BECN - Earnings call transcript Q3 2021 | Beacon Roofing Supply, Inc.

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Operator

Good afternoon, ladies and gentlemen, and welcome to the Beacon Third Quarter 2021 Earnings Conference Call. My name is Nye and I will be your coordinator for today. [Operator Instructions].

As a reminder, this conference call is being recorded for replay purposes. This call will contain forward-looking statements, including statements about the company's plans and objectives and future economic performance.

estimate, identified to fact and other historic words as be not they often words can likely such strictly will similar relate or anticipate, and statements expressions by project meaning. that the do use result, of Forward-looking outlook, believe, and expect, current facts

a events Therefore, including important financial and by differ of the within may to materially of company's the XXXX. including, safe those indicated in Forward-looking information of revise forward-looking as predictions to the forward-looking Private These today, company's limited set number Securities the results this obligation are statements Litigation on to, X, or are provisions Reform company undertakes forward-looking the statements various of Form future call the latest performance Risk forth and actual statements a of forward-looking result statements company, Act as any no August but not in update outlook. as such fall regarding XX-K. subject required the factors, Factors the financial The of only based risks of and uncertainties. those contained statements. by of section law, except from harbor are future And XXXX, the

release. Binit Finally, Mr. proceed, Please reconciliation I to press certain of set would this Sanghvi. turn of like call to in Head call over The forth now will non-GAAP Investor these today's Mr. measures. contain references is non-GAAP measures Sanghvi, the Relations. to

Binit Sanghvi

Francis, Financial Frank the call XXXX to President fiscal Julian quarter on call. and earnings With welcome afternoon, Good are and Officer. me Lonegro, and CEO; Nye. our you, Thank Chief today third

Relations I correspond Beacon's to the now remarks section session. turn After will call question-and-answer prepared be with posted management's will Julian. deck to the slide will there remarks, of the over prepared a website. Our Investor

Julian Francis

Thanks, Binit.

outstanding. quarter third results are fiscal Our

and product XX% all revenue Our sales, EBITDA. grew Sales delivered team quarter. approximately adjusted X we net on categories. and was margin significant EBITDA XX% cost more adjusted quarterly and than Adjusted margin increased leverage, as higher delivered operating expansion record the XX.X% for EBITDA across income gross

thrilled living serving quarter with I is every results. values. remain slide performance Beacon's on will of and the third work customers the employee's last our year. roofing increased X sales compared begin be our continuing third and team's to trends our quarter hard a materials to highlights of key continue We execution. the discuss strong. Residential Demand from XX% result Page

fundamentals provided construction our to also New continued demand The for product up sales a team to tailwind be drive housing market complementary positive strong. XX%.

In addition, year sales nonresidential grew prior to by compared COVID-impacted period. we XX% the

delivered over product us execution price categories the focus a critical strong across Our area last margin improvement, all months. XX for gross

it's In environment, critically of categories, continue product We to pressure curve the most increases quickly ahead XX across see categories. even this of apart, inflationary important profitability. can delays a erode in cost number product slight implementation days cost stay with to across

great So level. at branch focus on been driving has our execution the

gross to margins Third quarter XX.X%. expanded

can we cost see continue headwinds. additional to to but that to confident to execute the offset expect We pressure capture are pricing

new 'XX fiscal levels growth. significant for new anticipated team, optimizing leadership a growth. Our actions have in investing flexibility, our financial positioned These assembling include and creating executive in the to us inventory meet capacity

of each touch on these. briefly me Let

going ability value-creating the the leverage X.Xx and debt forward. financial ago. growth detailed a to through lower in stronger of now flexibility results debt of call, half We combination series quarter, May. The on less refinancing transactions year QX As restored at balance a cash net finalized paydown opportunities a our interest end it was and of are ample what sheet, than in we have of a have invest

to reliably service customers of exterior distributor in leading demand environment. any a As deliver we by high-caliber our products, trusted are

proactively in meet to it markets. anticipated have as demand in to we develop We see able inventory local are we ensure invested

and backlog Our to strong are metrics grow. continue

and example, third up For year-over-year sequentially quarter. the end at open of future is the of orders, a metric demand, both significantly key

us drive transformation to Our stakeholders. team in bringing that to attract highly and innovate, marketing and resources, improve the story our performance are to individuals growth has growth, talented leaders that essential bring These supply the deliver operational desire allowed for value human capabilities great for C-suite chain us position for and legal, new talents future. Beacon

location us before not fiscal only to our additional demand but growth, of we capacity, our These allow have more further to enable part including and also customers. be deliver far investments positioning branch X network greenfield and 'XX year-end. for added us value meet optimize calendar in to so commenced in As to X opened locations locations our new additional

also will add strength toolbox. growth and We to our deploy our financial resources to M&A

recently process have the opportunities. reactivated We acquisition of reviewing

are that and Our good is place. actively potential fit and right pipeline at the actionable, of are we tuck-ins available targets a evaluating growing,

We of to inclusion we've the is will quarter our that we based is is of role to note approach inorganic final particular to goals. join the people a I'd progress Female diversity, our inspire all wishes and to & The Of our our inspire to leads most Stephanie Windsor, and people. Construction in item skilled annual like like the advocate model Colorado nominees talented disciplined related industry. winner third from a opportunities. be individuals our Brahma powerful made Year that who anyone is for to the her highlight women announced Pouse. Roofing Stephanie and first and young to award equity Professional the and in Roofing It

have to simultaneously by we a initiatives. across our to by very is demonstrated that to the ability and high critical a Let react our underpinned confidence team's me level multiple changing in at growth rapidly environment summarize saying plan execute

please of slide Now to the Page X turn deck.

