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 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 star 0. As a reminder, this conference is being recorded Thursday, August 1, 2019. I would now like to turn the conference over to Ms. Tabitha Zane. 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 topfield.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 Vollert.

Good morning, everyone, and thanks for joining us today. We're pleased to report another solid quarter, again demonstrating the strength of our uniquely diversified business model and our focus on profitable growth. Before reviewing our second quarter results, I want to update you regarding our view of the U.S. housing industry. On our last call, With mortgage rates moving lower and builders positively reacting to the demand for more affordable housing, we expressed optimism that housing starts would begin climbing higher as the year progressed. Our outlook at that time was further reinforced by a more favorable trend for permits, positive conversations with builders, and a healthy economy driving solid wage and job growth. At this point in time, starts have not accelerated to the degree that we and many others had been anticipating. However, for all the aforementioned reasons, we do expect starts to strengthen further as we move through the year. Long term, we remain bullish on residential new construction. The fundamentals, such as household formations and limited housing supply, point towards continued growth in new home construction activity. Although the slope of growth may be unpredictable and could be choppy in the near term, We are confident starts will improve and continue towards the 50-year historical average of $1.4 million to $1.5 million per year. Moving to Topfield's financial results on slide four, we again reported an excellent quarter as we continue to execute well on our strategy, which includes outfacing lagged housing starts through market share gains and strong operational performance, growing markets here in the commercial space, and converting our top line growth to the bottom line through a focus on improving operational efficiency and leveraging our existing branch footprint and back office operations. In the second quarter, total sales were up 8.9% compared to lagged housing starts that were down 8%. Our commercial business again performed extremely well, and we saw solid residential new construction activity at True Team. While John will follow with more specifics, I want to emphasize that we are particularly pleased with the expansion of our adjusted operating and EBITDA margins of 210 basis points and 260 basis points, respectively. That drove adjusted net income to $1.43 per share, an increase of almost 40%. Our internal focus on share gains and operational efficiency continues to pay off. Turning to capital allocation on slide five, in mid-July, we completed the acquisition of Viking Insulation. This is a well-established, well-managed, and profitable company based in Burbank, California that focuses on fiberglass installation for residential and light commercial projects. For the trailing 12 months ended March 31, 2019, Viking generated approximately $9 million of revenue. Our cost-saving synergies will add to the financial performance of this excellent addition to our national footprint. Looking forward, our seasoned M&A team continues to work a robust pipeline of prospects, primarily core insulation companies, and we expect to close on a number of these opportunities this year. In addition to acquisitions, our capital allocation strategy includes share repurchases, and in the second quarter, This included almost 197,000 shares and an average per share price of $75.57. Before turning the call over to John, I want to emphasize that our national scale gives us a significant competitive advantage both from a material and a labor standpoint. Just as important, our diversified business model with both installation and distribution into both the residential and commercial markets gives us the ability to perform well in any environment. Our year-to-date results clearly demonstrate the value of this business model. John?