Beacon Roofing Supply, Inc (NASDAQ: BECN ) is a relatively unknown company that has had a fantastic run over the past few years when they started their new buyback program. This, along with outstanding My primary area of concentration will be on identifying companies of exceptional caliber, with a proven ability to reinvest capital for impressive returns. Targeting those with a market capitalization of less than $10 billion, affords ample opportunities for growth. The ideal scenario is for these companies t ...

Beacon Roofing Supply, Inc. (BECN) expanded its geographic footprint across the United States by opening branches at four locations. The branches were opened in Pelham, AL; Queen Creek, AZ; Port St. Lucie, FL, and Bellingham, WA. Expanding branch locations in new and existing markets, while simultaneously catering to customers' needs, is one of the goals under BECN's Ambition 2025 plan. BECN's Focus on Ambition 2025 Plan Beacon has been intently focusing on several strategic initiatives to drive its long-te ...

Beacon Roofing Supply, Inc.'s (BECN) shares have dropped 12.5% in the past six months against the Zacks Building Products - Retail industry's 6.3% growth, the broader Retail-Wholesale sector's 9.1% increase and the S&P 500's 9.6% rise. The company faces challenges from higher operating and acquisition-related expenses. Also, softer demand in certain markets due to weather disruptions contributed to the overall performance decline. Image Source: Zacks Investment Research The roofing materials industry, close ...

Beacon Roofing Supply, Inc. (BECN) has expanded its market reach by launching its no-cost digital tool, Beacon PRO+, in Canada. Many U.S. roofing contractors use Beacon PRO+ to manage their business and sales process anywhere and anytime. This convenient tool allows customers to find optimized product descriptions and specifications for their area and order templates, thus enabling a complete and accurate order. Contractors in Canada can avail of the Beacon PRO+ in English and French, thereby enabling them ...

Core Insights - Beacon Roofing Supply, Inc. has acquired Chicago Metal Supply & Fabrication, Inc., enhancing its position in the architectural metal fabrication market and expanding its presence in the North Central region [1][2]. Group 1: Acquisition Details - Chicago Metal Supply, founded in 2011, specializes in custom architectural sheet metal fabrication for commercial, residential, and historical restoration projects [2]. - The acquisition allows Chicago Metal Supply to leverage Beacon's digital platform, expanding its catalog and improving service offerings [2][3]. - This strategic addition is expected to strengthen Beacon's metal solutions offerings, integrating Chicago Metal Supply's expertise and advanced equipment [3]. Group 2: Growth Strategy - The acquisition aligns with Beacon's Ambition 2025 goals, which focus on growth through acquisitions and market share expansion in the metal fabrication sector [4][5]. - Since the beginning of 2022, Beacon has opened 58 greenfield locations and completed 18 acquisitions, generating $556 million in net sales in the first half of 2024 [6]. - In the first six months of 2024, Beacon acquired 23 branches and opened 13 new locations, with a 23.9% increase in digital sales compared to the previous year [7]. Group 3: Market Performance - Despite a 21.6% decline in shares over the past three months, the Building Products - Retail industry has seen a 6.6% rise, indicating external challenges affecting performance [8]. - The Architectural Billing Index (ABI) has been below 50, indicating a contraction in architectural activity, although strong demand for repair and reroofing has mitigated the impact of slowing new commercial construction [9]. - The company remains optimistic about improvements in the third quarter of 2024 and anticipates strong cash flow in the latter half of the year [10]. Group 4: Investment Outlook - The acquisition of Chicago Metal Supply is viewed as a strong indicator of Beacon's potential for long-term growth, enhancing its capabilities in metal solutions [11][12].

Participants in the Zacks Building Products – Retail industry are poised to benefit from technological initiatives to enhance the e-commerce experience. Companies are bolstering their digital ecosystems, offering superior online assortments and enhancing omni-channel capabilities. Industry players are also gaining from strategic acquisitions, supply-chain expansion and digital advancements. Ongoing innovation and growth in e-commerce are expected to support companies like The Home Depot Inc. (HD) , Lowe's C ...

