Beacon Roofing Supply(BECN) - 2021 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported nearly $1.8 billion in total net sales for the calendar fourth quarter, an increase of over 11% year-over-year, primarily driven by higher average selling prices [20][28] - Adjusted EBITDA increased by 21% in the calendar fourth quarter, yielding nearly 10% margin [7][28] - Gross margins improved to 26.3%, an increase of nearly 95 basis points year-over-year, with price cost contributing positively by approximately 110 basis points [23][28] Business Line Data and Key Metrics Changes - Residential roofing sales increased approximately 9%, while volumes were down about 10% year-over-year due to lower storm activity compared to the previous year [21][22] - Non-residential roofing sales rose approximately 13%, despite supply chain challenges [22] - Complementary sales increased approximately 16%, benefiting from higher prices across nearly all products [22] Market Data and Key Metrics Changes - The residential market remains strong, with approximately 80% of demand coming from re-roofing activity, which is largely non-discretionary [21] - The backlog is at its highest in history, with about two-thirds non-residential and one-third residential, indicating strong future demand [74] Company Strategy and Development Direction - The company is focusing on enhancing customer experience and sales effectiveness through investments in training and marketing [12] - The strategic initiative "Ambition 2025" aims to accelerate growth and profitability, with a focus on operational efficiency and talent development [18][30] - Recent acquisitions, including Midway Wholesale and Crabtree Siding and Supply, are expected to enhance market presence and operational capabilities [8][9] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for 2022, expecting total sales growth in the high single-digits range year-over-year, despite anticipated supply chain disruptions [28][29] - The company remains confident in its ability to implement price increases to offset inflation, with expectations for gross margin improvement [29][51] - Management highlighted the importance of distribution in managing inventory and capturing market share [34] Other Important Information - The company divested its solar products business to focus on core roofing customers, which was seen as a strategic move to enhance margins [9][26] - Operating cash flow was positive at $60 million for the quarter, reflecting improved financial flexibility [25] Q&A Session Summary Question: Inventory management and pricing dynamics - Management indicated that the inventory build is roughly half price and half volume, with specific categories varying [35] Question: Full-year guidance on sales and margins - Management clarified that for Q1 2022, volume is expected to be down in the low-single-digit range, while price is anticipated to be up in the low double-digit range [39] Question: Non-residential business consistency - Management noted that the commercial business is being run differently, with a positive long-term outlook despite short-term supply chain challenges [60] Question: EBITDA guidance and margin contraction - Management acknowledged that inventory profits will impact gross margins, with expectations for a 50 to 100 basis point headwind in 2022 [64] Question: Volume expectations by segment - Management expects low-single-digit volume growth in residential for the full year, with a more robust outlook for non-residential [70][72]