Financial Trends -- 5/10
QXO has only ~8 months of operating history as an entity. Beacon Roofing Supply was acquired on
April 29, 2025, making FY 2025 a stub year with only 3 quarters of consolidated results (Q2-Q4).
There are no prior-period comparables, no YoY growth rates, and no multi-year trends to assess.
The underlying Beacon business generates real EBITDA (~$900M-1B annualized) and positive FCF, but
GAAP results are deeply negative due to $315M amortization, $84M transaction costs, and $132M
inventory fair-value adjustments. Adjusted EPS of $0.34 is extremely thin for a ~$60 stock.
This is a bet on the operator (Brad Jacobs), not on demonstrated financial trends.
Weight: 25%
FY2025 Revenue (Stub)
$6,842M
~8 months of Beacon | Pro forma ~$9.5B
FY2025 Adj. EBITDA
$648M
9.5% margin | Annualized ~$900M-1B
FY2025 GAAP EPS
($0.63)
Adj. EPS $0.34 | ~727M diluted shares
FY2025 FCF (Stub)
$183M
Net debt ~$695M | 1.1x ann. EBITDA
Quarterly Revenue (USD M) -- Stub Year 2025
Only 3 quarters of data -- no trend to assess, only seasonal pattern.
Q3 ($2,728M) is seasonally the strongest quarter for roofing distribution (summer/fall), while
Q4 ($2,194M) is seasonally weakest (winter). The ~20% sequential Q3-to-Q4 decline is normal.
Legacy Beacon generated ~$9.5B in pro forma FY 2024 revenue, meaning the underlying business
is approximately flat to slightly negative vs. prior run-rate, reflecting soft new construction
demand. With Kodiak (~$2.5B annual revenue), pro forma run-rate approaches ~$12B.
| Metric | Q2 2025 | Q3 2025 | Q4 2025 | FY 2025 |
|---|---|---|---|---|
| Net Sales ($M) | $1,906M | $2,728M | $2,194M | $6,842M |
FY 2025 is a stub year (~8 months). No prior-period comparables exist. Pro forma FY 2024 revenue ~$9.5B. Data sourced from Daloopa.
Revenue by Product (Quarterly, USD M)
Residential roofing dominates at ~50% of revenue, driven by R&R and storm activity.
Residential roofing ($930M Q2, $1,352M Q3) benefits from storm-driven demand and repair/remodel
activity. Non-residential roofing (~27%) is more tied to commercial construction cycles.
Complementary building products (~23%) provide diversification. Software products (~$15M/quarter)
are immaterial today but represent a strategic digital platform ambition.
| Metric | Q2 2025 | Q3 2025 |
|---|---|---|
| Residential Roofing | $930M | $1,352M |
| Non-Residential Roofing | $536M | $734M |
| Complementary Products | $426M | $629M |
| Software Products | $15M | $14M |
Q4 2025 product breakdown not reported at segment level. ~80% R&R / ~20% new construction end-market mix. Data sourced from Daloopa.
Margin Trends (Quarterly)
GAAP margins distorted by acquisition adjustments; adjusted gross margins stable at ~25%.
GAAP gross margin improved sequentially from 21.1% to 24.2% as inventory fair-value adjustments
rolled off ($80M in Q2, $51M in Q3, ~$0 in Q4). Adjusted gross margins are stable at ~25%.
Adj. EBITDA margin of 6.9% in Q4 reflects normal winter seasonality (lower roofing volume with
semi-fixed costs). Q3 at 11.1% is more representative of peak-season profitability. FY 2025
adj. EBITDA margin of 9.5% is depressed vs. legacy Beacon 10-12% range due to the partial-year
effect and transformation costs.
| Metric | Q2 2025 | Q3 2025 | Q4 2025 | FY 2025 |
|---|---|---|---|---|
| GAAP Gross Margin | 21.1% | 23.3% | 24.2% | 23.0% |
| Adj. Gross Margin | 25.3% | 25.2% | 24.2% | 24.9% |
| Adj. EBITDA Margin | 10.7% | 11.1% | 6.9% | 9.5% |
Legacy Beacon adj. EBITDA margins ~10-12%. Q4 seasonality always depresses margins. Data sourced from Daloopa.
Adjusted EBITDA Bridge (USD M)
$261M in one-time adjustments distort GAAP results in the stub year.
Transaction costs were front-loaded in Q2 ($66M, the deal-closing quarter) and dropped to $4M/quarter.
Inventory fair-value adjustments ($132M total) have fully rolled off by Q4. Transformation costs
($45M FY) represent organizational restructuring, tech investments, and salesforce redesign -- these
are real operating costs that should moderate but will not disappear entirely. Annualized adj. EBITDA
of ~$900M-1B is the more relevant figure for valuation purposes.
| Metric | Q2 2025 | Q3 2025 | Q4 2025 | FY 2025 |
|---|---|---|---|---|
| Adj. EBITDA | $205M | $302M | $150M | $648M |
| Transaction Costs | $66M | $4M | $4M | $84M |
| Transformation Costs | $12M | $23M | $10M | $45M |
| Inventory FV Adj. | $80M | $51M | — | $132M |
Transaction costs $84M FY, transformation costs $45M FY, inventory FV adj. $132M FY. Data sourced from Daloopa.
