Builders FirstSource, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

Builders FirstSource, Inc., a Delaware corporation formed in 1998, is a leading supplier of building materials, manufactured components and construction services to professional contractors, sub-contractors, and consumers. The Company operates approximately 565 locations in 43 states across the United States. In this quarterly report, references to the “Company,” “we,” “our,” “ours” or “us” refer to Builders FirstSource, Inc. and its consolidated subsidiaries unless otherwise stated or the context otherwise requires.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all recurring adjustments and normal accruals necessary for a fair statement of the Company’s financial position, results of operations and cash flows for the dates and periods presented. Results for interim periods are not necessarily indicative of the results to be expected during the remainder of the current year or for any future period. Intercompany transactions are eliminated in consolidation.

The Condensed Consolidated Balance Sheet as of December 31, 2025, is derived from the audited consolidated financial statements but does not include all disclosures required by Generally Accepted Accounting Principles in the United States of America (“GAAP”). The Condensed Consolidated Balance Sheet as of December 31, 2025, and the unaudited condensed consolidated financial statements included herein should be read in conjunction with the more detailed audited consolidated financial statements for the year ended December 31, 2025, included in our most recent annual report on Form 10-K for the year ended December 31, 2025 (“2025 Form 10-K”). Accounting policies used in the preparation of these unaudited condensed consolidated financial statements are consistent with the accounting policies described in the Notes to Consolidated Financial Statements included in our 2025 Form 10-K.

Business Combinations

When they meet the requirements under ASC 805, Business Combinations, merger and acquisition transactions are accounted for using the acquisition method, and accordingly the results of operations of the acquiree are included in the Company’s consolidated financial statements from the acquisition date. The consideration transferred is allocated to the identifiable assets acquired and liabilities assumed based on estimated fair values at the acquisition date, with any excess recorded as goodwill. Transaction-related costs are expensed in the period the costs are incurred. During the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed with the corresponding adjustment to goodwill.

Segments

We offer an integrated solution to our customers providing manufacturing, supply, and installation of a full range of structural and related building products. Given the span and depth of our geographical reach, our locations are organized into geographical divisions. During the second quarter of 2026, the Company realigned its geographical divisional structure from three operating divisions (East, Central, and West) totwo operating divisions (East and West) in order to simplify management oversight, improve operational efficiency, and better align resource allocation and decision-making processes. Thetwo geographical divisions represent the Company’s operating segments.

Our operating segments have similar customers, products and services, and distribution methods. Due to these similarities, along with the similar economic profitability achieved across our operating segments, we aggregate ourtwo operating segments intoone reportable segment in accordance with GAAP. Centralized financial and operational oversight, including resource allocation and assessment of performance, is performed by ourprincipal executive officer (“CEO”), whom we have determined to be our chief operating decision maker (“CODM”).

The accounting policies of our reportable segment are consistent with the accounting policies described in the Notes to Consolidated Financial Statements included in our 2025 Form 10-K.

Cloud Computing Arrangements

We assess cloud computing arrangements to determine whether the contract meets the definition of a service contract or conveys a software license. When cloud computing arrangements meet the definition of a service contract, we capitalize expenditures for implementation, set-up, and other upfront costs incurred. Once the implementation of a cloud computing arrangement is complete and ready for its intended use, we amortize the costs over the expected term of the hosting arrangement using the straight-line method to the same income statement line as the associated cloud operating expenses. We had capitalized costs, net of amortization, included in other current assets totaling$21.8 million as of June 30, 2026, and$21.8 million as of December 31, 2025. We had capitalized costs, net of amortization, included in other assets, net totaling$73.9 million as of June 30, 2026, and$80.6 million as of December 31, 2025. For the three and six months ended June 30, 2026, we amortized$5.2 million and$10.3 million for these costs, respectively, which are included in selling, general and administrative expenses within the Condensed Consolidated Statements of Operations. We didnot have any amortization expense related to these costs for thethree and six months ended June 30, 2025.

Comprehensive Income (Loss)

Comprehensive income (loss) is equal to net income (loss) for all periods presented.

Equity Investments

The Company’s equity investments are accounted for using equity method accounting and are included in other assets, net in the accompanying Condensed Consolidated Balance Sheets and are not considered significant to the Company.