to done on growth, our quarters, central and initiatives. prior remain have operational strategic in sales we improved an initiatives me update efficiency let X As provide profitability. our These

and as well our as as progress, Our initiatives customers to benefit us approach from is importantly, with business more our easier these from and are Most differentiate measurable tangible. us efficient do our they competitors. make to designed systematic, plan's

begin Let growth. organic with me

As with we've have interactions our and sales daily a basis. calls, our previous customers on operations team discussed thousands on of

plan the effectiveness improving number focused and has on Our defined these both the clearly interactions. of initiatives,

continue We our capabilities. to and their providing value-added invest in developing relationships. to improve customer in our sales that investment example tools manage is team pricing ability One

to the and tools conditions local value-based local and partnership. pricing support value the from implemented pricing market execution allowing Advanced models responsive have customers We Beacon and team level. to to at our to allow are analytics that are training enhanced develop realize our

industry-leading differentiator Digital Beacon. clear platform. a our digital is is Next for

quarter rates to quarter nearly trending rise, platform last are active users fiscal to XX% Digital sales continue XX% adoption net of year. and to Our third and continue grow. online the of sales our we third our in around have in compared more

digital and the roof tool them for measurement, offering roof value-added minimizing aerial measurement our expanding for need recent months, our to a And access while employees we directly, with high-resolution are our of customers partnership the management We nonresidential safety detailed integrated in and In customers. supporting software and construction announced a Edge, saves time homeowner. their access estimation This project gives convenience the we ways. for a Pro+ EagleView, money which recently images to for provider Estimating have into platform.

On our to on moving & Time Complete network. Next,

network participating our the We markets MSAs. density more distinct branches X than strategy OTC in of and benefits. Our larger OTCs. OTC XX leverages branch provides and have operate XXX in key

we've branch our with leveraged from network the customer our we to greater customers. flexibility have issues improved the minimized In service as of deliver combination to is ensure First supply-constrained service. availability product are environment, product and this best for OTC

serve. delivery optimized improving have our branches, benefit labor to we that per reduced of the time XX more second per delivery and pleased fleet and and network The efficiency emissions. Since a delivery cost nearly report is lower reduced by X% trailing than we mileage, reducing reduced X% months. by and fuel hours in I'm across costs we to

can benefit the speed location, capacity been to the expected customers. MSA optimize open inventory as example our our for we across confident And and fourth warehouse we talent indicated its later by largest $XXX can has inventory centralized levels. And initiatives in implement year efficiency Houston this up from We've large development. hub $XX prime our third our and OTC to million position allows fifth that that benefit us can previously designed the our that reduce One target. ground center for our that and is The accelerate state-of-the-art million country. is inventory hit to we is we permanently remain the dispatch

operations. field retention variety Our logistics way, OTC of people of we talent our and in opportunities in explore to for roles This field. the better a creates development and have our

quintile Finally, on branch We've goal bottom and I've on cadence diagnostic I to our that extensively developed about want a performance. to tool update operating operating branches and sustainable. targets. performance emphasis improvements significantly change ensure that reporting to our focus a our are talked structural places improve their the

lowest from and XXXX, million expect up $XX of in at branches accelerate now We to from our improvement million. least progress quintile continue year-on-year guide the $XX the fiscal previous

these sales momentum branches measurable driving our at strategic to In and bring up average. continue delivering to improvements least and our focus are company continue gain to over will We initiatives time operating on summary, results. to

creating and energized in growth meaningful leadership profitability, returns. focused shareholder team is our new Our accelerating on improvement and

to over to provide continuing focus deeper results. call Now I'll our quarter Frank pass third the on

Frank Lonegro

Thanks, Julian, and good evening, everyone.

X demand our our to well total volumes for growth billion benefit from across and over sales robust all as as growth Residential by of our third net and tailwinds end in strong XX% in XX% product roofing price up our to nearly came We were demand the in X. Turning sales new nonresidential Roughly from markets. significant categories. half sales as Slide products customers. driven $X.X residential construction achieved continue execution quarter,

XX% were housing than drive homebuilders up national largest more starts. fundamentals new to Our continue housing the as

such volumes take strength lower shingle and as trends, of hail household work the increases to June also more shutdown third percentage also third and our in residential growth. than remodeling millennial year-over-year, points quarter. complementary that roofing in up activity Keep product products as to doors. values, approximately product XX% storm-related during sales Nonresidential regional We mainly year as lumber, number XX in remain nonresidential to residential compared repair growth and the that in residential a the revenue the up XX% ago benefits and approximately the contributed and than The homeowners advantage were the windows increased shingle lumber activity estimate XX% had from Complementary will low nonresidential tailwinds, continue rising We and prior siding, We example, Complementary our key the of against for optimistic were substantial more Major home residential storm category improve. the that was COVID price down due from deurbanization. were and rates quarter, home, volumes secular demand impacting and has exposure. equity sales, continue price namely mind our including wind third to formation quarter states. year. market to XX% interest Siding XX% saw down Midwestern sales activity compared April year-over-year. the in in period. trough for

benefits, gross price the of increases and third expansion Slide to successful the June price in increases. and X review April the we'll our or also the environment created quarter. implementation quickly increases, remained we price to gross The margins. Gross XX.X% Turning timing year-over-year. points both Similar increases execution thoroughly The margin to conducive XXX shingle contributed improved to favorable to margin supply-demand basis price during quarter. implemented of which X, prior team's

