Beacon Reports Third 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 third quarter ended September 30, 2024.

• Record quarterly sales driven by execution on Ambition 2025 growth initiatives
• Disciplined margin management and bottom quintile branch initiative resulted in solid net income and record Adjusted EBITDA
• Invested in organic growth by opening four greenfield locations to enhance customer reach
• Executed on value-creating acquisitions that are expected to contribute approximately $247 million of sales annually

“Beacon’s third quarter results demonstrated the resilience of our business model and the team’s strong execution on our Ambition 2025 initiatives,” said Julian Francis, Beacon’s President & CEO. “We have, once again, shown that we can grow in any environment. The majority of our demand is underpinned by non-discretionary repair and reroofing, which remained solid in the third quarter. However, despite the overall level of activity lower than our expectation, disciplined margin management resulted in favorable price-cost across all lines of business. In addition, in September, we took action to lower operating expense by aligning our staffing with current market conditions. We expect these actions will result in annual savings of approximately $45 million. For the quarter, we delivered record net sales, solid net income, and the highest Adjusted EBITDA in our history.

“Our balanced capital allocation demonstrates our commitment to growth and to creating shareholder value. During the quarter, we continued to invest in organic growth by adding four greenfield locations in key markets. We also continued building on our track record of value-creating acquisitions, including enhancing our non-residential and Canadian footprints. I am pleased with our achievements in the third quarter and confident that the Beacon team remains prepared to quickly adapt to changing market conditions going forward as we help our customers build more.”

Third Quarter

Net sales increased to $2.77 billion, 7.3% (5.6% on a per-day basis) growth compared to the prior year, and a Company record for quarterly net sales. Weighted-average selling price increased approximately 1-2% and estimated organic volumes (including greenfields) increased approximately 0-1% (decreased 1-2% on a per-day basis). Additionally, acquired branches contributed approximately 5.6% to the increase in third quarter net sales.

Residential roofing product sales increased 2.3% (0.7% on a per-day basis), non-residential roofing product sales increased 9.4% (7.7% on a per-day basis), and complementary product sales increased 17.2% (15.4% on a per-day basis) 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 solid market execution. The increase in complementary product sales was largely due to three waterproofing acquisitions totaling 20 branches since September 30, 2023. The three-month periods ended September 30, 2024 and 2023 had 64 and 63 business days, respectively.

Gross margin increased to 26.3%, from 26.0% 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 and warehouse operating costs. At the end of the third quarter, in response to market conditions, we reduced headcount. The increase in payroll and employee benefit costs was due to a higher average number of employees in 2024 coupled with one-time severance payments and employee benefit costs for employees impacted by our operating cost reduction initiative. 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 2024, primarily driven by the same factors.

Net income (loss) was $145.3 million, compared to $161.3 million in the prior year. Adjusted EBITDA was $325.2 million, compared to $309.6 million in the prior year. Net income (loss) per common share (“EPS”) on a diluted basis was $2.30, compared to $(4.16) in the prior year. The negative diluted EPS in the prior year was attributable to the $414.6 million preferred stock repurchase premium (the “Repurchase Premium”), which is included as a component of net income (loss) attributable to common stockholders in calculating EPS.

Year-to-Date

Net sales increased to $7.36 billion, 7.9% (7.3% on a per-day basis) growth compared to the prior year, and a Company record for net sales for the first nine months. Estimated organic volumes (including greenfields) increased approximately 2-3% (1-2% on a per-day basis) and weighted-average selling price increased approximately 1-2%. Additionally, acquired branches contributed approximately 4.4% to the increase in net sales.

Residential roofing product sales increased 4.0% (3.4% on per-day basis), non-residential roofing product sales increased 12.1% (11.5% on a per-day basis), and complementary product sales increased 12.2% (11.6% on per-day basis) 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 the impact of customer destocking in the prior year period and, to a lesser extent, solid market execution driving above market growth. The increase in complementary product sales was largely due to three waterproofing acquisitions totaling 20 branches since September 30, 2023. The nine-month periods ending September 30, 2024 and 2023 had 192 and 191 business days, respectively.

Gross margin decreased to 25.6%, from 25.7% 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 higher average headcount during the year and, to a lesser extent, one-time severance payments and employee benefit costs for employees impacted by our operating cost reduction initiative. 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. Both operating expense as a percent of sales and Adjusted Operating Expense as a percent of sales were higher in 2024, primarily driven by the same factors.

Net income (loss) was $278.1 million, compared to $339.9 million in the prior year. Adjusted EBITDA was $707.7 million, compared to $712.9 million in the prior year. Diluted EPS was $4.35, compared to $(1.93) in the prior year. The negative diluted EPS in the prior year was attributable to the $414.6 million Repurchase Premium. Results in the first nine months compared to the prior year period were largely driven by the modest decrease in gross margin and higher operating expense discussed above.

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 September 30, 2024, from 63.6 million as of March 31, 2024. Common stock outstanding at September 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 September 30, 2024, would have resulted in the repurchase of approximately 0.6 million additional shares. The $45.0 million equity forward contract is expected to settle in the fourth quarter of 2024.

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.

Please see the included financial tables for a reconciliation of “Adjusted” non-GAAP financial measures to the most directly comparable GAAP financial measure, as well as further detail on the components driving the net changes over the comparative periods.

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.