TopBuild Corp.

Greetings, and welcome to the Top Build Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we'll 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 the operator, please press star 0. I would now like to turn the conference over to Tabitha Zain. Please go ahead.

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 conditions. 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 Vollis.

Welcome everyone and thanks for joining us today. Our first quarter results have top-filled off to a very good start in 2019 with solid growth in both sales and earnings. Before discussing our financial results, I'd like to comment on our view of the current state of the U.S. housing industry. Affordability continues to be an issue, although it has been improving over the past few months. With the Fed hitting the brakes on further rate increases, mortgage rates have decreased significantly from late 2018 when they were approaching 5%. Mortgage rates at that level were one factor of pricing potential buyers out of the market. Fortunately, most of that increase has been reversed and 4% is again in sight. This reduction in rates does a couple of things. First, it contributes to pushing mortgage payments as a percentage of income back down to just below the historical average. Second, the optics signal to those on the sidelines that now is a good time to buy their first house or trade up to a bigger one. This is likely a key reason for new home sales in March increasing 3% year over year and 2% on a trailing three-month basis. Builders are also getting a bit of a break as the price of lumber, a major cost component, is considerably lower than previous levels. That certainly helps them in their question control pricing and footprint size, build more homes that consumers can afford, and still make money doing it. So while housing starts have been disappointing over the last several months, we believe they will climb higher as the year progresses for a couple of reasons. A strong economy with solid job and wage growth and improved affordability are driving new home sales. Builders are increasingly focused on building entry-level homes where inventory is extremely tight. And the recent trend for permits, which provides a forecast for starts, has been strong. In summary, supply and demand fundamentals continue to suggest a healthy construction environment in 2019 and for at least the next several years. Moving to Topfield's results on slide four, the strength and diversity of our operating model was very much on display this quarter as we recorded record first quarter results. Total sales were up 26%, with same branch sales increasing 7.1%. Both residential and commercial performed extremely well. Because our footprint spans the entire U.S., the unusually wet weather in parts of the country did impact a few of our branches, but most reported very healthy results. The conversion of that top line to the bottom line was again outstanding and produced EPS of $1.06 for the quarter. All of the earnings-related metrics were very good, and John will follow me with more detail on those. Driving all this positive news is a continued focus on improving the fundamentals of our business. The diversity of our business model offers numerous levers to manage top-line growth, and our relentless pursuit of operational efficiency drives conversion to the bottom line. Robert will have more to say about this in his comments. Turning to slide five, acquisitions have proven to be an excellent use of capital, and we have developed an effective core competency around selection, execution, and integration. Since 2016, we've acquired 10 companies, generating over $500 million of annual revenue. USI, the largest and most recent of these, continues to perform very well due in large part to cost-related synergies well north of the $15 million we identified a year ago. I want to congratulate our dedicated team of seasoned and talented professionals from both the Top Build and previous USI organizations for turning this significant investment into a financial win for Top Build and its shareholders. Last spring, we intentionally hit the pause button on acquisitions to give our full attention to USI. Today, we have a robust pipeline of prospects that we have identified and are moving through our discipline process. We expect to close on a number of these opportunities this year. Although we see considerable further runway with our current product offerings, we are always considering adjacent product categories that could add to our already substantial growth trajectory. Our approach is disciplined, and boxes to check include margin potential, scalability, and ease of execution. We have learned a few things from our long history in this business. and we'll always find a good balance between adjacent opportunities and ongoing focus on our current core products that serve us and our customers so well. Our second capital allocation priority after acquisitions is share repurchases. The $50 million ASR we announced last November was completed in the first quarter at an average price of $51.37 per share. And we acquired an additional 72,791 shares through March 31, 2019, at an average price of $63.49 per share. We will continue to make use of our current $200 million shared buyback authorization as the year progresses. John, I'll turn it over to you.