Q Investors Presentation NASDAQ: BECN

Transcription

1 Q Investors Presentation

2 Forward Looking Statements and Non-GAAP Measures This presentation contains forw ard-looking statements w ithin the meaning of the Private Securities Litigation Reform Act of Actual results may differ materially from those indicated by such forw ard-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 latest Form 10-K as w ell as the Company s subsequent filings w ith the U.S. Securities and Exchange Commission ( SEC ). In addition, the forw ard-looking statements included in this presentation represent the Company's view s as of the date of this presentation and these view s could change. How ever, w hile the Company may elect to update these forw ard-looking statements at some point, the Company specifically disclaims any obligation to do so, other than as required by federal securities law s. These forw ard-looking statements should not be relied upon as representing the Company's view s as of any date subsequent to the date of this presentation. This presentation includes EBITDA, Adjusted EBITDA, combined Adjusted EBITDA, combined net sales, combined net income and net debt of Beacon and EBITDA and Adjusted EBITDA of Allied, w hich are measures not presented in accordance w ith generally accepted accounting principles ( GAA P ). Beacon defines EBITDA as net income plus income tax expense, interest expense, net and depreciation and amortization. Beacon defines Adjusted EBITDA as EBITDA plus non-recurring acquisition costs and stock-based compensation. Beacon defines net debt as total debt less cash and cash equivalents. Allied defines EBITDA as net income plus income tax expense, interest expense, net and depreciation and amortization. Allied defines Adjusted EBITDA as EBITDA plus adjustments for certain one-time costs incurred by Allied. Combined Adjusted EBITDA is defined as combined net income plus combined interest expense (net of interest income), combined income taxes, combined depreciation and amortization expense, adjustments to contingent consideration, stock-based compensation, non-recurring acquisition costs, fiscal year 2017 year-to-date acquisition run-rate adjustments, other adjustments for certain one-time costs incurred by Allied and $110 million in anticipated annual run-rate synergies from the Allied acquisition. EBITDA is a measure commonly used in the distribution industry, and w e present EBITDA, Adjusted EBITDA and combined Adjusted EBITDA to enhance your understanding of our operating performance. An Adjusted EBITDA-based metric is used in Beacon s financing covenants and w e and Allied use EBITDA, Adjusted EBITDA and combined Adjusted EBITDA as internal performance measurements and as tw o criteria for evaluating our performance relative to that of our peers. We and Allied believe that the presentation of EBITDA, Adjusted EBITDA and combined Adjusted EBITDA provide investors and analysts w ith a measure of operating results unaffected by differences in capital structures, capital investment cycles and ages of related assets among otherw ise comparable companies. Further, w e and Allied believe that EBITDA, Adjusted EBITDA and combined Adjusted EBITDA are useful measures because they improve comparability of results of operations, since purchase accounting used for acquisitions can render depreciation and amortization non-comparable betw een periods. We present net debt to enhance your understanding of our financial position. While w e believe these are useful measures for investors, non-gaap measures should not be considered in isolation or as a substitute for any items calculated in accordance w ith GAAP. In addition, this presentation includes projections regarding the expected accretive impact of the proposed transaction to Adjus ted EPS, based on internal forecasts of Adjusted EPS, w hich forecasts are non-gaap financial measures and are derived by excluding transaction related expenses and intangibles amortization. These accretion projections also should not be considered a substitute for GAAP measures. The determination of the amounts that are excluded in making the accretion calculations are a matter of management judgment. 2

3 Sales ($ in billions) Beacon Overview A leader in many key metropolitan markets in the United States & across Canada 590 branches across all 50 U.S. states and 6 Canadian provinces¹ Serving nearly 70,000 customers with a broad product offering up to 50,000 SKU s² End market demand fueled by repair versus new construction (approx. 80%) Strong long-term historical performance Historical sales CAGR = 15.8% Historical operating income CAGR = 15.2% Historical operating margin averages 5.0% - 6.0% Opened 80 new greenfield locations since the IPO Successfully completed 44 acquisitions since our IPO in 2004 On January 2, 2018 acquired 208-branch Allied Building Products for $2.6 billion Fiscal 2017 acquisitions - BJ Supply Company, American Building & Roofing, Inc., Eco Insulation Supply, Acme Building Materials and Lowry s Inc. $5.0 $4.5 $4.0 $3.5 $3.0 $2.5 $2.0 $1.5 $1.0 $0.5 $0.0 $0.7 $1.5 On October 1, 2015 acquired 85-branch Roofing Supply Group (RSG) for $1.1 billion $1.8 $1.6 $2.0 $2.3 $2.5 $4.1 $ Years ¹As of 2/8/2018 ²customer and SKU count excludes acquired Allied operations 3

