Beacon Reports Second Quarter 2024 Results

Beacon (the “Company”, “we”, “our”), the leading publicly-traded wholesale distributor specializing in roofing, waterproofing, and exterior products, announced results for the second quarter ended June 30, 2024.

• Record quarterly sales driven by Ambition 2025 initiatives, including greenfields and acquisitions
• Organic sales growth across all 3 lines of business led by strong non-residential reroofing demand
• Acquired Smalley & Co., a leading waterproofing distributor in the West with 11 locations
• Entered into an accelerated share repurchase agreement to return up to $225M to stockholders in 2024

“Our Ambition 2025 initiatives drove record quarterly net sales, solid net income margin, and double-digit Adjusted EBITDA margin,” said Julian Francis, Beacon’s President & CEO. “Our team’s strong execution delivered organic sales growth across all three business lines despite disruptive weather events that reduced the number of roofing days in the quarter. As a result, we experienced lower-than-expected residential volumes and decreased operating leverage as we maintained staffing to meet a higher level of activity. We also continued to invest in growth initiatives during the quarter expanding our footprint in key markets. Since the end of the first quarter, we have acquired 21 branches and opened 10 greenfield locations. As previously announced in May, we entered into a $225M accelerated share repurchase agreement.

“Entering the second half of the year, we will be proactive in responding to local market conditions by adjusting inventory and resources, while maintaining Beacon’s high caliber customer service. We expect the fundamentals of our end markets to remain supportive, underpinned by repair and reroofing demand, the vast majority of which is non-discretionary. Our focus will remain on the areas within our control, including enhancing our customer experience, pricing discipline and operating efficiency. I am happy with the achievements this year and look forward to building on the momentum and creating value for all our stakeholders.”

Second Quarter

Net sales increased to $2.67 billion, 6.8% growth compared to the prior year, and a Company record for second quarter net sales. The increase in net sales when compared to the prior year period was largely driven by price execution and the contributions of acquired and newly opened branches. Weighted-average selling price and estimated organic volumes (including greenfields) increased approximately 2-3% and 0-1%, respectively. Additionally, acquired branches contributed 4.0% to the increase in second quarter net sales.

Residential roofing product sales increased 2.4%, non-residential roofing product sales increased 11.1%, and complementary product sales increased 12.3% compared to the prior year. The increase in residential roofing product sales was primarily due to price execution. The increase in non-residential roofing product sales was primarily due to higher volumes driven by strong underlying market demand and, to a lesser extent, the impact of customer destocking in the prior year period. The increase in complementary product sales was largely due to the acquisition of additional waterproofing companies since June 30, 2023, partially offset by lower volumes. The three-month periods ended June 30, 2024 and 2023 each had 64 business days.

Gross margin increased to 25.6%, from 25.4% in the prior year, as higher average selling prices for our products more than offset higher product costs and a higher non-residential product mix. The increases in operating expense and Adjusted Operating Expense were attributable to acquired branches, as well as higher organic selling, general, and administrative (“SG&A”) expense. The increase in organic SG&A expense was primarily due to higher payroll and employee benefit costs, general and administrative expenses, and warehouse operating costs. The increase in payroll and employee benefit costs was due to increased headcount, as well as wage inflation. The increase in general and administrative expenses was primarily due to higher professional fees and travel expenses. The increase in warehouse operating costs was primarily due to higher rent expense. Both operating expense as a percent of sales and Adjusted Operating Expense as a percent of sales were higher in the second quarter of 2024, driven by the same factors.

Net income (loss) was $127.2 million, compared to $153.8 million in the prior year. Adjusted EBITDA was $279.4 million, compared to $290.3 million in the prior year. Net income (loss) per common share (“EPS”) on a diluted basis was $1.99, compared to $1.97 in the prior year.

On May 9, 2024, the Company entered into an accelerated share repurchase (“ASR”) agreement to repurchase $225.0 million of its common stock. During the second quarter of 2024, the Company repurchased and retired $180.0 million of its common stock under the ASR. As a result, shares of common stock outstanding decreased to 61.9 million as of June 30, 2024, from 63.6 million as of March 31, 2024. Common stock outstanding at June 30, 2024 does not include the effect of the $45.0 million equity forward contract related to the unsettled portion of the ASR agreement, which, based on the daily volume-weighted average stock price from May 9, 2024 to June 30, 2024, would have resulted in the repurchase of approximately 0.5 million additional shares. The $45.0 million equity forward contract is expected to settle in the fourth quarter of 2024.

