• TopBuild Reports Third Quarter 2023 Results

    Source: Nasdaq GlobeNewswire / 31 Oct 2023 05:45:32   America/Chicago

    • 1.9% increase in net sales
    • 31.7% gross margin
    • 17.9% operating margin, 18.5% on an adjusted basis
    • 21.4% adjusted EBITDA margin

    DAYTONA BEACH, Fla., Oct. 31, 2023 (GLOBE NEWSWIRE) -- TopBuild Corp. (NYSE:BLD), a leading installer and specialty distributor of insulation and related building material products to the construction industry in the United States and Canada today reported results for the third quarter ended September 30, 2023.

    Robert Buck, President and Chief Executive Officer, stated, “TopBuild continues to perform well and produce solid operating results, a testament to our team’s hard work and focus on profitable growth. We are particularly pleased with the performance of our non-residential business. Both our Installation and Specialty Distribution segments reported mid-single digit volume growth related to the commercial and industrial end markets they serve.

    “Our strong track record of executing on our plan can be attributed, in part, to our relentless focus on driving improvements in both productivity and operational efficiencies. In addition, our unique and diversified business model provides multiple avenues for growth, and we see continued opportunities in all three end markets we serve.”

    Third Quarter Financial Highlights
    (unless otherwise indicated, comparisons are to the three months ended September 30, 2022)

    3 Months Ended 9/30/23ReportedChange
    Sales$1,326,1201.9%
    Gross Margin31.7%130 bps
    SG&A as % of revenue13.8%50 bps
    Operating Profit$237,4926.6%
    Operating Margin17.9%80 bps
    Net Income$167,6029.0%
    Net Income per diluted share$5.2710.7%
       
    3 Months Ended 9/30/23AdjustedChange
    Sales$1,326,1201.9%
    Gross Margin31.7%130 bps
    SG&A as % of revenue13.2%0 bps
    Operating Profit$245,9329.7%
    Operating Margin18.5%130 bps
    Net Income$172,50711.4%
    Net Income per diluted share$5.4313.1%
    EBITDA$283,6909.4%
    EBITDA Margin21.4%150 bps
       

    Nine Month Financial Highlights
    (comparisons are to the nine months ended September 30, 2022)

    9 Months Ended 9/30/23Reported
    		Change
    Sales$3,908,6204.4%
    Gross Margin31.0%130 bps
    SG&A as % of revenue13.8%0 bps
    Operating Profit$674,02513.5%
    Operating Margin17.2%130 bps
    Net Income$467,87013.5%
    Net Income per diluted share$14.7416.7%
       
    9 Months Ended 9/30/23AdjustedChange
    Sales$3,908,6204.4%
    Gross Margin31.0%130 bps
    SG&A as % of revenue13.4%(20 bps)
    Operating Profit$688,22414.6%
    Operating Margin17.6%160 bps
    Net Income$477,55115.1%
    Net Income per diluted share$15.0418.3%
    EBITDA$797,52013.4%
    EBITDA Margin20.4%160 bps
       

    Operating Segment Highlights ($ in 000s)
    (comparisons are to the period ended September 30, 2022)

    Installation3 Months
    Ended 9/30/23    		9 Months
    Ended 9/30/23    		 Specialty Distribution3 Months
    Ended 9/30/23    		9 Months
    Ended 9/30/23
    Sales$821,673$2,397,818 Sales$571,009$1,703,871
    Change   Change  
    Volume-3.5%1.4% Volume-0.2%-2.0%
    Price3.6%4.0% Price-1.9%1.4%
    M&A4.8%3.1% M&A0.0%0.0%
    Total Change4.9%8.6% Total Change-2.1%-0.7%
    Operating Margin21.3%20.6% Operating Margin15.5%14.5%
    Change160 bps220 bps Change40 bps20 bps
    Adj. Operating Margin21.6%20.7% Adj. Operating Margin15.5%14.6%
    Change200 bps230 bps Change20 bps20 bps
    Adj. EBITDA Margin23.7%22.9% Adj. EBITDA Margin18.2%17.2%
    Change210 bps230 bps Change20 bps20 bps
           

    Capital Allocation
    “We generate significant free cash flow and acquisitions remain our number one capital allocation priority. Our seasoned M&A team continues to identify strong prospects in our residential, commercial, and industrial insulation end markets and we expect to remain active on this front,” added Buck.

