QXO, Inc(QXO) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section provides QXO's unaudited condensed consolidated financial statements and management's analysis of its financial condition and operational results Item 1. Condensed Consolidated Financial Statements (Unaudited) This section presents QXO's unaudited condensed consolidated financial statements, detailing the financial impact of the Beacon Acquisition Condensed Consolidated Balance Sheets This section provides a snapshot of QXO's financial position, highlighting significant changes driven by the Beacon Acquisition | Assets/Liabilities/Equity | June 30, 2025 (in millions) | December 31, 2024 (in millions) | Change (in millions) | Percentage Change | | :------------------------ | :-------------------------- | :------------------------------ | :------------------- | :---------------- | | Assets | | | | | | Cash and cash equivalents | $2,278.5 | $5,068.5 | $(2,790.0) | -55.05% | | Accounts receivable, net | $1,575.7 | $2.7 | $1,573.0 | 58259.26% | | Inventories, net | $1,849.6 | $— | $1,849.6 | N/A | | Total current assets | $6,494.8 | $5,089.6 | $1,405.2 | 27.61% | | Property and equipment, net | $696.3 | $0.4 | $695.9 | 173975.00% | | Goodwill | $5,137.9 | $1.2 | $5,136.7 | 428058.33% | | Intangibles, net | $4,003.8 | $4.0 | $3,999.8 | 99995.00% | | Total assets | $17,114.2 | $5,098.3 | $12,015.9 | 235.68% | | Liabilities | | | | | | Accounts payable | $1,426.9 | $6.2 | $1,420.7 | 22914.52% | | Accrued expenses | $585.7 | $38.6 | $547.1 | 1417.36% | | Total current liabilities | $2,165.4 | $45.1 | $2,120.3 | 4701.33% | | Long-term debt, net | $3,051.5 | $— | $3,051.5 | N/A | | Total liabilities | $7,198.9 | $45.4 | $7,153.5 | 15756.61% | | Stockholders' Equity | | | | | | Total stockholders' equity | $9,915.3 | $5,052.9 | $4,862.4 | 96.23% | | Total liabilities and stockholders' equity | $17,114.2 | $5,098.3 | $12,015.9 | 235.68% | - Total assets increased significantly by 235.68% to $17,114.2 million as of June 30, 2025, primarily driven by the Beacon Acquisition, which introduced substantial goodwill ($5,137.9 million) and intangibles ($4,003.8 million)[12][31][66] - Cash and cash equivalents decreased by 55.05% to $2,278.5 million, reflecting the cash outflow for the Beacon Acquisition[12][65] - Total liabilities surged by 15756.61% to $7,198.9 million, largely due to new long-term debt incurred to finance the Beacon Acquisition[12][120][122][126] Condensed Consolidated Statements of Operations This section details QXO's revenues, expenses, and profitability, reflecting the operational impact of the Beacon Acquisition | Metric | Three Months Ended June 30, 2025 (in millions) | Three Months Ended June 30, 2024 (in millions) | Six Months Ended June 30, 2025 (in millions) | Six Months Ended June 30, 2024 (in millions) | | :-------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net sales | $1,906.4 | $14.5 | $1,919.8 | $29.0 | | Cost of products sold | $1,504.7 | $8.7 | $1,512.8 | $17.5 | | Gross profit | $401.7 | $5.8 | $407.0 | $11.5 | | Selling, general and administrative | $456.8 | $9.8 | $501.2 | $15.0 | | Depreciation | $27.2 | $0.1 | $27.3 | $0.2 | | Amortization | $79.8 | $0.2 | $80.0 | $0.4 | | Loss from operations | $(162.1) | $(4.3) | $(201.5) | $(4.1) | | Interest (expense) income, net | $(30.2) | $3.5 | $26.4 | $3.4 | | Loss on debt extinguishment | $(45.7) | $— | $(45.7) | $— | | Net loss | $(58.5) | $(0.6) | $(49.8) | $(0.5) | | Loss per common share - basic and diluted | $(0.15) | $(9.93) | $(0.19) | $(9.72) | - Net sales for the three months ended June 30, 2025, dramatically increased to $1,906.4 million from $14.5 million in the prior year, primarily due to the Beacon Acquisition[14][155] - The company reported a net loss of $(58.5) million for the three months ended June 30, 2025, compared to $(0.6) million in the prior year, influenced by increased operating expenses, interest expense from new debt, and a loss on debt extinguishment[14][159][165][167] Condensed Consolidated Statements of Comprehensive Loss This section presents QXO's comprehensive loss, including net loss and other comprehensive income/loss components | Metric | Three Months Ended June 30, 2025 (in millions) | Three Months Ended June 30, 2024 (in millions) | Six Months Ended June 30, 2025 (in millions) | Six Months Ended June 30, 2024 (in millions) | | :------------------------------ | :--------------------------------------------- | :--------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net loss | $(58.5) | $(0.6) | $(49.8) | $(0.5) | | Foreign currency translation adjustment | $(3.1) | $— | $(3.1) | $— | | Total other comprehensive loss | $(3.1) | $— | $(3.1) | $— | | Comprehensive loss | $(61.6) | $(0.6) | $(52.9) | $(0.5) | - Comprehensive loss for the three months ended June 30, 2025, was $(61.6) million, including a foreign currency translation adjustment of $(3.1) million, which was not present in the prior year[17] Condensed Consolidated Statements of Stockholders' Equity This section details changes in QXO's equity, reflecting capital raises and net losses post-Beacon Acquisition | Equity Component | Balance as of March 31, 2025 (in millions) | Issuance of Mandatory Convertible Preferred Stock, net | Mandatory Convertible Preferred Stock dividend | Convertible Preferred Stock dividend | Issuance of common stock, net | Proceeds from stock option exercises | Awards assumed in acquisition | Vesting of stock-based compensation awards | Stock-based compensation | Other comprehensive loss | Net loss | Balance as of June 30, 2025 (in