DEUTSCHE BANK 9 TH ANNUAL GLOBAL INDUSTRIALS & MATERIALS SUMMIT. June 6, 2018

Transcription

1 DEUTSCHE BANK 9 TH ANNUAL GLOBAL INDUSTRIALS & MATERIALS SUMMIT June 6, 208

2 Safe Harbor Statements contained in this presentation and during question and answer panels that reflect our views about our future performance constitute forward-looking statements under the Private Securities Litigation Reform Act of 995. Forward- looking statements can be identified by words such as believe, anticipate, appear, may, might, will, should, intend, plan, estimate, expect, assume, seek, forecast, anticipates, appears, believes, estimates, predicts, potential or continue, the negative of these terms and similar references to future periods. These views involve risks and uncertainties that are difficult to predict and, accordingly, our actual results may differ materially from the results discussed in our forward-looking statements. We caution you against relying on any of these forward-looking statements. Our future performance may be affected by our reliance on residential new construction, residential repair/remodel and commercial construction, our reliance on third-party suppliers and manufacturers, our ability to attract, develop and retain talented personnel and our sales and labor force, our ability to maintain consistent practices across our locations and our ability to maintain our competitive position. We discuss many of the risks we face under the caption entitled Risk Factors in our 0K and Form 0Q filed with the SEC. Our forward-looking statements in this presentation speak only as of the date of this presentation. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. Unless required by law, we undertake no obligation to update publicly any forward-looking statements as a result of new information, future events or otherwise. The Company believes that the non-gaap performance measures and ratios that are contained herein, used in managing the business, may provide users of this financial information with additional meaningful comparisons between current results and results in prior periods. Non-GAAP performance measures and ratios should be viewed in addition to, and not as an alternative for, the Company's reported results under accounting principles generally accepted in the United States. Additional information about the Company is contained in the Company's filings with the SEC and is available on TopBuild's website at 2

3 TopBuild at a Glance (at 2/3/7, pre USI acquisition) SPIN DATE (From Masco) HEADQUARTERS MARKET CAP U.S. EMPLOYEES June 30, 205 Daytona Beach, FL $2.7B 8, Revenue $.9B Product Mix Business Mix Service Partners (Distribution) 36% 64% TruTeam (Installation) After Paint Rain Gutters Other 2 4% 2% 7% 77% Insulation & Accessories Commercial 20% 80% Residential 3 As of 5/4/8; 2 Primarily includes garage doors, fireplaces and fireproofing; 3 Includes repair and remodel. Largest Purchaser, Installer and Distributor of Insulation in the U.S. 3

4 Capitalizing on Established Strong Foundation Pre June 30, 205 May, 208 Expansion Rationalization Positioned for Growth Spin-off USI Acquired Highly Acquisitive; Assembled Critical Mass Lowered Breakeven Point from.2m Housing Starts to 750K Implemented ERP System; Scalable and Efficient Optimized National Footprint and Labor Force Re-focused on Core Product Offerings Established Operating Model Driving Agility Diversified Business Mix Leveraged Unrivaled National Scale Launched TopBuild as a Public Company Streamlined Processes and Procedures Added Experienced, Entrepreneurial and Focused Management Strengthens position in installation and distribution of insulation Expands geographic footprint and penetration in key growth regions Significantly increases service capability for customers and suppliers 4

5 Accelerating Profitable Growth (pre USI acquisition) Non-GAAP measure Repositioning and Strengthening Business has Led to Successful Results 5

6 Business Segments # or #2 Insulation Installer in Majority of Top MSAs One-stop Solution for Insulation Products and Services Competitive Advantages Unrivaled national scale and buying power Established relationships with manufacturers Strong local presence and brands Reliable and consistent service Recognized building science expertise Institutional focus on safety Industry s most efficient order processing fulfillment and delivery system Exceptional service and reliability Flexible job-site delivery (less than full truckload) Product training for contractors Credit availability Growth Drivers Residential construction Commercial construction Stricter energy codes 6

7 One Company Leveraging Two Leading Channels INSTALLATION Provide contractor services to all builders SCALE ADVANTAGE Building Science Expertise DISTRIBUTION Distributes products to a variety of customers Small Contractors, Lumber Yards, Retail Access to 50K+ Builders and General Contractors Together, We Reach Customers Regardless of Size or Geographic Location 7

8 We Are Critical to the Insulation Supply Chain PRIMARY FIBERGLASS & SPRAY FOAM INSULATION MANUFACTURERS BUILDERS & CONTRACTORS # in Residential Installation >40% Share of New Housing Starts 2x Size of Largest Competitor Residential New Construction Highly Fragmented 50K+ U.S. Home Builders 50% of Housing Starts Covered by Large National/ Regional Builders 8

