TopBuild Reports First Quarter Results, Raises 2024 Outlook and Announces $1B Share Repurchase Authorization

First quarter sales grow 1.1% to $1.3 billion

Gross margin expands 100 basis points to 30.3%

Adjusted EBITDA margin expands 100 basis points to 19.8%

DAYTONA BEACH, Fla., May 07, 2024 (GLOBE NEWSWIRE) — TopBuild Corp. (NYSE:BLD) a leading installer and specialty distributor of insulation and building material products to the construction industry in the United States and Canada today reported results for the first quarter ended March 31, 2024.

Robert Buck, President and Chief Executive Officer, said, “We are proud of our first quarter results, which reflect the strength of our business, our ongoing drive to improve, and the hard work of our team. We continue to focus on growing the business – both organically and through M&A – and delivering operational improvements, as evidenced by the 100 basis point expansion in our first quarter adjusted EBITDA margin year over year.”

First Quarter Financial Highlights
(comparisons are to the quarter ended March 31, 2023)

3 Months Ended 3/31/24 Reported Change
Sales $1,278,717 1.1%
Gross Margin 30.3% 100 bps
SG&A as % of revenue 13.5% 0 bps
Operating Profit $214,508 7.6%
Operating Margin 16.8% 100 bps
Net Income $152,381 12.2%
Net Income per diluted share $4.79 11.9%
     
3 Months Ended 3/31/24 Adjusted Change
Sales $1,278,717 1.1%
Gross Margin 30.3% 100 bps
SG&A as % of revenue 13.5% 30 bps
Operating Profit $214,434 5.6%
Operating Margin 16.8% 70 bps
Net Income $153,122 10.7%
Net Income per diluted share $4.81 10.3%
EBITDA $253,818 6.5%
EBITDA Margin 19.8% 100 bps
     

Operating Segment Highlights ($ in 000s)
(comparisons are to the period ended March 31, 2023)

Installation 3 Months
Ended
3/31/24
  Specialty
Distribution
3 Months
Ended
3/31/24
Sales $798,743   Sales $545,794
Change     Change  
Volume 0.3%   Volume (4.2)%
Price 1.2%   Price 1.5%
M&A 3.5%   M&A 0.4%
Dispositions (0.9)%   Dispositions 0.0%
Total Change 4.1%   Total Change (2.3)%
Operating Margin 19.6%   Operating Margin 14.2%
Change 50 bps   Change 110 bps
Adj. Operating Margin 19.6%   Adj. Operating Margin 14.1%
Change 40 bps   Change 90 bps
Adj. EBITDA Margin 22.0%   Adj. EBITDA Margin 16.9%
Change 60 bps   Change 110 bps
         

Capital Allocation

2024 Acquisitions
Year to date, the Company has announced the acquisition of five insulation companies which are expected to generate approximately $68 million in annual revenue. They are listed in the chart below.

     
  TTM Revenue  
Company  ($ millions) Month
Brabble Insulation (I) $5.2 February
Morris Black & Sons (I) $3.8 March
Pest Control Insulation (D) $25.4 March
Green Space Insulation (I) $6.0 April
Insulation Works (I) $28.0 May
Total $68.4  
I = Installation, D = Specialty Distribution  
     

“We are extremely disciplined regarding capital allocation. We will continue to prioritize reinvesting our free cash flow to make acquisitions and drive increased shareholder value. With a total addressable market of more than $18 billion across our highly fragmented end markets, we are actively evaluating a strong pipeline of opportunities. Year-to-date, we have announced five acquisitions totaling approximately $68 million in annual revenue,” continued Buck.

New Share Repurchase Authorization
TopBuild also announced today that its Board of Directors authorized the repurchase of up to $1.0 billion of the Company’s outstanding common stock. The new authorization is in addition to the $154.0 million remaining from the prior authorization, bringing the total availability for share repurchases to $1.15 billion.

“Our new repurchase authorization demonstrates management and our Board of Directors’ continued confidence in and support of our long-term strategy and the importance of returning capital to shareholders,” Buck said.

2024 Outlook1
“We are confident in our ability to continue delivering strong performance in 2024. Our unique business model, our commitment to driving shareholder value, and our ability to successfully navigate changes in the macro environment position us extremely well for the long term,” concluded Buck.

The Company’s raised its outlook for 2024 in light of strong profitability in the first quarter and to incorporate the acquisitions completed to date in 2024.

