The EXPERIENCE You Want. The SERVICE You Expect. The VALUE You Deserve. Q Investors Presentation Paul Isabella - Chief Executive Officer

Transcription

1 The EXPERIENCE You Want. The SERVICE You Expect. The VALUE You Deserve. Q Investors Presentation Paul Isabella - Chief Executive Officer 1

2 Forward Looking Statements This presentation contains forward-looking statements. These statements relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. We caution you not to place undue reliance on forward-looking statements, which reflect our analysis only and speak only as of the date of this presentation, and you should refer to the Risk Factors section of our latest Form 10K. We undertake no obligation to update the forward-looking statements to reflect subsequent events or circumstances. 2

3 Company Overview 3

4 Beacon s Expansion Across North America 4 Note: 2014 branch count as of June 30, 2014.

5 Beacon Overview A leader in many key metropolitan markets in the United States and across Canada 254 branches across 40 U.S. states and 6 Canadian provinces Over 47,000 customers Broad product offering of up to 11,000 SKUs Strong long-term historical performance 10-year sales CAGR = 14.7% Operating Income 10-year CAGR = 13.3% Historical operating margin between 5-8% Successfully completed 25 acquisitions since our IPO in 2004 Opened 56 new greenfield locations since the IPO Sales ($ in billions) $2.5 $2.0 $1.5 $1.0 $0.5 $0.0 $0.7 $1.6 $1.6 $ Years 5 Note: 2014 branch count as of June 30, 2014.

6 Complete Residential Building Envelope Roofing: Asphalt, Metal, Slate, Tile, Vents, Underlayments Windows: Wood, Vinyl, Aluminum, Skylights, Replacement & New Construction Gutters: Aluminum, Copper Siding: Vinyl, Fiber Cement, Aluminum Fascia: Fiber Cement, Aluminum Decking & Railing: Composite, Vinyl Doors: Exterior & Patio Doors Columns: 6 Wood, Aluminum & Fiberglass

7 Complete Commercial Building Envelope 7 Roofing: EPDM, TPO, PVC, Built Up, Single Ply, Metal, Asphalt, Garden, Ventilation, Underlayments Roof Insulation: Tapered Panels, Fiberboard, Nailboard, Polyiso Custom Metals: Gutters, Downspouts, Drip Edge Air & Vapor Barriers: Below Grade Waterproofing: Sheet & Liquid Membranes, Sealants Below Grade Drainage Systems: Concrete Sealers & Coatings: Pedestrian & Vehicular Deck Coatings Ground Barriers: Vapor Barriers, Radon Barriers, Pond Liners

8 Comprehensive Assortment Of Products For All External Residential And Commercial Building Needs 2004 Revenue Product Mix 2013 Revenue Product Mix 25% 34% 14% 37% 41% 49% Residential Roofing Non-Residential Roofing Complementary Building Products Up to 11,000 SKU s offered 8 Selected relationships with manufacturers to achieve substantial volume discounts Historically re-roofing makes up approximately 76% and 80% of residential and non-residential demand.* *Source: Freedonia September 2013

9 Offering The Top Brands That Contractors Rely On 9

10 Why Invest In Beacon? High value-added distributor performing a critical role in the roofing supply chain Market leader in an attractive, growing and fragmented industry Highly scalable platform & proven business model with minimal capital expenditures Superior financial performance highlighted by attractive growth and margins Historical 10-year sales CAGR: 14.7% ( ) Historical 10-year organic sales CAGR: 5.0% ( ) Strong EBITDA margins: 7.6% in 2013 Results-oriented management, corporate culture and controls 10

11 Large And Attractive Market $20.2 billion industry* in the U.S. with a projected growth rate of 6.2% annually through 2017 to $27.2 billion. U.S. Roofing Materials Market Residential 58% Non-Residential 42% 11 Source: The Freedonia Group September 2013 *represents sales by manufacturers

