Investor Presentation Second Quarter 2018 NASDAQ: BECN NASDAQ: BECN 1
Disclosures Forward Looking Statements and Non-GAAP Measures This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors, including, but not limited to, those set forth in the "Risk Factors" section of the Company's latest Form 10- K as well as the Company’s subsequent filings with the U.S. Securities and Exchange Commission (“SEC”). In addition, the forward-looking statements included in this presentation represent the Company's views as of the date of this presentation and these views could change. However, while the Company may elect to update these forward-looking statements at some point, the Company specifically disclaims any obligation to do so, other than as required by federal securities laws. These forward-looking statements should not be relied upon as representing the Company's views as of any date subsequent to the date of this presentation. This presentation includes EBITDA, Adjusted EBITDA, combined Adjusted EBITDA, combined net sales, combined net income and net debt of Beacon and EBITDA and Adjusted EBITDA of Allied, which are measures not presented in accordance with generally accepted accounting principles (“GAAP”) . Beacon defines EBITDA as net income plus income tax expense, interest expense, net and depreciation and amortization. Beacon defines Adjusted EBITDA as EBITDA plus non-recurring acquisition costs and stock-based compensation. Beacon defines net debt as total debt less cash and cash equivalents. Allied defines EBITDA as net income plus income tax expense, interest expense, net and depreciation and amortization. Allied defines Adjusted EBITDA as EBITDA plus adjustments for certain one-time costs incurred by Allied. Combined Adjusted EBITDA is defined as combined net income plus combined interest expense (net of interest income), combined income taxes, combined depreciation and amortization expense, adjustments to contingent consideration, stock-based compensation, non-recurring acquisition costs, fiscal year 2017 year-to-date acquisition run-rate adjustments, other adjustments for certain one-time costs incurred by Allied and $120 million in anticipated annual run-rate synergies from the Allied acquisition. EBITDA is a measure commonly used in the distribution industry, and we present EBITDA, Adjusted EBITDA and combined Adjusted EBITDA to enhance your understanding of our operating performance. An Adjusted EBITDA- based metric is used in Beacon’s financing covenants and we and Allied use EBITDA, Adj usted EBITDA and combined Adjusted EBITDA as internal performance measurements and as two criteria for evaluating our performance relative to that of our peers. We and Allied believe that the presentation of EBITDA, Adjusted EBITDA and combined Adjusted EBITDA provide investors and analysts with a measure of operating results unaffected by differences in capital structures, capital investment cycles and ages of related assets among otherwise comparable companies. Further, we and Allied believe that EBITDA, Adjusted EBITDA and combined Adjusted EBITDA are useful measures because they improve comparability of results of operations, since purchase accounting used for acquisitions can render depreciation and amortization non-comparable between periods. We present net debt to enhance your understanding of our financial position. While we believe these are useful measures for investors, non-GAAP measures should not be considered in isolation or as a substitute for any items calculated in accordance with GAAP. In addition, this presentation includes projections regarding the expected accretive impact of the proposed transaction to Adjusted EPS, based on internal forecasts of Adjusted EPS, which forecasts are non-GAAP financial measures and are derived by excluding non-recurring costs related to acquisitions and the amortization of intangibles. These accretion projections also should not be considered a substitute for GAAP measures. The determination of the amounts that are excluded in making the accretion calculations are a matter of management judgment. NASDAQ: BECN 2