4 A Compelling Acquisition The acquisition of Allied is well-aligned with Beacon s strategic priorities. Enhances footprint and improves scale, positioning the combined company among industry leaders with 590 (1) branches and LTM 6/30/17 combined net sales of approximately $7 billion of which over 70% is repair & remodel Roofing remains the company's core focus driving ~70% of the combined net sales Creates a powerful and diverse building materials distribution platform with multiple avenues for growth Entry into adjacent interior products, a market structured similarly to roofing Projected $110 million in annual run-rate synergies, creating significant shareholder value Expected to be dilutive to GAAP EPS in year one, immediately accretive to Adjusted EPS (2) Expected to be accretive to GAAP EPS by year two ~$675 million of combined LTM 6/30/17 Adjusted EBITDA (3) Strengthens ability to capitalize on the recovery in the housing and construction markets (1) As of 2/8/18. (2) Excludes transaction related expenses and incremental deal-related intangibles amortization. (3) Includes $110mm of annual run-rate synergies and adjustments for, among other things, fiscal 2017 run-rate acquisitions. See appendix for reconciliation of net income to combined Adjusted EBITDA. 4

5 Overview of Allied Building Products Business Overview Allied Building Products is a leading North American distributor of roofing, siding, wallboard, ceiling systems and other building products Operates through two product categories: Exterior (60% of 2016 sales) and Interior (40% of 2016 sales) Repair & remodel accounts for ~60% of sales National network of 208 branches serves as critical link between vendors and over 50,000 customers Founded by the Feury family in 1950, acquired by CRH in 1996 Key Financials ($ in millions) LTM 6/30/17 Net Sales $2,366 $2,475 $2,560 $2,579 (1) Adjusted EBITDA $149 $169 $187 $193 % Margin (2) 6.3% 6.8% 7.3% 7.5% 2016 Revenue by Geography 2016 Revenue by Product Diversified and Loyal Customer Base Southeast Hawaii Northwest 6% 5% Southwest 15% 17% Residential Roofing Exterior 29% Interior 20% Wallboard Top 5 Customers: 6% Top 10 Customers: 9% Top 25 Customers: 12% Northeast 35% 12% 10% Midwest South Central Non-Residential Roofing 19% 12% Complementary Products 12% 8% Ceilings Other Interiors 88% All Others (1) See appendix for reconciliation (2) Defined as Adjusted EBITDA as % of net sales. 5

6 Two Distinct, Leading Product Categories A leading distributor of commercial and residential roofing products, waterproofing, and siding LTM 6/30/2017 Key Financial Metrics: Revenue: $1,585mm Exterior Products Repair & remodel accounts for ~75% of sales Interior Products A leading distributor of interior building materials, including gypsum wallboard and acoustical ceiling tile LTM 6/30/2017 Key Financial Metrics: Revenue: $994mm Repair & remodel accounts for ~35-40% of sales Strengthens Core Roofing Platform Exciting New Avenue For Growth Solidifies Beacon as one of the leaders in exterior building products distribution Increases scale in key metropolitan areas Enhances presence in previously underserved areas ~60% ~40% Similarly fragmented, but well-structured business Sizeable bolt-on M&A opportunities available to expand footprint Attractive interior complementary products business Opportunity for Savings Drive efficiencies through procurement Optimize internal distribution network Leverage best practices across combined business Many Similarities to Exterior Products Similar value chain to roofing distribution Products delivered to job site with specialized equipment Opportunities for distributors to add value Importance of local footprint driving consolidation Partnerships with vendors 6

7 Key Investment Highlights 1 Transformational Combination of Two Leading Building Materials Distributors 2 Improved Scale and Positioning in Fragmented Exterior Products Distribution 3 Enhanced Geographic Footprint in Attractive Areas Where Beacon is Underrepresented 4 Diversification into Adjacent Interior Products Distribution Opens New Avenues for Growth 5 Significant Value Creation Through Projected Cost Synergies 6 Management Team s Proven Track Record of Integrating Acquisitions and Delivering Results 7 Robust Free Cash Flow Generation Supports Deleveraging and Earnings Growth 8 Continued Tailwind from Uptick in Demand in Key End Markets 7

