Beacon Reports Second Quarter 2023 Results
Record quarterly net sales driven by execution on Ambition 2025 growth initiatives, including acquisitions and greenfields, and strong residential demand
Delivered net income of $153.8 million and Adjusted EBITDA of $290.3 million, both at the high end of our previously announced preliminary results
Substantial operating cash flow generation benefited from seasonally strong collections and continued inventory right-sizing
Repurchased all outstanding convertible preferred stock in July 2023, reducing underlying common share base by 9.7 million shares
HERNDON, VA., August 03, 2023--(BUSINESS WIRE)--Beacon (Nasdaq: BECN) (the "Company", "we", "our") announced results today for the second quarter ended June 30, 2023.
"Our team’s focused execution on the Ambition 2025 growth initiatives drove record quarterly net sales, strong net income margin and double-digit Adjusted EBITDA margin," said Julian Francis, Beacon’s President & CEO. "We leveraged an improving residential market and our strategic investments in greenfields and acquisitions, including Coastal Construction Products, to drive top-line growth. I am especially pleased with the growth of our industry-leading digital offering, achieving record adoption by our residential customers. Our relentless customer focus is propelling the team to help our customers build more. Internally, our emphasis on efficiency is also showing tangible results, demonstrated by our impressive operating expense to net sales ratio. We continued to adjust inventory levels to local market conditions and generated substantial cash flow, providing ample capacity to reinvest in the business and return capital to shareholders. To that end, earlier this week we closed on the repurchase of all the outstanding preferred shares, which effectively reduced the common share base of the Company by nearly 9.7 million shares. I am very happy with the achievements this year and look forward to building on the momentum to continue to create value for all our stakeholders."
Second Quarter Financial Highlights
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||
(Unaudited; $ in millions, except per share amounts) | |||||||||||||||
Net sales | $ | 2,503.7 | $ | 2,358.2 | $ | 4,236.0 | $ | 4,045.1 | |||||||
Gross profit | $ | 636.2 | $ | 650.2 | $ | 1,078.1 | $ | 1,089.7 | |||||||
Gross margin % | 25.4 | % | 27.6 | % | 25.5 | % | 26.9 | % | |||||||
Operating expense | $ | 401.9 | $ | 395.8 | $ | 783.2 | $ | 744.0 | |||||||
% of net sales | 16.1 | % | 16.8 | % | 18.5 | % | 18.4 | % | |||||||
Adjusted Operating Expense1 | $ | 377.6 | $ | 369.6 | $ | 734.4 | $ | 692.8 | |||||||
% of net sales1 | 15.1 | % | 15.7 | % | 17.3 | % | 17.1 | % | |||||||
Net income (loss) | $ | 153.8 | $ | 174.5 | $ | 178.6 | $ | 230.3 | |||||||
% of net sales | 6.1 | % | 7.4 | % | 4.2 | % | 5.7 | % | |||||||
Adjusted Net Income (Loss)1 | $ | 172.9 | $ | 194.6 | $ | 216.7 | $ | 270.2 | |||||||
% of net sales1 | 6.9 | % | 8.3 | % | 5.1 | % | 6.7 | % | |||||||
Adjusted EBITDA1 | $ | 290.3 | $ | 307.7 | $ | 403.4 | $ | 447.2 | |||||||
% of net sales1 | 11.6 | % | 13.0 | % | 9.5 | % | 11.1 | % | |||||||
Net income (loss) per share — diluted ("EPS") | $ | 1.97 | $ | 2.12 | $ | 2.22 | $ | 2.72 | |||||||
________________________ | |
1. | 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. |
Second Quarter
Net sales increased 6.2% compared to the prior year to $2.50 billion, a Company record for quarterly net sales. Second quarter sales increased compared to the prior year period driven by higher prices and the contributions of acquired and newly opened branches over the last four quarters. Weighted-average selling price increased approximately 2-3%, while estimated organic volumes decreased approximately 0-1%.
Residential roofing product sales increased 8.5%, non-residential roofing product sales decreased 1.7%, and complementary product sales increased 11.6% compared to the prior year. The increase in complementary product sales was largely due to the November 2022 acquisition of Coastal Construction Products. The three-month periods ending June 30, 2023 and 2022 each had 64 business days.
