TopBuild Corp.

Greetings and welcome to Top Build Second Quarter 2021 Earnings Conference Call. At this time, all participants are in a 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 today, 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 topfield.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. I want to start by thanking our entire Top Build team for their continued hard work and dedication. Our strong second quarter performance is a direct result of their commitment to excellence in all that they do. This continues to be a great operating environment for Top Build and one that we believe could last for the foreseeable future. Unlike the housing boom of two decades ago, which featured excess supply, rampant speculation, and weak credit controls, this current housing growth is being driven by strong pent-up demand, extremely limited housing inventory, and improving economy and low interest rates. Governing this growth and elongating the cycle are material and labor constraints for all trades in our industry. Evidence of this is clearly indicated by completions which have remained relatively flat over the past year. While we are optimistic some of these supply chain constraints will begin to ease by year-end, the extension of the build cycle has created a healthy backlog. Turning to our second quarter results, we again demonstrated the strength of our operating model and our ability to pass material cost increases through with selling price adjustments. Revenue increased 29.1%, 18.3% on a same-branch basis. Adjusted operating profit grew 55.5%, and adjusted EBITDA increased 39.1%. Adjusted operating margin expanded 270 basis points. Adjusted EBITDA margin expanded 130 basis points, and adjusted net income per diluted share increased 64.3% to $2.76. As expected, True Team saw a strong sequential increase in customer pricing from the first to the second quarter. With material and allocation and labor constrained, every branch is focused on striking the optimal balance between price and volume, understanding that at the end of the day, our goal is driving profitable growth. Service partners continue to do an outstanding job managing cost increases and customer pricing. reporting its highest adjusted operating margin since the spin in June 2015. The team also continues to expand its contractor base and grow share with existing customers. John will cover more segment details in his prepared comments. Turning to material, with fiberglass on allocation, spray foam supplies slowly normalizing, and demand remaining strong, we expect both crew team and service partners to continue to drive higher selling prices throughout the year. Knopf and Johns Manville are on track to bring on their loose fill lines in the fourth quarter, and current capacity is under constant review within the industry. Our commercial business in both segments continues to improve as delayed projects resume and new projects are initiated. Bidding activity for both light and heavy commercial remains strong, and our backlog is healthy. On a same branch basis, commercial revenue increased 20.8% compared to the second quarter of last year, making the fourth consecutive quarter of commercial revenue improvement. Our heavy commercial teams are busy, and the types of projects we are winning and working on include health care facilities, large distribution centers, and warehouses. Regarding light commercial, As residential homes are built, demand for services such as restaurants, strip malls, and other infrastructure to support these new communities should grow significantly. The vast majority of our residential branches perform like commercial installation, and the teams at our local branches are keenly aware of these opportunities and the importance of establishing relationships with small general contractors in their respective markets who control these types of projects. We remain very bullish with regards to the $5 billion commercial market, both heavy and light, and we expect our commercial business will continue to strengthen as we move through the year. On the capital allocation front, we completed three acquisitions in the second quarter, American Building Systems, Creative Conservation, both of which we discussed on our last call, and RJ Installation, which closed in June and is expected to generate approximately $4 million in annual revenues. Year-to-date, we've completed five acquisitions, which are expected to generate approximately $221 million of revenue on a pro forma, full-year basis. Over the six years, we've acquired 19 companies that combined are generating over $800 million of annual revenue, and they are creating tremendous value for our stakeholders. During this same period, we expanded and enhanced our M&A team, and the integration of acquisitions is a core competency. Our focus remains on acquiring well-run installation and distribution companies around our core of installation, as well as related adjacent products. With a robust pipeline of prospects, we expect to stay very busy on this front through 2021. We also used our capital in the second quarter to repurchase almost 74,000 shares, and year-to-date, we've repurchased 123,000 shares. We are pleased that our Board of Directors approved a new $200 million share repurchase program, demonstrating a high level of confidence in our financial performance and our strong cash generation. Since implementing our first share repurchase program in 2016, we have returned over $410 million to shareholders. One area that is growing increasingly important for all stakeholders is ESG. This remains a priority, and we recently dedicated additional resources towards this effort. Our approach includes maintaining our focus on safety and continuing to improve the well-being of our employees, ensuring that our workforce reflects the diversity of the communities in which we operate, incorporating energy efficient solutions in our residential and commercial projects, and tracking and reporting energy usage and waste generation across our footprint. On the environmental front, in addition to our core insulation business, which drives improved energy efficiency in all the communities in which we operate, I would remind you of our top built home services group, which is at the forefront of building science and building code compliance. Our expertise in this area is concentrated on advancing environmentally conscious construction. For example, our Environments for Living program helps builders construct high-performance homes that save energy and reduce greenhouse emissions. In addition, our extensively trained home energy raters provide the evaluation, testing, and independent verification required to be considered an ENERGY STAR compliant home. Before turning the call over to John, I wanted to note that in late June, we were pleased to learn that TOTDO was moving from the Russell 2000 to the Russell 1000 index. Some of you may remember that at the time of the spin in June 2015, our market cap was approximately $1.1 billion. Today, it is over $6 billion, more than a 450% increase. This move is clearly a recognition of our strong growth and the tremendous value we have created for our stakeholders over the past six years. Looking ahead, we are confident in our ability to grow our business and continue to provide great value for our stakeholders. John will now discuss our financial results.