TopBuild Corp. Aktie

Greetings, and welcome to TopBuild's Fourth Quarter and Full Year 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] Please note, this conference is being recorded.

I will now turn the conference over to P.I. Aquino, Vice President of Investor Relations. Thank you. You may begin.

Good morning and thanks for joining us. With me today are Robert Buck, our President and CEO; John Achille, our COO; and Rob Kuhns, our CFO. Our earnings release, senior management's formal remarks and a deck summarizing our comments can be found on our website at topbuild.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 have 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 our website.

Let me now turn the call over to our President and CEO, Robert Buck.

Thanks, and good morning, everyone. We appreciate you being with us. As P.I. mentioned, Rob and I are joined by John Achille, our COO. I've asked John to start joining us so he can share his business insights, including our ongoing efforts to drive operational excellence across the organization. Many of you will remember meeting John at our Investor Day a few months ago. We were really pleased to see many of you at our Investor Day in December, and if you weren't able to attend in person, I hope you've taken the opportunity to watch the replay on our website.

I'd like to start my comments today by reiterating a couple of the key themes and messages that we shared in December. First, we have a clear, profitable growth strategy and a proven track record of delivering compounded growth and strong shareholder returns.

Second, we have significant growth opportunities across our $95 billion total addressable market, which has increased non-cyclical and non-discretionary revenue drivers. We generate very strong free cash flow and we're disciplined in deploying capital both organically and through M&A.

Third, we have a differentiated business model and we will continue to leverage our connected technology platform to continue driving growth and operational excellence to improve the customer experience.

Finally, we have a cycle-tested leadership team. We're proud of the people-first culture we've built at TopBuild and we're grateful for the commitment of our nearly 15,000 employees to growing our business and to working safely every day.

Let me now transition to discussing the operating environment at a high level. In the fourth quarter, weakness in the residential and light commercial end markets persisted. Consumer confidence remains low, interest rates are still elevated, and affordability continues to be an issue, all drivers of muted demand in the current environment. We continue to believe the underlying fundamentals are strong, supported by household formations and an underbuilt housing market, and this means there is great long-term opportunity for new residential construction.

The commercial and industrial end markets remain solid. We continue to see expansion across a variety of verticals. Bidding and backlogs are healthy, and we're well positioned to capitalize on that growth both in the insulation and commercial roofing space. Turning now to our results, fourth quarter sales rose 13.2% to $1.49 billion, fueled by the 7 acquisitions we completed last year including SPI in the fourth quarter. We finished the year with over $5.4 billion in revenue and adjusted EBITDA of $1.04 billion, or margin of 19.2%. Rob will discuss the financials in more detail later in todays call.

Acquisitions continue to be our top priority for capital allocation. Last year, we deployed $1.9 billion in capital across the business, adding approximately $1.2 billion in annual revenue. Our M&A pipeline continues to be very healthy; the environment is active and we're off to a solid start this year, having recently closed the acquisitions of Applied Coatings and Upstate Spray Foam. We also announced our second commercial roofing acquisition earlier this week, Johnson Roofing.

Last year, we returned approximately $434 million to shareholders through our share repurchase program, demonstrating our ongoing confidence in our business and long-term strategy.

Now let me hand it over to John to cover operations and Rob will follow to discuss the results and guidance, and I'll come back at the end with some closing thoughts.

Thanks, Robert. I'm glad to be here with you today. I'd like to cover two key areas, the supply chain environment and our ongoing efforts to drive operational excellence across the business.

As housing demand has softened, we've seen the supply of building insulation and more specifically fiberglass loosen and become more available. In the second half of 2025, we saw a couple of fiberglass lines come down for extended maintenance as manufacturers work to balance supply with demand and stabilize pricing. We have strong relationships with our suppliers and our conversations are ongoing. Importantly we are leveraging our tools and technology platform to manage inventory across the branch network.

On the spray foam side, we continue to see plenty of availability. For mechanical insulation, fiberglass pipe insulation remains on allocation, and we continue to work closely with our supplier partners to ensure that we receive our fair share of existing supply.

Turning to operational excellence, we have great control of our business. You'll remember that in the first quarter of 2025, we were able to quickly take actions to align our cost structure with the demand outlook. Our work here continues as we navigate changes in the macro environment. We talked at Investor Day about how we leverage technology and take information from our businesses to share best practices, be more efficient and further optimize the network, everything from installer productivity to job site routing to shipments. Our field teams are doing a great job managing profitability. As soft demand has persisted, we are responding appropriately and making disciplined pricing and volume decisions at the local level. Our efforts to optimize our cost structure across the business are ongoing, and ops leadership continues to focus on the bottom quartile of our branches to improve performance.

On the Specialty Distribution side of the business, we are making great progress on integrating SPI. Late last year, we realigned Specialty Distribution field leadership to better serve our customers, and we've identified several cross-selling opportunities we expect to realize over time. On the supply chain side, we're capturing rebates and building on existing supplier relationships. Finally, our teams are working diligently to transition the SPI business to our technology platform and importantly, do so in a way that is seamless for our customers. We expect the IT integration to be completed by the end of the second quarter. As we move forward, we're confident that we'll meet or exceed our original synergy targets.

Let me also say a few words about our commercial roofing business. Nick Hadden and the team continue to do a great job. As Robert mentioned, we announced the acquisition of Johnson Roofing this week and expect it to close later in the first quarter. Johnson Roofing generates about $29 million in annual sales and is based in Waco, serving the Texas, Louisiana and Oklahoma markets. The acquisition will enable us to maximize many of our relationships with general contractors in the area that serve the technology, industrial manufacturing and education verticals. We're really excited to continue expanding our commercial roofing platform in a very large and highly fragmented space, which looks a lot like insulation did 20 years ago.

Finally, I want to echo my thanks to our employees across the network. We appreciate your hard work to lead your business, work safely and drive operational excellence in everything you do.

With that, I'll turn it over to Rob.

Thanks, John. 2025 marked our 10th year as a standalone public company and so I thought I would take a quick second to reflect back on our growth. Over the past decade, we have grown our sales and adjusted earnings per share at compounded annual rates of 13% and 31% respectively. This extraordinary growth has been the result of our unique business model that is driven by our people and culture. I want to take this opportunity to thank our teams in the field and at our branch support center for their efforts in delivering these results. And while we are proud of TopBuild's past successes, we are even more excited about the growth opportunities that lie ahead, which we detailed at our Investor Day in December.

Before I dive into the numbers, I wanted to point out that we've provided a little more detail in our presentation this quarter to split out our same branch results versus M&A results. Given the sizable impact of the Progressive and SPI acquisitions that we closed last year, we thought that would be useful.

Shifting to our fourth quarter results, total net sales were $1.49 billion, up 13.2% to prior year. Acquisitions contributed 23.0%, as both Progressive and SPI had solid quarters and exceeded our expectations. Pricing added 0.7% as positive price on gutters and mechanical insulation was partially offset by lower pricing on residential insulation products. Volume declined 10.5% driven by ongoing weakness in the residential and light commercial end markets.

Turning to our segments, Installation Services sales of $798 million rose 1.2% compared to last year. The M&A contribution of 16.3% more than offset the volume decline of 14.5% and pricing decline of 0.5%. Specialty Distribution sales totaled $755 million in the quarter, up 25.5% versus last year. Acquisitions added 28.9% and pricing rose 2.2%. This was partially offset by a volume decline of 5.5%.

Fourth quarter adjusted gross profit was $416 million with a margin of 28%, down 190 basis points to prior year. 100 basis points of the decline in margin was driven by a higher mix of distribution versus installation sales as a result of the SPI acquisition and weaker sales volumes in the legacy Installation Services segment. The remainder of the gross margin decline was driven by price/cost pressure and deleveraging on lower sales volumes.

Adjusted SG&A as a percentage of sales in the fourth quarter was 14.1%, compared to 13.2% last year. The increase in SG&A was driven by acquisitions, including amortization of customer lists and trade names. On a same branch basis, SG&A was down $19 million or 20 basis points due to cost reduction actions taken during the year.

TopBuild adjusted EBITDA in the quarter totaled $265 million, or a margin of 17.9%, down 180 basis points compared to prior year. The drivers of the EBITDA decline were the same as discussed with gross margin. Installation Services adjusted EBITDA margin was 21% in the fourth quarter, down 40 basis points year-over-year. Specialty Distribution adjusted EBITDA margin was 15.4%, down 230 basis points to last year's fourth quarter. Excluding the impact of M&A, EBITDA margins were down 80 basis points to prior year.

Fourth quarter interest and other expense rose to $36 million due to the expansion of our credit facilities and the addition of the $750 million bonds due in 2034.

Fourth quarter adjusted earnings totaled $4.50 per diluted share as compared to $5.13 in 2024.

Moving to our balance sheet and cash flow, total liquidity was $1.1 billion at the end of the year. Cash was $185 million and availability under our revolver totaled $934 million.

We ended the quarter with net debt of $2.7 billion, and our net debt leverage was 2.35x trailing 12 months adjusted EBITDA.

Working capital was $959 million or 15.4% of sales.

For the full year 2025 we generated $697 million in free cash flow. We deployed $1.9 billion for acquisitions and returned $434 million to shareholders via share buybacks.

Turning now to our 2026 guidance, while there are signs for cautious optimism in our end markets, significant near-term uncertainty remains as the residential market continues to deal with challenges from consumer confidence and affordability. We remain highly confident around the long-term demand fundamentals and the 2030 projections we shared at our Investor Day in December.

As we worked through our guidance for 2026, our overall philosophy at the midpoint was to assume no significant change in end market conditions. Under that lens, our 2026 guidance is for sales of $5.925 billion to $6.225 billion and adjusted EBITDA of $1.005 billion to $1.155 billion.

The midpoint of our revenue guidance at $6.075 billion is based on the following key assumptions: Overall, we expect volume and price to each be down low-single digits in 2026. From an end market perspective, residential sales, which account for roughly 52% of our total sales, will be down mid-single digits, inclusive of both volume and price. Commercial and industrial, approximately 48% of our total sales, is expected to grow low single digits, inclusive of volume and price. We expect M&A, which we have closed in the last 12 months, to contribute $800 million to $850 million of revenue.

The midpoint of our adjusted EBITDA guidance at $1.08 billion assumes the following: an EBITDA decremental of approximately 27% on lower volumes; $55 million of price/cost headwinds; and EBITDA margin on M&A in the mid-teens, inclusive of $15 million of Progressive and SPI synergies that will impact 2026. Those synergies are in line with our initial projections, and we remain highly confident in delivering at or above the high-end of our 2-year synergies targets.

With regard to the quarters, we expect quarterly sales to range between $1.4 billion and $1.6 billion and our EBITDA margins to range between 16.5% and 18.5%, with the first quarter being the weakest and the third quarter being the strongest.

Finally, let me give you a few additional inputs for your models. We expect the combination of interest and other will be $143 million to $149 million. Our tax rate will be approximately 26%. CapEx will be between 1% and 2% and we expect working capital to be in the range of 15% to 17% of sales.

With that, I'll turn it back over to Robert.

Thanks, Rob. Let me close with a couple of thoughts on our outlook. On the residential side of the business, external forecasts vary with some optimism for the back half of the year. And while we expect demand will improve, its not yet clear what that timing will be and it is too early in the year to bank on a second half recovery. This uncertainty is baked into our guidance as Rob discussed. Should the environment improve over the course of the year, we are very well positioned to capitalize. On the commercial and industrial front, bidding activity and backlog are solid and we are poised to capture growth in those verticals that are expanding.

So, while near-term uncertainty exists, we remain bullish about the underlying fundamentals of our industry, our $95 billion total addressable market and our ability to capitalize on both organic and inorganic growth opportunities.

We have a proven track record of success fueled by our unique, flexible and capital-efficient business model. We are well diversified between residential and commercial/industrial, between Installation Services and Distribution, as well as between cyclical and non-cyclical revenue.

We have great control over our business, and we have demonstrated the ability to adapt quickly and navigate broader changes in the environment.

Finally, we're disciplined stewards of capital. We have an active and robust M&A pipeline, and we'll continue to focus on compounding returns and delivering increased shareholder value.

With that, operator, let's open up the line for questions.

[Operator Instructions] And our first question comes from the line of Sam Reid with Wells Fargo.

Maybe starting off with a big picture question. I wanted to dig a little bit deeper into the guide path for single-family starts as we move through the year. It sounds like you're rightfully embedding really no recovery here, which I think is probably the right call. We obviously do have a lot of detail from the public builders, especially on the production side on their outlook for starts. But just curious kind of what you're hearing from the private builders and perhaps any differences in what those private builder conversations sound like versus what the public sound like?

Sam, this is Robert. So you're right. You get a lot of color from the public builders, which I'm sure you've seen in their guides as well as discussions came out of the Builders' Show last week. I'd say the regional builders, the private regional builders are keeping very cost competitive there, pushing to make sure that they get their volumes and maintain their own compared to the publics. And then I'd say on the smaller custom builders, they're probably the least impacted. So they seem to definitely be holding their own relative to demand when you think about their customer base as well. That's some of the color we see regional privates as well as the custom privates.

All helpful color there. And then maybe switching gears. It does sound like you're seeing some relatively solid backlogs on the commercial industrial side. But I did perhaps pick up on a little bit of a delineation between light versus heavy commercial. Would just love to hear kind of where we are on the light commercial side and maybe just talk through kind of how a recovery on the light side could potentially work.

Yes. I think we typically see the light follow residential. I think we see some positive trending in some of our backlogs on the light side. As we talk about backlogs relative to commercial industrial, as we think about mechanical insulation, as we think about roofing, we see those probably trending at a faster clip. But typically, lighter commercial does follow residential. But we see some trending there in the right direction, we believe. But again, more optimism on the mechanical and the commercial roofing side.

And our next question comes from the line of Michael Rehaut with JPMorgan.

First wanted to also kind of delve in a little bit to the outlook and really focusing around the pricing trends. You mentioned that embedded in your outlook is $55 million in price/cost headwinds and also that your mid-single-digit decline for resi is inclusive of pricing. So I guess it's more of a revenue type of number. Just wanted to get a better sense for when you think about the $55 million, how much of that is negative price or if all of that is negative price? And how you would expect that to flow through and impact the results throughout the year, if it's going to be more first quarter or first half weighted? Just trying to get a sense of the degree of impact, particularly as we start out the year.

Yes, Mike, this is Rob. So similar to last year, we started talking about these price cost headwinds, definitely something we started seeing pockets of in different markets as certain markets slowed, pressure picks up around that side of things. We obviously were pretty successful last year doing a lot to take cost out, both through negotiations with our suppliers, but also a lot of costs we took out in the business to help maintain margins. And certainly, that's going to be the focus and the things that we can control in 2026.

But since the main tenet of our guidance was really around, hey, the environment here from a macro standpoint, we're not going to forecast it improving dramatically. We do think we'll continue to see those headwinds similar to what we saw last year. It pops up in different pockets and different markets as you go through the year. I'd say, just like we said last year, it probably progressively gets a little worse as the year goes on. But we definitely saw some of that pressure in the fourth quarter, not quite as much as we had thought in our guidance, but we thought it was prudent to continue that given the macro environment we're in right now.

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We did some branch rationalization in the first quarter that's helped take cost out. We have realigned our headcount given the volumes we're seeing right now. And we continue to do all the same things we've done in the past around focus on bottom quartile and focus on operational excellence, and those things have helped offset some of the price cost headwinds we've seen in the markets.

I would say, Mike, this is Robert. I'd say the teams in the field did a nice job. I mean they remain very disciplined. They were driving where they could the operational excellence piece that Rob talked about. But they did a nice job staying very disciplined during the year and to announce Johnson Roofing earlier this week. So we spent time in the first 6 months with Progressive, working the M&A process, working the integration of the M&A process. So we're in a really good space there relative to how our process works and even front end of identifying deals to diligence to the back-end integration.

So we've made a lot of progress there. Very active on the front, I would say, smaller deals to bigger chunkier deals. And I would say, given the relationships that the Progressive team have on some of the smaller deals and some of the relationships we have in the industry, I'd say we're not competing right now in those [Audio Gap] be disciplined. We're looking for good quality companies, and we're definitely building some relationships and evaluating several right now.

Great. That's super helpful. And then switching topics here a little bit. On the prepared remarks, I think you mentioned the realignment in the specialty distribution field leadership. Can you talk about that a little bit more and kind of what the intention was there?

Yes. This is John. As far as the changes that we made, when you think of 3 distinct businesses that we have on the specialty distribution side, just making sure we have the right leadership in place. And I think coming off the SPI acquisition, we got some nice talent there that was able to accent with our existing talent. So just really good experience that we have leading those businesses today, driving the operational excellence that we expect of those teams. So that was really the biggest change there.

I think its really speaks to the pace at which John and the team have really worked the integration piece. So really quickly getting the right leadership team in place, which, by the way, some of that was SPI folks from the SPI side, some of our folks from the DI side. So a nice mix of the team, which we think is driving buy-in and integration pretty aggressively here. And I think we said in our prepared remarks, highly confident in the top end or exceeding our synergy number that we talked about whenever we announced that deal.

Yes. And just one more comment on that just around guidance, right? In terms of we've included the run rate that we signed up for, for year 1 around synergies. And if there's anything we see opportunity in this year in terms of overachieving the midpoint of our guidance, it's definitely around the synergies, right? And so that's why when we think about what we can do, we're about controlling the controllables. The macro is going to be what it's going to be, but we're focused 100% on driving these synergies and getting the results that we can control there.

And the next question comes from the line of Susan Maklari with Goldman Sachs.

My first question is on the cross-selling opportunities that you highlighted in your prepared remarks as you're working on the integration of SPI. Can you give a bit more color on what those are and how we should think about them coming through?

Yes, Susan, this is John. Yes, so I would say today, cross-selling for us is very -- it's very much just people talking to other people within our business, right? So we could have a DI customer that we have a great relationship with that happens to be working on a job where we can also offer that customer an installed service. So today, it's really just connecting our sales teams and our managers. But we do plan on putting some digital resources behind that in the future and really making that kind of just leveraging another one of our strengths where we touch all these different types of projects through different businesses that we have. So it's an exciting opportunity for us, and we plan on investing to make it even seamless for our internal staff.

Okay. That's helpful. And then as we do enter another year that seems like it could be fairly challenged as we think about the outlook for housing and the macro. Can you talk a bit about the cost structure across the business? How you're thinking about your positioning? Are there opportunities to perhaps make further adjustments in there? And what you're watching to determine if that needs to happen?

Yes. I mean, Susan, this is Rob. That's something we're constantly monitoring, certainly something we have an advantage given a common ERP across our footprint, our ability to see activity going on in the business on a daily basis and make adjustments. Last year was a great example as we saw things begin to slow early in the year, we quickly took action. And we'll be doing the same thing this year, right? We're going to continue to monitor the macro situation, continue to monitor what's going on. More than 70% of our costs are variable. So we can adjust quickly and make changes where we need to.

And our next question comes from the line of Phil Ng with Jefferies.

This is Maggie on for Phil. First, I wanted to dig into the pricing outlook. I mean pricing held up pretty well in the quarter and even stepped up in distribution, maybe a function of the end market exposure. But how should we think about that guide for down low single-digit pricing in the outlook between the 2 segments and how the $55 million price/cost headwind is split? And I think you also said 4Q or maybe it was 2025 total, you saw some inflation in gutters and spray foam and fiberglass saw some pressure. Any color on how that's trending into 2026?

Yes, Maggie, this is Rob. So that price cost bucket, it's obviously a mixed bag of products, some with price inflation, some with price pressure and price deflation. And it's one of the good things about the diversification we have in our model now, right? And you can see that coming through on the -- particularly on the specialty distribution side, where, as you pointed out, pricing actually increased in the fourth quarter on the distribution side, and that's because of the heavier exposure to the commercial products on that side, the mechanical insulation and also a heavier concentration of gutters on distribution than what we have on the install side.

So when you think about that mixed bag of products, we -- throughout last year, I'd say we started the year with some carryover pricing in fiberglass that was favorable, but definitely as the year progressed, saw that get pressured and saw prices go down a bit in the back half of the year. Pretty similar on spray foam. Mechanical, we saw good price increases throughout the year. Commercial projects were strong, particularly on the mechanical side and had really good pricing there. Gutters because of tariffs saw some pricing. So when you put that all together for the year, we netted out to positive sales price. I'd say it was still a drag on margins when you netted everything out from a cost perspective, roughly about 10 basis points when you net everything we were able to do from a cost perspective, so not terribly impactful.

But -- as we look out, like I said earlier, we expect a similar environment. We expect pricing on mechanical to be strong given the strong demand there. The pricing on fiberglass and spray foam, we continue to -- we think we'll continue to see pressure as we did the back half of this year, and that's really the biggest driver of the price pressure that we're talking about in 2026.

Okay. Got it. That was all really helpful. And next, on the margin guidance, the pressure makes sense with volume deleverage and the price cost headwinds you've outlined. But -- you're always doing stuff on the bottom quintile branches and the special ops teams to drive margins. Wondering if the outlook incorporates any of those productivity initiatives or if that could be upside to the guide? And then maybe just walk us through some different levers you have if demand is weaker than the outlook currently.

Yes, Maggie, this is Rob. So in the prepared remarks, we tried to give you some bookends around where EBITDA margins will be throughout the year. I'd say like we said in the prepared remarks, the strongest quarter will be Q3, probably in the neighborhood of 18.5% or call it, 18% to 19% and Q1 more in that 16.5%. And so we're definitely seeing the -- we've talked a lot already about kind of some of the price cost pressure. And we -- like we've said, we've done a really good job of offsetting a lot of that with cost reductions, and we plan to continue to do that.

But the other thing that's really impacting margins, too, is M&A, particularly the SPI transaction with that being a 10% EBITDA business that we acquired in the fourth quarter, still running around 10% today. But obviously, like we talked about, we see a lot of opportunities on the synergy side. We're moving quickly there. And with synergies, the goal would be to get that to the mid-teens this year. So we'll see that improve as the year goes on, on that piece. So that's definitely a big lever in terms of what we can do this year.

And then like I said earlier, I mean, the other levers are around our cost structure, and we're going to continue to monitor the environment. We feel like we made the adjustments necessary for the current volume environment we're in, but we'll make -- if that does get worse from here, we'll adjust and take more action. So that volume guide we talked about and saying, hey, we expect volume down low single digits for the year, but talked about a decremental of 27%. I mean that includes us taking cost out to get to that 27%. So definitely something we're -- we've done in the past and something we're comfortable we'll be able to do this year.

And our next question comes from the line of Ken Zener with Seaport Research.

Can you guys talk to -- it is going to be more residential focused. The guidance for res is down mid-single digit. Can you bridge the dynamics between kind of on the install side, the 15% decline we see, realizing some res is rolling through specialty distribution, which is down 6%. And then talk to the persistence or the dynamics why on the install side, the volume down. And if you see an equivalent decline, I guess, in the same residential products that you're not installing.

Yes, Ken, this is Rob. So from a volume perspective, on the install side in the fourth quarter, we definitely saw residential down single-family and multifamily as we've seen throughout the year, we would definitely say particularly December slowed down significantly. We were well ahead of our expectations at the end of November and then December slowed significantly on the resi side. And on the install side, our commercial business, as we've talked about throughout the year, about half of that business on the install insulation side is light commercial work. That's been slow throughout the year. So that also has been a drag on volumes on that side.

So that's -- the resi side and light commercial side, really driven by the slower starts environment. On the specialty distribution side, because of the diversification of our end markets there, right, and now that being a much heavier commercial focused business, you're not seeing as big an impact. We definitely have the resi products down, and that's why volumes overall were down, but we were able to offset a good portion of that with a really good year in mechanical insulation and also on some of the other commercial products we move through the Service Partners side of things and through our metal building business.

Okay. And then given that you guys have a very -- probably the best -- amongst the best visibility on what builders -- what you're bidding on, the mid-single-digit decline, could you comment on Florida, Texas, if you would feel comfortable kind of talking about the dynamics you're seeing given that those markets were certainly impacted by COVID. It seems like we're kind of coming through that more in Florida versus Texas. But could you talk to how that is impacting your business, if you would?

Yes, Ken, it's John. So on the resi side, Florida, you hit on it. It's a bit optimistic down there. We're seeing things start to recover. I would say there's a good story coming there versus Texas, probably still a little flat to slow. So we're seeing a little mixed bag between those 2. But maybe just take the opportunity to take you around the country a little bit. The Northeast off to a bit of a flat start, but I would say there's a good story coming there, probably impacted by weather as that area just got hammered again this past week. So nothing surprising there.

Midwest, a bit flat. But really down the middle of the country, we see some good optimism through Arkansas, Missouri, Iowa, some probably nice story going to shape up there. And then as you work out west a little bit, Colorado is still a little slow out of the gate. Just west of that, some of the Northwestern -- the Pacific Northwest, we've got probably a good story coming there, Montana, Utah. And really, the only one that's not showing signs of improvement is more around California. So that's the only one that I've marked as probably hasn't necessarily bottomed out yet.

And our next question comes from the line of Mike Dahl with RBC Capital Markets.

Sorry to belabor the pricing point. I just want to make sure we understand kind of the out-the-door pricing versus the cost you're taking. Our sense has been that on the resi fiberglass side, there is kind of low single-digit price pressure that the OEMs are also seeing. So if you're looking for down low singles on price out the door, is that worse for you in the resi insulation and that's why you're seeing the price cost pressure? Or just maybe a little more color on that kind of differential and what's actually driving that? And I think, Maggie you asked this, but also maybe just another clarification on how much is assumed within the install versus distribution side?

Yes. So this is Rob, Mike. So we don't break out the guidance by segment. But to give you -- try to give a little more color on the pricing. I mean, we have seen -- there is price pressure, obviously, in the market. The builders are dealing with affordability challenges, demand challenges. So there's been price pressure on that side. Like you said, the manufacturers are definitely feeling that as well. And so there have been price reductions. I mean, for us, what I have to always remind folks is, I mean, pricing is a local decision in our business, right? It's a local -- the builders are making local decisions.

So it's literally thousands of decisions being made around pricing. And so we think we do a really good job of adjusting to local markets and controlling that and putting guardrails around it with our ERP system. But just given the macro environment, we saw it in the fourth quarter. We do see markets where things are getting more competitive, prices are picking up. We're going to do what we can to recover that. But even if we recover dollar for dollar with what we're seeing there, that can be a margin headwind for us as well. So we're going to do our best to offset it. But like we said in the midpoint of our guidance, we've got a headwind baked in there.

Mike, this is Robert. Just to build upon that. I mean, I think we've done exactly what we said, right? We talked about being disciplined in 2025, but volumes have stayed slower for longer. And so as they stay slower for longer, you get the things that John talked about in his prepared remarks where we're making some good disciplined decisions at the local level, which is what Rob just talked about. So disciplined. And then as things stay slower for longer, then we appropriately stay disciplined but pivot appropriately as well.

Okay. Got it. Yes, that's helpful. I appreciate it. My second question, just on the commercial roofing dynamics. Can you -- I appreciate some of the high-level commentary. Since that business has some today pretty concentrated geographic exposures, can you help us understand at a market level, what you're seeing on the commercial roofing kind of end market volume growth and then maybe then the outgrowth that Progressive is seeing and what you're assuming versus the market in '26?

Yes. So maybe I'll -- this is Robert. So I'll start looking backwards a little bit. Progressive had a great 2025, some nice organic growth in the business, really strong execution in Q4. And if we look at back half of the year, our ownership of Progressive. So great job in '25. As we look at '26, I think I mentioned a while ago, those backlogs are growing at a steeper clip. And you're right, I mean, great footprint in the Southwest in Arizona, Texas, those areas. Johnson, obviously, we just purchased is focused Texas, but also did some work in Oklahoma and Louisiana as well. So we've got a nice footprint down there. But we do quite a bit of travel in that work. I know we just picked up a major project in Idaho. We're doing some projects up in Utah as well.

So we'll travel for some of the bigger projects. But as we do M&A, as you think about the future, we'll build out that footprint. And that's part of -- as we're looking at companies, looking at where we want to be, that type of thing, part of it is building out that footprint. So we think a great 2026 coming on the commercial roofing side and the leading indicator of that is backlogs and obviously staying close to the Progressive team. And as John said, they're doing a fabulous job. And again, a platform that we see building upon here with a high level of confidence.

And our next question comes from the line of Trey Grooms with Stephens Inc.

So you guys have been realigning headcount and some other actions you've taken. When we get back into an eventual kind of recovery mode, I guess the question is, how much of these cost outs do you see as sustainable versus kind of what you need to bring back pretty quickly as you look at the different levers you guys have been pulling?

Yes, Trey, this is Rob. I'll start. From a cost perspective, there's definitely a portion of what we did last year that we think will stick, right? I mean some of the facility consolidations, that rent cost isn't going to come back on us. Some of the back office fixed costs, we like to try to move on. We're trying to do things in the back office to automate and do things more efficiently. So our hope there would be to not have to add back as much on that side. And then obviously, the installer side, we're going to need to add back to adjust to the volumes as they go. But that's where our recruiting practices and our skill at doing that comes into play, and we've always outperformed at that. So we're confident we'll be able to adjust and get labor back as volume comes back.

All right. And then I know you touched on this a little bit. But as we're looking at the guide on the margins, the puts and takes there, you mentioned synergies as an area where there may could possibly be some upside there. You seem pretty confident in that. But as we think about the high end of the margin range versus the low end, again, we're specifically asking about the margins. So where -- what would be the other swing factors there, in your opinion, to get us to the high end versus the low end outside of the synergies? Is that going to be more volume related? Or could there be some swings in price cost? Or where are the more likely kind of swing factors there?

Yes. I mean you kind of hit on the 2 key ones there. I mean, for sure, the higher end of our range assumes higher volumes. And if that comes, we'll definitely -- like we typically say, we expect our incrementals to be in that 22% to 27% type range, and we're going to increase margins by putting volume in at that level. If demand is stronger, we would expect the price/cost situation to improve as well. So that's the second piece of that. So those are really the 2 other things. I mean the other piece is what we can do with the cost structure, which is like what I referenced earlier in terms of our focus, we're focused on what we can control there. And so we're doing all the things we always do around operational excellence. And this year, we have the unique opportunity with the synergies to outperform on that piece as well.

And our next question comes from the line of Adam Baumgarten with Vertical Research Partners.

Just back to the price/cost outlook. I guess is it fair to headwinds, you noted that $55 million will be felt more acutely in installation than specialty distribution given the competitive behavior that you guys mentioned earlier?

It will -- so I'd say, I mean, the price cost pressure on the residential products, we've seen more of it in distribution, right? Because of the labor component on install, it's less pressure there. It doesn't mean we don't have any pressure there, but we've seen less. But the distribution side, it doesn't show up as much in the P&L because of the diversification of the business on that side. So from a pure impact of what you'll see, yes, more than likely, I'd say more of it would be on the install side just because of the business mix piece of it.

Okay. Got it. And then just since John brought it up when he was through the markets, just any kind of sizing you could do on the weather impact you've seen in 1Q so far given the couple of storms...

Yes, really hard at this point, given we're still shoveling out in certain parts of the country. So it's definitely significant and definitely baked into kind of that -- or at least what we know as of today baked into kind of that bookend we gave around quarterly revenue.

And our next question comes from the line of Reuben Garner with Benchmark Company.

Most of my questions have been answered. I just have one on the commercial business and outlook. I was wondering, data centers have been a pretty big focus of late, but I was wondering if you could go into a little more detail on some of the other areas that you're seeing that are driving growth in your mechanical and commercial segment. And what kind of -- if you had to pick, is this -- is the mechanical side where you see the most upside to your outlook at this point this year?

Yes. This is Robert, Reuben. So I would say, as we think about some of the other verticals here, so obviously, data centers is -- you hear everybody talking about that. But I think the one thing is we look across the verticals, make sure we're bidding across the verticals, so you don't become too heavily reliant on one. So I would say education is big right now. Health care for sure. We're seeing manufacturing as well. So we're seeing it really across the board, even some things, food and beverage on the mechanical side. So really diverse, several of them growing there, and we're making sure that we're bidding across all the different verticals from that.

And that's why we talk about -- we do think there's upside there. There's going to be growth. Rob talked about in the guidance of commercial industrial growth. So we do see upside potential there. We think both top line and bottom line. We talked about how we're going to lean in on the synergies, highly confident in our synergy number around the SPI [indiscernible] but also the Progressive synergies. It was a smaller number, but we're highly confident in that. And then I talked about how the outlook is on commercial roofing for '26 as we look at backlogs and work that we're securing there. So definitely commercial, industrial, mechanical and roofing, we would say those are upsides and really across the different verticals.

And our next question comes from the line of Collin Verron with Deutsche Bank.

Just one for me. You talked about pricing in some of your categories, but I don't think you mentioned commercial roofing. I know it's a smaller piece of the pie right now, but it's growing. So I'd just be curious as to how prices are tracking there and if the price cost expectations differ from the consolidated company at all in 2026.

Yes. So obviously, for -- in our guide right now, any pricing related to roofing or at least for half of the year is baked into the M&A number. But overall, I'd say, in general, pricing is flattish on the commercial roofing side from what we're seeing. They can get a little bit different pricing depending on their mix of business from new roof to reroof -- and depending on new roofs, what end market it goes into. So there's a little bit of a mix element there. But from an overall pricing perspective with the suppliers, I'd say it's an overall flattish environment right now.

Operator, do we have anyone else in the queue?

No. With that, that was the last question. So I would like to pass the floor back to Robert Buck for any closing comments.

Okay. Thanks, everyone, for joining us today. We look forward to seeing many of you at the upcoming conferences. Thank you.

Thank you. And with that, ladies and gentlemen, this does conclude today's teleconference. We thank you for your participation, and you may disconnect your lines at this time, and have a wonderful day.

Welcome. Thank you for joining us here today for our Investor Day, both those of you in person, as well as those of you on the webcast, I'm P.I. Aquino, I lead our Investor Relations effort at TopBuild. I've been with the company for almost 2 years now. I spent most of my career in the consumer packaged goods space, both leading corporate IR, as well as on the sell side.

When I joined TopBuild, there were really two things that attracted me to the company. First, the strong track record of compounding growth and driving shareholder returns because as you can imagine from my standpoint, having that track record makes talking about the company that much better, right? And then number two, at the end of the day, I'm a people person, and this is a people business, right? We have an incredibly talented management team here today. I feel really privileged to get to work with each and every one of them on a day-to-day basis.

So we have a great morning of presentations planned for you, followed by lunch. And what I help you really take away today is that we have a vision here as a best-in-class industrial compounder. I hope you get a greater understanding of our businesses and the depth and talent of our management team.

And finally, that we have a great vision for profitable growth. To commemorate the 2025 Investor Day, we're pleased to be making a donation on your behalf to Habitat for Humanity. Who continues to make a difference in the communities that we serve. We partnered with Habitat for Humanity for many years, contributing both material and financial resources to help Habitat achieve its vision where everyone has a decent place to live.

Finally, as we are a people first, safety-focused company, I want to make sure I point out the emergency exits today, the doors from which you entered on your left, there's an exit behind you, and then there's also an emergency exit behind at the end of the room here behind the AV table.

Moving on to the formal piece of our presentation, which can be downloaded from our website, our safe harbor statement is available on Slide 4. This presentation is being live webcast and a replay will also be available on our website following the conclusion of the event. We have a really exciting agenda for you today that starts out with our President and CEO, Robert Buck. You'll then hear about culture and talent and our position in the industry as an employer of choice. We'll talk about the importance of operational excellence, and you'll also hear from each of our business leaders in installation services, insulation, and commercial roofing.

They'll provide an in-depth overview of their unique market position and how they drive sustainable growth and operational excellence each day. We'll then take a quick break. And if you haven't already this morning, I encourage you to visit our various displays out in the gallery. They're designed to give you a better understanding of what our teams accomplish every single day from installing insulation, we have various commercial roofing types to fabricating mechanical and metal building insulation.

For those of you on the webcast, we'll pause for about 10 to 15 minutes between the roofing presentation and specialty distribution, and we'll announce what time will come back. After the break, we'll talk about specialty distribution and then host our first Q&A session, which will be focused on the first part of our presentation.

Next, we'll talk about how we're leveraging technology both in the field -- sorry, we'll move on to M&A. We'll have our M&A panel and talk about how we'll continue to drive value as an acquirer of choice. Next, we'll talk about how we're leveraging technology both in the field and in the back office and how we think about improving the customer experience as we look forward.

