SRS Distribution Inc.

Overview Key strengths Key risks Majority of sales are tied to repair and remodeling (R&R) markets, which somewhat offsets the cyclicality of its results. Limited geographic and end-market diversity due to its sales concentration in North America. S&P Global Ratings-adjusted EBITDA margins of more than 10% compare favorably with those of its distribution peers. Operates in a highly competitive and fragmented industry. Aggressive growth policy leads to elevated S&P Global Ratings-adjusted leverage. The company's significant expansion has come at the expense of increased leverage and debt. In the past 12 months, SRS spent roughly $1.9 billion on acquisitions and paid out an additional $1.2 billion in dividends. In addition, the company recently restructured its capital stack with the summation of

...The company's significant expansion has come at the expense of increased leverage and debt. In the past 12 months, SRS spent roughly $1.9 billion on acquisitions and paid out an additional $1.2 billion in dividends. In addition, the company recently restructured its capital stack with the summation of roughly $5.4 billion. We forecast SRS' S&P Global Ratings-adjusted debt to EBITDA will remain elevated in the 6.5x-7.0x range. Although we believe the company will significantly expand its revenue and EBITDA this year, we still anticipate it will remain highly leveraged into 2023. This compares with our expectations for its peers such as Beacon Roofing Supply (leverage of 2x-3x) and ABC supply (2x-3x). We expect SRS to generate S&P adjusted EBITDA of $775 million-$800 million in...

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