approximately label private sales increased our addition, enhancement. XX% gross year-over-year, margin In providing

positive to growth benefit significant unfavorable points basis complementary price-cost By result quarter basis in nonresidential was year-over-year due approximately the in in XXX QX. mix comparison, experienced in of was and the a we price-cost product As categories. Product by XXX QX. points slightly the

measurable corporate Now to level. leadership, our shifting progress remain the and Julian's focused operating continue both to costs. in and we operating Under local at see efficiency

a apply to of capitalizing we implemented in the principles are many in demand to leveraging and environment. stronger on are the We response those opportunity changes COVID

quarter, focus times Our to Adjusted in on higher compensation. mainly a expenses quarter due $XXX was our and growth. $XX managing million ago incentive OpEx compared expenses demonstrated million, increase to volume-related year results third of the

low year. the given of are the We in this unusually comparable performance, prior proud

and measures, may You reduction cuts, that elimination cost and well work including fleet as proactive to near and travel we reduced the curb repair overtime, salary furloughs, recall fuel costs. the truck weeks, significant as took of entertainment reducing

less is seasonal activity. We volumes X% worth than XX%. noting It was increase to continued third in of to sequentially in that ramp headcount in approximately headcount up the meet an compared quarter the peak to

year-over-year manage improved sales as both OpEx basis fixed our Our variable and members points with QX our by discipline. costs team to XX adjusted percentage

can cost We continue fleet on labor Improving a of for business control. the centers, within elements our to and including major productivity that we Beacon. focus is focus our largest

per of you more metric of the As productivity that we see, in continuing last improvement year. deliver XX% compared productivity more are and our the productive pandemic hour can and are start we are work third an quarter sales to demonstrates generated than becoming the to even value. key This agile initiatives organization, as nearly

continue improvements a we as organization implement continuous to our Going forward, fully throughout we mindset. embrace will improvement

flexibility. will Slide review financial our we Turning to X,

sheet, plus Interiors commitment allowed to yielded As quarter financial after-tax we flexibility year-over-year, discussed of net restore our approximately company. to and business cash $X.X on balance have debt flow our funds the $XXX of with reduce divestiture billion to the proceeds consistent gross our us approximately by second These cash million. call,

During $XXX to end alone, debt as of the the we third reduced million gross quarter second by quarter. compared the

Xx As and result, adjusted makes. a trailing What ahead as expectations. leverage of net below XX, a our we target year a lowered of difference EBITDA to X.Xx June well our debt

addition, as lower current $XX At comprehensive interest quarter during interest cash third you the levels significantly XXXX. risk be XX million debt rates, refinancing refinancing months. go-forward to and due trailing have the debt our meaningful no In expect than eliminated can until we

growth $X.X core our to June provides our of the business. Importantly, in billion invest liquidity of strong more ability of position ample as than XX

As we our an in can be future volatility. and our investing inventory Julian growth. chain to environment includes supply in ensure capital meet with effectively mentioned, deploying accelerate to This we will efficiently demand inflationary

see, year inventory different. is third This customers. of to typically no can seasonal and demands you meet our us As peak our the quarter level our is positions

tuck-in cash the flexibility inventory the and increases, million for use impact up, $XXX quarter, appendix balance to were quarters, view Interiors flows and both earnings included Adjusted of of operations. quarter. In cash our provides reflective table non-COVID in inventory in the you to this with in through so the invest flows cash related account the in right our a adjusted organic growth flow performance tie price XXXX line operating believe comparables. manufacturer our housekeeping to the One our you to the this in pleased operating for and If with of sale looking addition recent is XXXX presentation in best strong on levels. this we're pipeline of the the execute greenfields view can starting of wrap GAAP account our To of to business. the reconciliation financial in higher be of items We've item, out. was will inorganic We continuing adjusted growth coming very growing targets. we the by operating the view

growth to for we closing year his I'll poised call the are With back turn the We Julian fiscal are remarks. and for finish our positioned in quarters. to that, well strong, coming

Julian Francis

Thanks, Frank.

the of our call outlook. reference fourth over I want and Page slide materials. Please quarter update the turn to we answers, Before XX question to

As we to quarter, solid. remained look fourth demand the

caused announced wind that rigor fourth expect fiscal also below as fiscal our It's hurricane-related increases. in price also XXXX this our demand. included in quarter Keep impact within growth quarter prior with that COVID-related strong in Last be a total quarter the fourth that the we demand an ending to week, storms and from of sales expect by context increase expect the in severe in September, extremely the implement prior mind quarter we the we shutdowns. early mid-single-digit snapback storm guidance September this For same is noting, range. benefited worth to we an year demand that of meaningfully the

contribution quarter over fourth the Our X the announced positive margins will quarters. increases the reflect from last

XX.X%. a a we of expect to around As basis gross result, year-to-year approximately meaningful increase points margin XXX

be provided outlook the to QX XX% between from quarter more full substantial a $XXX XXXX $XXX fourth the million, over the million adjusted year our between $XXX million. 'XX. we on adjusted improvement million EBITDA than and to and represents full increase for year This expect call We is EBITDA fiscal $XXX bringing fiscal and

the continue expectations discipline. a combination of threat for to cost ongoing reflects COVID, continued gross sales, including this our uncertainties exist, of and While margin outlook higher expansion

we created out, housing of an to new units. further millions market. decade of last fundamentals continue Looking have has in the strong both in underbuilding In construction, construction replacement new the the home and well-documented undersupply of the