    Through October 31, the Company has completed four acquisitions which are expected to contribute approximately $173 million in annual revenue. In addition, the Company announced in late July its agreement to acquire Specialty Products and Insulation (“SPI”) in an all-cash transaction valued at $960 million. This leading North American specialty distributor and custom fabricator of mechanical insulation is expected to generate annual revenue of approximately $700 million.

    2023 Outlook(1)
    ($ in millions)

    MetricLow
    		 High
    Sales$5,130  $5,210 
    Adjusted EBITDA*$1,025  $1,055 
            

    *See table for adjusted EBITDA reconciliation.
    (1) This outlook reflects management’s current view of present and future market conditions and are based on assumptions such as housing starts and completions, general and administrative expenses, weighted average diluted shares outstanding 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.

    Conference Call
    A conference call to discuss third quarter 2023 financial results is scheduled for today, Tuesday, October 31, 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 that summarizes management’s formal remarks 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.

    Investor Relations and Media Contact
    Tabitha Zane
    tabitha.zane@topbuild.com
    386-763-8801

    (tables follow)

    TopBuild Corp.           
    Condensed Consolidated Statements of Operations (Unaudited)         
    (in thousands, except share and per common share amounts)         
                
     Three Months Ended September 30, Nine Months Ended September 30, 
     2023  2022  2023  2022 
    Net sales$1,326,120  $1,300,998  $3,908,620  $3,744,201 
    Cost of sales 905,430   905,250   2,695,916   2,633,155 
    Gross profit 420,690   395,748   1,212,704   1,111,046 
                
    Selling, general, and administrative expense 183,198   172,874   538,679   516,997 
    Operating profit 237,492   222,874   674,025   594,049 
                
    Other income (expense), net:           
    Interest expense (18,830)  (14,561)  (55,427)  (39,936)
    Other, net 6,015   (303)  12,542   103 
    Other expense, net (12,815)  (14,864)  (42,885)  (39,833)
    Income before income taxes 224,677   208,010   631,140   554,216 
                
    Income tax expense (57,075)  (54,264)  (163,270)  (142,060)
    Net income$167,602  $153,746  $467,870  $412,156 
                
    Net income per common share:           
    Basic$5.30  $4.79  $14.81  $12.72 
    Diluted$5.27  $4.76  $14.74  $12.63 
                
    Weighted average shares outstanding:           
    Basic 31,615,110   32,076,285   31,588,740   32,404,275 
    Diluted 31,788,812   32,279,820   31,744,856   32,643,161 
                


    TopBuild Corp.            
    Condensed Consolidated Statements of Comprehensive Income (Unaudited)        
    (in thousands)            
                 
     Three Months Ended September 30, Nine Months Ended September 30, 
     2023 2022 2023 2022
    Net income$167,602  $153,746  $467,870  $412,156 
    Other comprehensive (loss) income:            
    Foreign currency translation adjustment (3,008)  (15,158)  3,029   (14,133)
    Comprehensive income$164,594  $138,588  $470,899  $398,023 
                 


    TopBuild Corp.       
    Condensed Consolidated Balance Sheets and Other Financial Data (Unaudited)    
    (dollars in thousands)       
     As of
     September 30, 2023 December 31, 2022
    ASSETS       
    Current assets:       
    Cash and cash equivalents$615,612  $240,069 
    Receivables, net of an allowance for credit losses of $17,880 at September 30, 2023, and $16,281 at December 31, 2022 870,890   836,071 
    Inventories, net 357,179   438,644 
    Prepaid expenses and other current assets 38,104   34,257 
    Total current assets 1,881,785   1,549,041 
            
    Right of use assets 209,707   205,892 
    Property and equipment, net 264,581   253,484 
    Goodwill 2,039,777   1,966,994 
    Other intangible assets, net 606,940   614,967 
    Other assets 11,300   16,453 
    Total assets$5,014,090  $4,606,831 
            
    LIABILITIES       
    Current liabilities:       
    Accounts payable$455,840  $487,114 
    Current portion of long-term debt 48,057   40,068 
    Accrued liabilities 183,084   199,370 
    Short-term operating lease liabilities 64,632   60,880 
    Short-term finance lease liabilities 2,057   2,207 
    Total current liabilities 753,670   789,639 
            
    Long-term debt 1,383,717   1,417,257 
    Deferred tax liabilities, net 252,419   251,481 
    Long-term portion of insurance reserves 58,343   59,783 
    Long-term operating lease liabilities 151,970   149,943 
    Long-term finance lease liabilities 4,596   6,673 
    Other liabilities 1,548   2,349 
    Total liabilities 2,606,263   2,677,125 
            