8 1 Transformational Combination of Two Leading Platforms Both Beacon and Allied have undergone significant transformations from small, family-owned building product distributors to the industry leading, nationally recognized companies that they are today Founded in Charlestown, MA in 1928 Initial Public Offering in 2004; Sales of ~$650 million Transformational acquisition of RSG in 2015 Combined Beacon by the Numbers 150 years of combined tttttttoperating history $7 billion in sales (1) ~$675 million in Adj. EBITDA (1) Acquired by CRH in 1996; Sales of ~$429 million Expanded into interior building products distribution in total locations (2) 8,500 employees Established in Jersey City, NJ in 1950 by the Feury family (1) LTM 6/30/2017. Adj. EBITDA includes $110mm of annual run-rate synergies and adjustments, among other things, fiscal 2017 run-rate acquisitions. See appendix for reconciliation of net income to Adjusted EBITDA. (2) As of announcement on 8/24/17. 8

9 2 Improved Scale in Fragmented Exterior Products Distribution Continued Growth in Exterior Products Sales Solidifies Beacon as a Leading Player Combined exterior products sales of $5.8 billion $3.4 $4.2 $5.8 $1.6 Repair & Remodel accounts for approximately 75 80% of combined exterior sales Enhances ability to serve customers and suppliers Roofing Category Remains Fragmented (1) $2.3 $1.1 $4.2 $4.2 ~20% $2.3 Other ~49% Beacon Beacon + RSG Beacon Beacon + Allied ~24% ~7% Competitor A Note: Beacon / RSG sales are based on FY 2014 and Beacon / Allied sales are based on LTM 6/30/2017 $ in billions. Source: Company filings. Competitor B 9

10 3 Enhanced Geographic Footprint Strengthens Beacon s nationwide distribution network in underserved and attractive regions Combined Branch Detail 385 Locations 208 Locations Allied Region Beacon Exterior Interior Northwest Southwest Total Combined Locations: 593 South Central Midwest Northeast Beacon Allied Exterior Allied Interior Southeast Hawaii Unique, High Volume Business Strengthening Position in Key Geographies Canada (1) Total Source: Company website and presentations. (1) As of announcement on 8/24/17. 10

11 4 Increases Diversification Across Products and Geographies Revenue by Product FYE 2016 Combined Complementary Products 15% 32% Residential Roofing 53% Interior Products 40% Residential Roofing 29% Complementary Products Interior Products 15% 14% Residential Roofing 44% Non-Residential Roofing 12% Complementary Products 19% Non-Residential Roofing Revenue by Geography 27% Non-Residential Roofing Combined Sales Over 70% Roofing FYE 2016 Combined Southeast Canada 23% Northwest Southwest 4% 2% 6% 5% 2% 3% 4% 11% Southeast Hawaii Northwest Southwest 15% 17% Southeast Hawaii Northwest Canada Southwest 20% 13% 27% South Central 10% South Central 20% South Central Northeast 26% 7% Northeast Midwest Note: Beacon s fiscal year end is September 30. Allied s fiscal year end is December % 12% Midwest Northeast 29% 9% Midwest 11

12 Wallboard 4 And Opens New Avenues for Growth in Adjacent Interior Distribution Parallels Interior Products Roofing End Markets Serves the single-family, multi-family and commercial markets Both new construction and repair and remodel Non-Resi Resi Non-Resi Resi Repair & remodel accounts for ~75% of Exterior sales and ~35-40% of Interior sales Market Dynamic Top 4 distributors hold ~45% of wallboard sales with meaningful room for further consolidation Wallboard demand is significantly below peak Company A Company B Company C Other + Company A Company B Other Consolidated supplier base Suppliers Wallboard manufacturers have reduced capacity since 2007 >90% of Wallboard Supply >80% of Roofing Supply Equipment / Facilities Large warehouse facilities located in densely populated MSAs Specialized equipment to transport high volumes of products Avg. Facility sqft Exterior: ~34,200 sqft Interior: ~35,200 sqft Source: Company presentations, USG, GMS and management estimates. 12

13 5 Significant Value Creation Through Projected Cost Synergies Allied Synergy Opportunity Allied Acquisition 2x the Projected RSG Synergies Same team as with RSG, including external consultants, to evaluate the synergy opportunity Same approach, improved by benefit of experience in estimation and integration of RSG $110mm Branch Consolidation Procurement Overhead Efficiencies Run-rate synergies of $110 million expected to come from branch consolidation and procurement and overhead efficiencies 50% to be achieved within the first 12 months of closing $50 - $60 $110 Allied run-rate synergies conservatively represents 4.2% of Allied net sales vs. 5.5% of RSG net sales % Expected to be Achieved ~50% 90%+ 100% Note: $ in millions. Year 1 Run-rate 13