Gross margin decreased to 25.4%, from 27.6% in the prior year, as higher product costs related to the inventory profit roll-off more than offset higher average selling prices for our products. The increases in operating expense and Adjusted Operating Expense were largely from acquired branches and greenfields. Excluding these impacts, operating expense from existing branches decreased by approximately 5.4%, or $21.3 million. The comparative decrease was related to a decrease in payroll and benefits costs, primarily due to lower incentive compensation, and decreases in selling, general and administrative expenses. On a consolidated basis, both operating expense as a percent of sales and Adjusted Operating Expense as a percent of sales were comparatively lower in the second quarter of 2023, driven by the higher sales combined with cost management.
Net income (loss) was $153.8 million, compared to $174.5 million in the prior year. Adjusted EBITDA was $290.3 million, compared to $307.7 million in the prior year. EPS was $1.97, compared to $2.12 in the prior year. Second quarter results compared to the prior year period were impacted by the lower gross margin and higher operating expenses as described above.
In February 2023, Beacon announced an increase in its share repurchase program, pursuant to which the Company may purchase up to $500 million of its common stock (inclusive of the $112 million remaining authorization under the program announced in February 2022). In the second quarter of 2023, the Company repurchased and retired $51.6 million of its common stock on the open market through Rule 10b5-1 repurchase plans. As a result, there were 63.4 million shares of common stock outstanding as of June 30, 2023. Following the end of the second quarter, the Company repurchased an additional $25.1 million of its common stock under the same plan and announced that it does not expect additional repurchases during the remainder of the year under the existing share repurchase authorization.
Year-to-Date
Net sales increased 4.7% (3.9% on a per-day basis) compared to the prior year to $4.24 billion, a Company record for net sales for the first half. 2023 net sales increased compared to the prior year period, largely driven by the successful implementation of price increases and the contributions of acquired and newly opened branches over the last four quarters. Weighted-average selling price increased approximately 5-6%, while estimated organic volumes decreased approximately 4-5% (5-6% on a per-day basis).
Residential roofing product sales increased 5.2% (4.3% on a per-day basis), non-residential roofing product sales decreased 4.2% (5.0% on a per-day basis), and complementary product sales increased 16.2% (15.3% on a per-day basis) compared to the prior year. The increase in complementary product sales was largely due to the November 2022 acquisition of Coastal Construction Products. The six-month periods ending June 30, 2023 and 2022 had 128 and 127 business days, respectively.
Gross margin decreased to 25.5%, from 26.9% in the prior year, as higher product costs related to the inventory profit roll-off more than offset higher average selling prices for our products. The increases in operating expense and Adjusted Operating Expense were largely from acquired branches and greenfields. Excluding these impacts, operating expense from existing branches decreased by approximately 1.8%, or $13.3 million. The comparative decrease was related to a decrease in payroll and benefits costs, primarily due to lower incentive compensation, and a decrease in amortization expense. On a consolidated basis, both operating expense as a percent of sales and Adjusted Operating Expense as a percent of sales were slightly higher in 2023, driven by increases in payroll and benefits costs related to additional headcount to support new and acquired branches as well as future growth initiatives. Inflation and higher selling, general and administrative expenses also contributed to the increase.
Net income (loss) was $178.6 million, compared to $230.3 million in the prior year. Adjusted EBITDA was $403.4 million, compared to $447.2 million in the prior year. EPS was $2.22, compared to $2.72 in the prior year. Results in the first half compared to the prior year period were largely driven by the decrease in gross margins and higher operating expenses described above.
In the first half of 2023, the Company repurchased and retired $74.8 million of its common stock on the open market through Rule 10b5-1 repurchase plans. As a result, shares of common stock outstanding decreased, net of issuance, to 63.4 million as of June 30, 2023, from 64.2 million as of December 31, 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.
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.
Earnings Call
The Company will host a conference call and webcast today at 5:00 p.m. ET to discuss these results. Details for the earnings release event are as follows:
What: | Beacon Second Quarter 2023 Earnings Call |
When: | Thursday, August 3, 2023 |
Time: | 5:00 p.m. ET |
Access: | Register for the conference call or webcast by visiting: |
Upon registration, participants will receive an email containing event details and unique access codes. To ensure timely access, participants should register for the earnings call at least 10 minutes before the 5:00 p.m. ET start time. An archived copy of the webcast will be available on the Events & Presentations page shortly after the call.
