TopBuild Corp.

Ladies and gentlemen, thank you for standing by, and welcome to the Top Build Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. At that time, if you have a question, please press the 1 followed by the 4 on your telephone. If at any time during the conference you need to reach an operator, please press the star 0. As a reminder, this conference is being recorded Tuesday, February 26, 2019. I would now like to turn the conference over to Tabitha Zing. Please go ahead, ma'am.

Thank you, and good morning. On the call today are Jerry Bolas, Chief Executive Officer, Robert Buck, President and Chief Operating Officer, and John Peterson, Chief Financial Officer. Please note, we have posted senior management's formal remarks on the investor relations section of our website at topbills.com. As shown on slide two of today's presentation, many of our remarks will include forward-looking statements concerning the company's operations and financial condition. These forward-looking statements include known and unknown risks, including those set forth in this morning's press release, as well as in the company's filings with the SEC. The company assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events. In addition, we will also discuss non-GAAP financial measures, which can be reconciled to the most comparable GAAP measures in a table included in today's press release. Please turn to slide three. I will now turn the call over to Jerry Voller.

Welcome, everyone, and thanks for joining us today. We finished 2018 with a strong fourth quarter, completing another outstanding year for Top Build. Our strategy, diversified business model, and execution again delivered on our objective of achieving profitable growth. Before discussing our financial results, I'd like to provide an update on our current view of the US housing industry. On our November call, I talked about consumer affordability issues potentially causing a short-term pause within the context of an otherwise strong environment for new home construction. Since then, the Fed has moderated their view on future interest rate increases Mortgage rates have come down from fourth quarter highs, and the stock market has rebounded from an overall negative sentiment that significantly impacted valuations. In addition, our builder customers, as they always do, are adjusting their strategies to provide homes that customers want and can afford. All of these developments are positive for new residential home construction. As an additional overall positive, the general economy remains strong with solid wage and job growth. While we still believe there could be a short-term pause in the near term, all of the factors I just mentioned appear to preclude an escalation of consumer affordability issues. Looking ahead, as shown on slide four, we continue to believe that supply and demand fundamentals will eventually drive housing starts towards the historical average of 1.4 to 1.5 million per year. Inventory is low, household formations are increasing, and we believe pent-up demand is growing. The next quarter or two will certainly inform the magnitude of any potential 2019 pause, inform the magnitude of any potential 2019 pause. But whatever shape that takes, our diversified business model that includes installation and distribution in both the residential and commercial markets and a core competency around acquisition, selection, and integration offers multiple avenues for growth and gives us the ability to perform well in any environment. Although John will get into further detail regarding our fourth quarter and full year 2018 financial results, let me discuss a few of the overall trends. Turning to slide five, within the context of 90-day lag housing starts, which were up 5.3% for the year, our total 2018 revenue increased 25.1%, with same branch up 8.5% and acquisitions contributing 16.6%. We view this as outstanding top-line performance, driving share in our existing branches and expanding our footprint aggressively through acquisitions. At the gross profit line, fourth quarter 2018 improved 40 basis points over fourth quarter 2017, and total year 2018 was flat at 24.2%. By far the most significant factor was our ability to successfully offset unprecedented material cost increases with higher sales pricing. Given our expansive geographic footprint and customer base, achieving this delicate balance between price and volume has been a monumental effort by our operators across the country. And they've done an outstanding job. It also reflects positively on the quality of our partnerships with both our suppliers and customers. Adjusted operating income and adjusted EBITDA margins expanded, both for the fourth quarter and full year. The incremental EBITDA margin, a key metric for us, was strong in the fourth quarter and finished the total year at 17.9%, 25.1% same branch and 14.3% for acquisitions. Our consistent culture of operational improvement and the leveraging of fixed costs across the company are the key drivers of this excellent result. Beyond that, our core competency around integrating acquisitions has produced excellent returns on the capital we are spending on our number one capital allocation priority. Moving to slide six, looking back on 2018, other significant accomplishments include closing and integrating three acquisitions, including USI, that are expected to generate over $410 million in annual revenue with significant synergies driving margin results, completing a $400 million bond offering at 5.625%, returning $65 million of capital to our shareholders through a share repurchase program, and winning the 2018 Energy Star Partner of the Year for our continued leadership in protecting the environment through superior energy efficiency achievements. Top Build Home Services has been an Energy Star Partner for 16 years by working closely with home builders and consumers to create homes that are more comfortable and energy efficient. As we looked at 2019 on slide seven, we are optimistic that it will be another year of profitable growth for capital. The housing market, even if there is a short-term pause, will eventually regain momentum due to strong supply and demand fundamentals. Our enhanced size and scale facilitate strong supplier partnerships and contributes to the outstanding value proposition we provide our customers. We will continue to drive operational efficiencies, improve sales and labor productivity, and leverage our cost base with higher revenue and further improve margins. Capital allocation remains an important component of our shareholder value creation strategy, with acquisitions being our number one priority. Our pipelines are robust with a primary focus on profitable companies within our two core businesses. As a reminder, We seek well-managed companies with solid customer bases that expand our market share in high-growth regions. Past beyond what is required to fund internal growth and acquisitions will be returned to our shareholders through our newly authorized $200 million share repurchase program. John, let me turn it over to you.