14 6 Proven Track Record of Integrating Acquisitions and Delivering Results Net Sales Contribution of Acquisitions Over Time $6,000 $5,000 $4,000 Delivered on synergies ahead of schedule Continued to grow the combined business Delevered back to ~3x within 2 years $3,000 $2,000 $1,000 $ Combined LTM 6/30/2017 Source: Company website and presentations. Note: $ in millions. 14

15 7 Significant Free Cash Flow Generation Conservative Structure, in Line with RSG Transaction Proven Ability to Delever Post Transaction RSG Allied ($ in millions) Cash & Equivalents Standalone 6/30 $33 Pro Forma 6/30 $33 4.3x Realized ~1x reduction in 24 months 4.6x Projected ~1.7x reduction in months Revolving Credit Facility $450 $593 Term Loan B $434 $ x Senior Notes $292 $1,559 ~2.9x $1.3 billion upsized ABL to provide significant liquidity ~$675 million of Combined Adj. EBITDA including synergies for LTM 6/30/17 $530 million incremental and $440 million existing Term Loan B $1.3 billion of new senior notes 1.5x $400 million of preferred equity from CD&R $300 million of common equity issuance 3/31/2015 Pro Forma at RSG Close Current 6/30/2017 Combined 6/30/ Year Target Note: Financing plans are indicative and subject to market conditions at the time of financing. Balance sheet amounts shown net of issuance. 15

16 8 Dynamics of Roofing Market Provide Stability Through the Cycle U.S. Asphalt Shingle Market Drivers of Re-Roofing Demand (Millions of Squares) Major Storms Re-Roof Demand New Construction % 2% 3%3% 25% 40% '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 Source: ARMA, Owens Corning and management estimates Sources: 3M Roofing Accounts for ~70% of Beacon s Products Leaks Old Weather Damage Deteriorating Upgrade Appearance Other Re-roof demand remains approximately 12% below prior cycle averages (1) Age of housing stock has increased ~65% (2) since 1985 Re-roofing/repair represents ~80% of roofing demand 94% of U.S. re-roofing demand is non-discretionary Insulated from broader economic conditions (1) Prior cycle average represents (2) Age of homes has increased from 23 years to 38 years per Census Bureau. 16

17 1Q 2018 Results & 2018 Outlook 17

18 First Quarter 2018 Highlights and Outlook Record first quarter net sales of $1.1 billion; existing markets same day sales growth of 8.3% Strong organic sales performance across all three segments. Positive residential growth for 15 consecutive quarters. Commerci al has produced two consecutive quarters of mid-single digit growth. Complementary was our top performer, increasing 11.7% vs. prior ye ar. Customer pricing turned positive (up %), a significant shift from recent trends Solid Q1 expense leverage; existing market operating expense as a percent of sales improved 100 bps First quarter net income of $67.6 million ($46.7 million Adjusted) 1 vs. $20.4 million ($34.4 million Adjusted) 1 in prior year Q1 EPS $0.98 ($0.68 Adjusted) 1 vs. EPS of $0.33 ($0.56 Adjusted) 1 in prior year; Q1 18 impacted by $0.08 dilution from secondary common stock offering U.S. tax reform had a favorable impact on Q1 results, adding $0.71 to EPS ($0.09 Adjusted) Record first quarter Adjusted EBITDA of $86.0 million 2 (7.7% of net sales) Net Debt Leverage remains below 3.0x at 2.8x 3 excluding net proceeds from September 2017 secondary common stock offering Closed on the acquisition of Allied Building Products on January 2 Raising 2018 EPS outlook from $2.95-$3.25 range to $3.40-$3.70, driven by tax reform and strong Q1 1,2,3 See appendix for reconciliation of EPS, adjusted EBITDA and net debt leverage. 18

19 Quarterly Results Net Sales & Gross Margin Existing Market Sales, Gross Profit and Gross Margin Existing Market Product Mix $1,500 $1,000 $500 $0 $1,083.2 FY2018 Revenue $1,000.3 $259.3 $ % 23.9% 25.1% FY2017 Gross Margin Existing Market results above exclude results from acquired branches until they have been under ow nership for at least four full fiscal quarters at the start of the fiscal reporting period 100% 80% 60% 40% 20% 0% FY2018 Existing Market Daily Sales Growth by Region* *Same Days 53.6% 53.0% Residential Roofing Non-Res Roofing 29.9% 31.0% Complementary 16.5% 16.0% FY2017 Total 8.3% Northeast 2.9% Mid-Atlantic (1.4%) Southeast 24.0% Southw est (1.0%) Midw est 8.3% West 25.2% Canada 9.0% 19