Forward-Looking Statements
This release 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 our directors, officers and employees to the investor and analyst communities, media representatives and others, depending upon their nature, may also constitute forward-looking statements. Forward-looking statements can be identified by the fact that they do not relate strictly to historic or current facts and often use words such as "anticipate," "estimate," "expect," "believe," "will likely result," "outlook," "project" and other words and expressions of similar meaning. Investors are cautioned not to place undue reliance on forward-looking statements. Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors, including, but not limited to, those set forth in the "Risk Factors" section of the Company's Form 10-K for the fiscal year ended December 31, 2022 and subsequent filings with the U.S. Securities and Exchange Commission. The Company may not succeed in addressing these and other risks. Consequently, all forward-looking statements in this release are qualified by the factors, risks and uncertainties contained therein. In addition, the forward-looking statements included in this press release represent the Company's views as of the date of this press release and these views could change. However, while the Company may elect to update these forward-looking statements at some point, the Company specifically disclaims any obligation to do so, other than as required by federal securities laws. These forward-looking statements should not be relied upon as representing the Company's views as of any date subsequent to the date of this press release.
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 500 branches throughout all 50 states in the U.S. and 6 provinces in Canada. Beacon serves an extensive base of nearly 100,000 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 https://www.becn.com/.
BEACON ROOFING SUPPLY, INC. Consolidated Statements of Operations (Unaudited; in millions, except per share amounts) | |||||||||||||||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||
2023 | % of Net Sales | 2022 | % of Net Sales | 2023 | % of Net Sales | 2022 | % of Net Sales | ||||||||||||||||||||
Net sales | $ | 2,503.7 | 100.0 | % | $ | 2,358.2 | 100.0 | % | $ | 4,236.0 | 100.0 | % | $ | 4,045.1 | 100.0 | % | |||||||||||
Cost of products sold | 1,867.5 | 74.6 | % | 1,708.0 | 72.4 | % | 3,157.9 | 74.5 | % | 2,955.4 | 73.1 | % | |||||||||||||||
Gross profit | 636.2 | 25.4 | % | 650.2 | 27.6 | % | 1,078.1 | 25.5 | % | 1,089.7 | 26.9 | % | |||||||||||||||
Operating expense: | |||||||||||||||||||||||||||
Selling, general and administrative | 358.7 | 14.3 | % | 355.4 | 15.1 | % | 697.0 | 16.5 | % | 664.7 | 16.4 | % | |||||||||||||||
Depreciation | 21.8 | 0.9 | % | 18.9 | 0.8 | % | 42.5 | 1.0 | % | 36.4 | 0.9 | % | |||||||||||||||
Amortization | 21.4 | 0.9 | % | 21.5 | 0.9 | % | 43.7 | 1.0 | % | 42.9 | 1.1 | % | |||||||||||||||
Total operating expense | 401.9 | 16.1 | % | 395.8 | 16.8 | % | 783.2 | 18.5 | % | 744.0 | 18.4 | % | |||||||||||||||
Income (loss) from operations | 234.3 | 9.3 | % | 254.4 | 10.8 | % | 294.9 | 7.0 | % | 345.7 | 8.5 | % | |||||||||||||||
Interest expense, financing costs and other | 26.0 | 1.0 | % | 18.9 | 0.8 | % | 53.8 | 1.3 | % | 35.5 | 0.8 | % | |||||||||||||||
Income (loss) before provision for income taxes | 208.3 | 8.3 | % | 235.5 | 10.0 | % | 241.1 | 5.7 | % | 310.2 | 7.7 | % | |||||||||||||||
Provision for (benefit from) income taxes | 54.5 | 2.2 | % | 61.0 | 2.6 | % | 62.5 | 1.5 | % | 79.9 | 2.0 | % | |||||||||||||||
Net income (loss) | $ | 153.8 | 6.1 | % | $ | 174.5 | 7.4 | % | $ | 178.6 | 4.2 | % | $ | 230.3 | 5.7 | % | |||||||||||
Reconciliation of net income (loss) to net income (loss) attributable to common stockholders: | |||||||||||||||||||||||||||