Then and the moment you'll all have been waiting for is the numbers. Rob Kuhns, our CFO, will bring it all together from a financial perspective and share how we think about the future. Finally, Robert will make some closing remarks before we do a final Q&A session with all of the leadership team. And then at the conclusion, we'll have a leadership luncheon, you'll be able to sit down, get to know the management team and so forth.

With that, let me turn it over to Robert Buck, TopBuild's President and CEO. Thank you.

Okay. Thank you, PI. Good morning, everyone. I obviously know many of you and appreciate you being here. Thanks for those of you live here in New York, as well as those that are on the webcast. My name is Robert Buck, President and CEO of TopBuild. I've been with the business since 2009 have really led the evolution of what is TopBuild today. This is my fourth Investor Day, and to me, the most exciting one for our shareholders.

Today is a look back at what we've built, but most importantly as a look forward as to where TopBuild's going for the future. And it's a great opportunity for you to meet, as P.I. said, our leadership team and the team that's poised to drive the future results of the company for our shareholders.

So let me start with a few key themes today that you're going to hear throughout the presentations and my key messages as well. So four key themes. TopBuild is a best-in-class industrial compounder and value creator with a clear profitable growth strategy. This is enabled by the great free cash flow we generate in this model and in the business. And we've taken that free cash flow to drive growth strategically and deliberately organically in the business, as well as via M&A.

We've got a proven and strong track record for doing this consistently over time. And we've consistently driven compounding returns and growth for our shareholders. This is a critical success factor in the model of TopBuild. You'll hear about it today, and Rob Kuhns will highlight it more in his presentation later this morning.

Let's lead to my second point. We have -- again, you're going to hear me say strategically and deliberately a lot. We have strategically and deliberately created a great opportunity for TopBuild and our shareholders. By expanding our total addressable market and our mix of revenue in nondiscretionary, noncyclical revenue streams. This has been by design. The growth opportunities are exciting and real.

And you're going to hear John Achille, our COO, to talk about the details of our end markets of where that growth can go. The growth runway exists in our core ventilation, you'll hear Jeff Krestancic, our President of TruTeam, speak about that. You'll hear David Fisher, our President of Specialty Distribution, talk about it in the core insulation distribution space. And then our new growth platform in commercial roofing. We have Nick Hadden and David Stowers from Progressive Roofing, They'll talk about the platform they're building and where we're taking that in the future.

All of this total addressable market that we've deliberately taken the path down, it's driven by a proven execution playbook. Why are we so confident because we have a proven execution playbook of where we can grow in this total addressable market that we've strategically positioned ourselves with.

I talked about the total addressable market, but also the mix of that total addressable market. More into noncyclical nondiscretionary revenue, making the revenue streams of TopBuild more resilient for our shareholders. You're going to hear our ops leaders today talk about critical decisions and actions they're taking in their business to drive the growth. You'll hear our M&A team talk about our acquirer of choice status and the competency we have in M&A. And most importantly, with our M&A panel, talk about the future opportunities to continue to drive compounding growth in TopBuild via M&A. That will be led by Joey Viselli, our Chief Growth Officer, He'll be joined by Jeff Caswell and Justin Rojas in the M&A panel discussion.

The third theme today, talking about our differentiated business model, and strategically advantaged technology and tools. You're going to hear today our team talk about how we win, how we win in the local markets, how we win in each business. This is facilitated by the tools and technology and the investments that we've made to do three things: drive operational excellence, drive growth in the business and a better customer experience with TopBuild in our companies. You're also going to hear about the value-added services we offer across our network in the different businesses. You also will talk about our future digital road map, future investments we intend to make.

That will be led by Sri Pullareddy, our CIO; and Madeline Otero, our Chief Accounting Officer; as well as Joey Viselli. It's really about the practical use of technology and tools to drive innovation throughout the business, both in the field, operations and in the back office.

Last but not least, the success of TopBuild past present future is really about a people-first culture led by a Cycle-tested leadership team. Jennifer Shoffner, our CHRO, we'll talk details about the culture that we've built and continue to refine, as well as the talented team we continue to build and develop as well within TopBuild. You're going to hear the common theme today from Jennifer and others around talent development. local empowerment and relationships, engagement of our team and an entrepreneurial spirit that exists within TopBuild.

You're going to talk -- we're going to -- you're going to hear us talk about how we influence our people to do the right thing every day. It's about employee engagement led by a passionate and cycle-tested leadership team. This drives and maximizes shareholder returns. So I just want to give you a glimpse into the life -- a TopBuild on a daily basis.

On an average day like today, we'll visit nearly 20,000 job sites between the U.S. and Canada. Those are 20,000 unique job sites that our installers will visit, our sales force, our drivers, our safety professionals, nearly 20,000 job sites. And if you think about those crews visiting those job sites, majority of them are unsupervised. So if you think about a model where the culture is so important of influencing people to do the right thing around quality, productivity, safety, managing and taking care of our assets. There's no better example than TopBuild in our model and why the culture here is so important as to what we've developed and part of the secret of our success. Steve Raia will come up and make the connection between our people, the culture and the operations on a daily basis.

So let's take a stapshot look at TopBuild of what we've created today. obviously, a leadership position in our end markets, a leader in the U.S. and Canada, installation and distribution. We're proud of that, but we're not content. And you're going to hear that today with where we're taking the company. Key financial stat, market cap, we were sitting here in Investor Day 2017, that was $3.8 billion. Investor Day 2022, $6.2 billion, we've nearly doubled that today or more than double that today in 2025 with a market cap of $12.5 billion. 15,000-plus employees, over 450 branches in our dispersed network. The sales breakdown, Rob will discuss the progression of the business in his presentation and a key part of the end market diversification that we've driven.

But the next couple of slides I want to talk about the deliberate strategic decisions we've made as a management team to position TopBuild for the future. We are well positioned. We're well positioned with this differentiated model we've developed. But to me, it really starts about the focus on core competencies of the business, and it's going to be the common thread of what you hear through the presentations today.

We have a proven playbook and that proven playbook is built upon these core competencies that we execute upon on a daily basis. A lot of you've heard me say in the past, I think companies go astray whenever they don't understand their core competencies. Where they think about where they're going to build, maybe adjacencies of where they're going. If they don't understand there's core competencies, I think that's a mistake.

On the opposite side, TopBuild, we lean into our core competencies, and we continue to strengthen upon these core competencies. So let me take a walk around this flywheel at a high level as we think about TopBuild's core competencies that we build upon every day. Strategy. We're disciplined. We're not flavor of the month, we're performance-driven with a drive to improve each and every day, and it shows in the results.

People we're a people business, a people-first culture, built on respect and safety of our people. We're driving a level of engagement and an employer of choice, designation. Organization, it's about local empowerment. An entrepreneur spirit to be the owner of your local business, relationships are key in all directions with our customers, with our suppliers and internally, all of our support functions as well.

Technology is about our connected technology platform that we've developed, which is an advantage. It's about a practical approach to enabling improvements in the business. It's also about having great command and control over our dispersed network on a daily basis. Operations, it's about leveraging our size and scale. It's about constantly optimizing and improving the model. It's about operational excellence and value-added services that we provide: financial, strong balance sheet, a disciplined capital allocation strategy, persistence, executing at the highest level and seeing things through.

I think for those of you that have been following us, you know our SPI transaction, which took nearly 2.5 years to complete, that's persistence. Staying behind it to get that deal closed and done and now integrating. M&A, a true competency for TopBuild. The ability to identify, close and integrate acquisitions, exceeding synergies, delivering compounding returns for our shareholders. Our differentiated model is built upon these competencies every day. These competencies in our playbook have positioned us well to outperform in the future.

Lot to look at our accomplishments since our 2022 Investor Day, Delivered sales growth, compounded annual growth rate of 6% to plus 16% and EBITDA margins still in line with our long-term targets. Expanded that total addressable market. Sitting here in 2022, we talked about a total addressable market of around $16 billion. Improved that by nearly 6x to over $90 billion, successfully completed 24 acquisitions since 2022, that brings in the last 8 years, 49 acquisitions that we've acquired integrated in the TopBuild.

Further diversified by design, our end market exposure. This nondiscretionary noncyclical revenue that we'll speak of today, doubling that from 11% in 2022 to 22% today. And again, continuing to build on our talent pipeline while improving on our industry-leading safety for our people.

As you can see on the next slide, we've also continued to grow and expand our geographic reach. Over 450 branches now in our dispersed network. But while we've grown our geographic reach all the while, we've continued to optimize our operational footprint, driving improvements as we continue to grow. We have a continued strong track record for driving profitability throughout the network on a consistent basis. And you'll hear that discussion today from our leaders around new and innovative tools that we're deploying to the business to continue to drive these improvements.

We have unrivaled scale in partnership with our suppliers. They're important to us and we're important to them, we provide unique advantages to our supply partners. Our nationwide reach, the ability to support contractors and builders of all sizes and project scope. Regardless of location and complexity of the project. With our bundled building envelope solutions, we're able to leverage our relationships, which is creating great cross-selling opportunities for our teams.

We're seeing multiple projects where it's one project, but multiple TopBuild businesses providing services to those customers and contractors. It's also about value-add capabilities we keep talking about. And you'll hear our team talk about today. I'll mention just a few. Fabrication, an unrivaled fabrication footprint between the U.S. and Canada, our building science expertise, as well as design and engineer capabilities that you'll hear from our commercial roofing team. Value-added capabilities that our customers benefit from.

M&A. It is a competency and depth and expertise for TopBuild. I mentioned 24 acquisitions since 2022, acquiring $1.5 billion in revenue over that time frame and $2.2 billion of capital successfully deployed. It is a competency, and it is a discipline that we have within TopBuild, a disciplined approach.

Again, evaluating, integrating and the synergy execution. Now look at the right side of the slide here. And the financial metrics are super critical. But here's another metric that's important, I believe, as well. The folks that we acquired, the owner operators that come along with these acquisitions. By far, if I think about those 49 acquisitions over the past 8 years, the majority of those owner operators are still with us in the business today.

I think that's a key success factor for us at TopBuild. And that metric speaks to -- metric speaks to this local empowerment culture that we built and this acquirer of choice status that we have. Our M&A panel will discuss our approach and also discuss the opportunities we continue to have across all end markets. And I think you'll hear the confidence of that team to continue to drive growth from an M&A perspective, given this competency and the ability to continue to drive strong shareholder returns as well.

We talked about the total addressable market. We absolutely by design, play in some very large and highly fragmented end markets. Again, John Achille in his presentation will go deeper into the end market details, but we've absolutely continued to scale our total addressable market to be in over $90 billion today. It's by, again, deliberate strategic decisions we've made in our core of insulation, continue to make acquisitions in the commercial and industrial space and now our decision to expand and build a new commercial roofing growth platform.

Commercial roofing is a natural adjacency for TopBuild, and I want to cover that in more detail. This was a calculated move by TopBuild to move into the commercial roofing space. You know what? It started by a full understanding of our core competencies and what we're good at, at TopBuild. But, we got a third party involved. We did a very detailed comprehensive review of several adjacencies. And quite honestly, commercial roofing was a clear space where TopBuild can win.

It's really built upon some of the key adjacency factors that you see on the right side here. Highly fragmented, Top 20 commercial roofers only make up about 10% of the share with no one commercial contractor having more than 2% of the share. In commercial roofing, it's built upon a model of a dispersed branch model, labor centric, very similar to the other TopBuild businesses. Most jobs are awarded at the local level, local relationships, relationships matter. We understand that as TopBuild. We understand the importance of those local relationships and local empowerment. Strong supplier partnerships. And by the way, there's major overlap in the same supplier partnerships in commercial roofing as there is an insulation, again, a natural adjacency.

The noncyclical nondiscretionary revenue streams that come along with commercial roofing. You have a leak in your roof, you have a hole in your roof, you're going to repair it. That's nondiscretionary. And now, this unique building envelope bundle that only TopBuild can provide to our contractor customers. Specifically to the Progressive team, which you're going to get to meet today. We're confident in their ability. We're confident in their ability to help us build a platform for growth in commercial roofing. They have a very similar focus on people and operational excellence and a very similar playbook to what TopBuild has ran over the years as well.

We feel like we can absolutely mirror the success in commercial roofing as we've done in the installation space over the years. Really excited for you to hear from the Progressive roofing team today. They're best in class, not only best-in-class in the execution of their company, but also best-in-class in their hair that you'll see as well today. That's Investor Day humor, if you've never seen it before.

Okay. So look, last couple of points. It's about a consistent and clear playbook, built upon competencies to drive compounded long-term value creation. This playbook is very similar to what we ran and that we've talked to you about in 2022 -- it's about attracting and retaining top talent. Fostering that culture that you hear so much about today. Operational excellence, drive to improve every day in the business, drive profitable growth, calculated expansion organically and through this M&A model. All enabled by practical technology innovation and a support network.

And then it is about a team that's confident as to what they can deliver. And you're going to hear that today. You're going to hear the experience of the team, the passion of the team. You're going to hear that confidence as each leader presents today. Over 250 years of experience with the team. And it's a great mix of the team as well. You're going to hear from folks that came up through our manager and training program and our leading part of the business. You're going to hear some internal talent that's been developed and now have key leadership roles. You're going to hear some great external talent, but we've been fortunate enough to bring in a TopBuild. And you're go a lot from folks that came along with acquisitions that now have key leadership positions in the company as well. It's about building the best team, which we've done within TopBuild. And winner surround themselves with winners, and this team knows how to win.

So with that, thank you. Thank you for being here. I want to introduce Jennifer Shoffner, our CHRO, who will talk to you about culture and talent as a competitive advantage for TopBuild. Thank you.

Good morning. As Robert said, I'm Jennifer Shoffner. I'm TopBuild's Chief Human Resources Officer. I've been here almost 6 years. And before joining TopBuild, I worked about 23 years at a Masco company. So I was certainly familiar with TopBuild in its business before the spin.

As you can imagine in my position, I get an opportunity to talk to a lot of leadership, candidates, managers and training, interns and a question that I get asked the most is what I like best about TopBuild. And that's always an easy answer for me, which is the people and the culture. So I get to talk about this topic a lot, and I'm excited to talk about it here with you today as well.

Robert already did a great job of introducing some of these key messages. One of the things that I described around TopBuild's culture is, as he said, people first. And so for us, that really means living our values, treating people well, taking care of them financially and physically keeping that entrepreneurial spirit even as we grow organically and through M&A, keeping that spirit of being the owner.

One of the things we talk about a lot is be the owner, be the leader. And for us, that means whatever your position, whatever your role you can own that. You can act like it's your business. How would you run this? How would you make decisions if you owned this business. And we try to instill that in every person. We also have a model of local empowerment with central support. And you'll hear later this morning about that central support model and how it enables local empowerment. And that lays the foundation.

Those values, those messages that lays the foundation for a workplace where people can make an impact, know they're cared for and be set up for success. And then on top of that foundation, we bring great talent. We add great talent to the foundation with programs that you'll hear about that really help us attract, retain and reward the best people.

All of this has helped us become an employer of choice. And we'll talk more about that as well. We know that employees have a choice where they work and what they do and how well they do it. And so we want to be the place where people come land, work for us are engaged and work with a purpose.

This people-first culture that we talk about really starts with our values. These values sound good, they look good, but they're not just words on a page or on a wall. They're only important if we really live them. And so for us, it's important, especially in that distributed model. You heard Robert talk about 20,000 job sites. We have hundreds of branches. Thousands of employees. So to have all of us living those same values and making sure that we're guided by common values, making the right decisions at every turn, that's a big part of what we do successfully.

These core values, as I mentioned, aren't just words. They're really embedded in our practices and in our programs. So from everything from recruiting guides to performance evaluations, to our leadership programs that I'll talk about. We embed the idea of these values and what it means to live them.

So it starts with valuing people, making sure they're safe, making sure they know what's expected of them and giving them an opportunity to make a difference in their team at their location and in their communities. Our talent management strategy is structured, but it's also flexible. It flexes depending on the talent group that we're working with, as well as our changing business needs. So whether it's sales professionals, installers, drivers, leadership folks, we really flex our program to what they might need. We look for people who have a track record of hard work and success and who are smart and then we match them to our opportunities. All of our elements of talent management provide choice, again, trying to create a workplace where there's something for everyone.

So I'll talk more about each of these key areas, starting with attracting talent. We know that having labor available is a key competency for us. As Robert talked about, it's key to our success and it's a competitive advantage. We compete by talent segment. So we think about our talent like that, making sure that we're highlighting things that are important to each of the different groups. Because like all of us, different workers want different things and different things are important to different people.

So for instance, for our installer and distribution teams, we highlight things like our safety program, keeping them safe. Our pay program, our competitive and comprehensive benefits. For our administrative and professional teams, we highlight things like our flexible and workspace, workplace. Our development and career opportunities and our performance. A couple of programs, while labor hasn't been as tight recently as it has been some in the past, we know that keeping -- having a pipeline of labor is important.

So a couple of the programs that we've had some recent success with. One is around veterans and military recruiting. We have some new partnerships that have really helped us bring in some active military as well as veterans into our company, especially in operations leadership and in our manager and training program. And just last month, just before Veterans Day, we were awarded as a military-friendly employer. So that's good evidence of the fact that we're providing great opportunities for veterans and their families, and it's a great source of labor for us.

We've had continued success with our friends and family referral program. You've heard about that before. That is in our employee referral program. Since the program began in 2021, we've had over 11,000 referrals. So this is TopBuild people trying to get other people to come to TopBuild. And we've had great retention with that program as well. And so that's a program we continue to leverage to have available labor.

Once we get people to TopBuild, one of the things we want to do is make sure we have programs that help develop them. You heard Robert mention manager in training. That's a program that we developed years ago, and you're going to hear from someone today who started as a manager in training. So it's a long-standing successful program for TopBuild. It's customized to really teach someone our business from the ground up. So we have 25 to 30 people in this program at any given time. They come in to a branch. They really start either in the warehouse or installing. They move through sales, support. They learn how to manage a P&L, so they really learn our business from the ground up with a manager mentor that's working with them, as well as support from the leadership team.

And when they graduate from our MIT program, they move -- 80% of them move right into a branch manager or assistant branch manager role. So it's a successful program. We've got great retention in this program as well. We're proud that this now covers all of our legacy TopBuild businesses, and we look forward in 2026, we anticipate adding this manager and training program to our two recent large acquisitions of SPI and Progressive roofing.

We also have a new leadership academy that we began last year based on need and customized to our business. So we started two programs. One is the foundation of leadership program and one is advanced leadership principles. So these are programs for people who are already in leadership who are looking to further their skills. We use this program to help promote our culture, as well as help build skills and leadership. So things like people management, delegation, strategic thinking. These are some of the things that we really cover in these 6-month courses.

And as I mentioned earlier with our values, this is just another opportunity to really embed our values and our leadership expectations in addition to building skills, which helps us achieve that consistent culture. In the year plus since these programs began, we've had nearly 100 graduates of these leaders in our business. So we've talked about recruiting and development. I want to talk a little bit about rewarding and retaining our employees. We offer comprehensive benefits and competitive pay that aligns to our company goals. So we align them with our goals like safety, which you've heard about sales growth, operating profit, working capital, those are things that we communicate across our company so that people understand, one, what are those things? And two, how can I impact those?

And that's a way to connect everybody in this pay-for-performance mentality to make sure that people are connected to each other, as well as our business goals. Retention of labor, clearly, that's important to us. So -- and that starts from recruiting right on through that life cycle of employment. Our commitment is to have employees who work safely who are productive. And who are available and consistent. So if you think about our insulation installers, that's our largest population. We have thousands of those across our company. We use a combination of benefits that they may not get with smaller employers.

If you think about an installer who's thinking about where they work, they can work at TopBuild, or they can work at maybe another local or regional employer. For us, they're going to get things that maybe for some of us seem standard but are unique for an installer. They get two vision reimbursement. They get paid time off. They get a matching 401(k). So those are things that are unique to them that we provide and make sure that we're using those things to retain them as well as competitive pay and that includes incentive pay or peace rate.

And that's where our installers are able to be paid based on their productivity and how much they can install safely and with quality. We know that we're doing a good job here because we measure two things, voluntary turnover and retention. And our average tenure with our installer base is more than 6 years, and our turnover is 20%, which is well below the industry average. It's important for us, as I mentioned, to ensure that everybody is taking care of physically and financially, and that helps us ensure their commitment and engagement.

Speaking of engagement, everything I've really talked about up until now leads to that employee engagement, which is important to us. We want to make sure that we have people who are giving their best every day. You would expect me as the Head of HR, to talk about what a great company we have and how engaged our workforce is, but I think it's probably more important what our employees have to say about our company.

In September, we had the opportunity to survey them. We do a biannual survey through a third-party company that we work with. And so we have some recent employee feedback, which is great. The first thing I'll point out is that 70% of employees participated, and that's well above an average, especially when you think about a distributed model like we have. So 70% participation already is great, hearing from thousands of employees. 85% of employees are considered engaged. Earlier this year, 82% rated us as a Great Place to Work. Safety was our highest rated category across our company, which -- so again, we know that people understand living that value of safety.

And then 93% of respondents one, understand how their job contributes to TopBuild's success and they know what's expected of them at work. And those two things together, again, really help us make sure that we're driving a positive culture and people are connected to each other as well as to our business goals. So we're always looking for how we can do things better, what we can do more for employees, but we're really proud of the feedback and the response that we received.

We're also proud that, again, this year, we were rated as a Great Place to Work for the third year in a row. We were, for the first time, ranked as a Forbes Best Companies in 2025. And then as I mentioned, most recently, we were awarded as a military-friendly employer. And these are all things we're proud of, not just for the recognition, but more for what that represents that we are an employer of choice.

So in closing, what we do around talent is structured and straightforward and simple, but it's not easy. It's not easy to do that across the distributed network that we have, and it's not easily replicated. So it is a competitive advantage for us to make sure that employees find a place where they can have a career, not just a job. That's what's important to us. We've achieved becoming an employer of choice, and we know that's something that's earned, but it's also something we have to maintain.

So we can't just be content. So we are always looking for employee feedback looking for ways that we can continue to compete as an employer and remain an employer of choice, giving people a purpose through their work and making sure that they're taking care of. This year, we celebrated 10 years as a public company. As part of that celebration, we created a video that included a lot of folks across the company and really helps tell our story. We shared this with employees on our anniversary. And I'm excited today to share part of this video with you to help you see some of the many faces across TopBuild.

[Presentation]

See that's probably easy to see why we're so confident and excited and passionate about what we do and the people for when we do it. Next up, I'm going to invite Steve Raia to come up. Steve has been a long-time employee with us. He'll tell his story and really bring to life a bit more about the people and the culture and how it relates to operations.

Yes. Good morning, everybody. This is one business that I'm very passionate about and been all my life and growing up in the industry and [ Mike Fallas ] started insulation company in 1946. Back then, it was much insulation. There was a lot of oil. But after that, 1955, I was born. And then 1969, summer vacations and high school breaks, I started hanging insulation, and obviously learn the business. And 1973, I graduated high school, on June 20 and moved to New Jersey on July 5. So $100 a week in an El Camino and off I went. So that's how I thought it. I had a nice business in New Jersey. 1991, my father passed away, we had three locations. And after '91, me and my brother grew it to over 30 locations and doing about $300 million a year in business.

99, I sold out to Masco, stayed there a few years. Their culture wasn't my type of culture. They're more of a product person. And I'm more of a people person. And I run the businesses by having great people around me and having great people around you make you successful and makes your business successful.

I try to get teach everybody in the business like our MIP program is, is where you start from the bottom up and you train them so they understand how to deal with the installers every day because they did it. If I did it, I know how to deal with them because I know how hard it is. And I know what it takes for someone to insulate a house and how much time it takes to do it and how they can make more money and keep them safe.

The big thing is -- today is you try to talk to them face-to-face before they leave the warehouse of the office or the truck drivers, whatever. And you just got to talk to them in a way like you see the way you look right now. This is what I want to see when you come back. So one split second, you could do something wrong, it could change your life forever. And you got to think about it. And it isn't like, you don't think about it once a month or once a week, you've got to engage it every day. And when you leave, you start to think, he said something, it's on their mind for the rest of the day. So we make sure we do those things.

So and I guess it came to '91, so 2011, I left Masco and I met Robert in 2011, and we used to meet two to three times a year and gain our relationship, our friendship and trust in each other. And in 2015, Robert says, would you like to come back to the business? And I said I would love to, but I want to run it the right way, Robert. I want to run it with great people around me I want to make sure our people do well in business and make money. I want them to make sure that, obviously, paid on the bottom line, I want to treat them like partners.

And because if we're going to grow, we can't be everywhere ourselves, we need great people to do it. And we have people today coming up to us and telling us how we changed their life and how happy they are. And these are [ installers ], the warehouse people or salespeople, and they have a great position here and they run their businesses every day like it's theirs. And they get paid on the bottom. So if they want to throw away money, it's going to cost them also. So we try to engage that with them to make sure that they're engaged in doing the best for the company, for theirselves and go forward every day.

So what have you got to do to be that person? Well, it's pretty much by basic things every day. It's the same old thing every day. And what is that? Well, you've got to be engaged with your team in the morning. If it's 5:00 or 6:00 in the morning, you're going to be on the docks where your driver is your warehouse people, your installers. You have to have that personal relationship with them. How is your family? What's -- how is the socket game? How did this go? You have to have a relationship with people for people to do good for you.

For people that you want to do anything for you, like, "Hey, boss, I'm going to finish the job today. I'm going to stay an extra hour." Those are relationships driven. That isn't like I'm going to just leave, I don't care because my boss doesn't care about me. I don't care about him. Right? So it's a very people-driven business where we make sure our managers are engaged with our people. So what's the second thing you do after you get the men out in the morning and you go into warehouse and you make sure you have the right goods the next stage job. So you got jobs coming up, you want to make sure you have the right material.

Then what else do you have to do? Well, you got to go into the office and make sure all the work you did yesterday, you bill it today. Because you have to make sure we bill everything every day to make sure we get paid. What else do you do? Well, there's a couple of contractors or builders or supply is that all this money, and I'm going to make some phone calls just to catch up and see when I'm going to get paid because there's some old accounts that aren't paying us on time.

So what else do you do? Well, the rest of the day, I work with my sales team. And I work with my sales team and engage with them, drive with them, help them sell more jobs, help them look for more work, help them drive around and look at windshield time, meaning look for all the work all the time constantly. And try to make them feel get successful and make -- and do better. And if you do these five or six basic things, you would be great in this business. You won't fail and you don't have to be anybody like Jennifer talked about the military. They know what five basic things are, right? They know what they do every day. As long as you do those things every day. You're going to be great. And it makes -- it makes our company what it is today, great, and it is the greatest feeling to talk about a business like this that we -- what we did as a team in this whole room in 10 years, you get the chills. It's exciting. It's a great story.

I mean, it's hard to tell a story in a 10 years in the business that we're in, a labor-intense driven business. So very proud of it. And I guess I want to thank everybody for coming here today. You can feel the passion I have and we have a person that -- John Achille that I want to introduce, where Me and John's former owner competed in the '80s in New Jersey together. So and John worked for that company for 15, 20 years. So I'll tell you more about it. But we're getting great people for our company for the future in the business, and that's the best part is always look for the greatest people to come into our business and make it great and keep it great. So thank you, everyone. Thank you. John?

Thank you, Steve. Good morning, everyone. As Steve mentioned, I'm John Achille. All right. As Chief Operating Officer at TopBuild, I'm thrilled to present our strategy for clear growth priorities, accelerated by operational excellence.

Before we dive into the details, I believe understanding my journey provides valuable context for how we approach these priorities. My foundation is in civil engineering, which I earned from Rutgers University in 2000. I gained practical experience early on as a project engineer with Turner Construction and late hone my skills in estimation and project management with a large heavy civil construction company.

My true immersion in the insulation industry began at Coastal Insulation in 2005, which was then one of the largest independent insulation contractors. I was brought on to build their new headquarters, but my interest in the business kept me there as a production manager and ultimately led me to serve as Vice President. It was through the acquisition of Coastal in 2021 that I proudly joined TopBuild bringing direct operational leadership to our team. My time within TopBuild has been a continuous journey through our core businesses.

I've had the invaluable experience of running a region and a portion of TruTeam followed by overseeing some areas of distribution International. In 2024, I led the Service Partners business, which collectively provided me with comprehensive hands-on understanding of our entire operational landscape, leading to my current role.

Today, I want to highlight three key messages that underpin our strategy. First, we are committed to expanding our market-leading positions across a large, highly fragmented and growing total addressable market in excess of $90 billion. Next, we are relentlessly driving operational excellence to enable continuous outperformance across our entire branch network. And finally, we are leveraging and enhancing our dispersed network with our dedicated branch support center and technology tools. So what does all this mean? I will provide some context and details now.

Let's start by diving a bit deeper into the scale of our opportunity that Robert introduced earlier. Our total addressable market is truly substantial, highly fragmented and offering significant growth potential. Our newest division, commercial roofing, which you'll hear more from Nick and David later, represents a significant opportunity driven by new construction, reroofing, maintenance, and other related services. Residential install and distribution is focused on single and multifamily homes from custom-built homes to single-family homes by national and regional builders to repair, remodel and retrofit projects and our own building science capabilities.

Our commercial building, install and distribution encompasses light commercial sectors such as retail, education and hotels as well as heavy commercial applications like manufacturing, data centers, airports and sports facilities. Finally, mechanical, which Dave Fischer will expand on and metal building insulation, both fabrication and distribution serving industrial manufacturing, energy, pharma, food and beverage and other critical verticals like oil and gas and marine.

So overall, we're well diversified with opportunities across many verticals. TopBuild holds a uniquely advantaged position within the industry supply chain, which benefits both our manufacturers and our trusted builder and contractor partners. For manufacturers, we offer deep local customer relationships and are a strong supplier partner ensuring their products reach key markets efficiently. Our builder and contractor partners value us because they know they can rely on us to consistently arrive on time, provide skilled labor, ensure the job is completed to code and stand behind our performance, ultimately helping to keep their projects moving and on schedule.

Our services are an absolute critical piece of the overall construction process, and we are proud to partner with the leading manufacturers as seen here. We have great control of our businesses. And operational excellence is at the heart of how we continuously drive outperformance. We have a systematic approach and a clear cadence of communication across our entire branch network. Our connected technology platform enables real-time measurement and tracking and you'll hear more about that from our team later this morning.

By the fifth business day of every month, we conduct monthly reviews of our more than 450 branches. We focus on operational and financial metrics, labor productivity and backlog. We also rank individual regions and branches so that we can focus and continually improving our bottom quartile. We can then dispatch special operations teams to train and improve the bottom quartile branches as needed. This is a continuous cycle whereby we empower local branches, but also measure and monitor performance from our branch support center. And take action to uplift performance by deploying best practices to train and elevate our teams.

Our disbursed branch network provides distinct competitive advantages. First, it allows for deep local relationships, fostering trust and understanding within specific communities. Next, it enables us to make timely decisions. reacting quickly to local market demands and challenges. This could be as simple as adjusting a bid to win a job or offering a value engineering option to keep a project within budget. Third, our structure ensures streamlined and efficient communication, both internally and with our customers. Fourth, we prioritize agile and safe operations. adapting swiftly while maintaining the highest safety and DOT standards. And finally, it cultivates an owner mentality among our local teams, driving accountability and proactive problem solving.

This model truly enables local empowerment with national scale and efficiency. Central to our operational strategy is the branch support center, or BSC, as a former independent business owner, I recognize the vital role that BSC plays in providing essential back-office services, setting critical guardrails and continuously monitoring performance.

In comparison, our independent competitors must rely on outside firms or make uninformed decisions. As we created this slide, I heard the passion from our BSC employees and departments about how they know they help support the field. The BSC centralizes as administrative support, enabling branches to focus on customer-facing operations and performance, while the BSC handles the crucial back-office functions.

The BSC also streamlines and standardizes processes, driving efficiency, reducing costs and significantly increasing productivity across all operations. It monitors performance by providing clear visibility of the business results through best-in-class business intelligence tools. The BSC sets guardrails and controls, helping to establish and closely monitor pricing and internal controls to maintain consistency and compliance. Ultimately, it provides access to critical safety and training resources, fostering professional development and knowledge sharing across our entire network. Overall, the BSC is focused on empowering and enhancing our dispersed branch network.

Now turning our attention to one of the most critical priorities and as you saw on the video, keeping our more than 15,000 employees safe. This isn't just a corporate mandate. These are critical safety programs ingrained into the very fabric of our culture. How do we achieve this? It starts with ongoing engagement and continuous sharing of safety best practices across all our locations. We invest heavily in our safety leadership by continuously conducting safety training for our business leaders ensuring safety is a priority from the top down.

We also have comprehensive training initiatives that build on our safety live program, which uses a mix of hands-on and virtual training to keep our team sharp and informed. Consistent communication is key. So we host mandatory monthly safety meetings and distribute a quarterly safety newsletter. Ultimately, we aim to make safety personal for every single employee. This commitment translates directly into measurable results. If you look at the chart on the right, you'll see our performance. This tracks the total number of work-related injuries per 100 full-time employees annually.

You can observe TopBuild incident and our performance remains far better than the industry averages across both distributors or drywall and insulation. This visual evidence underscores the effectiveness of our proactive safety measures. While we've made significant strides, our ultimate aspiration, as indicated on the bottom is to strive for zero safety incidents. This will further enhance profitability by eliminating costly and unnecessary incident expenses.

Let me share a compelling case study that truly exemplifies our commitment in operational excellence with a recent branch safety improvement initiative. Initially, we identified some challenges within our network. We observed inconsistencies in adherence to our safety processes and policies at a particular branch.

At times, the pressures of daily operations led to shortcuts or choices that compromise safety. Recognizing this, we understood there was a clear need for renewed focus, instilling greater engagement, enforcement and accountability. Our solution was a comprehensive improvement plan to increase collaboration between our safety and operation teams. We began with strong leadership, engagement and attitude, working directly with the branch to foster a culture of compliance and positive safety behaviors.

We then reinforce safety through various measures including reestablishing safety committees and utilizing meetings to communicate expectations in the field clearly.

And critically, we focused on employee expectations and accountability, providing feedback to recognize positive actions and ensuring team meets were held accountable when expectations were not met. The outcomes of these concerted efforts have been truly remarkable. We're proud to report a significant 90% decrease in recordable safety incidents year-over-year. That branch also saw an incident rate saw an impressive 83% reduction, and we achieved a notable 64% decrease in DOT points year-over-year.

Beyond these quantifiable metrics, we also observed a substantial increase in engagement during safety meetings and a proactive approach to preventing job site hazards. This case study clearly demonstrates the powerful impact of our operational focus and systematic approach.

To summarize our discussion today, I want to reiterate the three core takeaways. First, TopBuild is strategically expanding our market-leading positions within a vast, highly fragmented and growing total addressable market. Next, we are committed to continuously driving operational excellence, to enable outperformance across the branch network. And third, we are effectively empowering our network through the dedicated branch support center and technology tools. Thank you for your time.

Next, we're going to watch a quick TruTeam video.

[Presentation]

Okay. Now we're joined by Jeff Krestancic, a perfect example of success coming through our MIT program, our President of TruTeam.

Okay. Good morning, everyone. As John said, my name is Jeff Krestancic, and I lead the TruTeam install insulation business. I've got about 20 years of experience with the company. And I started my career first in the manager and training program back in 2005, where Steve and Robert watered me every day, right? So it's a great opportunity to get my foundation here with the company. And learn from some of the best and top leaders here in the business.

So a fantastic experience for me to learn the fundamentals, day-to-day operation and really pave the way for my future. Shortly after that, I transferred to our headquarters in Daytona Beach, Florida, where I worked on our ERP transformation project for the next couple of years. Good opportunity to learn about our systems or process and it really paved the way for where we are today with our connected technology platform. And then at the conclusion of that, I got my start as an operator in the business.

First, in Southwest Florida as a branch manager, spent a few years there and then took on multisite responsibility expanding to a district manager also in Florida. And then when we spun, I transferred out to Colorado in 2017, where I became a regional director and ran businesses in Colorado for the next couple of years. And then in the summer of 2021, I took on more of a national operations role with the business and then was eventually appointed as President of TruTeam in January of 2024. So that's a little bit about my background.

