The EXPERIENCE You Want. The SERVICE You Expect. The VALUE You Deserve. Q1 2014 - Investors Presentation Paul Isabella - Chief Executive Officer 1
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
Company Overview 3
Across North America Beacon’s Expansion 4
Beacon Overview • A leader in many key metropolitan markets in the United States and across Canada • 240 branches across 39 U.S. states and 6 Canadian provinces • Over 47,000 customers • Broad product offering of up to 10,000 SKUs per branch • Strong long-term historical performance • FY 2013 Sales of $2.24 billion (10-year CAGR 14.7%) • FY 2013 Operating Income of $129.7 million (10-year CAGR 13.3%) • FY 2013 Operating margin of 5.8% • Successfully completed 25 acquisitions since our IPO in 2004 • Opened 43 new greenfield locations since the IPO 5
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: Wood, Aluminum & Fiberglass 6
Complete Commercial Building Envelope 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 7
Comprehensive Assortment Of Products For All External Residential And Commercial Building Needs 14% Revenue Product Mix 37% Non-Residential Roofing Residential Roofing Complementary Building Products 49% Reflects net revenue for FY 2013 • Up to 11,000 SKU’s offered • 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 8
Offering The Top Brands That Contractors Rely On 9
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 and proven business model with minimal capital expenditures • Superior financial performance highlighted by attractive growth and margins • Historical 10-year sales CAGR: 14.7% (2004-2013) • CAGR internal sales growth since our IPO: 3.7% • Strong EBITDA margins: 7.6% in 2013 • Results-oriented management, corporate culture and controls 10
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 Non-Residential Residential 42% 58% 11 Source: The Freedonia Group – September 2013 *represents sales by manufacturers
Aging Housing Market Leads To Re-Roof Demand Year of construction of housing stock • Traditionally, over 78% of expenditures in the roofing market are for re-roofing 2012 (131.8 million units) projects, with the balance being for new construction. • In 2012 re-roofing made up approximately 1970’s 86% and 84% of residential and non- 18.6% 1960’s residential demand, respectively 1980’s 11.6% 12.6% • The median age of the housing stock as of 2012 is over 37 years old. 1990’s • Re-roofing demand provides stability and 12.1% Pre - 1960 the potential for growth even during periods 30.9% of declining building construction expenditures. 2000 or later • In 2011, the roofing market experienced 14.3% growth while building construction expenditures contracted. 12 Source: The Freedonia Group – September 2013
Re-Roofing Concentration Drives Stable Growth Source: The Freedonia Group September 2013 • 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 13
Drivers of Re-Roofing 88% of U.S. re-roofing demand is non-discretionary and insulated from broader economic conditions. 2% 7% Leaks Old 11% 33% Weather Damage Upgrade Appearance 14% Deteriorating Other 33% Source: ELK, F.W. Dodge 14
Drivers of Re-Roofing U.S. property damage due to hail is an element of annual re-roofing demand. $2,500 $2,000 $1,500 $1,000 $500 $0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 U.S. Property Damage Due To Hail ($M) 15 Source: National Oceanic and Atmospheric Administration, Insurance Information Institute
Strategically Located To Serve Severe Weather Markets Billion Dollar Weather Disasters 1980 - 2012 Source: National Climatic Data Center Source: National Climatic Data Center Source: National Climatic Data Center Number of Events 16 1 - 10 11- 20 21 - 30 31 - 40 41+
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 Bathrooms Remodels $23.1 Billion 5.0 Million Patio/Terrace/Detached Deck $13.4 Billion 3.5 Million Recreation Room $3.5 Billion .5 Million Source: U.S. Census Bureau and U.S. Department of Housing and Urban Development, 2011 American Housing Survey. 17
Highly Fragmented Market Is Ripe for Consolidation • Although over 1,500 distributors serve • Beacon is the second largest roofing the roofing materials market, fewer than distributor in North America 5% are regional • Consolidation driven by customer demands and needs Less Than 5% Of Roofing Market Share By Revenue Distributors Are Regional Beacon 10% All Other 50% ABC, Allied, RSG, SRS 40% 18
Strong Platform For Growth And Acquisitions 5 - 10% “organic” average growth potential 2-5% 3-5% + + = New Branch New Branch Existing Market Existing Market Target Average Target Average Acquisitions Acquisitions Openings Openings Growth Growth Annual Growth Annual Growth • Actual sales 10-year • Market plans by location • Acquisition opportunities • EBITDA impact = CAGR: 13.4% are identified and Typically break-even • Sales rep productivity accountable. in year one. • Highly fragmented • Identify new prospects market • Over 1,500 players • New product offerings • Long history of successful integration • Margin and revenue improvement • Scalable platform 19
Growth Through New Branch Openings • Disciplined approach to new branch openings in contiguous markets • Most branches opened by Beacon have been successful • 43 branches opened since 1997, of which only three have closed. • Low initial investment: $600,000 – $1,000,000 • Rapid breakeven – typically cash flow positive within one year • New markets are consistently being identified and evaluated • 35 branches have been opened since the IPO • Others in location identification stage • Potential new branch managers have been identified 20
Acquisitions Come With Significant Synergy Potential Revenue Revenue Expansion Expansion Sophisticated Sophisticated Uniform IT Uniform IT Best Practices Best Practices Platform Platform Large Large Operational Operational Scale Scale 21
Financial Overview 22
Significant Sales Growth Net Sales ($ in millions) $2,500 $2,241 $2,044 $2,000 $1,817 $1,785 $1,734 $1,646 $1,610 $1,501 $1,500 $1,000 $851 $653 $500 $0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 23
Margin Analysis By Fiscal Year Gross Profit Margin Fiscal Years 29.0% 25.4% 24.5% 24.3% 24.3% 23.7% 23.7% 23.5% 23.1% 22.7% 22.4% 22.0% 15.0% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Operating Income Margin Fiscal Years 10.0% 7.1% 7.0% 6.7% 6.5% 6.3% 5.8% 5.7% 5.3% 4.6% 5.0% 4.2% 0.0% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 24
Operating Income ($ in millions) $160 $143.7 $140 $129.7 $120 $109.2 $103.7 $100.3 $100 $94.7 $80 $73.5 $69.8 $60.7 $60 $42.3 $40 $20 $0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 25
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