Beacon Roofing Supply, Inc.

Good afternoon, ladies and gentlemen, and welcome to the Beacon Second Quarter 2022 Earnings Conference Call. My name is Tamia and I will be your coordinator for today. At this time, all participants are in a listen-only mode. We will be conducting a question and answer session for the end of this call. At that time, I will give you instructions on how to ask a question. If at any time during the call you require assistance, please press star followed 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 expressions 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 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 2021 Form 10-K and subsequent filings with the 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 the 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, August 4th, 2022, and except 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. The reconciliation of these non-GAAP measures to the most comparable measures calculated and presented in accordance with GAAP is set forth in today's press release and the appendix to the 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 call over to Mr. Bennett Songfi, Vice President, Capital Reserve. Please proceed, Mr. Songfi.

Thank you, Tamia. Good afternoon, and welcome to our second quarter 2022 earnings call. With me on the call today are Julian Francis, President and CEO, and Franklin Egro, Chief Financial Officer. Our prepared remarks will correspond with the slide deck posted on the investor 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, Bennett. Good afternoon, everyone. Let's begin on slide four of this presentation. Beacon delivered a strong financial performance in Q2 with record-setting top-line and bottom-line results and ahead of our expectations outlined during our earnings call in May. Our team's commitment to deliver great value to our customers combined with solid end-market demand enabled us to continue our track record of growth. And our focus on margin-enhancing initiatives and excellent pricing execution allowed us to deliver the 10th straight quarter of year-over-year increase in adjusted EBITDA. In a challenging inflationary environment, we continued to be price-cost positive and achieved the highest profits and margin in our history. The fundamentals of both residential and commercial roofing demand remained healthy across our end markets. and we have yet to be meaningfully impacted by rising interest rates. We continually monitor market conditions and remain watchful for changes in the macro indicators. We continue to believe that the replacement cycle that underlies approximately 80 percent of our business has a multi-year growth trajectory. If you look back 20 years, you see the beginning of a historic surge in the residential construction. Keep in mind that the expected life of a roof is around 20 years, And as those roofs begin to fail, the replacement cycle will begin anew. I'm also very pleased with the early progress towards our Ambition 2025 goals. Central to achieving our targets is our relentless customer focus. Our customers trust us to reliably deliver high-caliber service in any demand environment, and they can be assured that we are prepared with great products and services when and where they need them. We also have a clear and balanced capital allocation plan that consists of strategic investments in greenfields and acquisitions, our existing branches and our fleet, as well as returns to shareholders. We have restored financial flexibility to our company, and today our balance sheet provides the ability to deploy capital in value-creating projects throughout the cycle. In the first half of 22, we have rapidly accelerated the pace of investments in our fleet, greenfields, and share repurchases, in addition to actively pursuing a strong pipeline of tuck-in acquisitions. Please turn to page five of the slide deck, where you will find an overview of our strategic plan. Named Ambition 2025, it is intended to unlock the potential of our people, our growth engine, and our operations in order to deliver superior shareholder returns. We have structured our roadmap in four areas with detailed initiatives that are systematic and measurable. The first area is about building a winning culture. Our business is driven by our people working together. Second is a comprehensive set of measures to drive above-market growth, serving our markets in unique ways. Third is our continuous improvement process, which drives our operational performance. And fourth, by doing these things well, we will create value for our shareholders. The goals we laid out on Investor Day are to grow the business to more than 9 billion of sales by 2025, an 8% compound annual growth rate from our 2021 baseline, and to deliver EBITDA of about $1 billion, approximately a 10% annual growth. Now please turn to page 6 of the deck. I'll provide a brief update on our strategic initiatives, which will give you insight on how we intend to achieve our plan. Let me highlight a couple of ways that we are building a winning culture. Two of our core values are putting people first and our commitment to do the right thing. We believe that everyone deserves a safe home, and that is why we established a national partnership with Rebuilding Together, a nonprofit organization providing home repairs for underserved neighbors in Beacon's communities. As a distributor of essential building products such as roofing and siding, this partnership allows us to work with these local community champions to create an impact. I'd also like to highlight our continued progress related to our diversity, equity, and inclusion. During the second quarter, we announced Michelle Mulder as the winner of Beacon's second annual North American Female Roofing Professional of the Year competition. Michelle is the founder and owner of Nailed It Roofing, which has been one of the top roofing companies in North Bay, Ontario for the past seven years. Michelle's interest in the trade started in high school, which led to finding a passion in roofing. We applaud her work on the job site and devotion to mentoring young women in the community. Her story of determination and perseverance will surely inspire other women to become trailblazers in our industry. We are also driving growth above market and enhancing margins through a set of targeted initiatives. You may recall from our Invest Today that expanding our footprint is a major lever in our growth plans, which includes strategic investments in greenfields and tuck-in acquisitions. I'm pleased to report that we have quickly ramped up our ability to move forward on our pipeline of greenfield candidates. And while we had originally discussed opening 10 facilities in 2022, we are now targeting approximately 15 new branches located in key markets. Our focus on national accounts is also generating results. We grew sales to our largest customers by approximately 37% in the second quarter. Through our scale and capabilities, we not only serve national home builders, but also large professional repair and re-roofing contractors in both the residential and commercial roofing end markets. Our ability to invest in specialized account representatives who focus on the operational dynamics in each of these end markets offers a differentiated value proposition to these high volume customers. We also have a set of initiatives that support margin growth. Our digital capability continues to be a clear competitive differentiator for Beacon, and sales on our online platform deliver approximately 150 basis points better margin compared to offline channels. In the second quarter, 17% of residential sales went through this platform. We provide the most complete digital offering and continue to expand our capabilities to serve customers in the way that brings them the most value. Our most recent digital integration with Acculinks, a leading provider of all-in-one business management software for roofing contractors, is off to a great start. And I'm pleased to report that we achieved more than $100 million of sales through our digital channel in the month of June. This is a major milestone and one we intend to build upon by making it easier for customers to do business with us anywhere and anytime. Our private label line of high-quality building products sold under the Tribuilt brand deliver professional results and permit our customers to differentiate themselves from their competitors. For Beacon, these products yield between 500 and 2,000 basis points of additional margin versus the alternatives. Sales of our private label are up 37% in the quarter versus the prior year. Tribelt is becoming a recognized and trusted name by professional contractors across our residential, commercial roofing, and complementary end markets. As we have discussed for several quarters, We are enhancing productivity and capacity through our continuous improvement and operational excellence initiatives. Our focus on the bottom quintile branches has generated meaningful contribution to EBITDA, and this year is no different. We have a process to improve these branches, and the structure is simple and repeatable. We diagnose the root cause of the problem and ensure that branch managers at these locations are properly resourced to remedy the issues. Through this process, we have generated approximately $20 million year-on-year EBITDA improvement year-to-date, a strong start on our way to our $75 million Ambition 2025 target. And finally, our strategic initiatives are designed to create shareholder value, and we are committed to improving returns. During the second quarter, we entered into a second accelerated share repurchase program in the amount of $250 million. And this was in addition to the $125 million ASR completed in the second quarter. The repurchases are part of a $500 million share buyback authorization announced at the investor day. The buyback program demonstrates both our commitment to delivering value to shareholders and our confidence in the plan. As you can see, We truly have multiple paths to growth and margin expansion through the cycle. We have a differentiated approach and have built the tools to achieve our ambition 2025 targets. Now I'll pass the call over to Frank to provide a deeper focus on our second quarter results.