Foundation Building Materials, Inc. (FBM) Q2 2019 Earnings Call Transcript

Foundation Building Materials, Inc. (FBM)
Q2 2019 Earnings Call
Aug 06, 2019, 8:30 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Greetings. Welcome to the Foundation Building Materials second-quarter conference call. [Operator instructions] It is now my pleasure to introduce your host, John Moten, vice president of investor relations for Foundation Building Materials. You may begin.

John Moten -- Vice President of Investor Relations

Good morning and thank you for joining us today for our second-quarter 2019 conference call. Joining me today are several members of our management team. In addition to Ruben Mendoza, our president and CEO; and John Gorey, chief financial officer; are Pete Welly, our chief operating officer; and Kirby Thompson, senior vice president of sales and marketing, who are also available to answer your questions. Last night, we issued our second-quarter earnings release and slide presentation for today's call.

And we have posted these materials on the Investor Relations section of our website at fbmsales.com, under the Events & Presentations section. Yesterday, we filed the shelf-registration statement relating to our shares held by selling stockholder. For additional information, please refer to the registration statement. We will not be taking any questions about the potential offering on this call.

Our prepared remarks and answers to your questions this morning may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements address matters that are subject to risks and uncertainties, which may cause actual results to differ from those discussed today. Examples of forward-looking statements include remarks about future expectations, beliefs, estimates, plans and forecasts as well as other statements that are not historical in nature. Forward-looking statements discussed today relate to our acquisition strategy and integration, M&A pipeline, our greenfield expansion strategy and performance, our ability to gain leverage in our business and our ability to increase market share and expand into new markets.

In addition, forward-looking statements also include our 2019 financial guidance, including projected net sales, gross margin, adjusted EBITDA, adjusted EBITDA margin, net debt leverage ratio, and adjusted earnings per share. As a reminder, forward-looking statements represent management's current estimates. We assume no obligations to update any forward-looking statements in the future unless otherwise required by law or the listing rules of the New York Stock Exchange. Listeners are encouraged to review a more detailed discussions included in our filings with the SEC regarding the various risks, uncertainties, and other factors that could cause actual results to differ from those materially from those indicated or implied by these forward-looking statements.

Additionally, during today's call, we will discuss non-GAAP financial measures, which we believe could be useful in evaluating our financial performance. Other companies may calculate these measures differently, and our presentation of these non-GAAP measures should not be considered in isolation or as a substitute for measures prepared in accordance with generally accepted accounting principles or GAAP. A discussion of how we calculate these non-GAAP financial measures, which include adjusted EBITDA, adjusted net income, and adjusted earnings per share as well as a reconciliation of these measures to the most directly comparable GAAP measures can be found in our earnings release, which has been furnished to the Securities and Exchange Commission and is available on our website. With that, I will turn the call over to Ruben.

Ruben Mendoza -- President and Chief Executive Officer

Thanks, John. Good morning and thank you for joining us for review of our second-quarter results as well as the discussion of the recent developments in our business. On our call today, I will discuss some operational highlights from our second quarter results as well as our greenfield expansion activity and acquisition plans. John Gorey will provide details on our financial results and updated financial guidance for 2019, and I will conclude with some summary comments.

As a reminder, the numbers discussed on this call will focus on continuing operations as we sold our mechanical insulation segment in the fourth quarter of last year. After our prepared remarks, we will open the call for your questions. Foundation Building Materials recorded a solid second quarter of operational and financial performance, with net sales up more than 7% year over year to $560 million, and base business growth and average daily sales growth of over 3%. Our strong underlying profitability highlighted our second-quarter results with gross margins reaching nearly 31% and adjusted EBITDA margin of 9%, and adjusted earnings per share of $0.37.