12 Aging Housing Market Leads To Re-Roof Demand Traditionally, over 78% of expenditures in the roofing market are for re-roofing projects, with the balance being for new construction. Year of construction of housing stock 2012 (131.8 million units) In 2012 re-roofing made up approximately 86% and 84% of residential and nonresidential demand, respectively. The median age of the housing stock as of 2012 is over 37 years old s 11.6% 1970 s 18.6% 1980 s 12.6% Re-roofing demand provides stability and the potential for growth even during periods of declining building construction expenditures. In 2011, the roofing market experienced growth while building construction expenditures contracted. Pre % 2000 or later 14.3% 1990 s 12.1% 12 Source: The Freedonia Group September 2013

13 Re-Roofing Concentration Drives Stable Growth 13 Total roofing demand is stable Installed base of existing homes and commercial buildings is large and growing Re-roofing is not a luxury expenditure, and it is not discretionary Source: The Freedonia Group September 2013

14 Re-Roofing Concentration Drives Stable Growth 30% Construction Growth YoY % 20% 10% 0% (10)% (20)% (30)% (40)% (50)% New Residential Roofing New Non-Residential Roofing Total Roofing Residential new construction activity has been volatile Commercial new construction is also volatile and closely follows economic cycles Demand for roofing, due to the large installed base of aging structures, remains very stable and consistent despite the construction cycles 14 Source: The Freedonia Group

15 Drivers of Re-Roofing 88% of U.S. re-roofing demand is non-discretionary and insulated from broader economic conditions. 11% 7% 2% 33% Leaks Old Weather Damage 14% Upgrade Appearance Deteriorating 33% Other Source: ELK, F.W. Dodge 15

16 Drivers of Re-Roofing $2,500 U.S. property damage due to hail is an element of annual re-roofing demand. $2,000 $1,500 $1,000 $500 $ U.S. Property Damage Due To Hail ($M) 16 Source: National Oceanic and Atmospheric Administration, Insurance Information Institute

17 Strategically Located To Serve Severe Weather Markets Billion Dollar Weather Disasters Number of Events Source: National Climatic Data Center Source: National Climatic Data Center

18 Home Improvements When Faced With A Choice, Many Homeowners Decide To Improve Their Homes, Rather Than Move Total Expenditures Number of Projects Roofing $43.7 Billion 7.5 Million Kitchen Remodels $35.7 Billion 3.7 Million HVAC $34.0 Billion 9.8 Million Flooring/Paneling/Ceiling $33.2 Billion 18.8 Million Windows / Doors $24.1 Billion 8.9 Million Bathroom Remodels $23.1 Billion 5.0 Million Patio/Terrace/Detached Deck $13.4 Billion 3.5 Million Recreation Room $3.5 Billion 0.5 Million 18 Source: U.S. Census Bureau and U.S. Department of Housing and Urban Development, 2011 American Housing Survey.

19 Highly Fragmented Market Is Ripe for Consolidation Although over 1,500 distributors serve the roofing materials market, fewer than 5% are regional Less Than 5% Of Roofing Distributors Are Regional Beacon is the second largest roofing distributor in North America Consolidation driven by customer demands and needs Market Share By Revenue Beacon 10% All Other 50% ABC, Allied, RSG, SRS 40% 19

20 Strong Platform For Growth And Acquisitions 5-10% organic average growth potential 2-5% 3-5% New Branch Openings + Existing Market + Growth Acquisitions = Target Average Annual Growth EBITDA impact = Typically break-even in year one. Market plans by location Sales rep productivity Identify new prospects New product offerings Acquisition opportunities are identified and accountable. Highly fragmented market Over 1,500 players Long history of successful integration Margin and revenue improvement Scalable platform Actual sales 10-year CAGR: 14.7% 20

21 Greenfield expansion Greenfield Map Last 12 Months Greenfield Financial Impact Disciplined approach to new branch openings in contiguous markets Low initial investment $600,000 to $1,000,000 Rapid breakeven typically cash flow positive within 1 yr. Opened 10 new branches in 2013 On track to hit target of 25 new branches in 2014 Expect new branches to drive 2-3% organic growth in 2014 New markets are consistently being identified & evaluated For 2015 and beyond, anticipating approximately 20 new openings per year 21

