Beacon Roofing Supply, Inc.

Good morning, ladies and gentlemen, and welcome to the Beacon fourth quarter and full year 2024 earnings call. My name is Chach and I'll be your coordinator for today. At this time, all participants are in listen-only mode and we'll be conducting a Q&A session towards the end of this call. At the time, I'll give you instructions on how to ask a question. If at any time during the call you require assistance, please press start, 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 like to now turn the call over to Mr. Vinit Sanghvi, Vice President, Capital Markets and Treasurer. Please proceed, Mr. Sanghvi.

Thank you, Chet. 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 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. Second, the forward-looking statements contained in this call are based on information as of today, February 27, 2025. 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 to the appendix to the presentation accompanying this call. Both the press release and the presentation are available on our website at DECN.com. Now, let's begin with opening remarks from Julian.

Thanks, Bennett. Good morning, everyone. Let's begin on slide four. Our team delivered a record fourth quarter as a result of execution on our Ambition 2025 plan. Over the past three years, our strategy has been repeatedly tested, whether it be rapid inflation, supply chain disruption, or contracted stocking, and yet we continue to grow top and bottom line. We were challenged again in Q4 when, after a record October, November and December were well below the usual sales trend. The slowdown mostly impacted residential roofing, especially in markets in our north and west regions, yet we still set fourth quarter records for net sales, adjusted EBITDA, and cash flow. Sales per day were up approximately 3% year over year to $2.4 billion, driven by contributions from recently acquired branches. Our gross margin came in at the high end of our guidance. As a result of strong execution, average selling prices rose in the quarter. A concerted effort around operating efficiency, including our bottom quintile branch initiative and cost actions taken earlier in the year meant we delivered fourth quarter adjusted EBITDA of $223 million. I'm also pleased with our management of working capital. We generated fourth quarter cash flow of nearly $360 million, which enabled us to deploy resources towards our growth initiatives, including greenfield locations and acquisitions. When we launched our ambition 2025 plan in early 2022, we set out to transform the company and our performance. I can confidently say that we have done what we said we were going to do over the last three years. We have the right team and an operating model to unlock our full potential. Now please turn to page five. At our investor day in 2022, we laid out targets to drive above market growth deliver consistent double-digit adjusted EBITDA margins, build a great company, and generate superior shareholder returns. In the last year of our plan, we have already achieved many of our goals, and those that remain are in our sights. Building a winning culture has been important for us throughout Ambition 2025. A safe and respectful workplace is the foundation for attracting and retaining employees. When labor is a scarce resource, recruiting and retaining a talented workforce becomes a competitive advantage. We value making every day safer and have been working to ensure everyone gets home safely, and I'm proud of our results last year. Our analysis showed that in 2023, strains and sprains for new employees was our most frequent injury. In 2024, we were determined to cut these injuries in half, and I'm pleased to report that we exceeded that goal. In addition, Our OSHA total case rate, a key safety metric, was the best in Beacon's history. Next, investing in greenfields is a major lever in driving above-market growth and enhances our overall value proposition and customer reach, giving us the opportunity to earn market share. I'm pleased to report that the 17 greenfields in the class of 2022, the most mature of the portfolio, contributed nearly $22 million to EBIT in full year 2024. Our online capability continues to be a clear competitive advantage for Beacon, with sales through our digital platform increasing customer loyalty, generating larger basket sizes, and enhancing margin by more than 150 basis points when compared to offline channels. In the fourth quarter, we grew digital sales approximately 20% year over year, driven by our value-added integrations, Our digital sales as a percentage of total sales reached approximately 16% at the end of the fourth quarter, nearly a 200 basis point improvement year over year, led by sales to our residential customers. We will continue to invest in a differentiated digital offering and to build on our digital leadership. Our private label line of high-quality building products sold under the Tribuilt brand delivers professional results for customers and yields between 500 and 2,000 basis points of additional margin versus the alternatives. We have meaningfully invested in our brands to bolster its presence and expand its offerings to better serve our customers, including the launch of Tribuilt ISO, a professional-grade roof insulation. In the fourth quarter, we grew total private label sales approximately 7%. Our focus on driving operational excellence is anchored by our bottom quintile branch process. and it continues to generate meaningful results. We added more than $7 million of EBITDA year over year in the fourth quarter. Productivity is key to ensuring that we offset inflationary pressures and leverage our operating expenses. We've discussed previously the many ways in which we are focusing on driving improvement every day, including leveraging our labor and fleet, using technology such as our routing software, BeaconTrack, and executing on our strategic branch optimization. we've also demonstrated the ability to adjust our cost base to changing market conditions as we did in the third quarter. These actions are delivering results. And in the fourth quarter, we increased sales per hour worked by approximately 6% year on year, hitting a fourth quarter record. Now let me take a minute to talk about our M&A playbook. Acquired branches from the class of 2022, the first group under our Ambition 2025 plan, are delivering tangible results to the bottom line. The five acquisitions in aggregate delivered double-digit EBITDA margins in 2024. We believe this is indicative of our ability to improve businesses we acquire. And we continue to create shareholder value. During the fourth quarter, we completed the accelerated share repurchase program initiated in the second quarter. The share buyback program demonstrates both our commitment to delivering value to shareholders and our confidence in the Ambition 2025 plan. Prith will give you the details, but let me highlight that since the start of Ambition 2025, we have deployed more than $1.5 billion to share buybacks, three times our initial Ambition 2025 target, reducing the as-converted share count by more than 23%. In summary, we have built a business that has multiple paths to growth, margin expansion, and value creation in all market conditions. Our ambition 2025 plan has created an engine to drive our business model and systematically improve performance. Now I'll pass the call over to Prith to provide a deeper focus on our fourth quarter results.