2024 Low High
Sales $ 5,400   $ 5,600  
Adjusted EBITDA* $ 1,065   $ 1,155  

* See table for Adjusted EBITDA reconciliation.

1 This outlook reflects management’s current view of present and future market conditions and is based on assumptions such as housing starts, general and administrative expenses, and interest rates. These targets do not include any effects related to potential acquisitions or divestitures that may occur after the date of this press release. A reconciliation of non-GAAP targets to corresponding GAAP measures is not available on a forward-looking basis without unreasonable effort due to the uncertainty regarding, and the potential variability of, the costs and expenses that may be incurred in the future and therefore, cannot be reasonably predicted. The effect of these excluded items may be significant. Factors that could cause actual long-term results to differ materially from TopBuild’s current expectations are discussed below and are also detailed in the Company’s most recent Annual Report on Form 10-K and subsequent SEC reports.

Conference Call
A conference call to discuss first quarter 2024 financial results is scheduled for today, Tuesday, May 7, at 9:00 a.m. Eastern Time. The call may be accessed by dialing (877) 407-9037. The conference call will be webcast simultaneously on the Company’s website at www.topbuild.com. In addition, a copy of management’s formal remarks and a presentation will be available immediately prior to the conference call on www.topbuild.com.

About TopBuild
TopBuild Corp., headquartered in Daytona Beach, Florida, is a leading installer and specialty distributor of insulation and related building material products to the construction industry in the United States and Canada. We provide insulation installation services nationwide through our Installation segment which has approximately 240 branches located across the United States. We distribute building and mechanical insulation, insulation accessories and other building product materials for the residential, commercial, and industrial end markets through our Specialty Distribution business. Our Specialty Distribution network encompasses approximately 170 branches. To learn more about TopBuild please visit our website at www.topbuild.com.

Use of Non-GAAP Financial Measures

Adjusted EBITDA, incremental EBITDA margin, adjusted EBITDA margin, the “adjusted” financial measures presented above, and figures presented on a “same branch basis” are not calculated in accordance with U.S. generally accepted accounting principles (“GAAP”). The Company believes that these non-GAAP financial measures, which are used in managing the business, may provide users of this financial information with additional meaningful comparisons between current results and results in prior periods. We define same branch sales as sales from branches in operation for at least 12 full calendar months. Such non-GAAP financial measures are reconciled to their closest GAAP financial measures in tables contained in this press release. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company’s reported results under GAAP. Additional information may be found in the Company’s filings with the Securities and Exchange Commission which are available on TopBuild’s website under “SEC Filings” at www.topbuild.com.

Safe Harbor Statement
This press release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act.  These forward-looking statements may address, among other things, our expected financial and operational results, the related assumptions underlying our expected results, and our plan to repurchase our common stock under stock repurchase transactions. These forward-looking statements can be identified by words such as “will,” “would,” “anticipate,” “expect,” “believe,” “designed,” “plan,” “may,” “project,” “estimate” or “intend,” the negative of these terms, and similar references to future periods.  These views involve risks and uncertainties that are difficult to predict and, accordingly, our actual results may differ materially from the results discussed in our forward-looking statements.  Our forward-looking statements contained herein speak only as of the date of this press release.  Factors or events that we cannot predict, including those described in the risk factors contained in our filings with the Securities and Exchange Commission, may cause our actual results to differ from those expressed in forward-looking statements.  Although TopBuild believes the expectations reflected in such forward-looking statements are based on reasonable assumptions, the Company can give no assurance that its expectations will be achieved and it undertakes no obligation to update any forward-looking statements as a result of new information, future events, or otherwise, except as required by applicable law.

(tables follow)

             
TopBuild Corp.            
Condensed Consolidated Statements of Operations (Unaudited)      
(in thousands, except share and per common share amounts)      
             
    Three Months Ended March 31, 
    2024     2023  
Net sales   $ 1,278,717     $ 1,265,238  
Cost of sales     891,567       895,023  
Gross profit     387,150       370,215  
             
Selling, general, and administrative expense     172,642       170,784  
Operating profit     214,508       199,431  
             
Other income (expense), net:            
Interest expense     (18,795 )     (18,039 )
Other, net     11,282       1,923  
Other expense, net     (7,513 )     (16,116 )
Income before income taxes     206,995       183,315  
             
Income tax expense     (54,614 )     (47,445 )
Net income   $ 152,381     $ 135,870  
             
Net income per common share:            
Basic   $ 4.82     $ 4.31  
Diluted   $ 4.79     $ 4.28  
             