The improvement in our gross margin and adjusted EBITDA margin was driven by improved profitability across our product line and our ongoing pricing and purchasing initiatives. Given the strong underlying profit trends in the second quarter, we've raised our profitability guidance for 2019, which John Gorey will discuss later in the call. In the second quarter, wallboarding suspended ceilings base business net sales improved 2% and 3%, respectively, largely due to favorable price mix with flat unit volumes compared to the prior-year period. Base business volume growth for wallboard and suspended ceilings was impacted by adverse weather, especially during the month of May in the Midwest and Great Plains states as well as a slower construction activity in the Canadian market.

Base business net sales for our metal framing and complementary products, each improved approximately 5%, with metal framing benefiting from higher volumes compared to the prior year. The increase in complementary product sales was primarily due to our ongoing initiatives to expand the range of products we offer to our customers. Now turning to acquisitions. In the second quarter, we announced the acquisition of Select Acoustics Supply, expanding our presence in the commercial downtown Toronto ceilings market and expanding our service capabilities to the Greater Ontario market.

We continue to selectively acquire businesses that meet our strategic priorities and enhance our North American presence. In addition, we continue to open greenfield branch locations across the country. In the second quarter, we opened two greenfield branches in Lewisville and Corpus Christi, further strengthening our market position in Texas. In 2019, we plan on opening four to six greenfield branches, further extending our geographic footprint.

Our greenfield branch investments are projects yield high returns on invested capital in the first few years start-up, leverage our national scale, increase our market share and support our long-term organic growth. As we finished the first half for 2019, we are on target to meet our financial objectives for the year. We continue to see solid demand in our core nonresidential construction markets, with over 40% of our net sales tied to the new nonresidential construction market and over 30% to the commercial repair and remodel market. We see continued building activity in tenant improvements, healthcare facilities, data rooms, offices, schools, and stadiums that are supported by our customers backlog that extend into 2020.

For the second half of this year, we will continue to capitalize on the opportunities in front of us by executing our strategy and driving operational efficiencies throughout the company to deliver long-term value to our customers and shareholders. Now I'll turn the call over to John for more details on the second-quarter results.

John Gorey -- Chief Financial Officer

Thank you, Ruben. I would also like to welcome everyone on today's call. As a reminder, our discussion today excludes the MI segment, which was sold in November 2018 and is reported as discontinued operations in our SEC filings. As Ruben highlighted, we recorded solid second-quarter results with net sales of $559.9 million, up 7.2% over the prior-year period; base business net sales of $499 million, up 3.4%; net income of $14.7 million; and adjusted EBITDA of $50.3 million with an adjusted EBITDA margin of 9% for the first time in the company's history.

Now turning to our product line results. Second quarter wallboard net sales were $214.1 million, compared to $198.6 million, up 7.8% compared to the prior year. Our wallboard base business growth was 1.9%. The 2.1% higher selling prices and mix offset by a 20-basis-point decline in unit volume.

The slight decline in unit volume is primarily due to adverse weather in the quarter, which impacted deliveries to our customers. Suspended ceiling net sales were $106.2 million, compared to $97.8 million, up 8.6% compared to the prior-year period. Base business growth for suspended ceilings was 3.1% compared to the prior-year period, primarily driven by higher price mix for our ceiling products. Metal framing base business net sales increased by 5.3%.

The growth in metal framing base business was primarily due to higher unit volumes compared to the prior year. Base business net sales for complementary and other products increased by 4.6% compared to the prior year. The increase in complementary and other product net sales was primarily due to our ongoing initiatives to expand the range of products we offer to our customers. Gross profit for the second quarter was $171.5 million, compared to $146.3 million in the prior-year period, an increase of $25.3 million or 17.3%.

Gross margin for the second quarter was 30.6%, compared to 28% in the prior-year period. We experienced improved profitability across our product lines, driven by our ongoing pricing and purchasing initiatives. Selling, general and administrative, or SG&A, expenses for the second quarter were $122.7 million, compared to $110.2 million in the prior-year period. SG&A expenses as a percentage of net sales were 21.9%, compared to 21.1% in the prior-year period.