Our homebuilding to and times to on in will the benefit to roofing cycle multiyear elongated residential have nondiscretionary. continue reroofing managing ago. cycle demand and led will from side. XX of than to impact that more these customers Residential the labor XX% from business from to lots, Bear demand housing and material benefit continue the is constraints built years of meet impact limited construction that trends. These this try more than our constraints. mind have replacement products complementary while appear demand repair stock demand Both also

macros. Regarding nonresidential and trend for to we and future a gradually it it seen have continues our fiscal to This is continue Index improve. benefits first builder has as proxy expect good would it demand, since Architecture the we positive a demand, The Billings been from is commercial climbing. sentiment that quarter,

coming the As we in at we a very team's our level. look execute ability have quarters, forward to confidence high to

we open about and financially members I for are questions. as now are line are growth We team their customers for progress we more to and our we continued excited I achieving and Nye, more. help efforts. strategically growth, our the towards our for potential am With thank believe positioned our for poised than that, X,XXX ready build full

Operator

[Operator Instructions].

Kathryn with TRG. The Thompson first is from question

Kathryn Thompson

QX, of consideration to exteriors-focused from expansion the margin beyond like from And supply we've gross in is beyond and is much your or and for know that thinking that it to into of just it, you that some give a with focus gave take we you're factors your outlook guidance an that outlook, from headwinds I how terms seen other much stick chain? the being that really firm of mix versus of of knitting the it how 'XX? expansion now actions XXXX you able but that pricing or easement should In

Julian Francis

overall I was been there market declining and compression thought we've for obviously And pressures and progress Thanks turn. the to we've ability made. X if mean seen. We've some seen from we've Kathryn. with margin shown said come to cost obviously, increases inflation years, back you asphalt. recover impact a we've very we in we of we've the question, pleased, the that due that of go the seen our I execute really strongly mean to those in, marketplace this I demand-related think

our I are timing. would Certainly, value gross that somewhat we of is we margin a services we pricing. But we forward, plus minus on think generate or powerful we would feel we the time, and in us certainly this certainly incredibly that realize as margin period go things provide fluctuate expect from to repair sustainable. anticipate the depending over to for

prepared continue and The we us private market remarks. able another in think of including knitting, we've mix, little We overall pricing, where that to valuable marketplace. to label, for incredibly you'd to our think place, initiatives the I about bit we us. initiatives refine when for investment capture I think the about talked expand. being put opportunity put I terms think as to continue In highlighted, you ways said, think to also value are that's into that in I my you local area our as is sort stick to see a of

Frank Lonegro

given broadly add two be only well. us. really depending I'd bit on be more are time. obviously, got to at And enhancement a of nice specifically things has for It's then transitory the it's play any pricing is those - work branches digital, and types the - helpful also pricing that a the And on not going things happens of year which this underperforming we're as margin little structural Kathryn, the nature would in there. way doing been to but

Operator

is The from Markets. with question Dahl next RBC Mike Capital

Michael Dahl

release sequential environment to to the there's been year wanted is it a comment you I of ask are a increases, investing prior. time, in. COVID-impacted relative inventory. in but the around on It's kind said slides seeing you same At do the in and to about tough that think period inventory. I I know the

thinking they ask I wanted you volumes, some a where given at the levels So inventory - normal. continue to just the slowdown quarter, you're the And to about upcoming you're point comp today to potential about where levels? relative tough look how kind part of will to given stand and if in your in rebuild

Julian Francis

Thanks for Mike. the question,

that leadership to that inventory we continued third our the rebuild has to we're Frank's peak. and he on something we allocated levels got this the in when Certainly, got on basis. serve been product as annual we're Obviously, team, right would important. an where we've to been the ongoing fluctuate really think product think environment, our I bias we've managing availability and that to prepared of quarter with it can. an remarks, annual also But our that situation opportunity lines, commented to It's some a we're very you an ensure businesses to the on focused it committed, in expect the we've tends seasonality on, at that customers. be That's in. basis, replenish we've been ensuring take to

think mean bias in less I environment, more of err on for this the rather a the inventory, pretty the absorber and customers. have nonres we act has side been chain to substantial, I shock the than the that on been certainly a tell bit current bias as of environment quite I given and my situation, supply chain supply disruptions, demand you having Frank's the just side frankly. would our disruptions and little

supplier and a during better inventory of helps our more helps us us that bit little to do a having that so period customers. And be time

Operator

is from Capital Mamtora question Ketan BMO with Markets. next The

Ketan Mamtora

Can strong talked expecting Maybe improvement and a X that to performance quarter. are you the going you've you're estimate. back million look room or Year the on side? and that? of work about, on $XX versus further of ahead, that is seeing the more improvement through you that as things you over kind prior you opportunity for branch of seeing highlight more talk And in what Congrats where are X X kind now you're as you about

Frank Lonegro

exactly a gross the a performance opportunity we're going years, target, opportunity means it's OpEx, to this ways. in that to of or its we've to really it's of of raise the thought work Ketan, going turn Thanks gross initial we on When that's page the the there going at coming into actually company there. we and look we across back in that through, the we it the we initiative, of there very mentioned would analytical bearing you just inside well. pricing Frank. leverage P&L. branches, it for is operating some the which already continue We're much see that going obviously tell was a kind through we and still thought our lot sales, XXXX, we're When the and was question. that margin company sales, stand look on the way as the we to X expand fruit. to and charts hit room remaining It's bar. to Whether other come and to still underperforming and expense branches huge ton margin there at relative Julian this year and creates

performing example, not performing potential branch but For think we that a at be be large has. the it may may

going tons still same value to see tool we we're run So of that across diagnostic company, coming. the and

