fluctuations in the efficiency of collecting receivables, with a general improvement observed in the most recent periods.

Average Receivable Collection Period

The average receivable collection period closely mirrored the inverse trend of the receivables turnover ratio. Starting with tight collection periods around 31 days in early 2019, it increased progressively to a peak of 58 days in the first quarter of 2021, signaling slower collections at that time. Following this, the period shortened significantly, reaching a low of 23 days in the first quarter of 2023, suggesting enhanced collection efficiency. The last periods show a slight lengthening to about 32-34 days.

Overall Insights

The data reveals a cyclical pattern in receivables management, where collection efficiency declined notably around 2020-2021, possibly due to external factors affecting payment behaviors. Since early 2021, the company demonstrated marked improvement in collecting receivables more rapidly, as evidenced by both the increased turnover ratio and decreased collection period. The recent quarters maintain relatively strong performance in receivables management compared to earlier years.

Average Inventory Processing Period

The average inventory processing period exhibited relative stability from early 2019 through mid-2020, fluctuating mostly between 39 and 48 days. A notable increase occurred in the first half of 2021, reaching highs of 71 days, indicating a buildup of inventory or slower turnover during that interval. Post-2021, the period generally decreased, returning to the range of the early years and reaching its lowest point of 35 days in the fourth quarter of 2022, before slightly rising again in 2023. This suggests improvements in inventory management efficiency following the peak period.

Average Receivable Collection Period

The receivable collection period showed moderate variation over the timeframe. Initial values ranged from 31 to 40 days, remaining relatively consistent through 2020. However, a substantial increase occurred in early 2021, peaking at 58 days, which signals delayed collections or possible challenges in credit management. Subsequently, there was a marked improvement, with periods declining steadily to 23 days by the first half of 2023. The recent upticks toward the latest quarters remain moderate, suggesting stabilization in the collections process.

Operating Cycle

The operating cycle, combining inventory processing and receivable collection periods, reflected the trends observed in its components. It maintained a steady range between 70 and 88 days from 2019 until the end of 2020. A sharp increase occurred in early 2021, with the cycle extending to 129 days, indicative of operational inefficiencies or market disruptions impacting working capital turnover. The cycle then showed a steady recovery, declining to 58 days by the end of 2022, the most efficient point observed. Nevertheless, a slight extension was noted in 2023, settling around 73 to 77 days, which may reflect ongoing adjustments in operational processes or external factors.

Payables Turnover

The payables turnover ratio shows noticeable fluctuation over the observed periods. Initially, it remained relatively stable around 10 to 12 times per year from early 2019 through the end of 2019. In 2020, the ratio declined, reaching a low point of 8.85 in the third quarter before recovering slightly by the end of that year. The first half of 2021 experienced a further dip, reaching as low as 7.22 in the first quarter, followed by a recovery with a peak at 12.84 in the fourth quarter. In 2022, the ratio again fluctuated, with a temporary increase reaching 14.02 in the third quarter but then surged to its highest level of 18.65 in the final quarter, indicating faster turnover of payables during that period. However, the ratio dropped again in early 2023, stabilizing around 11 times by the third quarter. Overall, the trend exhibits periods of both slowdown and acceleration in payables turnover, with the highest turnover observed in late 2022.

Average Payables Payment Period

The average payables payment period inversely corresponds with the payables turnover and exhibits several distinct phases. In 2019, the payment period was stable around 30 to 34 days. Starting in early 2020, there was a notable increase, peaking at 41 days in the third quarter, reflecting slower payments. This was followed by a steady decrease in late 2020 through to late 2021, reaching a low of 28 days by the fourth quarter of 2021, which aligns with the higher payables turnover observed in that period. During 2022, the payment period showed volatility, fluctuating between 26 to 39 days. Notably, in the fourth quarter of 2022, it reached a minimum of 20 days, indicating markedly faster payments corresponding with the peak turnover ratio during the same period. In 2023, the payment period increased again slightly to around 32 to 33 days in the third quarter, suggesting a modest slowing of payment speed compared to the prior quarter but still relatively quicker than some earlier periods.

Overall Insights

The data indicates a cyclical pattern in the management of payables, with clear periods of accelerated payment practices followed by stretches of slower settlements. The peak efficiency in payables turnover and the shortest payment periods occurred in the final quarter of 2022, suggesting strong management focus on reducing outstanding liabilities during that time. In contrast, earlier quarters, particularly mid-2020 and early 2021, showed elongated payment periods and reduced turnover, possibly reflecting liquidity management challenges or strategic deceleration in accounts payable turnover. The fluctuations could also be influenced by external market conditions, operational changes, or shifts in supplier agreements. The recent trend through 2023 suggests a moderate return to more normalized payables management after the exceptional efficiency of late 2022, maintaining a balance between preserving cash flow and supplier relations.

Average Inventory Processing Period

The average inventory processing period demonstrated a fluctuating pattern over the observed quarters. Initially, it remained relatively stable around 39-41 days during 2019, then heightened significantly in 2020, reaching up to 48 days in the third quarter. A notable spike occurred in early 2021, peaking at 71 days for two consecutive quarters before declining steadily throughout late 2021 and 2022, reaching a low of 35 days at the end of 2022. The latest quarters show a mild increase, stabilizing in the low 40s by late 2023. This pattern suggests periods of slower inventory turnover especially in early 2021, followed by improved efficiency in later years.

Average Receivable Collection Period

The receivable collection period exhibited some volatility across the timeline. It averaged in the low to mid-30 days range through 2019 and 2020, then surged to significantly higher levels in 2021, peaking at 58 days in the first quarter. After this peak, there was a sharp decline through 2021 into the first quarter of 2022, where it returned to a range closer to the mid-30s. The subsequent quarters of 2022 and 2023 depict moderate fluctuations around the low 30s, reflective of improved receivables management following the 2021 peak.

Average Payables Payment Period

This period remained fairly consistent in 2019 and 2020, primarily ranging between 30 to 41 days, with a minor peak of 41 days in the third quarter of 2020. However, in 2021 there was a sharp increase, reaching a high of 51 days in the first quarter. Thereafter, a downward trend is observable with payment periods decreasing notably in late 2021 and stabilizing near the low to mid-20s through 2022 and 2023. This transition indicates a shift from extended payment terms back to quicker payment of suppliers in more recent periods.

Cash Conversion Cycle

The cash conversion cycle closely follows the trends in inventory processing and receivables collection periods. It remained stable around 40-42 days during 2019 and most of 2020, increased sharply to peak values of 78 and 80 days in early and mid-2021, coinciding with higher inventory and receivables periods. Subsequently, a significant improvement occurred through late 2021 and 2022, reducing the cycle to the mid-30s by the end of 2022. The cash conversion cycle slightly increased again in 2023 but remained below the highs seen in 2021, suggesting improved operational efficiency and better working capital management following a period of strain.