The increase in SG&A expenses as a percentage of net sales was primarily due to our continued investment in companywide initiatives to enhance our profitability and higher operating costs as a result of adverse weather conditions in the quarter. Now turning to the balance sheet and cash flow, we finished the quarter with cash of $6.5 million and $238.5 million of availability on our ABL credit facility, providing ample liquidity to pursue our growth initiatives. At the end of second quarter, our debt leverage ratio was approximately 3.3 times, and we expect to generate $60 million to $80 million in free cash flow for 2019, which will be used primarily for debt reduction. Now turning to our updated full-year 2019 financial guidance, we reiterate our estimated full-year net sales to be between $2.1 billion and $2.25 billion.

For the full year, we are raising our gross margin guidance to a range of 29.7% to 30.2%. For adjusted EBITDA, we are raising our guidance to a range of $165 million to $185 million with an adjusted EBITDA margin in the range of 7.8% to 8.2%. We are raising our estimated adjusted earnings per share to a range of $0.80 to $1. And finally, we are improving our debt leverage ratio target for 2019 to a range of 2.9 times to 3.2 times.

Now I'd like to turn the call over to Ruben some closing remarks.

Ruben Mendoza -- President and Chief Executive Officer

Thanks, John. We are pleased with our second-quarter results. Despite adverse weather impacting of our net sales in the quarter, our underlying profitability was very strong, reflecting our balanced business portfolio across product categories and strength from of our commercial end markets. For the balance of the year, we will continue to focus on our four strategic priorities.

First, we plan to strengthen our balance sheet by reducing our debt leverage ratio from 3.3 times currently to between 2.5 times and 2.8 times by the end of 2020. Second, we will continue to focus on driving organic growth by opening greenfield branches, growing our market share and expanding the products we offer to our customers. In 2019, we plan on opening four to six greenfield branches. Our greenfield branches drive long-term growth and profitability and yield high returns on invested capital.

Third, we will continue to focus on profit margin expansion across our business by leveraging our economies of scale and executing on our cost out initiatives to improve our full-year adjusted EBITDA margin. And finally, we plan to make strategic acquisitions while being mindful of our debt reduction targets. We also wanted to take a moment to share our perspective on our significant progress since our initial public offerings two and a half years ago. We've undertaken strategic actions to drive long-term growth and profitability and to position us well to withstand market changes.

Since our IPO, we've grown our net sales from $1.4 billion in 2016 to over $2.1 billion in 2019, even after selling our Mechanical Insulation segment, which generated over $300 million in net sales. We've improved both our gross margin over 120 basis points and adjusted EBITDA margin by over 80 basis points. We have made 15 strategic and accretive acquisitions that have expanded our geographic footprint in North America. We have opened 10 greenfield branch locations that have enhanced our organic growth.

We've optimized our capital structure by refinancing of our high-interest notes and reducing overall debt, which has provided over $20 million in annual cash interest savings, and we have paid down over $100 million in debt, which has reduced our dept leverage ratio from over five times at the time of IPO to 3.3 times currently. We believe these actions have driven growth, improved profitability and delivered value to our shareholders. In closing, we believe there is a larger runway of growth ahead of us as our industry still remains highly fragmented. There are numerous actions we will continue to take to improve our business to make us a much better company as we continue to grow our business.

The management team at FBM is very excited about our future. That concludes our remarks, and now we'll be happy to take your questions.

Questions & Answers:

Operator

[Operator instructions] Our first question is from Matthew Bouley with Barclays. Please proceed.

Matthew Bouley -- Barclays -- Analyst

Good morning. Thank you for taking my questions. Maybe starting with the gross margin guidance, obviously, you guys took that higher. But just kind of looking at your current levels= of margin today sort of suggest the lower end of that guide would require a little of a drop off.