9 Appealing to Employees and Customers WHY EMPLOYEES CHOOSE US WHY CUSTOMERS CHOOSE US Strong Focus on Employee Engagement Referrals Earnings Potential Full Suite of Benefits Clear Career Path Extensive Verification and Training Labor Flexibility Drug Screening/Background Checks Safety Training Mobile Installer Base National Footprint Reputation Financial Stability Multiple Benefits to Employees and Customers 9

10 USI Transaction Acquired for $475 million in all cash transaction Funding $400 million Senior Notes (closed April 25, 208) 5.625% Matures 2026 $00 million term loan (delayed draw on current credit facility) Expected to be accretive to GAAP EPS in the 2-month period after close Enhances scale and expands footprint in high growth regions Improves pro forma EBITDA margin and free cash flow profile Anticipate at least $5 million of run-rate cost synergies by May 2020 A Well-Run Business, Similar Culture to TopBuild 0

11 USI Overview Business Description A leading provider of insulation installation and distribution services to the residential and commercial construction markets Founded in 998 and headquartered in St. Paul, MN 38 locations in 3 states Significant presence in high-growth regions: Pacific Northwest, Mountain West, Southwest and Southeast Financials, Change Revenue ($M) $353 $375 6.% Adj. EBITDA ($M) $45 $47 4.5% Adj. EBITDA Margin 2.7% 2.5% (20 bps) Segment Revenue Mix 3 (207) Region Service Line Distribution 0% Installation 90% Northwest 9% Southwest 7% Mid Atlantic 9% Arizona 0% Florida 7% Texas 2% Utah 30% Colorado 6% Windows 9% Glass 0% Foam 3% Other % Fiberglass 57%. Acquisition does not include Construction Services; 2. Pro forma for all acquisitions; 3. Does not account for the impact of Glasshouse acquisition, corporate costs and eliminations

12 USI Fits Within TopBuild s Stated M&A Strategy Enhances Scale Increases Penetration in Key Regions Possesses Significant Value Creation Potential Augments Business Product Mix & Capabilities Provides Experienced Operators & Welltrained Direct Labor Provides opportunity to combine leading installers and distributors of insulation and other building materials Leverage across combined supply chain Increases presence in high-growth regions: Pacific Northwest, Mountain West, Southwest and Southeast Increases distribution presence in two key regions: Denver, CO and Salt Lake City, UT At least $5M of projected run-rate synergies by May 2020 Adds highly complementary core insulation business Strengthens position as leading installer and distributor Enhances value proposition for customers Well-trained labor force closely aligned with same best practices as TopBuild Exceptional service and reliability with an institutional focus on safety 2

13 Leadership in Insulation Installation and Distribution TopBuild USI Installation USI Distribution USI 207 Revenue ($M) Locations $345 $36 ($6) $2, $, TopBuild USI Installation USI Distribution USI Eliminations Pro Forma TopBuild USI Installation USI Distribution Pro Forma 207 Adj. EBITDA ($M) Employees $53 $4 ($) $5 $259,805 0,247 $98 8,442 TopBuild USI Installation USI Distribution USI Eliminations & Corporate Synergies Pro Forma with synergies 2 TopBuild USI 3 Pro Forma Boosts scale in fragmented insulation installation and distribution industry Increases ability to serve builders of all sizes Enhances value proposition for customers Provides welltrained labor force. Segment financials are before eliminations whereas pro forma financials shown after eliminations and corporate costs; 2. Pro forma figures include $5M of run-rate synergies; 3. Pro forma for all acquisitions 3

14 Enhances TopBuild s Financial Profile 207 ADJ. EBITDA MARGIN 207 CASH CONVERSION 2 0.4% 2.5%.4% 80.9% 83.9% 82.5% TopBuild USI Pro forma TopBuild 3 USI Pro forma, 3 Significantly improves TopBuild s revenue growth profile given higher pro forma exposure to key growth regions Assuming run-rate synergies, increases TopBuild 207 pro forma adjusted EBITDA margin from 0.4% to.4% Both TopBuild and USI are capital light and generate substantial free cash flow, enabling TopBuild to de-lever quickly Pro forma total leverage projected to be below 2.5x after one year. Pro forma figures include $5M of run-rate synergies; 2. Cash Conversion = (Adj. EBITDA Capex)/Adj. EBITDA; 3. TopBuild assumes illustrative pro forma adjustment of an additional $2.5M to account for full year of purchasing fleet vs. leasing 4

15 Significant Cost Synergy Potential $6 $4 $2 $0 $8 $6 $4 $2 $0 $8 Year $5 Run-rate End Year 2 Dedicated integration team with successful track record of executing on plan Highly complementary nature of businesses enables substantial synergy realization Synergies recognized through supply chain and improved efficiencies Branch Corporate Supply Chain Improve production efficiencies Improve sales productivity Better asset utilization Capture non-direct opportunities Eliminate redundancies and streamline head office functions and systems Leverage TopBuild s scale and best-practices across the supply chain and branch operations. Represents 2 months and 24 months post transaction close 5