Okay. So key messages that I want to cover with you today that support our strategy at TruTeam. So number one, we're going to spend some time talking about how we leverage best practices across our nationwide footprint coast to coast. The strength of our relationships extremely important how we interface with our customers and develop strong and tested relationships with those customers. And then how we bring national resources and expertise with any insulation solution.

Number two, driving operational excellence, which is hugely important on the install side of the business. And we're constantly looking to find meaningful improvements, optimize our productivity, drive our sales team, and we don't ever get comfortable with being complacent. And then number three, it's making targeted investments in our business that accelerates sales and support our profitable growth strategy.

Okay. Let me tell you a little bit about TruTeam in general. So TruTeam runs a $3.1 billion business. We have over 7,000 installers across our network. And we serve a wide variety here of end markets. So if you look at residential, light commercial, heavy commercial retrofit and remodel, Residential is the largest component of the business. And we serve builders in a variety of different sizes. We have large builders, national alliance customers, regional builders, custom builders and multifamily makes up the balance. So what gives us our edge, right?

So if you look at our nationwide network of over 7,000 installers, we have competencies in both residential and commercial. The strength of our local relationships, a critically important key differentiator here for TruTeam. And then lastly, that continuous improvement mindset that we have that allows us to really bring value forward for our customers, do a great job for them to deliver projects on time and do it from a profitable standpoint as well.

Okay. So our broad geographic footprint, as I said, coast-to-coast operations over 200 locations that we have throughout the country, strong presence across the top 100 MSAs. And then if you look at our complementary and services, the one thing that doesn't vary across those verticals is we provide insulation. Obviously, that's our core product line.

However, in some businesses, we add some additional product lines, as well based on the needs of our customers, what they require, and that drives some of that variation. And then on the commercial side of the business, that's a key component within that end market is we want to be able to provide a package for our customers. So we're looking for complementary products and services that go along with insulation. Some of those examples could be fire stopping, fireproofing, air and vapor barriers, great opportunity for us to add value for those customers kind of single stop shopping, if you will.

Okay. So I'm going to spend a little bit of time on why we win at TruTeam. So I'm going to go through each one of these and give you a couple of examples. So number one, our unmatched scale market leadership, TruTeam is the largest insulation installer in the country. We're always looking to be the market leader in each market that we serve. We have unmatched capacity, 7,000 installers and a proven track record for meeting customer scheduling requirements. We're able to share resources across our network, which allows us to respond well to spikes in demand, and we have the ability to take on large complex projects. And we also have continuity with our large builder customers. customers who operate in many different regions, our ability to scale and expand with them as a differentiator for us as well.

Number two, local execution, national strength. Our operating model combines entrepreneurial local leadership with the discipline and resources of a national platform. We have strong long-term relationships with builders and contractors, which gives us an advantage. And we have a service-first culture, which ensures reliability, quality and safety. Key reasons why customers choose TruTeam over and over again. And then our connected technology platform to monitor and optimize performance.

For us, it's a single source of truth for making decisions. It allows us to identify trends and inefficiencies in the business quickly. And we take a data-driven approach when we're making decisions, which drives accountability across our operations team. And then as the business grows and integrates new acquisitions, the platform makes it much simpler to scale.

Essentially, everyone uses the same system. Recognized building science expertise. This is a big one. So Building science brings a technical foundation to TruTeam's work that allows us to go beyond just installing insulation. We can help builders and homeowners achieve a more energy-efficient home. We can prevent comfort issues and warranty callbacks that ultimately add costs back into the business. And we offer consultative value, which elevates us above just providing labor and material. It's a differentiator between TruTeam and other installers.

Number five, a culture of accountability and safety. Our team operates with clear accountability, empowered decision-making and well-defined performance metrics. Safety is one of our core values, and our best-in-class safety performance reduces downtime and protects our people and our partners. Our culture is result-oriented and customer focused, which helps drive consistent execution in every market. And then bringing it all together, our advantaged position within the industry is because of our scale and our national reach, the strength of our customer relationships, the diversification of the end markets that we serve.

Our single operating platform, our building science and technical expertise that allows us to bring great solutions to our customers and our mindset of continuous improvement. All of those things add up to why TruTeam wins consistently.

Okay. Raising the bar with operational excellence. So I'm going to talk a little bit about our data-driven management approach. So we do have a fair amount of standardization throughout our systems. One of those examples would be schedule and dispatch component that we developed ourselves internally, which allows us to essentially mirror the schedule of our customers. We can take their requirements, their scheduling dates. We can replicate that in our system. We drag and drop that over to trucks, signed installers.

We have priorities, and we have route optimization that comes through doing that, which really helps us drive minimal indirect labor, more of an optimized routing with our team. The scale of our purchasing power, right? Obviously, the economies of scale that we bring, a big company, a lot of strength with the relationships that we have on the supply chain side.

And then we also have a standardized quoting tool, which allows us to have some standardization with how we price and allows us to bring discipline across all of our 200-plus locations. And then we do a fair amount of performance benchmarking across the businesses, which drives accountability. We measure employee productivity how we look at days on hand from an inventory perspective and then making sure we have the right balance of staff with our back office and our front office.

And then uniform P&L visibility. And for us, we talked a little bit about special ops in some of the earlier presentations. And what that means on our side of the business is we've got a team of highly skilled, capable experienced operators that understand our operating model at the back of their hand. So whenever we identify that we have an underperforming location, we have an opportunity to dispatch those folks into those branches, take more of a hands-on approach resolve some of those issues and drive efficiencies throughout the business.

A couple of examples of focus areas for us. Number one would be labor productivity. TruTeam runs a huge component of labor over 7,000 labor. So we're constantly looking at revenue per headcount. We're looking at making sure that we have the optimal amount of head count in place based on where demand is heading. And then the other component here for us is sales productivity, a big one. So as we look at the average number of daily quotes that our sales team is putting out there, what our close ratio looks like and how those folks are contributing to our backlog, critically important for us to optimize our outside sales team as well.

And then the last one that I'll talk about is material yields. So we have a couple of products and services that we offer that are a bit sensitive to actual performance versus advertised performance. So if you look at loose-fill blowing wool, spray foam is another good example. We would expect to get a certain amount of coverage or board foot yield from those respective products.

Our systems allow us to notate differences between actual performance versus advertised performance. And it triggers our teams to make some adjustments to -- the application or preventive maintenance or make some adjustments to the equipment. And what that allows us to do is really maximize direct margins and the performance of that product versus what -- where we would expect it to be. So these are all things that we look at from a continuous improvement and operational excellence standpoint.

Okay. I got a quick case study for you. And this is a good story of where we're able to leverage some of our best practices across the footprint. This is an example of a branch that was part of a larger acquisition based in North Carolina, not a lot was going well at the branch initially. The team was a bit concerned. We weren't making money. Folks that were new within our business, I didn't really understand a lot of the things that we're trying to do. So great opportunity for us to find some meaningful improvement there. And I'd say the other aspect of this that was critical.

Obviously, the installers are the backbone of our business. And in this particular situation, the installers didn't have consistent supply of material, which prevented them from completing a full schedule. They weren't making the kind of money that they expected to make and it really held us up from providing the high level of service that we would expect to provide from our customers. So our local TruTeam management team stepped in and started going through the process. So as I talked about a data-driven approach, having our systems in place allows us to very quickly identify weak points in the business. So we took a close look at the P&L. And started identifying where those weaknesses were and where we needed to drive some improvement.

The other part of that is effective communication with the team, absolutely critical for us. front office, back office have to be in lockstep and we have to have some optimization with how we want to run our business. In some cases, we have overlap with branches, so making sure that we have the right crew, the right branch servicing those customers, and it's optimized from a routing perspective. And then the big part of this was, hey, we couldn't provide enough consistent material supply.

So we leveraged our supply chain, the strength of our relationships and we're able to stabilize the material supply side, and that was really a game changer for us as well. So going through that process, the cost structure of the branch really started to align and things were improving. And I'd say the other element of that is, hey, whenever you deliver at a high level on time, high quality, you do it safely, you do it with value.

It allows us to push the envelope a bit from a pricing perspective. And that was another component here of our solution. So the outcomes of this case study, the installer productivity improved. Their compensation improved as a result of that, and we had some good things happening there. revenue and customer satisfaction increased as well because we're showing up on time, and we're doing a great job for our customers.

And then the net-net was both sales and operating profit improved in a relatively short amount of time. So within 90 days, we took an underperforming location to one of our top-performing locations within that region, and it compared very well with the performance of the rest of the business. And then the most important thing for us is we gain the trust and loyalty of new team members.

So having a group that came in that was part of an acquisition and being able to turn that into a really good experience for them and an opportunity to really address some of their concerns. It was just a fantastic store, and we're very proud of it. So just one of many examples where we can leverage those best practices across the footprint and drive some improvements throughout the business.

Okay. Driving profitable growth for us, there's really two sides of the equation here. So we have organic growth initiatives, and we have inorganic growth initiatives. So I'll start first walking you through organic growth initiatives for us. Number one, obviously, we're not going to forget about our current customer base, right, and making sure that we're taking care of existing customers, providing high service and reliability and making sure that we've got that continuation with our existing customer base.

Our CRM. So this is one of those targeted investments that we've made in the business. So if we look at what that means for us, CRM is a great opportunity. A component of that is we do a lead aggregation part of our CRM, where we're basically bringing a whole bunch of advanced information in front of our sales team giving them access to leads, giving them access to things a little quicker than maybe the next insulation installer may be able to do.

And for us, getting our outside sales team out there in front of our customers and doing that timely, that's a key advantage for us. And then continue to leverage our resources across the regions. Looking for that customer loyalty, looking for confidence from them as they may expand their markets and go into different geographies, we have the ability to do that as well. And then the targeted investments in sales force effectiveness, guided selling, better training, enhancing their capabilities.

And then the customer analytics and digital engagement side, that goes into the CRM component that we had talked about, where we want to drive optimization with leads and how we convert those leads, ultimately turning them into quotes and wins for the business. And then inorganically, it's pretty well documented. We have a proven M&A track record, disciplined approach, looking at accretive acquisitions, to expand our reach, customer base and capabilities.

And why do we select the targets that we select? And this is where the theme rings true throughout the presentation today is it's really all about the people. And we're looking for the best possible talent that we can find obviously, the quality of the operation and the strength of the markets that those acquisition targets service, all reasons why we make the selections that we make.

And then the consistency of our post-acquisition playbook. We do our best for a rapid integration. We get them on our systems, our best practices, make sure we're communicating effectively. We want to realize the synergies as well. That happens pretty quickly here within the install insulation business. And then we take companies that are good, and we want to make them great. So leveraging our model, taking the TruTeam install model in place driving improvements with direct margins and all of the things that are key factors in the profitability of one of our installation branches. That's what we want to bring forward and share with those folks. And at the end of the day, it's all about putting us in a position to bid more and win more.

Okay. One more case study for you, and this is -- talk about a customer relationship that really took off. It expanded introduced some new capabilities for us from an install perspective, but also took us into multiple geographies. So in this situation, this is a builder customer that was Florida-based and they were specializing in the construction of warehouses and distribution centers. So we did three initial projects with this customer. The projects went very well. We installed on time, high-quality and through that process, built a really nice connection with the customer. The relationship expanded.

There was trust, there was confidence. So they had some opportunities that were on the horizon. A large online retailer had gotten in touch with them and said, "Hey, not only do we want to expand our presence in Florida, but we're going to start doing this type of work in other parts of the country." And the question is, you got any interest in joining us and partnering with us to do something like that.

And naturally, our response was very quick, yes, right? Absolutely, we want to do that. So as those opportunities started to come in, it was very important for us to understand the size and the scale of those because that's really what drives success in a large complicated project. Do we understand the material requirements, do we understand what's going to be required from a capacity planning perspective?

So that triggered our team to start collaborating with our strategic suppliers. Making sure we can get the right material delivered to the job site at the right time and make sure we have the people on site and in place to be able to receive and very quickly turn that into an installation. So as we started going through that process, this is one of the beautiful things with some of these new installation solutions is the more you do it, the more repetitions you get, we typically get a lot better at it.

So in this particular situation, develop some synergies, as that competency expanded, we were able to do more with less, and it allowed us to deliver those projects with an elevated level of profitability. So the net outcome of this story expanded our geographic reach and capabilities through a new commercial builder partnership. And through the process, we've had a real nice portfolio of projects that we've been able to develop.

So as we're going out and we're prospecting new customers that have these types of opportunities, being able to lay out that project portfolio, show them the work that we've done, the large complicated projects that we've successfully completed great way for us to earn confidence with those prospective customers. So that's been a good experience for us. And in this particular example, it's generated an incremental revenue stream, so $10 million plus in annual revenue captured through a complementary installation service.

So a great example where we stepped a bit outside of the box, it took on a new solution, expanded our geography, and it really highlights the strength of those relationships. Here's a visual illustration of what one of those projects might look like, probably seen one of those before. And as you can see, it's a big building. There's a lot of material, a significant amount of revenue associated with those types of opportunities.

Okay. So wrapping it all up, as I talk about leveraging our best practices the depth of our network from coast to coast, the ability for us to take that and make some of these branches better as we go through that process, the strength of our local relationships the national resources that we bring, driving expertise with any insulation solution.

Number two is the relentless pursuit of continuous improvement, optimization, trying to fine-tune the TruTeam operating model. That's a big part of what we do every day. And then number three is about making targeted investments in the business that support our profitable growth strategy.

So thank you for your time today. We have another video coming up here, which is going to introduce our commercial roofing business. So we have Nick and David that are going to come up and present next.

[Presentation]

Good morning, everyone. My name is Nick Hadden. I'm the lucky guy that gets to lead the Progressive Roofing team every day. I'm the Chief Executive Officer of [ Rolv held ] now for 2 years. I took over from our founder, Mark Farrell, who's been our founder and my biggest mentor throughout my career. This is my 15th year in my current capacity, but I've been working at Progressive Roofing since I was 13 years old. It's a summer job started organizing blueprints and unloading and loading trucks worked its way into draftsman and in estimating and leading our sales team and kind of into my current capacity today.

I'm David Stowers, the Chief Operating Officer. I've been with Progressive for 3 years now. And prior to that, I had a lot of experiences. I normally don't go this far back into my past. But since it's Army Navy week this weekend, I'm a graduate state Naval Academy, spent 7 years in the military. And then the military, lots of discipline and everything that I've done has led me to where I am at Progressive.

You got the discipline in the military, started working on the leadership in the military took that leadership had more experiences at Walmart. I was in logistics of Walmart. That's where the operational efficiencies really came into fruition. From the cost side, I went to the sales side, the growth side, at Johnson Controls. So I spent the last 15 years at Johnson Controls growing a business, learning business skills and taking all of that experience to Progressive has really ended up here. So this is how we got here.

Okay. A couple of key notes that we're going to talk through today. We're talking about deepening our customer relationships and leading position and sizable noncyclical revenue. We do great production work. We do great service work, and we try to stay sticky with our customers. We're expanding geographic reach with repeatable business systems. We've built the platform as a really good place for family businesses who aren't sure about their future to bring -- we can have a great future for their people and part of our great platform.

Enhanced talent pipeline and differentiator as an employer of choice. We've made large investments in our people. You got to hear Robert talk about being a people company, a Progressive Roof when we talk about where a people company first that happens to install a couple of roofs along the way.

And then finally, deploying our Progressive Roofing business system. You got to hear a little bit about a $75 billion total available addressable market. with the partnership with TopBuild, we really feel we just left the launch pad, and we're just getting started.

So here's a little bit about Progressive roofing today. As you guys can see, we've got about $432 million in 2025 trailing 12 months revenue at which we performed $81 million of EBITDA or 19% EBITDA percentage. We have a great mix of roofing, reroofing and new construction and maintenance. Probably the thing you'll hear us talk about the most pride falls over 1,700 roofers nationwide.

As you can see, we've got a couple of other pieces here that make us unique and make this success story work for us. We have a complementary and comprehensive suite of commercial roofing services. We want to be involved in the entire life cycle of the building. So that starts out from the original design that comes out through the construction past that from maintaining to repairing to all the way at the end of it replacing your real. We feel with our business system, we can hop into that cycle at any given time. We have a highly experienced and capable management team with unparalleled expertise.

Biggest investment that we've made into our company in the past 5 years has been in our people. We've created a leadership program, a training and development program, and we're really just starting to see the fruit of our labor. And we've turned roofers into businessmen and women and shun the career path within our organization that gives them unlimited opportunities. We have a customer-centric approach.

One of the things you'll hear us talk a lot about is we want to make friendships with our customers, with friendships, we feel that we end up getting loyalty that comes with that. It takes a lot of work to earn a friendship. And once you've earned that, one of the benefits that you get is a loyalty. We have attractive and diverse verticals. Our business runs on strategy, a combination of strategy, both being in the K-12 markets where you're going to be investing in a community and part of it, as well as chasing larger opportunities in the things like the data centers and some of the other booms that you're seeing. We have a track record of profitability and expanding geographic reach.

Our model is simple. We bring good people to good markets with good leadership. And we feel -- again, we're just getting going with TopBuild, we feel we're really just getting started down that path. Here, you're going to see a layout of where we've got our branches across the country, we're licensed in 41 states. We'll go anywhere for a customer with the right opportunity for us and the right need that the customer would have for us to travel.

For us, this whole program works with the comprehensive services that we offer and first and foremost, it starts with the roofing assessments. Everything starts with this assessment. It's just kind of like a checkup when you're getting into medicine. It's where we demonstrate our abilities and our proficiency and start to build trust with the customer. Find the issues that they're having. Find solutions. Provide in a timely matter.

Specification, design and value engineering. This is where we think we're experts. You think about a roof, first and foremost, it can't leak, but secondly, it needs to stay on the building. And there's a lot more science that goes into that than I think people understand. It has to do with things like wind uplift, building cube, there are certain requirements through different insurance agencies, and we have the skills and ability to put together roofing assemblies that fit the budget needs of any customer.

Our expert installation, we're approved by every major manufacturer. In fact, we've reached top-tier status in every major manufacturer. The life cycle care program, once the roof is complete, we educate the customer and probably the most important part of their warranty, which is maintaining their warranty. And there are some requirements that the owner has to do. So as soon as the roof is complete, we provide both services for them for a couple of years. We get them signed up into long-term maintenance agreements, and we stay engaged in that facility through the entire life cycle of the building.

And then the emergency repair always being on call, always being available. Some of these stories that we have are -- there's a lot of stories about emergencies, but most importantly, if anyone's ever helped someone out an emergency more times than not, they make a friend, right? When you make a friend, again, that brings back that loyalty. You'll hear us talk about being sticky with our clients, and that's a lot of what it means. So why we win in installation services. We have a dispersed network with local branch empowerment.

We understand that people do business with people first, and we empower our local branches to do that with the support that we have at our own branch support center. Strong supplier relationships, we're good buyers. We negotiate direct, and we bring that value to our clients. We understand the budgets and the needs of owners. We have a customer-centric approach.

Again, we earn friendships and to earn a friendship that takes a lot of work. It's a 2-way street. You can't just go in with expectations of being given something you have to earn trust. We're the employer of choice. While other people in this industry were investing in intuitive softwares and automation. We invested in our people, their skills and their abilities, and it's really made us where we're at today. We have a proven M&A process.

Again, we're a great home for family businesses that aren't sure what they're going to do and what the future holds for their business. We take care of their people. We show them a career path and how they can climb within our organization. And highly skilled labor, again, over 1,700 of our own self-performing labor. That's what makes us stand out in this market. We self-perform, we do very little subcontracting. So how do we drive profitable growth?

This is some of the magic that we do here. It starts in the bidding process. We identify highly technical jobs across different target verticals and we sell our skilled labor. We have an idea of what we actually provide, which is labor, and we look for jobs that have the best opportunity for us to deploy that labor. We review technical project requirements and provide tested assemblies based on interpretations. We do the work, we do the research, we find the right solution for the customer. We perform a peer review process within our own walls.

Basically, we challenge each other to make sure this is the right type of work that we should be doing and the right type of work for our company to be chasing. And that lets us get to what we'd call a go, no go for launch. If we don't meet those requirements, and it's not something that fits for us, we're disciplined and we'll pass on that opportunity. What that does for us is it lets us target higher revenue opportunities and focused on our return per mandate, the labor that we're deploying. On execution, we negotiate with manufacturers directly to capture the best pricing and installation methods.

Again, we're good buyers. We understand how to buy direct, how to take it from the truck to the rooftop without multiple people handling it and not buying it from distribution necessarily. We deploy highly skilled labor and again, self-performing labor. That's such a critical part of the progressive roofing solution. A lot of these owners and you're looking at these larger scale on facilities, they want that comfort to know that they're going to get the same company and the same people that work for them delivering those results. We leverage technology to track costs. We make corrections in real time. You'll get to hear David talk about that, but that's some of our magic when it comes to the operational excellence. We can see problems happening, we can adjust and we can make changes to our course.

And the key benefit you're seeing there is it enhances our margins. We're able to take a project and make it better, which is very difficult to do in our industry. Post job, how we stay sticky, right? We educate the customer and what their responsibilities are to maintain their warranty and how we can assist with that. We actually include that for them in that first 2 years because we know that's a critical part for them to understand. You have to do it. We build that into your original process, and then we sign them up for that opportunity post that 2-year period. And that lets us provide annual inspections, get on that roof on a yearly basis and make sure that it's performing the way that they're expecting.

And all this combined, what it does for us is, again, it makes us sticky. We have those maintenance programs. We had the service plans. We're the first person in line when that reroof opportunity becomes available.

Okay. I've got a case study here that we thought was kind of an interesting one to present to you. This opportunity was a new data center located in the rural suburbs. We didn't have any of the commercial capabilities to develop something of this size, especially in the 60-day time frame they gave us. 1.1 million square feet of mission-critical roofing start to finish 60 days. So how we did it?

We mobilized our 94-person installation team, and that came from across the country. Our own employees, we use the national support system to put together the estimates, the project management, the leadership and the safety that it would need. And then from there, we took our manufacturer direct pricing. We have made it the most efficient installation we could. We went from truck to rooftop, we use the most optimized efficient methods that you could do when it came to the installation, new techniques, new tooling, advantages that not everyone has available to them.

And it allowed us to maximize our efficiencies by front-loading the dry in, right, the most important part, get that building dried in as fast as possible. And then run a second crew behind them to get the completed roofing system finished.

The outcome for us is being able to dry in 70,000 square feet per day. That's about a football field in a half, if you're not familiar with the square footage, pretty impressive. We were able to significantly reduce our project costs because we were buying directly. We were running two separate shifts, and we brought more labor efficiency into the project.

And by doing all this, we were able to deliver the toughest piece, which is completing in the 60 days. We are in the trust of the customer and we were able to negotiate the second and the third building that came after. This is just an idea of what the data centers look like. This was one that we did in, I believe, Columbus, Ohio, just to give you an idea on the scale.

Yes, this is a good project for us. Nick covered the high level of the process. I geek out on this stuff, so I insisted that we take it down a notch. And so I want to go through the process, which to me, is a competitive advantage for us. This process, operational excellence is anchored in this process. It's broken up into three phases. Each phase ends with a meeting where we can collaborate and align as a team together, 2/3 of the process is around planning before we even step foot on the job site.

It started off with what Nick called the go/no-go decision. So our teams, our sales teams qualify opportunities through a pretty complex filtering system to find the best opportunities that give us the best chances to win. We'll win that job. We'll then do a handoff meeting.

So the initiation phase, the first phase ends with the hand-off meeting between sales and operations. That's where we can collaborate on promises that were made during the bidding process. we consider ourselves as operations folks, promise keepers. And that's where we can start to really understand what the promises were made for that job. We then entered from the initiation phase into the planning phase.

And the planning phase is probably one of the most important phases because this is where we can really build the roof before we actually install the roof. We go through our assemblies. We work with our manufacturers. We figured out, we're not loyal to any one manufacturer. We leverage those relationships to find -- to buy at the best cost. We're TopBuild. We just started scratching the surface with their relationships. I thought we had really good relationships. They have really good relationships. So together, now we can leverage that buying power.

We start to plan our labor. We start to do our quality control program. We start our safety program. This is where we really go through all the programs and communicate to everybody who's doing the installation, again about the promises that we're making. The planning phase ends with the preconstruction meeting. And that's where we all collaborate, we problem solve, we get on the right page. And then we entered the execution phase. The execution phase is where we install the roof. And this is where we have to follow up and communicate our plans on a daily basis.

Weekly is not -- is too long. Problems happen in construction every day. This is where we can get -- we send our expectations to the field. We get the feedback from the field. We make adjustments and Nick talked about the problem solving as a key attribute, solving problems early preserves more profit. When you solve a problem late, when you find the problem at the end of the job, it's too late, you've already spent the money it's gone.

So the key to our profitability is identifying these problems early so that we can solve those problems and keep the profit. That project -- that process, the execution phase ends with the last meeting that we have before we turn it over to service, which is a closeout meeting than what John talked about in operational excellence around continuous improvement.

That's our ability to learn what -- well on the project, what didn't go well on the project. What do we need to do better? And then we train -- we got the sales team in there, the operations teams all learning from that project. That's -- to me, this is one of our biggest -- it's a true competitive advantage. This is a repeatable process. We can take this process to any size job anywhere in the country. It's a simple process that we use. We use our technology to make sure that it gets followed and we contribute this way.

So I'll just give you a quick case study here, and then we'll kind of wrap it up, and then we get a break right after this. This case study is not necessarily about the complexity of the roof that we installed. It's more about the complexity of the logistics. So I wanted to reiterate around the planning side of it. This was a brand-new customer of ours. It's a $3 million project, which is a nice sizable project. It was competitively bid and competitively won.

However, this building -- this has had 22 buildings. This customer had 22 buildings. Each of the buildings was surrounded by trees. This is around last Christmas. Each of those trees had Christmas lights in it. They told us do not damage the trees. So the promises that we made were don't damage the trees. And so our staging area, our equipment, everything was across the street. The customer kept the occupation. So they didn't -- none of the buildings were unoccupied. So we had to dance around the employees coming and going.

And we were able to plan our loading program, our labor program. And in the end, we beat our labor estimate because that's the number we talked about the army that we have, the army of roofers. That's where you can let it -- that's where you can have margin erosion pretty easily with -- if you don't plan that labor. We were able to beat the estimate about 20%, which pushed our margins higher.

As a result, we got a referral to the next project within the next 6 months. So this $3 million project turned into $6 million above market margins. And it was a really good job for us.

So I'll kind of close. As Robert talked about earlier and people have mentioned about the total addressable market, the roofing industry is a very highly fragmented market, but it's a ton of runway for us. We have a huge opportunity to capitalize on our processes, scale up with our labor to go install -- and go to any market in the country. We have relationships at the local level and at the national level. These national level relationships are bringing us into markets that we're probably not right now. The job that he was talking about on the slide on the previous, that was a customer taking us to a new state, and that we're able to capitalize, we're able to put a foothold in that state.

From there, we're talking about expanding it with this process that I talked about. We can do this process anywhere, any time, any size roof, and we have the technology to keep us on track. Our people are -- as everybody has talked about, our talent development is critical. And so we really have invested a lot in our trading and development programs. We do performance-based incentives, and we pretty much guarantee a safe working environment for these roofers.

And finally, we're able to scale this. We have been able to, through our acquisitions, been able to scale this very easily moving forward. And so for us, that is commercial roofing. So it's been a long morning, so we'll take a break. Let me see what time it is. It's 5 to 10. So let's come back at 10:05. Is that good? P.I? So 10:05. Thank you very much.

Thank you.

[Break]

If we could please have everybody take their seats so that we can get started again.

[Presentation]

All right. Good morning to all of you here. So the question is why is specialty distribution important to TopBuild? And that's what I'm going to talk about today. My name is David Fischer. I'm the President of the Specialty Distribution business for TopBuild. I came to TopBuild through the Distribution International acquisition, I have 35 years of experience in distribution, started with my degree from Texas A&M, which is in industrial distribution, have 28 years of P&L management experience in the electrical business. I spent a decade at General Electric, specialty distribution, building materials.

So we want to just talk about some of the best practices that we do here at TopBuild. I'm really excited to share with you that the specialty distribution business is one of the fastest-growing businesses at TopBuild. As Robert shared, we've really changed the landscape across the customer base that we target. We're a leader in the commercial, industrial and residential construction segments as well as doing maintenance, repair and operations in the commercial and industrial segments.

The way that we continue to drive profitable organic growth and increased noncyclical revenue is by providing our customers with the best-in-class services and solutions. We have deep customer relationships and a comprehensive vertical market strategy, which I'm going to talk about later, across every type of commercial, industrial and residential construction. We have a proven track record of driving synergies of acquisitions.

Robert shared '24 acquisitions since just '22. So we have a very good playbook on how we drive synergies. We're committed to our most recent acquisition to drive $35 million to $40 million in synergies at SPI. We're going to do that through our operational excellence which is enabled by a robust and evolving technology and data analytics platform that continues to inform labor, automation and pricing decisions.

I'll start with just the businesses $3.1 billion in the specialty distribution business has significantly grown over the past 4 years, producing 16% EBITDA. We have 35 branches -- I mean, 3,500 employees and the breakdown of that revenue is 45% as mechanical insulation, and I'm going to explain what exactly that is a little bit later. 42% for Building Envelope in the building and then 13% and specialty products. We have primarily 5 business units, service partners, services, the residential and commercial building envelope business, silver code, focuses on metal building insulation in all aspects and markets that use metal building, distribution, international and SPI, both are leaders in the mechanical insulation, specialty products and leaders in fabrication.

And then Canada, across roads. -- across roads of business, does the commercial and industrial job up in Canada. So we have 250 specialty distribution branches. It's a comprehensive portfolio spanning all across North America with building envelope, interiors, mechanical systems and specialty products. Not only does each business specialize in product -- in its own specific product and service offerings.

Like Robert said, we cross-sell across each one of those geographies, the different businesses for different scopes on the same exact project. So whether that's building interior interiors, mechanical, metal building. Our sales teams are able to cross-sell and bring solutions to our customers' needs in any construction segment, commercial, industrial and residential.

Now I had a question earlier from someone outside asking about what is mechanical insulation and why is it important? And I want you to think about every single liquid or gas that is being processed into something else is being heated or cool. The very error that comes into this room has been heated or cooled goes through a [ DUC ] system that is insulated to bring the desired temperature into this room. So it's affecting right now you.

Oil converted into gasoline food being cooked and processed, beverage -- food and beverage industry, electricity, using natural gas turbines or steam turbines. All of that is insulated liquefying natural gas, which is a very big, big industry for us in vertical markets. I'll talk about that in a little bit. So those are all just a few examples of how mechanical insulation really touches every part of our lives.

Any place that you're trying to regulate the temperature, reduce the noise, ensure safety for your personnel provide energy efficiency, they all use mechanical insulation. A significant portion of the specialty distribution business is MRO, saying, maintenance, repair and operations. When you're processing a liquid, that liquid is going through a pipe and you'll see examples of the pipe cover outside. What's important is that you keep what's going through the pipe inside the pipe and then it's insulated.

So periodically, depending on how corrosive the environment is, the installation has taken off. The pipes are inspected for corrosion, [ sam ] blasted, recoded and reinsulated. That creates a repeat same location business for specialty distribution business. So that's the takeaway I want you to take from that point.

Specialty distribution has a tremendous opportunity to participate in every single type of construction in North America, as well as provide the maintenance repair and operations for the installation. The nationwide footprint shows that we have the right inventory, subject matter experts at the local branch to help customers with their insulation needs, the right product at the right time every time.

We have an unmatched geographical reach with our fabrication capabilities. Every type of the specialty distribution business touches fabrication. So we're fabricating mechanical products. We're fabricating metal building insulation. And in the residential sector, our gutter section has been one of the fastest-growing organic growth models that we have. So where we've been delivering insulation for a house being built to that same house will deliver gutter product that we've fabricated to a different contractor working on the same house.

So why do we win? The specialty distribution business is -- we are leading in this space, and I'm proud of that fact. My personal vision for our business is for it to be a leader in every single one of our geographical branches, so those 250 branches in the commercial, industrial and residential segments. So we accomplished this by driving the best-in-class customer experience with a comprehensive product offerings to our long-term customer relationships and continue to invest in innovate and technology with our digital platform.

Just the other day, I was seeing a customer, and what resonated with them was they were doing commercial work, and they had -- one of our businesses delivering them building envelope installation. We're providing the mechanical insulation for the plumbing portion of the business. And then they also had another project going on for metal building insulation. So that just shows an example of how we had multiple TopBuild customers calling on this one specific contractor and cross-selling multiple types of products to them. That is repeatable and scalable. Just a great example. So underlying everything that we do is operational excellence.

You've heard John talk about it earlier. Really, we raised the bar for distribution and operational excellence. We have minimum standards for all of our KPIs. We have a proven playbook that drives rhythm and rigor that drive results. by chasing every project in every vertical market in the commercial, industrial and residential segments. We show that we have value-added services for multiple scopes of work on the same project.

Our MRO focus is the broadest and most diverse offering of anybody in the space. Our proven playbook that shows the track record of margin expansion and OpEx discipline and supply chain, operational improvements and price expansion, all at the same time. that happens in that playbook. We will use that same playbook to provide the cost synergies with SPI.

Overall, as John highlighted earlier, we're leveraging operational excellence to continuously see drive outperformance and profitable growth. Driving profitable growth is in our DNA. I'm going to explain a little bit later about how in-depth I go in the vertical market strategy at the local branch level and how it's the basis for our organic growth. But Jennifer talked earlier about our development plans, primarily around the MIT, which stands for a Manager and Training Program. We also have a branch manager development course for new hires, as well as custom tailored programs that we do for experience -- more experienced associates.

The key to any training or digital tool that we use in specialty distribution is that it provides sales force effectiveness or operational improvement effectiveness to be more productive. I have to reiterate, the broad reach of all the TopBuild companies across North America, every single type of construction in the commercial, industrial and residential segments in every state in every city, every single project is what we're chasing.

Innovation is one of our values. And if you notice there's a big picture of a really big pipe on here with some insulation on it. that insulation is an engineered elbow that Distribution International at TopBuild has a patent for. That elbow is specifically designed computer-aided design cut on a CNC machine for that specific pipe. It shows up to the job site. If you look really closely, you can see a numbering system on it, and it goes together with instructions on the site for our customers to be able to install this elbow rather than fabricated on site with a detailed set of instructions, and it saves them 40% labor savings.

So that's a significant savings form and just one of the examples of how we're driving innovation to help our customers. So here's an example of our industrial vertical markets here in green on the side. My goal is for us to be number one or number two in every single one of those verticals everywhere we have a branch in those 250 branch locations. Some of the recent projects that I see that are going to provide a very strong runway for the specialty distribution business are some pictures here.

First off, I want to talk about data centers. There's over 400 data centers in construction right now today. Data centers produce a lot of heat. That means there's a great opportunity that they need significant cooling systems to cool them down.

In addition to that, we provide the building envelope for the building. We provide the installation for the cooling system that's bringing the chill water to the building to the equipment to cool it down. And then we also -- every one of those data centers needs a lot of power. So whether they're having on-site power or adding to the local power plants, we have experience in all of that.

And those power -- the plants need the data centers need additional power, whether that's a natural gas turbine or a generator. So we're providing the insulation for those as well. Semiconductor plants is another one that I've listed here. We've participated that's in the industrial manufacturing market. We participated in every single semiconductor plant that's been built in the U.S. over the past couple of years and will continue to. So that's a vertical market. I see some runway with liquefied natural gas. I'll dig in a little bit deeper on that, as well as the petrochemical industry are both areas that I see a good runway for us that not only provide a significant amount of construction, but also maintenance and repair and operations after we've completed the construction.

So in addition to the industrial market, the commercial market has -- the vertical markets that we chase are listed here in green. The Commercial segment is one of the most exciting for specialty distribution because every one of the TopBuild businesses participate in it, whether it's insulation install, roofing install, supply of building envelope and interiors mechanical insulation are all required on commercial construction jobs. Very -- a few vertical markets highlighted here that I see continued growth for us our health care education and transportation. So we try to chase every single one of those segments in every geography that we have a branch in.

Now I'd like to talk about a case study for one of our key clients. This is a liquefied natural gas plant that was installed in Plaquemine. That's the way you pronounce that word, Plaquemine in Louisiana, which is down -- at almost at the mouth of the Mississippi River. It's one of the most farthest places you can go along the Mississippi before you get into the Gulf of Mexico.