millions) | | :----------------------------------- | :----------------------------------------- | :--------------------------------------------- | :------------------------------------- | :----------------------------------- | :---------------------------- | :--------------------------------- | :-------------------------- | :----------------------------------------- | :------------------------- | :----------------------- | :--------- | :--------------------------------------- | | Mandatory Convertible Preferred Stock | $— | $558.1 | $— | $— | $— | $— | $— | $— | $— | $— | $— | $558.1 | | Convertible Preferred Stock | $498.6 | $— | $— | $— | $— | $— | $— | $— | $— | $— | $— | $498.6 | | Common Stock | $— | $— | $— | $— | $— | $— | $— | $— | $— | $— | $— | $— | | Additional Paid-in Capital | $4,580.7 | $— | $— | $— | $4,218.4 | $14.3 | $87.5 | $(0.1) | $65.0 | $— | $— | $8,965.8 | | Retained Earnings (Accumulated Deficit) | $(20.0) | $— | $(3.1) | $(22.5) | $— | $— | $— | $— | $— | $— | $(58.5) | $(104.1) | | Accumulated Other Comprehensive Loss | $— | $— | $— | $— | $— | $— | $— | $— | $— | $(3.1) | $— | $(3.1) | | Total Stockholders' Equity | $5,059.3 | $558.1 | $(3.1) | $(22.5) | $4,218.4 | $14.3 | $87.5 | $(0.1) | $65.0 | $(3.1) | $(58.5) | $9,915.3 | - Total stockholders' equity increased to $9,915.3 million as of June 30, 2025, from $5,052.9 million at December 31, 2024, primarily due to the issuance of Mandatory Convertible Preferred Stock ($558.1 million) and common stock ($4,218.4 million net of issuance costs)[12][20][23] - The company reported an accumulated deficit of $(104.1) million as of June 30, 2025, reflecting net losses and preferred stock dividends[12][20][23] Condensed Consolidated Statements of Cash Flows This section outlines QXO's cash generation and usage, significantly impacted by the Beacon Acquisition and related financing | Cash Flow Activity | Six Months Ended June 30, 2025 (in millions) | Six Months Ended June 30, 2024 (in millions) | Change (in millions) | | :-------------------------------------- | :------------------------------------------- | :------------------------------------------- | :------------------- | | Net cash used in operating activities | $(137.7) | $(0.7) | $(137.0) | | Net cash used in investing activities | $(10,575.4) | $(0.1) | $(10,575.3) | | Net cash provided by financing activities | $7,923.7 | $965.9 | $6,957.8 | | Net (decrease) increase in cash | $(2,789.7) | $965.1 | $(3,754.8) | | Cash, cash equivalents and restricted cash, end of period | $2,282.3 | $971.3 | $1,311.0 | - Net cash used in operating activities increased significantly to $(137.7) million for the six months ended June 30, 2025, primarily due to seasonal working capital requirements for inventory purchases and cash collections following the Beacon Acquisition[26][214] - Net cash used in investing activities surged to $(10,575.4) million, overwhelmingly driven by the $10,556.5 million cash paid for the Beacon Acquisition[26][215] - Net cash provided by financing activities increased to $7,923.7 million, reflecting significant debt issuances (Notes, Term Loan, ABL Facility) and equity offerings (common stock, Mandatory Convertible Preferred Stock) to fund the acquisition[26][216] Notes to the Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements 1. Description of Business This note describes QXO's transformation into a building products distribution company following the Beacon Acquisition - QXO, Inc. transitioned from a technology solutions and professional services company to a building products distribution company following the acquisition of Beacon Roofing Supply, Inc. on April 29, 2025[30][31][32] - The company aims to become the tech-enabled leader in the $800 billion building products distribution industry, targeting $50 billion in annual revenues within the next decade through acquisitions and organic growth[32] 2. Basis of Presentation and Significant Accounting Policies This note outlines the accounting principles and policies applied, including the treatment of the Beacon Acquisition - The Beacon Acquisition was accounted for using the acquisition method, with Beacon determined as the predecessor entity for financial reporting due to its substantially larger operations[35] Cash, Cash Equivalents and Restricted Cash (in millions) | Category | June 30, 2025 | December 31, 2024 | | :--------------------------------------- | :------------ | :------------------ | | Cash and cash equivalents | $2,278.5 | $5,068.5 | | Restricted cash | $3.8 | $3.5 | | Total cash, cash equivalents and restricted cash | $2,282.3 | $5,072.0 | Allowance for Expected Credit Losses (in millions) | Period | Balance at beginning of period | Current period provision | Recoveries | Balance at end of period | | :-------------------------------- | :----------------------------- | :----------------------- | :--------- | :----------------------- | | Six months ended June 30, 2025 | $0.5 | $2.7 | $0.1 | $3.3 | | Year ended December 31, 2024 | $0.5 | $— | $— | $0.5 | Property and Equipment, Net (in millions) | Category | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :------------------ | | Total property and equipment | $718.0 | $4.3 | | Accumulated depreciation | $(21.7) | $(3.9) | | Total property and equipment, net | $696.3 | $0.4 | Goodwill (in millions) | Period | Balance at beginning of period | Acquisitions | Translation and other adjustments | Balance at end of period | | :----------------------------- | :----------------------------- | :----------- | :-------------------------------- | :----------------------- | | Six months