Q1 2017 Investors Presentation Forward Looking Statements and - - PDF document

Q1 2017 – Investors Presentation

Forward Looking Statements and Non-GAAP Measures

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This presentation contains information about management's view of the Company's future expectations, plans and prospects that constitute forward-looking statements for purposes of the safe harbor provisions under 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. In addition, the forward-looking statements included in this press release represent the Company's views as of the date of this press release 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 contains references to certain financial measures that are not presented in accordance with generally accepted accounting principles (“GAAP"). The Company utilizes non-GAAP financial measures to analyze and report operating results that are unaffected by differences in capital structures, capital investment cycles, and varying ages of related assets. Although the Company believes these measures provide a useful representation of performance, non-GAAP financial measures should not be considered in isolation or as a substitute for any items calculated in accordance with GAAP. A reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measure can be found in the Appendix to this presentation as well as Company’s latest Form 8-K, filed with the SEC on February 2, 2017.

Company Overview

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• A leader in many key metropolitan markets in the United States & across Canada
• 373 branches across 47 U.S. states and 6 Canadian provinces*
• Serving nearly 67,000 customers with a broad product offering up to 46,000 SKU’s
• End market demand fueled by repair versus new construction (approx. 80%)
• Strong long-term historical performance
• Historical sales CAGR = 16.6%
• Historical operating income CAGR = 16.2%
• Historical operating margin averages 5.0% - 6.0%
• Opened 75 new greenfield locations since the IPO
• Successfully completed 40 acquisitions since our IPO in 2004
• On October 1, 2015 acquired 85-branch Roofing Supply Group (RSG) for $1.1 billion
• Fiscal 2017 YTD acquisitions - BJ Supply Company, American Building &

Roofing, Inc. and Eco Insulation Supply

Beacon Overview

$0.7 $1.5 $1.8 $1.6 $2.0 $2.3 $2.5 $4.1

$0.0 $0.5 $1.0 $1.5 $2.0 $2.5 $3.0 $3.5 $4.0 $4.5 2004 2006 2008 2010 2012 2014 2015 2016 Sales ($ in billions) Years *As of 2/2/17

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A 12-Year Success Story

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Growth Strategy

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Existing Market Growth Existing Market Growth New Branch Openings New Branch Openings Acquisitions Acquisitions Target Average Annual Growth Target Average Annual Growth

+ + =

5-10% “organic” average growth potential

• EBITDA impact =

Typically break-even in year one

Strong Platform For Growth And Acquisitions

• Market plans by location
• Sales rep productivity
• Identify new prospects
• New product offerings
• Acquisition opportunities

are identified and accountable

• Highly fragmented

market

• Over 1,500 players
• Long history of successful

integration

• Margin and revenue

improvement

• Scalable platform
• Historical sales CAGR: 16.6%

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$‐ $100 $200 $300 $400 $500 $600 $700

Sales ($ in millions) Fiscal Year

Sales Contribution

• f Greenfields

Greenfield Growth

$‐ $2.0 $4.0 $6.0 $8.0 Sales ($ in millions) Years in Operation

Average Sales per GF Since IPO

Greenfield Financial Impact

• Disciplined approach to new branch openings in contiguous

markets

• Low initial investment … $0.6 million to $2.0 million
• Rapid breakeven … typically cash flow positive within one year
• Beacon Greenfields opened since the IPO account for

~$580mm of FY16 sales

• New markets are continually being identified & evaluated

CAGR = ~30%

~$580mm of FY16 Sales

Beacon & RSG Greenfield Openings*

24 4 11 34 12 1 1

FY04-FY11 FY12 FY13 FY14 FY15 FY16 FY17 * Reflects “net” openings including branch closures for each noted timeframe

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Acquisition Growth

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• Up to 46,000 SKUs offered
• Selected relationships with manufacturers to achieve substantial volume discounts
• Historically, re-roofing makes up approximately 79% and 81% of residential and non-residential demand,

respectively.*

Product Mix Growth

Source: Freedonia June 2015

Sales Product Mix ($ in millions)