Weighted average shares outstanding:            
Basic     31,641,454       31,550,658  
Diluted     31,843,818       31,713,239  
             
TopBuild Corp.              
Condensed Consolidated Statements of Comprehensive Income (Unaudited)
(in thousands)              
               
    Three Months Ended March 31, 
    2024   2023
Net income   $ 152,381     $ 135,870  
Other comprehensive (loss) income:              
Foreign currency translation adjustment     (4,092 )     1,753  
Comprehensive income   $ 148,289     $ 137,623  
               
TopBuild Corp.                
Condensed Consolidated Balance Sheets and Other Financial Data (Unaudited)              
(dollars in thousands)                
    As of
    March 31, 2024   December 31, 2023
ASSETS                
Current assets:                
Cash and cash equivalents   $ 968,809     $ 848,565  
Receivables, net of an allowance for credit losses of $22,398 at March 31, 2024, and $23,948 at December 31, 2023     829,221       799,009  
Inventories     375,056       364,731  
Prepaid expenses and other current assets     29,376       36,939  
Total current assets     2,202,462       2,049,244  
                 
Right of use assets     201,392       204,629  
Property and equipment, net     266,422       264,487  
Goodwill     2,052,319       2,042,568  
Other intangible assets, net     578,335       591,058  
Other assets     9,522       10,865  
Total assets   $ 5,310,452     $ 5,162,851  
                 
LIABILITIES                
Current liabilities:                
Accounts payable   $ 467,863     $ 469,585  
Current portion of long-term debt     46,230       47,039  
Accrued liabilities     201,402       187,217  
Short-term operating lease liabilities     67,041       65,780  
Short-term finance lease liabilities     1,829       1,917  
Total current liabilities     784,365       771,538  
                 
Long-term debt     1,362,498       1,373,028  
Deferred tax liabilities, net     243,622       243,930  
Long-term portion of insurance reserves     60,179       58,783  
Long-term operating lease liabilities     142,552       146,213  
Long-term finance lease liabilities     3,716       4,150  
Other liabilities     1,487       1,554  
Total liabilities     2,598,419       2,599,196  
                 
EQUITY     2,712,033       2,563,655  
Total liabilities and equity   $ 5,310,452     $ 5,162,851  
                 
    As of March 31, 
    2024   2023
Other Financial Data                
Receivable days     52       52  
Inventory days     38       43  
Accounts payable days     62       60  
Receivables, net plus inventories less accounts payable   $ 736,414     $ 805,225  
Receivables, net plus inventories less accounts payable as a percent of sales (TTM) †     14.0 %     15.6 %
                 
† Trailing 12 months sales have been adjusted for the pro forma effect of acquired branches                
                 
TopBuild Corp.            
Condensed Consolidated Statement of Cash Flows (Unaudited)            
(in thousands)            
             
    Three Months Ended March 31, 
    2024   2023
Cash Flows Provided by (Used in) Operating Activities:                   
Net income   $ 152,381     $ 135,870  
Adjustments to reconcile net income to net cash provided by operating activities:            
Depreciation and amortization     34,257       32,100  
Share-based compensation     5,127       3,135  
(Gain)/loss on sale of assets     (561 )     185  
Amortization of debt issuance costs     720       720  
Provision for bad debt expense     4,464       1,338  
Provision for inventory obsolescence     2,902       1,642  
Deferred income taxes, net     (240 )     563  
Change in certain assets and liabilities:            
Receivables, net     (28,486 )     (10,847 )
Inventories     (12,056 )     20,096  
Prepaid expenses and other current assets     7,541       11,579  
Accounts payable     (2,659 )     (25,480 )
Accrued liabilities     16,170       (3,339 )
Other, net     (783 )     2,239  
Net cash provided by operating activities     178,777       169,801  
             
Cash Flows Provided by (Used in) Investing Activities:            
Purchases of property and equipment     (19,881 )     (15,580 )
Acquisition of businesses, net of cash acquired     (22,240 )     (45,845 )
Proceeds from sale of assets     1,608       455  
Net cash used in investing activities     (40,513 )     (60,970 )
             
Cash Flows Provided by (Used in) Financing Activities:            
Repayment of long-term debt     (12,059 )     (9,743 )
Taxes withheld and paid on employees’ equity awards     (6,059 )     (6,350 )
Exercise of stock options     1,020       1,029  
Net cash used in by financing activities     (17,098 )     (15,064 )
Impact of exchange rate changes on cash     (922 )     (58 )
Net increase in cash and cash equivalents     120,244       93,709  
Cash and cash equivalents – Beginning of period     848,565       240,069  
Cash and cash equivalents – End of period   $ 968,809     $ 333,778  
             
