Beacon Roofing Supply, Inc.

Good afternoon, ladies and gentlemen, and welcome to the Beacon Transition Period and Calendar Year 2021 Earnings Conference Call. My name is Tamiya, and I will be your coordinator for today. At this time, all participants are in listen-only mode. We will be conducting a question-and-answer session toward the end of this conference. At that time, I will give instructions on how to ask a question. If at any time during the call you require assistance, please press star-fold by zero, and a coordinator will be happy to assist you. As a reminder, this conference call is being recorded for replay purposes. This call will contain forward-looking statements, including statements about the company's plans and objectives and future economic performance. 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 expression of similar meaning. Forward-looking statements are only predictions and are subject to a number of risks and uncertainties. Therefore, actual results may differ materially from the 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 2021 form 10-K and subsequent filings with U.S. Securities and Exchange Commission. These forward-looking statements fall within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 regarding future events and future financial performance of the company, including the company's financial outlook. The forward-looking statements contained in this call are based on information as of today, February 3, 2022, and expect as required by law. The company undertakes no obligation to update or revise any of these forward-looking statements. Finally, this call will contain references to certain non-GAAP measures. These reconciliations of these non-GAAP measures to those most comparable measures calculated and presented in accordance with GAAP is set forth in today's press release and the appendix to presentation accompanying this call. Both the press release and the presentation are available on our website, www.becn.com. I would now like to turn the conference over to Mr. Bennett Sangvi, Head of Investor Relations. Please proceed, Mr. Sangvi.

Thank you, Tania. Good afternoon, and welcome to our transition period and calendar year 2021 earnings call. With me on the call today are Julian Francis, President and CEO, and Franklin Egro, Chief Financial Officer. Relations section of Beacon's website. After management's prepared remarks, there will be a question and answer session. I will now turn the call over to Julian. Thanks, Ben, and good afternoon, everyone.

Before I provide my comments on the quarter, I just want to remind everyone that we've changed our fiscal year end to coincide with the calendar year end. As a result, we're reporting our calendar fourth quarter today, which is referred to in our earnings release and other materials us again on slide four. I'm very pleased to report that we finished the year in record fashion. The team delivered calendar fourth quarter records for sales, net income, and adjusted EBITDA. I also want to highlight that we achieved double-digit EBITDA margins for the calendar year 2021, a significant milestone for the company. For the quarter, sales were up 11%. in which we had high shingle demand driven by housing investment and storm volumes. We exceeded the expectations we set out in November of net sales growth in high shingle digits, largely due to the later onset of winter weather, which allowed for an extended roofing season, particularly in the northeast. The fundamental drivers of residential demand remain strong. And despite continuing supply chain issues, Commercial activity continues to show an improving trend as evidenced by our strong year-end backlog. We also continue to experience inflationary pressure across most product categories. Our focus continues to be on great execution at the branch level and staying ahead of the cost curve while ensuring we have products available when and where our customers need it. As a result, Gross margins in the quarter expanded year over year by more than 90 basis points to 26.3%. We expect cost pressure to continue, but are confident that we can execute to capture additional pricing to offset the headwinds. Impressively, we increased adjusted EBITDA by 21% in the calendar fourth quarter and yielded nearly a 10% margin. We continue to focus on our portfolio. and our renewed financial flexibility provided the capacity to add tuck-in M&A as another lever to our growth ambition. We successfully closed on two acquisitions recently, expanding our presence in key markets. As we announced in our prior earnings call, on November 1st, we acquired Midway Wholesale, a premier distributor of roofing products and a borrowed offering of complementary building materials. With annual sales of approximately $130 million, and 10 locations across the Midwest, we expanded our presence in growing markets in Kansas, Missouri, and Nebraska. Additionally, on January 1st, we acquired Crabtree Siding and Supply, a distributor who's built trusted relationships with customers and suppliers. Located between Nashville and Knoxville, Crabtree has annual sales of approximately $1 million. We welcome the Midway and Crabtree teams to Beacon and look forward to leveraging their reputation for quality, service, and reliability to further enhance our combined market positions. During the quarter, we also announced that we divested our solar products business, further focusing our resources on delivering high-carburet services to our core roofing customers. Overall, the solar business was diluted to our margins, and we determined that the buyer was better positioned for long-term growth in the categories. Now, I'd also like to take time to highlight critical non-financial initiatives that demonstrate how we continue to build the organization.