With a project of this size, there are very few companies that have the project management experience and capabilities to custom fabricate and provide insulation across multiple states. TopBuild companies have participated in most LNGs built in North America. Our experience is that we participate in the construction, and then we also know the facility so then we can provide the MRO after it's done.

This project, I personally tracked for 5 years before it was built, because I live in New Orleans. And I knew that was going to be built. So tractor for 5 years. LNG projects are very large scale. This specific job was 630 acres. 1.3 miles along the Mississippi River, it has a docking station. It had four 200,000 cubic meter storage tanks all insulated. And two gas turbines. So we provide the insulation for the power and then all of the piping and everything to do with the plant from the initial design through completion of 3 years we provided mechanical insulation exceeding $50 million in revenue. This is a picture of it. It's big. It's really big.

Like I've walked it, like that's a full day to get through -- to get around. Not only bringing the natural gas to the facility through two 42-inch wide diameter pipes, 12 and 15 miles each. Modular construction was used on this job. So modules were made in other states and then transported along the waterway brought to the facility. We insulated the modules. Every portion of the job we did.

So then once the modules got to the job site, we provided the insulation for the tie-in work in roughly every part of the project. So as with every LNG, TopBuild companies have the geographical span, combined with technical expertise and project management skills that are scalable to any size of job, whether it's a house, a residential house all the way to a 630-acre facility.

Next case study I'd like to highlight is a major warehouse club customer. This leading global wholesale retailer was looking for a metal building insulation solution that was custom engineered and scalable worldwide for all of their club stores. Silvercote has provided the metal building insulation for the builder of 230 stores over the past 10 years. This is a prime example of our capability to scale this service for all construction projects in this segment.

Our fall protection system, I don't know if you noticed it during the video, which showed a guy getting caught, fall protection system that we have put in has prevented any lost time injuries. There have been 0 over those 10 years in the 230 facilities built.

In addition, our custom engineered insulation has been compliant with every country's energy codes in the specific locality. So the key here is that we create unique solutions for our customers that standardize and scale those solutions to achieve even greater efficiencies. So in conclusion, I just want to point out that we are a leader in commercial, industrial and residential segments in construction and MRO for industrial and commercial segments.

The way that we continue to drive profitable organic growth and increase noncyclical revenue is by providing our customers with the best-in-class services and solutions. We have deep customer relationships and a comprehensive vertical market strategy across every type of construction.

We have a proven track record driving synergies of acquisitions. So we will deliver $35 million to $40 million for our SPI acquisition and through using our operational excellence that is enabled by a robust and evolving technology and data analytics platform that continues to inform labor, automation and pricing decisions. Thank you for your time. And now we'll do a little Q&A.

We're going to host our first Q&A session here. So I'd like to ask our presenters from this morning from the businesses to please go ahead and head to the stage and get situated. And while they do that, you guys know how this works. We've got a couple of traveling mics in the room, raise your hand if you would like to ask a question. Please state your name clearly as well as your firm before asking the question. Try to keep it to one question with a follow-up so that everyone has a chance to ask a question. And as a reminder, if you don't get to ask a question at this time, we'll have everybody available for Q&A afterwards as well as the lunch.

Yes. So I'll quarter back the Q&A today. So definitely open to the questions. But as PI mentioned, we'll have another Q&A at the end before we break out to lunch, and we have about an hour for table breakouts at lunch as well for all the business leaders and topics. So we've got the -- each business leader up here. And also, you heard from Jennifer and Steve this morning as well. So we'll get started. So we've got a lot of questions. Phil, you want to get started?

Well, my question is for Nick and David. I guess it was really impressive in terms of your presentation, the multi-generation building that business. I guess, what were you able -- what weren't you able to do as a stand-alone versus being part of TopBuild going forward? And how do you scale the business, right? M&A is going to be a very big part of the opportunity going forward. How do you kind of integrate these deals? And how long does it take to kind of the companies that you acquire embrace the DNA of Progressive?

Good. Well, first of all, I'll answer the first question that you asked, what weren't we able to do? With this partnership with TopBuild comes the ability to look at every other roofing contractor that's in our space. There's nothing that's off limits versus [indiscernible] to acquire. So that immediately gets released for us. A lot of -- you asked the question, too, what is our biggest lever for growth. That has been identified 100% as M&A.

Having the cash flow that we have available to us and now the partnership with TopBuild and the understanding of how to go attract and find the right companies, use the skills that they've done with all of their acquisitions over the years and really expedite kind of the process that you talked about, which is how long it takes to integrate.

There's no golden answer for that. Every company is kind of unique, but we're getting it more dialed in every day with the partnerships. We've got the experience from the leadership team. You'll get to hear Sri present a little bit later. He's just been incredibly impactful on our entire team and building our own integration teams using the playbooks and the collateral that they already have and just perfecting our craft.

Yes. I think, Phil, I think it's great points that Nick made. So this has been one of the first areas of investment that we've made is around the M&A side, the M&A team. You're going to hear from Justin Rojas, who is the point person within Progressive on commercial roofing acquisitions, but then the integration team. So it's not just the upfront business development side, but dedicated integration team because as we go down this path, I mean, Progressive has great local relationships. They're very well known across the country for the type of business they run. So they've got great relationships.

Some of the folks that they've acquired have come in. We have great relationships across the country. And then we TopBuild have some of the bigger relationships that we're tackling M&A from both sides and actually making an investment here so we can move fast with M&A, integrate appropriately, but part of the same disciplined process that TopBuild has. Stephen, you're next.

Yes. Just a question, I guess, for the TruTeam and the Service Partners businesses. If you go back to 2018 -- late 2018 into 2019, you had a slowdown in the single-family market and also the multifamily market a little bit. And yet TopBuild was able to perform extraordinarily well through that time period. My recollection was that pricing actually held in better than we would have thought given manufacturers couldn't get it, but you were able to actually get a little bit.

And then you also had efficiencies that you were able to extract at that time. And it's particularly the latter that I'm curious about. Can you give us a sense for what was actually really going on in your mind, if there were like 1 or 2 things that stuck out during that period of time that enabled you to outperform on the margin side? And how that might be tweaked in this environment given the different kind of situation that we find ourselves -- we may find ourselves let's say, starts are down 5% or something like that next year?

Yes. So I'll give you the TruTeam perspective. So I'd say the playbook is very consistent, right? I mean it's not all that different from things that we had done in years past. When you take a look at facility, we want to make sure that we don't have too much overlap. And we've done some work earlier this year where we did an optimization project within the business, which helped us recapture some of that margin as we have had a little bit of volatility with pricing.

So for us, it's just maintaining constant with the business, continuing to pull out those inefficiencies as we find them and making sure that we're appropriately sized based on where the market is heading. So not all that different from how we ran the business in '18 and '19.

The implication, though, from The Street's perspective is that you've already done that, right? So like does this put you in a little bit of a disadvantage because that's already been accomplished and low-hanging fruit is done, that kind of thing. So that's, I guess, the essence of the question.

Yes. So I think we always expand on the low-hanging fruit, right? That's the easy stuff to grab first, and then we have to work. And that's where our team comes into play, the branch support center, really directing us, okay, there's opportunity here. Maybe we didn't see it at first. Let's dig deeper. And I think Jeff even mentioned yields that we've improved, right? We can -- there's so many different levers that we can pull to enhance the business. And I think that's why it's not like it's one and done. This is a consistent cadence that we have within the business that we're always driving that operational efficiency. So I think it just goes hand-in-hand with what we do every day.

Mike Rehaut, JPMorgan. My question is for Dave and Nick. You kind of laid out a broad landscape of opportunity, and M&A, clearly, a lot of opportunities there. But I wanted to focus on organic for a moment. Dave, you talked about kind of wanting to be #1 in every end market and every branch in every city, every state. So a real broad perspective there in terms of what the opportunity is. But I'd love to get a sense of how does that boil back to organic growth and how you see that path over the next 2 or 3 years? And a similar question for Nick kind of along those lines.

Yes. I would say the -- the vertical market strategy and bringing that down to the geographical of every branch's location is what's driving the organic growth. So it's a diversification across all of those segments, but then down to the point of every one of those verticals in each branch's geography is, I think, something that we're doing that not many people are.

So I think that not only diversification, but also then diversifying the product scope that's offered. So Gutters is a prime example of the residential segment that back to your question about how have you been able to continue revenue generation and it's by getting a larger share of the wallet at the project level, even though it's not the same contractor. So that kind of answer your question?

I think if you -- so if you look back and let's talk about the DI history as an example, when you talk about organic growth, if you look at the DI business that we bought it in '22, the industrial business was strong through the middle part of the country and the edges of the country was mainly commercial. And so by taking this vertical market strategy, now you're taking that across the country where now the coasts, they're getting stronger industrial and the mid part of the country has got stronger commercial. That's the strength in that vertical market because you're taking that across the country versus certain areas being a strength in one vertical market.

Now you're getting them strong in all the markets. And if you look at this year and the results of TopBuild, that's really driven that organic growth. And while we've leaned in so much on commercial and industrial this year as residential has been slower. Let's take some...

Maybe Nick wants to answer.

Answer Yes. Organic growth, I mean, you're hitting one of my favorite pieces. That's what we're living every single day. Talking about my roots where we kind of came from, we were originally known as just an Arizona roofing company, and you've got to see that expansion now that all the different states. We're in 12 plus, and we brought that set that we developed in Arizona, and now we've traveled with it.

You're seeing an explosive amount of growth for us in the state of Texas, and that's through exactly what me and David preach every single day. It's about growing new additional talent within the business, making them competent. There's lots of people that are in the roofing industry that have all the right answers to give you, but they don't have the right skills to deliver and they get exposed over that period of time.

And that's really enhanced us being a people business. Investing in our people, making roofing professionals, making them part of the community, building schools, building these large data center opportunities, focusing on these verticals, that's in the DNA of Progressive Roofing. So we feel we've already done a fantastic job, and we're continuing to do a fantastic job on the organic growth. And now we're turning into students from TopBuild and everything they can teach us through the M&A opportunities.

Keith?

Keith Hughes, Truist. Commercial roofing question. Just building on that M&A comment. As you get bigger, will your ability to buy truckload and direct product delivery to the job site grow? Or is it -- every job is so independent that leverage -- that kind of size leverage doesn't exist?

You're asking is as we continue to grow, is our pricing going to continue to improve?

I guess my question more on the cost side as you...

More direct truckloads, not going through distribution, the volume that we'll be able to work through the engine here.

Absolutely. We make it a competitive environment for the manufacturers. I think you got to hear us briefly talk about it. We choose solutions that's best for the customer. We feel that customers come back to do business with progressive roofing. They don't necessarily pick a brand name of what they want in their building, and we utilize that advantage by going to these major manufacturers and saying, hey, we are growing this opportunity and your pricing is not necessarily in line, so that might not be an opportunity for you to grow with us. You might want to take another bite at the apple. We feel we're pretty good buyers in that space.

I think one thing, Keith, that we'll be able to do is if you take -- so go look at some of the built-up systems that are out in the lobby there. If you think about some of the polyiso boards, the spray foams, those types of things, not only we leverage the scale, but we'll leverage our distribution network, which will only facilitate better logistics and stuff on the roofing side of the business. So all that works together here and we're in the playbook and what we're putting together.

Will you be adding more commercial roofing focused products within your current distribution to be able to serve because the job site is changing for these guys all the time.

Yes. I don't know that we'll be expanding into some of the unique commercial roofing products, but there's definitely some crossover in our insulation products today that we'll be facilitating for like the commercial roofing for the future.

Rob Davis, ACK Asset Management. Just had a question regarding commercial roofing. You mentioned your 12 branches licensed in 41 states. Is there an opportunity organically to leverage the TopBuild footprint with distribution, building out your own facilities, greenfield, leveraging their own facilities where you can expand, service some of those 41 states more from local branches or otherwise expand your physical geographic presence?

Absolutely. That's one of the first things we found out in our first 6 months of working with Robert is just the availability to us for expansion. It's difficult when we're running the business every day and we start thinking about wanting to get a larger facility or a larger footprint in different locations. The resources are readily available to us in TopBuild. So it makes it where we have partnerships in these tough decisions and expedites the process for us.

There's probably 2 locations that are on the radar right now where they leverage a TopBuild facility. I think we have time for probably one more question, and we're going to put any time later as well. Front row.

Rafe Jadrosich at Bank of America. Just on the TruTeam side, you sort of talked about the opportunity to improve the performance of certain branches. Can you talk about the margin difference between your best-performing branches versus that bottom quartile? What is the opportunity to move that up? And just help us quantify that.

Yes. So I'll give you an example. We talked about the spray foam yield improvement. So we just recently conducted an exercise across roughly 150 or so of our locations, and we're looking at the performance of that product. And the average across all the branches where we made those adjustments was roughly a 10% improvement in yield, right? That's not necessarily applicable across the entire footprint, but in that particular example, which is a significant portion of our business, that's a good reference on where we did drive some of that improvement.

I think the mindset is, guess what, somebody is always in the bottom 10%. And so you can move some up and some will fall. And this is a continual cycle of working that bottom 10%, whether it be products, customers, branches, installers as well. So there's a constant churn of that.

Okay. I think we want to keep moving on with the presentations. But again, we have Q&A a little bit later and over lunch. So with that, we're going to get into talking about M&A and digital. So I want to -- thank you guys. I want to introduce Joey Viselli, who is TopBuild's Chief Growth Officer. And Joey will kick off talking about the M&A competency and then we'll be sponsoring an M&A panel discussion as well. So Joey?

Thanks, Robert. Appreciate it. Hey name is Joey Viselli. And before we go into the exciting world of M&A, which to me is very exciting, and I hope it is to you as well. I want to talk a little bit about myself. I spent the first 15 years out of school at Procter & Gamble. I rose up to the sales and then the marketing functions there, eventually got to manage some global brands. That was a great experience for me.

Then I also spent time at Goodyear Tire & Rubber Company. I ran their marketing and brand management and product development and product management functions for North America. Then in 2009, I got to enter the exciting world of insulation. I did that by joining the Management Board of Knauf Insulation. If you're not familiar with who Knauf is, they are the second largest producer of fiberglass insulation in North America and in the world. They're also involved in a lot of other businesses that are based in Germany.

That was a great change for me. I tell you, if you want to do something meaningful, there's not much that's more meaningful than positively impacting the energy efficiency, the sustainability, the energy independence in North America. There's not a better way to do that than helping insulate buildings, pipes, processes, all the things you can do to drive down energy consumption. I've really enjoyed my time in this industry.

So I was still in this industry in 2021 when Distribution International was purchased by TopBuild, and that's how I kind of came into this company. I'm one of the people -- many people you're going to hear from today that got to experience that M&A process myself, got to experience what it means to be here post-M&A process. It's been great for Distribution International, just like it is for most companies that TopBuild purchases.

So let's go a bit into some things we're going to talk about up here. Robert talked about our total addressable market being about $90 billion now. So as a $6.3 billion company, that gives us tremendous upside, tremendous runway across all of our verticals across all of our key pillars.

We strive to be and we believe we are the strategic buyer of choice for people who are looking to sell their businesses. We have a team of folks who are out there on a kind of constant basis looking for those opportunities, and it's great to sit down with them. We sat down with an owner recently. We said, Why are you thinking about selling to us? He said, my people are continuing to grow, and I think they're growing faster than our company is. And I don't want to limit their opportunities. So I want to send them somewhere where they have a lot of upside opportunities for themselves. And that's an incredibly noble reason to sell a business. And we're looking forward to continuing those talks to them and hopefully finalizing those talks with them and bringing their folks into our business.

If you think about long-term prospects here, we don't just want to be the strategic acquirer of choice, we want to be the strategic employer of choice as well. And I came to TopBuild through an acquisition. You're going to hear from a lot of folks today. I think the majority of us here, most of the TopBuild folks are over here. Raise your hand if you came to TopBuild through an acquisition. So this isn't a place where you just send your company. This is a place where you bring your people. This is a place where you can thrive. Your business can thrive and your people can thrive. And that's our proposition to these folks. We can tap you into all of our processes and help you improve your businesses, and we can learn a lot from you as well.

So we do have a rigorous process that we put all of our acquisition prospects through. It starts with identification. Our M&A team teams with our field leaders to constantly be looking for opportunities. And then we stay in contact with hundreds of them at a time across all of our main pillars. And that means that when they're ready to sell, it might not be today, but we're talking to them, we're forming a relationship with them. We're bringing them along. And when they are ready to sell, they know we're ready to buy, right? It's a good conversation for us to have.

We also have a dedicated team that does diligence. And diligence isn't just about financial diligence. We want to do things like we want to get to know very quickly. If there's a reason why we have to say no on either side, we don't want to waste each other's time. It's not productive.

We can also identify things in their business. We can go, this is a reason we might not want to purchase you today. But if we can fix these things, if you can fix these things, you can come talk to us again to kind of help point them in the right directions for making their business, getting it to the point where we're ready to buy it.

We also take this opportunity, though, to learn what they do well because one of the secrets of our success is we know that there are people out there who still do things better than us. We can learn from every acquisition we make. And we have the processes, we have the technology to take their best practices and spread them across our other businesses. We're not just there to improve them. We know that they can help improve us as well. And that's key to our process.

Finally, we have a cross-functional team that helps to integrate those businesses and gets them along the lines of that process. So we've learned how they can affect us positively. We can learn some of their shortcomings. We can integrate them quickly into our systems and processes. And then they can benefit from all the things that we benefit from as well, right? We have a great dispersed leadership and management style where we -- we empower the field, right? We have great relationships with our suppliers. We have a single technology platform that unifies us and unifies all of our processes. All the things that help drive our organic growth, we can quickly transition and drive their organic growth as well. You heard about that from some of the folks who've recently been acquired as well.

So I talked about our processes. I'll talk a little bit about our pillars now as well. On the left-hand side of that screen, you're going to see insulation installation services. That's the TruTeam business you saw up here. A lot of upside. We tend to get quick synergies here because we have a lot of purchasing power. We have a lot of experience making those businesses successful. Still a lot of runway there.

On the far right, you're going to see specialty distribution. David talked about that. This is the distribution of building installation but also the fabrication and distribution of mechanical installation to the commercial and industrial end markets. You can see how dedicated we are to that pillar with our actions this year, right? We purchased a $700 million SPI business just a little bit earlier this year. And we've done several other acquisitions in this space over the last year or so. So great pillar for us, very full, very robust pipeline there.

And finally, that big center pillar there, you're seeing there is our newest pillar, and that's commercial roofing installation. And Progressive, you heard from them several times, you'll hear from them again. They bring not just a solid M&A platform to us. They also bring a solid team to help execute that platform as well. So again, very diverse market, very dispersed market, great upside, great opportunity for us as a company. So as a $6.3 billion company within this $90 billion total addressable market, there's no reason we are able to fill up all these pillars with great opportunities for M&A.

So I'll talk to you about the process a little bit. I've talked to you about the pillars a little bit. I want to talk to you about the people as well who are helping drive success here. You guys can come up here while I'm introducing you. Jeff Caswell is our Vice President of M&A for all of TopBuild Jeff has been a CFO and a COO. He worked for a very large installation installer in their M&A function. He -- during his 9 years there, he led 70 or so acquisitions. He integrated those acquisitions really well. A lot of success there, brought us a great Rolodex.

He came to us because in 2023, we purchased a business that he was helping run. He was the COO and CFO of SRI. He helped grow that business into a $65 million business before we were able to purchase it. So it's great to have him in here helping us lead our team.

And then Justin is leading M&A for our new pillar for Progressive. And Justin has a lot of experience in the energy markets. He has a lot of experience in construction services before he went to Progressive and became their Chief Growth Officer, and we're really thrilled to have him with us today. And we're going to sit down for just a bit and talk about their experience and the processes that they're helping lead. So we're going to look shorter to you in just a minute.

Okay. So you both came to TopBuild through acquisitions, and I want to talk about that process just a little bit, see what you went through and See what that was like. And Justin, you're the newest one here, so I'll pick on you first. When you're helping Progressive with this process, what were you looking for in an acquirer?

Yes. The common word we're hearing quite a bit is people, 1,600, 1,700 employees being introduced to TopBuild, obviously, managing over 15,000 employees. It's just eye-opening that they get it. Obviously, being a people business, that was important to us.

Outside of that, in regards to the boutique private equity we were partners with now on the publicly traded stage, kind of tying that back to our people. It's just -- it's amazing that we can now have our mindset, our strategy is more on perpetuity of growth per se versus kind of that 3- to 7-year cycle of let's hold of the private equity group transition and who knows what that vision is. This is just way more clear with the partnership today with TopBuild.

That's awesome. Thank you. Jeff, just same question as Justin. You entered this process. There was a reason you entered this process to kind of talk about the rationale for being acquired.

Absolutely. So we -- in 2018, we were a store $6 million insulator in Augusta, Georgia. So by 2022, we've grown our run rate to $65 million in sales, half through acquisition, half organically. And we had hit a ceiling for sure. Rates were starting to increase, and it was time for us to look for a partner.

We looked at private equity. We looked at junior debt, mezzanine and a lot of different options. And we settled on TopBuild, primarily because we were competing with TruTeam in all of our markets. And we could see evidence of all the people-first type culture in our markets they had. They were staffed by wonderful people. And when we tried to hire them away from TruTeam, they said no pretty consistently. So we thought this would be a wonderful place for us to land.

So you went through that process and you closed, then you had to tell your people about it. What was the internal sentiment kind of when you first talked to folks?

So we -- there are a couple of themes that were very clear to us out of the gate. First of all, after the deal closed, Robert and Steve called immediately. So we felt very welcome to the organization. Joey Shri and Jeff Kay came to our stores quickly after that. So our people felt like they were part of an organization very quickly. The branch support center, that is a gigantic deal at TopBuild, quickly engaged to interview my people. They made them feel safe and like they had a home and a place where they could continue their careers.

So the people first piece was fantastic. The second piece that needs to get -- we need to explain this, the do no harm sort of philosophy that TopBuild has towards acquisitions is super important. The humility and open-mindedness with which the integration team works on deals allows us to keep the uniqueness of these acquisitions even through integration, so they can continue to use those as a strategy going forward. So those two sort of pieces of the acquisition strategy, I think, came through very clearly to our people. We didn't have any kind of customer disruptions. Everything looked business as usual to our installers and customers and things were very smooth and efficient.

Thanks, Jeff. And Jeff is referring to our mantra in M&A. First, do no harm. Don't assume you know everything about a company, take time, learn about them, make sure that they understand our processes and we understand what they do well. So that's a big thing that we pound into all our teams.

So Justin, similar question, how that process go for you?

Yes. It's been excellent. Back to that saying, do no harm. TopBuild leadership came in, kept every word they pretty much promised to us. Major focus was on sincerely understanding our business, understanding what makes us special, understanding how we can scale this together with a lot of the efficiencies that TopBuild brings to the table.

The senior leadership team especially has been world-class, putting us across the table with other peers within TopBuild that have scaled at the pace we're going. And it's just been tremendous to be able to have that peer across the table to make sure we're walking down this path with wisdom and not just firing from the hip.

That's helpful and excellent. Okay. So once you went through the process, you went through integration, how do you think that the acquisition has changed the business for Progressive?

Yes. The big word we keep talking about is people, obviously. Our future targets used to view Progressive as this whale of their people can now progress not only in their local branch, but also within Progressive. But now with the TopBuild partnership, 15,000 employees, it's apparent that there's a hunger for leadership as you've seen in the headcount that's been a part of just the M&A process in general.

Another keyword would probably be growth. Growth has been obvious and apparent that it's going to happen. The pace of play within TopBuild, tremendously different from our private equity partner, right? There is in-house counsel. There's a deep bench of analysts that are allowing us to look at these deals of scale and to move at a pace that we weren't before.

The other piece back to the peers with operations, seeing different divisions handling over $3 billion in sales. And you see, obviously, where our revenue is at. We're just excited to have that expertise as we prepare for our national scale.

And the last component on the M&A side, I really -- it's apparent in the industry that our value proposition is very unique. You're seeing various models around franchising, et cetera, in the roofing space. But true integration and the expertise with 49-plus acquisitions TopBuild has done, it's definitely going to make us stand out in the industry.

Thanks. I appreciate that. And we're looking forward to that growth as well.

Jeff, you talked a little bit about what your folks -- how folks kind of reacted to the acquisition. Tell me about how that went. What changed to the integration process?

Sure. The integration process was very smooth. I mean, first of all, I have to say that being part of a larger organization immediately had a tremendous impact on our margins. We were blessed with that.

From an IT integration perspective, they were people at all of our stores that had a great degree of operational experience in our space. They knew how to talk to us in our language, and they knew how to, again, preserve our uniqueness in pricing and how we paid labor into their Oracle system. So that all went very smoothly.

Being part of a publicly traded business was a little bit different for us. Obviously, we had key controls and stocks that we needed to comply with, and they were extremely thoughtful and very, very patient with our people and getting them to understand those controls very quickly. So our folks felt very supported by the team that was at the stores, and they spent a lot of time with us at the stores. When the folks left, our team felt very poised for growth.

So I ask -- so you went through that whole process, you went through integration. I asked Justin how it changed the Progressive business. How did it change your business?

From a -- well, so we grew from $6 million in sales to $65 million in sales in 5 years. There were a lot of things that we did well, and there were a lot of things that we just didn't have the resources for, right?

Jennifer talked about the program she provides from an HR perspective on the leadership side. I've had some of my players go through our leadership programs, and they're very good. I've had some of my players be promoted into bigger roles in different roles and they're thriving. So they're family to me, and I'm just -- I feel blessed that they're sort of blossoming here at TruTeam.

From a growth perspective, obviously, I talked about margin expansion already. That was great. But what probably isn't talked about quite as much is the availability in our markets to bid bigger jobs. When you're all on the same production management platform, you can share labor pretty efficiently with one another. It gives you confidence. And products that maybe you looked at and thought, I don't really completely understand that product. You have experts all over the place that can help you sort of shepherd you through to that process. So growth was -- I mean that was -- it was easy for us post acquisition.

From an operational perspective, we valued safety and HR, but we didn't have the resources or the time necessarily to have dedicated resources in those spaces to help build to roll those folks in and they're excellent patient teachers. And we thrived on the safety and HR side as well. So thankful for that.

So we've just gone through, and thank you guys for both discussing how the process went for you and your businesses. But I want to kind of shift to the future and the processes you're managing now. So Justin, you're leading M&A for a big new business platform. What's going to drive your success as you kind of start to build commercial roofing installation?

Yes. We bring a proven playbook to the table. But again, 49 acquisitions on the TopBuild side, tweaking that playbook, increasing the pace of play. It's just apparent that we're definitely in good hands in this partnership. The ideal thing, obviously, it is a people business. We're trying to find the right leaders that share the same values. Again, the competitiveness in business with us, making sure that they fit us culturally. Obviously, there's a huge filter there on deal economics, et cetera. But anyways, once we find that right partner, we're able to implement a lot of our -- you've heard Nick and David allude to our Progressive Roofing business systems. A lot of strategies there put into place. Some common ones are obviously tied to buying power. But I really -- a lot of us take a lot of pride in our preconstruction services, our sales and estimating strategies, obviously able to promote that with our relationships across the nation as well with these targets.

On top of that, David alluded to some of the controls we put in place to make sure that these projects or our promises on our sales side are actually executed exactly how we financially model them to be done. We take a lot of pride in just those processes, as you heard David speak to them.

That makes sense. So you've got a process there to kind of identify and figure out which prospects you want. How does that translate in your deal pipeline now?

On that side, on the deal pipeline, it's extremely strong right now. And it's surprising that it's that case because we do say no quite a bit. Economics are a big component of this, finding the right cultural fit, as I talked about already. But with that being said, the industry, it's apparent, as you've seen that powerful pie chart of how fragmented this total addressable market really is. We're definitely excited on our value proposition versus what's out there.

So you want to keep filling that pipeline. What makes it so the business owners want to uniquely talk to Progressive?

Yes. The big one for us is a lot of these founders, a lot of these owners, they're called on daily. It's known. It's known that this is a fragmented industry. But with the recent acquisition, again, we've gained influencers in the space. Just in our building alone, we're in the fourth generation of roofing. And so when you think about these founders taking inbounded calls, yes, it's not a banker. It's not private equity. We have operated businesses. We've had recapitalized businesses. We understand the process and the psychology on their side. We're just not viewed as, oh, here's another cold call. This is an actual people that are dealing with roofers is something unique and definitely separates us.

That's awesome. Thanks for that. Jeff, kind of coming over to you, running all the M&A. How do you think about TopBuild's M&A opportunities kind of going forward?

Sure, absolutely. I'll piggyback off what Justin said. So I've always been self-generating -- I've always had to self-generate acquisition activity. When I came to TopBuild, I found 2 other people that were self-generated. They were also generating acquisition activity. They were an insulation contractor and a person with national scale and scope in the distribution business. So I'm now one of 3 people who is pretty actively outbound calling for -- on these targets.

And we are small business people, right? We understand and talk the same talk that the people that we're talking to speak. So we can develop trust pretty quickly with the folks. So just from an acquisition activity perspective, we're generating great volume. What I didn't really expect that I'm seeing is that TopBuild has been an acquirer of choice for so long. A lot of activity comes to us, right, just because we're TopBuild. We also get inbound activity from customers and vendors. And it's also interesting how deep in the organization at TopBuild people take acquisitions seriously. So I get calls from branch leaders all across the country saying, "Hey, you should probably look at this guy, hey, you should probably look at that guy. So we have a wide funnel and a full funnel on the TopBuild side.

That's awesome. Any other advantages you want to point out before we head on?

Well, I would say that from a management team perspective, in regards to the uniqueness and what kind of gives us an advantage in this space. Our team -- I mean, as I think about my top build coworkers here, they all have M&A and their job descriptions in place. I collaborate with them on just about every deal I do. So I'm blessed to have a deep, deep management team that supports me in doing acquisitions. We are truly kind of built for working on deals.

Yes, I think so, too, and I appreciate that. And I'll kind of wrap up this conversation so we can move on to the next piece. I want to close where we started. Robust pipeline of M&A opportunities, huge total addressable market, $6.3 billion company. There's a lot of runway for us. We like to be the strategic acquirer of choice. We leverage really deep relationships, and we manage those relationships, but we translate that into being the strategic employer of choice as well. And that creates kind of a beacon for us as we look for M&A opportunities.

And finally, we have a very disciplined process from diligence, deal evaluation, integration and maximizing the opportunity for each of these businesses. It gives us a really strong return on invested capital, and we intend to keep that going, going forward. So guys, thank you for your time. I appreciate it. Good seeing you.

All right. We're going to go to the next session right now, which is unlocking growth through our connected technology platform. You've heard about that some today. We're going to dive into it a bit deeper because it really is secret to a lot of success. It's actually the answer to a lot of questions that you guys have answered. So Sri Pullareddy is our Chief Information Officer, who will lead this conversation. So I'll hand this to you now.

Thanks, Joey.

And then Madeline Otero is our Chief Accounting Officer, and she'll be up here with us as well.

Good morning, everybody. I'm Sri Pullareddy, Chief Information Officer. TopBuild, 34 years of experience, 18 of which with TopBuild. During my early days, I had the opportunity spending time in one of our Texas branches. So that exposure helped technology groups focus and how they would design systems and applications grounded in practicality and simplicity.

My group's focus is working with the business leaders and leveraging the technology to drive profitable growth. During this presentation, you will hear additional examples from Joey and Madeline, how we have unlocked connected technology platform to support our strategy.

So 3 key messages. Number one, we continue to leverage our connected technology platform to drive operational excellence across our branch network and deliver that customer experience. You heard this from our operational leaders from John, Jeff and David.

Number two, our technology platform allows us to consolidate and automate back-office functions, driving significant efficiencies and savings. This is especially critical when you think about our scale and M&A activity.

Number three, we have a clear digital road map grounded in practical innovation and disciplined approach to further expand our competitive advantage.

So let's look at our evolution of digital strategy here. We have integrated and orchestrated the best of the breed of applications with Oracle ERP as the anchor to support our strategy. We continue to upgrade and invest on our tools and making sure that they deliver operational excellence among many other things, one of which is actually you see what's in the middle section of this slide.

Every single day, our installers, roofers, drivers visit thousands of customer job sites, delivering and installing material safely. This means 15,000 employees across 450-plus branches, hundreds of processes and technology coming together without missing a beat. We do this at scale, backed by the passion of our people to deliver customer experience.

With everybody on one platform, all our business units, we have real-time access to a wealth of information across the spectrum of our operations, whether it is bidding, pricing, scheduling, distribution, labor, fleet, inventory, you name it. This access is critical for our branch managers at local level as well as operational leaders to drive better decisions. Looking ahead, we'll continue to make investments in our digital transformation initiatives to drive the customer experience and lead in our segments.

So you kind of heard a lot about connected technology platform this morning. So this is in a hybrid architecture that is built for scalability. It provides secure, scalable, extendable and highly resilient to support our strategy.

The secret sauce is the approach we have taken in developing and integrating these applications and delivering a platform on which all our business units can thrive without the constraints of systems and processes. So some of the customer-facing applications you see here on this slide, they make it easy for our customers to do business with us, whether they are looking for a price, stock availability, tracking a shipment or paying invoices at their convenience. So this experience drives customer stickiness that Nick talked about. We'll continue to invest in this area to drive that customer stickiness.

As far as the back office is concerned, be it as the branches or warehouses or a branch support center, the platform drives stability and scalability, which is critical for us when you think about our growth and M&A activity will we continue to pursue on. So in short, the architecture has enabled several capabilities. Some of them are listed here. You heard from our leaders, and we'll hear a few more examples from Joey and Madeline in a moment.

So thinking ahead, our digital road map will continue to leverage on the capabilities we have built with our connected technology platform and the wealth of information that flows through our system.

With the rapid commoditization of software, hardware and the developments happening in the AI space, we will be diligent and opportunistic in pursuing the technologies and partners as well to drive and support our strategy. We'll now hear from Joey on his perspective.

Thanks, Sri. Sri used the term digital road map. I just want to explain what that is for a minute because it means different things in different companies. For us, it's how we're going to take all the information we generate. It's a ton of information and use it to do a few things, gather it, use it to drive customer satisfaction and loyalty, improve our efficiencies and improve our operations.

You've heard a lot of people say we have 450 branches. We like to be leaders in most of the markets that we're in. that generates a huge amount of data. And that data can be chaos, right? There can be a whole lot of chaos in all this data coming into you or you can harness it and leverage it and make it an opportunity, use it as an advantage. And we choose, obviously, to take that data, leverage it, harness it and use it to our advantage.

Our digital road map just basically outlines for us how we're going to use it to our advantage. It's about creating actionable knowledge for our branches with scorecards and digital maps they can see every day. It's also about more sophisticated tools like an AI-driven digital twin that we've built of our businesses. We can look at that digital twin and scan the businesses on a regular basis and look for ways to improve our operational effectiveness.

So it's a broad span of things we're doing, all to make all that information work for our businesses and ultimately work for our customers as well because our business doesn't move forward if we're not satisfying our customers with that knowledge as well. So how do we leverage this in the field? You've heard our leaders talk about they have real-time data behind branch productivity, sales productivity, labor productivity, inventory productivity, you name it, they have data they need.

And you heard some of them talking about today that gives them ability to adjust in real time. One example we talk about often is kind of top quartile and bottom quartile. We can give them the data so they can challenge their businesses are in the bottom quartile and help drive change there. But importantly as well, they can look at the top quartile of their businesses and go, okay, what are they doing well? I can look here digitally and see what they're doing well and then raise the rest of my businesses up to that level. So it's not just about pulling the bottom branches up, it's about improving their entire business through these digital tools we give them.

It also allows customers to benefit from our size and scale. So you heard earlier that we can share product and even labor between our branches. That means a lot to a customer because if they have a big job that needs to get done, a sophisticated job that gets done, an unexpected job that needs to get done, we can flow resources to them. But that also means a lot to us.

I mean using our labor more effectively means our installers don't have downtime. Well, they don't like downtime, they're paid on their productivity. And that productivity really matters to us as a company as well. If we can get 10 minutes of productive time for an installer, and we learn that across 7,000-plus installers, we can deploy that, that has a real material impact, not just on our customers, but on our business as well.

