TopBuild Corp.

Greetings, and welcome to the top-billed fourth quarter and year-end 2020 earnings call. At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Tabitha Zane. Please go ahead, ma'am.

Thank you and good morning. On the call today are Robert Buck, President and Chief Executive Officer, and John Peterson, Chief Financial Officer. We have posted senior management's formal remarks and a PowerPoint presentation that summarizes our comments on the investor relations section of our website at topbills.com. Many of our remarks will include forward-looking statements which are subject to known and unknown risks and uncertainties, 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. Please note that some of the financial measures to be discussed on this call will be on a non-GAAP basis. The non-GAAP measures are not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP. We have provided a reconciliation of these financial measures to the most comparable GAAP measures in a table included in today's press release and in the presentation accompanying this call. I will now turn the call over to Robert Buck.

Good morning, and thank you for joining us today. We're pleased to report a strong fourth quarter with volume growth and margin expansion at both business segments. This casts a year of opportunities and challenges for our company and our industry, framed by a national pandemic and unprecedented demand for residential new construction. I want to start by thanking our entire top-level team for their dedication, enthusiasm, and hard work. Our team quickly adapted to a changing world, working from home in some cases, and adhering to strict safety standards at all of our facilities and on job sites. At the same time, the team continued to provide our customers with the level of service and support they expect from our top-billed companies. While John will discuss our financial results in detail, I want to highlight our full-year 2020 results. Revenue increased 3.6%, adjusted operating profit grew 22.8%, and adjusted EBITDA increased 21.6%. Adjusted operating and EBITDA margins expanded 200 basis points and 240 basis points respectively. And adjusted net income increased 32.6% to $7.28 per diluted share. These solid results are a testament to the strength and resiliency of our top-billed team during the pandemic, and especially given the four states where we have significant operations deemed construction not essential for an extended period of time. In 2020, we completed three acquisitions, Hunter Insulation, Garland Insulating, and Cooper Glass, which combined are expected to contribute almost $80 million of annual revenue. We likely would have welcomed additional companies to our team during the year, but made the decision to pause our acquisition program in late first quarter and through the summer in response to the many uncertainties related to the pandemic. Turning to our outlook for 2021, from my point of view, Our industry hasn't been this strong since before the Great Recession. The combination of significant pickup demand, low levels of new and resale home inventory, historically low interest rates, and a COVID-enhanced consumer appetite to relocate from densely populated urban communities to suburban rural locations are all contributing to our extremely favored outlook for the long-term growth and health of our industry and our companies. Top builders is an excellent position to capitalize on this housing growth with a national footprint, supply chain focus, and a flexible labor force that can be shared across multiple branch locations. However, we also recognize there will be some constraints throughout the entire housing industry, primarily from labor material, that will impact how quickly orders convert into permits, permits into starts, and ultimately into work for top builders. these constraints will likely lead to a longer build cycle extending to housing recovery. Regarding material availability, all trades are experiencing constrained capacity. While fiberglass is on allocation and spray foam raw material is in short supply, we will see additional fiberglass capacity come online later this year and spray foam availability should improve by the end of the second quarter. Owens Corning is adding fiberglass capacity in Kansas City in the second quarter, and Knopf and Johns Manville are each bringing on glowing wool capacity in the third and fourth quarters of this year. As far as material pricing, we saw an increase last September as well as this January, and a number of manufacturers have announced price increases effective this April. We feel very confident in our ability to manage these cost increases as evidenced by our track record in 2018 when we saw significant material inflation. This is a testament to our strong operations leadership and local branch managers, as well as the quality of our partnerships with our suppliers and customers. Labor constraints remain top of mind within the industry as well. As it relates to labor at Topfield, our friends and family recruiting program, which I discussed last quarter, is yielding great results. We have added several hundred new installers through this program and continue to receive referrals daily. We're also focusing on improving the productivity of our current labor force, including getting into the job site faster using routes optimization tools. In addition, having all of our branch locations on the same ERP system gives us a distinct advantage in servicing our customers. We move crews, equipment, and material among our branches every day to ensure we meet our builder customer's project timelines. No other installer has this capability. This is yet another reason, in addition to achieving supply chain efficiency, we quickly move acquisitions onto our operating platform. Our commercial business, which slowed last year due to pandemic-related project delays, is showing solid signs of improvement. On a same branch basis, revenue was flat compared to a year ago in the quarter. Bidding activity remains very strong, and our backlog is growing. Our long-term outlook for our commercial business remains bullish, and we expect to see meaningful improvement as we move through this year. Acquisitions remain an important component of our growth strategy and our continued number one capital allocation priorities. In January, we announced the acquisition of LCR Contractors, a fireproofing and insulation company generating approximately $58 million in annual revenue and servicing the Texas markets of Dallas, Austin, and Amarillo, and the Tennessee markets of Knoxville and Asheville. This is a great addition to True Team as it significantly enhances our heavy commercial presence in these high-growth regions. Since 2016, we've acquired 15 companies which combined are contributing almost $650 million of annual revenue. Our focus remains on acquiring installation and distribution companies in core installation. Our scope is wide and includes companies installing many different types of installation products beyond just fiberglass and spray foam. With a robust pipeline of prospects, we expect to stay very busy on this front in 2021. Before handing the call over to John, I want to highlight our annual leadership meeting, which we held in mid-January, virtually, of course. Everyone is extremely optimistic and excited about what they see as robust growth in our business. We took the opportunity to set forth our goals for the year with a continued focus on driving improvements throughout the business. Towards that end, our team is focused on driving organic growth, successfully integrating new acquisitions into our family of companies, expanding our efforts to think differently in order to simplify processes, leverage fixed overhead, manage expenses, and improve productivity, developing and building the talent and diversity of our team and striving for zero safety estimates. We are looking forward to a great 2021. I'll now turn the call over to John.