22 Acquisitions Come With Significant Synergy Potential Revenue Expansion Sophisticated Uniform IT Platform Best Practices Large Operational Scale 22

23 Financial Overview 23

24 Significant Sales Growth Net Sales ($ in millions) $2,500 $2,241 $2,000 $1,500 $1,501 $1,646 $1,785 $1,734 $1,610 $1,817 $2,044 $1,000 $851 $653 $500 $

25 Margin Analysis By Fiscal Year Gross Profit Margin Fiscal Years 29.0% 22.0% 25.4% 24.3% 24.3% 22.7% 23.5% 23.7% 22.4% 23.1% 24.5% 23.7% 15.0% Operating Income Margin Fiscal Years 10.0% 5.0% 6.5% 7.1% 6.7% 4.2% 5.3% 6.3% 4.6% 5.7% 7.0% 5.8% 0.0%

26 Operating Income ($ in millions) $160 $140 $143.7 $129.7 $120 $100 $100.3 $94.7 $109.2 $103.7 $80 $60 $60.7 $69.8 $73.5 $40 $42.3 $20 $

27 Financial Review ($ in millions) Q YTD Q YTD Change Q Q Change Net Sales $1,600.4 $1, % $663.4 $ % Gross Profit $364.5 $373.7 (2.5)% $150.8 $ % % margin 22.8% 24.0% (1.2) pts. 22.7% 23.5% (0.8) pts. Operating Income $55.7 $82.2 (32.2)% $45.8 $48.0 (4.5)% % margin 3.5% 5.3% (1.8) pts. 6.9% 7.6% (0.7) pts. Net Income $29.6 $45.2 (34.4)% $26.8 $27.2 (1.3)% % margin 1.9% 2.9% (1.0) pts. 4.0% 4.3% (0.3) pts. Adjusted Diluted EPS (1) $0.59 $0.90 (33.8)% $0.54 $0.55 (2.2)% Significant impact of severe winter weather in Q (1) For reconciliations of reported Diluted EPS to Adjusted Diluted EPS, please reference our press release dated August 8, 2014.

28 Financially Positioned To Deliver On Growth Ample Liquidity $325 million U.S. revolving line of credit and CDN $15 million Canadian revolving line of credit, with initial term loan totaling $225 million, through March $242.6 million available as of June 30, 2014, plus approximately $26.4 million in cash. Conservative Capital Structure Strong free cash flow Net Debt / Total Capital ratio of 27% as of June 30, 2014 Debt to Adjusted EBITDA ratio of 2.26 to 1 (a) as of June 30, 2014 Robust Financial Controls Systems integrated Sarbanes-Oxley compliant Disciplined financial approach Historical bad debt expense less than 0.1% of net sales Minimal Capital Expenditures of Less than 1.5% of Sales $17.4 million in 2012, $26.1 million in 2013 and $26.1 million in Q YTD 28 (a) Calculated as defined under our credit facilities

29 Balance Sheet Position Leverage Ratio Interest Coverage Ratio Annual Return on Invested Capital Annual Return on Equity 12.0% 10.0% 8.0% 6.0% 6.2% 8.4% 10.1% 8.1% 12.0% 10.0% 8.0% 6.0% 7.8% 9.2% 10.8% 7.8% 4.0% 4.0% 2.0% 2.0% 0.0% % Note: Leverage ratio for 2010 and 2011 recalculated to align to current definition (total debt used in place of net debt).

30 Long Term Annual Financial Performance Objectives Average sales growth goal of 5% - 10% (excluding acquisitions) Gross margin between 23.0% % Operating margin between 6% - 8% Capital expenditures of approximately 1 1.5% of sales 30

31 Beacon Roofing Supply A Company Of Substance Fundamentals Benchmarking Forecasting & Accountability Culture Routines Excellent Track Record 31