So our consolidated platform finally, we heard about in the last session a bit, it enables M&A. Many companies we acquire, we're looking at the results on a quarterly basis or a semiannual basis. It's a powerful shot in the arm for them to now be able to look at their business in real time and figure out how to improve it.

They can connect with other like businesses in our platform and share those products and share that labor. We can quickly get them up to speed on best practices. They can take things that they're doing well and help apply it across our company. So a lot of advantages there in the field.

Now I mentioned earlier that we created this AI-empowered digital twin of our business using a lot of tools. Agility is one of those tools. That allows us to see every shipment, every order, every piece of installation in our inventory. We can look at how that flows across our footprint. We can look at how it flows to our customers. We can look at how some of those products flow in from our suppliers. And that helps us constantly adjust and optimize our network.

We mentioned this earlier, and it kind of came up in the Q&A as well. When we saw the market start to soften in residential a little bit earlier this year, we could act quickly. We could look at this and say, how can we rearrange our footprint a bit in a way that doesn't harm our customers, right? We want to take out waste but not take out effectiveness. And so quickly, we consolidated about 33 branches. The ongoing benefit is about $30 million for that change. So that helps our bottom line.

But this digital twin isn't a single point in time. This is a process we're constantly looking at. So someone asked, are we done? No, we're not done. We're constantly looking at our operation for efficiencies. And we're going to do that as the market opportunities come up. And sometimes as the market shifts in a way that doesn't -- it's not going to grow as much as we'd like, we'll continue to adjust. And we have the ability to do that using these tools.

As another example, we've recently purchased SPI. That's already being folded into this digital twin. So we had a mechanical business in DI, right, Distribution International, and we can map them. Now we're going to map SPI. We have 2 mechanical businesses. We can map across them and say, what are the efficiencies and opportunities across these 2 businesses as well. That work has already started. We're having a meeting tomorrow in Dallas with some of the leaders of that business talking about some of those opportunities.

So our digital twin doesn't just allow us to quickly identify opportunities. It allows us to quickly act on those opportunities as well. We can realize synergies, and we can maximize through all of it, our customer experience, which is absolutely key to us. It's another example of driving our customers' experience.

We have a new Service Partners e-commerce platform. And that allows our customers to interact with service partners 24 hours a day, 7 days a week. That matters to a contractor. If you're not a contractor and things aren't going well, you don't always think to order product for the next day or for the next job. You have to make adjustments quickly.

If the branch is closed, it can cause a lot of tension for a contractor. Well, that's not a problem anymore. They can log on to our website. They can see their prices. They can see their past jobs. They can see their future jobs. They can order product. They can adjust things in real time. So when the branch opens up in the morning, they can address those needs. They don't have to worry about doing it just when the branch is open. It's a big step change for them.

Another example you've heard people talking about is the custom CRM platforms we put together for our different businesses. Our CRM tools give these businesses a 360-degree look at their operations and at their customers for each and every market. It also lets them look at their pipelines because we don't just say, we're not just going to reflect what they're doing. We also look at a lot of construction data sources, and we flow them into the CRM tool. We deduplicate them. We get them to the right people at the right time and it allows them to always have something to sell, and we can hold them accountability for those sales because we can actually see the leads that we're passing along to them so it helps us improve our sales effectiveness as well. So look, I've spent some time discussing how this connected platform and our digital road map impact our operations and help us improve our operations. Madeleine is going to spend a little bit of time discussing how it's helping drive efficiency and accuracy in the back office as well.

Thank you, Joey. Good morning, everyone. My name is Madeline Otero, and I'm the Chief Accounting Officer for TopBuild. I started my career in public accounting. I've been in accounting and finance for over 25 years, from there mainly in the consumer products industry. Two years ago, I joined the TopBuild family, and it's been a great journey. What I like the most about TopBuild is the people, and that's something you've heard as a theme throughout the morning. And that's been true for me since the day I interviewed for this role. I also value how our philosophy for the brand support center, which you heard from John, which is to centralize administrative support so that the field can concentrate on what they do best, which is to drive the business and provide excellent customer service. And to carry out that mission, basically, we invest in technology and prioritize that technology.

Let me give you a few examples. For instance, over the last 2 years, we have implemented technologies such as robotic process automation and intelligent document processing to increase operational efficiency in accounts payable. Specifically, we have increased the percentage of invoices that are processed through automation from 27% in 2023 to 65% in 2025. And our goal is to achieve an 80% automation rate over the next 18 months.

In addition to that, we have automated the preparation of supplier statement research files. And let me give you some background on that. Basically, every month, the accounts payable team, they review supplier statements looking for compliance with terms, but also to make sure that balances are complete and accurate. Before automation, the team would manually put together hundreds of these research files just to get them ready for analysis. After automation, the team now receives each file via e-mail ready for analysis, and this is saving us more than 200 hours every month, time that is now invested on not just the research, but of course, and more importantly, proactively communicating with suppliers, all of which has increased supplier satisfaction. And the best part is that accounts payable is just one example.

Just this year, our operations, finance and accounts receivable teams have also started to roll out this technology. And in doing so, they've been able to automate repetitive processes. And similar to that, we have also identified use cases across the organization, including legal, contracts, tax, just to name a few, all of which are part of our road map. Basically, there's a process that is repetitive or time consuming, there's an opportunity to automate it. We're excited to leverage technology to continue to centralize, streamline and scale processes at the branch support center so that we can continue to provide great support to our branches across U.S. and Canada. And now Sri is going to wrap up this section for us.

Okay. Thanks, Madeline. So as we come to this section, wrap up, so just a recap of what you heard from our leaders. Connected technology platform is a key differentiator in driving the strategic priorities in the field and in the back office. With all of the business units on one platform, it helps reduce complexity, deploy best practices across our network and quickly onboard M&A acquired companies.

Speaking of M&A, with the competency that we have with our brand support center and the connected technology platform, it's a win-win. Our sellers can focus on growing the business without distractions while the synergies are realized in the back end.

So -- sorry. So as far as like as we understand, we look at what's ahead of us, we understand the challenges with the rapid advancements happening in the technology and the market forces. We understand the challenges and we see opportunities. We will be diligent and disciplined in driving out investments and making sure that we are addressing customer experience, profitable growth, M&A synergies, operational excellence and expand competitive advantage. We have the track record in delivering on the commitments we make.

Thank you for listening. With that, we'll turn to Rob Kuhns, our Chief Financial Officer.

All right. Good morning, everyone. I'm Rob Kuhns, the Chief Financial Officer for TopBuild. I've been with the company for about 7.5 years now. Wrapping up right now my fourth year as CFO. I've been in the building products space for roughly 20 years. I was with Mohawk prior to coming over to TopBuild. And I've been in corporate finance or corporate accounting roles for almost 30 years now, starting my career with Ingersoll Rand.

So jumping into the key messages I want to make sure everybody takes away from today, right? Our company has a tremendous track record for growth, and that's been fueled by a unique, flexible and capital-efficient business model that we've built. That unique business model is driven by culture, supported by technology. And as you learned about today, it cannot easily be replicated. That unique model generates significant free cash flows. And when it's supported by our solid balance sheet and our disciplined capital allocation strategy, we drive significant returns for shareholders. That disciplined capital allocation strategy is focused on M&A, and we have a proven discipline around M&A and proven processes around realizing the synergies with M&A. As a result of that M&A strategy, as you heard Robert explain, we've strategically entered new markets, new spaces. And as a result of that, our revenues and cash flows are going to be more resilient as we move forward, more reliable. And our total addressable market is larger. So our ability to continue to do this is tremendous. So when I put all that together, that's why we have a high level of confidence with what I'm about to show you guys.

So moving to this next slide. This is my favorite one. And I guess, first off, I should thank our whole team here that was here today. I think they did a magnificent job telling you more about our business. And most of all, I have to thank them for putting up these results and what they do with their teams every day, drive these results and make my job of talking to you guys a lot easier.

So just to give you a few data points on here, just to walk you through the slide. 2015, that's the year we spun off from Masco, obviously. 2025 is the midpoint of our guidance for this year. 2020 is obviously the midpoint in between those 2 spots. And then the 2025 pro forma is our September 30 results on a TTM basis, adjusted for the TTM results of SPI and Progressive, so you can see what we would look like with a full year of those acquisitions. And what you can see there is we've grown our sales over 10 years at a 13% compounded annual rate. We've grown our EBITDA from $107 million of EBITDA to over $1 billion of EBITDA this year. We've expanded those EBITDA margins from 6.6% to over 19% this year. And over that period of time, and you'll see it on an upcoming slide, we've invested over $7 billion of capital and over that period of time, increased our return on invested capital by 780 basis points.

This is a slide I showed at our last Investor Day that I think, at least from my viewpoint, kind of summarizes TopBuild, all of our businesses, whether you're talking about distribution, installation and now with roofing as well, they fit right into this as well.

So when I say unique, what I think is unique about our business is our ability to optimize performance for 450 local businesses, right? That's not something that's easy to do. And the #1 part of doing that, and you heard a lot about it today from Robert, from Jennifer, from others, you heard it from Nick and how it works in roofing, it's about the people. And it is about people and culture and how we drive that as a company. Our business is built on local empowerment, and we want people with entrepreneurial spirit out there making decisions and driving the business. Jennifer helped talk about how we drive that through training and recruiting to help build that into the organization.

Now sometimes people say, well, Rob, 450 branches with 450 entrepreneurs out there, that sounds a little out of control and a little crazy, right? And it would be, right? It could be without our connected technology platform, which is a huge competitive advantage that you just heard a lot about, right? What that does is it allows us to empower our folks but put guardrails around it, right, put some guardrails and checkpoints and reporting behind it. You heard John Achille talking about from an operational excellence standpoint, how we use all that data to help drive our operational excellence, look at our bottom performance, work on moving them up. It's a big part of what we do, and it's not something that you'll see anywhere else in the industry. So that's -- I get back to this cannot be easily replicated.

Then you put all that together, 450 branches, the largest player in the space, the way our supplier relationships cross over between product categories. We obviously have significant national scale and buying power, and that can't be replicated, right? So that's what makes us really unique and can -- something that cannot be replicated.

The next part, resilient and flexible from a financial standpoint, this is what I really like. Our cost structure is highly flexible. Over 70% of our cost is variable. And you guys have seen that this year where residential sales have slowed. We've taken cost out of the business and maintained profitability.

I'll show a chart coming up, but we've definitely increased our noncyclical revenue mix. You heard today from Dave Fisher. You guys are aware that the roofing space is over 70%, reroofing and maintenance. And so that percentage has grown over the last 10 years for us, and you can definitely see a path for that to continue to grow moving forward.

And then finally, it's a very capital-efficient model, right? We have very low CapEx requirements, 1% to 2% of sales, low working capital requirements at 15% to 17% of sales. You put all that together, we generate significant free cash flow, right? This is a great example this year. In 2025, we're going to generate nearly $700 million of free cash flows, and that's in a slowing residential environment.

So you put with those strong free cash flows, our solid balance sheet, we have behind it. Currently, our net debt leverage sits at 2.4x trailing 12 months EBITDA. Historically, we run about 1 to 2x, but we have gone up to 2.5, 2.6 post large acquisitions like we recently did. Typically, we delever back to 1 or 2x pretty quickly, but we're not uncomfortable where we are, and we've got plenty of dry powder to continue doing bolt-on acquisitions, which you guys have seen us recently do, and we're excited about the opportunities that are coming with commercial roofing as well.

Looking at our total liquidity, we've got over -- or we've got close to $1 billion of liquidity. We've got $1 billion revolver with our upsized credit facility we just did.

Moving to our capital structure on the right-hand side. No significant maturities in the near term, and we maintain our strong credit ratings.

So I talked about how we've been allocating capital. We've allocated $7 billion over the last 10 years. You can see how that's been spread out, 4% to mandatory debt reductions on our term loan, 7% to internal investments, again, the light capital model we have. So that goes towards our fleet and the digital investments that Sri and team talked about. We put 29% to share repurchases, and we've retired 30% of our shares over the past 10 years. But our primary focus with capital allocation is M&A. We know that's where we can generate the most significant returns, but we're very disciplined around our M&A strategy. You guys are well aware of how we had to walk away from the SPI transaction a couple of years ago. We did finally get it done, and we're very excited about that opportunity moving forward. But over the course of our history, we've done 49 acquisitions. And so that's obviously the #1 priority. But because of our discipline, we know it's going to be lumpy, and that's where we'll balance in the share repurchases and be opportunistic with that. As we move forward, I don't see a major change in that strategy coming. It worked very well for us, and that's certainly our plan as we move forward.

So just to give you a little bit about our M&A history. This walks you through our 4 major deals we've done since spin as well as on the far right, the 45 bolt-on acquisitions we've done as well. So USI back in 2018, first major acquisition we did. They were the third largest residential insulation installer in the country. We signed up for about $15 million of synergies with that. We well exceeded that. That transaction went very, very well for us. In 2021, late 2021, we made our first step into an adjacency when we acquired Distribution International. That got us into mechanical insulation and also expanded our metal building insulation business. That business was about a 10% EBITDA business when we acquired it. Today, it sits mid-teens to upper teens overall as you look at it. So the $35 million to $40 million of synergies we signed up for with that, we definitely exceeded.

Progressive Roofing, which we did earlier this year is our second adjacency we've stepped into. Again, Robert talked about the strategy there, how we looked at that space. We looked at a number of adjacencies we looked for over a year at 30-plus different adjacencies where it would make sense, where TopBuild could win. And that's where we landed with commercial roofing. Then we talked with a number of different commercial roofing players. And when we met Progressive, we knew that was the team. It wasn't just Nick's hair like Robert talked about. It was the business model they have, the commonality with TopBuild that you see. I mean, you definitely see commonality between the cultures. You see commonality between the businesses, whether it's the supplier overlap, the importance of the labor force, the dispersed model. And we're really excited about what we bought there is a platform that we're going to grow, right? So we signed up for $5 million of synergies there. We've got clear line of sight to achieving that. We are not worried about those synergies whatsoever. But we're very excited about what's to come and the deals we're going to layer on with Nick and team moving forward.

And then obviously, SPI, that's our one that took a little longer than we would have liked. Ray Sears is here today, the CEO of SPI. He's excited to be part of the TopBuild team as well now. We brought over a great team from that side of the business. And we're very excited about having them. With them, we've signed up for about $35 million to $40 million of synergies as well, similar to what we signed up with DI. They're about 11% EBITDA business today, so a little higher than where DI was when we acquired them. But we definitely feel like with those synergies, we'll get them to the mid-teens within 2 years as we've talked about.

And then the 45 bolt-on deals we've done, that's something we do every day. We've got a process, a system, as Joey detailed, and something we're learning a lot about with every deal we do, every deal is a little different. But we definitely feel like we got an advantage. When you hear from Jeff and Justin and folks like that, folks that sold or part of a sale process to TopBuild that can sit across the table from an owner that's about to sell his business, who wants to understand what's going to happen to my people, what's going to happen to my salespeople, what's going to happen to my installers. These guys can walk them through what they went through and what it's meant for their people, what it's meant for them. And so just a huge competitive advantage for us.

In addition to that advantage, we also have the proven track record on the back end in terms of realizing synergies. So the team behind the scenes that does that work, they're not here today, but they've got a lot of experience at that and a great track record.

So one of the nice things about M&A is it's transformed our revenue profile, right? And we talked a lot about this today. If you look at the main demand drivers of what drives our revenue, new construction, that used to be 88%. We've shifted that by 10% with the move into mechanical insulation and into roofing, right? And Dave Fisher did a great job today talking about MRO and why that's so important for our commercial and industrial customers on the mechanical insulation side. On the roofing side, I think everybody gets it, right? When the roof leaks, you're going to get it fixed. So maintenance is a key part there. Nick talked about how he's making his customer sticky, getting them to come back for that maintenance work, building that relationship with them to get the reroofing when they need to do it. So you can definitely see where that 22% is going to continue to grow over time. Our end market mix is much more balanced today. So we were 20% commercial and industrial 10 years ago. That sits at about 47% today. So we're almost 50-50 on that front.

So looking ahead, I know nobody flipped ahead and looked at this yet. So we'll preview what numbers we put in here. So from an outlook for this year, no change to our guidance, right, just reiterating what we told you back in October. Sales of $5.35 billion to $5.45 billion. That's assumptions there are residential sales will be down low double digits. Commercial and industrial will be flattish. Inside of commercial industrial, it's a tale of 2 stories, right? Heavy commercial has been good. Mechanical insulation is up high single digits this year. So they're having a great year, helping to balance things out there for us.

M&A has obviously been a big part of the story this year. That's going to add $450 million of revenue this year. And then EBITDA from $1.01 billion to $1.06 billion, 19.2% at the midpoint of our guidance. I think that's really a testament to that flexible model we talk about and how we've taken cost out this year and still generating really good EBITDA margins.

So before we look ahead, looking back at what we told you back in 2022 at Investor Day, we talked about $6.4 billion is where we wanted to be in 2025 in terms of sales. We said we wanted to keep our compounded annual growth rate moving like it had been at about 16%. On a pro forma basis with our recent acquisitions, we're at $6.3 billion. So I think the interesting part there, right, obviously, the market didn't play out exactly how we thought, I'd say, from that period of time, housing starts are down north of 15% over that 3-year period, total housing starts. But if I would have told you back then that housing starts were going to be down 15%, and we were going to do 16% compound annual growth rate, you guys would have looked at me like I was crazy. So we feel really good about that. I think it's a testament to what we've built and the cash flows we generate even in challenging markets and our ability to keep growing as a company.

You can see the EBITDA targets we gave back then, EBITDA margins broken down for incremental EBITDA margin, the M&A margin. And we also talked about decremental margins. We said, hey, if we have a down year, here's what we'll do from an EBITDA perspective in terms of cost takeout, right? And you can see from the incremental margin perspective in '22 to '24, we exceeded our targets. The decremental margin, unfortunately, we're seeing that this year on a same-branch basis, but we're right in line with what we expected to be. And our M&A has come in right in line with what we expected.

So as we look forward, we want to take that $6.3 billion of revenue. And if we look out 5 years, 2030 and say, what is TopBuild going to look like? We think $9 billion to $10 billion is very achievable, right? I mean the market growth, who knows, right? We know it's very unpredictable, the things that will happen over a 5-year period. But to assume 2% volume growth, that's not too far off of what we've seen over the last 10 years. In fact, our organic growth, including price over the last 10 years has been 4%, which is what we're baking in here. We know if we do get that volume growth of 2%, materials will tighten up, pricing will be healthy. So we're assuming 1% price. And then you heard a lot today about a lot of the things we're doing strategically, whether it be with our CRM tool, whether it be with e-commerce, whether it's the organic initiatives, our vertical strategy in the mechanical business, there's a lot of things we think we can do to outgrow the market. So you put those 3 together, we're looking at about 4% organic growth on a compounded annual basis over the next 5 years. And then from an M&A perspective, 4% to 6%, we feel like it's a nice conservative number to put out there. If you looked at the last 10 years, it's closer to 10%. Obviously, as we get bigger, the numbers get bigger as well. But we would say that's basically bolt-on acquisitions we're going to do in our core and in the roofing space as well. We know there are some larger deals in the roofing space. And if those come along, we'll be interested. And you'll see in a minute, we'll have the cash flow to do it, but that's certainly not assumed in this right now.

So you put all that together, we're looking at an 8% to 10% compounded annual growth rate over the 5 years. If we hit those sales, the EBITDA margin assumptions similar to what we've had in the past, that will land our EBITDA $1.7 billion to $2 billion. We hit those numbers. Our cumulative cash flow, again, our strong free cash flow model, we'll generate $4.2 billion to $5 billion of free cash flow over that 5-year period. To support the M&A, I talked about on the previous page, it will use a little less than $2 billion. So that will leave well over $2 billion for either returning to shareholders or doing some of the larger acquisition opportunities or doing additional bolt-ons, but significant free cash flow over the period of time. And then we plan to maintain or increase our return on invested capital at 14% over that time.

The other assumptions you can see there, working capital, 15% to 17%, slightly higher than our historical guidance with SPI and Progressive coming in, a little higher working capital businesses, certainly something we're going to work towards trying to improve, but we think that's a safe assumption right there. CapEx remaining at the 1% to 2% we've talked about historically, and then taxes at 26%.

So finally, just to simplify my key messages, we've got a great track record. But from our opinion, we're just getting started. Our business model is uniquely advantaged and cannot easily be replicated. Our M&A processes are disciplined and proven to drive great returns. And now with more resilient free cash flow and a larger TAM, we've got a high level of confidence in delivering the results I just talked about.

So now I'll turn it over to Robert for some closing remarks.

Okay. Thank you, Rob. So number one, I think great job by the team walking through things. I see the quicker the walking through things. I think what you can hear today is a great confidence in our ability to continue to outperform in the future and what we've built. And I really do believe that we've positioned the company by making deliberate and strategic decisions here for the future. And what we've developed is this opportunity to continue to driving best-in-class compounding returns for our shareholders.

What's that built upon? Look, we have the team and the talent. You've heard us talk all day about the people business, the proven track record, building upon that around execution. we focus on execution, we're about execution. I think what I like about the look back Rob did is we control what we can control. And that's what we're really good at executing in that playbook and that continued operation of that playbook as well. And we've got the competencies required to drive this outperformance and really make the most of this opportunity that we developed with the expanded total addressable market. And we believe absolutely the ability to outperform and deliver for our shareholders. And we think it's a great place for investment dollars as in TopBuild for what we're going to continue to do in this model for the future. And the best is yet to come.

So I'm sure you walk away with that same confidence. We're going to take a little time here for some Q&A. It's cold here, so we're going to move from Q&A to really a fireside chat. Fireside chat here. John is going to come up and join us. We obviously have this have the lunch time as well that we'll take some questions. But I think we just want to see if there's any general questions for the overall business and glad to answer any.

Again, we've got 2 traveling mics. So when you're -- when Robert calls on you, please state your first and last name and your firm for the webcast. Thank you.

Take any of them.

Keith Hughes, Truist. I guess 2 questions, Rob, on that planning period, are you expecting expansionary residential and nonresidential in that 2% unit growth? Or how are you thinking about those years economically?

Yes. I mean we're not breaking it down between residential and commercial, but I think to assume 2% over the longer period of time. Now it doesn't mean -- I should have said this during the presentation. It doesn't mean every year, we're assuming 2%, right? It doesn't mean every year is going to turn out that way, but because we know that the end markets can be unpredictable. But we definitely feel like over a 5-year period, 2% volumes is a reasonable assumption.

And could you talk about the 1% price gain per year if you think about the different products? That seems a little light to, quite honestly. But if you could just talk about how you break those apart.

Yes. I mean we know on the fiberglass insulation side, right, like capacity, even today, blowing wool is a little bit tight. Some of that's supply side driven for sure. We know there's some capacity announced that will be coming on. But if we get this volume growth, we know the suppliers are going to maintain a tight market. And when fiberglass is tight, pricing tends to be healthy, right? So I'm with you. I hope that's conservative as well.

On the mechanical side, this year is a great example where we had some price increases across some of the key products to start the year, and our teams did a great job of realizing that price as well. So I'm with you. I hope that's a conservative assumption, but we'd be happy to outdo it.

Ken Zener, Seaport. Congratulations on 10 years. Your market cap is your spin-out company's market cap. So TopBuild's margin rise and stability, I think, has been a big story this year as well as over the last 10 years. A lot of it on the residential side, I think you guys initially projected, it came from your purchasing power. But at this point, I think that really overshadows your business systems, which drove the stability and your ability to handle the degrading margins.

So my question really to roofing is this. Given that roofing is largely going to be a roll-up story similar to what insulation was, what gives you confidence that Progressive's business processes are replicable and sustainable given that it's a new category?

Two, can you give us reference the 19% EBIT you have for Progressive? What is kind of like the industry, if you will, just so you can benchmark that for us a little bit?

And then three, you can take pieces of these. The buckets of superior performance, labor; material; which we're conditioned to on the res side; and then bidding, obviously, a big part of it. That's it.

Okay. I'm going to try to cover all those, Ken, but you gave me quite the list. If I think about -- I think it's a great question that you're asking because if you said -- maybe said differently, hey, Robert, what's underappreciated about the story here at TopBuild? I think one of the main things underappreciated is the operational excellence piece. And so we can buy a 10%, someone talk insulation, then I'll move and talk roofing. We can buy a 10% company, and everybody knows, obviously, we get great synergies. We have great buying power. So we'll increase that EBITDA in that business pretty quickly to 15%, 16% or something. But it's the operational excellence of improving these businesses, whether it be from -- you've heard about technology, you've heard about underperformers, you've heard about how we get in and work the labor side of it, how we work the productivity side of the sales productivity side. The operational excellence piece is what really helps drive those margin and drive that performance.

I mean I love your question earlier, Stephen, about how we did that in the past and what we're doing now. There are definitely plenty of room in the gas in the tank to continue to drive those improvements. And so I think as we've looked at -- as we looked and understood the commercial roofing, it was super important to us, the first company that we purchased or partnered with mainly as to what we could build because we do feel very strongly we can replicate this in the commercial roofing space, what we did in insulation. But you had to start with this playbook, which is what we've had in insulation, we've been able to replicate over and over, but also this belief in this operational excellence of how you can take a company and you get supply chain synergies quickly, but then over a pretty definitive time frame, i.e., a year, 18 months, now you can drive operational improvements that whenever you hear Nick and David talk about the jobs that you look at, how do you bid those jobs? How do you look at labor hours or mandates, if you will? How do you constantly look at how that job is performing on a daily basis from a job costing perspective? That's operational excellence. And so that's why we have the confidence as to what we can do here with commercial roofing, similar to what we've done in insulation, but it has to start with that right basis of the playbook and then how you stack operational excellence upon that.

I think your third question was around what we've seen. We've seen a variety of margins in commercial roofing. Whenever I said that Progressive is best-in-class, it is, we've seen everything from mid-single digits to mid-teens in that range. That's what we like about it because we know at the right multiple, we can buy these businesses. You put the synergies on top of it. Somebody asked earlier about what we'll do in our distribution footprint with commercial roofing. There's going to be some great synergies there. We already see it. We have great line of sight for the future. But you put that on top of -- you put those synergies on top of now the ability to improve operationally, that's why we love the fact that you'll see these companies that are 8, 9, 10, 12 and then we'll be able to get them to those high teens, 20% type of number from a margin perspective. So it's about the playbook, our confidence of what we can deliver here really built upon the operational excellence piece of it.

Mike Dahl from RBC Capital Markets. I want to stick with commercial roofing. And it seems very obvious that the playbook operationally is repeatable. It seems like the top of the funnel, which I think Nick described as part of the secret sauce is unique in terms of selection of jobs and focusing on the most technical, the most complex. So when you think about the addressable market and then also the M&A opportunity, how do you kind of distill that down to, well, this is actually kind of the market within that $75 billion, this is really what we can go after hard? Or from an M&A standpoint, is it we can take any business and train them to do that? Just help us understand that a little more.

I think there's definitely -- so if you look at that $75 billion, 30% of that -- 25% to 30% of that $75 billion is new construction. So you hear Nick talk about, hey, the jobs that you target, you're targeting certain jobs in that new construction space, 70% to 75% of this repair and maintenance reroof piece of it as well. And so I think he mentioned it, but you're getting a whole lot better -- some better margin performance in that reroof and that maintenance activity. So we definitely, in the 75% of that pie, see a lot of opportunity. Then you are selective in the new construction jobs that you go after. But our thought is, and again, choosing the right partner to start with and where we can go. And I think it is key around how they talk about David and Nick talk about the talent development piece, this repeatable process is we can train. And I think looking at some of the companies they've acquired, some of the things we believe that are on the horizon of the business, it is really now taking that playbook and the operational excellence and really instilling that into some -- into new acquisitions for the future. So I think if you look at the $75 billion TAM in commercial roofing, we think, by far, a lot of that is addressable that we can go after, and it's going to be built upon some of these competencies that we have and that are proven.

Two somewhat unrelated questions. I think earlier in the discussion of Progressive M&A, there was a comment about a lot of saying no. Help me understand the situations that you're walking away from and why might it be harder than it seems at first glance to consummate deals in Roofing.

Yes. So working with the team there and Justin or someone can feel free to speak up here. I think it's discipline. So as we've gotten involved with them, we've seen some businesses that are maybe 2% or 3% businesses. And maybe if you look at their backlogs, that type of thing, maybe look at some of the succession in the business as well. I think it's been a discipline that Progressive has brought along. You've heard us talk about disciplined capital allocation priorities. I think it's been more of a discipline of some of the businesses that they've seen in the past. Justin, I get that right?

No, you're spot on. And as you know, you spearheaded this, being a fiduciary to the return on investment capital is the main criteria. As Robert alluded to some of that EBITDA margin profiles right away, right? We're saying no to anything below that 10% threshold. That's just one component outside of culture, outside of people, outside of alignment of vertical markets. There's just a lot out there to make sure as Robert and Rob have illustrated to us, it can't be a distraction. We got to keep the pace of play of the business.

And just to be clear, I mean, on our insulation business, we say no to a lot of deals as well, right? I mean there's sometimes labor issues, cultural issues, things we don't want to get into in terms of the messiness or liabilities we see. So we like the fact that they're coming in with being disciplined with what they do.

So you basically don't want a fixer upper, you want a good business you can improve on?

That's right. I mean it needs to be appropriate. We're all about adding best practices to businesses. We're all about this operational excellence. But Justin said it right. If you're going to come in, it's going to be a distraction, and we don't feel like that in the near term, there's plenty of other opportunities out there, and we're going to put our energy towards those opportunities are going to be the best for our shareholders.

Okay. And then one more, just on the outgrowth assumption of 100 basis points, have you guys been able to track that historically? And how have you performed on the outgrowth over whatever historical time frame might be relevant?

Yes. I mean it's -- on the residential side, I think when it comes to single-family results, our results you can track with kind of lagged single-family starts from a volume perspective. And that gives you some idea of where the market is at. You got to kind of break that down by region to really take a look at it.

Price is another area. I think we've definitely, over the -- but again, it's hard to say what the market -- exactly what the market price did. We know what we took and what we push. But I think we've definitely done better than most in terms of overachieving on price. So to answer your question, I mean -- and then in commercial and industrial, it's a little more difficult. Obviously, there's a lot of data out there from Dodge and other folks, but hard to really tie it back exactly to what did the insulation market do. But we definitely feel like with the tools we're putting in place, some of the things we're working on strategically, that's very achievable.

Charles Berumpicher from Goldman Sachs. I just want to go back to Rob, your growth you pointed out. And if you think about the insulation business as a whole, how do you think about the trade-off between volume and price. Considering the businesses are going to probably going to expand over time, you're going to get incremental purchasing power with some of your suppliers, how do you navigate that dynamic based on different market conditions ahead?

I'm sorry, you started that with...

The volume dynamics versus price, how do you approach that equation between...

In the insulation?

Yes.

I mean I think nothing is changing in our strategy there, right? Like I think what's unique that not everybody always appreciates in our business is the negotiations with our customers, whether it's a national builder or a small regional builder, it's local decisions that are being made by those folks. And so we got to give some leeway to our folks in terms of negotiating. And so that's power we give to our branch managers to make that volume price decision.

Now like I said before, we don't just open it up and say, go do what you want, right? We've got guardrails around pricing. Our incentive systems for our branch manager based on you make a higher percentage of your profitability if you have a higher profit margin, and so they're driven towards driving price. But that's how we go about that, and I don't see that changing going forward.

I'll just add to that. So I mean, we would give the branch a bit of what their appetite should be, and then we'll guide within that. But there -- it's up to them to determine what is their mix, whether it's different product lines, customer mix, so they get that makeup of what a P&L would look like for that branch that they're incentivized based off of that.

Mike Rehaut, JPMorgan. On your margin targets, I think it's, in effect, you're kind of saying flat to up 100 bps over the next few years, the 19% to 20% range. You've also, at the same time, over the last few years, demonstrated an incremental EBITDA margin well above your target to your credit. And we've talked over conference calls about your special ops teams, your bottom quartile focus. So looking forward, obviously, you guys want to continue to put out achievable targets, conservative targets. But is there any reason to, let's say, not expect the ability at points to outperform that 22% to 27% range? And in particular, I'd love for you to kind of go into maybe the drivers of what allowed you to exceed that target over the past few years? And if that's changing at all or how you see those drivers, again, the special ops, the productivity, the bottom quartile focus, has any of that changed that would limit your ability to exceed that goal going forward?

Yes. No, you've asked us that question a lot of times, right? We've gotten that a lot. 22% to 27%, I think it's a number we're not going to apologize for hitting, right? Like I think 22% to 27% for our business is a really strong number. We are going to look to do better than that like we have in the past. Now in some of the years in the past, and we pointed out, like when you get a really small sales incremental, that percentage can be really big. It's just the way the math works, right? So you got to balance that in the equation.

But to your question around our strategy, nothing is going to change around our strategy, right? The things that have driven that have been our ability to manage price cost strategically across our markets. And like I just answered Charles' question, we're not changing how we manage price and cost. The operational excellence piece has been a huge piece of how we do that. You heard a lot about that today from the team in terms of what we're doing, focusing on the bottom quartile. We're going to continue to do that and continue to look for that. And then we continue to leverage our fixed costs. So if we are in a growth market, things like Madeleine talked about today that we're doing in the back office to -- I mean it may sound kind of boring to folks to talk about automating things in accounts payable, but that's going to allow us to continue to support this business as it grows to $10 billion with the 30 people we have paying the bills today, which -- 30 people for 450 branches, that's already a pretty good number, especially if you think about if we didn't have the common ERP system, you'd have a payables person at every single one of those branches. So we're going to continue to do those things, and we're going to try to do better than that 22% to 27%, but we feel like for modeling purposes, that's the best number to use.

We definitely get that question a lot, to your point. And so I think as we look back here, so let's talk about today, right? If you ask John or Jeff or others today, like one of the key things that we're working on sales productivity. You heard one of the takeaways on one of the slide was bid more, win more. So a lot of work around the sales productivity. How do we get the sales force more productive, right? We've talked about, I think Joe used the example, 10 minutes per day over 7,500 installers is significant while that can drop down. So we -- some people ask me sometimes, is there more opportunity here in the model? There's absolutely more opportunity in the model because little incremental changes here, little incremental improvements can have a very significant impact from an EBITDA perspective and stuff. So we've just done a nice job of continuing to work those. And as we do acquisitions, which this idea of looking across our footprint and looking at where is our drop-off points with customers, where is product coming from with the suppliers, what's our overlap of branches that -- a lot of people wonder this year, how we've been able to sustain margins. It's that constant work. Jeff talked about yields on spray foam. We've talked publicly about spray foam has been a market that's been challenging, but we've maintained margins because we worked really hard on yields this year on the spray foam side of the business. So there's always things for us to work here. We try to select a select few of high impact to really drive the improvement. So sorry, I know somebody was over here.

Adam Baumgarten, Vertical Research Partners. Just on the install side, maybe outside of insulation, maybe how much you're leaning into some of those ancillary products in a pretty weak market backdrop and how you can maybe lean into that more to sort of offset some of the underlying demand weakness in single-family?

Yes, sure. So I mean, every business owner, every branch manager can choose what products, what adjacencies they want to get into. We give them the guidance. We give them the training that they would need to make that effective and efficient. But we have multiple products that we're looking at or deploying throughout the network that's allowing them to outperform if the market was softening in their area.

Got it. And then just one other. In the past, you've given a kind of dollar amount for every 50,000 starts on the residential side. Any update there and how that's evolved over the last few years?

Yes. That's not something we updated. We just felt, given the mix of our business now and being so much more commercial, people tend to look at us as a pure resi play, and we wanted to kind of take away that metric as a result of that. So yes, no update to that.

Phil Ng from Jefferies. We understand the pricing power in your legacy residential insulation business, especially when we have an up cycle. But now that your commercial industrial business is much bigger, 50%, help us appreciate through a cycle, is there as much torque on price? Or is it more steady?

And I guess a question for John. You talked at length in terms of operational excellence and looking at the top and bottom branch. Is there that opportunity on your commercial industrial distribution business as well as commercial roofing?

I'll take the first part on the pricing. So I'd say more stable on the commercial industrial side, but we have seen -- as you've seen in our results, there has been some nice margin progression in the business there. Obviously, we've got some great scale in the business now with SPI being part of that. If you think about the major players there would be Owens Corning, Koff, other Johns Manville, obviously, the big player there. We're doing business with all of them. So I think stable from a market perspective, but I think the team has done a nice job of our leverage, but also relative to margin opportunities. John, you want to...