20 Quarterly Results Operating Expenses Existing Market Operating Expense $220 $210 $200 $190 $180 $170 $160 Total OpEx & OpEx % of Net Sales $210.6 $ % $188.5 $ % 20.4% 18.2% FY2018 FY2017 GAAP OpEx Adjusted OpEx* FY18 vs. FY17 OpEx Increase (Decrease) GAAP Adjusted Payroll volume related $9.8 $10.5 Warehouse and G&A 0.5 (3.9) Other 0.2 (0.6) Amortization (3.6) -- Subtotal $6.9 $6.0 Existing Market results above exclude results from acquired branches until they have been under ow nership for at least four full fiscal quarters at the start of the fiscal reporting period *See appendix for reconciliation table 20

21 Cash Flow from Operations Year-to-Date Results FY 2018 FY 2017 ($60) ($40) ($20) $0 $20 $40 $60 $80 $100 $ in millions Net Income Non-Cash and Working Capital Adjustments Operational Cash Flow FY 2018 $67.6 ($108.1) ($40.5) FY 2017 $20.4 $57.7 $78.1 $ in millions 21

22 Key Balance Sheet Metrics 2.0% 1.5% 1.0% 0.5% 0.0% Capital Expenditures as Percent of Sales 1.6% 0.9% % 0.8% % 0.6% E Long Term 19% 18% 18% 17% 17% 16% 16% 15% Average Working Capital as Percent of Sales 18.1% 17.4% % 16.3% 16.5% Long Term Inventory Turns Q1 Q2 Q3 Q4 23.2% FY14 FY15 FY16 FY17 FY Net Debt Leverage Oct-15 Sep-16 Mar-17 Sep-17 Dec-17 Dec-17 (1) Includes opening working capital balances for RSG transaction (2) Excludes proceeds from September 2017 secondary common stock offering; see appendix for detail 22

23 Fiscal 2018 Outlook Summary 2018 Current 2018 Previous Revenue $6.6 - $6.9 billion $6.6 - $6.9 billion Adjusted EBITDA* $560 - $600 million $560 - $600 million Adjusted EPS* $ $3.70 $ $3.25 Effective Tax Rate 29% - 30% 38% - 39% *See definitions in the Appendix of this presentation 23

24 Anticipated Impact from U.S. Tax Reform FY 2018 tax rate reflects one-quarter under the previous Federal tax rate, and three quarters within the new rate structure. The result creates a blended base quarterly effective tax rate estimate of 29-30%. Adjusted Effective Tax Rate Summary by Period Q1 18 Q2 18 Q3 18 Q4 18 FY 2018 FY 2019 Effective Rate 25.3%* ~30% ~30% ~30% 29-30% 26-27% *Q1 18 was impacted by certain discrete items, the largest of which relates to adoption of ASU for share-based payment accounting One-Time Q1 18 Tax Benefits (Costs) Excluded from Adjusted EPS Revaluation of deferred tax assets and liabilities Repatriation tax of foreign earnings/profits Tax Impact Adjusted EPS $47.4 million $0.68 ($0.9 million) (0.01) 24