ended June 30, 2025 | $1.2 | $5,138.6 | $(1.9) | $5,137.9 | Intangible Assets, Net (in millions, except time periods) | Category | June 30, 2025 | December 31, 2024 | Weighted-Average Remaining Life (Years) | | :-------------------------------- | :------------ | :------------------ | :-------------------------------------- | | Customer relationships and other | $3,860.7 | $9.4 | 9.8 | | Trade names | $229.9 | $— | 2.8 | | Total amortizable intangible assets, net | $4,003.1 | $4.0 | 9.4 | | Indefinite-lived domain names | $0.7 | $— | N/A | | Total intangibles, net | $4,003.8 | $4.0 | N/A | Estimated Future Amortization Expense for Intangible Assets (in millions) | Year | Amount | | :---------------------- | :----- | | 2025 (July - December) | $231.3 | | 2026 | $462.6 | | 2027 | $462.6 | | 2028 | $410.5 | | 2029 | $385.3 | | Thereafter | $2,050.8 | | Total | $4,003.1 | Accrued Expenses (in millions) | Component | June 30, 2025 | December 31, 2024 | | :------------------------------ | :------------ | :------------------ | | Inventory | $228.0 | $— | | Selling, general and administrative | $132.1 | $— | | Payroll and employee benefit costs | $108.8 | $8.1 | | Customer rebates | $80.0 | $— | | Interest expense | $27.2 | $— | | Income taxes | $— | $24.0 | | Other | $9.6 | $6.5 | | Total accrued expenses | $585.7 | $38.6 | Interest Income (Expense), Net (in millions) | Component | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Interest income | $22.3 | $3.5 | $78.9 | $3.5 | | Interest expense | $(52.5) | $— | $(52.5) | $(0.1) | | Interest (expense) income, net | $(30.2) | $3.5 | $26.4 | $3.4 | 3. Acquisition This note details the Beacon Acquisition, including consideration, purchase price allocation, and pro forma financial impact - On April 29, 2025, QXO completed the acquisition of Beacon Roofing Supply, Inc. for $10.6 billion, transforming QXO into the largest publicly-traded distributor of roofing, waterproofing, and complementary building products in North America[31][61][62] Preliminary Aggregate Acquisition Consideration (in millions) | Component | Amount | | :---------------------------------------------------- | :------- | | Cash paid for outstanding Beacon common stock | $7,736.6 | | Converted Beacon RSUs and options | $103.5 | | Payment of Beacon debt, including accrued interest | $2,947.8 | | Preliminary aggregate acquisition consideration | $10,787.9 | | Less: cash acquired | $(143.9) | | Preliminary aggregate acquisition consideration, net of cash acquired | $10,644.0 | Preliminary Purchase Price Allocation (in millions) | Asset/Liability | April 29, 2025 | | :-------------------------------- | :------------- | | Accounts receivable | $1,349.3 | | Inventories | $1,833.2 | | Vendor rebates receivable | $240.1 | | Income tax receivable | $20.1 | | Prepaid expenses and other current assets | $82.3 | | Property and equipment | $695.2 | | Goodwill | $5,138.6 | | Intangibles | $4,080.6 | | Operating lease right-of-use assets | $744.2 | | Other non-current assets | $18.7 | | Accounts payable | $(1,163.6) | | Accrued expenses | $(488.5) | | Deferred incomes taxes | $(1,022.8) | | Other long-term liabilities | $(31.3) | | Operating lease liabilities | $(670.6) | | Finance lease liabilities | $(181.5) | | Preliminary aggregate acquisition consideration | $10,644.0 | Unaudited Pro Forma Combined Net Sales and Net Income (Loss) (in millions) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net sales | $2,693.2 | $2,689.1 | $4,614.4 | $4,616.0 | | Net income (loss) | $(9.2) | $24.4 | $(144.0) | $(263.1) | 4. Restructuring This note describes QXO's restructuring plan post-acquisition, aimed at streamlining operations and reducing costs - Subsequent to the Beacon Acquisition, QXO initiated a restructuring plan to streamline operations, improve efficiency, and reduce costs, resulting in $72.8 million in pre-tax restructuring charges[75] Restructuring Charge Liability (in millions) | Component | June 30, 2025 | | :------------------------------------ | :------------ | | Restructuring charge liability, beginning of the period | $— | | Restructuring charges | $35.3 | | Payments | $(4.4) | | Restructuring charge liability, end of the period | $30.9 | 5. Segment Reporting and Geographic Information This note clarifies QXO's single operating segment structure and provides geographic sales information - QXO operates as a single operating segment, with its Chief Executive Officer reviewing consolidated results to allocate resources and assess performance[77][78] Net Sales by Line of Business (in millions) | Product Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Residential roofing products | $929.8 | $— | $929.8 | $— | | Non-residential roofing products | $535.5 | $— | $535.5 | $— | | Complementary building products | $426.1 | $— | $426.1 | $— | | Software products and services | $15.0 | $14.5 | $28.4 | $29.0 | | Total net sales | $1,906.4 | $14.5 | $1,919.8 | $29.0 | - Approximately 97% of total net sales for the three and six months ended June 30, 2025, were derived from the U.S., and 97% of long-lived assets were located in the U.S.