Net income (loss) | $ | 153.8 | 6.1 | % | $ | 174.5 | 7.4 | % | $ | 178.6 | 4.2 | % | $ | 230.3 | 5.7 | % | |||||||||||
Dividends on Preferred Stock | (6.0 | ) | (0.2 | )% | (6.0 | ) | (0.2 | )% | (12.0 | ) | (0.3 | )% | (12.0 | ) | (0.3 | )% | |||||||||||
Undistributed income allocated to participating securities | (19.5 | ) | (0.8 | )% | (20.9 | ) | (0.9 | )% | (21.9 | ) | (0.5 | )% | (26.8 | ) | (0.7 | )% | |||||||||||
Net income (loss) attributable to common stockholders | $ | 128.3 | 5.1 | % | $ | 147.6 | 6.3 | % | $ | 144.7 | 3.4 | % | $ | 191.5 | 4.7 | % | |||||||||||
Weighted-average common stock outstanding: | |||||||||||||||||||||||||||
Basic | 63.7 | 68.1 | 64.0 | 69.1 | |||||||||||||||||||||||
Diluted | 65.1 | 69.5 | 65.3 | 70.4 | |||||||||||||||||||||||
Net income (loss) per share: | |||||||||||||||||||||||||||
Basic | $ | 2.02 | $ | 2.17 | $ | 2.26 | $ | 2.77 | |||||||||||||||||||
Diluted | $ | 1.97 | $ | 2.12 | $ | 2.22 | $ | 2.72 | |||||||||||||||||||
BEACON ROOFING SUPPLY, INC. Consolidated Balance Sheets (Unaudited; in millions) | |||||||||||
June 30, | December 31, | June 30, | |||||||||
2023 | 2022 | 2022 | |||||||||
Assets | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | 65.8 | $ | 67.7 | $ | 54.6 | |||||
Accounts receivable, net | 1,361.7 | 1,009.1 | 1,321.7 | ||||||||
Inventories, net | 1,352.8 | 1,322.9 | 1,548.7 | ||||||||
Prepaid expenses and other current assets | 512.1 | 417.8 | 422.6 | ||||||||
Total current assets | 3,292.4 | 2,817.5 | 3,347.6 | ||||||||
Property and equipment, net | 380.8 | 337.0 | 289.1 | ||||||||
Goodwill | 1,922.9 | 1,916.3 | 1,785.2 | ||||||||
Intangibles, net | 415.8 | 447.7 | 383.4 | ||||||||
Operating lease assets | 470.3 | 467.6 | 418.0 | ||||||||
Deferred income taxes, net | 6.8 | 9.9 | 58.0 | ||||||||
Other assets, net | 11.3 | 7.5 | 1.4 | ||||||||
Total assets | $ | 6,500.3 | $ | 6,003.5 | $ | 6,282.7 | |||||
Liabilities and Stockholders' Equity | |||||||||||
Current liabilities: | |||||||||||
Accounts payable | $ | 1,317.4 | $ | 821.0 | $ | 1,168.9 | |||||
Accrued expenses | 498.0 | 448.0 | 476.5 | ||||||||
Current operating lease liabilities | 97.2 | 94.5 | 89.7 | ||||||||
Current finance lease liabilities | 20.4 | 16.1 | 10.9 | ||||||||
Current portion of long-term debt/obligations | 10.0 | 10.0 | 10.0 | ||||||||
Total current liabilities | 1,943.0 | 1,389.6 | 1,756.0 | ||||||||
Borrowings under revolving lines of credit, net | 67.5 | 254.9 | 461.3 | ||||||||
Long-term debt, net | 1,603.2 | 1,606.4 | 1,609.6 | ||||||||
Other long-term liabilities | 0.7 | 0.2 | 0.6 | ||||||||
Non-current operating lease liabilities | 385.1 | 382.1 | 334.4 | ||||||||
Non-current finance lease liabilities | 78.9 | 67.0 | 45.3 | ||||||||
Total liabilities | 4,078.4 | 3,700.2 | 4,207.2 | ||||||||
Convertible Preferred Stock | 399.2 | 399.2 | 399.2 | ||||||||
Stockholders' equity: | |||||||||||
Common stock | 0.6 | 0.6 | 0.6 | ||||||||
Undesignated preferred stock | — | — | — | ||||||||
Additional paid-in capital | 1,208.1 | 1,187.2 | 1,123.5 | ||||||||
Retained earnings | 820.1 | 728.8 | 562.8 | ||||||||
Accumulated other comprehensive income (loss) | (6.1 | ) | (12.5 | ) | (10.6 | ) | |||||
Total stockholders' equity | 2,022.7 | 1,904.1 | 1,676.3 | ||||||||
Total liabilities and stockholders' equity | $ | 6,500.3 | $ | 6,003.5 | $ | 6,282.7 | |||||
BEACON ROOFING SUPPLY, INC. Consolidated Statements of Cash Flows (Unaudited; in millions) | |||||||
Six Months Ended June 30, | |||||||
2023 | 2022 | ||||||
Operating Activities | |||||||
Net income (loss) | $ | 178.6 | $ | 230.3 | |||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | |||||||
Depreciation and amortization | 86.2 | 79.3 | |||||
Stock-based compensation | 14.3 | 13.1 | |||||
Certain interest expense and other financing costs | 1.3 | 2.6 | |||||