Sales CAGR

19.1% 16.1% 11.6%

$269

$897 $1,236 $2,187

$223

$600 $883 $1,336

$161

$237 $396 $604

FY04 FY09 FY15 FY16

Residential Roofing Non-Residential Roofing Complementary Building Products

15.7%

$1,734 $2,515 $4,127

24.7% 34.2% 41.2%

51.7%

$653

53.0% 14.6% 32.4% 49.2% 35.1% 34.6% 13.7%

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Significant Sales Growth

$653 $851 $1,501 $1,646 $1,784 $1,734 $1,610 $1,817 $2,044 $2,241 $2,327 $2,515 $4,127

$0 $300 $600 $900 $1,200 $1,500 $1,800 $2,100 $2,400 $2,700 $3,000 $3,300 $3,600 $3,900 $4,200 $4,500

FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16

Net Sales ($ in millions)

FY04 to FY16 = 16.6% CAGR

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Industry Drivers

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Residential 58% Non-Residential 42%

Large And Attractive Market

Approximately $26 billion industry

Source: The Freedonia Group and Management estimates

U.S. Roofing Materials Market

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• Traditionally, over 78% of expenditures in the

roofing market are for re-roofing projects, with the balance being for new construction.

• In 2014, re-roofing made up approximately

80% and 83% of residential and non- residential demand, respectively.

• The median age of the housing stock as of

2014 is over 40 years old.

• Re-roofing demand provides stability and the

potential for growth even during periods of declining building construction expenditures.

Aging Housing Market Leads To Re-Roof Demand

1960’s 11.5% 1970’s 18.8% 1980’s 12.1% 1990’s 11.6% 2000 or later 15.2%

Year of construction of housing stock

2014 (133.3 million units)

Pre - 1960 30.8%

Source: The Freedonia Group – June 2015

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Re-Roofing Concentration Drives Stable Growth

Source: The Freedonia Group

• Residential new construction activity has been volatile
• Commercial new construction is also volatile and closely follows economic cycles
• Demand for roofing, due to the large installed base of aging structures, remains very stable and consistent

despite the construction cycles

• 50.0%
• 40.0%
• 30.0%
• 20.0%
• 10.0%

0.0% 10.0% 20.0% 30.0%

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Construction Growth YoY %

New Residential New Non-Residential Total Roofing

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40% 25% 27% 2% 3% 3%

Leaks Old Weather Damage Deteriorating Upgrade Appearance Other

Drivers of Re-Roofing

94% of U.S. re-roofing demand is non-discretionary and insulated from broader economic conditions

Source: 3M, National Association of Home Builders

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Source: National Climatic Data Center

Strategically Located To Serve Severe Weather Markets

Number of Events

Billion Dollar Weather Disasters

1980 - 2015

1 - 15 16 - 29 30 - 39 40 - 49 50+

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Scale Advantages in a Fragmented Market

16%

Roofing Industry Overview Estimated Roofing Industry Market Share(2)

Rest of Top 4(3) Company 1: 25% Company 3: 6% Company 2: 6% Others Other Roofing Suppliers: 48%

Number of Roofing Distributors Multi-Regional Roofing Players Top 5 Distributors

1,500 Total 75 Are in more than

• ne region

Account for ~52%

• f industry sales
• Roofing is approximately a $26 billion industry(1)
• Beacon is the second largest roofing distributor

in North America

• Beacon sales are more than $1 billion greater

than its next largest competitor

• Roofing is approximately a $26 billion industry(1)
• Beacon is the second largest roofing distributor

in North America

• Beacon sales are more than $1 billion greater

than its next largest competitor

Sources: The Freedonia Group, Pro Sales Magazine. (1) Source: The Freedonia Group and Management estimates (2) Top 4 share estimate based on sales figures in Pro Sales Magazine, May 2015. (3) Figures may not sum due to rounding.

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Roofing Markets Provide Growth Opportunity

Sources: Asphalt Roofing Manufacturers Association, Summary of Asphalt Roofing Industry Shipments. U.S. Census Bureau. National Association of Realtors existing home sales and Owens Corning management estimates. 3M, National Association of Home Builders.