Financial Performance - Net sales for the three months ended June 30, 2024, were $2,674.6 million, an increase of 6.8% compared to $2,503.7 million for the same period in 2023[77]. - Net income for the three months ended June 30, 2024, was $127.2 million, down from $153.8 million in the same period of 2023[77]. - Total net sales for the six months ended June 30, 2024, were $4.59 billion, compared to $4.24 billion in 2023, reflecting a strong performance[92]. - Net sales increased by 8.3% to $4.59 billion in 2024, up from $4.24 billion in 2023, driven by a 5.0% increase in residential roofing products and a 13.6% increase in non-residential roofing products[94]. - Net income attributable to common stockholders was $132.8 million in 2024, down from $178.6 million in 2023, resulting in diluted net income per share of $2.07[106]. Sales and Growth - Digital sales increased by 23.9% compared to the prior year, indicating strong growth in the company's digital commerce platform[72]. - The company opened 13 new branch locations and acquired 23 branches during the first half of 2024, contributing $240.6 million and $315.4 million to net sales, respectively[72]. - Net sales increased by 6.8% to $2.67 billion in 2024, up from $2.50 billion in 2023, driven by a 2.4% increase in residential roofing products, an 11.1% increase in non-residential roofing products, and a 12.3% increase in complementary building products[80]. - Organic net sales for existing products increased by 0.5% to $2.52 billion, while greenfields contributed $57.6 million, resulting in total organic net sales of $2.57 billion, a 2.8% increase[81]. - The company anticipates continued growth driven by new product developments and market expansion strategies[80]. Profitability and Margins - Gross profit margin improved to 25.6% in Q2 2024 from 25.4% in Q2 2023, reflecting effective cost management[79]. - Gross profit rose to $683.7 million in 2024, a 7.5% increase from $636.2 million in 2023, with a gross margin of 25.6%, up from 25.4%[83]. - Gross profit for 2024 was $1.16 billion, a 7.3% increase from $1.08 billion in 2023, with a gross margin of 25.2%, down from 25.5%[96][97]. Expenses - Operating expenses increased to $467.9 million in Q2 2024 from $401.9 million in Q2 2023, primarily due to higher selling, general, and administrative expenses[77]. - Selling, General, and Administrative (SG&A) expenses increased by 16.7% to $418.5 million, primarily due to a $23.3 million rise in payroll and employee benefits, and a $9.6 million increase in general and administrative expenses[84]. - Selling, General, and Administrative (SG&A) expenses rose by 14.8% to $800.0 million, influenced by a $43.2 million increase in payroll and employee benefits[99]. - Depreciation expense increased to $26.5 million in 2024 from $21.8 million in 2023, attributed to new and acquired branches[86]. - Interest expense rose significantly to $45.4 million in 2024, compared to $26.0 million in 2023, due to higher average debt balances[88]. Shareholder Actions - The company repurchased all 400,000 shares of Preferred Stock for $805.4 million on July 31, 2023, enhancing shareholder value[73]. - The company repurchased $180.0 million worth of shares in the three months ended June 30, 2024, at an average price of $93.38 per share[127]. - The total number of shares repurchased in the six months ended June 30, 2024 was 1.9 million, compared to 1.2 million in the same period of 2023[127]. - Approximately $164.1 million remains available for repurchases under the share repurchase program as of June 30, 2024[129]. - The final settlement of the May 2024 ASR Agreement for share repurchases is expected to be completed in the fourth quarter of 2024[126]. Tax and Liquidity - The effective tax rate for 2024 was 26.5%, slightly up from 26.4% in 2023, with an expected range of 26.0% to 27.0% for the year[89]. - The company’s liquidity as of June 30, 2024, included cash and cash equivalents of $76.6 million and available borrowings of approximately $812.0 million under asset-based revolving lines of credit[118]. - The company may explore additional financing sources to bolster liquidity and strengthen its capital structure[120]. Cash Flow - Net cash used in operating activities was $189.2 million in 2024, a decrease of $547.9 million compared to $358.7 million provided in 2023[121]. - Net cash used in investing activities increased to $263.2 million in 2024 from $81.0 million in 2023, primarily due to increased acquisitions[122]. - Net cash provided by financing activities was $445.8 million in 2024, an increase of $725.8 million compared to net cash used of $280.0 million in 2023[123]. - The company experienced a significant cash outflow of $523.6 million due to unfavorable changes in net working capital, particularly in inventories, accounts payable, and accounts receivable[121]. Operational Strategy - The Ambition 2025 Value Creation Framework aims to drive growth and improve operational performance, with a focus on customer service and market expansion[72]. - The company plans to continue focusing on market expansion and synergies from recent acquisitions to improve operational efficiency[99]. - New product and technology developments are expected to contribute positively to future sales growth, although specific details were not disclosed in the call[99]. Adjustments and Restructuring - For the three months ended June 30, 2024, total adjusting items amounted to $28.5 million, compared to $25.6 million for the same period in 2023, reflecting an increase of 11.3%[109]. - Adjusted Operating Expense for the three months ended June 30, 2024, was $440.9 million, up from $377.6 million in the same period of 2023, representing a 16.7% increase[112]. - Adjusted EBITDA for the three months ended June 30, 2024, was $279.4 million, slightly down from $290.3 million in the same period of 2023, a decrease of 4.9%[115]. - The company reported acquisition costs of $27.6 million for the three months ended June 30, 2024, compared to $23.8 million for the same period in 2023, an increase of 15.9%[109]. - Restructuring costs for the three months ended June 30, 2024, were $0.9 million, compared to $1.8 million for the same period in 2023, a decrease of 50%[109]. Market Conditions - The company experienced a net income of $127.2 million for the three months ended June 30, 2024, down from $153.8 million in the same period of 2023, a decline of 17.3%[113]. - The company anticipates fluctuations in demand due to seasonal changes and unpredictable weather patterns, impacting financial performance[116]. - Operating expense as a percentage of net sales for the three months ended June 30, 2024, was 17.5%, compared to 16.1% for the same period in 2023[112].

