2019 FOURTH QUARTER INVESTOR PRESENTATION · 3 | A leader in key metropolitan markets • Over 500...

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2019 FOURTH QUARTER INVESTOR PRESENTATION

Transcript of 2019 FOURTH QUARTER INVESTOR PRESENTATION · 3 | A leader in key metropolitan markets • Over 500...

Page 1: 2019 FOURTH QUARTER INVESTOR PRESENTATION · 3 | A leader in key metropolitan markets • Over 500 branches in 50 US states and 6 Canadian provinces • 110,000+ customers with a

2019 FOURTH QUARTERINVESTOR PRESENTATION

Page 2: 2019 FOURTH QUARTER INVESTOR PRESENTATION · 3 | A leader in key metropolitan markets • Over 500 branches in 50 US states and 6 Canadian provinces • 110,000+ customers with a

DISCLOSURE NOTICE

This presentation contains information about management's view of the Company's future expectations, plans and prospects that constitute forward-lookingstatements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from thoseindicated by such forward-looking statements as a result of various important factors, including, but not limited to, those set forth in the "Risk Factors" sectionof the Company's latest Form 10-K. In addition, the forward-looking statements included in this presentation represent the Company's views as of the date ofthis presentation and these views could change. However, while the Company may elect to update these forward-looking statements at some point, theCompany specifically disclaims any obligation to do so, other than as required by federal securities laws. These forward-looking statements should not be reliedupon as representing the Company's views as of any date subsequent to the date of this presentation.

This presentation contains references to certain financial measures that are not presented in accordance with United States Generally Accepted AccountingPrinciples (“GAAP"). The Company uses non-GAAP financial measures to evaluate financial performance, analyze underlying business trends and establishoperational goals and forecasts that are used when allocating resources. The Company believes these non-GAAP financial measures permit investors to betterunderstand changes in underlying operating performance over comparative periods by providing financial results that are unaffected by cyclical variances thatcan be driven by items such as investment activity or purchase accounting adjustments. While the Company believes these measures are useful to investorswhen evaluating performance, they are not prepared and presented in accordance with GAAP, and therefore should be considered supplemental in nature. TheCompany’s non-GAAP financial measures should not be considered in isolation or as a substitute for other financial performance measures presented inaccordance with GAAP. These non-GAAP financial measures may have material limitations including, but not limited to, the exclusion of certain costs without acorresponding reduction of net income for the income generated by the assets to which the excluded costs are related. In addition, these non-GAAP financialmeasures may differ from similarly titled measures presented by other companies.

A reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measure can be found in the Appendix as well asCompany’s latest Form 8-K, filed with the SEC on November 25, 2019.

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Page 3: 2019 FOURTH QUARTER INVESTOR PRESENTATION · 3 | A leader in key metropolitan markets • Over 500 branches in 50 US states and 6 Canadian provinces • 110,000+ customers with a

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A leader in key metropolitan markets

• Over 500 branches in 50 US states and 6 Canadian provinces

• 110,000+ customers with a broad product offering up to 140,000 SKU’s

• 2nd largest specialty roofing products distributor

• 4th largest distributor of specialty interior building products

Strong long-term historical performance

• Sales CAGR = 17.2%

• Adjusted EBITDA CAGR = 15.9%

• Op cash to adj. net income last 14 years = 141%

Rapid growth since 2004 IPO

• Repair & Remodel fuels market demand (~70-75%)

• Expansion of same branch growth initiatives

• Opened 89 new greenfield locations

• Completed 46 acquisitions

0

100

200

300

400

500

600

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

Net Sales & Adjusted EBITDA Since IPO

BEACON OVERVIEW

Net

Sal

es

($M

)

Ad

j. EBITD

A ($

M)

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LARGE STABLE MARKETS

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ROOFING PRODUCTS• Estimated market size of $26 billion

• ~20% current share; 2nd largest distributor

• Beacon is a leading consolidator

~46%

~20%

~24%

~10%

Roofing Products Market Share

Competitor A

Competitor B

Other

EXTERIOR COMPLEMENTARY• Estimated market size over $30 billion

• Fragmented with diverse markets and channels to customers

INTERIOR PRODUCTS

• Estimated market size of greater than $15B

• 4th largest, regional strength

Beacon

Source: Company Estimates, ProSales

Page 5: 2019 FOURTH QUARTER INVESTOR PRESENTATION · 3 | A leader in key metropolitan markets • Over 500 branches in 50 US states and 6 Canadian provinces • 110,000+ customers with a

CONTINUED STABILITY THROUGH THE CYCLE

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U.S. Asphalt Shingle Market (Millions of Squares)

• Re-roof demand remains approximately 13% below prior cycle peaks

40%

25%

27%

2%3%3%

• Re-roofing/repair represents ~80% of roofing demand

• 94% of U.S. re-roofing demand is non-discretionary

• Insulated from broader economic conditions

Drivers of Re-Roofing Demand

Leaks Old Weather Damage Deteriorating

Upgrade Appearance3 3 3 27 8

188

3 22 176

1911 6 6 4

15 15 13

107 103 109 110113 116

116

112

100

9693

91

9394

88 83 89

98108

101

3330

31 32

3437

39

35

26

17

11

11

1114

1718

19

20

2122

143136

143 144154

161

173

155

129135

120

108

122 118111 107

112

133144

136

Major Storms Re-roof Demand New Construction

Sources: Owens Corning, ARMA, 3M

Other

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FY2016-2019 | BEACON’S TRANSFORMATION