Operator

Jefferies. Phil question from Ng with next is The

Philip Ng

And execution. your in Congrats be you Just noticeable really for pull I parse the good little quarter profile on a you sales the if to pricing much you comp helpful got for strength any how and been strong guidance a tough thought that's kind would about nonres the given you're it a contributed XQ? have would better. in Can a seeing saw growth, guess, mid-single-digit fourth might forward in and complementary, I of I really quarter Frank, deceleration. talk XQ. to resi, appreciate out have demand

Frank Lonegro

Sure think few going we of the QX digits mentioned to if guide, quarter, you're thing. will Julian's to parse be of comp it's a low it and business want up I consistent that I talking see strong mid-single-digit then out, I in moments a gave. the expansion. guide kind that peers, I complementary mid-single higher you in of Look, res your be one pull I the What mean see growth in project with ago. the in cycle you I necessarily I forward. and heard the the you elongation. that terms more July as range. will finished that see mentioned, don't think think nonres to remarks about life

in You're well. as number hearing that our it seeing We're from a of the different business homebuilders.

membrane get or around demand. way an fasteners itself. or or of be as shingles example, in carpet the ability actual it done. see get it's any paint that can It's cabinets project of don't just or a we remember particular to just question could a in things project the that completion. And It this anything So the not could like instead as that be

those happening supply So right chains in a now. there's lot

season on Julian a get side hurricane strong be would we As It'd that. going inventory. well. the called great We nice that had have hail it is mentioned, we're quarter. we a storm saw if to It err Julian didn't. the nice mentioned we if in out be of as season, The could We real. hangover

What question the about your that the So important an the volume good feel multiyear around about is volume half quarter, demand heard about we feel and talk I half aggregate. question. the we about. the we good quarter, In run price and Julian in said growth, that's was think that is XX% you

more nonres the that side enjoy it the the and resi of color board, might I you were volume more If side thought having all you complementary and price, inflections volume, was down the some across there break price business, just on. by than line than positive

Operator

from is Stephens. question next Trey The Grooms with

Noah Merkousko

for on Grooms. Merkousko Noah is Trey This actually

again, So echo, seen leading growth nonres a improve, quarter. on of to come a really across finally impressive of a congrats more segments, through. I little We've Very want top seeing lot that wanted side. volume line, I all to in indicators the is sounds just dig starting some it like to but strong bit and

could was next into on market more of repair and your break replacement I demand activity as year. wondering kind we that end seeing construction, down go if So of or thoughts if just and you new then sort you're

Julian Francis

Thanks for question. the

supply more to project with, market, and been the The to they've in pass a has just I'll get job lot to some start events back supply early and have of in there of that been be a disruptions plant just terms had shutdowns complete construction the Texas the and challenging. triggered been the February by So use that of it to were that a of one product get We've much chain to a nonresidential on over may what disruption where The started life frame lot weather in year hit to continuing. chain were set can you real, ability the fine, to but cycle. we're degree, ability products seeing in Frank. full

bit then been demand improve product for while stocking said so assemble of restock has packet overall on real a has we a And challenge and again, as job and shock seen a challenge. and to how completed ability and little the get to we a absorber. we've us. this a act back and reasonable to And the off job goes been a real full regarding inventory to in Trying time of a what the

any specific So of area pickup. we've seen not sort

Architectural the construction - indicator ABI, follow, is which construction demand in prepared an of new what And I Index, remarks, the for improving. improving future that has markedly. Billing is is the clearly my that's clearly been we and referenced New side generally. new quite

So I they're but I through. that's replacement a perhaps little on that sector-specific. And see to overall, think we're and bids good growth starting think of seeing bit the repair we're side, coming

bit more and caution. bit So the I think then retail a and and In been on positive. seen seeing a of little some warehouses, government-related that's work, little demand, we've less office, and hospitals very continued we're schools,

others. more I the call markets So where sector-specific that. we rapidly see said last to are than continue probably improving think I that And on some

So that's he overall is feels add Frank anything kind backdrop, of let I'll necessary. the that

Frank Lonegro

see you hit maybe, of in year-over-year covered by Julian. look you'd were in great, kind probably Only, if beginning to COVID are but would point additional geography, be, that some Yes, reopen. the that data the areas year hardest growth at it you last

Operator

is with Patterson question Wolfe Truman next from Research. The

Truman Patterson

inventory Just give load-in digits mid-, all can sounds your high quarter during color balance you up and understand Anything it this were with the the had sales - to quarter. how volumes, any hoping much like you be single really trying just well? wanted you there ARMA to us discuss I'm shipments can helpful. residential incremental in they on as industry would

Frank Lonegro

sure this We're environment, very question Sure, good allocated with. familiar ARMA. on Yes, you in as Truman. are I'm all

the see we to of So do, bought manufacturers' line obviously us expect you both We have No as given why our less inventory in allocation They still We saying ARMA, days. the that it. which to make customers like we the us. one of sell we cost to. is a one demand. did price, right sure, in when is the inventory units would want need to through is built all reasons and these we than no inventory. really their increases with ARMA, strength pass The combination

what that monetize the And on you we thing shingles. generally look world, basis, move at which you in X-year is inventory that generally If think And pretty XXXX, are quickest. important I year, the monetized our things an us last to do, that significantly. is a remember

you if we QX QX XX% the 'XX, again, at terms in units. against inventory, of about 'XX were look down So

year got at get against this in If XX% a year, last look are we about perspective. understanding look of inventory view up it on units. you've where again, bit But we're from longer-term an of to us to a you at good a

Truman Patterson

Okay.

