Beacon Roofing Supply, Inc.

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. I would now like to turn the call over to Mr. Benit Sanghavi, Vice President, Capital Markets and Treasurer. Please proceed, Mr. Sangibi.

Thank you, Ezra. Good morning, 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 that I posted to the investor relations section of Beacon's website. After that, we'll 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. Second, the forward-looking statements contained in this call are based on information as of today, October 31st, 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, and good morning, everyone. Let's begin on slide four. BEACON's third quarter results continue to demonstrate the resilience of our industry and this team's execution on our Ambition 2025 plan. We have multiple paths to top line growth and margin expansion and continue to deliver record numbers for the company. Our end markets are underpinned by the repair and replacement cycle of exterior weatherproofing products on residential housing and commercial buildings. The majority of this demand is non-discretionary. And while core demand remains good, the overall level of activity came in lower than we anticipated in the third quarter. Nevertheless, the Beacon team has delivered. by continuing to focus on our strategic plan and areas within our control. In the third quarter, we grew daily sales by nearly 6% year over year, driven primarily by our acquisitions. Our growth margin came in at 26.3% above our prior guidance through our team's disciplined margin management. Notably, we were price-cost positive across all three lines of business. We stayed focused on cost management and continuous improvement. During the quarter, we took action to lower operating expenses and align costs with market conditions. As a result, we achieved record top-line and strong bottom-line performance, including a record for quarterly adjusted EBITDA. We continued to use our cash flow and balance sheet capacity to reinvest in organic growth, conduct M&A, and return capital to shareholders. We have acquired seven companies since the end of the second quarter. I'd like to highlight the addition of Passaic Madeline Building Supplies. Headquartered in Clifton, New Jersey, Passaic adds strength to our commercial solutions footprint with eight branches in New Jersey and one in New York. For more than 100 years, the Goodman family has built a reputation for providing commercial contractors in the region the most professional service and technical support. This acquisition significantly strengthens our position in commercial roofing and related businesses in the state. Our Ambition 2025 plan is entirely about unlocking the potential of Beacon, and I can confidently say today we are well on our way to achieving that goal. Now please turn to page five. As most of you know, we laid out our targets in that investor day 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 for achieving those goals. Our team works every day to deliver a great customer experience. Let me provide you with an update on our strategic initiatives, starting with a few ways that we are building a winning culture. One of our community support pillars is empowering people to build skills and achieve their goals. In the past few quarters, we've donated funds and expertise to the Roofing Industry Center at Clemson University. The center's top goal is attracting and training professionals in the industry. I'm pleased to say that online courses are already available to anyone considering a career in roofing and a number of our own employees have advanced their skills by completing the eight-week course. Further in September, our team announced that Beacon has officially partnered with the U.S. Army's Partnership for Your Success, or PAYS, program. This exciting new collaboration highlights our unwavering commitment to supporting veterans by providing them with rewarding career opportunities across our nationwide footprint. The PAYS program connects soldiers with top employers, ensuring that they have a clear path to civilian careers after their military service. As a PAYS partner, Beacon guarantees soldiers an interview that allows them to showcase their skills, discipline, and leadership, in addition to learning about career opportunities. And for those of you who have listened to our calls in the past, you may recall that we established Beacon Cares four years ago. Beacon Cares is an employee crisis relief support fund that provides grants to employees coping with unexpected financial hardships resulting from natural disasters or other personal situations. Hundreds of our team members live and work in the past of the recent storms. And during the quarter, the Beacon team made donations totaling $100,000 to the fund. I'm thankful that all of our employees are safe and that we have a program in Beacon Cares to ease some of their hardship. Our second pillar is driving above market growth and enhancing margins through a set of targeted initiatives. Our Greenfield team continues to execute on our pipeline of new locations and we have opened 17 branches year to date. Each time we open a new location, 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 62 new branches since the beginning of 2022, well ahead of our original Ambition 2025 goal of 40 total. Turning to acquisitions, we discussed our recent purchase of Passaic earlier. We also highlighted the acquisition of Rufus Mart, Extreme Metal, and Integrity Metal to our call in August. We completed three other acquisitions since the end of the second quarter, including SSR in Canada, Chicago, Metallic Supply, and Ryan Building Products in Massachusetts. Collectively, these acquisitions add to our commercial footprint and enhance our customer solutions. I'm pleased to report that our acquisition portfolio is performing well and delivering better than expected results. Since announcing our Ambition 2025 plan, we have acquired 24 companies, adding 83 branches, which together are generating around $1 billion in annual revenue. In the third quarter, we grouped digital sales approximately 28% year-over-year. Digital sales to our residential customers were once again a highlight, as we achieved our highest quarterly adoption ever at more than 28%. Our online capability continues to be a clear competitive advantage for Beacon, and sales through our digital platform increase customer loyalty, generate larger basket sizes, and enhance margin by roughly 150 basis points when compared with offline channels. In September, we announced the launch of Beacon ProPlus in Canada. Now our customers there can enjoy our robust, no-cost digital tool that is used by thousands of U.S. roofing contractors to manage their business and sales process anywhere at any time. Many of you know that our private label line of products sold under the Tribelt brand delivers professional results for customers at a competitive price and yields between 500 and 2,000 basis points of additional margin versus branded alternatives. And please report that Tribuilt ISO, our newest addition to our expanding private label line, launched in the second quarter, is off to a great start and helped drive private label sales higher by 12% year on year. Our customers have come to rely on Tribuilt products available exclusively through Beacon, and we will continue to support them through our extensive and growing catalog of product offerings. Third, and as we have discussed for several quarters, We are enhancing productivity, capacity, and safety through our continuous improvement and operational excellence initiatives. Our focus on the bottom quintile branches has generated meaningful contributions to EBITDA, and this year is no different. A disciplined process for diagnosing and addressing issues has been core to our operational improvement in the last four years. I'm pleased to report that the process contributed approximately $9 million of EBITDA year over year in the third quarter. And as you may recall from our first quarter call, we held our annual company-wide safety stand down in which all of our branches and employees paused and recommitted to making every day safer. This year, we put a spotlight on newer employees who are at greater risk of injuries through strains and sprains. And I'm pleased to report that our focus has already resulted in tangible improvements. We are well on our way to achieving our goal of reducing the strains and sprains Fourth, let's review how we are creating shareholder value. As previously announced, during the second quarter, we entered into an additional accelerated share repurchase program in the amount of $225 million. The share buyback program demonstrates both our commitment to delivering value to shareholders and our confidence in the Ambition 2025 plan. Since the start of Ambition 2025, we have deployed more than $1.5 billion to share buybacks, reducing the as-converted share count by approximately 23%. In summary, we have a differentiated service model and have built the tools to enable multiple paths to growth, margin expansion, and value creation through the cycle. Our Ambition 2025 plan has seamlessly stitched it all together into an operating model to amplify the resiliency of our business model and unlock our potential. Now I'll pass the call over to Pris quarter results.