[81] 6. Equity This note details QXO's equity transactions, including preferred stock, warrants, and common stock offerings - On June 6, 2024, QXO issued 1.0 million shares of Convertible Preferred Stock with an initial liquidation preference of $1.0 billion, convertible into 219.0 million common shares[84] - The company issued Warrants exercisable for 219.0 million shares of common stock, with varying exercise prices, exercisable until June 6, 2034[87] - In May 2025, QXO completed a preferred stock offering, issuing 11.5 million Depositary Shares representing 5.50% Series B Mandatory Convertible Preferred Stock, raising $558.1 million in net proceeds[92] - Between April and June 2025, QXO conducted multiple underwritten public offerings of common stock, raising approximately $3.39 billion in net proceeds[99][100][101] 7. Earnings (Loss) Per Common Share This note presents the calculation of basic and diluted earnings (loss) per common share Basic and Diluted Earnings (Loss) Per Common Share (in millions, except per share amounts) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss attributable to common shareholders | $(84.1) | $(6.6) | $(97.9) | $(6.5) | | Total weighted-average common shares outstanding | 564.7 | 0.7 | 508.4 | 0.7 | | Basic and diluted loss per common share | $(0.15) | $(9.93) | $(0.19) | $(9.72) | Potential Dilutive Securities Not Included in Loss Per Common Share (in millions) | Security | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Convertible Preferred Stock | 219.0 | 219.0 | 219.0 | 219.0 | | Mandatory Convertible Preferred Stock | 34.8 | — | 34.8 | — | | Warrants | 219.0 | 219.0 | 219.0 | 219.0 | | Stock-based awards | 30.1 | — | 30.1 | — | | Total potential dilutive securities | 502.9 | 438.0 | 502.9 | 438.0 | 8. Stock-based Compensation This note details QXO's stock-based compensation plans, including awards assumed in the Beacon Acquisition - The 2024 Omnibus Incentive Plan allows for various equity awards, with the Plan Share Limit automatically increasing to 27.0 million shares for fiscal 2025[105][106] - As part of the Beacon Acquisition, 21.5 million additional shares were added to the 2024 Plan's share limit, specifically for former Beacon employees or new QXO hires[107] - Beacon equity awards were converted into QXO RSUs and NSOs, with $87.5 million of their fair value related to pre-combination expense included in the purchase price[109][110][111] Stock-Based Compensation Expense (in millions) | Award Type | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | NSOs | $7.8 | $— | $7.8 | $— | | RSUs | $44.0 | $— | $51.6 | $— | | PRSUs | $13.2 | $— | $25.8 | $— | | Total stock-based compensation expense | $65.0 | $— | $85.2 | $— | 9. Debt This note provides details on QXO's debt instruments, including new issuances for the Beacon Acquisition Outstanding Debt as of June 30, 2025 (in millions) | Debt Type | Principal Balance | Carrying Value | Fair Value | | :------------------------ | :---------------- | :------------- | :--------- | | Revolving Lines of Credit | $199.9 | $199.9 | $199.9 | | Term Loan Facility | $850.0 | $823.2 | $855.3 | | Senior Secured Notes | $2,250.0 | $2,228.3 | $2,323.1 | | Total Long-term Debt, net | $3,100.0 | $3,051.5 | $3,178.4 | - On April 29, 2025, QXO Building Products issued $2.25 billion in 6.75% Senior Secured Notes due 2032, secured by first-priority liens on most assets[122] - A Term Loan Facility of $2.25 billion was also entered into on April 29, 2025, maturing April 30, 2032, with variable interest rates[126][127] - On May 29, 2025, a voluntary principal prepayment of $1.40 billion was made under the Term Loan Facility, resulting in a $45.7 million loss on debt extinguishment[131] - An Asset-Based Revolving Credit Facility (ABL Facility) provides up to $2.0 billion in borrowing availability, with $199.9 million outstanding and $1.78 billion capacity as of June 30, 2025[133][139] 10. Leases This note outlines QXO's lease obligations, including operating and finance leases and associated costs Lease Costs Recognized (in millions) | Lease Type | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Operating lease costs | $28.4 | $0.1 | $29.4 | $0.1 | | Finance lease costs (amortization) | $7.7 | $— | $7.7 | $0.1 | | Finance lease costs (interest) | $2.0 | $— | $2.0 | $— | | Variable lease costs | $3.2 | $— | $3.2 | $— | | Total lease costs | $41.3 | $0.1 | $42.3 | $0.2 | Future Lease Payments (in millions) | Year | Operating Leases | Finance Leases | | :---------------------- | :--------------- | :------------- | | 2025 (July - December) | $67.4 | $27.5 | | 2026 | $155.3 | $54.3 | | 2027 | $138.8 | $49.3 | | 2028 | $120.8 | $38.0 | | 2029 | $100.7 | $25.0 | | Thereafter | $249.2 | $17.2 | | Total future lease payments | $832.2 | $211.3 | | Imputed interest | $(152.4) | $(27.3) | | Total lease liabilities | $679.8 | $184.0 | 11. Commitments and Contingencies This note discloses QXO's legal claims and other commitments, assessing potential financial impacts - The company is involved in various legal claims in the normal course of business and believes it has adequately accrued for probable and reasonably estimable loss contingencies[144][145] - Stockholder demand letters related to Beacon Acquisition disclosures are not believed to be material, individually or in aggregate[146] 12. Income Taxes This note explains QXO's income tax provisions, effective tax rates, and the impact of recent tax legislation Effective Tax Rates (excluding discrete items) | Period | 2025 | 2024 | | :------------------------------ | :----- | :----- | | Three Months Ended June 30, | 72.7% | 28.9% | | Six Months Ended June 30, | 74.5% | 27.3% | - The significant increase in effective tax rates for 2025 is primarily due to lower pre-tax income coupled with increased compensation above $1 million and non-deductible transaction costs from the Beacon Acquisition[147] - The company is evaluating the impact of the recently enacted One Big Beautiful Bill Act (OBBBA) on its consolidated financial statements, which includes provisions for tax treatment of businesses