TopBuild Corp.

Ladies and gentlemen, greetings and welcome to the Top Bill's fourth quarter and year-end 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star and zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, P.I. Aquino. Please go ahead.

Good morning, and thank you for joining us. With me today are Robert Buck, our President and Chief Executive Officer, and Rob Koons, our Chief Financial Officer. We've posted our earnings release, senior management's formal remarks, and a presentation that summarizes our comments on our website at topbills.com. Many of our remarks today 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 and in the company's SEC filings. The company assumes no obligation to update any forward-looking statements because of new information, future events, or otherwise. Please note that some of the financial measures to be discussed during this call will be on a non-GAAP basis. These non-GAAP measures are not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP. We've provided a reconciliation of these financial measures to the most comparable GAAP measures in today's press release and in our presentation, both of which are available on the website. I'd now like to turn the call over to our President and CEO, Robert Buck.

Good morning. Thank you for joining us today. We at Top Build are proud to share that 2024 represents our ninth consecutive year of growth and profit expansion, as we celebrate our 10-year anniversary as a public company this year. Since our spin in 2015, we have demonstrated the strength of our business model and the long-term opportunity for Top Build. Our results have truly been a team effort, and I want to start by thanking our employees for their dedication and commitment to our business. Congratulations to our installation and special distribution, as well as branch support center teams for working diligently to service our customers, drive operational excellence, and work safely every day. The new residential construction landscape in the fourth quarter was much like the prior two quarters. Interest rates have remained elevated for longer than anticipated, and although some builders noted increased traffic, External forecasts for 2025 housing starts have been trimmed in the last few months. That being said, the underlying housing market fundamentals are strong, and we continue to be bullish about the mid- and long-term opportunities. Many uncertainties exist in today's environment, so before I move on to our results, let me cover a few topics. On tariffs, we do not anticipate a significant impact on our business. Products potentially impacted represent a relatively small portion of our material spend, and we are taking appropriate steps to mitigate this impact. Regarding labor, we are aware of deportations happening in certain markets which have not impacted top build. This has the potential to slow the construction cycle, putting labor at a premium. We are confident in the strength of our labor force and are being cautious and strategic as we manage our labor cost structure in this environment. We will continue to watch closely and evaluate as regulatory and economic conditions impact our industry. Turning now to our results, our residential business performed as expected in the quarter. Single family grew slightly while multifamily declined double digits. Our commercial industrial business saw growth in the quarter and for the full year. We also started to see some delayed projects move forward in the fourth quarter We have built a strong backlog and continue to be very active on the bidding front. Fourth quarter top-billed sales grew 2% to $1.3 billion, fueled by specialty distribution growth. Our adjusted EBITDA grew 2.5% to $258 million, and adjusted EBITDA margin of 19.7% improved 10 basis points year over year. Rob will provide more details and results in a moment. Turning to our operations, fiberglass supply has loosened as housing demand has softened. The new Kanawha facility in Texas has started production and the plant is still building to optimal capacity. While planned maintenance is expected to be less than last year, pricing in this environment will be dependent on future demand improving. Like previous times of uncertainty relative to demand, our seasoned operations team is working diligently and making strategic decisions to optimize our model across the footprint. We have great insights and control of our business that allows our field teams to be proactive in navigating changes to outperform in the current environment. Turning to capital allocation, acquisitions continue to be our top priority. Last year, we completed eight acquisitions across both installation and specialty distribution for a total of approximately $153 million in annual revenue. In 2024, we returned nearly $1 billion to shareholders through our share repurchase program. As you saw in the release today, our board of directors authorized a new share buyback program of up to $1 billion, demonstrating confidence in our business and long-term strategy. Our M&A pipeline continues to be very healthy, the environment is active, and we're off to a solid start this year. As I noted last quarter, we continue to focus on our core of insulation, at the same time learning about opportunities that could expand our total addressable market. As always, we will be disciplined in our approach and seek opportunities that label us to leverage our core strengths. Let me take a minute and talk about how we define our strengths and core competencies. First, we are a people business. We have nearly 14,000 employees who are essential to our success. We have a core competence of recruiting and retaining direct labor and developing talent throughout the business. We have a dispersed network with over 440 branches across the U.S. and Canada. Our operating philosophy is rooted in local empowerment. The day-to-day business decisions happen at the local level, so our field leadership are encouraged to be the owner to drive operational excellence and strong performance. We have a great track record of driving continuous improvement and are confident operating a dispersed branch model. Technology and the use of a single ERP system across our entire footprint is a key contributor to our business success. Our technology investments give us the ability to provide new business leads, facilitate best practices across the network, analyze real-time business information, measure productivity, drive improvement initiatives, and consolidate certain back office functions at our branch support center. Our category has unique supplier and customer dynamics, and as the largest buyer of insulation in the industry, we operate in partnership with our suppliers. For our customers, our teams drive exceptional value and service. Finally, we are committed to being financially disciplined and thoughtful in our strategy. Our balance sheet is healthy, we have a great M&A track record, and a history of delivering strong shareholder returns. I'll close by giving you some broad thoughts on 2025, then turn it over to Rob to take you through the details of our results and guidance. Persistent inflation is keeping interest rates high, and ongoing economic and regulatory uncertainty is creating challenges for the construction industry. External forecasts for housing starts this year have come down in the past few months, with most predicting a decline in starts in 2025. We expect residential demand to improve. However, the timing is yet unclear. On the commercial and industrial front, at both installation and specialty distribution, we are seeing an uptick as some of last year's delayed projects are launched. Bidding activity in this space continues to be strong. We continue to be optimistic about the underlying fundamentals of our industry and our ability to outperform the market and capitalize on growth opportunities, both organic and inorganic. We see the diversification of our business model being an advantage. Finally, our guidance does not contemplate M&A, and given our pipeline, we are anticipating 2025 to be another active year on the acquisition front. Rob? Thanks, Robert.