Households in America are getting older…

Median Age of Owner-Occupied Housing 23 years 38 years 94% of U.S. re-roofing demand is non-discretionary U.S. Asphalt Shingle Market

(Sq. Ft. in mm)

…And most owners are forced to invest in repairs… …While roofing volume is still below long-term averages

40% 25% 27% 2% 3%3%

Leaks Old Weather Damage Deteriorating Upgrade Appearance Other

3 3 3 2 7 8 18 8 3 22 17 6 19 11 6 6 4 107 103 109 110 113 116 116 112 100 96 93 91 93 94 88 83 89 33 30 31 32 34 37 39 35 26 17 11 11 11 14 17 18 19 143 136 143 144 154 161 173 155 129 135 120 108 122 118 111 107 112 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Major Storms Re-roof Demand New Construction

Long-Term Average: 134mm

Change From Peak Levels % decline from total peak (2005) 35.3% % decline from major storms peak (2008) 81.8% % decline from reroof peak (2005) 23.3% % decline from new construction peak (2005) 51.3%

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Financial Overview

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Margin Analysis by Fiscal Year

7.7% 9.3% 7.1% 6.0% 6.3% 4.7% 5.9% 7.5% 6.5% 4.6% 5.1% 6.5%

FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16

Existing Markets Gross Profit Margin Existing Markets Operating Income Margin

25.3% 25.4% 23.4% 24.8% 23.7% 22.4% 23.1% 24.4% 23.4% 22.7% 23.7% 24.6%

FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16

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Financial Review

(1), (2) Please see 8K filed on 2/2/2017 and the reconciliation tables at the end of this presentation

($, in millions)

2017 2016 Change

Net Sales $1,002.2 $976.5 2.6% Gross Profit $251.1 $233.2 7.7%

% margin 25.1% 23.9% 1.2 pts

Operating Income $47.0 $26.9 74.7%

% margin 4.7% 2.8% 1.9 pts

Net Income $20.4 $7.1 188.0%

% margin 2.0% 0.7% 1.3 pts

Diluted EPS $0.33 $0.12 175.0% Adjusted EPS(1) $0.44 $0.41 6.6% Adjusted EBITDA(2) $80.0 $73.4 9.0%

% margin

8.0% 7.5% 0.5 pts

Q1

Non-GAAP Financials:

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Significant Cost Synergy Potential

Estimate of RSG Synergy Opportunity Run-Rate Synergies & Timing of Expected Realization

~$55mm ~$55mm

Source: Global management consulting firm.

 Beacon has successfully acquired and integrated 40 businesses since its IPO in 2004  Run-rate cost synergies conservatively represent ~5% of RSG’s 2014 sales  Management, with support of external consultants, has developed a detailed plan for the implementation of its cost synergy initiatives  Beacon has successfully acquired and integrated 40 businesses since its IPO in 2004  Run-rate cost synergies conservatively represent ~5% of RSG’s 2014 sales  Management, with support of external consultants, has developed a detailed plan for the implementation of its cost synergy initiatives

60% 95% 100%

$30 ~$40 ~$55

FY16 Target FY16 Achievement FY17 Goal

% Achieved

55% 73% 100%

($mm)

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Ample Liquidity

• Cash of $73.3 million as of 12/31/2016
• Strong liquidity position with $341.8 million of ABL availability as of 12/31/2016 for seasonal working capital

needs and acquisitions

Conservative Capital Structure

• Strong free cash flow
• Weighted Average Cost of Capital ~4.2%
• 12/31/16 LTM Net Debt Leverage ratio 3.0x
• By FY18 plan to deliver Leverage ~ 2.0x

Minimal Capital Expenditures … historical average 1.1% of sales

• $17.4 million in FY12, $26.1 million in FY13, $37.2 million in FY14, and $20.8 million in FY15, and $26.3

million in FY16.