parse what Yes, there. I that's Okay. exactly trying was to out

was So line it. it seems of like Yes, sales kind that in out market. with the door the

Frank Lonegro

now less delighted storms, inventory didn't where the whether honestly, built the at making a we're the feel sell look, it. some market market really in kind we cost. expect but you We position inflationary good a at necessarily hail we than in were a asking inventory. I ARMA We statement things like and didn't given some especially couldn't to I expected told price are, a or able But the you, Truman. we're question, sold it of a price We late into to get be increase, cycle lower have environment. to tell

So we shape there. feel like we're in good

Operator

with question Capital. from The is next Shmois Loop Garik

Garik Shmois

and the operations. strongly focusing and sheet years two balance spent and last given Just you position improved in very delevering significantly the cash the

this bit. You touched on little a

starting past. of the a have On around more kind you're M&A than the recent little to side, in bit you sniff

on So guys the little more opportunity can provide what from there. you high bit a just, is set level and Julian, looking a what you're at if Frank, maybe

Julian Francis

to We grow. can to opportunities incredibly to real the We're the we Yes. going framing to back on level. great in continue Thanks going we're said strategy. grow. balance feel teams executing we would the a really disciplined it framed market continue level great look we've now the money, at opportunities turn at for to to way the the our way business. spot. is we're marketplace focus absent we've that, while very our now continue from were - fixing done be We're at And we The question, The high core that We're with Garik. be the going our that sheet. company got at come in Obviously, to and we shareholders' branch local a to together. focus we've the to

like local lies - tuck-ins. this business. going local have we been of market about incredibly our M&A markets, pick position right opportunity really a markets core and be our right can The and We into bring. to where acquired a bring can pricing is going what can years can now We new several we really last value. We - branches bring our can sales we've digital. elevated, branches we've the on X there's knowledge. can where We and how valuations where OTCs. business to acquisition our work That's look really connect - to at our the to bring the disciplined we're expertise. have done level. for Obviously, It's targets over improve really the about we to strengthen our targets. value significant in can reap pick benefits the understand We think it's we position us So inside add we as bring

we we've thing We've really very mean, new through that of here we M&A. got generate the sheet. a in great fix a a balance that And the is so really performing going big business. We're we I great feel value-accretive ways now got can well. ton deploy obviously, And thesis It's to cash.

to really And want to deploy coming them, we're ways and that it. for so that's - that at think us value in shareholders I create how for that our

Operator

is question with Hughes next The Truist. from Keith

Keith Hughes

Just on a residential. question

some You about the the to fiscal go were year. in we against? up fourth comping that going be you're back to of in that period talked comps year-over-year quarter units 'XX, prior If what

Julian Francis

Keith. Let was our you ask over in XXXX in Are our me a clarifying question, what XXXX growth quarter? saying fourth

Keith Hughes

about over talk in growth X% number I numbers. products the of unit number? a the don't the fourth for Yes. what unit have Adjusted you 'XX. your revenue Can residential quarter is. of 'XX some know I

Julian Francis

X sold shingles, going I'm the of maybe call recollection My And component the of against residential. way, which which on so year. year-over-year was a XXX,XXX fourth that's is by 'XX. quarter the significantly, Yes. million you, last 'XX shingles or units it, asphalt ballparking up in a pretty is we I'm basis.

Keith Hughes

Right.

the I'm So following. what's not -

Julian Francis

there last fiscal from squares. market If around produce. at was I pretty manufacturers were everything ARMA I Keith, fourth I shipment, quarter could much - as mean was some and shipping you I look we're our mean, think shipments, you shipments the I was about biggest million the the in when - think, fourth that a 'XX, quarter, think last XX-plus whole, they the year, - think the year

was their delevering think I there inventory. also of

I high delevering Demand last at this think that was point industry. channel year. the also was so

I of with much think pretty inventory. we exited everyone out quarter the

a the - So the was there But and all shipped situation literally, I demand such was everything think strong manufacturers. from was so the high. snapback

- shipped also they and think all their inventory, the I I shipped think we all inventory. of that channel

get we've the the that you repeat can't been inventory to difficult inventory - because struggling shipments as because to it's get has everyone So been well.

really pump so it's pass I but out you're the elements it to So a different that for. looking into think it's difficult difficult also

Frank Lonegro

clarity if correct against mentioned if 'XX you X%, just QX your that, you is units. you on against X% - - shingle want Your that QX 'XX number asphalt

Operator

Ryan with from Blair. William is question Merkel next The

Ryan Merkel

to go commentary. to the want Just July back

that? your sounds year-over-year, are that's lower Is So it negative am And there's I residential like if right storm guide? volumes I elongated that right, And some have driving it what's and that demand? projects.

Frank Lonegro

what what terms Yes. guide I we of putting just essentially together said is in you mean that's the for QX. said

Ryan Merkel

compares guess I keep because turns quarters? And in back next what the Okay. harder the couple again getting volumes positive the of

Frank Lonegro

cycle R&R remarks. of support The that's housing back into see construction the think that I get I new from will mention in over prepared benefit there his Yes, the to obviously, in piece chains believe demand equilibrium continuing the supply I We time. to fair. to mean, that. heard back is think, strong. stay the continue housing The Julian will you equation, early XXXXs

do So lot And is there, it I be environment think increases think I continue a conducive the to we're in us months? Is things pass XX that. continue do leverage to going but Probably still to harder. comps pricing through. there's get for X be but to going to to not, going the price

itself That shape. will get like a other's rapid getting as about they we're look we as It done at fashion at solve ultimately chains continue as they've feel So supply in you to and used back talk homebuilder in - in just I to commentary commentary, QX difficulty balance. projects look been when the good the to. the and

