Slide 1: Third Quarter 2019
Third Quarter 2019 _____________ Jerry Volas, CEO October 31, 2019 Robert Buck, President & COO John Peterson, CFO
Slide 2: Safe Harbor
Safe Harbor 2 Statements contained in this presentation that are not historical and reflect our views about future periods and events, including our future performance, constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking
Slide 3: U.S. Housing Overview
U.S. Housing Overview 3 Third Quarter 2019 ▪ Builder confidence/order profile remains strong ▪ Single family starts improving ▪ Inventory tight ▪ Job and wage growth strong ▪ Mortgage rates low ▪ Projected household formations indicate significant growth ▪ Starts remain well below historical level o
Slide 4: Financial Highlights
Financial Highlights 4 Third Quarter 2019 ▪ 5.4% increase in net sales ▪ 130 bps gross margin expansion to 26.3% ▪ 160 bps operating margin expansion to 11.8% ▪ 140 bps adjusted EBITDA margin expansion to 14.4% ▪ 39.1% incremental EBITDA margin ▪ 24.4% increase in adjusted EPS to $1.53 Our Results R
Slide 5: Capital Allocation
Capital Allocation 5 Third Quarter 2019 ▪ Acquisitions number one priority • Acquired 11 companies since 2016 ▪ Robust pipeline of acquisition candidates ▪ Share repurchases number two priority • $200M share repurchase program in place • $50M ASR announced…completion expected 1Q 2020 • Since 2016, r
Slide 6: Financial Overview
Financial Overview 6 Third Quarter 2019 ($ in 000s) Three Months Ended September 30, 2019 Nine Months Ended September 30, 2019 Sales $682,330 $1,961,771 Y-O-Y Change 5.4% 12.4% Adjusted Operating Profit* $80,584 $216,114 Y-O-Y Change 16.0% 30.6% Adjusted Operating Margin* 11.8% 11.0% Y-O-Y Change 11
Slide 7: Adjusted EPS
Adjusted EPS 7 Third Quarter 2019 ($ in 000s) Three Months Ended September 30, Nine Months Ended September 30, 2019 2018 2019 2018 Income before income taxes, as reported $ 71,591 $ 57,014 $ 185,875 $ 125,057 Rationalization charges 8 1,668 1,977 6,807 Acquisition related costs 131 1,578 1,034 14,85
Slide 8: CapEx, Working Capital & Cash Flow
CapEx, Working Capital & Cash Flow 8 Third Quarter 2019 ($ in 000s) Nine Months Ended September 30, 2019 Nine Months Ended September 30, 2018 CAPEX $34,100 $42,379 Working Capital % to Sales (using Pro Forma LTM sales) 11.6% 11.3% Operating Cash Flow $182,779 $96,033 Cash Balance $171,591 $93,463 St
Slide 9: 2019 Outlook
2019 Outlook 9 Third Quarter 2019 SALES ADJUSTED EBITDA* $2,625M to $2,645M $354M to $360M ✓ Low end raised by $15M ✓ Low end raised by $9M ✓ High end raised by $5M ✓ High end raised by $5M Assumes Housing Starts Between 1.245M and 1.275M * See slides 17 & 19 for adjusted EBITDA reconciliations
Slide 10: Our Strong Performance is a Direct Result of…
Our Strong Performance is a Direct Result of… 10 Third Quarter 2019 ▪ Our team’s hard work, alignment and cadence by which we run the business ▪ Our ongoing operational efficiency initiatives ▪ Our commitment to excellent customer service ▪ Our strong customer and supplier relationships ▪ Our insist
Slide 11: TruTeam segment results
11 Third Quarter 2019 ($ in 000s) Three Months Ended September 30, 2019 Nine Months Ended September 30, 2019 Sales $498,390 $1,430,800 Y-O-Y Change 7.3% 17.0% Adjusted Operating Profit* $69,886 $190,210 Y-O-Y Change 14.2% 35.3% Adjusted Operating Margin* 14.0% 13.3% Y-O-Y Change 80 bps 180 bps Outpa
Slide 12: Service Partners segment results
12 Third Quarter 2019 ($ in 000s) Three Months Ended September 30, 2019 Nine Months Ended September 30, 2019 Sales $220,947 $638,899 Y-O-Y Change 3.8% 5.4% Adjusted Operating Profit* $23,406 $65,263 Y-O-Y Change 20.9% 13.9% Adjusted Operating Margin* 10.6% 10.2% Y-O-Y Change 150 bps 70 bps Stronger
Slide 13: Strong Commercial Growth
Strong Commercial Growth 13 Third Quarter 2019 ▪ Same branch commercial revenue • 18.8% increase 3Q 2019 • 21.4% increase first nine months 2019 ▪ ~23% of total BLD revenue ▪ Accretive margins ▪ Opportunities for growth • Expand market share at existing branch locations • Make strategic acquisitions
Slide 14: Labor and Material
Labor and Material 14 Third Quarter 2019 ▪ Labor remains tight • TopBuild “employer of choice” including full benefits package, training and education assistance • Ability to share labor across footprint…major differentiator ▪ Highly confident in our supply chain ▪ Spray foam growing but at slower p
Slide 15: Core Values and Culture
Core Values and Culture 15 Third Quarter 2019 ▪ Putting the safety of our people first ▪ Delivering results with integrity, respect and accountability ▪ Focusing on exceeding the expectations of our customers ▪ Continuously improving and encouraging idea sharing ▪ Aligning as one team and valuing di
Slide 16: Appendix
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Slide 17: Adjusted EBITDA Reconciliation
Adjusted EBITDA Reconciliation 17 Third Quarter 2019 ($ in 000s) Three Months Ended September 30, Nine Months Ended September 30, 2019 2018 2019 2018 Net income, as reported $ 54,976 $ 42,658 $ 145,011 $ 96,198 Adjustments to arrive at EBITDA, as adjusted: Interest expense and other, net 8,854 9,203
Slide 18: Segment GAAP to Non-GAAP Reconciliation
Segment GAAP to Non-GAAP Reconciliation 18 Third Quarter 2019 ($ in 000s) Three Months Ended September 30, Nine Months Ended September 30, 2019 2018 Change 2019 2018 Change TruTeam Sales $ 498,390 $ 464,540 7.3 % $ 1,430,800 $ 1,223,357 17.0 % Operating profit, as reported $ 69,846 $ 61,004 $ 189,56
Slide 19: Reconciliation Table
Reconciliation Table 19 Third Quarter 2019 ($ in 000,000s) Twelve Months Ending December 31, 2019 Low High Estimated net income $ 179.7 $ 188.5 Adjustments to arrive at estimated EBITDA, as adjusted: Interest expense and other, net 37.0 35.0 Income tax expense 64.8 68.0 Depreciation and amortization