Yes, Phil, I'd follow up. It's not just adding a different product, right? So those branches that may be heavier residential, single multifamily, they can shift with those -- that same product line that they offer and now go after a bit more commercial or even retrofit, right? That's something else that we can use to offset in this market.

Collin Verron, Deutsche Bank. You're targeting the mid-single-digit revenue CAGR for M&A. Can you just talk about what the M&A is going to look like from an end market and product mix perspective? And what BLD, as a whole, might look like in 2030 if you hit that $9 billion to $10 billion in sales?

Yes. I mean there's not any specific end market mix we're targeting, right? As we look at the pipeline of deals that Joey and team are bringing to us, and we've got healthy pipeline across all the businesses. We're prioritizing in terms of what gives us the highest return on capital. And so whether that's a residential installer, whether that's something in the mechanical distribution space, the residential distribution space or in commercial roofing, we're going to prioritize based on returns.

Now if you just you look at the white space that's out there, right, the reality is there's more white space in commercial. And so that's why I kind of alluded to on those revenue side, you could certainly put together a scenario where in 5 years, potentially our mix is more commercial than residential. And as a result, we'll probably have even more noncyclical revenue streams. But we'll have to see how the M&A pipeline plays out, right? Like we don't control who comes for sale. We're going to stay disciplined in our process, and we're going to prioritize based on returns.

Maybe 2 things. N umber one, there's not a lack of targets out there and stuff. So that's the exciting point.

I think we probably have time for one more question. We don't want the corn dogs to get cold for lunch.

Aatish Shah, Evercore. Just want to go back to the commercial roofing space. You talked about kind of the best practices and kind of staying disciplined. But what do you see as kind of the challenges in consolidating that space going forward?

Justin, you got an opinion on that? I've got my opinion, but challenges of consolidating or some of the M&A challenges in the commercial roofing space.

It's a good question, seeing how much opportunity there is there. But some of the main components, just again, that focus on return on investment capital, we're coming across a lot of targets where these are lifestyle businesses for families. Multigenerational roofing families exist and are prevalent within that. That's just one component of it. Progressive roofing itself is in its fourth generation. And so finding businesses that have made that transition, the value proposition is a little more unique with a younger age group and trying to strategize behind that. But the big megatrend that's kind of our tailwind is that by 2030, the youngest baby boomer will be 65. And so riding on that tailwind right now is amazing, and it's been pretty opportunistic for us in the pipeline.

So I think it's going to be -- you're finding companies out there that are certain time in their life cycle relative to their development and stuff. So I think Justin is right. Some of the ones that we've looked at, we just looked at one here in the city over the weekend that the team had dinner with. It's a great opportunity. He is -- the owner is, call it, late 30s. Is he ready for that next move from that perspective? So I mean we have got a robust number of targets that we're talking to. It's just kind of where they are relative to their time of selling the business and stuff.

Okay. PI, you want to talk about the lunch plan?

Sure. That is going to end our webcast for today. So we appreciate the folks joining us online.

Greetings, and welcome to TopBuild's Third Quarter 2025 Earnings Conference Call. [Operator Instructions]. As a reminder, this conference is being recorded.

It is now my pleasure to introduce P.I. Aquino, Vice President, Investor Relations. Please go ahead.

Good morning, and thanks joining us. With me today are Robert Buck, our President and CEO; and Rob Koon, our CFO. Our earnings release, senior management's formal remarks and the deck summarizing our comments can be found on our website at topbuild.com. Many of our remarks today will include forward-looking statements, which are subject to known and unknown risks and uncertainties and 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 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 our website.

Let me now turn the call over to our President and CEO, Robert Buck.

Good morning. Thank you for joining us today for our third quarter earnings call. With more than 3 quarters of the year behind us, we are proud of what our teams have accomplished thus far in 2025. Let me start by giving you an update on where we are with our acquisitions.

In the third quarter, we acquired Progressive Roofing, with roughly $440 million in annual sales, we've established an exciting new platform for growth in commercial roofing, which has a large and very fragmented $75 billion TAM. In the first 100 days following the acquisition, we continue to learn great things about the business and are finding a strategy to build on the platform.

We've established a great connection points across the Progressive Roofing organization, and our teams are doing a great job coming together and executing for the future. In October, we closed the SPI transaction. With this strategic deal, we're bringing together 2 leaders in the mechanical insulation and custom fabrication to better serve our commercial industrial customers across diverse vertical markets. The transaction extended our geographic footprint and expanded our capabilities.

Our teams are already hard at work as we leverage our M&A integration expertise to get SPI onto our technology platform and drive synergies. We -- we expect to deliver $35 million to $40 million in annual run rate synergies over the next 2 years, and we're excited to have the SPI team on board. We also announced yesterday several additional acquisitions. We closed insulation fabrics, Diamond door products and performance insulation fabricators over the last few weeks and will soon close on our fourth acquisition, L&L Insulation. Together, these acquisitions add just over $50 million in annual revenue.

Diamond or products is a very attractive complement to our specialty distribution business. Diamond or fabricate and assembles insulated steel door systems, which gives us the opportunity to provide metal building and installation customers with a value-added bundle of products that customers have requested. Insulation fabrics and performance insulation fabricators expand our distribution offerings of installation accessories and mechanical insulation, while L&L installation grows our residential installation business in Colorado.

Our M&A team is doing a great job. We continue to have a very attractive pipeline of acquisition candidates and there's no shortage of opportunities to consider.

Let me transition to discuss our results in the quarter. Results were in line with expectations and similar to the prior quarter. Our performance was solid even as the macro environment remains uncertain. We posted total sales growth in the quarter of 1.4% to $1.4 billion. Although the residential new construction market continues to be weak, it was partially offset by ongoing growth in heavy commercial and industrial.

We're also benefiting from the contribution of our commercial roofing acquisition. Fundamentally, housing in the U.S. is still under built and our long-term opportunities intact. Near term, the downward movement of interest rates is encouraging. However, mixed economic signals and affordability concerns linger, impacting consumer confidence and home buying decisions.

Profitability in the third quarter was again solid and we reported an adjusted EBITDA margin of 19.8% and as we continue our focus on operational excellence across the business and supply chain.

Turning to capital allocation. Our priorities have not changed. We continue to believe we can drive the greatest shareholder returns through M&A. We're also -- we're always evaluating opportunities, and we remain disciplined around valuation. In the third quarter, we repurchased nearly 178,000 shares, returning $65.5 million in capital to shareholders. As you know, we plan to host an Investor Day in New York on December 9.

So before I turn it over to Rob, let me give you a bit of a preview of the day, so you have an idea of what to expect. TopBuild has a differentiated business model and a clear profitable growth strategy. which drives compounded returns. Our strong track record of value creation would not be possible without our great team of leaders, many of whom you'll meet including some folks from our recent acquisitions. You've heard us talk a lot about being a people business. One of our core strengths is our culture and our ability to attract and retain great talent, both of which we'll cover in more detail.

This year, we've expanded our total addressable market to approximately $90 billion, so we'll spend some time discussing our strategy for continued growth in this space, both organically and through M&A. We have the advantage of having a single technology platform that enables us to drive operational excellence and efficiencies. As we look ahead, we'll share more on our digital road map to support continued operational excellence and solutions that improve the customer experience.

Finally, we'll share our thoughts on TopBuild's long-term financial outlook. We encourage you to join us in person. If you don't already have the details, I would like to attend, please reach out to PI.

With that, let me close by thanking our teams as we continue our focus on safety, driving profitable growth and operational excellence. I also want to welcome our most recent acquisitions to our team. We look forward to working together and are delighted to have you join the TopBuild family.

Rob?

Thanks, Robert. Let me start by thanking our teams for continuing to drive solid results. Despite some challenging macro headwinds, our business continues to generate healthy margins and strong free cash flows proving the strength and resiliency of our model.

Turning to the third quarter results. Our performance was in line with our expectations. Total sales grew 1.4% to $1.4 billion, driven by M&A of 7.9% and pricing of 0.3%, which were partially offset by a 6.7% decline in volume. Sales in our Installation Services segment totaled $858.3 million, up 0.2% as M&A added 11%, which was offset by a decline of 10.4% in volume and a 0.5% pricing decrease.

As a reminder, our Installation Services segment includes Progressive Roofing, and they drove the majority of the $95 million of M&A revenue for the segment in the quarter. During the third quarter, the demand for our legacy insulation installation services remain challenged in both residential and light commercial markets, but was in line with our expectations.

Specialty Distribution sales grew 1.4% to $608.9 million in the third quarter. Our sixth consecutive quarter of year-over-year sales growth in Specialty Distribution was driven by acquisitions of 2.3% and and pricing of 1.2%, which were partially offset by a 2.1% volume decline.

During the third quarter, specialty distribution volumes and pricing remained challenged in residential products, but continued to be strong for commercial products, especially mechanical insulation. Adjusted gross profit in the third quarter was 30.1%, which compares to 30.7% last year.

Adjusted SG&A as a percentage of sales in the third quarter was 13.6% versus 12.8% last year. The increase in SG&A percentage was primarily driven by incremental amortization from acquisitions. On a same branch basis, excluding acquisitions, SG&A was 13.1% in the third quarter.

Third quarter adjusted EBITDA for TopBuild totaled $275.6 million, and adjusted EBITDA margin was 19.8%, down 100 basis points versus the third quarter of last year. Our margins continue to be very resilient, primarily due to actions we took earlier this year and supply chain improvements. These cost savings are helping to offset price pressure on residential insulation products.

Installation Services adjusted EBITDA margin was 22.5%, an improvement of 20 basis points versus the third quarter of last year. Specialty Distribution adjusted margin of 16.9% was down 150 basis points versus the third quarter of 2024. Other expense for the quarter was $24.5 million compared to $16.1 million last year. The increase is due to higher interest expense resulting from the increased borrowing on our upsized credit facility that occurred in May of this year.

Third quarter adjusted earnings per diluted share was $5.36 and compares to $5.68 last year.

Turning to the balance sheet and cash flows. We ended the third quarter with total liquidity of $2.1 billion, of which $1.1 billion was cash and $933.4 million was available under our revolver. Total debt at the end of the quarter was $2.9 billion, $1.5 billion higher than last year due to the refinancing and expansion of our credit facility and $750 million in senior notes issued in September.

Third quarter net debt was $1.7 billion, and our net debt leverage ratio was 1.6x trailing 12 months pro forma adjusted EBITDA. Our TTM free cash flow as of Q3 was $791.2 million, up 13.4% versus last year primarily due to working capital. Working capital as a percentage of sales totaled 14.2%, which compares to 14.1% last year.

We've been talking about our active M&A pipeline, and we are very excited to announce some results on that front as we closed the SPI transaction in October. And as you saw in our press release yesterday, we have signed and/or closed for additional deals across our businesses.

M&A remains our top capital allocation priority. Assuming we owned SPI and the 4 most recent acquisitions for the last 12 months, our pro forma net debt leverage would have been 2.4x. In the third quarter, we also repurchased shares totaling $65.5 million, which brings our year-to-date total to $417.1 million or more than 1.3 million shares. $770.9 million remains under the current authorization.

As you saw in our release, we are updating our guidance today to incorporate the impact of our recent acquisitions. In the release and presentation, we formatted our guidance table to make your modeling more straightforward. We expect full year sales to be between $5.35 billion to $5.45 billion, with the following assumptions at the midpoint.

On a same branch basis, including price, we continue to expect residential sales will be down low double digits for the year, driven by continued weakness in both single-family and multifamily. Commercial and industrial same-branch sales are expected to be flattish. We expect heavy commercial projects to remain strong, while light commercial will continue to be challenged.

The full year impact of M&A on sales is expected to be approximately $450 million. We are raising our adjusted EBITDA guidance for the year to be between $1.01 billion to $1.06 billion, which represents adjusted EBITDA margin of 19.2% at the midpoint. Depreciation and amortization are expected to be in the range of $166 million to $171 million and interest expense and other will be between $88 million to $91 million for the year. We continue to expect our tax rate to be approximately 26%.

In closing, I would like to welcome the employees from our recent acquisitions to the TopBuild family. These recent acquisitions have strengthened our legacy installation and distribution businesses, they've made our revenue streams less cyclical, and they have broadened our opportunities for growth. We are looking forward to sharing our excitement about the future at our Investor Day in New York next month.

Let me now turn it back over to Robert.

Thanks, Rob. The underlying fundamentals for our business are solid, and we have a uniquely positioned diversified business model across the residential, commercial and industrial construction end markets.

Our leadership has a great control over our business, as demonstrated by our ability to navigate successfully in a challenging environment. And as always, we're focused on driving profitable growth and increased shareholder value. We look forward to seeing you at our Investor Day on Tuesday, December 9.

With that, operator, let's open up the line for questions.

[Operator Instructions]. Our first question is from Stephen Kim with Evercore ISI.

This is Aatish for Steve. I just wanted to touch on Progressive. Can you talk about the sales contribution for Progressive in the quarter? And are you still on track for the -- I think the incremental $215 million for the full year. If you can touch on that, that would be helpful.

Yes, Aatish, this is Rob. So their total contribution in the quarter was about $92 million of sales. For the quarter, they're probably closer to about a 205 number now than the $215 million we had previously. There's been a handful of projects pushed out a big data center in Iowa, some school funding in Arizona that was a little bit slower than originally anticipated. I'd say despite that, we're still looking at the back half of the year up low single digits for them. So nothing that we're concerned about at this point.

Great. Yes, it's Steve Kim. I appreciate that. You also announced these 4 acquisitions yesterday. And One of them was a manufacturer, and it seemed like that was sort of an interesting move on your part. So I was curious and frankly, also the fabric distributor was also interesting. Can you just provide a little bit more color on those and why those were something that was particularly intriguing for you? for example, like the fabric, the distribution, why not just add the bags netting and suit to your existing facilities? I assume there's something the value-add they bring, and that would be helpful to understand.

And then the doors, the insulated doors, is this -- is your intent to move deeper into manufacturing of specialty products like that? Those are the sort of the questions I had around those acquisitions.

Steve, Robert. So let's start with Diamond Doors. Not a manufacturer, they just do assembly and some fabrication i.e. assembling those doors, I would definitely not call it manufacturing. And it's really just a bundle that goes with the metal building industry and the metal building products and where our customers have been asking for it is doors would typically get delivered at the beginning of the project. You would have damage to doors, that type of stuff they were sitting on job sites.

And so given our relationships now we're able to bundle it with the installation that both get installed at the same time, these door systems. So it's a great adjacency then put our sales force on top of what we think is going to drive some great cross-selling opportunities. So we got it right down the fairway from that perspective. Insulation fabric, from that perspective is some of the products that we sold, some new products, but it's all really installation accessories. They have a great reputation in the industry as well as some great customer relationships as well. So it was really a good add-on there given some of the talent, relationships and it just adds to the insulation accessories. So we would consider that right down the fairway from a distribution perspective.

Okay. So were you already selling those nettings and suits in your existing priorities...

Some of those products like the suits and the netting we were already in some of those products as well. Yes, absolutely.

Our next question is Michael Rehaut with JPMorgan.

Great. First question, wanted to zero in, and apologies have I missed this in your prepared remarks, but quarter ago, you kind of baked in some price cost headwind into the back half of the year based on the potential for maybe pricing on the margin to weaken insulation pricing that is wanted to know in your current guidance, if that headwind is still baked in. I believe it was a $30 million headwind. And more broadly, how insulation pricing has trended during 3Q?

Yes, Michael, this is Rob. So that is still baked into our guidance, about $30 million for the full year. We got impacted by roughly $12 million, I'd say, in the third quarter, more heavily on the distribution side of the business than on the installation side of the business.

Now you do see pricing on installation. We did have negative price there. So we're kind of seeing the product mix play out between the 2 segments. So when you look at the installation segment, where we're having price pressure is on residential products, fiberglass and spray foam, to much larger percentage of our revenue on the installation side of the business.

Now we're doing a good job of maintaining margins there and working back with our supply chain partners and taking costs out where we can.

On the distribution side, I'd say those pressures in residential products are even stronger and having more margin impact, but it's a much smaller percentage of the product mix on that side of the business because of all the commercial products.

And then the other thing you got going on that's driving pricing actually positive on the distribution side is that we've got gutters and mechanical insulation, which make up a larger percentage of the product mix on that side that have positive pricing going on this year, and that's helping to drive that number up to the 1.2% you saw in the quarter.

Great. That's very helpful, Rob. I appreciate all the detail there. Maybe secondly, you reiterated, I believe, your end market assumption for the year for residential to be down low double digits, commercial and industrial flattish. If we kind of took the trend line where it is today, the level of activity kind of more interested in residential, but if you have any comments on commercial industrial as well. I'm trying to think about the first half of '26 and recognizing guidance is a little premature.

But -- if we think about the fact that just mathematically, if residential kind of did have softness that progressed throughout 2025, would this still point to some level of year-over-year decline in the first half of '26 year-over-year. Just trying to understand the trajectory of '25 and how it might impact at least 1H '26?

Yes, Michael, this is Rob. So I'd say what we're seeing out there right now is single family was weak throughout most of the country, there are some pockets of strength in the Midwest and Northeast. But for the most part, weak across the country, it definitely got a little bit worse in Q3, I'd say, as we anticipated than it was the first half of the year. Our projections would say Q4 is probably a little softer as well.

So to answer your question, if you roll that into next year, I think you're looking at probably flat to potentially slightly down first half of the year on single family. The other side of the equation, multifamily sales remain weak there. The little bit of bright side we see there is we are seeing some backlog starting to improve in certain markets. across this country. So there could be some potential upside on the multifamily next year.

Yes, Michael. I'll add on to that. So Rob, right, on the single family a little sluggish, and we'll see how that bears out to start the year. But he's is right. Multifamily backlogs betting is building there. I'd say fairly consistently if you look across the regions. And I think what this shows too is if you look at the quarter here, the plan around commercial industrial is -- I mean, the backlogs that are building there, even as we're seeing continued momentum whether it be mechanical as we look at backlogs and roofing and stuff as well, we think that's the positive as we look at what we've done in the mix of the business here as well.

Our next question is from Susan Maklari with Goldman Sachs.

My first question is on the margin. It's really nice to see how, especially in installation the operating margin is held up in there. Can you talk about your efforts to support that? And how we should be thinking about the path there for fourth quarter and anything looking out from that?

Yes, Susan, this is Rob. So yes, the profitability on the install side of the equation has been a strong suit all year long, I'd say, something we're really happy with. It really -- the biggest driver there, I'd say, is are the cost savings actions we took in the first quarter of this year that we've talked about in the past. So that's the consolidation of facilities. Some headcount reductions across back office and support functions as well as some direct labor to really align our cost structure with the current environment.

Like I mentioned earlier, there is some pressure on price there, but we've done a really good job of maintaining that's impact overall on our margins. So just really a terrific story this year in terms of the margin resiliency of the installation segment.

Yes. Okay. And then turning to Progressive. Given the weakness that we've seen on the new construction side, especially in some of the end markets there. Can you talk about what you're seeing on the reroofing side of that business? Is there any change in the competition and your ability to come up against that and continue to see the level of growth that you expect?

Yes. It's Robert. So I think we feel very confident and comfortable with what's going on roofing as we look at the mix of reroof and new construction as we look at our backlog, was being bid, was being one, even Q4 and definitely very strong for 2026. And margins are doing a nice job there given the mix of business as well. So highly confident. I'd say, some people ask us questions about, hey, you've owned the business here for, call it, 100 days or more.

What have you learned or what have you seen? And that is just that team and the backlog that they're building especially across Southwest into Texas where they're strong and stuff. It's been a bright spot, and we think a bright spot for the future. So highly confident in what's going on there and what we see in the fundamentals of the business.

Our next question is from Ken Zener with Seaport Research.

Robert, great investor summary. Save me a trip. All right. So Rob, the question about -- look, public builder inventory units are down 15% to 20%. I mean, you can pick a range in there, but call it mid-teens. To the extent that, that correction tied to demand what they consider too many spec homes, accelerating cycle time. You know the routine suggest they could have fewer inventory units. What gives you confidence that, that kind of bogey of mid-teens, which we're seeing broadly in at least if we had permit data, that would be useful, but you do have better data. It gives you confidence that the first half in res can be so benign.

And it kind of reminds me of the whole concerns around multifamilies we exited last year, but could you expand on that a little bit given your view the data you have on bids in the absence of government data. I really appreciate that.

Yes, I'd say -- I mean, we're not giving guidance for 2026 at this point. I mean just -- Yes. Yes. I mean I think just given what we're seeing, we're not anticipating the market to dramatically improve from here, right? But we will be comping pretty tough first and second quarter from last year. So that's really the thinking there around the comment to flattish. -- to slightly down. But obviously, there's a long way to go, most of what we'll be working on in the first and second quarter of next year hasn't even been started yet by the builders. So we obviously got to see what activity happens there, and that will really ultimately end up driving our sales.

And if I can ask you to expand on that then, given your substitution for the census data in many ways, -- we've seen builders really the margin pressure really coming out of places like Florida select parts of Texas. But are you seeing them really slamming on the brakes in those areas? And could you kind of contrast that with not public builder type business, I'm thinking above the smile, so to speak?

Yes, Ken, this is Robert. So yes, look, in some certain markets, you've definitely seen it slow and they're trying to work through that inventory to exactly what you just said. And April will be a nice example of that. In Austin, Texas would be a nice example of that. So that's definitely happened in some markets. But there's somewhere, I'd call it steady. We talked about the Midwest -- so if you look at some of those above user term the smile states there, there are some pockets of some positiveness there relative to, I call it, steady demand.

Even the Pacific Northwest isn't isn't a bad area to look at and we look at what we're seeing in book sales and stuff also. So definitely some where they've slowed given the inventory and some where we're seeing, I'd call it, given the current environment steadiness, if you will.

Our next question is from Bill with Jefferies.

Congrats on another strong quarter in a choppy environment. Robert, I guess it would be helpful to kind of give us a little more color in terms of backlogs and the pace of orders particularly in your C&I business. Any nuances between your legacy business versus some of the stuff you acquired, whether it's progressive, SPI. Are things accelerating? I'm asking just because obviously, the headlines data points on data center has been pretty encouraging. But -- is it more steady than inflecting? Are you starting to see light commercial bottom out here? Just a little more perspective on what you're seeing on the C&I side of things.

Yes. I think so kind of hit the gamut there. So C&I, we would call -- it's steady. We would say the backlogs are growing there. There's been some projects push out a little bit, no cancellations by no means there's even been some government projects slow down, although that's not a big percentage for us. But whenever we look at backlogs across mechanical, DI and SI those are growing for sure.

I think SPI, they're definitely bringing focus back to the business there now being part of top bills. That's we call that a big positive. And then someone asked the question previously, progressive. And as we look at commercial roofing, has been the real positive as we're past over 100 days here of owning Progressive, but those backlogs are building as well, both reroof maintenance as well as new bigger projects, i.e., data centers that you're talking about, some big projects that they've landed.

So very steady to, I'd call it, bright spot, and if we think about commercial and industrial. You mentioned light commercial, is that bottoming out -- we would hope so. It's definitely been a soft spot for shares that follows the residential trends. Our teams are trying to go after appropriate projects there across the footprint. So hopefully bottomed on that standpoint, and we're seeing some wins in the light commercial space.

Okay. I mean everything you're saying, guys, probably some level of growth next year for 26 on C&I. Is that a fair characterization?

I think we feel positive about C&I as we go into 2016, yes.

Okay. And then from a pricing standpoint, appreciating maybe the little choppier and your customers are dealing with affordability, but your commercial industrial business is 50% of the business at this point, post all the acquisitions you've announced this year.

How should we think about pricing in those categories just because like mechanical insulation, everything we're reading, it's on allocation, I think prices are going higher, certainly don't have as great as a feel for commercial roofing. But internal perspective on pricing momentum and, I guess, at this point, half of your business?

Yes, Phil, this is Rob. So -- you hit the nail on the head there, right price has definitely held up a lot better on the commercial industrial side this year. On the mechanical side of things, we had some cost increases that came through in the first quarter. and our teams have done a great job passing those along and recognizing price increases there.

From what we're seeing on the commercial roofing side, pricing is holding up well there. So definitely, the stronger demand environment on the commercial industrial side is definitely helping to support the pricing environment there.

Okay. Appreciate great color, guys.

Our next question is from Jeffrey Stevenson with Loop Capital Markets.

Yes, I was hoping to dive deeper into the variance between residential installation and distribution pricing. And I wondered if the better relative installation pricing is driven by builders reliance on TopBuild National and high-quality service levels compared with independent competitors.

And then in distribution, our channel inventories currently at elevated levels, leading to increased competitive dynamics?

Yes. It's Robert. So I'll hit the first part of that. Rob may add in as well. So yes, I mean, on the install side of the business, I mean, there's there's definitely pressure on the fiberglass side. But to Rob's point earlier, the team has done a great job there of weighing that price volume discussion market by market, given what's happened and the uniqueness in each market. But it is a bundled solution, right? Labor and material and our teams are known for great service, so -- and have really strong relationships with those builders in their local markets. So -- that has definitely helped although some headwind, but has helped those margins hold up.

On distribution side, look, the material is definitely readily available right now. And so that obviously creates the supply and demand environment -- and we've seen more pressure there, specifically, as Rob called out fiberglass and spray foam. So it's really supply and demand there that's created some more competitive dynamics, but again, you can look at the overall margins, the team continues to do a nice job, but it's the balance there as well, but more pressure distribution on that residential side of the equation.

Great. And then I appreciate all the updates on the integration of Progressive Roofing, but just wondered on the roofing M&A pipeline and now that you've had that business for several months now, how has the pipeline evolved given the fragmented nature of that market? And would you expect an acceleration in bolt-on acquisitions as we move through 2026.

Yes. So great question. So we very active from an M&A perspective in the roofing space. I'll hit it from 2 different angles. I think we mentioned on the last call, some investment we're making on the M&A side and the team on roofing. So some of that's coming together for sure. That Progressive team has a lot of relationships in the industry. So they're working those relationship sides of of some of the smaller to chunky acquisitions.

Then obviously, we've got our relationships broader in the industry. And so we're definitely working some from, I'd say, the bigger side or, again, chunkier side of the of some rupee acquisitions. So definitely very active. We feel good about activity going on from both ends in commercial roofing, and we definitely look to that to lead to some good execution in 2026.

Our next question is from Keith Hughes with Truist Securities.

Kind of building on the last question on more commercial routing deals. Is there a specific region that you're looking specifically going after to acquire? And does it make a difference in terms of deals who the major suppliers of membrane are to the installers.

Keith, it's Robert. So a couple of points there. So we have a lot of white space and it's highly fragmented. So we're not being to -- as far as the geographic location, obviously, Progressive has that great footprint, especially in the Southwest and some other spots across. So no particular area. I think it's back to probably the discipline that TopBuild has had in the past and that is looking for great companies, great talent to come along here in the white spaces is pretty broad.

Relative to the supply base, if you think about the big suppliers in the space there, they're big top note suppliers today. and we have great relationships there. So it doesn't have to lean too much on who the supplier is given our breadth of those partnerships and geography, again, we're just looking for -- we're looking at good quality companies here that match up and checks the boxes you would expect here from a competency perspective, talent perspective and performance.

Our next question is from Collin Verron with Deutsche Bank.

I just wanted to go back to the installation margins and the strength there. You called out the primary driver being the cost saving actions that you guys have taken. Can you just help us think about how much was realized in the third quarter and maybe to date in 2025.

And what you expect the annualized benefit of those cost actions to be as you go forward into 2026?

Yes, Colin, this is Rob. So yes, the cost actions we took in the first quarter annualized is about $35 million of savings, I'd say our productivity in the third quarter definitely had it 0.25 share of that as well as I'd say some additional savings we had there that helped really drive the margins up in the quarter.

Our next question is from Kurt Yinger with D.A. Davidson.

Just wanted to go back to competitive dynamics on the residential install side. It sounds to me like that's primarily some savings on the material side. Is that the case? Or are you seeing increased bidding pressures depending on geography. And then maybe stepping back, can you just talk about kind of the tone of customer conversations as builders kind of battle the affordability challenges and maybe work to share some of that with suppliers like yourself?

Curt, it's Robert. So relative to the competitiveness, I mean, obviously, we worked in productivity side of it. If you think about margins, we've obviously worked with our supplier partners as well. But they're definitely in the slower markets. There definitely increased competitiveness in some of that bidding.

And I think that's where we look at our team and the job they've done and why we complement them on the work that they've done there because I think they try to find that right balance of volume and price. And obviously, we were able to put some controls around that from a bidding perspective as well. So that's some of the dynamics that have happened from that standpoint.

And if you look at the commentary around the country, the builders are obviously smart themselves. So between not just coming to us relative to some of the pressures, I mean, obviously, they're they're reengineering some of the products they're going to market with, can look at whether it be some of the footprints, where there's some of the things that they're doing. Obviously, we've done some of that value engineering with them as well to help them as they face the pressures and they come to us as well.

But it definitely has to be a partnership because as we said in our prepared remarks, look, the fundamentals are intact here. but we've got a time period here to the the inflection point. So we're working with the customers on it. I think our teams in the field are doing a nice balance of that.

Okay. I appreciate that. And maybe just following up on kind of the balance of price and volume. Does it feel like as the year has progressed and we've kind of seen that additional step down in residential that more often, you're maybe having to walk away from some of these projects or bids? Or has that been pretty consistent with what you felt over the last couple of quarters?

Yes. This is Rob. I'd say it hasn't gotten a whole lot worse in terms of us having to step away from volume. We have as we talked about and as we anticipated, we have seen the price pressure pick up, and we have gotten a little more aggressive on pricing as a result of that. So I'd say we're not stepping away from more work. I'd say we're -- we're doing -- we're holding our share out there. And you can see the impact of that a little bit on the price side on the install side, where price was negative in the quarter. But as we've talked about, we've done a great job in terms of managing our costs and recouping most of that through productivity savings.

Our next question is from Rafe Jadrosich.

On the distribution side, the pricing improved, but to price/cost getting sort of worse there. I think that's just on the residential piece of that. Can you just help me understand and like what's going on there? And just if the market stays soft, is there an opportunity from a cost perspective said differently, like if the market like kind of stays like this, could you get to a point where you're able to lower your costs where you can get to price cost neutral even if pricing stays negative?

Yes, Rafe, this is Rob. So we're working with our suppliers today in terms of that price cost equation, and we are seeing some relief there. But like we've talked about, we're definitely seeing the price pressure on the sales side. We've talked about how on install. We've done a great job offsetting.

On the distribution side, a little tougher, a little more pressure there because you don't have the labor component. So the price pressure we're seeing is having a negative impact on margins. Now this is what I was trying to explain a little bit earlier. When you look at our overall pricing on distribution were up and it's really a product mix impact there because of gutters, we're seeing inflationary pressures on those products, mechanical insulation, we talked about how commercial products, we're seeing good, strong price.

So we're driving price. Costs are up and prices are up on those products, and we're maintaining margins. And then you got the residential products where you got cost down, price down. And when you put the 2 of those together, you're kind of netting out to a positive price, negative cost and a net slightly negative price cost number for distribution.

And I think relative to -- Rob talked about productivity, I mean we're always looking at -- I think that's something we always say we always look at what's going on across the footprint. We look at what in market. And so if we have to make any adjustments, I think we've shown in the past, we've got a track record of being ahead of the curve on any of those as well.

That's helpful. And then in the quarter, you bought back stock and then you obviously continued to close acquisitions. How much of a priority is getting the leverage sort of below 2x versus just continued M&A and buyback? Like are you comfortable sort of continuing to do that with the leverage above the long-term target?

Yes, Rafe, this is Rob. So yes, we're not uncomfortable with where our leverage is today. It's pro forma with the SPI deal, we're at 2.4x, we've been that high or slightly higher before after large deals. We certainly will be more comfortable in that long-term target range of 1% to 2%. We don't feel the need to try to get there overnight.

Obviously, there's there's multiple paths to get there, ones to drive growth in EBITDA, which is definitely plan on and how we'd like to get there. We can also pay down debt or hold on to cash, and it would take about $500 million of cash to get us back down to the 2x, which would be a portion of next year's free cash flow.

So we can continue to do M&A and continue to have, like we've talked about in the past, we balance buybacks with M&A and typically put a grid in place. So we think we can continue that strategy at these levels with longer-term goal of getting that leverage back down to closer to 2x.

Our next question is from Adam Baumgarten with Vertical Research Partners.

Just on the kind of implied 4Q guidance, it kind of points to worsening year-over-year margin pressure. Maybe if you could sort of run through the drivers there, whether it's some of the acquisitions, pricing, price cost, just kind of the outlook there in the near term.

Yes, Adam, this is Rob. So if you back into the Q4 numbers from the guidance we've given I mentioned price cost, we plan for that to continue to be a headwind, slightly worse in the fourth quarter than what we saw in the third quarter. We, again, hope that's a conservative estimate, but we're working our best on that one.

M&A, obviously, in year before we get the synergies with SPI, that's going to have a negative impact on the overall EBITDA with them coming in at a 10% to 11% type EBITDA business. So that's -- but as we drive synergies there, we anticipate getting them up to the mid-teens on that deal. So those are really the 2 biggest drivers as well as the continued volume headwinds that we've talked a lot about those in the fourth quarter can be a little more pronounced as well just due to seasonality.

Thank you. There are no further questions at this time. I'd like to hand the floor back over to management for any closing comments.

Thank you for joining us today. We look forward to seeing you next month at our Investor Day on December 9. Thank you.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.

Greetings, and welcome to the TopBuild acquisition of Specialty Products and Insulation SPI in an all-cash transaction valued at $1 billion conference call. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, P.I. Aquino, Vice President, Investor Relations for TopBuild. Thank you. You may begin.

Good morning, everyone, and thanks for joining us on such short notice. With me today are Robert Buck, our President and CEO; and Rob Kuhns, our CFO. Earlier this morning, we issued a press release announcing that we've completed the acquisition of Specialty Products and Insulation or SPI, a leading specialty distributor and fabricator of mechanical insulation solutions for commercial, industrial and residential end markets.

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 presentation, both of which are available on our website at topbuild.com.

Let me now turn the call over to our President and CEO, Robert Buck.

Good morning, thank you for joining us. SPI noted, we announced this morning that we have successfully closed on the acquisition of SPI in an all-cash transaction valued at $1 billion. This is an exciting day for TopBuild and our shareholders as we're taking another step forward to deliver on our growth strategy. Let me start by covering the SPI business at a high level and our strategic rationale, and then I'll turn it over to Rob to talk about the financials before we open it up for Q&A.

SPI is a leading specialty distributor and fabricator of mechanical insulation solutions in the U.S. and Canada. The company is based in Charlotte, North Carolina and has 90 branches and approximately 1,000 employees across North America. We've had the pleasure of getting to know Ray Sears and the SPI team over the last few years, and they've done a great job driving steady growth and profit improvement. Both TopBuild and SPI have similar corporate values and culture with a strong emphasis on people, safety, integrity and execution. We're excited to welcome SPI's experience and talented team to the TopBuild family.

The SPI acquisition represents the next phase of expansion in our mechanical insulation business, bringing together 2 special distribution leaders, each with a strong presence in the commercial and industrial end markets. SPI is a great complement to our existing specialty distribution business and enables us to further expand our installation solutions for customers across all verticals, data centers, energy, industrial manufacturing and marine, just to name a few.

For those of you that are less familiar with mechanical insulation, it is any form of insulation design to insulate equipment in commercial and industrial facilities and is used in both high- and low-temperature applications. It includes the protective coverings applied to pipes, ducts and other equipment to regulate temperature, reduce noise and improve energy efficiency. It also helps protect workers from exposure to extreme temperatures. The transaction extends our geographic footprint and expands our value-added fabrication capabilities for engineered mechanical insulation parts better enabling us to serve our customers' needs.

The combination of SPI and our current mechanical insulation business creates opportunities for us to drive operational excellence throughout the organization. In the presentation, we've included a map showing the combination of SPI and TopBuild's mechanical insulation branches. And as you can see, SPI's branch network is complementary. SPI also enables us to expand into some key white spaces such as Florida, where today, we don't have a mechanical insulation distribution presence. SPI has a strong presence in the Southeast and Northeast both of which are important markets for mechanical insulation.