Julian Francis

solely. I Ryan, mean this. to asphalt shingles not our I'll And mean add is business I

- mean said, there's lot different of storms, a of kind we year are of We well, the a I supplier below are there's as and average. XX-year a multiple. X-, products, this

to can business. that supply expect return area we've would repaired, think the that disruptions away, of go we chain as as business the normal. in growth commercial see more to We that side gets to see of we seen So the on the that

been has said, Frank as business, strong. complementary our and business siding Our

into that if to it mean, And I that were, million to years growth we're what the you the XX XXXX homes hinted residential other starts of to marketplace, back area. roofing that in groups. see XX-year-old cyclical period. at we've really growth the XXXX for, see back that the - long take cycle about starts X.X we think is pacing time going runway in replacement look mentioned, as to of or that single-family see continue piece we We that give we're That's, the new period that the you filter builds construction strength XX I and on I see years. X into positive what a And in of entering have a go at, million, got and the we is

got is we've that supply easing this great on challenge and to chain weather-related time. normal think replacement the replacement So I slightly we got homes. really got continued growth a a side. to return here. We've that of we've going the see think got we're good I new and depressed an cycle. period We've think over market. a demand repair will building got commercial And in We've going of cycle year on just the

on So bullish all businesses now. our pretty we're of right future for the

Operator

is Kevin with next Research. Northcoast Hocevar from The question

Kevin Hocevar

the quarter. And even on the year. quarter. a large pretty it when the quick the in pretty A step-down the strongest guidance. most implies years, fourth it's But In it's to EBITDA the the to the question of fiscal third from close quarter guidance, third not, is quarter quarter fourth

million million So million $XXX you $XXX quarter, the in third earned fourth. of $XXX the guidance in to

the June guess that's September from the bigger we usually see I than So quarter. a step-down to

would curious So that why the on be thoughts your I'm case. on

Frank Lonegro

seasonality are guide relative July, geography for and look would But sales if least, quarters helpful August in going the few us. at we gave, to probably June. September think pre-COVID, you for normally, to quite post-COVID, April, at that see you're Normal I see at weather May - and to a in not look you has

the are less think certainly differences of basis quarter-over-quarter on with down the think about year QX mix. I in to that I normal flat resi a prior the impacting and slightly COVID comps one, from more hail a

hopefully a that you're you So to last every got bit line. again, The going can you're guidance going margin and nail We're to little then fight lose which the to margin would side, on mid-XXs. a tell we've bit little that work bit top year the to in some little get Julian for line, dollar a margin. going a tooth gross us hard there. on help the comp OpEx gross in quoted his gross we can had on do. And the We lose on

If every you it's do there dollar look We're the your for to math as in continue there, mid-XXs. on to going guide well. the

and So going environment every dollar. to something with a in we're to for the X handle feels continue that we're pretty scratch good, given

Operator

with The next MacGregor Research. question Longbow is from David

David MacGregor

you we hanging a the thinking guidance? further from as comped of of mean on Congratulations from I your cost get all opportunities in I through conversion standpoint, from fruit is you now lowest be so guess, I'm most earnings think the but the free progress. sense just guess of a accessible the XXXX, are standpoint context about of in already, an the terms - forward, cash reductions? And cost your flow from further this where to just are should I further how much XXXX you how thinking about from trying what reductions? point in -

Frank Lonegro

you two So asked there. really different questions in

tackle of Let them. both us

a cost the then or and flow. quarters last have one first so generate flow cash seen The you has the on significant ability in The on business, tremendous to as reductions. X free free other cash one

that that refinancing. bit It given XX% feel We a we've the capital, EBITDA, a neutrality still even delays free seen that long-term the cash of the you've on been cash some necessarily free heard of neutral, talk of working that may net given of little assumes in. It realization we're a fact hasn't kind of conversion flow as inventory number the just bit us done You've in about the of long-term build environment side. better, about type that be flow. a good XX%

forward. me mention costs You going interest the cash lower heard

attentive have the of also periods our good feel about need we sure that So to make demand. we customers that in that be one. But they have and we to inventory

I'd we've the The up right and board. that this of terms say margins thrown it's we're In now, couple the the XX incremental OpEx, I think in last quarters generating of across quarter. XXXs

fixed judicious So continuing and to adding as in cost costs are about the variable we're there. leverage volumes being

did growth. quarter, that think have around we say what the than good X% I'd of job making minimize adding that this I sure we leveraging more and a good. so cost volume, feels we on headcount less of pretty XX% that it's

Julian Francis

our about from We David, have - as that come of And and optimize through that. the decisions and and network had add, running that going once crisis is face see we've them, learning tough us. learned COVID really taking for company a make benefit I'll huge so we've much branches the through to deploying and across we opportunity tremendous XXXx network the as

excellence we of had this as think no of lowest And great that look we're going it have still at broaden in the get lot There's does the leverage there's said, leveraging starting on sure, deploying like how How in can terms to the we've forward? new had. we So we benchmark terms the our We're think branch a looking can operational across we've we're OTC. focused we of that Frank our own on I branches so like make felt can't network some that both at we branches, mean We better. and I think we deploy have. because marketplace that And company. near perspective. deploying all how capabilities we hinted performing to once? we're branch the a anywhere either. approach to through What think but we mature of certainly quintile don't also elements we runway we of But that to, learning of that that

of a this. So we to see, again, leverage continue lot opportunity to

managing we'll We this, cost make of do that side and it continue also sure to carefully we as the want how do in be that. to we're we disciplined

