Beacon announced results today for the second quarter ended June 30, 2023, and the company beat Wall Street’s estimate slightly, with earnings coming in at $2.5 billion; analysts had predicted $2.49 billion.

In a news release sent after trading, Beacon announced its net sales increased 6.2% compared to the prior year; $2.5 billion is a new concern record for quarterly net sales. The company said its second-quarter sales increase was driven by higher prices and acquired and newly opened branches over the last four quarters. Weighted-average selling price increased by approximately 2-3%, while estimated organic volumes decreased by about 0-1%.

“Our team’s focused execution on the Ambition 2025 growth initiatives drove record quarterly net sales, strong net income margin and double-digit Adjusted EBITDA margin,” Julian Francis, Beacon’s president & CEO, said in the August 3 news release. “We leveraged an improving residential market and our strategic investments in greenfields and acquisitions, including Coastal Construction Products, to drive top-line growth. I am especially pleased with the growth of our industry-leading digital offering, achieving record adoption by our residential customers.”

Residential roofing product sales increased 8.5%, non-residential roofing product sales decreased 1.7%, and complementary product sales increased 11.6% compared to the prior year. The increase in complementary product sales was mainly due to the November 2022 acquisition of Coastal Construction Products. 

Gross margin decreased to 25.4%, or 2.2% year-over-year this past quarter as higher product costs related to the inventory profit roll-off more than offset higher average selling prices for its products. The increases in operating expenses and Adjusted Operating Expenses were primarily from acquired branches and greenfield openings. 

Beacon 2023 Q2 Chart.png

Excluding those impacts, operating expenses from existing branches decreased by approximately 5.4%, or $21.3 million. The comparative decrease was attributed to reduced payroll and benefits costs, primarily due to lower incentive compensation, decreases in selling, and general and administrative expenses. 

On a consolidated basis, both operating expenses as a percent of sales and Adjusted Operating Expenses as a percent of sales were comparatively lower in the second quarter of 2023, driven by the higher sales combined with cost management.

Net income (loss) was $153.8 million, compared to $174.5 million in the prior year. Adjusted EBITDA was $290.3 million, compared to $307.7 million in the preceding year. EPS was $1.97, compared to $2.12 in the prior year. Second quarter results compared to the prior year period were impacted by the lower gross margin and higher operating expenses as described above.

Stock Buybacks and Retrenchment

In February 2023, Beacon announced an increase in its share repurchase program, according to which the company may purchase up to $500 million of its common stock (inclusive of the $112 million remaining authorization under the program announced in February 2022). 

During the second quarter of 2023, Beacon repurchased and retired $51.6 million of its common stock on the open market through Rule 10b5-1 repurchase plans. As a result, 63.4 million shares of common stock were outstanding as of June 30, 2023. Following the end of the second quarter, Beacon repurchased an additional $25.1 million of its common stock under the same plan. The company also said it does not expect additional repurchases during the remainder of the year under the existing share repurchase authorization.

“Our relentless customer focus is propelling the team to help our customers build more,” Francis said. “Internally, our emphasis on efficiency is also showing tangible results, demonstrated by our impressive operating expense to net sales ratio.” 

The CEO added that Beacon’s flexibility with its inventory levels, adjusting to various local market conditions, generating substantial cash flow that has allowed it to reinvest in the business and return capital to shareholders. 

In the first half of 2023, the company repurchased and retired $74.8 million of its common stock on the open market through Rule 10b5-1 repurchase plans. As a result, shares of common stock outstanding decreased, net of issuance, to 63.4 million as of June 30, 2023, from 64.2 million as of December 31, 2022.

“To that end, earlier this week, we closed on the repurchase of all the outstanding preferred shares, which effectively reduced the common share base of the Company by nearly 9.7 million shares,” Francis said. “I am very happy with the achievements this year and look forward to building on the momentum to continue to create value for all our stakeholders.”