Supplemental disclosure of noncash activities:            
Leased assets obtained in exchange for new operating lease liabilities   $ 13,737     $ 18,271  
Accruals for property and equipment     307       835  
             
TopBuild Corp.                      
Segment Data (Unaudited)                      
(dollars in thousands)                      
                       
    Three Months Ended March 31,         
      2024       2023     Change   
Installation                      
Sales   $ 798,743     $ 767,090       4.1   %
                       
Operating profit, as reported   $ 156,757     $ 146,897          
Operating margin, as reported     19.6   %   19.1   %      
                       
Acquisition related costs     45       263          
Operating profit, as adjusted   $ 156,802     $ 147,160          
Operating margin, as adjusted     19.6   %   19.2   %      
                       
Share-based compensation     330       379          
Depreciation and amortization     18,267       16,493          
EBITDA, as adjusted   $ 175,399     $ 164,032       6.9   %
EBITDA margin, as adjusted     22.0   %   21.4   %      
                       
Specialty Distribution                      
Sales   $ 545,794     $ 558,375       (2.3 ) %
                       
Operating profit, as reported   $ 77,579     $ 73,333          
Operating margin, as reported     14.2   %   13.1   %      
                       
Rationalization charges     (750 )              
Acquisition related costs           340          
Operating profit, as adjusted   $ 76,829     $ 73,673          
Operating margin, as adjusted     14.1   %   13.2   %      
                       
Share-based compensation     433       238          
Depreciation and amortization     14,836       14,572          
EBITDA, as adjusted   $ 92,098     $ 88,483       4.1   %
EBITDA margin, as adjusted     16.9   %   15.8   %      
                       
TopBuild Corp.                      
Adjusted EBITDA (Unaudited)                      
(dollars in thousands)                      
                       
    Three Months Ended March 31,           
    2024   2023     Change 
Total net sales                      
Sales before eliminations   $ 1,344,537     $ 1,325,465            
Intercompany eliminations     (65,820 )     (60,227 )          
Net sales after eliminations   $ 1,278,717     $ 1,265,238       1.1   %
                       
Operating profit, as reported – segments   $ 234,336     $ 220,230            
General corporate expense, net     (9,067 )     (10,828 )          
Intercompany eliminations     (10,761 )     (9,971 )          
Operating profit, as reported   $ 214,508     $ 199,431            
Operating margin, as reported     16.8   %   15.8   %        
                       
Rationalization charges     (750 )                
Acquisition related costs †     676       3,658            
Operating profit, as adjusted   $ 214,434     $ 203,089            
Operating margin, as adjusted     16.8   %   16.1   %        
                       
Share-based compensation     5,127       3,135            
Depreciation and amortization     34,257       32,100            
EBITDA, as adjusted   $ 253,818     $ 238,324       6.5   %
EBITDA margin, as adjusted     19.8   %   18.8   %        
                       
Sales change period over period     13,479                  
EBITDA, as adjusted, change period over period     15,494                  
Incremental EBITDA, as adjusted, as a percentage of change in sales     114.9   %              
                       
† Acquisition related costs include corporate level adjustments as well as segment operating adjustments
                       
TopBuild Corp.              
Same Branch and Acquisition Metrics (Unaudited)              
(dollars in thousands)              
               
    Three Months Ended March 31,   
    2024   2023  
Net sales              
Same branch:              
Installation   $ 771,942     $ 760,652    
Specialty Distribution     543,445       558,375    
Eliminations     (65,820 )     (60,227 )  
Total same branch   $ 1,249,567     $ 1,258,800    
               
Acquisitions (a):              
Installation   $ 26,801     $    
Specialty Distribution     2,349          
Total acquisitions     29,150          
               
Dispositions (b):              
Installation   $     $ 6,438    
Total dispositions           6,438    
Total net sales   $ 1,278,717     $ 1,265,238    
               
EBITDA, as adjusted              
Same branch   $ 250,105     $ 237,190    
Acquisitions (a)     3,713          
Dispositions (b)           1,134    
Total   $ 253,818     $ 238,324    
               
EBITDA, as adjusted, as a percentage of sales              
Same branch (c)     20.0   %      
Acquisitions (d)     12.7   %      
Total (e)     19.8   %   18.8   %
               