Reclassifications

The prior period revenue by product category amounts disclosed in Note 3 have been reclassified to conform to current year presentation. These reclassifications had no impact on net income (loss), total assets and liabilities, stockholders’ equity or cash flows as previously reported.

Recent Accounting Pronouncements

In November 2024, the FASB issued ASU No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”), and in January 2025, the FASB issued Accounting Standards Update No. 2025-01, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date (“ASU 2025-01”). ASU 2024-03 requires additional disclosure of the nature of expenses included in the income statement as well as disclosures about specific types of expenses included in the expense captions presented in the income statement. ASU 2024-03, as clarified by ASU 2025-01, is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027. The requirements will be applied prospectively with the option for retrospective application and early adoption is permitted. We are currently evaluating the potential impact of adopting this new guidance on our consolidated financial statements and related disclosures.

In September 2025, the FASB issued ASU No. 2025-06, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. The standard applies to costs incurred to develop or obtain software for internal use. ASU 2025-06 amends the existing standard that refers to various stages of a software development project to align better with current software development methods, such as agile programming. Under the new standard, entities will commence capitalizing eligible costs when (i) management has authorized and committed to funding the software project and (ii) it is probable that the project will be completed and the software will be used to perform the function intended. The amendments in ASU 2025-06 are effective for annual reporting periods beginning after December 15, 2027, and interim reporting periods, with early adoption permitted. We are currently evaluating the potential impact of adopting this new guidance on our consolidated financial statements and related disclosures.

2. Business Combinations

During the first six months of 2026, we completed the acquisitions of Premium Building Components, Inc. (“PBC”) and Precision Design and Trim LLC (“Precision Design”) for a combined total of approximately$31.0 million. PBC is based in New York and supplies trusses and wall panels to customers from western New York to Maine and Delaware. Precision Design provides finish work installation services in the Boise, Idaho area.

During the first six months of 2025, we completed the acquisitions of Alpine Lumber Company (“Alpine Lumber”), O.C. Cluss Lumber Company (“Cluss Lumber”) and Truckee Tahoe Lumber (“Truckee Tahoe”) for a combined total of approximately$891.9 million, net of cash acquired. Alpine Lumber was the largest independently operated supplier of building materials in Colorado and northern New Mexico. Alpine Lumber serves the Colorado Front Range, western Colorado and northern New Mexico, providing a broad product range which includes prefabricated trusses and wall panels, and millwork. Cluss Lumber is a supplier of lumber and building materials to southwestern Pennsylvania, western Maryland and northern West Virginia. Truckee Tahoe is a supplier of lumber and building materials in the northern California and northwestern Nevada markets.

The acquisitions were funded with a combination of cash on hand and borrowings under our $2.2 billion revolving credit facility due May 20, 2030 (the “Revolving Facility”). The transactions were accounted for by the acquisition method, and accordingly, the results of operations have been included in the Company’s consolidated financial statements from the acquisition dates. The purchase price was allocated to the assets acquired and liabilities assumed based on estimated fair values at the acquisition dates, with the excess of purchase price over the estimated fair value of the net assets acquired recorded as goodwill.

Pro forma financial information for the acquisitions discussed above for 2026 and 2025 are not presented as these acquisitions did not have a material impact on our results of operations, individually or in the aggregate for each respective period.

The following table summarizes the aggregate fair values of the assets acquired and liabilities assumed for acquisitions during the periods ended June 30, 2026, and June 30, 2025:

3. Revenue

The following table disaggregates our net sales by product category:

As our product category alignment continues to be refined, we have reclassified prior periods’ net sales by product category to conform to current period presentation. The impact to each of the prior periods’ net sales for manufactured products, windows, doors and millwork, specialty building products and services, and lumber and lumber sheet goods was 0.7%,2.0%,-2.3%, and-0.1%, respectively, for the three months ended June 30, 2025 and 0.5%,1.8%,-2.1%, and-0.2%, respectively, for the six months ended June 30, 2025.

The timing of revenue recognition, invoicing, and cash collection results in accounts receivable, unbilled receivables, contract assets, and contract liabilities. Contract assets include unbilled amounts when the revenue recognized exceeds the amount billed to the customer, and amounts representing a right to payment from previous performance that is conditional on something other than passage of time, such as retainage. Contract liabilities consist of customer advances and deposits, and deferred revenue.

