A conversation with Dave Flitman, the Dallas CEO running the nation’s largest building supplier

Dave Flitman is optimistic about the building materials business and for good reason.

As the CEO of Dallas-based Builders FirstSource, he rides the real estate wave at the helm of a company that has grown to become the nation’s largest supplier to the housing industry in just a few short years.

Builders FirstSource’s success is due in part to demand, but also timely acquisitions, including one that closed earlier this year that brought Flitman to the company.

In January, Builders FirstSource closed its nearly $ 2.5 billion deal for BMC Stock Holdings, a competitor based in Raleigh, NC. As part of that deal, Chad Crow, CEO of Builders FirstSource, retired 90 days later, handing the reins on to Flitman, CEO of BMC, who had by then moved to North Texas.

Dave Flitman, CEO of Builders FirstSource, in front of the New York Stock Exchange.

The merger created the nation’s largest provider of building materials and services with total sales of $ 11.7 billion last year and a huge network of 550 sales and manufacturing locations in the US year, but should this year with sales of Rise to the top 10 for $ 18 billion to $ 19 billion.

For the first six months of this year, Builders FirstSource’s sales rose 73%, with commodity price inflation accounting for nearly 42% of that increase.

In May, Builders FirstSource followed BMC’s merger with a $ 400 million deal for the largest independent building materials supplier in Arizona, giving it a huge presence in one of the fastest growing regions in the country – metropolitan Phoenix, Tucson and Prescott Valley Areas. A month later, it spent $ 450 million to buy WTS Paradigm LLC, a technology company expanding the Builders FirstSource digital toolbox.

“It’s an exciting time to be in the industry,” said Flitman, whose career path has spanned chemistry, electricity, hospitality and now construction materials. “There is no other place I would rather be. This company is strong. We are able to capture a disproportionate share of industry growth for a long time. Our future is very bright. “

The Dallas Morning News sat down with Flitman to discuss the surge in housing demand, the causes of supply chain issues, and the company’s growth plan. This interview has been edited for brevity and clarity.

Let’s start with an overview of where the building materials industry stands today in terms of housing demand.

It’s a very robust demand environment. Wood made a lot of headlines this year, but it’s really just a reflection of the strength of the underlying demand. I think there are two or three points that support the demand picture, even before COVID. In the first quarter of 2020, we were at one million single-family launches in the country for the first time in a long time. We had historically low interest rates and they continue to this day. On the demographic front, this is the first time we have millennials in the real estate market and 82 million of them did not exist in the industry during the financial crisis. We were there in the first quarter of last year. Then came COVID and it really had two effects. First, people really checked where they could live at home given the work environment. People thought it might be time to move from the city to a more rural area or just get a bigger home because I might be working from home on a long-term basis. Last summer we saw DIY repairs and conversions on the rise. The coincidence of events really puts a strain on the entire supply chain. It was pretty much every building product you can imagine. We sell a lot of windows and doors and they were in short supply. We’ve heard stories from home builders that houses couldn’t be closed because they couldn’t get appliances. It’s not just a thing.

Do you see any loosening of supply chain restrictions, especially for materials from Asia?

Windows and doors are still tight, and I expect it will stay that way for a while. We saw that timber prices peaked in the middle of the second quarter and have now returned to 10% of historical levels. This is a relief when doing home improvement. You read a lot about builders slowing down the start. It’s not because there is a demand challenge. All of this is due to supply bottlenecks that allow the supply chain to take a deep breath and catch up. We expect [demand] to continue until 2022 and maybe beyond.

What does this mean for your day-to-day business?

It meant a lot. We have 27,000 team members in 39 states. We’re in 84 of the top 100 [metro areas]. We have a really good pulse in the industry and what is happening across the country. As the biggest in the field, we’ve given ourselves the opportunity to make sure we get more of what customers need, but that certainly doesn’t mean we don’t pay much more for it. And it took a lot longer to get it.

Who is your typical customer?

We sell to everyone. We sell to small local custom builders who still make up over half of the market. But we also sell to all national builders. There is really no part of the market that we don’t have a good understanding of what demand is in and how they think about the future.