David MacGregor

made forward? these bit or you million guess, Is upgraded year underperforming of year that being than rate? something That little that $XX quarter, that that this - of - that is $XX case, be branches, XXXX might thinking the OTC of a the about going number the some million networks from we is there $XX from that million was a and less sustainable I to a how from as should kind special $XX rate? a Or kind be this million the

Frank Lonegro

We that population based look XXXX. the goal, be twice Yes. continue this an their same about every The to is in annual to the We've to year. through XX XX performance branches restacked at we We're going do upped the kind to line of to to every XX success to as is be We in over in push on the branches delivered of going thought which created can. basis. XXXX. on everything XX. recipe The and XX going going We're and finish the different different from year. going be was then XXXX, now we to new underperforming

gross be an more it's important tightly We're a always you you've out the it which to We're of branches could is it every can will branches. enduring to value the with targets. give and have combination thing the There come we strategy. get margin guidance OpEx for year. it's earnings the a mix we out it pole, the something totem change, side, going so side, just profit be And are time year. believe the set delivered been it's final has we speak. as those going of side, be that we to think be operating our on reset following we're going the that on seen sales Again, going I value every to lower to of be set could as more product something there's doing whether far. kind of so And a manage that to that year going on

Operator

question next is Fargo. Deepa from with Wells Raghavan The

Deepa Raghavan

strongly witnessing Strong you nonres as given nonresidential is in that That's or meaningful positive able push just Are as price-cost here, spread nascent resi, there to difference recovery? businesses? nonres residential a pricing but in one. is Julian, across

Julian Francis

categories. as But across question, increases We've single seen well across Thanks all well. We've we've our category. Deepa. very we've progress our across of for the seen of price certainly categories seen all every - executed

timing a them, to that case-by-case from line In of because quantify commercial terms when the timing on they're ship priced. it's from it jobs of difficult on a lot the the product a just is jobs - basis different each

so bit all pleased over and of the commercial I've little X last a or and categories. there's gotten months but So been our side, think these has more noise better on execution across the better incredibly I

Frank Lonegro

positive Yes, price-cost XXX Deepa, corporate quarter I mentioned well in nonres the view average more commercial the in if favorable than resi the the we should think prepared on you as both as at as that remarks, the the in look you complementary. being price-cost

While are less to both of that XXX that than just the nicely all average, you corporate but price/cost heard. the less and together on the than positive blends residential

Deepa Raghavan

continues? Got inflationary this it. situation How helpful. you No, do long think that's

Julian Francis

this off I now think - you're asking on right question, are manufacturers Deepa. on the us better that you than

the a Clearly, abate out. that market of that I are remains a disruptions we've likely the time. about settling good. we that I think period seeing spoken supply over think And chain

maximize good run we're got increases see into getting price - without models either. I had think think continue here. manufacturers we we've the continue from we to we're dynamics think And a I that to capabilities, necessarily building opportunities our see that pricing to So the around building business we've But across We opportunities. this.

on remain sure at paid We competitive the level, get day the the customers branch said, a we're for I focused really deal making provide, choice we to want executing provide. marketplace. we with that for we every make the and local buy in from. we the As value we ability where services at we get have sure paid product appropriately and make a And are we who that they in to that choice that coming level of the

Frank Lonegro

the best out back. clearly. That's haven't coming we nonresidential of Deepa, still seen

are or new that's household when the good XX the it XX over us play. the combined of to years, look side, to required the in a the that multiyear think number We with that all going years about On you the X underinvestment feeling gives a to formation for sheer believed for over the to we be that through. coming, confidence XX begin the increases last residential homes order a we'll that real next area be base not fundamental and their price And homebuilders and receive which higher than is support manufacturer there's clicking to economy that current us the the all closing pass there at us price, able the be increases year-over-year is price still cylinders. as on price from gives tells the

of So run we part feel like tougher the the to out cylinders. forward to we're yet on not and look COVID of all opportunity

Operator

with is Morgan with JPMorgan. question Michael next from The Rehaut

Margaret Wellborn

gross timing talk This benefits is being for about long Maggie pointed on XQ benefits Can how to Mike. you last? you those and as tailwinds. margins, procurement cost-effective On

Frank Lonegro

benefits gross on in sure. quarter I just differential mean the and the mix a me, were price gross couple in helpful XXX certainly margin points the headwind But growth to When we're benefit. at rates Well, QX, We look things margin some on you and you side. that speak. there we've mentioned increases timing mentioned a the profits, of were rates quarter, of was that so at of there X price-cost basis little there. bit guiding to when given to a look inventory

I than somewhat think the be will that the will price-cost negative. higher that be and mix

tell positivity continue that in price-cost will So you we QX. that in to see

Operator

R. question David next with W. Manthey is from Baird. The

David Manthey

guys. questions off-line, my I'll Yes. take Thanks.

Operator

That questions. concludes the

would to Mr. like call remarks. for the back turn I closing Francis to over Now

Julian Francis

I at are the suppliers last And our for evening. appreciate and investors this you, this really night. all I we third joining that to thank thank proud the our statement in would good time Thank time. again, the employees, our the of for your And great fiscal results It's customers, We're clearly a hope delivering all of certainly and staying you quarter. safe that We Thank challenging company. Nye. our for make is you, results And employees all incredibly want the everyone, such support. still.

Operator

Earnings of Conference the concludes Third your Enjoy Quarter XXXX day. the Call. rest Beacon That

Beacon Roofing Supply (BECN) 8 Aug 212021 Q3 Earnings call transcript