Through June 30, 2026, and 2025, we recognized as revenue approximately 85% and 84% of the contract liabilities balances outstanding as of December 31,2025, and 2024, respectively.

4. Net Income (Loss) per Common Share

Net income (loss) per common share (“EPS”) is calculated in accordance with the Earnings per Share topic of the FASB Accounting Standards Codification, which requires the presentation of basic and diluted EPS. Basic EPS is computed using the weighted average number of common shares outstanding during the period. Diluted EPS is computed using the weighted average number of common shares outstanding during the period, plus the dilutive effect of potential common shares.

The table below presents the calculation of basic and diluted EPS:

5. Goodwill

The following table sets forth the changes in the carrying amount of goodwill:

(1) Goodwill is presented net of historical accumulated impairment losses of $44.6 million.

In 2026, the change in the carrying amount of goodwill is attributable to the acquisitions completed during the period. The amount allocated to goodwill is attributable to the assembled workforce, synergies, and expected growth from the expanded product and service offerings of the acquisitions. The goodwill recognized from the current year acquisitions is expected to be deductible and amortized ratably over a 15-year period for tax purposes.

As a result of the division realignment discussed in Note 1, the Company reassessed its reporting unit structure and determined that the division realignment resulted in a change in the composition of its reporting units. Accordingly, goodwill was reassigned to the affected reporting units using a relative fair value approach. In connection with the realignment, the Company performed qualitative impairment assessments both before and after the change in reporting unit structure. For each assessment, the Company evaluated all relevant events or circumstances that could impact estimates for fair value and determined it was more likely than not that the fair value of each reporting unit exceeded their carrying amount and that no impairment existed as of June 30, 2026.

6. Intangible Assets

The following table presents intangible assets as of:

In connection with the current year acquisitions, we recorded customer relationship intangible assets of$9.6 million, with a useful life of 2.0 years. The fair value of the acquired customer relationship intangible assets was primarily estimated by applying the multi-period excess earnings method, which involved the use of significant estimates and assumptions primarily related to forecasted revenue growth rates, gross margin, contributory asset charges, customer attrition rates, and market-participant discount rates. These measures are based on significant Level 3 inputs not observable in the market. Key assumptions developed based on the Company’s historical experience, future projections and comparable market data include future cash flows, long-term growth rates, attrition rates and discount rates.

During the three and six months ended June 30, 2026, we recorded amortization expense in relation to the above-listed intangible assets of$72.1 million and$144.9 million, respectively. During the three and six months ended June 30, 2025, we recorded amortization expense in relation to the above-listed intangible assets of$73.9 million and$147.2 million, respectively.

During the second quarter of 2026, as part of the Company’s reorganization disclosed in Note 1, we derecognized certain intangible assets, including customer relationships, developed technology, trade names, and non-compete agreements as they were fully amortized, resulting in a decrease in the gross carrying amount of the intangible assets and the related accumulated amortization. The derecognition had no impact on net income (loss), stockholders’ equity, or cash flows.

The following table presents the estimated amortization expense for intangible assets for the years ending December 31:

7. Accrued Liabilities

Accrued liabilities consisted of the following as of:

8. Long-Term Debt

Long-term debt consisted of the following as of:

(1) The weighted average interest rate was 4.7% as of June 30, 2026.

The Company’s Revolving Facility and outstanding senior unsecured notes are discussed in more detail in our 2025 Form 10-K.

Fair Value

As of June 30, 2026, and December 31, 2025, the Company does not have any financial instruments that are measured at fair value on a recurring basis. We have elected to report the value of our Revolving Facility,4.25% senior notes due 2032 (the “4.25% 2032 Notes”),6.375% senior notes due 2034 (the “6.375% 2034 Notes”),6.75% senior notes due 2035 (the “6.75% 2035 Notes”),6.375% senior notes due 2032 (the “6.375% 2032 Notes”), and 5.00% senior notes due 2030 (the “5.00% 2030 Notes”), at amortized cost.

The following table presents the fair value of each such series of notes as of June 30, 2026, which was determined using Level 2 inputs based on market prices:

We were not in violation of any covenants or restrictions imposed by any of our debt agreements at June 30, 2026.