Aren’t you also in the logistics business on a large scale?

No question. We have 2,400 drivers across the country delivering products on a daily basis. We also have a lot of value-added services. We have more than 700 designers who take blueprints from home builders and convert them into supporting structures for roof systems [and other] Components. We actually make these roof systems – trusses and such. Builders really struggle with the efficiency of work and construction sites. If you can produce off-site and get them where you don’t have to cut and measure, it helps counter the shortage of skilled workers in the industry.

Is your company affected by labor shortages?

We are not immune to this. I mentioned our driver workforce. It always seems that someone is willing to pay a bigger sign-up bonus. One way to address this is through automation. We have invested a lot of capital in our component production. They’ll never get away from work, and I don’t want to either. But to the extent that you can modify and automate the feeding systems, you don’t need someone to feed wood into the front end. They automate the assembly. We are investing quite heavily in these across the country to meet the challenges of the world of work.

In positions that you cannot automate, do you offer incentives to try to retain employees?

In any case, we did a lot of it. Attracting new talent is always a challenge. But most importantly, not so long ago we brought two great companies together. We spent a lot of time in the first quarter researching these kinds of issues and understanding what we need to do to be competitive. We made a number of changes, not just to the incentives, but also to the base pay. We chose to have a profit-sharing scheme for our physical workforce so that they would have an incentive to help us drive this growth across the country. We’ll keep getting creative as time goes on because I don’t think the work challenge is going to subside anytime soon. Here in Texas, we have 4,500 field workers and another 320 at our Dallas headquarters. So we have over 4,800 employees in Texas, that’s almost 20% of our total workforce. As you can see, Texas is a major state for Builders FirstSource.

Dallas-based Builders FirstSource employs 27,000 people in 39 states.(Courtesy Builders FirstSource)

To what extent will consolidation be part of your future growth story?

If you look at BMC and BuildersFirstSource, these companies have largely been started through acquisitions and rollups for the past 10 to 15 years. It is important that both had major mergers in 2015. BFS was No. 1 and BMC was No. 2 in the market. Despite this consolidation, we still only have a market share in the mid-ten range in the industry. That speaks for how fragmented this industry is to this day. There is still a lot of consolidation to come and I believe, given our presence and the strength of our balance sheet, there is no one better placed to do it than we are. We have a lot of dry powder to continue our organic growth and to invest in the company as well as to drive growth through acquisitions. We intend to do both.

How did you get into the building materials industry after studying chemical engineering?

I started my career at DuPont. I spent 20 years there as a chemical engineer, but most of all, I got into chemical distribution pretty early on. Most of the changes you’ve seen in my career, even though the products were different, were focused on sales. The products are different, but the business model is very similar. Pennies are important. Efficiency, logistics – regardless of the products, the same principles apply. When I was 27, I ran DuPont’s third largest chemical company. This is how you get security out of passion. I bring that security focus everywhere I’ve gone.

How do you see the housing construction industry developing over the next ten years?

Housing construction is almost in last place when digitization is introduced. Not much has changed in residential construction in 150 years. Wood is still at the heart of the house. Given our size and scale, we believe we can change the game of digitization for this industry. In late June, we announced the acquisition of WTS Paradigm, a Madison, Wisc. Company. His technical core strength lies in the work of the mill – being able to take design, make it visual and make estimates out of it. We saw an opportunity to put the digital in the foreground. It plays out in different ways. I’ve talked about our 700 designers, so there is an option to do a blueprint, do a structural blueprint, and then come up with a quote for our clients. It’s not that easy to push a button and let all of this happen. We think we can make it a lot easier to do business with us. It’s a big game, but it’s an investment in the future. I don’t know if it’s a year, five years or 10 years, but digitization is coming into this industry in a big way. We have a time horizon of five years when we consider what we can do with Paradigm. Given the strength of our presence and the relationships we have with clients of all sizes, I believe no one is better positioned to drive this outcome than we are. I think this could be one of the bigger changes you will see in this industry going forward [decade].

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