We also see strong potential to share leads and capture cross-selling opportunities for our building envelope installation and commercial roofing installation services. The SPI transaction also improves our noncyclical revenue mix. More than half of SPI sales are driven by maintenance, repair and replacement activity. As a result, the acquisition improves our revenue resiliency, something Rob will get into more detail in his remarks.

Finally, the transaction drives strong return on invested capital and leverages our core strength in M&A. The complementary nature of SPI's business gives us great confidence in our ability to drive $35 million to $40 million in annual run rate synergies within 2 years. Those of you that have followed TopBuild closely have heard us talk about our core strengths and specifically, M&A being a core competency. We have a clearly defined strategy and process and are very disciplined around identifying and executing strategic M&A. Having now completed 45 acquisitions in the last 10 years, we have a strong track record of success. We're experienced at integrating companies, converting them onto to our ERP and realizing synergies. Through the acquisition of SPI, we're once again putting our M&A expertise to good use.

With that, let me hand it over to Rob to discuss a couple of other very attractive features of the deal.

Good morning, everybody, and thanks for joining us. Let me reiterate how excited we are to announce the SPI transaction. We believe the transaction provides significant value for our shareholders and is great use of capital. We're acquiring a well-run company that is complementary to TopBuild and has a solid track record of driving profitable growth.

Let me start with the financial details of the transaction. The cash consideration for SPI was $1 billion. Revenue for the trailing 12 months ended June 30, 2025, was approximately $700 million. The company generated $75 million of EBITDA for the same period, representing a margin of 10.7%. This represents an acquisition multiple of 12.4x trailing 12 months EBITDA inclusive of a $70 million tax asset. We expect annual run rate synergies of $35 million to $40 million within 2 years, which takes the transaction to an 8.3x EBITDA multiple post synergies.

We have a consistent track record of achieving synergies and expect to drive a combination of supply chain savings and operational improvements. The transaction closed on October 7 and was funded with cash on hand including the proceeds from our $750 million senior notes issuance in September. Pro forma for the transaction, our net debt to adjusted EBITDA as of June 30, 2025, is approximately 2.4x. We've included a slide in our presentation that gives you a view of TopBuild's trailing 12 months pro forma revenue. Total pro forma revenue for TopBuild is $6.4 billion for the trailing 12 months ended June 30, 2025. Specialty Distribution inclusive of SPI will now account for 43% of our annual revenue. Revenue from the commercial and industrial end markets will now account for 47% of total top build revenue. This transaction also improves TopBuild's revenue resiliency as our noncyclical revenue is now approximately 22% of total sales.

In closing, I would like to welcome the SPI team to TopBuild, I'm extremely confident that the combination of our companies will be a success for our customers, our employees and our shareholders.

With that, let me hand it back over to Robert to wrap up our prepared remarks.

The acquisition of SPI is another important step for TopBuild. Bringing together 2 leading specialty distributors with a strong commercial and industrial end market mix reinforces our leadership position so that we can drive innovation and better meet customers' needs. SPI's geographic reach and fabrication capabilities enabled us to extend our footprint and create opportunities to drive operational efficiencies across our branch network. The acquisition also increases noncyclical revenue mix, improving our revenue resiliency.

Finally, the SPI transaction drives strong returns and leverages our core strengths around M&A. With the transaction closed, we've hit the ground running, and we're already working on integration. We're confident we can achieve the run rate synergies within the period outlined. We are very excited to welcome SPI to the TopBuild family. We hope all of you will join us at our Investor Day on December 9 to hear more about our progress as well as our plans to continue driving sustainable, profitable growth and creating value for our shareholders.

With that, operator, let's open up the line for questions.

[Operator Instructions] Our first question comes from the line of Stephen Kim with Evercore ISI.

This is Aatish on for Stephen. And congrats on the deal. Just a quick high-level question in terms of market share for SPI in the Mechanical Insulation segment. If you can give us a sense of that. I think with DI at the time of acquisition, like mid-teens for DI. So I just want to get a sense of kind of market share for both.

This is Robert. So I would say, if you looked at the footprint and the reach that SPI has, we would put their market share somewhere in the ballpark of high single digits, maybe 10% in that type of ballpark. And so we've always kind of talked about our share being somewhere in the low double digits. So probably somewhere in the ballpark of that 20% is probably what you could look at our scope today relative to mechanical insulation.

That's very helpful. And just 1 more, just anything structurally -- has anything structurally changed in SPI since the last conversations and post-termination that we should be aware of? I know the deal no longer includes the MBI, so in a sense there?

Yes, nothing significant. You heard that this transaction obviously excluded the metal building insulation business. So this is really the core mechanical business they have, and they have a small piece of building installations. So nothing has really changed in the structure. They've done a couple more acquisitions in the space since last time. But great management team is still in place there, great talent in place. And as we said, we've kept the relationship there. So we're super excited about having that team join TopBuild, but no significant changes.

Our next question comes from the line of Phil Ng with Jefferies.

Congrats. You guys have been really busy on the M&A front. I guess perhaps a question for Rob, can you provide the major buckets in terms of the synergies you have laid out? And then how that kind of layers in the next 2 years? When I look at margins for SPI, obviously not fully integrated, it's obviously lower than your core service partner business, your confidence of bridging that gap within that 2-year time frame.

Yes, Phil, this is Rob. So yes, the synergy number we've signed up for is $35 million to $40 million of run rate synergies by the end of year 2. With that fully synergized EBITDA, that would take the EBITDA today that's at 10.7% to around 16%. So getting it right there in the range of where our existing distribution business falls. We've got a high level of confidence in these synergies. We've obviously had a lot of time to spend study in that piece of it. But the breakdown, it's roughly, I'd say, 50% supply chain savings, 50% operational. The operational has got a number of different buckets that can be back office, indirect spending, et cetera, insurances, IT costs, things like that. So we feel really good about that. And like I said with that, we'll get it up to the kind of mid-teens type EBITDA margins.

Will the existing management team be sticking around post this deal?

Yes, absolutely, the existing team plans on staying with the business. And again, we built some long relationships across multiple years there. So absolutely, and we're very excited about that.

Okay. And then -- and Robert, you gave a little color already. But considering this deal doesn't include the MBI business, it's impressive sales and EBITDA looks pretty similar to what you initially gave us a framework a few years ago. Appreciate they had done some deal, but any color how the organic growth profile has looked for these guys the last few years? And how is your backlog in booking? I know your legacy business is looking quite good just given how strong C&I has been, but just any color on how this business has progressed organically and the outlook going forward?

Yes. I'll hit the last part first, and Rob will talk about the organic growth. So backlogs are healthy there, great bidding activity, active bidding activity really across all the verticals. Again, another thing we like about the business, SPI participates across multiple verticals, just like we do in our current mechanical insulation business. So nice backlog coming along, great bidding activity there as well. Rob will talk about organic.

Yes. Yes. So I mean if you went back in time to when we first announced this transaction, I mean, the business we're buying today, it's ironically around the same sales and EBITDA now. The business we're buying now back then was roughly $600 million of revenue and its growth since then, has been around kind of mid-single-digit organic growth. And then like we mentioned, they've done a handful of kind of bolt-on acquisitions that have added kind of low single-digit growth to that number. So that's gone in from the roughly $600 million to $700 million they have today.

Our next question comes from the line of Susan Maklari with Goldman Sachs.

My first question is on the revenue opportunity. In your remarks, you mentioned that there's some cross-selling opportunities between the businesses. Can you talk a bit more about that?

Yes, absolutely, Susan. So 1 thing that -- and we've already seen this playing out with our deal with progressive roofing, but -- and the crossover between mechanical and roofing and even our building installation business and the same contractors, the same contacts with those and how we're handling leads and bidding those jobs. And so I think we gave a story in our last earnings call where we were on a big data center campus in Arizona, where our TruTeam business had done the building envelope a few months earlier and at the same time, Progressive was doing the roofing systems on those buildings. DI was delivering the material.

So we now see with SPI, we're going to have that same type of formula that same type of ability to share leads, which is going to allow us to bid the same jobs and really provide that total solution, whether it be the envelope or now the mechanical solution across the footprint. So excited about that. We're already seeing that work with Progressive and our current DI business and our current TruTeam business. So we only expect that to expand now as a proven formula with the addition of SPI.

Okay. That's great color. And then you've done obviously 2 really significant deals this year already. How are you thinking about future uses of capital what's your willingness to do additional deals and maybe the types of things that you're going to be looking at across the business. versus perhaps focusing on integrating the Progressive and SPI and getting those 2 fully into the core of the business.

Yes, Susan, this is Rob. So I mean, obviously, right now, our net debt leverage, we've taken it up a bit with this deal. We're up to about 2.4x on a pro forma basis. I think just like in the past, when we've gone up into that type of range, you'll see us hopefully quickly delever from that. And come back down kind of in that 1 to 2 range, where we've historically been. I think even at this range, though, you're going to continue to see us do bolt-on acquisitions. And we're going to continue to use our cash to grow the company to do M&A. That's been our #1 capital allocation priority and it's going to remain that way. But obviously, we're going to focus our efforts on making sure we integrate these companies correctly and generate the returns we've signed up for.

And I'll just add on to that, Susan. I think the nice thing, too, is SPI comes in with a pipeline. And so we've got a lot of opportunities here, busy, very much so on the M&A front. So to Rob's point, you'll see more opportunities coming here with bolt-ons. We're going to do -- the team is very focused on the integration of Progressive and SPI, but we've got the resources and the, if you will, the muscle relative to continue to do some nice transactions here.

Our next question comes from the line of Keith Hughes with Truist Securities.

Just digging more on the 50% of synergies in supply chain. Historically, those have come pretty quickly on distribution acquisitions. Anything here that would delay that versus what historically has happened?

Keith, I think you're thinking about it right. I mean we'll obviously work the process here. We'll have to look at the footprint. We've got some great tools as if you think about optimization. Rob talked about some things around or may have talked about things around logistics and freight, those types of things. So we'll quickly be able to look at footprint, where is material coming from, where we're shipping to those types of things. So -- but you're thinking about it right. I mean, we think we'll deliver a nice part of the synergies in the first year. and then the total amount that Rob talked about by the end of year 2.

And are the suppliers similar to DI and quite honestly, TopBuild in general?

Very much so, definitely overlap in the supply base in places where we have great partnerships, relationships and SPI has as well, but very similar supply base, absolutely.

Our next question comes from the line of Rafe Jadrosich with Bank of America.

Just a couple of quick modeling ones. Just how do we think about the cost of debt here in like the incremental interest expense. And then what's the seasonality of SPI relative to the legacy BPLD business?

Yes, Ray, this is Rob. So with the new bond we issued in September at $750 million. Interest rate on that is going to be 5% and 5.8%. So that the new interest cost to factor into your model there. In terms of seasonality, I would expect it -- I mean, it's very similar to what we see on the DI side of the business. So strongest quarters kind of in the middle of the year, Q2, Q3, things slowed down a bit in Q4 and Q1 typically is a little bit soft as well.

Great. And then just on the commercial and industrials continue to grow as a percent of the overall mix, can you give a little bit more color on the specific end markets that those are sort of selling into. Is there an overweight to any specific end market does SPI have more exposure to 1 segment versus another? Is there different than DI? Just any color there would be really helpful.

Yes, Ray, this is Robert. So no, very balanced. Obviously, we dug into that. We obviously know our current mix as well. So I'd say it's pretty balanced across the different verticals, whether you're talking about data centers, oil and gas, manufacturing, education, health care, food and beverage. So no, I would say pretty balanced there across the different verticals as we look at the SPI business similar to our DI business.

Our next question comes from the line of Kurt Yinger with D.A. Davidson.

Just 1 question going back to kind of the value proposition. You talked about kind of the sharing of leads and relationships with Progressive and the legacy business. I guess, is there kind of an opportunity to maybe centralize the bidding process and maybe simplify for some of the customers delivering the different material types and different stages of construction? Or is it more so just that relationship and leads aspect that this deal and Progressive really enhances.

Yes. Kurt. So I think what you're going to see is some good sharing of best practices and relationships from that perspective. And so we'll look at that. What we are doing and to your point about making it simpler for the customer, the way that we're bringing leads in and we're able to manage those leads and get those back out to our different businesses and stuff. And we got some centralization of some of those relationships and stuff, that will definitely make it easier for the customer relative to that. And so now they'll have some 1 point of contact on certain things, but then there can make sure that from a, I'll say, total TopBuild solution that there is a more cohesive approach to that. So I think definitely will see benefit of the customer.

And then maybe to your other point, if I heard it correctly, what this really allows us to do with the footprint as well, and I think we gave this example on our previous earnings call, where we have these fairly significant-sized projects where we're going to be able to service those projects, supply those projects from different locations and can flex up and down on capacity and stuff that you think about from a fabrication perspective. Absolutely going to be the benefit to the benefit of the customer as we do that. So we see it from multiple different ways, make it easier and better service for the customer base.

Got it. And maybe just 1 on Progressive specifically. I mean the location footprint of that is much more consolidated than I guess the Service Partners business and SPI. As you think about the existing relationships that you have on the insulation side, do you think that provides you an advantage in terms of the ability to expand progressive into new markets and already have kind of a preestablished customer base?

Yes. Definitely from a contractor -- larger contractor perspective, we'll definitely share those relationships. We're already seeing some of that happen as well. And that, by the way, both ways. I mean, Progressive has some great relationships and their stronger service areas as well. So we're seeing that work both ways, but we think that's part of the strength of the model here, and we talked some about cross-selling as well, is how we can share those contracts, those relationships. So we absolutely see that as an advantage.

Our next question comes from the line of Collin Verron with Deutsche Bank.

Earlier in the call, you talked about the share being about 20% for the mechanical installation business. Just in terms of bolt-ons, are you guys looking at for additional product categories within mechanical? Is it more of a geography play where you're trying to fill some white space. And I guess what does market share look like for some of those competitors out there after a combined TopBuild SPI.

Yes. This is Robert. So hard for me to comment on anything relative to the competitors. But some of the acquisitions that we have in our pipeline and that we see in the SPI pipeline. Some of it is geographic. Some of it continues just to build upon current competencies. In the mechanical business, as an example, there's different things like some metal jacketing, some blanket systems, those types of things, things that we do today as well. So I wouldn't necessarily call them adjacency, I'd call them part of the core mechanical installation products. We'll just be adding to that. capability as well and definitely some geographic play also.

That's helpful. And I guess just any commentary around the opportunity set just maybe on how you're thinking about M&A between insulation and commercial roofing. Is there a preference for one towards the other? Or how are you guys thinking about the sort of the opportunities that's there?

Yes, Collin, this is Rob. So I mean, our strategy is unchanged there, I'd say. We think about acquisitions the same way and that we prioritize based on return on investment. So regardless of end market, whether it's residential, whether it's commercial, we're looking for the best return on the capital we're deploying. Ultimately, when you look at our TAM now, particularly with commercial roofing, there's a lot more white space in there than the existing business. It doesn't mean we're not going to do deals in the existing business. There's still a lot of deals to be done there, and we're going to continue to do transactions in that space. But we're very excited about the addition of Progressive and the roofing business and the opportunity set that comes with that.

Thank you. Ladies and gentlemen, there are no other questions at this time. I'll turn the floor back to Mr. Buck for any final comments.

We appreciate everyone joining today's call. I'll reach out with any questions, and we'll talk with you next when we announce third quarter results on November 4. Thank you.

Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.

Greetings, and welcome to the TopBuild Second Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce P.I. Aquino, Vice President of Investor Relations. Please go ahead.

Good morning, and thanks for joining us. With me today are Robert Buck, our President and CEO; and Rob Kuhns, our CFO. Our earnings release, senior management's formal remarks and the deck summarizing our comments can be found on our website at topbuild.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 our website.

Let me now turn the call over to our President and CEO, Robert Buck.

Good morning. Thank you for joining us today for our second quarter 2025 earnings call. With half of 2025 behind us, I want to start by saying how proud I am of everything our teams have accomplished so far this year. In July, we completed the acquisition of Progressive Roofing, establishing a new platform for growth in the large, highly fragmented $75 billion commercial roofing services market. The transaction aligns very well with our core strengths, expands our installation service offerings for commercial customers and increases our exposure to noncyclical nondiscretionary revenue drivers. Commercial roofing is a natural adjacency to our core insulation business with exciting potential, and we're delighted to welcome the talented Progressive Roofing team to TopBuild. Our teams are starting to work together, including sharing best practices and thoughts on an integration road map.

We also took steps in the first quarter to better align our cost structure with the demand environment and optimize our footprint, including the consolidation of 33 branches across our network. On a daily basis, our teams put a great deal of effort in driving our performance, and I want to thank everyone on our team for continuing to strive for improvement across our business and delivering solid results. Our continued solid profitability in the second quarter is a testament to our ability to successfully navigate changes in an uncertain macro environment.

We are pleased with our sequential improvement from the first quarter, with our second quarter adjusted EBITDA margin of 20.1%, which is a reflection of the command we have of our business and is supported by our ongoing work to drive improvements across the business and our supply chain. Softness in residential new construction was partially offset by growth in heavy commercial and industrial, where verticals like technology, education and health care continue to flourish.

Total TopBuild sales in the second quarter declined 5% to $1.3 billion as the new residential construction market remained weak and single-family demand slid further on a year-over-year basis. While the housing market in the U.S. is still underbuilt, mixed economic signals, interest rates and affordability concerns continue to weigh on consumer confidence, keeping some homebuyers on the sidelines. We'll continue to closely monitor the macro environment.

Turning to capital allocation. We have a robust pipeline of acquisition candidates, and M&A is still our highest priority for deploying capital. In addition, the Progressive team has several acquisition opportunities in their pipeline. As always, we'll stay disciplined around valuation and focus on driving strong shareholder returns. In the second quarter, we also repurchased just under 455,000 shares of our stock, returning a total of $136 million in capital to our shareholders.

Before I turn it over to Rob, I want to give you a brief look back at our business, but also share with you some thoughts on how we're positioning TopBuild for the future. This past July 1 marked the 10-year anniversary for TopBuild as a public company. When I look back over that time, it's remarkable how much we've grown. When we spun in 2015, we had $1.6 billion in sales and mid-single-digit profit margins. Last year, we were roughly $5.3 billion in sales or about a 14% compounded annual growth rate. With Progressive, we'll be more than $5.5 billion on a pro forma basis this year.

Since 2015, we've also more than tripled our EBITDA margin. Our safety metrics have also improved as we stay focused on keeping our people safe. 10 years ago, about 85% of our sales were tied to residential, and 15% of our sales were tied to the commercial industrial end markets. Now having completed 44 acquisitions, we've grown our commercial industrial sales to approximately 40% of our total sales this year.

We successfully diversified our business, and in doing so, we've also improved our sales resiliency. About 20% of our total sales are considered recurring, non-discretionary or non-cyclical. As we look out, our runway opportunity for growth is exciting. We have a total addressable market of nearly $95 billion for insulation and commercial roofing and are encouraged by our growth prospects.

Let me give you just one example of how our business diversification positions us well for our next level of growth and more exposure to commercial, industrial and nondiscretionary spend and reduced dependence on residential housing. Just last week, our leadership team was on site at a multiphase data center campus in Arizona. At the same data center campus, our now combined TopBuild family of companies was providing multiple services and products for the same contractor. The Progressive Roofing team was providing new construction roofing services for the first 200,000 square foot facility at the site, while our distribution international team was delivering fabricated mechanical insulation parts. And prior to that, our local TruTeam business had provided building envelope insulation solutions in the form of fiberglass and spray foam installation.

Currently, there are 324 data center projects under construction and 110 data centers that are in the engineering stage. We're also tracking nearly 2,000 more projects that are in the planning stage. This growing vertical data center is just one example of the commercial and industrial projects which TopBuild can now provide a full suite of service solutions.

Let me conclude my remarks today by recognizing and thanking each one of our employees. Our success over the last 10 years would not be possible about the hard work and support of our talented and highly motivated teams. Rob?

Thanks, Robert. First, I'd like to thank our teams for delivering another quarter of strong results in an uncertain macro environment. While weak demand in the residential markets continued, our teams have done an outstanding job adjusting our cost structure and driving profitability. In addition, our teams are continuing to drive profitable growth in heavy commercial and industrial end markets.

Turning to the second quarter results. Total sales declined 5% to $1.3 billion. Volume was down 7.8%, partially offset by M&A of 1.9% and pricing of 0.9%. Our Installation segment sales totaled $780.7 million, down 8.3%, driven by a 10.5% volume decline, which was partially offset by acquisitions of 1.4% and pricing of 0.9%. The volume decline was driven by weakness in new residential construction and light commercial end markets. Heavy commercial projects continued to be a bright spot and posted solid growth in the quarter.

Specialty Distribution sales improved 1.1% to $599.2 million in the quarter. Acquisitions grew our sales by 2.3%, and price added 0.8%. This was partially offset by lower volume of 2.1%. Lower volumes were driven by slower sales of residential products, which were partially offset by continued strong growth in mechanical insulation for the commercial and industrial end markets. Adjusted gross profit in the second quarter was 30.3% and 70 basis points lower than last year.

Adjusted SG&A as a percentage of sales in the second quarter was 13.3% versus 13.6% last year. Second quarter adjusted EBITDA for TopBuild was $261.3 million or 20.1% of sales. Our EBITDA margin improved 110 basis points from the first quarter and was down only 20 basis points to prior year. This strong profitability was driven by the cost actions we took in the first quarter and supply chain improvements. These savings almost entirely offset the EBITDA margin pressures from lower sales volume and price pressure on residential products in our Specialty Distribution segment.

Installation adjusted EBITDA margin was 22.3%, up 120 basis points sequentially and flat versus the second quarter of last year. Specialty Distribution adjusted EBITDA margin of 17.2% was up 90 basis points sequentially and down 50 basis points versus the second quarter of 2024.

Other expense for the quarter was $16.2 million compared to $7.2 million last year. The increase is due to the combination of lower interest income from lower cash balances and higher interest expense from our expanded credit facility. Second quarter adjusted earnings per diluted share was $5.31 and compares to $5.42 last year.

Turning to the balance sheet and cash flows. We ended the second quarter with total liquidity of $1.8 billion, of which $842.5 million was cash and $938.8 million was available under our revolver. Our total debt at the end of the quarter was $1.9 billion, $500 million higher than prior year due to the refinancing and expansion of our bank credit facility. This new $2.25 billion credit facility includes a $1 billion term loan, a $1 billion revolver and a $250 million delayed draw term loan, all of which mature in May of 2030.

Net debt at the end of the quarter totaled $1.1 billion, and our net debt leverage ratio was 1.01x trailing 12 months pro forma adjusted EBITDA. Year-to-date, our free cash flow is $321.4 million, up approximately 38% from the prior year, primarily due to the improvement in timing of working capital. Working capital as a percentage of sales totaled 13.7%, which compares to 14.8% last year.

We continue to prioritize our strong free cash flows towards M&A. And in July, we closed the acquisition of Progressive Roofing. This acquisition establishes a new platform for growth and expands the building envelope installation services we can provide for commercial contractors. We funded the transaction with cash on hand and proceeds from our expanded credit facility. Assuming Progressive Roofing within our results for the second quarter, our net debt leverage would have been approximately 1.65x trailing 12 months pro forma adjusted EBITDA.

In the second quarter, we also repurchased shares totaling $136 million. On a year-to-date basis, we've returned a total of $351.6 million in capital to shareholders, representing about 1.1 million shares. We have approximately $836.4 million remaining under the current authorization.

Turning to guidance. As you saw in the release, we are issuing guidance today that includes the impact of the Progressive Roofing acquisition for the balance of the year. We expect full year sales to be between $5.15 billion to $5.35 billion. Our assumptions are as follows: On a same branch basis, including price, we are now assuming that residential sales will decline low double digits for the year, driven by continued weakness in both single-family and multifamily activity. Commercial and industrial same branch sales are expected to be flattish to up low single digits. We expect heavy commercial to remain strong, while light commercial will continue to be challenged.

The full year impact of M&A is expected to add approximately $300 million to sales. Inclusive of M&A, total net sales will be flattish in the third quarter and up low single digits in the fourth quarter, as the fourth quarter will benefit from a full quarter of Progressive sales and the comparison to prior year is slightly softer. We expect adjusted EBITDA for the year to be between $970 million to $1.07 billion. At the midpoint of our guidance, our adjusted EBITDA margin will be 19.4%, a very strong profit performance.

In closing, I want to thank our teams once again for their efforts, and I would also like to welcome our new teammates from Progressive Roofing. As TopBuild enters its second decade as a public company, I couldn't be more excited about the growth opportunities that lie ahead for our teams and for our shareholders.

With that, I'll turn it back to Robert.

Thanks, Rob. I want to express my confidence in the underlying fundamentals of our business. Our flexible and diversified business model enables us to deliver solid results, and we have incredibly focused teams that have great control over our business. We've proven that we can adjust our operations as demand changes and expect to outperform in a changing environment. As always, we'll stay focused on driving profitable growth and increasing shareholder value.

We are planning to host an Investor Day in New York on December -- on Tuesday, December 9. We'll be sharing more details in the coming months and look forward to having you join us in person.

With that, operator, let's open up the line for questions.

Thank you. [Operator Instructions] Our first question is from Michael Rehaut with JPMorgan.

Yes. First, I wanted to dive in a little bit to Progressive and just the impact on the second half, more so from the margin side, if you expect that to be dilutive or accretive to margins? And how you're thinking about the contribution in 2026? And I guess, more broadly, how you're seeing early opportunities perhaps even from the sales synergy side as well?

Sure, Michael. This is Rob. I'll start, and Robert will jump in with the second half. I mean in terms of our guidance, what we have baked in for Progressive, from a sales perspective, it's roughly about $215 million incremental for Progressive. Our guide last time was around $85 million for M&A. We're up to about $300 million. And then the EBITDA that goes with that is going to be right around in the neighborhood of 20% EBITDA. So really not decremental or heavily incremental to where we're running right now, pretty much in line with our core business.

Yes, Michael, relative to the question on cross-selling and the synergy piece, yes, really excited about that. I mean, just that data center project I gave you the example of in the prepared remarks, I mean that's one example. As we've started working with the Progressive team and looking at crossover in projects, customer base, verticals, that type of thing, we definitely see an opportunity. And I've already been on a few M&A visits with the Progressive team as well and talking to some, I'm going say, future companies that will be coming on board. We see that as well and some crossover where they have relationships with our insulation contractors and stuff as well. So we think it was a part of our model, but we definitely see upside to that as we're starting to work together.

That's great to hear. And obviously, very exciting in terms of the multiyear prospects that, that whole vertical can lend itself to. So congrats on that. Secondly, I appreciate also the, I guess, more challenging core business, specifically residential end markets down low double digits versus down high single digits before. Maybe you could just talk about which parts of the business that's hitting more? Is it kind of equally on installation or distribution? And also, just if there's particular areas of the country or any more color in terms of what's driving that softness and if we should expect perhaps a down low double-digit rate into, let's say, the first half of '26?

Yes, Michael, this is Rob. I'll start with kind of what we've got baked into our guidance and what we saw. Robert can get into some of the details of what we're seeing kind of across the country. Yes, we've adjusted our midpoint guidance around residential to be down low double digits from high single digits before. And that's really primarily driven by deterioration in single-family that we've seen. Really, the guidance we had previously assumed, things weren't going to get worse from what we saw in the first quarter, and we definitely saw the starts environment slow down here in the second quarter. So we're baking that into the guidance.

I'd say the other piece that's been a little bit softer is light commercial. Heavy commercial, as we talked about, has been strong. Industrial has been strong. So seeing a lot of good growth there, but light commercial has remain challenged. So we've eased up a little bit on the commercial guidance as well to being flattish to up low single digits. So that's really the core changes in the guidance. Robert can take you around the country a little bit in terms of what we're seeing.

Yes. So it's a mixed bag around the country as you might expect, Mike, I'll give you a few instances. So let's just pick here in Florida, where we are, South Florida, slow. Orlando, some positive trends the Panhandle, some positive trends, but Jacksonville, slow. You move up to the Southeast, we like what we're seeing coming here in the Carolinas and even I'd say optimistic up in the Northeast and the Midwest. Texas is the mixed bag, again, right, like what we're seeing in Dallas and San Antonio, but Austin, Houston slowed from that perspective. Just a couple of other, Colorado, single-family, slow, building some multifamily backlog in Colorado, so a little bit back there. Some better trends in multifamily, probably Vegas and Southwest. We see some positive things building in the Northwest right now. So it's kind of mixed as you go around, a little mixed multi versus single.

Great. And any thoughts about how that might carry over into the first half of next year?

I think you're seeing some of the builders, what they're coming out with the public builders as they're talking as you've seen their guidance and stuff. And so I think we're aligned across the variety of size of builders there. So we're definitely starting to bid work for the fourth quarter into the first part of next year. I think some of that multifamily that we're talking about and even seeing some of the starts, that's probably heading into the first quarter of next year. So that's kind of how we think about it and see it.

Our next question is from Susan Maklari with Goldman Sachs.

My first question is focused on the commercial industrial side of the business. Can you give us a bit more detail on how you're thinking about the volume versus breakdown in there? And maybe with that, are you still seeing some of that momentum on the price side within that segment of the business that you talked to in the first quarter?

Yes, Susan, this is Rob. So yes, from a price perspective, what we talked about in the first quarter was we saw some incremental pricing on some of the mechanical insulation products and mineral wool products that we use on that side. Those definitely stuck through the second quarter. So we're continuing to see that. The weakness is really from a volume perspective on the light commercial side of things, where we're down double digits, I'd say, on a year-to-date basis. We're up on the heavy commercial side of things more in the high single digits, almost double digits on a year-to-date basis. So seeing good growth there, but the light commercial weighing a little bit heavier on us right now.

Okay. That's helpful. And then one of the things that you mentioned in your prepared remarks was improvements to the supply chain. Can you talk a bit more about what some of those efforts are? How we should think about them continuing to flow through the business in the back half of this year? And any potential for additional opportunities there and what those could mean for the business?

Susan, it's Robert. So a couple of things to talk about when in first quarter, we talked about some of the work we did in optimizing the footprint. That's obviously coming through in supply chain savings for us relative to logistics, relative to even some productivity measures that we track as we work through that as we make sure we position our resources appropriately based on where work and jobs are happening. So that definitely be part of it.

We're obviously working with our supplier partners. I mean, I think we've talked about openly around spray foam as an example. So we're obviously working with those supplier partners as there's been some dynamics change there. So we'll expect that to continue in the back half of the year here as we're in constant discussions and constantly working with -- working to drive improvements in our business and working with our partners as well.

Our next question is from Phil Ng with Jefferies.

Congrats on a really strong quarter in a dynamic environment. So I guess a question for me is around pricing. Pricing was actually pretty solid in the first half. It's holding despite a pretty tough resi backdrop. Rob, I guess, implicit in your guide and your conversations with your big builder customers. How are you seeing that pricing backdrop kind of unfolding? Obviously, they're dealing with a lot of affordability headwinds as well.

And on the flip side, the cost side, what are you seeing on that side of things, especially in material costs? Whether it's fiberglass or spray foam in the back half. So when you kind of think about price/cost, what's embedded in your guide and how you're thinking about it?

Yes. So Phil, this is Rob. I'll start. Robert will jump in. But I'd say what we've got baked in from a guidance perspective, similar to what we talked about last quarter, we do have some price/cost headwinds baked in, roughly $30 million of headwind in the back half of the year, knowing that really the price, the first half of this year was driven by carryover benefit of fiberglass pricing that hit kind of middle of last year. So we're going to be rolling over that, no longer benefiting from that as well as the commercial products that I talked about a little bit earlier. We're seeing the benefits of those. We do expect those to carry forward through the remainder of the year.

But obviously, with that dynamic, the comparisons are going to get a little tougher on price. And to your point, the builders are pushing out there. And where necessary, we do make adjustments. We're definitely seeing the price impacts a little heavier impacting the margins on the distribution side of the business, the residential side of the distribution business. But like I said, we've got some headwinds baked into the second half forecast. That's why the EBITDA margins are a little bit worse than the first half. Hopefully, that proves to be conservative, but we got to see how that plays out.

Yes. I think, Phil, so to add on to what Rob said, you can see the second quarter, you can do the calculation in the back half. I mean, still very solid profitability. So what that equates to is great work by the teams in the field from a few different things. One, driving productivity, work in all elements, including labor productivity, sales productivity, where do we pick up more volume and how do we leverage that relative to driving our efficiencies in the field. So I think that speaks loudly to that. And then also definitely working with our supply partners. You talked about the foam side, fiberglass as well. So continue to work with our supply partners here because we can provide some uncertainty in an uncertain environment.

No doubt, Robert. And Rob, I mean, that margin performance guidance for the year is pretty incredible given the current backdrop. So true testament to the business. On your C&I side of things, any more color on how booking orders are progressing as well as the Progressive deal? Any cancellation project delays? And how is the order book looking into 2026?

Yes. So Phil -- Robert. I'd say solid. As we look at -- I'll just give a few data points here. As we look at bidding, as we look at bidding activity, backlogs here, heavy commercial, industrial looks positive, continues. I would say cancellations, nothing on the radar that we're seeing on cancellations. And I'd say just -- obviously, we've been working the relationship with Progressive for a while and now being part of our team here for nearly a month. I love what we're seeing there. And that team just does a fabulous job of continuing to work their relationships across multiple service areas and continue to build backlogs there as well.

Yes, Phil, I would just add to that. I mean, we were in Arizona with the Progressive folks about a week ago, and they're really happy with where their backlogs are sitting right now and definitely stronger than a year ago. So feeling really good about that.

That's really great color. Can you emphasize some of these stronger end markets in C&I that you're seeing, whether it's data centers or perhaps some of these LNG projects and whatnot? Just kind of give us a little perspective on how impactful it is for your C&I franchise.

Yes. So a couple of points there. So data centers, key one. If you think about power, power generation, which you got to have that infrastructure relative to the data centers, I'd say that's another one to point to. And by the way, as we think about power, you think about LNG, that's U.S. and Canada. I mean, our Canadian team is doing fabulous. When we look at their results and when we look at backlog there for the rest of the year. So we're seeing that strength across verticals in Canada. And I'd also point out definitely health care and then manufacturing, food and beverage. And then we're seeing it -- and again, because of the relationships we have, we're seeing in education as well in some key markets.

Our next question is from Keith Hughes with Truist Securities.

Thank you. You had said earlier in the call, I think you're about 40% commercial and industrial sales. Did that include the Roofing transaction, or was that before the transaction?

That's inclusive of the Roofing transaction.

Okay. And on Progressive, can you give us a feel, how much of their business would be in the heavy commercial versus the light commercial? Is that something you know?

On the Progressive side of the business, by far, the majority heavy commercial, Keith.

Yes. The important part to remember there is that it's only 30% new construction. So 70% is reroof and services. But to Robert's point, more towards heavy commercial projects.

And does Progressive slant towards any one of the different applications, [ EPDM, TPO ], anything like that?

No. They're agnostic. They really got a great skill set there to provide any of the solutions, including, to Rob's point, can handle it on new construction, but definitely, any of the applications from our reroof service maintenance perspective as well. So great skill set across the team there.

Okay. And final question. As you progress in the second half of the year, these commercial numbers are -- I think they are weakening. I think you said that on the call. Is there any signs of life in terms of order activity coming in that could paint to something brighter in 2026?

Yes, Keith, this is Rob. I'd say on the heavy commercial side and some of the larger projects, we still feel pretty good, given the backlogs we have there. Definitely feel good about the back half of the year. We'll have to see on 2026, but we're definitely bidding work out that far. And like I said, Progressive's backlog is strong there as well. But the headwinds on the light commercial side are what's been the drag on that side of things.

Okay. So no light at the end of the tunnel on that yet?

Not on light commercial, but to Rob's point, I think we feel solid about heavy commercial and the industrial side based on the backlogs.

Our next question is from Stephen Kim with Evercore ISI.

Appreciate all the color. Let me start on the M&A side. I think you had talked previously about the fact that Progressive has superior margins to its competitors in the space. And I'm curious as to how you think Progressive might go about raising any acquired entities kind of up to their level. If you could sort of just walk us through what you think the opportunity there is and how you would go about capturing that, that would be helpful.

And then also, you also have this other vertical where it seems like it's been a little quiet in the mechanical and industrial side on the M&A side, notwithstanding the efforts at SPI or with SPI. Curious if you can give us an update specifically on the mechanical and industrial pipeline, how that's looking?