So -- I mean, just based on where you are to year to date, is there any reason why margins would soften in your view or should we be thinking that at this point you're kind of tracking toward the higher end of that guide already? Thank you.

John Gorey -- Chief Financial Officer

Yes. Our guidance is for the full year with gross margins now at about 30% and an EBITDA margin improving about 50 basis points, and we are on track to get those by the end of the year.

Matthew Bouley -- Barclays -- Analyst

OK. Got it. And then that leverage guide, you took the year-end level down by three-tenths of a turn, free cash flow guide up a little bit at the top end, but I don't know, perhaps, not quite fully accounting for that leverage change. Should we read anything into what you guys are thinking about M&A as a result of that changed leverage guide?

Ruben Mendoza -- President and Chief Executive Officer

Yes. I think it's the second half, we're looking at a lot of targets for M&A. We're not sure if any come to fruition or not, so we're conservative on that three turns.

Matthew Bouley -- Barclays -- Analyst

All right. I'll leave it there and thank you very much.

Ruben Mendoza -- President and Chief Executive Officer

Thanks, Matt.

Operator

Our next question is from Keith Hughes with SunTrust Robinson Humphrey. Please proceed.

Keith Hughes -- SunTrust Robinson Humphrey -- Analyst

Thank you. I guess bigger-picture question on demand, particularly on nonresidential. If you could just kind of characterize what you're seeing from customers backlog and quotation activity?

Kirby Thompson -- Senior Vice President of Sales and Marketing

Yes, Keith. This is Kirby. Thank you for the question. Our customer backlog on the commercial side is very robust, heading into and almost through 2020.

We feel very confident.

Keith Hughes -- SunTrust Robinson Humphrey -- Analyst

I'm sorry. Have you seen any change of light, any inflection down? Specifically, we've seen one or two comments, not many, but one or two comments on that.

Kirby Thompson -- Senior Vice President of Sales and Marketing

Not on the commercial side.

Keith Hughes -- SunTrust Robinson Humphrey -- Analyst

OK. And kind of moving into the businesses, you're ceiling growth has been a little less than it's been in the past, still up. But if you could make any comments of what you think is happening in that business?

Pete Welly

Yes, Keith, this is Pete. Our ceilings business remains still a vital part of core business, which continue to see some of the core units down a little bit. But if you read our results, they pretty much mirror Armstrong's in a lot of ways. We have a strong architectural specialties business.

And for sure, the Canadian market where we are -- only Armstrong up there is really -- had a bit of a drag on those results. The U.S. were hit our numbers, and we're right in line with our expectations.

Keith Hughes -- SunTrust Robinson Humphrey -- Analyst

OK. Final question on wallboard. We've seen some -- from some of your suppliers, a talk of sequential decline in prices. If you could just kind of characterize what the pricing environment out of the door for you looks like in near term? And what your expectation is in the third quarter?

Ruben Mendoza -- President and Chief Executive Officer

Our price has been stable throughout the year. We're more commercial than residential, and we continue to see a stable price through the rest of 2019.

Keith Hughes -- SunTrust Robinson Humphrey -- Analyst

OK. Thank you.

Ruben Mendoza -- President and Chief Executive Officer

You bet.

Operator

Our next question is from Trey Grooms with Stephens. Please proceed.

Trey Grooms -- Stephens Inc. -- Analyst

Good morning.

Ruben Mendoza -- President and Chief Executive Officer

Good morning, Trey.

Trey Grooms -- Stephens Inc. -- Analyst

So first question is on the gross profit margins, EBITDA margins. Great job in the quarter, and I understand the guidance for the balance of the year. But as we look at -- you guys have gone a long way with price cost. But as we look at that more in kind of medium term, how should we be thinking about the EBITDA flow through on a little bit longer-term basis, not just kind of in the back half of this year? Any change there?