Financially Positioned To Deliver On Growth

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Significant Cash Flow Generation Supports Deleveraging

Strong Deleveraging Profile Illustrative Net Debt / Pro Forma EBITDA

• Pro forma net debt of $1.1 billion at RSG close

‒ Strong liquidity position with $350mm of ABL availability for seasonal working capital needs and acquisitions

• Rapid expected deleveraging driven by:

‒ Cost synergies realization ‒ Earnings expansion ‒ Strong free cash flow generation enhanced by recovering housing sector ‒ Low ongoing capital expenditure ‒ Utilization of tax attributes, including approximately $130 million in net operating losses, existing intangible deductions of approximately $190 million and transaction- related deductions of approximately $50 million

• Pro forma net debt of $1.1 billion at RSG close

‒ Strong liquidity position with $350mm of ABL availability for seasonal working capital needs and acquisitions

• Rapid expected deleveraging driven by:

‒ Cost synergies realization ‒ Earnings expansion ‒ Strong free cash flow generation enhanced by recovering housing sector ‒ Low ongoing capital expenditure ‒ Utilization of tax attributes, including approximately $130 million in net operating losses, existing intangible deductions of approximately $190 million and transaction- related deductions of approximately $50 million

1.5x 4.3x 3.6x 3.3x 3.0x 2.0x

Beacon Status Quo 03/312015 Pro Forma at Close 6/30/2016 9/30/2016 12/30/2016 FY18 Goal

Approx ~2.0x in three years 25

Long-Term Revenue Growth Outlook

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Long Term Annual Financial Performance Objectives

Organic Sales Growth 5.0% - 10.0% 5.0% - 10.0% Gross Margin 23.5% - 25.5% 23.5% - 25.5% Variable / Fixed Structure 60% / 40% 60% / 40% Adjusted EBITDA% 8% - 11% 8% - 11%

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Key Strategic Tenets

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Appendix

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Beacon Roofing Supply A Company Of Substance

Benchmarking Culture Excellent Track Record Fundamentals Forecasting & Accountability Routines

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RSG and Other Non-Recurring Acquisition Costs

Acquisition costs reflected on a pre-tax basis

Q1 Q1 2017 2016 Integration Costs $0.0 $14.1

• Misc. SG&A

$0.0 $9.8 Op Ex Stock Comp. Expense $0.0 $4.3 Op Ex Transaction Costs $2.7 $9.6

• Misc. SG&A

$1.2 $5.0 Op Ex Interest Expense $1.6 $3.8 Other (income) / expense (Gain) / Loss on Assets $0.0 $0.8 Op Ex Incremental Amortization $8.0 $5.7 Op Ex Total $10.7 $29.5

(In millions)

P&L Line Item

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19.8%

• f

Sales

19.8%

• f Sales

Adjusted Net Income is defined as net income excluding non-recurring costs and the incremental amortization of acquired intangibles related to acquisitions completed in fiscal years 2016 and 2017. We believe that Adjusted Net Income is an operating performance metric that is useful to investors because it permits investors to better understand year-over-year changes in underlying operating performance. Adjusted net income per share or “Adjusted EPS” is calculated by dividing the Adjusted Net Income for the period by the weighted-average diluted shares outstanding for the period. Non-GAAP Adjustments are comprised entirely of non-recurring costs and the incremental amortization of acquired intangibles related to acquisitions completed in fiscal years 2016 and 2017 - See "RSG and Other Fiscal 2016-2017 Acquisition Costs" slide for further detail. While we believe Adjusted Net Income and Adjusted EPS are useful measures for investors, these are not measurements presented in accordance with United States Generally Accepted Accounting Principles (“GAAP”). You should not consider Adjusted Net Income or Adjusted EPS in isolation or as a substitute for net income and net loss per share or diluted earnings per share calculated in accordance with GAAP.

(In millions) Actual Non-GAAP Adjustments Actual (Adjusted) Actual Non-GAAP Adjustments Actual (Adjusted) Net sales 1,002.2 $