9. Employee Stock-Based Compensation

2026 Equity Incentive Plan

On May 14, 2026, the Company’s stockholders approved the Builders FirstSource, Inc. 2026 Equity Incentive Plan (the “2026 Plan”). Under the 2026 Plan, the Company is authorized to grant awards in the form of incentive stock options, non-qualified stock options, stock appreciation rights (“SARs”), restricted stock, restricted stock units (“RSUs”), other stock-based awards, and cash-based awards. As of June 30, 2026, the Company had reserved 3.6 million shares ofcommon stock for the grant of awards under the 2026 Plan, subject to adjustment as provided by the 2026 Plan, and less one share for every one share subject to an award granted under the Builders FirstSource, Inc. 2014 Incentive Plan (the “2014 Plan”) after March 1, 2026 and prior to May 14, 2026. All shares under the 2026 Plan may be made subject to options, SARs, or full value stock awards. Stock options and SARs granted under the 2026 Plan may not have a term exceeding 10 years from the date of grant. The 2026 Plan also provides that all awards will become fully vested and/or exercisable upon a change in control (as defined in the 2026 Plan) if those awards (i) are not assumed or equitably substituted by the surviving entity or (ii) have been assumed or equitably substituted by the surviving entity, and the grantee’s employment is terminated under certain circumstances. Other specific terms for awards granted under the 2026 Plan shall be determined by our board of directors’ compensation committee (or the board of directors if so determined by the board of directors). Awards granted under the 2026 Plan generally vest ratably over athree-year period or cliff vest after a period ofthree years. As of June 30, 2026, 2.5 million shares were available for issuance under the 2026 Plan. If it is assumed that shares will be issued at the target vesting amount (rather than at maximum potential payout) for outstanding RSUs with variable payout provisions, an additional 0.3 million shares would be included in the shares available for future issuance under the 2026 Plan.

Employee Stock Purchase Plan

On May 14, 2026, the Company’s stockholders approved the Builders FirstSource, Inc. Employee Stock Purchase Plan (the “ESPP”). Eligible employees may purchase shares through payroll deductions at a purchase price equal to 85% of the lesser of the fair market value of the Company’s common stock on the first or last day of the offering period. A total of 2.5 million shares have been reserved for issuance under the ESPP. The initial offering period under the ESPP commences during the third quarter of 2026. No shares had been purchased or issued under the ESPP as of June 30, 2026.

Time Based Restricted Stock Unit Grants

In the first six months of 2026, our board of directors granted 575,000 RSUs to employees under the 2014 Plan for which vesting is based solely on continuous employment over the requisite service period. These grants vest over a service period betweenone andthree years. The weighted average grant date fair value for these RSUs was$89.18 per unit, which was based on the closing stock price on the respective grant dates.

Performance, Market and Service Condition Based Restricted Stock Unit Grants

In the first six months of 2026, our board of directors granted 218,500 RSUs to employees under the 2014 Plan, which cliff vest on the third anniversary of the grant date based on the Company’s level of achievement of performance goals relating to return on invested capital over athree-year period (the “performance condition”) and continued employment during the performance period (the “service condition”). The total number of shares of common stock that may be earned from the performance condition ranges from zero to 200% of the RSUs granted. The number of shares earned from the performance condition may be further increased or decreased by 10% based on the Company’s total shareholder return relative to a peer group during the performance period (the “market condition”). The grant date fair value for these RSUs, with consideration of the market condition, was$88.88 per unit, which was determined using the Monte Carlo simulation model, applying the following assumptions:

The expected volatilities and correlation are based on the historical daily returns of our common stock and the common stocks of the constituents of our peer group over the most recent period equal to the measurement period. The expected dividend yield is based on our history of not paying regular dividends in the past and our current intention to not pay regular dividends in the foreseeable future. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant and has a term equal to the measurement period.

10. Income Taxes

A reconciliation of the statutory federal income tax rate to our effective rate for continuing operations is provided below:

During the three months ended June 30, 2026, the Company entered into a settlement agreement with the Internal Revenue Service (the “IRS”) regarding the treatment of certain research and development expenses claimed in prior years. As a result of the settlement agreement, the Company recognized a discrete income tax expense of approximately$43.9 million during the quarter. The settlement agreement did not result in a current period cash payment, as the Company had previously remitted cash tax payments in excess of the amounts claimed in prior years and ultimately due under the settlement agreement. A comparison of the Company’s effective tax rate for the three months ended June 30, 2026, to the three months ended June 30, 2025, is not meaningful due to the impact of the discrete settlement agreement relative to the amount of income earned. For the six months ended June 30, 2026, the Company had a loss before income taxes with income tax expense, primarily from the impact of the discrete settlement agreement, therefore a comparison of the effective tax rate to the six months ended June 30, 2025, is not meaningful.