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94

45

118

70

79

10418

31

68

33

48

53

PRE-RSG BRANCH COUNT FY2019 BRANCH COUNT

Revenue from $2.5B to $7B+

Market Share ~9% to ~20% Combined RSG + Allied Synergies:

$175M+

Industry-leading Digital Platform Expansion of Private Label - TriBuilt

Multiple Product Platforms: Interiors, Exteriors, Complementary

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PRODUCT MIX GROWTH

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$270M, 41%

$220M, 34%

$160M, 25%

FY04

Residential roofing Non-Residential roofing Other*

$3.1B, 43%

$1.7B, 24%

$2.3B, 33%

FY19

Residential roofing Non-Residential roofing Other*

• Significant product expansion - up to 140,000 SKUs• Added Interior products as part of Complementary with Allied Acquisition in 2018• Expansion of private label (TriBuilt) in each Product Line

Sales Product Mix

Total Sales = ~$650M

Total Sales = ~$7.1B

* Other includes complementary products such as siding, windows, insulation, waterproofing systems, and specialty interior building products

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Customer Engagement That Drives Customer Retention and Innovation

• Digital Bill Pay• Online Rebate Tracking

• Delivery Tracking • Jobsite Pictures• Triple Check

• Beacon Pro+• 3D+ Estimate to Order • Project Management

PURCHASE MATERIALS

DELIVERY

CLOSE OUT THE JOB

• Homeowner Financing • In-Home Visualizer

• Digital Lead Gen• Logic Track • Storm Tracker

• HomeAdvisor Partnership• Certification Programs • Custom Marketing Programs

SELL THE JOB

GENERATE LEADS

ESTABLISH CREDIBILITY

CONTRACTOR LIFECYCLE

WHY PROS CHOOSE BEACON

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500+ Branch Locations

B2B buyers say personalized customer care has a moderate to major influence on their loyalty82%

Pro+ Digital Suite

Source: Salesforce, December 2017

Expanded Market Presence and Industry Leading Omni-Channel Experience

OMNI-CHANNEL APPROACH

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A network of branches sharing resources and systems to provide an optimal customer delivery experience

Customers Benefit Improved delivery timetables

Shipment delivery notification via text or email

Improved branch interactions

Consistent end-to-end customer experience

Suppliers Benefit Collaboration for inventory optimization

Logistics leverage via hub locations

Beacon Benefits Enhances sales growth

Improves operating cost leverage

Reduces working capital

BEACON OTC (ON TIME AND COMPLETE) OVERVIEW

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FOURTH QUARTER 2019 HIGHLIGHTS

Q4 net sales of $2.03B; 3.2% daily organic growth over prior year

Existing market residential daily sales growth of 11.5% over prior year

Operating cash generation of more than $400M, reduced Net Debt by $393M

Improvements to capital structure; refinanced $300M of Sr. notes

1 Defined as gross debt less cash. Decrease in gross debt and increase cash from 6/30/2019 to 9/30/2019 was $348.4 million and $44.6 million, respectively.

1

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SIGNIFICANT SALES GROWTH AND MARGIN EXPANSION

Gross Margin($M)

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21.5%

22.0%

22.5%

23.0%

23.5%

24.0%

24.5%

25.0%

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

$2,000

FY14 FY15 FY16 FY17 FY18 FY19

Gross Margin $ Gross Margin %

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

FY14 FY15 FY16 FY17 FY18 FY19

Sales $

Sales ($M)

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STRONG CASH GENERATOR

Operating Cash Flow – Cumulative 3 Years

$0

$200

$400

$600

$800

$1,000

$1,200

FY 15-17 FY 16-18 FY 17-19

$545

$975

$1,067

• Generated ~$1.1B in operating cash flow over three years

• Net Debt reduction in Q4 was $393M

• Improved the capital structure:

• Refinanced existing bonds

• Issued $300M of 8 yr. Sr. Secured HY notes @ 4.5%• Replaces 2023 notes @ 6.375%• Lowered interest rate by ~190 bps.• Extends maturity 3 years

• Fixed $500M of Term B loan at rate of ~3.75%

24.3% 25.4%24.3% 25.4%($M)

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Page 14: 2019 FOURTH QUARTER INVESTOR PRESENTATION · 3 | A leader in key metropolitan markets • Over 500 branches in 50 US states and 6 Canadian provinces • 110,000+ customers with a

SUMMARY

Significant Positives in Q4 and Fiscal 2019

Daily organic residential sales grew 11.5% in the quarter

Demonstrated good operating leverage, improving 40 bps. over the prior year

Robust operating cash flow – almost $1.1 billion in total over the last 3 years

Integration activities complete

Looking forward to FY20

Pivot focus to organic growth

New customers across our branch network

Improving branch operating performance

Expanding on our industry-leading digital platform

FY20 and beyond…realizing our potential

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*

* On an adjusted basis – see Appendix.

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APPENDIX

Note: for non-GAAP reconciliations please reference the most recent investor presentation located on the Beacon Roofing Supply website / Investor Relations / Events & Presentations