Core Insights - Beacon Roofing Supply, Inc. reported disappointing second-quarter 2024 results, with earnings and net sales falling short of the Zacks Consensus Estimate, despite a top-line increase and consistent net sales growth over the last 14 quarters [1][4]. Financial Performance - Adjusted earnings per share (EPS) were $2.32, missing the consensus estimate of $2.82 by 17.7% and down 38.8% from the previous year's adjusted EPS of $2.66 [4]. - Net sales reached $2.67 billion, slightly below the consensus mark of $2.69 billion, but represented a year-over-year increase of 6.8%, driven by price execution and contributions from newly-established branches [4]. - Organic volumes saw a slight increase of 0-1%, while the weighted average selling price rose by 2-3%. Acquired branches contributed over 4% to the overall net sales increase [5]. Sales Breakdown by Product Line - Residential Roofing Product sales, accounting for 49.7% of quarterly net sales, were $1,328.9 million, up 2.4% year-over-year, which was below expectations of 10% growth [6]. - Non-Residential Roofing Product sales, comprising 27.9% of quarterly net sales, increased by 11.1% year-over-year to $745.1 million, driven by strong market demand [7]. - Complementary Product sales, making up 22.4% of quarterly net sales, rose 12.3% year-over-year to $590.4 million, exceeding expectations of 10.4% growth, primarily due to increased waterproofing volumes and acquisitions [8]. Operating Metrics - The gross margin improved to 25.6%, up 20 basis points year-over-year, attributed to higher average selling prices that offset increased product costs [9]. - Adjusted EBITDA decreased by 3.7% year-over-year to $279.4 million, with the adjusted EBITDA margin contracting by 120 basis points to 10.4% [9]. Financial Position - As of June 30, 2024, cash and cash equivalents were $76.6 million, down from $84 million at the end of 2023. Long-term debt increased to $2.49 billion from $2.19 billion at the end of 2023 [10]. - Net cash used in operating activities was $189.2 million in the first half of 2024, compared to $358.7 million cash provided in the prior year [11]. Future Guidance - For the third quarter of 2024, the company expects net sales per day to increase in the high single digits year-over-year, with gross margin anticipated to be in the high 25% range [12]. - For the full year 2024, net sales growth is projected to be 6-8% year-over-year, with gross margin expected in the mid-25% range and adjusted EBITDA revised to $930-$970 million [13]. - The company remains optimistic about sustained demand for residential non-discretionary repair and reroofing, despite challenges from lower storm volume projections and higher interest rates [14].