• $

1,002.2 $ 976.5 $

• $

976.5 $ Cost of products sold 751.1

• 751.1

743.3

• 743.3

Gross profit 251.1

• 251.1

233.2

• 233.2

Operating expense 204.1 (9.1) 195.0 206.3 (25.7) 180.6 Income from operations 47.0 9.1 56.1 26.9 25.7 52.6 Interest expense, financing costs and other 13.6 (1.6) 12.0 16.3 (3.8) 12.5 Income before provision for income taxes 33.4 10.7 44.1 10.6 29.5 40.1 Provision for income taxes 13.0 4.1 17.1 3.5 11.9 15.4 Net Income 20.4 $ 6.5 $ 27.0 $ 7.1 $ 17.6 $ 24.7 $ Reconciliation of EPS to Adjusted EPS: EPS 0.33 $ 0.12 $ Non-GAAP Adjustments per share impact 0.11 0.29 Adjusted EPS 0.44 $ 0.41 $ Three Months Ended December 31, 2016 Three Months Ended December 31, 2015

Reconciliation: Adjusted Net Income/Adjusted EPS

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19.8%

• f

Sales

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Adjusted EBITDA is defined as net income plus interest expense (net of interest income), income taxes, depreciation and amortization, adjustments to contingent consideration, stock-based compensation and non- recurring acquisition costs from acquisitions completed in fiscal years 2016 and 2017. We believe that Adjusted EBITDA is an operating performance measure that provides investors and analysts with a measure of

• perating results unaffected by differences in capital structures, capital investment cycles, and ages of related assets among otherwise comparable companies.

Acquisition costs reflect all non-recurring charges related to acquisitions completed in fiscal years 2016 and 2017 (excluding the impact of tax) that are not embedded in other balances of the table. Certain portions of the total acquisition costs incurred are included in interest expense, income taxes, depreciation and amortization, and stock-based compensation. While we believe Adjusted EBITDA is a useful measure for investors, it is not a measurement presented in accordance GAAP. You should not consider Adjusted EBITDA in isolation or as a substitute for net income, cash flows from operations, or any other items calculated in accordance with GAAP. In addition, Adjusted EBITDA has inherent material limitations as a performance measure. It does not include interest expense. Because we have borrowed money, interest expense is a necessary element of our costs. In addition, Adjusted EBITDA does not include depreciation and amortization expense. Because we have capital and intangible assets, depreciation and amortization expense is a necessary element of our costs. Adjusted EBITDA also does not include stock-based compensation, which is a necessary element of our costs because we make stock awards to key members of management as an important incentive to maximize overall company performance and as a benefit. Moreover, Adjusted EBITDA does not include taxes, and payment of taxes is a necessary element of our operations. Accordingly, since Adjusted EBITDA excludes these items, it has material limitations as a performance measure. We separately monitor capital expenditures, which impact depreciation expense, as well as amortization expense, interest expense, stock-based compensation expense, and income tax expense. Because not all companies use identical calculations, our presentation

• f Adjusted EBITDA may not be comparable to other similarly titled measures of other companies.

Reconciliation: Adjusted EBITDA

2016 2015 2016 Net Sales 1,002.2 $ 976.5 $ 4,127.1 $ Net Income 20.4 $ 7.1 $ 89.9 $ Acquisition costs 1.2 15.7 24.7 Interest expense, net 13.2 16.3 58.1 Income taxes 13.0 3.5 56.6 Depreciation and amortization 28.4 23.7 100.2 Stock-based compensation 3.8 7.2 17.7 Adjusted EBITDA 80.0 $ 73.4 $ 347.4 $ Adjusted EBITDA as a % of net sales 8.0% 7.5% 8.4% Twelve Months Ended September 30, Three Months Ended December 31,

19.8%

• f

Sales

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Reconciliation: Net Debt Leverage Ratio1

1 Net debt leverage ratio = Total debt, net of cash / Trailing 4 quarter Adjusted EBITDA

(In millions) Gross total debt as of December 31, 2016 1,134.0 $ Cash and cash equivalents as of December 31, 2016 (73.3) $ Net debt as of December 31, 2016 1,060.7 $ Adjusted EBITDA for the three months ended December 31, 2016 80.0 $ Adjusted EBITDA for the twelve months ended September 30, 2016 347.4 $ 427.4 $ Less: Adjusted EBITDA for the three months ended December 31, 2015 73.4 $ Pro Forma Adjusted EBITDA for the twelve months ended December 31, 2016 354.0 $ Net Debt Leverage Ratio as of December 31, 2016 3.0 $