Yes, Stephen, this is Robert. So let me start on the Progressive side. It's something that we spend a lot of time with understanding and learning and seeing the track record. So if you think back to our announcement about the transaction, it's really about the business system that Progressive has. And so their ability to -- how they target jobs, how they bid jobs, even selecting the job there based on the scope of the bid, if you will, or the spec of the job, if you will.

And then obviously, as they get involved, how they engineer and how they track and manage the job, man hours, man days. And they've got certain checkpoints, if you will, throughout the process there of making sure that their jobs are staying on track. So that's really the business system and how they manage those jobs everywhere from what they go after to how they bid it, how they manage the job to make sure it's landing appropriately or exceeding.

But then I'd say other things around -- there's definitely synergy perspective of things they bring to the table whenever they do a transaction. And then there are obviously going to be some of those TopBuild adds as well. So you're right, there's a variety of margins that we see across M&A landscape in roofing. But as we look at those -- and we've looked, Rob and I've looked at some recent ones here, the record of what can happen there, high-level confidence, and we would say, generates a great, great return for our investors.

So Progressive, we dug into that, a lot of detail and high level of confidence in their business system and how that works. I think relative to mechanical, you bring up a great point. So we did 2 transactions in the space at the end of '24. And [ Shannon Global ] and then [ Metro ]. So we've definitely got things in the pipeline here. Those companies have come on board, have gotten integrated, but we continue to have pipeline opportunities there.

But we've had a couple that we've walked away from because we continue to remain disciplined here and going to bring on ones that are going to drive great returns here. So there's definitely activity in that space, but we'll stay targeted there, and we see opportunity continue to be on the mechanical side. That's a great question. And as we said on the M&A standpoint, the core still has a lot of opportunity and Progressive is bringing a ton of opportunity as well.

On the Progressive, the system that they have, are there proprietary computer systems or software that they utilize? Or is it merely the way in which they utilize or employ just the standard type of computer systems or management systems that everybody else has, it's just they utilize them in a better way?

I'll hit that from 2 or 3 different directions. Rob may have some additional comments here. So I think what they've done from a job costing perspective in that, I'd say there are some things others don't have. So you could call that proprietary. But I would just say they're training. I mean, how they bring folks on board, how they train the talent development, the focus on talent development, whether it be leadership in the field or whether it be from a sales talent perspective, they've got something they've developed there that works, and that's how they've continued to scale the business. I think whenever we made the announcement, we talked about the organic growth rate, some things that have led to that organic growth rate in that business. So I'd say some proprietary, but I'd also say beyond what I call business system, I'd say some great training and talent development as well.

Yes. And this is Rob. I'd just add. I mean, I think similar to our business, it's a relationship business, right? And [ Nick ] and team do a great job of building relationships with key contractors and getting bids on jobs where they know they're going to have a right to win. And Robert touched on it in terms of their job tracking and cost tracking that they do they've developed and worked to put together a tool that's really helpful for them with that, and it's really integrated not just into their accounting, but into their operations. And that's certainly not something we see with every company we've looked at in that space.

And so while, as Robert mentioned, the margin profiles of other companies in the space are not as strong as Progressive's, that just makes a bigger opportunity for us in terms of what we can bring them to. So that's another reason we're so excited about the space.

Appreciate that. That's really clear. Last one for me, staffing. I think in previous calls, you had indicated that you were reluctant to move too quickly on reducing staffing levels on the idea that you might see a recovery in volume and you want to be ready for it. Simply put, do you feel that given the modest deterioration in the market in the last several months that maybe you're taking a harder look at staffing levels?

Yes. I'll start with that, Stephen. So you saw what we did in the first quarter. I think we appropriately calibrated with those actions, but our team continues at a local market. And obviously, the standard ERP gives us that insights to look at that on a market-by-market basis. But we did a lot of calibration at that first quarter action. And I think what you heard us say is we didn't cut muscle. So we feel like we're prepared for if there are uptakes and things that happen here. But yes, we definitely -- the team has taken the appropriate action to this point.

Yes. And I'll just add, Stephen, we did -- we talked about last quarter, those cost actions we took. It's between the lease cost and the people cost north of $30 million a year in savings. And you can see the benefit of that in this quarter's results, right? Our decremental was 23% for the quarter, same branch decremental when you pull out the impact of M&A. So below what we've talked about as a target from 27%. Our full year guidance is closer to 29%, but that's because of the price/cost headwind we've got baked in that I talked about. But I definitely feel like we've calibrated from a headcount standpoint to the volumes we're seeing right now. And as Robert points out, we're going to continue to monitor that and we'll take further actions if necessary.

Our next question is from Collin Verron with Deutsche Bank.

I just want to start just a follow-up on the Progressive Roofing here. I know you've only owned it for less than a month, but any early reads on how quickly you can start executing M&A in commercial roofing and what the deals in the Progressive pipeline look like from a size perspective when you acquired it?

Yes. Colin, this is Robert. I'll start off. So we said a few things when we made the announcement about a month ago. Number one is there's some nice, chunkier deals in the pipeline there. We've seen that, like I mentioned maybe in one of the previous questions, visited a few of those, and Rob and I have started getting involved in the process. But Progressive has got a team there that's focused on it. So that's why it is exciting.

I think we said earlier, we think the multiples stayed pretty close to what you've seen in some of our traditional multiples for some of the side deals on the roofing side. So good activity there. We're -- I don't mind saying this, we're making an investment to make sure that the momentum of M&A keeps up on that side at the same time, staying disciplined. So we think there's good opportunity there, and we'll be excited to be talking to you about that in the future as well.

Great. I appreciate the color. And then just one follow-up question on the price/cost question. I think, Rob, you mentioned that it was a $30 million headwind in the back half of the year. Was that just a price comment? Or was that a total price/cost headwind?

It's both really, right? It's more driven by the top line, but it's the net impact between it.

Our next question is from Ken Zener with Seaport Research Partners.

You know, that makes me think because this quarter, you guys had a big footprint. You all said you're going to grow into your branches that would provide you operating leverage with your IT system, et cetera, et cetera. We've, by and large, seen that. Then the concern was during a contraction, which volume down 10% res, it's a modest one. You guys cut costs. Your SG&A is still, percentage-wise, the same. Rob, you're talking about the second half price/cost headwinds that are baked in your guidance. It's just -- you guys have been able to handle the incrementals better, right? So specific to the second half positive/negative factors, what kind of gets you -- if you're guiding conservative to that 29%, what are kind of the things that you think about in the positive bucket that could get you more to what you saw in the first half? And what are the things that could go against you to get to that midpoint? Is it volume predominantly?

Yes, Ken, this is Rob. Yes, I mean, volume is definitely a player in that, right? I mean if the residential single-family in particular environment continues to get worse from here, that could be a potential headwind. We're not hearing that at this point or projecting it to get a whole lot worse.

I'd say it's going to be -- our guidance has it a little worse the back half than the first half, but not a dramatic falloff there. I think commercial and industrial is potential upside, right? I mean, as we talked about in the past, these large projects can fluctuate quarter-to-quarter in terms of timing, but our backlogs are good. So we feel like that could be an opportunity in the back half of the year.

I think the big ones that's different than the first half is price/cost. We've had kind of a price/cost headwind baked in throughout the year, being cautious. It hasn't cost us a ton so far this year. I'd say on the distribution side, you see a little bit of impact there. On the install side, not as strong at this point. So hopefully, potentially, that's a conservative assumption that gets us maybe in a little better spot. But there's a lot of potential puts and takes there.

But I think all in all, we feel really good about the midpoint of our guidance. I think roofing is it's new. We got to see how they do. But like I was saying before, we feel good about the backlog of work they do or the backlog of the work they have and the results we've seen so far. So we feel pretty good about that as well as a potential upside potentially in the back half of the year.

And then we estimate to the public builders, the res exposure, you guys are, call it, 30%, give or take, percent to the larger builders, top 10. Are you doing better with the publics, would you say, or with the private builders? And given your guidance, do you think that the public builders, which kind of more the smile states, we all kind of know where they are, but like is inventory more of an issue in those markets where the publics are? Or is it more on the private side?

Yes, Ken, I'll start on that, and Robert will add on here. But I'd say, overall, what we're seeing year-to-date, the private and regional builders have held up pretty well. Custom builders especially, I think, have done pretty well so far this year. So in a tough environment, pretty well is relative, right? But they're hanging in there. I wouldn't say they're doing significantly worse than the big builders this year.

in there. I wouldn't say they're doing significantly worse than the big builders this year.

And I think custom builders doing well. I mean, obviously, you think about that client base for the majority of them. But then I'd say regional builders, look, regional builders have to sell what's coming out of the ground. So they've done well, but they've got to sell their inventory, and we see that in our discussions with them and our bidding with them as well. So I think that's where you see the pressure point there with the regionals.

Our next question is from Rafe Jadrosich with Bank of America.

It's Rafe. I wanted to just follow up on some of the price/cost commentary for the second half of the year. The $30 million headwind, it sounds like that's predominantly price on the Installation side. Are you getting any relief? Are you able to push back on the manufacturers yet? And if we go into 2026 and say the market stays like stable with where it is, remains soft, will there be more opportunity on the cost side of that price/cost equation? Like could that narrow going forward if the backdrop stays consistent?

Rafe, it's Robert. So look, there's an abundance of supply out there now, no doubt about it. So obviously, it's constant conversations with the supply partners to make sure we're calibrating. Obviously, they're important to us. We're important to them. So we're definitely having constant dialogue and conversations there. I mentioned spray foam earlier is a good example of that. So there's definitely a consistent dialogue happening with the supply partners right now across the business, quite honestly.

You haven't seen anything on the fiberglass side yet, though, it sounds like in terms of the relief from manufacturers?

I'd say there's been equal discussions there as well.

Okay. Got it. And then in terms of the outlook for M&A on the commercial roofing side with Progressive, can you talk about your willingness of the level of leverage you would be willing to take for larger deals, just given some of the weakness on the core business?

Yes, Rafe, this is Rob. So as we've talked historically, we're very comfortable between 1x and 2x net debt leverage. That's where we spend most of our time, but we have gone above that and we'll go above that. We've always delevered pretty quickly after that. And so we would anticipate doing that if we saw the right opportunity there to do that.

Our next question is from Reuben Garner with The Benchmark.

Congrats on the strong results. Just one question from me. In the past few years, not a ton of focus, I don't think from you guys on kind of growing your R&R business on the residential side, not -- didn't have the time, didn't have the resources and have the materials. Can you talk about that market? Is this kind of down cycle in new housing an opportunity to focus more there? Or is that still not kind of top of mind for you guys?

Yes. Reuben, this is Robert. So I'd say our Service Partners team gets after that on the R&R side. So relative to the smaller contractor that's doing that work. That's definitely a focus of our distribution business on the Service Partners side. So that continues to be a good part of the business, continues to be a healthy part of the business there because there are definitely smaller projects going on in the residential side. And so definitely, our Service Partners team gets after that, and that continues to be a focus for our distribution side of the business.

Thank you. There are no further questions at this time. I'd like to hand the floor back over to Robert for any closing comments.

Okay. Thank you for joining us today, and we look forward to talking with you in early November, where we'll be talking our Q3 results. Thank you.

This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.

Greetings, and welcome to the TopBuild to acquire Progressive Roofing Conference Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to P.I. Aquino, Vice President, Investor Relations. Please go ahead.

Good morning, everyone, and thank you for joining us on short notice. With me today are Robert Buck, our President and CEO; and Rob Kuhns, our CFO. Earlier this morning, we issued a press release announcing that we've entered into a definitive agreement to acquire Progressive Roofing, a leader in the commercial roofing installation services sector. 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. On our website, we posted the release as well as a presentation that provides an overview of the transaction that we'll be referring to on this call. Let me now turn the call over to our President and CEO, Robert Buck, who will start on Slide 3.

Good morning and thank you for joining us. Rob and I are excited to be with you to discuss today's announcement, which represents an important step in our growth journey. We'll cover the transaction overview first, and then I'll give you more detail on Progressive Roofing and our strategic rationale behind the deal. Rob will talk about the attractiveness of the commercial roofing industry, and then we'll open it up for Q&A. We are establishing a new platform for growth with the strategic acquisition of Progressive Roofing as we remain committed to creating value for our shareholders. Progressive is a highly profitable leader in commercial roofing installation and aftermarket services in the United States.

Progressive provides a full suite of offerings across the commercial roofing life cycle. The company serves key geographies out of their 12 branch locations and will provide TopBuild with a great platform for future geographic expansion and growth. Commercial roofing installation is a large, highly fragmented industry with a total addressable market of about $75 billion. A significant portion of commercial roofing services are nondiscretionary, providing a noncyclical, stable revenue stream with favorable margins.

From a financial perspective, Progressive has a solid track record of profitable growth. Revenue for the trailing 12 months ended March 31, 2025, totaled $438 million, and the company delivered EBITDA of $89 million, a very healthy margin of 20.3%.

Given the company's financial strength, we anticipate the transaction will be immediately accretive to EPS. The acquisition has an all-cash consideration of $810 million, which implies a multiple of 9.1x EBITDA. Assuming about $5 million in synergies, this gets us to an 8.6x EBITDA multiple post synergies. We expect to fund the acquisition with proceeds from our recently expanded credit facility. Pro forma for the transaction, net debt to adjusted EBITDA for the first quarter of 2025 is approximately 1.6x, which is well within our target leverage range. Finally, we expect the transaction to close early in the third quarter.

Thanks, Rob. Looking at Slide 4, you can see more details on Progressive Roofing. The company, which was founded in 1978, offers comprehensive services across the full roofing life cycle from new construction to nondiscretionary and recurring revenue streams from reroofing and maintenance services. In fact, about 70% of Progressive's business is reroofing, maintenance and services. Progressive is one of the largest commercial roofing services companies in the United States. Its sales growth has outpaced the market for the last few years. The company employs approximately 1,700 team members across the United States. The management team is highly experienced and brings deep industry expertise, a strong commitment to safety and a track record of attracting and retaining labor. Approximately 80% of Progressive's customer base are multiyear repeat clients, a direct result of the high-quality work and service they deliver. Progressive's customers span a diverse set of verticals, including industrial, technology, government, education and health care.

They've also been very successful at accelerating growth and extending their geographic reach through both greenfield and M&A activities. Let me take you through our strategic rationale at a high level on Slide 5, and then Rob and I will cover each one in more detail. Commercial roofing and this acquisition are a natural adjacency for TopBuild. First, it aligns with our TopBuild core strengths and culture. By building on our core competencies, we're better positioned for success, giving us the right to win. Second, the acquisition of Progressive Roofing broadens our product and service offerings for general contractors. Third, the addition of Progressive increases our exposure to noncyclical and nondiscretionary revenue drivers. Finally, the transaction provides a scalable platform into a sector with a large fragmented total addressable market. Those of you that follow TopBuild closely have heard us talk over the last few quarters about our thoughts on adjacencies and how we think about building on our core strengths.

On Slide 6, we've highlighted how Progressive Roofing's operations complement TopBuild and while the company is such a great fit. Both companies successfully utilize a dispersed branch business model with local empowerment and central support. We both place high value on maintaining strong partnerships with our suppliers, many of which are shared. Progressive has also made meaningful investments in technology, processes and training to capture performance metrics and provide data-driven insights across the business. Progressive and TopBuild are committed to safety and to cultivating a collaborative working environment. Safety programs, technical skill development and well-defined career road maps have enabled each of us to become an employer of choice in a competitive labor market.

Finally, like TopBuild, Progressive has a proven track record of successful accretive acquisitions and integration of those businesses. The company brings with it a strong pipeline of opportunities that will add to our ongoing growth. Turning to Slide 7. On the left, you can see several of the shared suppliers across both businesses. The diagram on the right shows how Progressive expands our installation and service capabilities to provide the broadest offering of building envelope solutions for general contractor customers. Let me now hand it over to Rob.

Thanks, Robert. I'll start my comments on Slide 8 and give you some color on the revenue streams of Progressive Roofing. Progressive's revenue is approximately 55% reroofing and 15% maintenance and services, largely in line with the overall commercial roofing industry. These revenue streams are driven by noncyclical and nondiscretionary demand. Demand for reroofing and maintenance services continue to strengthen due to an aging installed base of commercial buildings and more frequent weather events. 30% of the company's revenue come from new construction with those roofs providing a pipeline for future maintenance services and eventually reroofing. Slide 9 gives you a sense for just how large and how highly fragmented the commercial roofing services landscape is. With such a large total addressable market, approximately $75 billion, the acquisition of Progressive Roofing represents a robust platform for scalable future growth.

On a combined basis, the 20 largest commercial roofing companies account for only about 10% of the market and no single player accounts for more than 2% of the market. The great majority of the landscape is made up of tens of thousands of privately owned local businesses across the United States. As Robert mentioned earlier, Progressive has a proven track record of scaling its business, both organically and via acquisition. The company has an established M&A playbook and a strong pipeline of acquisition opportunities. Importantly, the company has experience with integrating acquisitions, successfully realizing synergies and driving margin expansion. Together, the complementary M&A strength of TopBuild and Progressive provide significant potential for growth. Last week, TopBuild celebrated our 10-year anniversary as a public company. And as you can see on Slide 10, we've delivered very strong growth and returns over that period of time.

Having successfully completed 43 acquisitions in our 10 years, M&A continues to be our #1 capital allocation priority. Our insulation end markets continue to provide significant white space for growth, and you will see us continue to do acquisitions in that space. In addition, we are extremely excited to be expanding those M&A growth opportunities into the commercial roofing market. Investors can rest assured that we will continue to maintain the disciplined M&A approach and rigorous diligence that we have in the past, which has led to the profitable growth, strong free cash flows and significant returns on invested capital that you see on this slide. With that, let me turn it back to Robert to wrap up our prepared remarks.

Let me close our call today by summarizing why we're so enthusiastic about this transaction. On Slide 11, Progressive Roofing and TopBuild are very closely aligned in how we operate our businesses, empower our branches and invest in our people and our culture. Together, we can broaden our building envelope offerings to commercial customers while expanding into the $75 billion commercial roofing installation and services market. The acquisition increases our sales resiliency given the sector's noncyclical, nondiscretionary recurring revenue drivers. Approximately 70% of Progressive's revenue is generated by reroofing and maintenance services. Progressive also provides a new platform for growth in a highly fragmented industry. Between our insulation end markets and commercial roofing installation and services, we have a well-developed M&A pipeline across a total addressable market of nearly $95 billion.

We're very excited to welcome the Progressive Roofing team to the TopBuild family. We anticipate hosting an Investor Day in the coming months to share our progress and our plans to continue to drive sustainable, profitable growth and creating value for our shareholders. We expect to share more details soon. With that, operator, let's open up the line for questions.

[Operator Instructions] Our first question today is coming from Stephen Kim from Evercore ISI.

Exciting stuff. Thanks for all the information so far. I wanted to explore, if I could, the $5 million synergy target you set up and maybe broaden the question to include potential purchase synergies and sales synergies. So the question is basically is, can you help us understand what that $5 million encompasses? And then are there any purchase synergies that you see with this acquisition? And are there any potential sales synergies that you see as well?

Stephen, it's Robert. I'll start. So yes, of the $5 million, it's about half and half between material and some other supply chain kind of opportunities and then some, what I'd call indirect opportunities that we'll get -- that we see in acquisitions, and we're highly confident with the Progressive acquisition. So we feel highly confident in that number, but definitely some purchasing synergies are part of that. And we think as we do more deals in this space, those synergy opportunities will continue to grow, as you might expect. So yes, so high level of confidence relative to that. And then second question, can you repeat it again?

Well, I think you pretty much addressed it, although I just did have a question. I didn't really know what you meant by indirect, what exactly that encompass.

Yes. So that would be like insurances, those types of things that we see good leverage on in our acquisitions. And I think the second question -- sorry, was around selling opportunities. So yes, we see some cross-selling opportunities. So let me give you kind of an example. Progressive is playing big in the space of data centers. As you know, we very much so do on the mechanical side and on our heavy commercial side of our business as well. So that's going to be some of the same general contractor relationships. And so how we'll be able to take leads and offer a more broader bundle to these contractor customers, we definitely are going to see some opportunities and that deal wasn't based upon that. But given discussions that we've already had, we know those opportunities are going to exist.

And Stephen, this is Rob. As you know, we -- on these deals, we like to underpromise and overdeliver for sure, when it comes to synergies. And like Robert said, this deal is really about getting a platform and the future synergies we're going to be able to drive with future deals in this space.

Yes, that's encouraging. I guess second question would be whether you whether you see opportunities to distribute roofing products? Or is it your intent to only provide labor because we observed that your other 2 existing segments are primarily based around distribution of products. This one seems like maybe it's more about just simply providing the labor. So I just want to see if you could clarify that for us.

Yes. So this is definitely installed a bundled package of material and labor in this commercial roofing side of the business, Stephen. But your question is a good one. So from a distribution side, there's actually some of these products that crossover that you saw when we talked about supplier crossover. There's actually some of these products that we already supply. So if you look at a built-up roofing system and some of the polyiso boards, some of the sealants, some of the maybe air barriers, those types of things, those are similar products we're already distributing today. So there's already some nice crossover for some of the complementary products in roofing and what we already distribute in our core business today.

But you're not looking to expand significantly that distribution of commercial roofing products. Am I right about that?

Yes, you're correct. No plan for any significant expansion of that.

Next question is coming from Phil Ng from Jefferies.

This is Maggie, on for Phil. I guess, first, kind of similar to Steve's last question, how should we think about this opportunity between just the commercial side of roofing? Is there any opportunity on the residential side, not specifically with the Progressive acquisition, but do you think of this as a platform for maybe future expansion into the residential side?

Maggie, Robert. So we did a lot of work here in the space around roofing to understand the opportunities here for the future. And so as we looked at that and looked at the commercial side, it was much more attractive to us for the reasons that we talked about. So residential would not be an area that we're looking at going into. We think there's there are different pressures in that part of the industry. And so we're strictly here focused on the commercial side of it. So really no plans to expand into the residential side of roofing.

Okay. Okay. That makes sense. And then you talked about for Progressive the last few years, it's seeing outsized growth versus the industry. Maybe we could dig a little more into that. Is that more M&A driven? Or are there organic expansion initiatives that they've been benefiting from?

Maggie, this is Rob. I can start with that. I mean their growth has been great, both on the organic and M&A side. I can tell you the industry on the organic side has been kind of traditionally more kind of low single-digit volume, low single-digit price, so kind of growing at mid-single digits. And over the last 4 years, Progressive has grown somewhere north of 20% just with their core business. And then you layer on top of that, they've done -- in the last, call it, 2 years, they've done 3 acquisitions that have added to their sales as well. And like we've talked about in the presentation, they've got similar to us, a very good process around M&A, very thorough process. So that's definitely a big opportunity moving forward is to rev up that engine on the M&A side and continue their growth, both organically and via M&A.

Next question is coming from Trey Grooms from Stephens.

This is Ethan, on for Trey. Just wanted to ask, how does the addition of more stable through-the-cycle roofing demand with Progressive and other acquisitions in the future? How does that benefit TopBuild's free cash generation and enhance your M&A roll-up strategy? And is the cash conversion there similar to TopBuild?

Yes. Yes, I'll start with the end of that. I mean, from a cash conversion, it's very similar. In fact, their CapEx actually runs a little lower than ours. So we run 1%, 1.5%. They typically run a little bit lower than that. Their working capital similar around kind of more towards the high end of ours, probably 13%, 13.5%. So great free cash flow generation in the business. And then as you mentioned, I mean, the resiliency of the revenue in this space is something we really are excited about, right? It's something that when we got into DI, into the mechanical space, we learned about the recurring revenue streams we have there.

That's really helping us out in that side of the business today. And so as we look at this business, we get even more excited and even the entire industry, you're looking at 70% of the revenues being nondiscretionary. Your roof is leaking, you're going to get it fixed type of work. So very excited about that, very excited about the resiliency of our revenue streams going forward and the opportunity to continue to grow those.

Okay. Got it. Got it. And then how are you looking to balance M&A moving forward in roofing versus insulation? Understanding you mentioned you still plan to continue insulation-related M&A. And separately, while it's still early days here, are there any other verticals at this point you'd be willing to consider that might further that comprehensive building envelope portfolio? Or is it more just wait and see down the road what opportunities present themselves?

Ethan, Robert. So look, we expect to be active both in our core of insulation. There's still, as Rob mentioned in his prepared remarks, a lot of white space there, and we're very active. The pipeline is still active in that, both on the mechanical side and in the residential commercial side of our current core insulation business. And then Progressive has a very active pipeline and some deals that we already know that are potentially out there on the commercial roofing side. So you're going to see us be active in both, and we know we have runway in both areas here for the future.

As far as other verticals, nothing that we would mention. I think there's -- we got -- we talked about the TAM being now nearly $95 billion. So there's a lot of runway, a lot of white space there. But in some of our work here, we did see things in our core business that we continue to work on and expand there. So we got a lot of opportunity here. And this is just -- we did a lot of diligence in this space, and it was the right time for us to move here into the commercial roofing side of the business. So just continue to build a great path of growth here for our shareholders and for the business.

Next question is coming from Susan Maklari from Goldman Sachs.

First question is on the $75 billion TAM that you talked about in your prepared remarks. Can you give us a bit more detail breaking that down? How much of that is in the core sort of deals that you would be interested in? How do you think about the areas that you really want to focus on as you build out the platform and the potential, how that could come together?

Yes, Susan, this is Rob. I mean just giving you a little bit more color on that. I mean it includes both the new construction as well as the R&R, the reroofing, the maintenance. So it's the total TAM of all of those with roughly 70% of that being on the R&R side and 30% being new construction. As you look at the lay of the land there with the competition, and we've got a nice chart in the presentation on that. The largest 20 players in that space make up about 10% of the market. And then the other 90% is a lot of local businesses, similar to what we've seen in some of our core markets we have today. So a lot to be excited about there, just given the fragmentation and the potential for the future there.

And Susan, this is Robert. Maybe I'd add on. If you look at the pipeline of deals, a lot of these companies are strictly focused in the commercial side of the business. So that even makes looking at the pipeline more attractive.

Okay. That's helpful color. And then you mentioned that you'll be paying cash for this. I think you expect pro forma leverage to go up to about 1.6x. Can you just talk about the uses of cash as this comes together, how you're thinking about deleveraging versus continuing to grow the business and perhaps shareholder returns?

Yes. Susan, this is Rob again. I'd say, obviously, at 1.6x, we feel still very modestly levered there. We've, in the past, for the right deals, gone north of 2, 2.5. So we've got plenty of room if we decide -- if we find another strategic deal that we think fits well. We've got room to add some leverage with the cash flow we're generating and the cash flow Progressive is going to generate for us. We've got plenty of cash to continue to do the small to medium-sized deals that we do every quarter. And we still feel like we've got great runway on the buyback as well. We've got the capacity to do both. So you're going to see us continue forward as we've been here for the past few years from a capital allocation standpoint.

Next question is coming from Michael Rehaut from JPMorgan.

This is [indiscernible] on for Mike. I wanted to ask how you view complementary products going forward and whether we should see a focus on roofing going forward or also continue to focus on other complementary products to add on to the platform?

This is Robert. So if you think about the -- our prepared remarks, we talked about the $95 billion TAM, and that obviously is our core insulation space, which we remain focused on growing that organically and through acquisition, and we still see a lot of white space and runway. And then this new $75 billion TAM on the commercial roofing side, which is strictly focused on commercial roofing, the makeup of that TAM. So I think you can expect to see us in that space, stay focused in that space, and there's a lot of opportunity here for definitely the foreseeable future in our business.

So that's what we like about it, a great time to get into this area, and it's just such a natural adjacency for TopBuild and how it lines up with our strengths and Progressive is just a great fit given the team there and given the culture fit as well. So it's perfect timing for this.

Yes. And the only thing -- this is Rob. The only thing I'd add to that, we started this process over a year ago at looking at potential adjacencies or complementary products. We've done a deep dive on a lot of different categories. And there's others that are attractive that potentially down the road might be opportunities for us. But as Robert said, what came to the top of the list by far in that in terms of where we felt TopBuild would have a right to win in terms of the attractiveness of the end market with things like recurring revenue, the profitability of the businesses, the size of the TAM, commercial roofing shot up to the top of that list for sure. So given the white space we still have in our core of insulation, given the white space we have in this TAM, I think you'll see us, as Robert said, staying focused on that here for the foreseeable future.

Sure. That sounds really great. And then one other last quick question on that. In terms of -- you mentioned the technology investments and sort of that shared culture. How should we think about like the duration of the ERPs? And how do you view sort of those -- that process on your end?

Yes. So this is Robert. So look, we're going to -- as you've seen us do in the past, we're going to take some time to learn the business. We know that we have some great tools. We know that Progressive has some great tools as well. And during our discussions of getting this deal done, we've talked through those as well. So we think about some people tools, that type of thing. Those will be some of the first areas. But we're going to learn from an ERP perspective and make sure we have something that's actually going to add value to the Progressive business.

Again, they've built some really nice tools there, which really drives what they're able to do with their customers, how they bid projects, how they keep up the projects and track projects for successful installs. And so it will be something that will eventually be on the same system, but we're going to take some time to learn here, make sure the customer experience is not interrupted, and we continue to support what Progressive does and that's excellent service for their customers.

Next question is coming from Collin Verron from Deutsche Bank.

Just one of the hallmarks of the insulation installation business has been your ability to manage price cost and drive margin improvement. Can you just talk about the industry structure here for Progressive and how successful they have been and maybe the whole commercial roofing installation business as a whole has been in managing price cost over time?

Yes, it's Robert. So yes, the team there has done a really nice job. I mean if you think about our history and our road map here, you talked about how we manage margin, how we manage cost, price, that stuff. We've seen that in the same history that we've been looking at the Progressive business, and they've actually expanded margins through, I'd say, everything from sales development to talent, to estimating process, to how they bid the jobs, the jobs they select to how they manage the jobs all the way through the process here. They've actually what I call operational excellence, how they work that into their process.

So we've seen, as we look at the history of the business here of Progressive, we've seen the margins expand. And I think they have great control over that and how they manage labor once they go into the job site. Again, I go back to why it's such a great fit with TopBuild because the same things that we do to manage our business on the contract and installation side, we see Progressive doing the same things, how important the labor aspect of it is, how important these local relationships are and how you manage that and how that eventually at the end of the day, drifts down to the bottom line and the profitability of the business. So very similar characteristics, very similar makeup. It is a local business. So we talk about this dispersed model. So again, why it's such a natural fit and very similar industry structure.

Great. That's really helpful color. I guess just more -- concentrating more on the margin side. It already has a 20% EBITDA margin. I guess, can you just talk about how sustainable that margin is and sort of your guys' ability to expand it going forward here? Or is it really going to be concentrated on sort of the top line growth on the commercial roofing side?

Yes, Collin, this is Rob. So I mean, obviously, it's a tremendous margin they have. And obviously, we've done a lot of homework in the space, looked at a lot of other players. I'd say they're best-in-class there, right? So we know as we look at other companies, you're probably looking at more mid- to upper teens. And just like we talk about in our commercial business with these large commercial projects, there's a wide range, right? There's some people more at the lower end of margins, too, with a lot of opportunity for improvement that we think these guys with their best practices, and what they've been able to do in their business in terms of how they bid work, how they review those bids as they share those best practices with other folks, there's going to be opportunities to lift up others in that space. I mean, honestly, looking at their numbers, I don't see a ton of runway upwards, right? But I think the big opportunity will be with the future deals and how we're able to expand the margins of those businesses by sharing the best practices that Progressive has today.

Our next question today is coming from Rafe Jadrosich from Bank of America.

I wanted to ask, can you talk a little bit about the management team at Progressive, if there's any changes that are going to happen? And then from just an M&A perspective, will Progressive and then TopBuild have separate M&A teams? Or will that all be consolidated?

Yes. So great question. So the management team at Progressive, there will be no changes. So they have a President and CEO that's running that business. He'll be staying as a COO that's heavily involved in the operations will be staying on. Their CFO or Head of Finance, he'll be staying on. And they have a Chief Growth Officer, which is focused on growing the business, inclusive of M&A and organically. He'll be staying on as well. So the Progressive management team will be staying in place.

And then relative to the future on the M&A side, so they've got a great process, a disciplined process. So we're going to share best practices, but they have a lot of relationships in the space there. So for now, we'll have our M&A team, what we'll call on the roofing side of the business. We have an M&A team on the insulation side of the business, and those will run concurrently, but working with our TopBuild executive team here. And we've already had those discussions, and I think everybody is pretty excited about how we're going to do that and keep the momentum in both businesses relative to M&A.

Great. That's really helpful. And then just a little bit more on the roofing M&A side. Can you maybe compare it to the opportunity that you saw in residential installation, if you go back historically in terms of like how much you were able to consolidate the industry. I think you've been able to pay on smaller deals and insulation, very attractive multiples, 5 to 6x and then you'd get the synergies would bring that down to 3 to 4x. Should we think on smaller deals, you'll be able to pay a lot lower multiples than what you just paid for Progressive? Maybe if you can just compare like the playbook that you did on insulation that was so -- insulation that was so successful, how that compares to the commercial opportunity.

Yes. I think you did a nice job of describing the landscape. So it's very fragmented. for sure. As Rob went through, the top 20 make up 10% of the industry. So there's a lot of opportunity, a lot of space for growth there and a lot of relationships are already established. So very similar from that perspective of what the landscape looks like. So we're excited about that again. And as we think about the dynamics here of the industry relative to this dispersed model relative to the total package of material and labor, we see a very similar landscape to what we've been able to execute well on.

And then I think the last piece that I would say, Rob may have something to add is if you look at the acquisitions that we do as TopBuild, obviously, we get synergies day 1, but then we bring this operational excellence piece to the table. That's what we see in Progressive. Rob talked about it how they're going to -- how Progressive teaches that Progressive way and that operational excellence and stuff. So you've got this piece of driving synergies quickly, and you got this way of constantly improving the business over time operationally from a sales perspective, from an operational perspective. So they have a great, what I'd call business system around that, very attractive and why this does create a new platform.

Yes. And this is Rob, Rafe. The only thing I would add to that is just to hit on your question on multiples, we expect and what we've seen from the deals these guys have done is that on the smaller deals, smaller than this, medium-sized deals, the multiple is going to be less than this. And then on some of the larger chunkier deals that are out there, just like in our space, the multiple is going to be a little bit higher, but obviously, the synergy opportunities on those deals will be significantly greater. So we're very excited about it.

Next question is coming from Reuben Garner from The Benchmark Company.

Maybe to start a follow-up on the pricing environment. I know the materials itself in the space have been under pressure recently. You mentioned how it's similar to the insulation space and that you're selling labor. Can you talk about how pricing has held up more recently for Progressive?

Yes. This is Robert. So whenever we look at it over time, they've done a nice job of sustaining, I would say, actually growing. So as they've looked to ways of improving business, how they're bidding the work, how the jobs they're taking, the jobs that leverage their strengths, how they manage labor on the site, the number of man hours, man days on the sites and stuff. We talked about their investment in technology and kind of using data-driven insights into the business, they've done a really nice job over the past, I'm going to say, 2 to 3 years in growing that competency in their business.

So even given some of the dynamics you mentioned, they've done a nice job of maintaining and even expanding. And some people have asked the question or may ask the question about tariff impact, very minimal, similar to what we talked about in our core business, very minimal on this side as well. So it's a lot of attractive parts about this business and a great company and Progressive.

Great. That was going to be my second question. So I'm going to sneak one more in. So one of the advantages that you have in the insulation space is a pretty significant material purchasing advantage. Does Progressive have an advantage over smaller peers today? Is that something that maybe you think you can gain -- gain over time as you consolidate the space? Any kind of color there on how much material synergy they might have over smaller companies that you may purchase down the road would be helpful.

Yes. Maybe a couple of comments there. I think Rob said it well. As we do more deals in the space, we expect the synergies to continue to improve and bigger the deals, the more attractive the synergies. And I would just say from a Progressive standpoint, they have great supplier relationships, done a nice job of building those over the years, and I think they see the benefit of that.

We have reached the end of our question-and-answer session. I'd like to turn the floor back over for any further or closing comments.

We appreciate all of you joining us for today's call. Please reach out with any questions, and we'll talk with you next when we announce our second quarter earnings in early August. Thank you.

Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.