EPS Trajectory (Quarterly)
GAAP losses across all 3 quarters; adjusted EPS extremely thin at $0.34 FY.
GAAP diluted EPS was negative every quarter: ($0.15), ($0.24), ($0.17), totaling ($0.63) for FY 2025.
Losses driven by $315M amortization, $84M transaction costs, and $132M inventory write-ups.
Adjusted EPS of $0.34 is thin due to the massive diluted share count (~727M-869M) and heavy
interest expense. At ~$60/share, the stock trades at ~175x adjusted stub-year EPS -- valuation
is entirely dependent on forward normalization and Jacobs track record, not current earnings.
| Metric | Q2 2025 | Q3 2025 | Q4 2025 | FY 2025 |
|---|---|---|---|---|
| GAAP Diluted EPS | $-0.1 | $-0.2 | $-0.2 | $-0.6 |
| Adj. Diluted EPS | $0.1 | $0.1 | $0.0 | $0.3 |
| Adj. Diluted Shares (M) | 702M | 875M | 869M | 727M |
~700M+ diluted shares vs ~200M pre-Beacon. $315M FY amortization. Data sourced from Daloopa.
Cash Flow and Balance Sheet (FY 2025 Stub)
FCF positive at $183M on 8 months; net leverage modest at ~1.1x.
FCF of $183M on 8 months of operations is respectable. Annualized FCF likely $350-500M once
normalized. Net debt is modest at ~$695M (or ~1.1x annualized adj. EBITDA). However, the pending
Kodiak acquisition ($2.25B) will add significant incremental debt. Interest expense annualizes
to ~$145M+ based on the Q4 run-rate ($36M/quarter), which is material relative to adjusted
net income. The balance sheet has capacity for Kodiak but will be more levered post-close.
| Metric | FY 2025 |
|---|---|
| Operating Cash Flow | $261M |
| Capital Expenditure | $-78M |
| Free Cash Flow | $183M |
| Long-Term Debt (Net) | $3,057M |
| Cash and Equivalents | $2,362M |
| Net Debt | $695M |
| Interest Expense (Partial Yr) | $48M |
| Q4 Interest Run-Rate (/Qtr) | $36M |
Kodiak ($2.25B) pending Q2 2026, funded by cash + debt. Interest annualizes to ~$145M+. Data sourced from Daloopa.
Acceleration / Deceleration Analysis
| Signal | Detail | Direction |
|---|---|---|
| Organic Revenue | Approximately flat to slightly negative vs. legacy Beacon run-rate; soft new construction | Flat / Slightly Negative |
| Adj. Gross Margin | Stable at ~25% across all 3 quarters after adjusting for inventory FV write-ups | Stable |
| Adj. EBITDA | $205M -> $302M -> $150M; seasonal pattern, not deterioration; annualized ~$900M-1B | Seasonal (No Trend) |
| GAAP Profitability | Deeply negative due to $315M amortization + $84M transaction + $132M inventory FV adj. | Negative |
| Deal Costs | Transaction costs: $66M (Q2) to $4M (Q3/Q4); inventory FV fully rolled off by Q4 | Dissipating |
| Share Dilution | ~700M+ diluted shares vs ~200M pre-Beacon; massive equity issuance for deal funding | Severe Dilution |
| Balance Sheet | Net debt ~$695M (~1.1x); will increase materially post-Kodiak (~$2.25B deal) | Adequate (Pre-Kodiak) |
| FCF Generation | $183M on 8 months; annualized $350-500M; positive despite massive distortions | Positive |
Score Derivation
| Factor | Assessment | Impact |
|---|---|---|
| Base Score | Underlying Beacon business generates real EBITDA (~$900M-1B annualized), adj. gross margins stable at ~25%, FCF positive despite acquisition-year distortions | 6.0 |
| No Organic Growth | Underlying revenue flat to down vs. legacy Beacon; no visible organic momentum | -0.5 |
| GAAP Deeply Negative | ($0.63) GAAP EPS; $315M amortization + $84M transaction costs + $132M inventory FV adj. | -0.5 |
| Massive Dilution | ~700M+ diluted shares vs. ~200M pre-Beacon; adj. EPS only $0.34 for ~$60 stock | -0.5 |
| Too Young to Trend | Only 3 quarters of data; no prior-period comparables; impossible to assess trajectory | -0.5 |
| Positive FCF | $183M FCF on 8 months; low net leverage ~1.1x; business generates real cash | +0.5 |
| Deal Costs Dissipating | Transaction and inventory FV costs fully rolling off; GAAP will normalize | +0.5 |
| Net Adjustment | -0.5 - 0.5 - 0.5 - 0.5 + 0.5 + 0.5 = -1.0 | -1.0 |
| Final Score | Base 6.0 minus 1.0 net adjustment | 5/10 |
FY 2025 is a stub year (~8 months). Financial trends are one data point, not a trend. Data sourced from Daloopa.