    EQUITY 2,407,827   1,929,706 
    Total liabilities and equity$5,014,090  $4,606,831 
            
     As of September 30,
     2023 2022
    Other Financial Data       
    Receivable days 51   48 
    Inventory days 36   48 
    Accounts payable days 60   63 
    Receivables, net plus inventories, net less accounts payable$772,229  $752,750 
    Receivables, net plus inventories, net less accounts payable as a percent of sales (TTM) † 14.6% 15.5%
            

    † 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)     
          
     Nine Months Ended September 30, 
     2023 2022
    Cash Flows Provided by (Used in) Operating Activities:             
    Net income$467,870  $412,156 
    Adjustments to reconcile net income to net cash provided by operating activities:     
    Depreciation and amortization 98,216   93,051 
    Share-based compensation 11,080   9,673 
    Loss on sale of assets 2,733   76 
    Amortization of debt issuance costs 2,161   2,147 
    Provision for bad debt expense 7,380   8,837 
    Loss from inventory obsolescence 3,617   5,127 
    Change in certain assets and liabilities:     
    Receivables, net (52,482)  (152,578)
    Inventories, net 82,960   (101,148)
    Prepaid expenses and other current assets (3,267)  (807)
    Accounts payable (21,361)  49,079 
    Accrued liabilities (9,027)  3,469 
    Other, net (1,402)  6,548 
    Net cash provided by operating activities 588,478   335,630 
          
    Cash Flows Provided by (Used in) Investing Activities:     
    Purchases of property and equipment (48,076)  (56,044)
    Acquisition of businesses, net of cash acquired (147,614)  (20,500)
    Proceeds from sale of assets 14,674   2,877 
    Net cash used in investing activities (181,016)  (73,667)
          
    Cash Flows Provided by (Used in) Financing Activities:     
    Repayment of long-term debt (27,711)  (28,968)
    Proceeds from revolving credit facility —   70,000 
    Repayment of revolving credit facility —   (70,000)
    Taxes withheld and paid on employees' equity awards (6,350)  (11,719)
    Exercise of stock options 2,489   2,028 
    Repurchase of shares of common stock —   (200,050)
    Payment of contingent consideration (300)  (1,674)
    Net cash used in financing activities (31,872)  (240,383)
    Impact of exchange rate changes on cash (47)  (1,975)
    Net increase in cash and cash equivalents 375,543   19,605 
    Cash and cash equivalents- Beginning of period 240,069   139,779 
    Cash and cash equivalents- End of period$615,612  $159,384 
          
    Supplemental disclosure of noncash activities:     
    Leased assets obtained in exchange for new operating lease liabilities$45,525  $80,186 
    Accruals for property and equipment 305   395 
          


    TopBuild Corp.                  
    Segment Data (Unaudited)                  
    (dollars in thousands)                  
                       
     Three Months Ended September 30,     Nine Months Ended September 30,   
      2023   2022  Change   2023   2022  Change 
    Installation                  
    Sales$821,673  $783,056   4.9% $2,397,818  $2,208,717  8.6%
                       
    Operating profit, as reported$175,218  $154,236     $494,394  $406,835   
    Operating margin, as reported 21.3%  19.7%     20.6% 18.4%  
                       
    Rationalization charges 1,882   (807)     1,882   (334)  
    Acquisition related costs 26   15      516   112   
    Operating profit, as adjusted$177,126  $153,444     $496,792  $406,613   
    Operating margin, as adjusted 21.6%  19.6%     20.7% 18.4%  
                       
    Share-based compensation 436   268      1,124   956   
    Depreciation and amortization 17,417   15,610      50,700   46,615   
    EBITDA, as adjusted$194,979  $169,322   15.2% $548,616  $454,184  20.8%
    EBITDA margin, as adjusted 23.7%  21.6%     22.9% 20.6%  
                       
    Specialty Distribution                  
    Sales$571,009  $583,543   (2.1)% $1,703,871  $1,715,196  (0.7)%
                       
    Operating profit, as reported$88,269  $88,364     $247,583  $245,534   
    Operating margin, as reported 15.5%  15.1%     14.5% 14.3%  
                       
    Acquisition related costs 10   660      350   1,235   
    Operating profit, as adjusted$88,279  $89,024     $247,933  $246,769   
    Operating margin, as adjusted 15.5%  15.3%     14.6% 14.4%  
                       