16 Footprint with USI Acquisition LARGEST NETWORK IN U.S. Midwest TruTeam: LOCATIONS Service Partners: WA SERVE 95% OF ALL HOUSING STARTS 5 2 OR 2 2 ID 3 PRESENCE IN 99 OF TOP 00 MSAs 3 2 NE UT AZ IA KS USI Distribution PA 2 2 NM OK WV 2 2 KY 4 AR 2 VA MS LA TN RI CT 3 NJ DE 6 SC 3 TX MD OH NC TruTeam USI Installation 4 2 MO Service Partners 5 3 IN IL CO NH MA 3 NY MI 4 WY CA WI SD 2 6 NV VT MN 2 Total: 52 ME ND MT GA AL 5 Northeast TruTeam: 52 Service Partners: 7 Total: 59 South TruTeam: 44 Service Partners: 38 Total: 82 West 9 3 FL 6 High-Growth Regions TruTeam: 72 Service Partners: 26 Total: 98 Increases Penetration in High-Growth Regions 6

17 TopBuild at a Glance (pro forma with USI) SPIN DATE (From Masco) HEADQUARTERS Locations U.S. EMPLOYEES June 30, 205 Daytona Beach, FL Close to 300 0, Revenue $2.3B Product Mix Business Mix Service Partners (Distribution) 32% 68% TruTeam (Installation) After Paint Glass & Windows Rain Gutters Other 6% 3% 3% 6% 72% Insulation & Accessories Commercial 9% 8% Residential 2 Primarily includes garage doors, fireplaces and fireproofing; 2 Includes repair and remodel. Largest Purchaser, Installer and Distributor of Insulation in the U.S. 7

18 Financials

19 Financial Overview Q 208 ($ in 000s) Sales $49,444 $329,394 $87,766 YoY Δ.3% 3.2% 0.3% Adj. Operating Profit $38,72 $29,547 $7,927 YoY Δ 33.6% 37.8% 5.8% Adj. Operating Margin 7.8% 9.0% 9.5% YoY Δ 30 bps 60 bps 40 bps Non-GAAP measure Continued Strong Performance in Q 208 9

20 Financial Profile LEVERAGE Long-term Debt $750.7 Less Cash Net Debt $73.4 Adj. TTM EBITDA $ Target Leverage Range 0.9x 2.8x 2.6x <2.5x 2/3/207 Pro Forma 3,4 Pro Forma Target 2 w/synergies 3,4,5 Months Ability to deleverage quickly; pro forma leverage expected to return to within targeted leverage range within 2 months. As of 5//8 2. As of 3/3/8 3. BLD LTM Adj. EBITDA as of 3/3/8 plus USI pro forma LTM Adj. EBITDA as of 2/3/7 4. Uses cash as of 3/3/8, debt as of 5//8 5. Includes $5M in run-rate synergies 20

21 Long-term Targets and Annual Guidance 3-YEAR TARGETS $75M of Residential Revenue for Every 50K Increase in Starts (previously $60M for every 50K increase in starts) REVENUE 208 OUTLOOK ($M) ADJUSTED EBITDA TOPBUILD $2,065 to $2,5 $226 to $242 0% Commercial Annual Growth % to 6% Incremental EBITDA % (M&A) USI (8 months) 8.5% to 9.5% Working Capital (% of Sales) 2.0% to 2.5% Capex (% of Sales) 22% to 27% Incremental EBITDA % (Organic) 27% Normalized Tax Rate $273 to $283 $2,338 to $2,398 CONSOLIDATED $37 to $42 2 $263 to $284 Acquisitions in year one. Assumes housing starts between.250k and.280k 2 Includes $2M to $4M of cost savings synergies 2

22 Wrap-up

23 Positive Outlook for Construction Industry TopBuild Advantages $ GENERAL ECONOMY POPULATION GROWTH HOUSEHOLD FORMATIONS Our Footprint Covers 95% of All Housing Starts Largest Buyer of Insulation Facilitates Preferred Partnerships with Suppliers AGE OF HOUSING STOCK NEW HOME CONSTRUCTION Employer of Choice Macro Economic Trends Supporting Growth 23

24 Our Business Model is Differentiated CORE STRENGTHS Unrivaled National Scale and Buying Power Leveraging two channels to reach 95% of all starts Footprint and Industry Competencies Enable Adjacent Expansions Tenured Relationships with Customers and Suppliers Operational Excellence Focused on Continuous Improvement Focus on Safety Flexible Delivery (Less than Full Truckload) One Stop Shop Efficient Order Processing and Logistics Product Breadth and Knowledge 24