Beacon Roofing Supply, Inc.

At that time, I will give you instructions on how to ask a question. If at any time during the call you require operator 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. I would now like to turn the call over to Mr. Bennett Sanghvi, Vice President, Capital Markets, and etc. Please proceed, Mr. Sanghvi.

Thank you, Elliot. Good evening, everybody. And as always, we thank you for taking the time to join our call. Today I'm joined by Julian Francis, our Chief Executive Officer, and Prith Gandhi, Beacon's Chief Financial Officer. Julian and Prith will begin today's call with prepared remarks that will follow the slide deck posted to the investor relations section of Beacon's website. After that, we will open the call for questions. Before we begin, please reference slide two for a couple of brief reminders. First, this call will contain forward-looking statements about the company's plans and objectives and future performance. Forward-looking statements can be identified because they do not relate strictly to historic or current facts and use words such as anticipate, estimate, expect, believe, and other words of similar meaning. 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 factor section of the company's 2023 Form 10-K. The forward-looking statements contained in this call are based on information as of today, August 1st, 2024, and except as required by law, the company undertakes no obligation to update or revise any of these forward-looking statements. And finally, this call will contain references to certain non-GAAP measures. The reconciliation of these non-GAAP measures to the most comparable GAAP measures 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 at BECN.com. Now, let's begin with opening remarks from Julian.