We base our estimate of deferred tax assets and liabilities on current tax laws and rates. In certain cases, we also base our estimate on business plan forecasts and other expectations about future outcomes. Changes in existing tax laws or rates could affect our actual tax results, and future business results may affect the amount of our deferred tax liabilities or the valuation of our deferred tax assets over time. Due to uncertainties in the estimation process, particularly with respect to changes in facts and circumstances in future reporting periods, as well as the residential homebuilding industry’s cyclicality and sensitivity to changes in economic conditions, it is possible that actual results could differ from the estimates used in previous analyses. These differences could have a material impact on our consolidated results of operations or financial position.

On July 4, 2025, H.R.1 - One Big Beautiful Bill was enacted into law (the “Act”). The Act makes permanent key elements of the Tax Cuts and Jobs Act, including 100% bonus depreciation, domestic research cost expensing, and the business interest expense limitation. The Company’s deferred income tax liabilities as of June 30, 2026, and December 31, 2025, were$238.2 million and$178.0 million, respectively. The increase was primarily due to the bonus depreciation and domestic research cost expensing elements of the Act. The Act did not have a material impact on our income tax expense for the period ended June 30, 2026, and we do not expect it to materially change our effective income tax rate for the year ending December 31, 2026. We anticipate the Act will have a material impact on our future financial results including cash flows. The permanent extension of 100% bonus depreciation and reinstatement of domestic research cost expensing are anticipated to reduce our cash tax payments in current and future years, and to increase our operating cash flows.

11. Commitments and Contingencies

As of June 30, 2026, we had outstanding letters of credit totaling$76.0 million under our Revolving Facility that principally support our self-insurance programs.

The Company has a number of known and threatened construction defect legal claims. While these claims are generally covered under the Company’s existing insurance programs to the extent any loss exceeds the deductible, there is a reasonable possibility of loss that is not able to be estimated at this time because (i) many of the proceedings are in the discovery stage, (ii) the outcome of future litigation is uncertain, and/or (iii) the nature of the claims is complex. Although the Company cannot estimate a reasonable range of loss based on currently available information, the resolution of these matters could materially affect the Company's financial position, results of operations or cash flows.

In addition, we are involved in various other claims and lawsuits incidental to the conduct of our business in the ordinary course. We carry insurance coverage in amounts in excess of our self-insured retention that we believe to be reasonable under the circumstances and that may or may not cover any or all of our liabilities in respect to such claims and lawsuits. Although the ultimate disposition of these other proceedings cannot be predicted with certainty, management believes the outcome of any such claims that are pending or threatened, either individually or on a combined basis, will not materially affect our consolidated financial position, cash flows or results of operations. However, there can be no assurances that future adverse judgments and costs would not be material to our results of operations or liquidity for a particular period.

12. Significant Segment Expenses

As discussed in Note 1, during the second quarter of 2026, the Company reorganized the structure of its internal organization from three geographical divisions (East, Central, and West) totwo geographical divisions (East and West), which represent the Company’s operating segments. We aggregate ourtwo operating segments intoone reportable segment in accordance with GAAP.

The primary measures reviewed by the CODM, including revenue, gross margin, and income (loss) before income taxes, are shown in these condensed consolidated financial statements. The CODM uses these measures to assess performance for the reportable segment and to decide how to allocate resources. Gross margin and income (loss) before income taxes are driven by the segment’s significant expense items of cost of sales and compensation and benefits, as well as other segment items. Cost of sales is shown in these condensed consolidated financial statements. Compensation and benefits, which are reported within selling, general, and administrative expenses in these condensed consolidated financial statements, were$0.5 billion and$0.6 billion for the three months ended June 30, 2026 and 2025, respectively, and$1.1 billion for both six month periods ended June 30, 2026 and 2025. Other segment items are substantially all the remaining selling, general, and administrative expenses reported in these condensed consolidated financial statements. The measure of segment assets is reported on the Condensed Consolidated Balance Sheet as total assets.

Item 2. Management’s Discussion and Analysis of