Slide 1: Second Quarter
Second Quarter Jerry Volas, CEO Robert Buck, President & COO August 1, 2019 John Peterson, CFO
Slide 2: Safe Harbor
SAFE HARBOR Statements contained in this presentation that are not historical and reflect our views about future periods and events, including our future performance, the size of our market opportunity, new housing starts and other industry growth and development metrics, constitute “forward-looking
Slide 3: U.S. Housing Overview
U.S. Housing Overview 3 Second Quarter 2019 ▪ Remain bullish on residential new construction • Increasing household formations • Mortgage rates low • Builders focusing more on entry level homes • Inventory tight • Job and wage growth strong • Starts remain well below historical average level of 1.4M
Slide 4: Financial Highlights
Financial Highlights 4 Second Quarter 2019 ▪ 8.9% revenue growth ▪ 260 bps gross margin expansion ▪ 14.2% adjusted EBITDA margin, up 260 bps ▪ 43.3% incremental EBITDA margin ▪ 98.7% increase in EPS to $1.51, 38.8% increase in adjusted EPS to $1.43 Leveraging Our Unique Diversified Business Model to
Slide 5: Capital Allocation
Capital Allocation 5 Second Quarter 2019 ▪ Completed acquisition of Viking Insulation in July ▪ Acquisitions number one priority with strong track record • Headquartered in Burbank, CA • Acquired 11 companies since 2016, generating almost $510M of annual revenue • Founded in 1974 ▪ Robust pipeline o
Slide 6: Financial Overview
Financial Overview 6 Second Quarter 2019 THREE MONTHS ENDED SIX MONTHS ENDED ($ in 000s) JUNE 30, 2019 JUNE 30, 2019 Sales $660,112 $1,279,442 Y-O-Y Change 8.9% 16.6% Adjusted Operating Profit* $76,432 $135,530 Y-O-Y Change 32.2% 41.2% Adjusted Operating Margin* 11.6% 10.6% Y-O-Y Change 210 bps 190
Slide 7: Adjusted EPS
Adjusted EPS 7 Second Quarter 2019 ($ in 000s) Three Months Ended June 30, Six Months Ended June 30, 2019 2018 2019 2018 Income before income taxes, as reported $ 66,934 $ 36,441 $ 114,284 $ 68,043 Rationalization charges 142 4,341 1,969 5,138 Acquisition related costs 251 9,799 903 13,281 Income be
Slide 8: CapEx, Working Capital & Cash Flow
CapEx, Working Capital & Cash Flow 8 Second Quarter 2019 SIX MONTHS ENDED SIX MONTHS ENDED ($ in 000s) JUNE 30, 2019 JUNE 30, 2018 CAPEX 2 $21,982 $27,521 Working Capital % to Sales 3 11.9% 11.1%1 Operating Cash Flow $96,264 $41,393 Cash Balance $141, 767 $65,737 1 Proforma LTM EBITDA to account for
Slide 9: Leverage
LEVERAGE 9 Second Quarter 2019 2.55x 1 Total Debt $745.6 2.5x TARGET 2.19x 1 Less Cash 141.8 LEVERAGE RANGE 1.80x Net Debt $603.8 2.0x Adj. EBITDA $335.3 Leverage 1.80x 6/30/2018 12/31/2018 6/30/2019 1 Proforma LTM EBITDA to account for USI acquisition QUICKLY DELEVERED AFTER USI ACQUISITION
Slide 10: 2019 Outlook
2019 Outlook 10 Second Quarter 2019 ($M) ASSUMES $2,610 to $2,640 $345 to $355 1.23M to 1.27M Revenue Adjusted EBITDA* Housing Starts • Low end unchanged • Low end raised by $15M • High end lowered by $30M • High end raised by $5M 2019 Expected to Be Another Strong Year for TopBuild * See slides 17
Slide 11: TruTeam segment results
11 Second Quarter 2019 THREE MONTHS ENDED SIX MONTHS ENDED ($ in 000s) JUNE 30, 2019 JUNE 30, 2019 Sales $483,028 $932,410 Y-O-Y Change 12.5% 22.9% Adjusted Operating Profit* $68,781 $120,324 Y-O-Y Change 37.9% 51.5% Adjusted Operating Margin* 14.2% 12.9% Y-O-Y Change 260 bps 240 bps • Market Share
Slide 12: Service Partners segment results
12 Second Quarter 2019 THREE MONTHS ENDED SIX MONTHS ENDED ($ in 000s) JUNE 30, 2019 JUNE 30, 2019 Sales $213,487 $417,951 Y-O-Y Change 3.8% 6.2% Adjusted Operating Profit* $21,151 $41,857 Y-O-Y Change 5.7% 10.3% Adjusted Operating Margin* 9.9% 10.0% Y-O-Y Change 20 bps 40 bps • Margin Expansion • A
Slide 13: Strong Commercial Growth
Strong Commercial Growth 13 Second Quarter 2019 ▪ 22.1% same branch revenue growth % of Revenue 1H 2019 ▪ Most installation branches perform light commercial work Commercial ▪ 18 branches focused solely on heavy commercial 22.6% ▪ Working on dozens of projects across the country Residential 77.4% ▪
Slide 14: Fiberglass
Fiberglass 14 Second Quarter 2019 ▪ More supply available vs. a year ago • Excess capacity filling distribution channels ▪ New capacity expected late 2020 • Testament to long-term confidence in health of US housing market High Confidence in Strength, Stability and Cost Effectiveness of Our Supply Ch
Slide 15: Competitive Advantages
Competitive Advantages 15 Second Quarter 2019 ▪ Uniquely diversified model • Nationwide footprint that gives us scale and efficiency • Residential construction balanced with Commercial • Two ways to reach fragmented industry…installation and distribution • Expertise in all insulation solutions ▪ Rem
Slide 16: Appendix
4 TopBuild
Slide 17: Adjusted EBITDA Reconciliation
Adjusted EBITDA Reconciliation 17 Second Quarter 2019 ($ in 000s) Three Months Ended June 30, Six Months Ended June 30, 2019 2018 2019 2018 Net income, as reported $ 52,051 $ 27,153 $ 90,035 $ 53,540 Adjustments to arrive at EBITDA, as adjusted: Interest expense and other, net 9,105 7,240 18,374 9,5
Slide 18: Segment GAAP to Non-GAAP Reconciliation
Segment GAAP to Non-GAAP Reconciliation 18 Second Quarter 2019 ($ in 000s) Three Months Ended June 30, Six Months Ended June 30, 2019 2018 Change 2019 2018 Change TruTeam Sales $ 483,028 $ 429,423 12.5 % $ 932,410 $ 758,817 22.9 % Operating profit, as reported $ 68,423 $ 49,635 $ 119,722 $ 78,965 Op
Slide 19: 2019 Guidance Reconciliation Table
2019 Guidance Reconciliation Table 19 Second Quarter 2019 ($ in 000s) Twelve Months Ending December 31, 2019 Low High Estimated net income $ 170.5 $ 185.6 Adjustments to arrive at estimated EBITDA, as adjusted: Interest expense and other, net 38.9 35.9 Income tax expense 61.5 66.9 Depreciation and a