    Share-based compensation 434   296      987   938   
    Depreciation and amortization 15,102   15,662      44,414   43,697   
    EBITDA, as adjusted$103,815  $104,982   (1.1)% $293,334  $291,404  0.7%
    EBITDA margin, as adjusted 18.2%  18.0%     17.2% 17.0%  
                       


    TopBuild Corp.                 
    Adjusted EBITDA (Unaudited)                 
    (dollars in thousands)                 
                      
     Three Months Ended September 30,     Nine Months Ended September 30,    
     2023 2022 Change  2023 2022 Change 
    Total net sales                 
    Sales before eliminations$1,392,682  $1,366,599     $4,101,689  $3,923,913    
    Intercompany eliminations (66,562)  (65,601)     (193,069)  (179,712)   
    Net sales after eliminations$1,326,120  $1,300,998  1.9% $3,908,620  $3,744,201  4.4%
                      
    Operating profit, as reported - segments$263,487  $242,600     $741,977  $652,369    
    General corporate expense, net (14,494)  (8,920)     (35,280)  (28,371)   
    Intercompany eliminations (11,501)  (10,806)     (32,672)  (29,949)   
    Operating profit, as reported$237,492  $222,874     $674,025  $594,049    
    Operating margin, as reported 17.9%  17.1%     17.2%  15.9%   
                      
    Rationalization charges 1,882   (807)     1,882   (334)   
    Acquisition related costs † 6,558   2,107      12,317   6,759    
    Operating profit, as adjusted$245,932  $224,174     $688,224  $600,474    
    Operating margin, as adjusted 18.5%  17.2%     17.6%  16.0%   
                      
    Share-based compensation 4,194   2,611      11,080   9,673    
    Depreciation and amortization 33,564   32,430      98,216   93,051    
    EBITDA, as adjusted$283,690  $259,215  9.4% $797,520  $703,198  13.4%
    EBITDA margin, as adjusted 21.4%  19.9%     20.4%  18.8%   
                      
    Sales change period over period 25,122         164,419       
    EBITDA, as adjusted, change period over period 24,475         94,322       
    Incremental EBITDA, as adjusted, as a percentage of change in sales 97.4%        57.4%      
                      

    † Acquisition related costs include corporate level adjustments as well as segment operating adjustments.

    TopBuild Corp.           
    Non-GAAP Reconciliations (Unaudited)           
    (in thousands, except share and per common share amounts)           
                
     Three Months Ended September 30, Nine Months Ended September 30, 
     2023 2022 2023 2022
    Gross Profit Reconciliation           
                
    Net sales$1,326,120  $1,300,998  $3,908,620  $3,744,201 
                
    Gross profit, as reported$420,690  $395,748  $1,212,704  $1,111,046 
                
    Acquisition related costs —   —   —   121 
    Gross profit, as adjusted$420,690  $395,748  $1,212,704  $1,111,167 
                
    Gross margin, as reported 31.7% 30.4%  31.0% 29.7%
    Gross margin, as adjusted 31.7% 30.4%  31.0% 29.7%
                
    Selling, General and Administrative Expense Reconciliation           
                
    Selling, general, and administrative expense, as reported$183,198  $172,874  $538,679  $516,997 
                
    Rationalization charges 1,882   (807)  1,882   (334)
    Acquisition related costs 6,558   2,107   12,317   6,638 
    Selling, general, and administrative expense, as adjusted$174,758  $171,574  $524,480  $510,693 
                
    Operating Profit Reconciliation           
                
    Operating profit, as reported$237,492  $222,874  $674,025  $594,049 
                
    Rationalization charges 1,882   (807)  1,882   (334)
    Acquisition related costs 6,558   2,107   12,317   6,759 
    Operating profit, as adjusted$245,932  $224,174  $688,224  $600,474 
                
    Operating margin, as reported 17.9% 17.1%  17.2% 15.9%
    Operating margin, as adjusted 18.5% 17.2%  17.6% 16.0%
                
    Income Per Common Share Reconciliation           
                
    Income before income taxes, as reported$224,677  $208,010  $631,140  $554,216 
                
    Rationalization charges 1,882   (807)  1,882   (334)
    Acquisition related costs 6,558   2,107   12,317   6,759 
    Income before income taxes, as adjusted 233,117   209,310   645,339   560,641 
                
