Slide 1: Fourth Quarter 2018 Presentation
Fourth Quarter 2018 Presentation Jerry Volas, CEO _____________ Robert Buck, President & COO John Peterson, CFO February 26, 2019
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, constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking s
Slide 3: Current Environment
CURRENT ENVIRONMENT ▪ Strong economy, wage and job growth ▪ Fed has moderated view on interest rate increases ▪ Mortgage rates down from 4Q highs ▪ Builders focused on building homes consumers want and can afford “THESE FACTORS SHOULD PRECLUDE AN ESCALATION OF CONSUMER AFFORDABILITY ISSUES.” 3
Slide 4: Long-Term Outlook
LONG-TERM OUTLOOK ▪ Household formations will continue to increase ▪ Pent-up demand growing ▪ Builders will remain focused on building homes consumers want and can afford ▪ Housing starts will eventually grow to historical average of 1.4M to 1.5M annually “SUPPLY AND DEMAND FUNDAMENTALS REMAIN STRON
Slide 5: 2018 Financial Highlights
2018 FINANCIAL HIGHLIGHTS ▪ 25.1% revenue growth, 8.5% organic • Outpaced lagged housing starts of 5.3% ▪ Gross margin flat at 24.2% • Expanded 40 basis points in Q4 ▪ 11.9% adjusted EBITDA margin, up 150 bps ▪ 17.9% incremental EBITDA margin, • 25.1% same branch • 14.3% acquisitions ▪ 50.7% increas
Slide 6: 2018 Significant Accomplishments
2018 SIGNIFICANT ACCOMPLISHMENTS ▪ Closing and integrating three acquisitions expected to generate $410M+ in annual revenue ▪ Identifying over $15M in cost-saving synergies through the integration of USI onto our operating platform ▪ Enhancing geographic footprint in key growth regions ▪ Successfull
Slide 7: 2019 Outlook
2019 OUTLOOK ▪ Optimistic it will be another good year ▪ Profitable growth remains key focus ▪ Continue to identify and implement initiatives that drive operational efficiency ▪ Continued deployment of capital • Internal growth • Accretive acquisitions • Share buybacks • $200M authorized “2019 SHOUL
Slide 8: TopBuild Financial Overview
TOPBUILD FINANCIAL OVERVIEW Three Months ended Twelve Months ended ($ in 000s) December 31, 2018 December 31, 2018 Sales $639,547 $2,384,249 Y-O-Y Change 27.6% 25.1% Adjusted Operating Profit * $67,156 $232,614 Y-O-Y Change 32.1% 35.3% Adjusted Operating Margin * 10.5% 9.8% Y-O-Y Change 40 bps 80 bp
Slide 9: Adjusted EPS
ADJUSTED EPS ($ in 000s) Three Months Ended December 31, Year Ended December 31, 2018 2017 2018 2017 Income before income taxes, as reported $ 55,766 § 47,760 $ 780,824. § 428,040 Significant legal settlement - - - 30,000 Rationalization charges 929 356 7,736 3,755 Acquisition related costs 1,066 50
Slide 10: Cash Flow/Working Capital & CAPEX
CASH FLOW/WORKING CAPITAL & CAPEX Twelve Months ended Twelve Months ended ($ in 000s) December 31, 2018 December 31, 2017 CAPEX $52,504 $25,308 Working Capital % to sales 10.4% 9.1% (using Pro Forma LTM sales) Operating Cash Flow $167,172 $113,192 Cash Balance $100,929 $56,521 Net Leverage* 2.19x 0.
Slide 11: Leverage
LEVERAGE 2.55x 2.5x 2.31x (at 12/31/18) Total Debt $751.9 2.19x Less Cash 100.9 Target Leverage Range 2.0x Net Debt $651.0 Adj. EBITDA1 $297.9 Leverage 2.19x 6/30/2018 9/30/2018 12/31/2018 1. Proforma LTM EBITDA “CONTINUING TO DELEVER, WITHIN OUR TARGETED RANGE.” 11
Slide 12: Long-Term Targets and Annual Guidance
LONG-TERM TARGETS AND ANNUAL GUIDANCE 3-YEAR TARGETS 2019 OUTLOOK* ($M) 10% 11% to 16%1 $2,570 to $2,635 Commercial Annual Revenue Revenue Incremental EBITDA % (M&A) Growth 10% to 11% 22% to 27% $310 to $330 Adjusted EBITDA Working Capital (% of Sales) Incremental EBITDA % (Organic) *See Slide 21 fo
Slide 13: TruTeam segment 4Q Highlights
Three Months ended Twelve Months ended ($ in 000s) December 31, 2018 December 31, 2018 Sales $457,610 $1,680,967 Y-O-Y Change 36.1% 31.2% Adjusted Operating Profit * $57,232 $197,831 Y-O-Y Change 34.1% 40.9% Adjusted Operating Margin * 12.5% 11.8% Y-O-Y Change (20 bps) 80 bps * See slide 20 for GAAP
Slide 14: Service Partners segment 4Q Highlights
Three Months ended Twelve Months ended ($ in 000s) December 31, 2018 December 31, 2018 Sales $213,974 $820,309 Y-O-Y Change 10.7% 14.0% Adjusted Operating Profit * $21,598 $78,898 Y-O-Y Change 20.5% 14.8% Adjusted Operating Margin * 10.1% 9.6% Y-O-Y Change 80 bps 0 bps * See slide 20 for GAAP to non
Slide 15: USI Integration
USI INTEGRATION ▪ Exceeding all integration milestones ▪ All core USI locations successfully transferred to BLD operating systems ▪ Back office and corporate functions consolidated ▪ Supply chain integrated ▪ Efficiently sharing labor and materials ▪ Undertaking branch optimization effort ▪ Highly c
Slide 16: Adjacent Product Offerings
ADJACENT PRODUCT OFFERINGS ▪ Deep dive review underway ▪ Considering product offerings that provide value to existing customers and enhance supplier relationships • Glass and windows a focus area ▪ Product line entered through USI acquisition ▪ ~$90M in annual revenue ▪ Accretive margins “PROFITABIL
Slide 17: We Are Focused On...
WE ARE FOCUSED ON… ▪ Driving operational improvements through best in class execution ▪ Growing heavy and light commercial businesses ▪ Increasing market share organically and through acquisitions ▪ Expanding into adjacent product areas ▪ Maximizing long-term value “2019 WILL BE ANOTHER SOLID YEAR F
Slide 18: Appendix
APPENDIX ______________
Slide 19: Adjusted EBITDA Reconciliation
Adjusted EBITDA Reconciliation ($ in 000s) 19
Slide 20: Segment GAAP to Non-GAAP Reconciliation
Segment GAAP to Non-GAAP Reconciliation ($ in 000s) 20
Slide 21: Reconciliation Table
Reconciliation Table ($ in 000,000s) 21