Year-to-Date

Net sales increased to $4.59 billion, 8.3% growth compared to the prior year, and a Company record for net sales for the first half of the year. The increase in net sales when compared to the prior year period was largely driven by price execution and the contributions of acquired and newly opened branches. Estimated organic volumes and weighted-average selling price increased approximately 3-4% and 1-2%, respectively. Additionally, acquired branches contributed approximately 3.7% to the increase in net sales.

Residential roofing product sales increased 5.0%, non-residential roofing product sales increased 13.6%, and complementary product sales increased 9.3% compared to the prior year. The increase in residential roofing product sales was primarily due to price execution. The increase in non-residential roofing product sales was primarily due to higher volumes driven by strong underlying market demand and, to a lesser extent, the impact of customer destocking in the prior year period. The increase in complementary product sales was largely due to acquisitions of additional waterproofing companies since June 30, 2023, partially offset by lower volumes. The six-month periods ending June 30, 2024 and 2023 each had 130 business days.

Gross margin decreased to 25.2%, from 25.5% in the prior year, as higher product costs related to the inventory profit roll-off and a higher non-residential product mix more than offset higher average selling prices for our products. The increases in operating expense and Adjusted Operating Expense were attributable to acquired branches, as well as higher organic SG&A expense. The increase in organic SG&A expense was primarily due to higher payroll and employee benefit costs, warehouse operating costs, and general and administrative expenses. The increase in payroll and employee benefit costs was due to increased headcount, as well as wage inflation. The increase in warehouse operating costs was primarily due to higher rent expense. The increase in general and administrative expenses was primarily due to higher professional fees and travel expenses. Both operating expense as a percent of sales and Adjusted Operating Expense as a percent of sales were higher in the first half of 2024, driven by the same factors.

Net income (loss) was $132.8 million, compared to $178.6 million in the prior year. Adjusted EBITDA was $382.5 million, compared to $403.4 million in the prior year. Diluted EPS was $2.07, compared to $2.22 in the prior year. Results in the first half compared to the prior year period were largely driven by the decrease in gross margins and higher operating expense discussed above.

To calculate approximate weighted average selling price and product cost changes, we review organic U.S. warehouse sales of the same items sold regionally period over period and normalize the data for non-representative outliers. To calculate estimated volumes, we subtract the change in weighted average selling price, as described above, from the total changes in sales, excluding acquisitions and dispositions. As a result, and especially in high inflationary periods, the weighted average selling price and estimated volume changes may not be directly comparable to changes reported in prior periods.

During the fourth quarter of 2023, we revised our definition of when a branch classification changes from acquired to existing. Previously, the results of operations of branches were designated as acquired until they had been under our ownership for at least four full fiscal quarters at the start of the fiscal reporting period, after which such branches were classified as existing. Under our new definition, the results of operations of branches will be designated as acquired until they have been under our ownership and have contributed to our results of operations for at least 12 calendar months (treating partial months as full months), after which such branches are classified as existing. The effect of this change in definition is that the prior year results of operations for branches will be reclassified to existing when the comparable current month’s financial results are also classified as existing.

For full results click here.

About Beacon

Founded in 1928, Beacon is a Fortune 500, publicly traded distributor of building products, including roofing materials and complementary products, such as siding and waterproofing. The company operates over 530 branches throughout all 50 states in the U.S. and 6 provinces in Canada. Beacon serves an extensive base of nearly 100,000 customers, utilizing its vast branch network and diverse service offerings to provide high-quality products and support throughout the entire business lifecycle. Beacon offers its own private label brand, TRI-BUILT®, and has a proprietary digital account management suite, Beacon PRO+, which allows customers to manage their businesses online. Beacon’s stock is traded on the Nasdaq Global Select Market under the ticker symbol BECN. To learn more about Beacon, please visit www.becn.com.

Contact:

Jennifer Lewis – VP, Communications and Corporate Social Responsibility – jennifer.lewis@becn.com – (571) 752-1048

Source: Beacon Roofing Supply, Inc.