TopBuild Corp.

Greetings and welcome to the top-billed first quarter 2021 earnings call. At this time, all participants are on a listen-only mode. A question and answer session will follow the formal presentation. If you would like to ask a question, please press star 1 on your telephone keypad. If anyone should require operator assistance during the conference, please press star 0 on your telephone keypad. As a reminder, this conference is being recorded. I'll now turn the call over to Ms. Tabitha Zane, Vice President of Investor Relations. Thank you. You may begin.

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 topbill.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 gap 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. The residential new construction market remains incredibly strong, with builders reporting robust first quarter order growth and March new housing starts at a pace of 1.74 million, on a seasonally adjusted basis, well above industry expectations. This demand is greatly outstripping the number of homes available for sale, both new and existing, and is being fueled by low interest rates, increasing household formations, an improving economy, and a COVID-enhanced consumer appetite to relocate from densely populated urban communities to suburban rural locations. In fact, An article in the Wall Street Journal noted that a recent analysis by Freddie Mac showed that the U.S. housing market is nearly 4 million homes short of buyer demand. As the residential construction industry drives to meet this demand, all trades are facing material and labor constraints, effectively tempering the speed at which new homes can be built. As a result, assuming interest rates remain low and home affordability stays in balance, we should see several years of strong housing activity. ThoughtBuild continues to capitalize on this housing growth as our solid first quarter results demonstrate. Revenue increased 13.7%, adjusted operating profit grew 38.3%, and adjusted EBITDA increased 31.1%. Adjusted operating margins expanded 230 basis points, adjusted EBITDA margins expanded 210 basis points, and adjusted net income per diluted share increased 47.4% to $2.02. While John will review our financial results of both True Team and Service Partners, I want to congratulate the teams at both segments for outstanding execution in this accelerated growth environment, challenged by both labor and material constraints and weather-related issues in our Southwest and Midwest markets, which John will discuss in a few minutes. Our True Team branches are working diligently every day, winning new projects, allocating labor and material appropriately, and meeting tight builder schedules. The team is doing an excellent job of managing price and customer expectations. Given the extended build cycle, customer price increases are being realized as we expected. As we move through the quarter, pricing improved, and it continued to strengthen in April. At ServicePartners, given the steep demand curve and extreme material shortages, material cost increases are passed through to customers much more quickly, and this is reflected in ServicePartners' results. The team is also doing an outstanding job of managing customer service and expanding their customer base in areas such as gutters and commercial products. Our commercial business in both business segments continues to improve as delayed projects get back on track, and bidding activity for both light and heavy commercial, is strong. On a same-branch basis, commercial revenue increased 8.1% in the first quarter compared to a year ago. On the heavy commercial side, we believe our success rate in winning new projects is due to our strong value proposition that includes expertise in a broad array of insulating products, adherence to strict safety standards, and excellent quality control, all from an established and financially stable company. We also continue to expand our relationships and services with general contractors across the country. The types of heavy commercial projects we are bidding on and winning include hospitals, distribution centers, corporate campuses, as well as public works jobs such as schools, universities, and public safety facilities. We expect our commercial business will continue to strengthen as we move through the year. On the capital allocation front, we completed two acquisitions in the first quarter, LCR Contractors and Ozark Foam, and repurchased slightly over 49,000 shares. We discussed LCR on our last call, and as a reminder, this company primarily services heavy commercial customers and is expected to generate approximately $58 million of annual revenue. Ozark Foam, acquired in March, is a residential and light commercial insulation company that primarily installs spray foam insulation For customers in Missouri, Arkansas, and Oklahoma, Ozark is expected to produce close to $8 million of annual revenue. Subsequent to the end of the first quarter, following the expiration of the HSR pre-merger waiting period, we closed on our acquisition of American Building Systems, or ABS. With $144 million of annual revenue, ABS operates 34 branches that primarily service the eastern United States with branches in high-growth markets in Virginia, the Carolinas, Georgia, and Florida. On April 7th, we acquired Creative Conservation, a residential light commercial company serving customers throughout Virginia. Creative generated almost $7.5 million of annual revenue in 2020. These four acquisitions are expected to generate approximately $217 million of annual revenue. Our integration teams are hard at work ensuring a smooth transition for our new customers and employees as we integrate these companies onto our systems and operations. Looking ahead, based on our pipeline of prospects, you can expect us to remain active on the acquisition front. Regarding material availability, all trades in our industry continue to experience constrained capacity. While fiberglass has been on allocation for a number of months, our industry experienced a significant shortage of spray foam in the first quarter as a result of the severe weather in Texas, which forced the temporary closure of a number of chemical plants. These plants are back in operation, and we expect this situation to improve over the next few months. Regarding material pricing, fiberglass manufacturers have just announced a third cost increase effective at the end of June, the first two effective in January and April of this year. We're also seeing cost increases for spray foam and other building products. In light of the current environment, we expect both crew team and service partners to drive higher selling prices throughout the year. Many of you asked how we manage these material costs and selling price increases. Within our branch-wide system, our sales force utilizes a tool that sets the order margin thresholds at which a job can be bid. This range is established by our regional leadership team on a market-by-market basis in response to changes in material pricing and demand. Our goal is to strike the optimal balance, market-by-market, between price and volume with consistent emphasis on profitable growth. If the sales rep submits a bid outside of the established range, it is escalated in the system for review by the branch manager and regional leader as appropriate. As we look to the rest of the year, we are confident in our ability to fully offset material cost inflation with higher selling prices, and our track record supports this conviction. This type of inflationary environment, strong demand coupled with material and labor constraints, is one in which top build can excel. John, I will now turn the call over to you.