and international tax framework modifications[148] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses QXO's financial condition and operational results, highlighting the transformative impact of the Beacon Acquisition Overview This section provides a high-level summary of QXO's business transformation and strategic objectives - QXO transitioned from a technology solutions and professional services company to a building products distribution company following the Beacon Acquisition[150][152] - The company aims to become the tech-enabled leader in the $800 billion building products distribution industry, targeting $50 billion in annual revenues within the next decade through accretive acquisitions and organic growth[152] Beacon Acquisition This section briefly reiterates the completion and impact of the $10.6 billion Beacon Acquisition - On April 29, 2025, QXO completed the acquisition of Beacon Roofing Supply, Inc. for $10.6 billion, renaming it QXO Building Products, Inc.[151] Results of Consolidated Operations This section summarizes QXO's consolidated financial performance, highlighting key changes post-acquisition | Metric | Three Months Ended June 30, 2025 (in millions) | Three Months Ended June 30, 2024 (in millions) | Six Months Ended June 30, 2025 (in millions) | Six Months Ended June 30, 2024 (in millions) | | :-------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net sales | $1,906.4 | $14.5 | $1,919.8 | $29.0 | | Gross profit | $401.7 | $5.8 | $407.0 | $11.5 | | Loss from operations | $(162.1) | $(4.3) | $(201.5) | $(4.1) | | Net loss | $(58.5) | $(0.6) | $(49.8) | $(0.5) | - Net sales for the three and six months ended June 30, 2025, significantly increased to $1,906.4 million and $1,919.8 million, respectively, primarily due to the Beacon Acquisition[154][155][156] - The company reported increased net losses for both periods, driven by higher operating expenses, interest expense, and a loss on debt extinguishment related to the acquisition and associated financing[154][159][165][167] Net Sales This section analyzes the significant increase in net sales, primarily driven by the Beacon Acquisition Net Sales by Line of Business (in millions) | Product Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Residential roofing products | $929.8 | $— | $929.8 | $— | | Non-residential roofing products | $535.5 | $— | $535.5 | $— | | Complementary building products | $426.1 | $— | $426.1 | $— | | Software products and services | $15.0 | $14.5 | $28.4 | $29.0 | | Total net sales | $1,906.4 | $14.5 | $1,919.8 | $29.0 | - The substantial increase in net sales for both the three and six months ended June 30, 2025, was primarily attributable to the inclusion of Beacon's net sales following the April 29, 2025 acquisition[155][156] Cost of Products Sold This section examines the increase in cost of products sold, influenced by higher sales and inventory adjustments - Cost of products sold increased to $1.50 billion for the three months and $1.51 billion for the six months ended June 30, 2025, up from $8.7 million and $17.5 million respectively in the prior year, mainly due to higher net sales from the Beacon Acquisition[157][158] - Cost of products sold was negatively impacted by inventory fair value adjustments resulting from recording Beacon's inventory at fair value on the acquisition date[157][158] Selling, General and Administrative ("SG&A") This section analyzes the rise in SG&A expenses, driven by acquisition-related costs and ongoing operations - SG&A expense rose to $456.8 million for the three months and $501.2 million for the six months ended June 30, 2025, from $9.8 million and $15.0 million respectively in the prior year[159][160] - The increase was primarily driven by costs supporting ongoing business operations post-Beacon Acquisition, acquisition-related transaction costs ($65.6 million for three months, $75.5 million for six months), and stock-based compensation expense ($65.0 million for three months, $85.2 million for six months)[159][160] Depreciation Expense This section details the increase in depreciation expense due to the expanded asset base from the Beacon Acquisition - Depreciation expense increased to $27.2 million for the three months and $27.3 million for the six months ended June 30, 2025, from $0.1 million and $0.2 million respectively in the prior year, due to the increase in property and equipment from the Beacon Acquisition[161][162] Amortization Expense This section explains the rise in amortization expense from new intangible assets acquired in the Beacon Acquisition - Amortization expense rose to $79.8 million for the three months and $80.0 million for the six months ended June 30, 2025, from $0.2 million and $0.4 million respectively in the prior year, primarily due to amortization of new customer relationships and trade names intangible assets recognized from the Beacon Acquisition[163][164] Interest (expense) income, net This section analyzes the shift in net interest, driven by new debt for the Beacon Acquisition - Interest (expense) income, net, shifted to $(30.2) million for the three months ended June 30, 2025, from $3.5 million income in the prior year, mainly due to higher interest expense from new debt issued for the Beacon Acquisition, partially offset by increased interest income from higher cash balances[165] - For the six months ended June 30, 2025, interest income, net, was $26.4 million, up from $3.4 million, driven by higher average interest-bearing cash balances, partially offset by increased interest expense from acquisition-related debt[166] Loss on Debt