25 Appendix 25

26 Reconciliation: Adjusted Net Income /Adjusted EPS Quarter-To-Date Reconciliation of Net Income to Adjusted Net Income (Loss): (In millions) Three Months Ended December 31, 2017 Three Months Ended December 31, 2016 Reported Non-GAAP Adjustments Adjusted Reported Non-GAAP Adjustments Adjusted Net sales $ 1,122.0 $ - $ 1,122.0 $ 1,002.2 $ - $ 1,002.2 Cost of products sold Gross profit Operating expense (23.8) (21.3) Income from operations Interest expense, financing costs and other 22.6 (12.3) (1.6) 12.0 Income before provision for income taxes Provision for (benefit from) income taxes (41.1) Net income $ 67.6 $ (20.9) $ 46.7 $ 20.4 $ 14.0 $ 34.4 Reconciliation of EPS to Adjusted EPS: EPS $ 0.98 $ 0.33 Non-GAAP Adjustments per share impact (0.30) 0.23 Adjusted EPS $ 0.68 $ 0.56 Note: Adjusted Net Income (Loss) is defined as net income excluding non-recurring costs related to acquisitions and the amortization of intangibles, as well as the non-recurring effects of tax reform. We believe that Adjusted Net Income (Loss) is an operating performance metric that is useful to investors because it permits investors to better understand year-over-year changes in underlying operating performance. Adjusted net income per share or "Adjusted EPS" is calculated by dividing the Adjusted Net Income (Loss) for the period by the weighted -average diluted shares outstanding for the period (see Consolidated Statements of Operations for amounts). While we believe Adjusted Net Income (Loss) and Adjusted EPS are useful measures for investors, these are not measurements presented in accordance with United States Generally Accepted Accounting Principles ( GAAP ). You should not consider Adjusted Net Income (Loss) or Adjusted EPS in isolation or as a substitute for net income and net loss per share or diluted earnings per share calculated in accordance with GAAP. 26

27 Reconciliation: Net Debt Leverage Ratio Reconciliation of Net Debt Leverage Ratio: (In millions) Gross total debt as of December 31, 2017 $ Cash and cash equivalents as of December 31, 2017 (63.8) Net debt as of December 31, 2017 $ Adjusted EBITDA for the year ended September 30, 2017 $ Add: Adjusted EBITDA for the threee months ended December 31, Less: Adjusted EBITDA for the three months ended December 31, 2016 (80.0) Adjusted EBITDA for the trailing 4 quarters ended December 31, 2017 $ Net Debt Leverage Ratio as of December 31, x Net Debt Leverage Ratio excluding net proceeds from Sept secondary common stock offering: Net debt as of December 31, 2017 $ Net proceeds from Sept secondary common stock offering Net debt as of December 31, 2017, excluding net proceeds from Sept secondary common stock offering $ 1,049.5 Net Debt Leverage Ratio as of December 31, 2017, excluding net proceeds from Sept secondary common stock offering 2.8x 27

28 Reconciliation: Adjusted EBITDA Three Months Ended December 31, Year Ended September 30, Net income $ 67,596 $ 20,430 $ 100,864 Acquisition costs 5,569 1,160 15,745 Interest expense, net 23,516 13,239 53,802 Income taxes (41,068) 12,953 62,481 Depreciation and amortization 26,904 28, ,467 Stock-based compensation 3,459 3,816 15,074 Adjusted EBITDA $ 85,976 $ 80,023 $ 364,433 Adjusted EBITDA as a % of net sales 7.7% 8.0% 8.3% Adjusted EBITDA is defined as net income plus interest expense (net of interest income), income taxes, depreciation and amortization, stock-based compensation and non-recurring acquisition costs. We believe that Adjusted EBITDA is an operating performance measure that provides investors and analysts with a measure of operating results unaffected by differences in capital structures, capital investment cycles, and ages of related assets among otherwise comparable companies. Acquisition costs reflect all non-recurring charges related to acquisitions (excluding the impact of tax) that are not embedded in other balances of the table. Certain portions of the total acquisition costs incurred are included in interest expense, income taxes, depreciation and amortization, and stock-based compensation. While we believe Adjusted EBITDA is a useful measure for investors, it is not a measurement presented in accordance GAAP. You should not consider Adjusted EBITDA in isolation or as a substitute for net income, cash flows from operations, or any other items calculated in accordance with GAAP. In addition, Adjusted EBITDA has inherent material limitations as a performance measure. It does not include interest expense. Because we have borrowed money, interest expense is a necessary element of our costs. In addition, Adjusted EBITDA does not include depreciation and amortization expense. Because we have capital and intangible assets, depreciation and amortization expense is a necessary element of our costs. Adjusted EBITD A also does not include stock-based compensation, which is a necessary element of our costs because we make stock awards to key members of management as an important incentive to maximize overall company performance and as a benefit. Moreover, Adjusted EBITDA does not include taxes, and payment of taxes is a necessary element of our operations. Accordingly, since Adjusted EBITDA excludes these items, it has material limitations as a performance measure. We separately monitor capital expenditures, which impact depreciation expense, as well as amortization expense, interest expense, stock-based compensation expense, and income tax expense. Because not all companies use identical calculations, our presentation of Adjusted EBITDA may not be comparable to other similarly titled measures of o ther companies. 28