Gain on sale of fixed assets and other | (9.5 | ) | (2.9 | ) | |||
Deferred income taxes | 1.6 | 0.7 | |||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | (346.5 | ) | (466.1 | ) | |||
Inventories | (19.5 | ) | (385.0 | ) | |||
Prepaid expenses and other current assets | (87.2 | ) | (47.1 | ) | |||
Accounts payable and accrued expenses | 539.2 | 383.7 | |||||
Other assets and liabilities | 0.2 | 4.4 | |||||
Net cash provided by (used in) operating activities | 358.7 | (187.0 | ) | ||||
Investing Activities | |||||||
Purchases of property and equipment | (60.3 | ) | (39.8 | ) | |||
Acquisition of business, net | (30.5 | ) | (16.7 | ) | |||
Proceeds from the sale of assets | 10.7 | 3.0 | |||||
Purchases of investments | (0.9 | ) | — | ||||
Net cash provided by (used in) investing activities | (81.0 | ) | (53.5 | ) | |||
Financing Activities | |||||||
Borrowings under revolving lines of credit | 840.7 | 1,365.9 | |||||
Payments under revolving lines of credit | (1,028.8 | ) | (898.1 | ) | |||
Payments under term loan | (5.0 | ) | (5.0 | ) | |||
Payments under equipment financing facilities and finance leases | (9.1 | ) | (4.9 | ) | |||
Repurchase and retirement of common stock, net | (72.4 | ) | (338.1 | ) | |||
Advance payment for equity forward contract | — | (50.0 | ) | ||||
Payment of dividends on Preferred Stock | (12.0 | ) | (12.0 | ) | |||
Proceeds from issuance of common stock related to equity awards | 8.1 | 12.2 | |||||
Payment of taxes related to net share settlement of equity awards | (1.5 | ) | (0.4 | ) | |||
Net cash provided by (used in) financing activities | (280.0 | ) | 69.6 | ||||
Effect of exchange rate changes on cash and cash equivalents | 0.4 | (0.3 | ) | ||||
Net increase (decrease) in cash and cash equivalents | (1.9 | ) | (171.2 | ) | |||
Cash and cash equivalents, beginning of period | 67.7 | 225.8 | |||||
Cash and cash equivalents, end of period | $ | 65.8 | $ | 54.6 | |||
Supplemental Cash Flow Information | |||||||
Cash paid during the period for: | |||||||
Interest | $ | 53.4 | $ | 37.1 | |||
Income taxes, net of refunds1 | $ | 31.3 | $ | 57.4 | |||
Supplemental Disclosure of Non-Cash Activities | |||||||
Amounts accrued for repurchases of common stock, inclusive of excise tax | $ | 2.9 | $ | — | |||
________________________ | |
1. | Six months ended June 30, 2022 amount includes $18.6 million related to the transition period from October 1, 2021 to December 31, 2021. |
BEACON ROOFING SUPPLY, INC. Consolidated Sales by Line of Business (Unaudited; in millions) | ||||||||||||||||||||
Sales by Line of Business | ||||||||||||||||||||
Three Months Ended June 30, | Year-over-Year Change | |||||||||||||||||||
2023 | 2022 | |||||||||||||||||||
Net Sales | Mix % | Net Sales | Mix % | $ | % | |||||||||||||||
Residential roofing products | $ | 1,298.0 | 51.8 | % | $ | 1,196.1 | 50.7 | % | $ | 101.9 | 8.5 | % | ||||||||
Non-residential roofing products | 670.8 | 26.8 | % | 682.6 | 29.0 | % | (11.8 | ) | (1.7 | )% | ||||||||||
Complementary building products | 534.9 | 21.4 | % | 479.5 | 20.3 | % | 55.4 | 11.6 | % | |||||||||||
$ | 2,503.7 | 100.0 | % | $ | 2,358.2 | 100.0 | % | $ | 145.5 | 6.2 | % | |||||||||
Sales by Business Day1,2 | ||||||||||||||||||||
Three Months Ended June 30, | Year-over-Year Change | |||||||||||||||||||
2023 | 2022 | |||||||||||||||||||
Net Sales | Mix % | Net Sales | Mix % | $ | % | |||||||||||||||
Residential roofing products | $ | 20.2 | 51.8 | % | $ | 18.7 | 50.7 | % | $ | 1.5 | 8.5 | % | ||||||||
Non-residential roofing products | 10.5 | 26.8 | % | 10.6 | 29.0 | % | (0.1 | ) | (1.7 | )% | ||||||||||
Complementary building products | 8.4 | 21.4 | % | 7.5 | 20.3 | % | 0.9 | 11.6 | % | |||||||||||
$ | 39.1 | 100.0 | % | $ | 36.8 | 100.0 | % | $ | 2.3 | 6.2 | % | |||||||||
