Beacon Reports Fourth Quarter and Full Year 2022 Results

Beacon (Nasdaq: BECN) (the “Company”, “we”, “our”) announced results today for the fourth quarter and full year ended December 31, 2022 (“2022”).

“We finished the year with strong results including the highest fourth quarter and full year sales, net income and Adjusted EBITDA in Beacon’s history,” said Julian Francis, Beacon’s President & CEO. “In 2022, our 7,000+ team members set financial records by executing against our plan, delivering high caliber service to our customers and progressing on our Ambition 2025 strategy to fully unlock Beacon’s potential. We ramped up growth investments, with 22 acquired branches during the year including our fourth quarter acquisition of Coastal, which substantially expanded our waterproofing and restoration offerings to our customers. We also accelerated greenfield investments, adding 16 locations during the year in key markets creating capacity and expanding our branch footprint. I am pleased to report that we finished the year with strong cash generation and enter 2023 with ample capacity to deploy capital to both growth initiatives and shareholder returns. Looking forward, I am confident that we have the right leadership and values-driven culture to deliver on our multi-year strategic roadmap to help our customers build more.”

• Record fourth quarter and full year net sales, net income and Adjusted EBITDA
• Achieved strong net income margin and double-digit Adjusted EBITDA margin for the second consecutive calendar year
• Ambition 2025 initiatives provided significant contribution to results, with improvements from the bottom quintile branch initiative, accelerated greenfield investments, and M&A
• Methodical and targeted inventory reduction efforts since the second quarter yielded strong fourth quarter cash generation and provided capacity to invest
• Coastal acquisition substantially enhances Beacon value proposition to roofing, waterproofing and restoration contractors with nationwide specialty waterproofing footprint

Fourth Quarter

Net sales increased 12.2% (14.1% on a per-day basis) compared to the prior year to $1.97 billion, a Company record for fourth quarter net sales. Fourth quarter sales increased compared to the prior year period driven by the successful implementation of price increases. Weighted-average selling price increased approximately 17-18% and estimated volumes decreased approximately 6-7% (4-5% on a per-day basis).

Residential roofing product sales increased 5.1% (6.9% on a per-day basis), non-residential roofing product sales increased 25.2% (27.1% on a per-day basis), and complementary product sales increased 14.0% (15.9% on a per-day basis) compared to the prior year. The three-month periods ended December 31, 2022 and 2021 had 61 and 62 business days, respectively.

Gross margin decreased to 26.2%, from 26.3% in the prior year, as higher average selling prices for our products were largely offset by higher product cost, combined with increased non-residential product sales mix. The increase in operating expense and Adjusted Operating Expense in 2022 was due to increases in payroll and benefit costs and stock-based compensation, primarily due to increased headcount to support new and acquired branches, as well as inflation and higher incentive compensation. Operating expense as a percent of sales was lower in the fourth quarter of 2022, driven by the positive impact from net sales growth combined with the loss on sale of Solar Products in the prior year period. Adjusted Operating expense as a percent of sales was higher as the positive impacts from net sales were more than offset by higher payroll and benefit costs and selling costs.

Net income (loss) from continuing operations was $73.3 million, compared to $68.1 million in the prior year. Adjusted EBITDA was $178.5 million, compared to $174.1 million in the prior year. EPS was $0.88, compared to $0.76 in the prior year. Improvements in fourth quarter results compared to the prior year period were driven primarily by higher net sales and a reduction in the number of shares outstanding.

Year ended December 31, 2022

Net sales increased 23.6% compared to the prior year to $8.43 billion, a Company record. 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 20-21% and estimated volumes increased approximately 1-2%.

Residential roofing product sales increased 17.5%, non-residential roofing product sales increased 41.6%, and complementary product sales increased 17.3% compared to the prior year. The years ended December 31, 2022 and 2021 had 252 and 253 business days, respectively.

Gross margin decreased to 26.5%, from 26.7% 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 combined with the effect of acquired branches. 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 $458.4 million, compared to $241.9 million in the prior year. 2021 results include a loss on debt extinguishment of $60.2 million. Adjusted EBITDA was $910.0 million, compared to $685.9 million in the prior year. EPS was $5.55, compared to $2.69 in the prior year. The improvement compared to the prior year period was largely driven by higher net sales 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 2022, the Company repurchased and retired $388 million of its common stock through a combination of open market repurchases and two previously announced accelerated share repurchase (“ASR”) agreements, both of which concluded during 2022. As a result, shares of common stock outstanding decreased to 64.2 million as of December 31, 2022, from 70.4 million as of December 31, 2021.

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.

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 the full press release, 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.