As Adjusted Incremental EBITDA, as a percentage of change in sales              
Same branch (f)     NM          
Acquisitions (d)     12.7   %      
Total (g)     114.9   %      
               
(a) Represents current year impact of acquisitions in their first twelve months              
(b) Represents operating results in prior period previously classified as same branch              
(c) Same branch metric, as adjusted, as a percentage of same branch sales              
(d) Acquired metric, as adjusted, as a percentage of acquired sales              
(e) Total EBITDA, as adjusted, as a percentage of total sales              
(f) Change in same branch EBITDA, as adjusted, as a percentage of change in same branch sales        
(g) Change in total EBITDA, as adjusted, as a percentage of change in total sales              
NM Not Meaningful              
               
TopBuild Corp.              
Non-GAAP Reconciliations (Unaudited)              
(in thousands, except share and per common share amounts)              
               
    Three Months Ended March 31,   
    2024   2023  
Gross Profit Reconciliation              
               
Net sales   $ 1,278,717     $ 1,265,238    
               
Gross profit, as reported   $ 387,150     $ 370,215    
               
Acquisition related costs              
Gross profit, as adjusted   $ 387,150     $ 370,215    
               
Gross margin, as reported     30.3   %   29.3   %
Gross margin, as adjusted     30.3   %   29.3   %
               
Selling, General and Administrative Expense Reconciliation              
               
Selling, general, and administrative expense, as reported   $ 172,642     $ 170,784    
               
Rationalization charges     (750 )        
Acquisition related costs     676       3,658    
Selling, general, and administrative expense, as adjusted   $ 172,716     $ 167,126    
               
Operating Profit Reconciliation              
               
Operating profit, as reported   $ 214,508     $ 199,431    
               
Rationalization charges     (750 )        
Acquisition related costs     676       3,658    
Operating profit, as adjusted   $ 214,434     $ 203,089    
               
Operating margin, as reported     16.8   %   15.8   %
Operating margin, as adjusted     16.8   %   16.1   %
               
Income Per Common Share Reconciliation              
               
Income before income taxes, as reported   $ 206,995     $ 183,315    
               
Rationalization charges     (750 )        
Acquisition related costs     676       3,658    
Income before income taxes, as adjusted     206,921       186,973    
               
Tax rate at 26.0%     (53,799 )     (48,613 )  
Income, as adjusted   $ 153,122     $ 138,360    
               
Income per common share, as adjusted   $ 4.81     $ 4.36    
               
Weighted average diluted common shares outstanding     31,843,818       31,713,239    
               
TopBuild Corp.              
Reconciliation of Adjusted EBITDA to Net Income (Unaudited)              
(in thousands)              
               
    Three Months Ended March 31, 
    2024   2023
Net income, as reported   $ 152,381     $ 135,870  
Adjustments to arrive at EBITDA, as adjusted:              
Interest expense and other, net     7,513       16,116  
Income tax expense     54,614       47,445  
Depreciation and amortization     34,257       32,100  
Share-based compensation     5,127       3,135  
Rationalization charges     (750 )      
Acquisition related costs     676       3,658  
EBITDA, as adjusted   $ 253,818     $ 238,324  
               
TopBuild Corp.  
Acquisition Adjusted Net Sales (Unaudited)  
(in thousands)  
  2023   2024   Trailing Twelve
Months Ended
  Q2   Q3   Q4   Q1   March 31, 2024
Net sales $ 1,317,262     $ 1,326,120     $ 1,286,074     $ 1,278,717     $ 5,208,173  
Acquisitions proforma adjustment †   35,527       13,815       9,525       5,691       64,558  
Net sales, acquisition adjusted $ 1,352,789     $ 1,339,935     $ 1,295,599     $ 1,284,408     $ 5,272,731  
                                       
                                       
† Trailing 12 months sales have been adjusted for the pro forma effect of acquired branches             
                                       
TopBuild Corp.              
2024 Estimated Adjusted EBITDA Range (Unaudited)            
(in millions)              
               
  Twelve Months Ending December 31, 2024
    Low       High  
Estimated net income, as reported $ 611.0     $ 689.0  
Adjustments to arrive at estimated EBITDA, as adjusted:            
Interest expense and other, net   47.0       43.0  
Income tax expense   216.0       241.0  
Depreciation and amortization   143.0       139.0  
Share-based compensation   19.0       17.0  
Acquisition related costs   29.0       26.0  
Estimated EBITDA, as adjusted $ 1,065.0     $ 1,155.0  


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