________________________ | |
1. | The three-month periods ended June 30, 2023 and 2022 each had 64 business days. |
2. | Dollar and percentage changes may not recalculate due to rounding. |
Sales by Line of Business | ||||||||||||||||||||
Six Months Ended June 30, | Year-over-Year Change | |||||||||||||||||||
2023 | 2022 | |||||||||||||||||||
Net Sales | Mix % | Net Sales | Mix % | $ | % | |||||||||||||||
Residential roofing products | $ | 2,148.1 | 50.7 | % | $ | 2,042.6 | 50.5 | % | $ | 105.5 | 5.2 | % | ||||||||
Non-residential roofing products | 1,120.8 | 26.5 | % | 1,170.3 | 28.9 | % | (49.5 | ) | (4.2 | )% | ||||||||||
Complementary building products | 967.1 | 22.8 | % | 832.2 | 20.6 | % | 134.9 | 16.2 | % | |||||||||||
$ | 4,236.0 | 100.0 | % | $ | 4,045.1 | 100.0 | % | $ | 190.9 | 4.7 | % | |||||||||
Sales by Business Day1,2 | ||||||||||||||||||||
Six Months Ended June 30, | Year-over-Year Change | |||||||||||||||||||
2023 | 2022 | |||||||||||||||||||
Net Sales | Mix % | Net Sales | Mix % | $ | % | |||||||||||||||
Residential roofing products | $ | 16.7 | 50.7 | % | $ | 16.1 | 50.5 | % | $ | 0.6 | 4.3 | % | ||||||||
Non-residential roofing products | 8.8 | 26.5 | % | 9.2 | 28.9 | % | (0.4 | ) | (5.0 | )% | ||||||||||
Complementary building products | 7.6 | 22.8 | % | 6.6 | 20.6 | % | 1.0 | 15.3 | % | |||||||||||
$ | 33.1 | 100.0 | % | $ | 31.9 | 100.0 | % | $ | 1.2 | 3.9 | % | |||||||||
________________________ | |
1. | The six-month periods ended June 30, 2023 and 2022 had 128 and 127 business days, respectively. |
2. | Dollar and percentage changes may not recalculate due to rounding. |
BEACON ROOFING SUPPLY, INC.
Non-GAAP Financial Measures
(Unaudited; in millions)
Non-GAAP Financial Measures
To provide investors with additional information regarding our financial results, we prepare certain financial measures that are not calculated in accordance with GAAP, specifically:
Adjusted Operating Expense. We define Adjusted Operating Expense as operating expense, excluding the impact of the adjusting items (as described below).
Adjusted Net Income (Loss). We define Adjusted Net Income (Loss) as net income (loss), excluding the impact of the adjusting items (as described below).
Adjusted EBITDA. We define Adjusted EBITDA as net income (loss), excluding the impact of interest expense (net of interest income), income taxes, depreciation and amortization, stock-based compensation, and the adjusting items (as described below).
We use these supplemental non-GAAP measures to evaluate financial performance, analyze the underlying trends in our business and establish operational goals and forecasts that are used when allocating resources. We expect to compute our non-GAAP financial measures consistently using the same methods each period.
We believe these non-GAAP measures are useful measures because they permit investors to better understand changes over comparative periods by providing financial results that are unaffected by certain items that are not indicative of ongoing operating performance.
While we believe that these non-GAAP measures are useful to investors when evaluating our business, they are not prepared and presented in accordance with GAAP, and therefore should be considered supplemental in nature. These non-GAAP measures should not be considered in isolation or as a substitute for other financial performance measures presented in accordance with GAAP. These non-GAAP financial measures may have material limitations including, but not limited to, the exclusion of certain costs without a corresponding reduction of net income for the income generated by the assets to which the excluded costs relate. In addition, these non-GAAP financial measures may differ from similarly titled measures presented by other companies.
BEACON ROOFING SUPPLY, INC.