29 Reconciliation of Existing Markets Operating Expense to Adjusted Operating Expense (In millions) Three Months Ended December 31, 2017 Three Months Ended December 31, 2016 Reported Non-GAAP Adjustments Adjusted Reported Non-GAAP Adjustments Adjusted Existing Markets Sales $ 1,083.2 $ - $ 1,083.2 $ 1,000.3 $ - $ 1,000.3 Existing Markets Operating Expense (22.1) (21.3) Adjusted OpEx as % of Sales 19.4% 17.4% 20.4% 18.2% Note: FY18 operating expense adjustments include: Acquisition costs $5.6 million and Amortization $16.5 million. FY17 operating expense adjustments include: Acquisition costs of $1.2 million and Amortization of $20.1 million 29

30 2018 Guidance Reconciliations Adjusted EBITDA 2018 Outlook Adjusted EPS 2018 Outlook $ in millions Low High GAAP Net Income $150 - $160 Acquisition Costs (SG&A) $70 - $80 Interest Expense, net $135 - $145 Income Taxes $5 - ($5) Depreciation $55 - $60 Amortization $130 - $140 Stock Compensation $15 - $20 Adjusted EBITDA $560 - $600 $ in millions Low High GAAP Net Income $150 - $160 One-time tax items ($45) - ($45) Acquisition Costs (post-tax) $65 $70 Amortization (post-tax) $90 - $100 Adjusted Net Income $260 - $285 Avg Diluted Shares Outstanding Adjusted Diluted EPS $ $

31 Reconciliation of Net Income to Adjusted EBITDA Beacon Reconciliation Year Ended September 30, Nine Months Ended June 30, LTM Ended June 30, 2017 (unaudited) (unaudited) Net income $89,917 $62,277 $53,846 $55,733 $42,525 $103,125 Interest expense, net 58,145 10,561 10,336 40,098 41,836 56,407 Income taxes 56,615 43,767 34,922 33,800 25,073 65,342 Depreciation and amortization 100,191 34,862 30,294 86,238 73, ,410 EBITDA $304,868 $151,467 $129,398 $215,869 $182,453 $338,284 Adjustments: Stock-based compensation $17,749 $9,936 $7,422 $11,227 $14,070 $14,906 Acquisition costs (a) 24,749 6, ,715 23,310 6,154 FY17 acquisitions run rate (b) ,319 Adjusted EBITDA $347,366 $168,381 $136,820 $231,811 $219,833 $371,663 Allied Reconciliation Year Ended December 31, Six Months Ended June 30, LTM Ended June 30, 2017 (unaudited) (unaudited) Net income $80,476 $70,469 $60,565 $30,071 $24,374 $86,173 Interest expense, net 7,993 13,815 19,546 1,776 4,803 4,966 Income taxes 52,507 47,006 39,965 19,944 15,829 56,622 Depreciation and amortization 34,301 32,189 29,389 16,003 17,403 32,901 EBITDA $175,277 $163,479 $149,465 $67,794 $62,409 $180,662 Other adjustments'(c) 11,552 5,186 NA NA NA 12,303 Adjusted EBITDA $186,829 $168,665 $149,465 $67,794 $62,409 $192,965 (a) Acquisition costs relate to the costs incurred by Beacon to integrate prior acquisitions, primarily the RSG Acquisition. (b) Adjustments made to annualize the partial year results for prior Beacon acquisitions made between September 30, 2016 and June 30, (c) Certain non-recurring costs incurred by Allied and corporate allocations from CRH plc. 31