Thanks, Bennett. Good afternoon, everyone. I'm pleased to say that we delivered another quarter of solid execution on our growth initiatives. But before I begin our review, let me remind you of the assumptions that underpinned our prior outlook. We expected the residential roofing market would be down year on year as storm-related demand declined substantially and more than offset the improvement in new residential construction and non-storm-related reroofing. In commercial roofing, we said that there would be a contraction in the installation activity in the first half of the year, but our volumes would grow because of last year's contractor destocking. We also expected a shift to more repair and reroofing activity rather than new commercial construction, That would impact product mix in this part of our business. By and large, end market demand has performed as we expected, with commercial slightly better than anticipated and new res slightly worse. And we expect storm demand to be in line with the 10-year average. Now let's begin on slide four. Against this backdrop, our team demonstrated that our ambition 2025 plan has created multiple paths to growth, and we delivered a record for quarterly sales. In the second quarter, average selling prices were up low single digits year over year, which combined with contributions from greenfields and acquisitions to drive net sales nearly 7% higher, although slightly lower than our initial expectations given the weather in the quarter. And once again, we delivered double-digit adjusted EBITDA margins. Our gross margin came in at 25.6%, TAB, Mark McIntyre, Approximately 20 basis points above the second quarter of last year, but below our expectations, largely due to the lower than expected contribution from inventory profits related to our April shingle price increase. TAB, Mark McIntyre, Adjusted our backs increased primarily from additional headcount as we maintain staffing at our branches to meet a higher level of anticipated activity. TAB, Mark McIntyre, Additionally, the impact of recent greenfield locations and M&A yet to be fully synergized. also negatively impacted operating leverage. We continue to use our balance sheet capacity to reinvest in the business, conduct M&A, and return capital to shareholders. Since the end of the first quarter, we have acquired 21 branches, including the recent announcements of Rufus Mart of Southern California, Extreme Metal Fabricators, and Integrity Metals. Rufus Mart has a 40-year history serving contractors in the Los Angeles metro market and demonstrates our focus on growing our commercial roofing business. Extreme Metal and Integrity Metals extend our residential and commercial roofing product offering to include metal solutions to meet the needs in Florida's coastal regions. Entering the second half of the year, we will be proactive in responding to local market conditions by adjusting inventory and staffing levels while maintaining Beacon's high caliber customer service. We're investing in improving our operations, delivering results today while also preparing for the future, including investments in our leading digital platform, private label offering, and our pricing model. Now please turn to page five. As many of you know, we laid out our targets to drive above-market growth, deliver consistent double-digit adjusted EBITDA margins, build a great organization, and generate superior shareholder returns. A relentless focus on our customers is central to how we operate and to achieving these goals. Our team is working every day to deliver a great customer experience and ensure we are building on our legacy of service. Let me provide you with an update on our strategic initiatives, starting with how we are building a winning culture. As part of our commitment to our team members' wellness, we recently launched an upgraded employee assistance program. The new program has added emphasis on mental health as well as physical health to recognize the challenge today's employees and their families face. One of our core values is do the right thing, and this applies to our efforts to build better for the environment. In May, we issued our third annual Corporate Social Responsibility Report, which demonstrated our commitment to action and transparency on environmental and social topics. We proudly reported three years of progress towards our goal of halving our emissions intensity by 2030. In addition, we outlined our scope one and two greenhouse gas emissions and our efforts to reduce those emissions by operating a more sustainable fleet and investing in renewable energy. Our 2023 CSR report highlights how we are progressing on our commitment. I encourage all of our stakeholders to go to our website and view the full report. Our second pillar is driving growth above market and enhancing margins through a set of targeted initiatives. Expanding our customer reach continues to be a major lever in our growth plans, including our investments in greenfields and acquisitions. Our Greenfield team continues to execute on our pipeline of new locations, and we have opened 13 branches year to date. Each time we have a new branch, we add sales resources and reduce the average distance and time it takes us to reach our customers. This enhances our overall value proposition, giving us the opportunity to earn market share. We have now opened 58 new branches since the beginning of 2022, exceeding our original Ambition 2025 goal of 40 total. On acquisitions, we discussed our recent purchase of Rufus Mart Extreme Metals and Integrity Metals earlier. And we highlighted the acquisitions of Rufus Supply of Greenville, General Siding, and Smalley & Company on our call in May. However, it is worth mentioning again that with the acquisition of Smalley and its 11 locations spread throughout the West, we have built the leading national specialty waterproofing distribution platform with a track record of providing value-added solutions to contractors in both new construction and restoration markets. Since announcing our Ambition 2025 plan, we have acquired 21 companies, adding 71 branches. In total, we have deployed approximately $690 million in capital towards these acquisitions, adding base year revenue of more than $800 million. In total, these acquisitions are performing ahead of our expectations. Our online capability continues to be a clear competitive advantage for Beacon and sales through our digital platform increases customer loyalty, generates larger basket sizes and enhances margin by roughly 150 basis points when compared to offline channels. In the second quarter, we grew digital sales approximately 22% year over year. Digital sales to our residential customers were a highlight as we achieved our highest quarterly adoption ever at nearly 26%. We continue to invest to strengthen our platform, and just last week announced an enhanced alliance with EagleView, a leading provider of aerial imagery, software, and analytics. This collaboration makes it easier for contractors to quickly and accurately place digital orders, allowing them to run their businesses more efficiently, and as such, choose Beacon as their supply partner. Our focus on commercial roofing solutions is one of the key growth initiatives of our Ambition 2025 plan. We outlined above-market growth targets and have been taking steps to become the market leader. To achieve this goal, we must develop best-in-class talent, and in the past year, we launched a new training program. Hundreds of employees have attended the e-learning and hands-on sessions, with over 150 completing the advanced level certification. Team members improved their understanding of commercial roofing basics, including product details, installation techniques, and all varieties of low-slope roof systems. Through a more knowledgeable and confident branch and sales team, we are better able to support the needs of our commercial contractor customers and create positive interactions that will increase loyalty, resulting in higher wallet share. Now, as we have discussed in several quarters, we are enhancing productivity and capacity through our continuous improvement and operational excellence initiatives. Our focus on the bottom quintile branch process has generated meaningful contributions to EBITDA, and this year is no different. Through this process, we have already generated approximately $3 million additional from the class of 2024. Our branch optimization efforts are also showing results, increasing storage capacity, improving yard flow, and optimizing product placement for picking efficiency, all of which improves branch productivity and supports increased sales from existing assets. And all these tools are deployed to drive synergies from our acquisition portfolio. Through a systematic approach to integrating acquired branches, we are able to achieve top line and bottom line performance improvements. As we have mentioned on previous calls, our recent acquisitions that have yet to be synergized are likely to be diluted in the near term. But I'm pleased to report that the margins in our portfolio as a whole continue to improve relative to the performer at the time of transaction. And fourth, let's review how we are creating shareholder value. As previously announced during the quarter, we entered into an additional accelerated share repurchase program in the amount of $225 million. The buyback program demonstrates both our commitment to delivering value to shareholders and our confidence in the Ambition 2025 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, many of you know or have met Prith Gandhi, our CFO, since May. I'm very pleased that Prith has joined us, and as I said in the last call when I welcomed him, Prith's proven track record in financial leadership, especially in the building products industry, makes him a great addition to our team. Now I'll pass the call over to Prith to provide a deeper focus on our second quarter results.