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    BECN Q2 2024: Sees H2 Free Cash Flow of $750M

    Reported on May 16, 2025 (After Market Close)
    Pre-Earnings Price$98.27Last close (Aug 1, 2024)
    Post-Earnings Price$84.94Open (Aug 2, 2024)
    Price Change
    $-13.33(-13.56%)
    • Operational improvements: Management is actively adjusting staffing levels and branch operations to better align with variable day-to-day demand, which should improve efficiency and margin performance going forward.
    • Robust pricing and margin expansion: The company is leveraging price increases—most recently the August hike—with expectations for higher realization and a 30–50 basis point improvement in gross margins, which supports a sustainable margin expansion strategy.
    • Strong organic and greenfield growth: With significant contributions from greenfield initiatives (over $500 million in revenue potential) and solid organic sales growth, both residential and commercial segments are expected to drive top-line expansion.
    • Pressure on Operating Expenses: Executives highlighted challenges with higher-than-expected SG&A, driven by additional staffing needs for greenfield and acquired branches along with difficulties managing variability in daily demand due to weather conditions, potentially squeezing margins.
    • Execution Issues with Price Increases: The company didn’t capture the expected inventory profits from the recent price hikes due to delays in implementing them in weaker markets, indicating potential risks to gross margins.
    • Weather-Driven Demand Variability: Frequent weather disruptions resulted in inconsistent roofing days and unpredictable sales performance, complicating staffing and inventory management.
    1. Free Cash Flow
      Q: Timing for free cash flow?
      A: Management explained that while they used cash in H1, they expect the back half to generate roughly $750 million in free cash flow, with about 60% in Q4 and 40% in Q3, emphasizing the seasonal inventory cycle and stronger roofing activity later in the year.

    2. SG&A Efficiency
      Q: Why was SG&A higher?
      A: They noted that higher SG&A resulted from increased staffing to handle variable demand and extra costs from greenfield and acquisition activities, with steps already taken to recalibrate staffing for improved efficiency.

    3. Inventory Profits
      Q: Why lower inventory profit realization?
      A: Management attributed the shortfall in expected inventory profits to delayed price implementation in weaker markets, which prevented the typical early profit spike even as inventory costs rose.

    4. Residential Guidance
      Q: What’s the residential outlook?
      A: They expect Q3 residential performance to improve by low single digits in price and volume, but Q4 will see mid negative single-digit volume declines, partly due to strong storm-driven sales in the prior year.

    5. Margin Protection
      Q: How will margins be protected?
      A: The team is focused on cost control via branch efficiency, leveraging a new pricing model and digital tools, which they expect will deliver about 50 basis points of gross margin improvement by early 2025.

    6. Daily Sales Acceleration
      Q: What drives daily sales acceleration?
      A: Management expects a pickup in daily sales in Q3 driven by a shift of unmet demand from Q2, aided by the recent August price increase, though performance remains subject to weather variability.

    7. Organic Growth Contribution
      Q: What’s the organic and greenfield contribution?
      A: They reported that organic demand contributed roughly 2.8% to a 6.8% revenue growth, with greenfield initiatives contributing over $500 million in revenue to date.

    8. Staffing Adjustments
      Q: How are staffing levels adjusted?
      A: Management is fine-tuning staffing, reducing resources in weaker markets while boosting teams where demand is strong, ensuring branches are more efficiently aligned with daily market conditions.

    9. Roof Days Lost
      Q: How many roofing days lost to weather?
      A: They observed that weather affected roughly one-third of weeks in the quarter, resulting in low single-digit decreases in daily sales, primarily impacting the residential segment.

    10. Inventory Profit Guidance
      Q: What’s the inventory profit guidance?
      A: Following the April experience, management expects the August price increase to yield a similar pattern, targeting an improvement of about 30 basis points in inventory profits as realization picks up over several weeks.

    Research analysts covering BECN.