32 Reconciliation of Net Income to Adjusted EBITDA (Cont d) Combined Adjusted EBITDA Reconciliation for LTM Ended 6/30/2017 Run Rate Beacon Allied Synergies Combined Net income (loss) $103,125 $86, $189,298 Interest expense, net 56,407 4, ,373 Income taxes 65,342 56, ,964 Depreciation and amortization 113,410 32, ,311 EBITDA $338,284 $180, $518,946 Adjustments: Stock-based compensation $14, $14,906 Acquisition costs (a) 6, ,154 FY17 acquisitions run rate (b) 12, ,319 Other adjustments '(c) -- $12, ,303 Total adjustments $33,379 $12, $45,682 Adjusted EBITDA, before cost savings $371,663 $192, $564,628 Estimated cost savings (d) $110, ,000 Adjusted EBITDA, after cost savings $371,663 $192,965 $110,000 $674,628 (a) The costs incurred by Beacon to integrate prior fiscal year 2016 and 2017 acquisitions, primarily the RSG Acquisition. (b) Adjustments made to annualize the partial year results for prior Beacon acquisitions made between September 30, 2016 and June 30, (c) Other adjustments primarily relate to (i) CRH, plc corporate overhead allocations to Allied, (ii) a one-time gain on sale of Allied property, plant and equipment, (iii) the release of an excess inventory reserve and accrual for tax audit assessments related to prior periods and (iv) certain other non -recurring costs, including CRH, plc consulting, legal and other professional fees and expenses. (d) Represents Beacon management s estimated projected annual cost savings from the Allied Acquisition through branch consolidation, general and administrative cost reductions and procurement benefits totaling approximately $110 million, which are expected to be fully implemented beginning with the secon d year following consummation of the Allied Acquisition. During the first year following closing, we anticipate realizing approximately $50 million of the anticipated $110 million of annual cost savings. During the second year following closing, we anticipate realizing an additional $60 million. Excludes estimated one-time costs of approximately $50 million over the first two years required to achieve the anticipated annual savings. Anticipated branch consolidation cost savings relate to potential savings achieved through the planned consolidation of branch facilities in overlapping Beacon and Allied regions. Anticipated general and administrative cost savings relate to potential savings achieved through the planned consolidation of corporate support functions and planned consolidation of benefit plans and insurance policies. Anticipated procurement cost savings relate to potential savings achieved through optimized pricing and rebates with existing contractual relationships with suppliers. 32

33 Reconciliation of Net Income to Free Cash Flow Beacon Reconciliation ($ in thousands) Year Ended September 30, Nine Months Ended June 30, LTM Ended June 30, (unaudited) (unaudited) Cash Flow Data (in thousands): Net cash provided by operating activities $120,648 $109,340 $55,497 $74,152 $74,359 $120,441 Capital Expenditure 26,315 20,802 37,239 31,882 21,553 36,644 Free Cash Flow $94,333 $88,538 $18,258 $42,270 $52,806 $83,797 33

34 Reconciliation of Net Debt ($ in thousands) Actual basis with respect to Beacon Roofing Supply, Inc. As of June 30, 2017 (unaudited) Pro Forma as adjusted giving effect to the Allied Transactions(1) Debt: U.S. ABL Facility(2) $437,285 $580,187 Canadian ABL Facility(2) 12,330 12,330 Term Loan B Facility(3) 434, ,000 Senior Notes due 2023(4) 292, ,008 New Senior Notes(5) -- 1,267,000 Equipment financing facilities(6) 37,674 38,446 Total debt $1,213,474 $3,147,971 Cash and cash equivalents $33,055 $33,055 Net Debt $1,180,419 $3,114,916 (1) The combined as adjusted balances gives effect to the Allied Transactions, the application of the net proceeds of this offering as set forth in Use of Proceeds in the prospectus supplement, and the repayment of approximately $200 million of borrowings under our existing U.S. ABL Facility. The existing ABL Facility has a maturity date of October 1, 2020 and had an effective interest rate of 3.28% as of June 30, (2) Reflects borrowings under our existing U.S. ABL Facility and existing Canadian ABL Facility. At the closing of the Allied Acquisition, we expect to increase the size of the existing ABL Facility (both the U.S. dollar and Canadian dollar tranches) from $700 million to $1.3 billion pursuant to the terms of the New ABL Facility. (3) Represents borrowings under our existing Term Loan B Facility. At the closing of the Allied Acquisition, we expect to refinan ce the existing Term Loan B Facility with a $970 million New Term Loan B Facility. (4) Represents the outstanding balance of the senior notes due 2023, net of debt issuance fees. (5) Represents the New Senior Notes we currently expect to issue in lieu of any borrowings under the Bridge Facility to finance the Allied Transactions. We expect to use any remaining net proceeds of the New Senior Notes (if issued) in excess of the amount needed to finance the Allied Transactions for general corporate purposes, including repayment of borrowings under our existing U.S. ABL Facility. If and to the extent we do not issue a sufficient amount of the expected New Senior Notes at or prior to the closing of the Allied Acquisition, we expect to borrow under the Bridge Facility in order to finance the Allied Transactions. After giving effect to this offering and the Convertible Preferred Stock Purchase and the intended use of net proceeds therefrom, we expect the aggregate commitments under the Bridge Facility to be reduced to $1.1 billion. (6) Represents outstanding obligations under our existing equipment financing facilities. Pro forma as adjusted column includes approximately $0.8 million of assumed Allied deferred acquisition consideration. 34