Ruben Mendoza -- President and Chief Executive Officer

Well, I think for the longer term, Trey, we have our budgets and five-year plan as our EBITDA above 9% in the next couple of years and getting there. I think with our results in the last couple of quarters, we get there sooner than later.

Trey Grooms -- Stephens Inc. -- Analyst

All right. That's encouraging. And I guess, kind of looking at -- switching gears just a little bit on -- more on expectations around top line. I know you mentioned on the commercial side, it sounds like your outlook there and kind of talking to our customers, it sounds like even though 2020 is looking pretty good. But what about on the res side? What's the kind of your thoughts on the residential side of your business?

Ruben Mendoza -- President and Chief Executive Officer

So that's a great question, and I'm glad you brought it up because I wanted to talk about it. Our first half for residential was a little soft. I -- we saw July pickup in residential, and that's a good sign for us. And I see housing starts and then we get 1,270, 1,250.

I mean, kind of flattish to up a little bit. And 2020, at least from the stuff that we're looking at looks flat to maybe up 1% or so. So don't see a big drop, and we don't see a big gain in residential. But our July, and especially in certain spots where it was down, we had a pretty good resi month.

And just -- I wanted -- most of our sales shortfall for our targets were -- was in May and due to weather, 95% to 97% of our sales shortfall was weather in May. June was a great month for us, July was a good month for us.

Trey Grooms -- Stephens Inc. -- Analyst

Great. Thanks, Ruben. Thanks for the color there. I'll pass it on.

Thanks for taking my questions.

Ruben Mendoza -- President and Chief Executive Officer

Thanks, Trey.

Operator

Our next question is from Sam Darkatsh with Raymond James. Please proceed.

Sam Darkatsh -- Raymond James -- Analyst

Good morning, Ruben, Keith, Kirby. How are you?

Ruben Mendoza -- President and Chief Executive Officer

Good. [Inaudible]

Sam Darkatsh -- Raymond James -- Analyst

A couple of questions here, if I could. Your second-half EBITDA guidance is suggestive of a quarterly run rate somewhere between $40 million and $50 million each quarter. John, could you help put a little bit meat on the bone in terms of directionally where we should think about it on a quarter-to-quarter basis, 3Q and 4Q?

John Gorey -- Chief Financial Officer

Well, we really have our guidance on an annual basis for that EBITDA margin. Typically, our third quarter is stronger than our fourth quarter in revenue, which falls down to that EBITDA line.

Ruben Mendoza -- President and Chief Executive Officer

So, $165 million to $185 million is our guide for the full-year EBITDA.

Sam Darkatsh -- Raymond James -- Analyst

So outside of this normal seasonality and volumes, there is nothing funky this year, 3Q over 4Q that might influence EBITDA performance?

John Gorey -- Chief Financial Officer

No.

Sam Darkatsh -- Raymond James -- Analyst

OK. Second question, do you anticipate or have you seen much by way of prebuy in the channel here in July ahead of price increases in wallboard?

Ruben Mendoza -- President and Chief Executive Officer

We have not.

Sam Darkatsh -- Raymond James -- Analyst

And last question, operating expenses obviously have been delevering. I know you had some weather. I know you've been investing a fair amount investments with respect to e-commerce and what have you. At least by my math, it looks like this second-half operating expenses are looking to delever and maybe delever even more so than you're originally looking at.

First off, why might that be, especially given the fact that weather, I think, influenced this quarter. And at some point, when do you anticipate beginning to leverage operating expenses once again or should we in the out years just assume continual investment flow that creates the deleverage effect?

John Gorey -- Chief Financial Officer

Yes, we will continue to invest in many companywide initiatives going through the next couple of years, but we are driving value for our shareholders with those initiatives. So we think that's going to continue.

Sam Darkatsh -- Raymond James -- Analyst

Do you anticipate -- at what point, John, do you anticipate leveraging opex? Is it next year or is it in the year in the future?

John Gorey -- Chief Financial Officer

Probably some time in the second half of next year.