Extinguishment This section explains the $45.7 million loss on debt extinguishment from a Term Loan Facility prepayment - A loss on debt extinguishment of $45.7 million was recognized for both the three and six months ended June 30, 2025, due to a $1.40 billion principal prepayment under the Term Loan Facility, including pro-rata extinguishment of original issue discounts and debt issuance costs[167] Income Taxes This section discusses the increased tax benefit and effective tax rates, influenced by acquisition-related factors - Benefit from income taxes increased to $177.8 million for the three months and $169.3 million for the six months ended June 30, 2025, compared to $0.2 million for both periods in the prior year[168][169] - The increase in tax benefit was primarily due to lower pre-tax income combined with an increase in compensation above $1 million and non-deductible transaction costs related to the Beacon Acquisition[168][169] - The effective tax rate, excluding discrete items, was 72.7% for the three months and 74.5% for the six months ended June 30, 2025, significantly higher than the prior year's 28.9% and 27.3%, respectively[168][169] Non-GAAP Financial Measures This section presents non-GAAP financial measures used to provide additional insights into QXO's performance - QXO uses non-GAAP financial measures such as Adjusted Gross Profit, Adjusted Gross Margin, Adjusted Net Income (Loss), Adjusted Diluted EPS, Adjusted EBITDA, and Adjusted EBITDA Margin to provide additional insights into its financial results and core operating performance[171][172][174] Adjusted Gross Profit and Adjusted Gross Margin Reconciliation (in millions, except percentages) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Gross profit | $401.7 | $5.8 | $407.0 | $11.5 | | Inventory fair value adjustments | $80.3 | $— | $80.3 | $— | | Adjusted Gross Profit | $482.0 | $5.8 | $487.3 | $11.5 | | Gross margin | 21.1% | 40.0% | 21.2% | 39.7% | | Adjusted Gross Margin | 25.3% | 40.0% | 25.4% | 39.7% | Adjusted Net Income and Adjusted Diluted EPS Reconciliation (in millions, except per share amounts) | Metric | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :------------------------------------------ | :------------------------------- | :----------------------------- | | Net loss | $(58.5) | $(49.8) | | Adjusted Net Income | $109.2 | $144.4 | | Adjusted Net Income attributable to common stockholders | $83.6 | $96.3 | | Basic and diluted loss per common share | $(0.15) | $(0.19) | | Adjusted Diluted EPS | $0.11 | $0.17 | | Adjusted diluted weighted-average common shares outstanding | 702.0 | 580.6 | Adjusted EBITDA and Adjusted EBITDA Margin Reconciliation (in millions, except percentages) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss | $(58.5) | $(0.6) | $(49.8) | $(0.5) | | Adjusted EBITDA | $204.6 | $(1.2) | $195.6 | $(0.7) | | Net margin | (3.1)% | (4.1)% | (2.6)% | (1.7)% | | Adjusted EBITDA Margin | 10.7% | (8.3)% | 10.2% | (2.4)% | Seasonality This section discusses the seasonal and weather-dependent nature of demand for exterior building materials - Demand for exterior building materials is seasonal and weather-dependent, with net sales and net income typically highest in quarters ending June 30, September 30, and December 31, and lowest in the quarter ending March 31 due to winter construction cycles[178] Liquidity and Capital Resources This section details QXO's cash position, funding sources, and uses of cash, including acquisition financing - As of June 30, 2025, QXO's cash balance was $2.28 billion. Primary liquidity sources include cash on hand, cash from operations, and borrowings under the ABL Facility[179] - The company's primary uses of cash post-Beacon Acquisition are working capital, debt service, and capital expenditures[179] - QXO paid $22.5 million and $45.0 million in dividends to Convertible Preferred Stock holders for the three and six months ended June 30, 2025, respectively[181] - The company raised significant capital through private placements and registered equity offerings, including $823.8 million from a March 2025 private placement and approximately $3.39 billion from public offerings between April and June 2025[184][193][194][195] - New debt incurred for the Beacon Acquisition includes $2.25 billion in 6.75% Senior Secured Notes due 2032 and a $2.25 billion Term Loan Facility due 2032, along with an ABL Credit Agreement providing up to $2.0 billion in revolving credit[196][200][207] Cash Flows (in millions) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------------- | :------------------------------- | :------------------------------- | | Net cash used in operating activities | $(137.7) | $(0.7) | | Net cash used in investing activities | $(10,575.4) | $(0.1) | | Net cash provided by financing activities | $7,923.7 | $965.9 | | Net (decrease) increase in cash | $(2,789.7) | $965.1 | Item 3. Quantitative and Qualitative Disclosures About Market Risk This section outlines QXO's exposure to market risks, primarily focusing on interest rate risk. The company's cash equivalents are short-term, limiting interest rate sensitivity, while its debt portfolio includes both floating and fixed-rate instruments, with variable-rate debt having a weighted-average effective interest rate of 6.94% as of June 30, 2025 - QXO has minimal foreign currency exposure, with operations principally within the U.S.