Beacon Overview One of the largest building materials distributors in North America • 563 branches¹ across all 50 states and 6 Canadian provinces and ~8,500 employees • 2 nd largest roofing products distributor • 4 th largest distributor of interior building products • Pro-forma revenues of approximately $7 billion Multiple avenues for growth • Expansion of same-branch growth initiatives • New branch openings across product platforms • Diverse acquisition strategy in terms of size, geographies and product niche • Favorable end markets support continued cyclical recovery • High percentage of sales (70-75%) from more consistent R&R market History of success • IPO September 2004 with 66 branches, ~1,200 employees, $653 million sales and ~$50 million EBITDA • Despite cyclical headwinds, Beacon has grown each metric greater than 7x on pro forma basis • Sales CAGR of ~20%, inclusive of pro forma Allied revenue. ¹as of 05/08/18 NASDAQ: BECN 3
A Multifaceted Growth Strategy Same-Branch New Branch Market Growth Acquisitions Openings Growth Initiatives 45 Acquisitions Proven and New Drivers of Stable R&R (70-75% Since IPO Market Share Gains of Sales), Favorable including Allied Economic and and RSG Inflation Trends NASDAQ: BECN 4
Successful Acquisition History Acquisition Efforts 240 • 45 acquisitions Since IPO • 210 Attractive Valuation Multiples Acquisitions • Proven Integration Track Record and ($ of sales) 180 Synergy Realization 150 • Substantial Growth in Market Share # of Branches and Driver of Industry Consolidation 120 90 Strategic Acquisition Types • 60 New/Emerging Product Platforms • Strengthen Geographic Presence 30 • Localized Infill Opportunities 0 • Greenfield Driver • Mega-Acquisitions Acquisition Date NASDAQ: BECN 5
RSG Acquisition: Proven Success RSG Synergies Exceeded Pre- and Post- RSG EBITDA Consistent Reduction in Expectations Net Debt Leverage Post- 5.0 400 9.0% RSG 60 350 Cost Synergies ($ millions) 8.5% 4.0 50 Adjusted EBITDA ($millions) 300 Adjusted EBITDA Margin (%) 8.0% 250 40 3.0 200 7.5% 30 2.0 150 7.0% 20 100 1.0 6.5% 10 50 0.0 0 - 6.0% 2016 2017 Total Original Cost Synergy Goals Cost Synergy Actuals NASDAQ: BECN 6
Allied: Strategic Importance • Creates combined roofing distribution presence representing ~20% of the market • Unique geographic footprint with locations in all 50 states and 6 Canadian provinces • Powerhouse exteriors franchise in key New York/New Jersey markets • Strengthens presence in the Midwest, Pacific Northwest, California, Florida and Texas • Establishes platform launching investment into interior products distribution • Combines two early ecommerce adopters within exteriors products industry • Adds one of the industry’s leading private label offerings to Beacon • Shared best practices adds to combined operational expertise and improved execution NASDAQ: BECN 7
Allied: Additive to our Results 2017 Adjusted Margin Profiles • Attractive margin profile Legacy ALLIED • BEACON Allied reputation for strong product Gross Margin % 24.6 26.6 pricing discipline Adjusted Opex % 17.4 20.4 • Significant value creation from realization Adj. Operating Income % 7.2 6.2 of cost synergies Adjusted EBITDA % 8.3 7.5 • Early synergy progress results in raised Estimated Synergy Benefit by Year expectations $120 million • (prior: $110M) Meaningfully accretive to adjusted EPS 120 100 $ millions $40 million • Free cash flow benefits from branch 80 (prior: $35M) 60 consolidations and hub-and-spoke branch 40 20 network re-alignments 0 2018E 2019E 2020E NASDAQ: BECN 8
Greenfield Activity and Performance Greenfield openings Sales Contribution ~$640mm of • of Greenfields Beacon opened 51 since FY2012 FY17 Sales $700 • Acquired RSG opened 22 from 2013- Avg. Sales per Greenfield Since IPO $600 2015 $10.0 Sales ($ in millions) $8.0 • Acquired Allied opened 30 from 2011- $500 $6.0 Sales ($ in millions) 2017 $4.0 $400 $2.0 $- New branches can feature any of our product $300 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 platforms, or represent a combination of $200 multiple product categories $100 Greenfield activity is balanced with M&A $- effort Fiscal Year NASDAQ: BECN 9
Same-Branch Growth Initiatives Invest in our Personnel • Specialized recruiting programs • Talent development • Employee training/new learning center • Improving selling effectiveness Technology Investments • Leading ecommerce solutions • Use technology to help our customers win Expand Product Depth and Breadth • Cross-selling across our platforms • Building out private label lines • Expansion of complementary products Support non-traditional customers • Solar installation contractors • Dealers Choice platform • National accounts NASDAQ: BECN 10
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