| --- | --- | --- | --- | --- | |-------------------------------------|-------|-------|-------|-------| | | | | | | | 2024 Q2 2024 EARNINGS PRESENTATION | | | | | | AUGUST 1, 2024 | | | | | Disclosure Notice This presentation contains information about management's view of the Company's future expectations, plans and prospects that constitute forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. In addition, oral statements made by ...

Financial Data and Key Metrics Changes - Total net sales reached nearly $2.7 billion in Q2 2024, up nearly 70% year-over-year, primarily driven by acquisitions and higher average selling prices [18] - Gross margin was 25.6%, up approximately 20 basis points year-over-year, but below expectations due to lower-than-expected inventory profits from a price increase [21][6] - Adjusted operating expenses increased to $441 million, up $63 million year-over-year, driven by additional headcount and expenses from acquired and greenfield branches [22] Business Line Data and Key Metrics Changes - Residential roofing sales increased by more than 2%, although lower shipments were noted in regions with high storm demand last year [19] - Non-residential sales grew by over 11%, supported by strong repair and reroofing activity, despite a low single-digit decline in prices year-over-year [20] - Complementary sales rose by more than 12% year-over-year, driven by acquisitions that enhanced specialty waterproofing product sales [20] Market Data and Key Metrics Changes - The residential roofing market is expected to be down year-on-year due to a decline in storm-related demand, while commercial roofing is anticipated to see a contraction in installation activity [5] - The Architectural Billing Index remains below 50, indicating contraction in commercial activity, but repair and reroofing activities are expected to improve [27] Company Strategy and Development Direction - The company is focused on its Ambition 2025 plan, which aims for above-market growth, consistent double-digit adjusted EBITDA margins, and superior shareholder returns [8] - Investments are being made in digital platforms, private label offerings, and pricing models to enhance operational efficiency and customer service [8][9] - The company has acquired 21 branches and opened 13 new locations year-to-date, exceeding its original goal of 40 branches by 2025 [11] Management's Comments on Operating Environment and Future Outlook - Management expects total sales per day growth in Q3 2024 to be in the high single-digit range year-over-year, with gross margin anticipated to be in the high 25% range [27] - The company remains optimistic about the demand environment, citing the aging housing stock and buildings as key drivers for reroofing demand [75] - Adjustments will be made to staffing and inventory levels in response to local market conditions to maintain high service levels [8][80] Other Important Information - The company has entered into a $225 million accelerated share repurchase program, demonstrating its commitment to delivering value to shareholders [16] - Operating cash flow was negative $48 million in Q2, typical for the first half of the year due to seasonal working capital needs [24] Q&A Session Summary Question: What drove the higher SG&A in Q2? - Management noted that staffing levels were increased to meet high demand, but variability in daily sales due to weather impacted efficiency [31][32] Question: How should we think about bottom quintile contributions to gross margin? - Management acknowledged that while improvements have been made, it is becoming incrementally harder to drive further enhancements [36][37] Question: What are the drivers for expected sales acceleration in Q3? - Management expects demand to continue into Q3, with a recent price increase expected to positively impact top-line results [41][42] Question: Can you clarify the impact of weather on roofing days lost in Q2? - Management indicated that approximately one-third of the weeks in Q2 were affected by weather, primarily impacting residential roofing [46] Question: What is the outlook for inventory profits? - Management expressed that the realization of price increases was slower than expected, impacting inventory profits [49][50] Question: How is free cash flow expected to be distributed in the second half? - Management anticipates stronger cash flow generation in the second half, with a heavier weighting towards Q4 [56][59]