[217] - The company's cash equivalents are short-term, making their fair value not significantly affected by interest rate changes[218] - As of June 30, 2025, QXO had $199.9 million in outstanding variable-rate borrowings under its ABL Facility, $823.2 million under its Term Loan Facility, and $2.23 billion under fixed-rate Senior Secured Notes[218] - The weighted-average effective interest rate on variable-rate debt instruments was 6.94% as of June 30, 2025, and a 10% change in interest rates is not expected to materially affect interest income or expense[218] Item 4. Controls and Procedures This section details management's evaluation of QXO's disclosure controls and procedures, concluding their effectiveness as of June 30, 2025. It also notes the ongoing integration of policies, processes, and systems following the Beacon Acquisition, which may impact internal control over financial reporting, while acknowledging the inherent limitations of any control system - Management, including the principal executive and financial officers, concluded that QXO's disclosure controls and procedures were effective as of June 30, 2025[220] - The Beacon Acquisition on April 29, 2025, led to ongoing integration of policies, processes, people, technology, and operations, which management will continue to evaluate for its impact on internal control over financial reporting[221] - The company acknowledges that disclosure controls and internal control over financial reporting are designed to provide reasonable, not absolute, assurance and may not prevent or detect all errors or fraud[222] PART II. OTHER INFORMATION This section provides additional information beyond the financial statements, including legal proceedings and risk factors Item 1. Legal Proceedings This section refers to Note 11 of the financial statements for information regarding QXO's legal proceedings, commitments, and contingencies - Information regarding legal proceedings is cross-referenced to Note 11 – Commitments and Contingencies in Item 1 of the financial statements[224] Item 1A. Risk Factors This section outlines significant risks that could materially affect QXO's business, financial condition, or results of operations. Key areas of risk include those related to common stock ownership, product supply and vendor relations, the company's growth strategy and acquisitions (especially the Beacon Acquisition), cyclicality and seasonality, information technology and cybersecurity threats, human capital, regulatory compliance, and the substantial indebtedness incurred Risks Related to Ownership of our Common Stock This section details risks associated with QXO's common stock, including potential market price impacts and ranking - The Mandatory Convertible Preferred Stock and Depositary Shares may adversely affect the market price of QXO's common stock due to potential resale, investor preference for preferred shares, and hedging activities[226] - QXO's common stock ranks junior to both Convertible Perpetual Preferred Stock and Mandatory Convertible Preferred Stock regarding dividends and liquidation distributions[227] Risks Related to Product Supply and Vendor Relations This section outlines risks concerning product availability, supplier relationships, and pricing fluctuations - Inability to obtain distributed products due to supply disruptions (e.g., unanticipated demand, production difficulties, loss of key supplier arrangements, global events) could result in lost revenues, reduced margins, and damaged customer relationships[228] - Changes in supplier pricing and demand, influenced by raw material costs, energy costs, labor costs, tariffs, and inflation, could adversely affect income and gross margins, especially if price increases cannot be passed on to customers[230][232][233] - Adverse changes in vendor rebate programs, which reduce product costs, could lower gross margins and income in future periods[234] Risks Related to Acquisitions and our Growth Strategy This section addresses risks associated with QXO's growth strategy, particularly through acquisitions and operational integration - QXO's inorganic growth rate may slow if it cannot identify suitable acquisition targets or successfully complete acquisitions on acceptable terms[235] - Acquisitions involve numerous risks, including difficulties in integrating operations, technologies, and employees; diversion of resources; potential loss of key employees; cybersecurity risks; unforeseen liabilities; and failure to achieve expected cost savings or profitability[237] - Maintaining a strong safety record is crucial, as catastrophic safety incidents involving employees, customers, or the public, particularly with the commercial fleet, could result in material liabilities and reputational damage[238][239][240] Risks Related to Cyclicality, Seasonality, and Weather This section highlights risks from market cyclicality, seasonal demand, and unpredictable weather patterns - The business is susceptible to cyclicality in residential and non-residential construction markets, which depend on factors like credit availability, interest rates, and consumer confidence, potentially leading to lower revenues and reduced profitability during economic downturns[243] - Seasonal changes, unpredictable weather patterns, and natural disasters (e.g., hurricanes, floods, wildfires) can significantly impact financial results by affecting demand, supply chains, branch staffing, and customers' ability to pay[244][245] Risks Related to Information Technology This section addresses risks related to IT system interruptions, cybersecurity threats, and data privacy compliance - Interruptions in IT systems, including those from cybersecurity threats, could cause material operational problems (inventory, collections, customer service, cost