Sam Darkatsh -- Raymond James -- Analyst

OK. Thank you very much, gentlemen.

Operator

Our next question is from Mike Dahl with RBC Capital Markets. Please proceed.

Mike Eisen -- RBC Capital Markets -- Analyst

Mike Eisen of RBC. Just following up from some of the questions around gross margins. Great progress in the quarter, again. And I think in the past, you guys have talked about when we look at fourth quarter, there are some tough comps, and it will be difficult for there to be gross margin expansion.

Can you help us think of how that has evolved? And if you can quantify in any way in the quarter, how much of that benefit was from these internal initiatives you guys are executing and how much was strictly price cost as we think about the possibility for margin expansion moving forward?

Ruben Mendoza -- President and Chief Executive Officer

Thanks, Mike. I think that it's more of the same -- it's what we said on the last call. Fourth quarter is a tough comp. We had a great gross margin fourth quarter last year.

We believe we'll outperform gross margins in the third quarter this year. And our full-year midpoint is about 30% for gross margins for this year. And we do have and we've talked a lot about initiatives for the last to increase those gross margins falling down to the EBITDA margin, and we still believe that for this year and the follow-on year and the years to come.

John Gorey -- Chief Financial Officer

And as far as the pricing and purchasing improvements as well as the price cost dynamics, they're also tied together. You really have to look at it as a whole.

Mike Eisen -- RBC Capital Markets -- Analyst

Got it. That make sense, and it's helpful. And then if there's any way you can frame for us what you think of normalized? I know there's a lot of volatility when it comes to the price and the competition. But what in your mind a normalized gross margin is for the business as it sits today?

Ruben Mendoza -- President and Chief Executive Officer

Yes. I think it's what -- for us, it's what our midpoint of our guidance is for the full year.

Mike Eisen -- RBC Capital Markets -- Analyst

Got it. Thanks for the information.

Ruben Mendoza -- President and Chief Executive Officer

Thanks, Mike.

Operator

Our next question is from Luke Junk with Robert W. Baird. Please proceed.

Luke Junk -- Robert W. Baird -- Analyst

Good morning. Ruben, you referenced strong commercial activity in the release. Just wondering if you could provide some more color on what you saw in the market between your business in the U.S. and Canada? And also, if you could just comment on residential activity in Canada as well? And what, if any, impact that's having on your reported growth?

Ruben Mendoza -- President and Chief Executive Officer

So great question. There is a lot there. The U.S. is performing well for us.

We're hitting our internal targets in the U.S. Canada, we budget it to be down a bit, and it's down a little further than we budget it to be, obviously that has a small effect. Now I do want to make sure everybody knows, Canada is 10% to 12% of our business. So overall, the U.S.

has a much greater impact on our earnings. And residential in Canada is also about 25% of our business, and it has the -- of the businesses in Canada. Yes, sorry about that. 25% of our business in Canada, and it has had some decline in the residential sector.

We do think Canada and we do see Canada in the second half performing better than the first half.

Luke Junk -- Robert W. Baird -- Analyst

OK. That's helpful. And then second, great to see leverage target for the year-end moving lower and possibly going even below 3.0 times this year. Similar for some additional flexibility going into the next year, do you look -- put that flexibility to work, Ruben, or you're really committed to taking it down to that 2.5 to 2.8 range that you said in the deck?

Ruben Mendoza -- President and Chief Executive Officer

Well, we are committed to taking it down to 2.5 to 2.8 times, but we're always going to look at opportunities in front of us and there will be some, there will be some as there even are now. So I kind of danced around your question there, but we are committed 2.5 to 2.8 by the end of 2020, and we have made some excellent progress and we plan to continue to do that.

Luke Junk -- Robert W. Baird -- Analyst

Perfect. Thanks so much, Ruben.

Ruben Mendoza -- President and Chief Executive Officer

Thank you.