Non-GAAP Financial Measures (continued)
(Unaudited; in millions)
Adjusting Items to Non-GAAP Financial Measures
The impact of the following expense (income) items is excluded from each of our non-GAAP measures (the "adjusting items"):
Acquisition costs. Represent certain costs related to historical acquisitions, including: amortization of intangible assets; professional fees, branch integration expenses, travel expenses, employee severance and retention costs, and other personnel expenses classified as selling, general and administrative; gains/losses related to changes in fair value of contingent consideration or holdback liabilities; and amortization of debt issuance costs. Acquisition costs are impacted by the timing and size of the acquisitions. We exclude acquisition costs from our non-GAAP financial measures to provide a useful comparison of our operating results to prior periods and to our peer companies because such amounts vary significantly based on the magnitude of the acquisition and do not reflect our core operations.
Restructuring costs. Represent costs stemming from headcount rationalization efforts and certain rebranding costs; impact of divestitures; costs related to changing our fiscal year end; amortization of debt issuance costs; debt refinancing and extinguishment costs; and abandoned lease costs. We exclude restructuring costs from our non-GAAP financial measures, as such items vary significantly based on the magnitude of the restructuring activity and also do not reflect expected future operating expenses. Additionally, these costs do not necessarily provide meaningful insight into the current or past core operations of our business.
COVID-19 impacts. Represent costs directly related to the COVID-19 pandemic. Beginning January 1, 2023, the Company determined COVID-19 impacts should no longer be considered an adjusting item. This change was applied prospectively.
The following table presents the impact and respective location of the adjusting items on our consolidated statements of operations for each of the periods indicated:
Operating Expense | Non-Operating Expense | ||||||||||||||||||
SG&A1 | Amortization | Interest Expense | Income Taxes2 | Total | |||||||||||||||
Three Months Ended June 30, 2023 | |||||||||||||||||||
Acquisition costs | $ | 1.4 | $ | 21.4 | $ | 1.0 | $ | — | $ | 23.8 | |||||||||
Restructuring costs | 1.5 | — | 0.3 | — | 1.8 | ||||||||||||||
Total adjusting items | $ | 2.9 | $ | 21.4 | $ | 1.3 | $ | — | $ | 25.6 | |||||||||
Three Months Ended June 30, 2022 | |||||||||||||||||||
Acquisition costs | $ | 1.7 | $ | 21.5 | $ | 1.0 | $ | — | $ | 24.2 | |||||||||
Restructuring costs | 2.9 | — | 0.3 | — | 3.2 | ||||||||||||||
COVID-19 impacts | 0.1 | — | — | — | 0.1 | ||||||||||||||
Total adjusting items | $ | 4.7 | $ | 21.5 | $ | 1.3 | $ | — | $ | 27.5 | |||||||||
Six Months Ended June 30, 2023 | |||||||||||||||||||
Acquisition costs | $ | 3.1 | $ | 43.7 | $ | 1.9 | $ | — | $ | 48.7 | |||||||||
Restructuring costs | 2.0 | — | 0.6 | — | 2.6 | ||||||||||||||
Total adjusting items | $ | 5.1 | $ | 43.7 | $ | 2.5 | $ | — | $ | 51.3 | |||||||||
Six Months Ended June 30, 2022 | |||||||||||||||||||
Acquisition costs | $ | 2.2 | $ | 42.9 | $ | 2.0 | $ | — | $ | 47.1 | |||||||||
Restructuring costs | 4.6 | — | 0.6 | — | 5.2 | ||||||||||||||
COVID-19 impacts | 1.5 | — | — | — | 1.5 | ||||||||||||||
Total adjusting items | $ | 8.3 | $ | 42.9 | $ | 2.6 | $ | — | $ | 53.8 | |||||||||
________________________ | |
1. | Selling, general and administrative expense ("SG&A"). |
2. | For tax impact of adjusting items, see Adjusted Net Income (Loss) table below. |
BEACON ROOFING SUPPLY, INC.