control) and adversely affect financial results[246][247] - IT systems are vulnerable to natural disasters, power outages, employee error, cyber-attacks (viruses, ransomware), and the increasing sophistication of AI-aided threats, which can lead to business disruption, data theft, and increased costs[248][250][251] - Failure to comply with data privacy laws and regulations could result in litigation, significant sanctions, and harm to the company's reputation and financial condition[251] Risks Related to Human Capital This section covers risks related to retaining key personnel, attracting talent, and potential labor disputes - The loss of key executive officers or management personnel, or the inability to attract and retain qualified talent, could adversely affect QXO's operations and growth strategies[254] - Work stoppages, union negotiations, labor disputes, or challenges in customers' ability to attract and retain workers could increase labor costs and negatively impact demand for QXO's products[255][256] Regulatory Risk This section addresses risks from compliance with various laws and regulations, and potential impacts of violations - QXO is subject to numerous federal, state, provincial, and local laws and regulations (environmental, climate, transportation, health and safety, tax), with compliance potentially increasing general and administrative costs[257][258][259] - Violations of these laws or changes in their interpretation could lead to penalties, fines, operational curtailment, and material adverse effects on the business[259][260] Risks Related to the Acquisition of Beacon This section details specific risks associated with integrating Beacon, including operational, financial, and reputational challenges - The successful integration of Beacon's operations is subject to risks including unforeseen difficulties in integrating systems and cultures, diversion of resources, potential loss of key employees, and the inability to achieve anticipated cost savings and synergies[262][263][264][267] - Beacon may have unknown or contingent liabilities that were not discovered during due diligence, which could materially adversely affect QXO's financial condition[265] - Acquisition accounting adjustments, including the allocation of purchase price to assets and liabilities at fair value, could materially impact QXO's consolidated financial statements and future results[266] - Business uncertainties following the acquisition, such as customers and suppliers delaying decisions or terminating relationships, could negatively affect QXO's revenues, earnings, and cash flows[268] Risks Related to Our Indebtedness This section addresses risks stemming from QXO's substantial debt, including servicing obligations and restrictive covenants - QXO incurred substantial additional indebtedness of approximately $4.9 billion (face value) in connection with the Beacon Acquisition, along with $2.0 billion in revolving commitments under the ABL Facility[269] - A high level of debt could make it difficult to satisfy obligations, reduce funds for other purposes, limit additional financing, increase vulnerability to economic conditions, and restrict strategic activities[270] - Inability to generate sufficient cash flow to service debt obligations could lead to liquidity problems, forcing QXO to reduce investments, dispose of assets, or seek additional capital, which may not be successful[272][273][274] - Debt agreements contain restrictive covenants that limit QXO's operational flexibility, and a failure to comply could result in an event of default, accelerating debt and potentially allowing lenders to seize collateral[275][276][277] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section states that there are no unregistered sales of equity securities or use of proceeds to report for the period - This item is not applicable for the reporting period[278] Item 3. Defaults Upon Senior Securities This section indicates that there were no defaults upon senior securities during the reporting period - There were no defaults upon senior securities[279] Item 4. Mine Safety Disclosures This section states that there are no mine safety disclosures to report - There are no mine safety disclosures[280] Item 5. Other Information This section notes the inclusion of unaudited predecessor financial information for QXO Building Products, Inc. as an exhibit to the Quarterly Report - Unaudited predecessor financial information for QXO Building Products, Inc. is included as Exhibit 99.1 to this Quarterly Report[281] Item 6. Exhibits This section provides a comprehensive list of exhibits filed with the Form 10-Q, including certificates of designations, deposit agreements, indentures, credit agreements, and various certifications - The report includes various exhibits such as Certificate of Designations for Series B Mandatory Convertible Preferred Stock, Deposit Agreement, Indenture for Senior Secured Notes, Term Loan Credit Agreement, and Asset-Based Revolving Credit Agreement[283] - Certifications by the Principal Executive Officer and Principal Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are also furnished[283] - Unaudited predecessor financial information for QXO Building Products, Inc. is filed as Exhibit 99.1[283] Signature This section contains the signatures of the registrant's authorized officers, Brad Jacobs (Chief Executive Officer) and Ihsan Essaid (Chief Financial Officer), certifying the report on Form 10-Q - The report is signed by Brad Jacobs, Chief Executive Officer, and Ihsan Essaid, Chief Financial Officer, on August 14, 2025[287]