Operator

Our next question is from Paul Dircks with William Blair. Please proceed.

Paul Dircks -- William Blair -- Analyst

Good morning, everyone.

Ruben Mendoza -- President and Chief Executive Officer

Good morning, Paul.

John Gorey -- Chief Financial Officer

Good morning.

Paul Dircks -- William Blair -- Analyst

So, just a quick follow-up or two for me. First, on the top line. Ruben, you mentioned some weakness in the Midwest in the month of May. Were there any other pockets geographically or, perhaps, within certain product lines that were areas of outperformance relative to what you're expecting? And maybe could you touch briefly upon what you're seeing in the multi-family vertical?

Ruben Mendoza -- President and Chief Executive Officer

Sure. Thank you. Good question. So you said, outperformance, so not weather-related, right?

Paul Dircks -- William Blair -- Analyst

Correct. Outperformance relative to what you guys were internally budgeting?

Ruben Mendoza -- President and Chief Executive Officer

California is outperforming for us commercially and multi-family. Arizona is outperforming for us. There's -- there are several regions. And even in the Midwest, we had a substantial amount of weather, but Michigan, we have such a good footprint in the Midwest.

We believe we have the No. 1 position in the Midwest, and we are very strong there. And so even though there is weather, even though there is some softness and we've outperformed in the Midwest as well. And so there's another pockets too and there's pockets of weakness, we mentioned Canada.

Texas also had a lot of weather as well. I know you didn't ask for that, but I wanted to make sure I've mentioned that, but Texas is still performing well for us. So I hope I answered your question.

Paul Dircks -- William Blair -- Analyst

Yes. No, that's helpful. And then, I guess, maybe to get back on the weather, SG&A relative to our model is little bit higher than what we are expecting. Is there any way to parse out what some of those adverse weather costs were that hit you on the SG&A line? And I guess the related question would be, you guys are, of course, investing in some of your technology and, of course, in tools and processes.

Is -- are some of the cost-out initiatives that you guys have outlined previously, are they continuing as expected or is perhaps some of the progress on these initiatives a little bit slower than what you guys thought coming into 2019?

John Gorey -- Chief Financial Officer

No, the actual cost-out initiatives are doing really well for us, and if you've seen that with our results, we just continually add new initiatives to continue to improve and one of the big ones is our e-commerce. And so we're kind of pushing the time line a little quicker to our costs on some of these new initiatives.

Ruben Mendoza -- President and Chief Executive Officer

As far as SG&A is concerned, it's about 20 to 25 basis points is what we figured.

John Gorey -- Chief Financial Officer

We figured the weather impact was -- for the Q2, it was 20 to 25 basis points.

Paul Dircks -- William Blair -- Analyst

OK. Very helpful. Thank you, guys.

Operator

[Operator instructions] There are no more questions at this time. I would like to turn the call back over to Ruben Mendoza for closing remarks.

Ruben Mendoza -- President and Chief Executive Officer

Thank you, everybody, for joining the call. I'd like to just -- we had a great quarter, fourth quarter in a row, which -- outstanding quarter, and I'd just like to thank all of our FBM employees for just really pushing hard and making a difference. Thank you.

Operator

[Operator signoff]

Duration: 37 minutes

Call participants:

John Moten -- Vice President of Investor Relations

Ruben Mendoza -- President and Chief Executive Officer

John Gorey -- Chief Financial Officer

Matthew Bouley -- Barclays -- Analyst

Keith Hughes -- SunTrust Robinson Humphrey -- Analyst

Kirby Thompson -- Senior Vice President of Sales and Marketing

Pete Welly

Trey Grooms -- Stephens Inc. -- Analyst

Sam Darkatsh -- Raymond James -- Analyst

Mike Eisen -- RBC Capital Markets -- Analyst

Luke Junk -- Robert W. Baird -- Analyst

Paul Dircks -- William Blair -- Analyst

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