Beacon Reports Third Quarter 2022 Results

Beacon (the “Company”, “we”, “our”) announced results for the third quarter ended September 30, 2022 (“2022”).

• Highest quarterly sales in Beacon’s history driven by price and volume growth across all lines of business resulting in record third quarter bottom line results
• Acquisition of Coastal Construction Products makes Beacon a significant national player in specialty waterproofing products, and substantially enhances value proposition to commercial roofing contractors
• Strong third quarter cash generation, improving inventory position and balance sheet capacity provide continued ability to invest
• Accelerating greenfield investments expand branch footprint and enhance the Beacon OTC® network, while bottom quintile branch initiative continues to yield measurable results

“Beacon’s record third quarter results demonstrate our team’s focused execution and the resiliency of our business model in a dynamic environment,” said Julian Francis, Beacon’s President & CEO. “We continued to deliver value to our customers, driving record third quarter net income and our 11th straight quarter of year-over-year increases in Adjusted EBITDA. At the same time, we continued making strategic investments toward achieving our Ambition 2025 growth and margin targets. We took an important step this week with the acquisition of Coastal Construction Products, one of the largest independent distributors of specialty waterproofing products in the U.S. The combination of Beacon’s specialty waterproofing branches in the West, and Coastal’s strong presence in the Southeast, creates a new national player in waterproofing products and significantly enhances our value proposition by providing a building envelope solution to our commercial and multifamily roofing customers. We also accelerated greenfield investments in several key markets, creating capacity, expanding our branch footprint and enhancing service to our core exteriors customers. Our balanced capital allocation demonstrates our commitment to creating shareholder value and confidence in our Ambition 2025 strategic plan. I am extremely pleased with our achievements in the third quarter and know 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 28.8% compared to the prior year to $2.42 billion, a quarterly record. Third quarter sales increased compared to the prior year period driven by the successful implementation of price increases and higher demand across all three lines of business. Weighted-average selling price increased approximately 20-21% and estimated volumes increased approximately 7-8%.

Residential roofing product sales increased 21.5%, non-residential roofing product sales increased 54.2%, and complementary product sales increased 17.0% compared to the prior year. The three-month periods ending September 30, 2022 and 2021 each had 64 business days.

Gross margin decreased to 26.1%, from 27.1% in the prior year, as product cost increases more than offset higher average selling prices for our products, combined with the higher non-residential product sales mix. The increase in operating expense and Adjusted Operating Expense in 2022 was primarily due to increases in payroll and benefit costs, selling costs and general and administrative expenses. Both operating expense as a percent of sales and Adjusted Operating Expense as a percent of sales were lower in 2022, driven by the positive impact from net sales growth.

Net income (loss) from continuing operations was $154.8 million, compared to $104.5 million in the prior year. Adjusted EBITDA was $284.2 million, compared to $208.1 million in the prior year. EPS was $1.95, compared to $1.21 in the prior year. Improvements in third quarter results compared to the prior year period were driven by higher net sales and favorable operating leverage and a reduction in the number of shares outstanding.

Year-to-Date

Net sales increased 27.5% compared to the prior year to $6.46 billion, a Company record for net sales for the first nine months. 2022 net sales increased across all three lines of business versus the prior year period, driven largely by the successful implementation of price increases and higher demand for our products. Weighted-average selling price increased approximately 22-23% and estimated volumes increased approximately 4-5%.

Residential roofing product sales increased 21.7%, non-residential roofing product sales increased 47.4%, and complementary product sales increased 18.5% compared to the prior year. The nine-month periods ending September 30, 2022 and 2021 each had 191 business days.

Gross margin decreased to 26.6%, from 26.8% in the prior year as price-cost improvement was more than offset by a higher non-residential product sales mix. The increase in operating expense and Adjusted Operating Expense in 2022 was primarily due to increases in payroll and benefit costs, selling costs and general and administrative expenses. Both operating expense as a percent of sales and Adjusted Operating Expense as a percent of sales were lower in 2022, driven by the positive impact from net sales growth.

Net income (loss) from continuing operations was $385.1 million, compared to $173.8 million in the prior year. 2021 results include a loss on extinguishment of $60.2 million. Adjusted EBITDA was $731.4 million, compared to $511.9 million in the prior year. EPS was $4.65, compared to $1.93 in the prior year. The improvement compared to the prior year period was largely driven by higher net sales, favorable operating leverage and a reduction in the number of shares outstanding.

In February 2022, Beacon announced the authorization of a share repurchase program, pursuant to which the Company may purchase up to $500 million of its common stock. In the first nine months of 2022, the Company repurchased and retired $338 million of its common stock through a combination of open market repurchases and two previously announced accelerated share repurchase (“ASR”) agreements. As a result, shares of common stock outstanding decreased to 65.1 million as of September 30, 2022, from 70.4 million as of December 31, 2021. Common stock outstanding at September 30, 2022 does not include the effect of the $50 million equity forward contract related to the unsettled portion of the second ASR agreement, which, based on the average stock price during the quarter ended September 30, 2022, would have resulted in the repurchase of 0.9 million additional shares. The $50 million equity forward contract is expected to settle in the fourth quarter 2022.

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.

To read the full third quarter 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 470 branches throughout all 50 states in the U.S. and 6 provinces in Canada. Beacon serves an extensive base of over 80,000 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:

Binit Sanghvi – VP, Capital Markets and Treasurer – Binit.Sanghvi@becn.com – (972) 369-8005

Source: Beacon Roofing Supply, Inc.