    Tax rate at 26.0% (60,610)  (54,421)  (167,788)  (145,767)
    Income, as adjusted$172,507  $154,889  $477,551  $414,874 
                
    Income per common share, as adjusted$5.43  $4.80  $15.04  $12.71 
                
    Weighted average diluted common shares outstanding 31,788,812   32,279,820   31,744,856   32,643,161 
                


    TopBuild Corp.           
    Same Branch and Acquisition Metrics (Unaudited)           
    (dollars in thousands)           
                
     Three Months Ended September 30, Nine Months Ended September 30, 
     2023 2022 2023 2022
    Net sales           
    Same branch:           
    Installation$784,025  $783,056  $2,328,800  $2,208,717 
    Specialty Distribution 571,009   583,543   1,703,871   1,715,196 
    Eliminations (66,562)  (65,601)  (193,069)  (179,712)
    Total same branch$1,288,472  $1,300,998  $3,839,602  $3,744,201 
                
    Acquisitions (a):           
    Installation$37,648  $—  $69,018  $— 
    Total acquisitions 37,648   —   69,018   — 
    Total$1,326,120  $1,300,998  $3,908,620  $3,744,201 
                
    EBITDA, as adjusted           
    Same branch$277,497  $259,215  $787,212  $703,198 
    Acquisitions (a) 6,193   —   10,308   — 
    Total$283,690  $259,215  $797,520  $703,198 
                
    EBITDA, as adjusted, as a percentage of sales           
    Same branch (b) 21.5%     20.5%   
    Acquisitions (c) 16.4%     14.9%   
    Total (d) 21.4%  19.9% 20.4%  18.8%
                
    As Adjusted Incremental EBITDA, as a percentage of change in sales           
    Same branch (e) NM      88.1%   
    Acquisitions (c) 16.4%     14.9%   
    Total (f) 97.4%     57.4%   
                  

    (a) Represents current year impact of acquisitions in their first twelve months
    (b) Same branch metric, as adjusted, as a percentage of same branch sales
    (c) Acquired metric, as adjusted, as a percentage of acquired sales
    (d) Total EBITDA, as adjusted, as a percentage of total sales
    (e) Change in same branch EBITDA, as adjusted, as a percentage of change in same branch sales
    (f) Change in total EBITDA, as adjusted, as a percentage of change in total sales
    NM Not Meaningful

    TopBuild Corp.             
    Reconciliation of Adjusted EBITDA to Net Income (Unaudited)             
    (in thousands)             
                  
     Three Months Ended September 30, Nine Months Ended September 30, 
     2023 2022 2023 2022
    Net income, as reported$167,602  $153,746  $467,870  $412,156 
    Adjustments to arrive at EBITDA, as adjusted:             
    Interest expense and other, net 12,815   14,864   42,885   39,833 
    Income tax expense 57,075   54,264   163,270   142,060 
    Depreciation and amortization 33,564   32,430   98,216   93,051 
    Share-based compensation 4,194   2,611   11,080   9,673 
    Rationalization charges 1,882   (807)  1,882   (334)
    Acquisition related costs 6,558   2,107   12,317   6,759 
    EBITDA, as adjusted$283,690  $259,215  $797,520  $703,198 
                  


    TopBuild Corp.                    
    Acquisition Adjusted Net Sales (Unaudited)                   
    (in thousands)                   
     2022 2023 Trailing Twelve Months Ended
     Q4 Q1 Q2 Q3 September 30, 2023
    Net Sales$1,264,543  $1,265,238  $1,317,262  $1,326,120  $5,173,163 
    Acquisitions proforma adjustment † 45,575   30,745   25,753   4,258   106,331 
    Net sales, acquisition adjusted$1,310,118  $1,295,983  $1,343,015  $1,330,378  $5,279,494 
                        

    † Trailing 12 months sales have been adjusted for the pro forma effect of acquired branches

    TopBuild Corp.       
    2023 Estimated Adjusted EBITDA Range (Unaudited)      
    (in millions)       
            
     Twelve Months Ending December 31, 2023
      Low   High 
    Estimated net income$597.0   625.0 
    Adjustments to arrive at estimated EBITDA, as adjusted:      
    Interest expense and other, net 54.0   51.0 
    Income tax expense 210.0   219.0 
    Depreciation and amortization 133.0   131.0 
    Share-based compensation 15.0   14.0 
    Acquisition related costs 16.0   15.0 
    Estimated EBITDA, as adjusted$1,025.0  $1,055.0 
            

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