BEACON ROOFING SUPPLY INC (BECN)·Q3 2024 Earnings Summary

Executive Summary

• Record net sales of $2.77B (+7.3% YoY; +5.6% per day) with acquisitions contributing ~5.6% to growth; Adjusted EBITDA reached a company record at $325.2M (+5.0% YoY) while gross margin expanded 30 bps to 26.3% .
• Diluted EPS was $2.30 vs $(4.16) YoY (prior-year EPS impacted by a $414.6M preferred stock repurchase premium); GAAP net income declined to $145.3M from $161.3M YoY as higher OpEx and interest offset gross margin gains .
• Management expects Q4 gross margin in the mid-25% range and sales/day up mid-single digits; full-year Adjusted EBITDA now expected in the lower half of the previously communicated $930–$970M range, with OpEx actions estimated to reduce annual expenses by ~$45M .
• Near-term catalyst: storm rebuild demand (approx. 3M squares over ~6 quarters) and pricing execution; medium-term margin levers include digital (~150 bps GM uplift), private label TRI-BUILT (sales +12% YoY), and bottom-quintile branch turnaround (Q3 EBITDA +$9M YoY) .

What Went Well and What Went Wrong

What Went Well

• Price-cost discipline delivered ~50 bps positive spread and gross margin of 26.3%, above prior expectations, despite a higher non-residential mix .
• Ambition 2025 execution: Record Adjusted EBITDA ($325.2M), 7 companies acquired since Q2, 4 new greenfields, and digital adoption among residential customers surpassed 28% in Q3 .
• Strategic quote: “We have, once again, shown that we can grow in any environment… disciplined margin management resulted in favorable price-cost across all lines of business” — CEO Julian Francis .

What Went Wrong

• GAAP net income declined YoY (to $145.3M from $161.3M) amid higher operating expenses (including severance and rent) and interest expense; adjusted OpEx as a % of sales rose 70 bps YoY .
• Organic volumes decreased ~1–2% per day in Q3 (residential volumes down; Florida particularly weak), with growth largely acquisition-driven .
• Full-year Adjusted EBITDA guide shifted to the lower half of the range as sales/day growth moderated from previously expected high-single digits to mid-high single digits and interest expense outlook rose to ~$184M .

Financial Results

Segment Breakdown (Net Sales)

KPIs

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “Beacon’s third quarter results demonstrated the resilience of our business model and the team’s strong execution on our Ambition 2025 initiatives… disciplined margin management resulted in favorable price-cost across all lines of business.” — Julian Francis, President & CEO .
• “Gross margin was 26.3% in the third quarter, up 30 bps year-over-year and higher than our forecast… price cost was up approximately 50 bps year-over-year.” — Prithvi Gandhi, CFO .
• “Restructuring charges… were approximately $11 million in the quarter… we estimate the annualized impact of these actions to be approximately $45 million in reduced operating expenses.” — Prithvi Gandhi, CFO .
• “We grew digital sales approximately 28% year-over-year… adoption [residential] at more than 28%… digital sales… enhanced margin by roughly 150 basis points.” — Julian Francis .

Q&A Highlights

• Storm rebuild cadence: Hurricanes to drive ~3M squares (~2% of annual industry shipments) spread over ~6 quarters; Florida demand likely ramps starting December and into 2025; product availability will be tight regionally .
• Non-residential verticals: Strength in hospitals and schools; ongoing shift from new construction to repair/reroof; warehouse/data centers continue to support demand .
• Gross margin seasonality: Q4 GM mid-25% driven by geographic/product mix (south/new construction bias) and typical winter pattern; EBITDA margin less impacted .
• OpEx actions: Both field and corporate headcount addressed; structural leverage expected via synergies from acquisitions/greenfields and tighter budgeting aligned to demand .
• 2025 setup: Acquisitions done to date expected to add ~3–4% to 2025 revenue; interest expense outlook raised to ~$184M for 2024 .

Estimates Context

• Wall Street consensus estimates from S&P Global were unavailable for BECN due to a data mapping issue at the time of this analysis. As a result, we cannot present versus-consensus comparisons for Q3 2024. We will update when S&P Global mapping is available.

Key Takeaways for Investors

• Gross margin execution positive: Q3 GM 26.3% (+30 bps YoY) with ~50 bps price-cost tailwind; Q4 GM guided mid-25% due to normal seasonality and mix — watch price discipline and storm-driven supply tightness into 2025 .
• Earnings quality: Record Adjusted EBITDA ($325.2M) despite higher OpEx; GAAP net income down YoY on OpEx and interest — focus on adjusted metrics and cash conversion in Q4 .
• Cost actions: ~$45M annual OpEx savings expected from Q3 restructuring; benefits to be realized in Q4 and beyond — supports margin resilience into 2025 .
• Storm narrative: Rebuild demand (~3M squares over ~6 quarters) provides multi-quarter tailwind, particularly for waterproofing and commercial solutions; near-term allocation tightness manageable given weak Southeast backdrop YTD .
• Digital and private label: >28% residential digital adoption and TRI-BUILT sales +12% YoY bolster margins (~150 bps uplift) — sustained levers for ROIC and price-cost management .
• M&A/greenfields: Acquisitions contributed ~5.6% to Q3 sales; 7 deals since Q2; plan to add 20+ greenfields in 2024 with continued synergy realization — supports above-market growth and mix diversification .
• Balance sheet/capital allocation: Expect strong Q4 cash flow, net debt leverage to return within 2–3x target, and $45M ASR forward to settle (~0.6M shares) — enhances flexibility for M&A and shareholder returns .

All data and statements are sourced from Beacon’s Q3 2024 Form 8-K and earnings materials, and Q1–Q2 2024 filings and transcripts as cited above.