Non-GAAP Financial Measures (continued)
(Unaudited; in millions)
Adjusted Operating Expense
The following table presents a reconciliation of operating expense, the most directly comparable financial measure as measured in accordance with GAAP, to Adjusted Operating Expense for each of the periods indicated:
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||
Operating expense | $ | 401.9 | $ | 395.8 | $ | 783.2 | $ | 744.0 | |||||||
Acquisition costs | (22.8 | ) | (23.2 | ) | (46.8 | ) | (45.1 | ) | |||||||
Restructuring costs | (1.5 | ) | (2.9 | ) | (2.0 | ) | (4.6 | ) | |||||||
COVID-19 impacts | — | (0.1 | ) | — | (1.5 | ) | |||||||||
Adjusted Operating Expense | $ | 377.6 | $ | 369.6 | $ | 734.4 | $ | 692.8 | |||||||
Net sales | $ | 2,503.7 | $ | 2,358.2 | $ | 4,236.0 | $ | 4,045.1 | |||||||
Operating expense as % of sales | 16.1 | % | 16.8 | % | 18.5 | % | 18.4 | % | |||||||
Adjusted Operating Expense as % of sales | 15.1 | % | 15.7 | % | 17.3 | % | 17.1 | % | |||||||
Adjusted Net Income (Loss)
The following table presents a reconciliation of net income (loss), the most directly comparable financial measure as measured in accordance with GAAP, to Adjusted Net Income (Loss) for each of the periods indicated:
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||
Net income (loss) | $ | 153.8 | $ | 174.5 | $ | 178.6 | $ | 230.3 | |||||||
Adjusting items: | |||||||||||||||
Acquisition costs | 23.8 | 24.2 | 48.7 | 47.1 | |||||||||||
Restructuring costs | 1.8 | 3.2 | 2.6 | 5.2 | |||||||||||
COVID-19 impacts | — | 0.1 | — | 1.5 | |||||||||||
Total adjusting items | 25.6 | 27.5 | 51.3 | 53.8 | |||||||||||
Less: tax impact of adjusting items1 | (6.5 | ) | (7.4 | ) | (13.2 | ) | (13.9 | ) | |||||||
Total adjustments, net of tax | 19.1 | 20.1 | 38.1 | 39.9 | |||||||||||
Adjusted Net Income (Loss) | $ | 172.9 | $ | 194.6 | $ | 216.7 | $ | 270.2 | |||||||
Net sales | $ | 2,503.7 | $ | 2,358.2 | $ | 4,236.0 | $ | 4,045.1 | |||||||
Net income (loss) as % of sales | 6.1 | % | 7.4 | % | 4.2 | % | 5.7 | % | |||||||
Adjusted Net Income (Loss) as % of sales | 6.9 | % | 8.3 | % | 5.1 | % | 6.7 | % | |||||||
________________________ | |
1. | Amounts represent tax impact on adjustments that are not included in our income tax provision (benefit) for the periods presented. The tax impact of adjustments for the three months ended June 30, 2023 and 2022 were calculated using a blended effective tax rate of 25.4% and 26.9%, respectively. The tax impact of adjustments for the six months ended June 30, 2023 and 2022 were calculated using a blended effective tax rate of 25.7% and 25.8%, respectively. |
BEACON ROOFING SUPPLY, INC.
Non-GAAP Financial Measures (continued)
(Unaudited; in millions)
Adjusted EBITDA
The following table presents a reconciliation of net income (loss), the most directly comparable financial measure as measured in accordance with GAAP, to Adjusted EBITDA for each of the periods indicated:
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||
Net income (loss) | $ | 153.8 | $ | 174.5 | $ | 178.6 | $ | 230.3 | |||||||
Interest expense, net | 27.6 | 19.1 | 56.7 | 36.3 | |||||||||||
Income taxes | 54.5 | 61.0 | 62.5 | 79.9 | |||||||||||
Depreciation and amortization | 43.2 | 40.4 | 86.2 | 79.3 | |||||||||||
Stock-based compensation | 8.3 | 8.0 | 14.3 | 13.1 | |||||||||||
Acquisition costs1 | 1.4 | 1.7 | 3.1 | 2.2 | |||||||||||
Restructuring costs1 | 1.5 | 2.9 | 2.0 | 4.6 | |||||||||||
COVID-19 impacts | — | 0.1 | — | 1.5 | |||||||||||
Adjusted EBITDA | $ | 290.3 | $ | 307.7 | $ | 403.4 | $ | 447.2 | |||||||
Net sales | $ | 2,503.7 | $ | 2,358.2 | $ | 4,236.0 | $ | 4,045.1 | |||||||
Net income (loss) as % of sales | 6.1 | % | 7.4 | % | 4.2 | % | 5.7 | % | |||||||
Adjusted EBITDA as % of sales | 11.6 | % | 13.0 | % | 9.5 | % | 11.1 | % | |||||||
________________________ | |
1. | Amounts represent adjusting items included in SG&A and other income (expense); remaining adjusting item balances are embedded within the other line item balances reported in this table. |
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Contacts
INVESTOR CONTACT
Binit Sanghvi
VP, Capital Markets and Treasurer
Binit.Sanghvi@becn.com
972-369-8005
MEDIA CONTACT
Jennifer Lewis
VP, Communications and Corporate Social Responsibility
Jennifer.Lewis@becn.com
571-752-1048
