• Net sales increase 3.6%
  • Gross margin expands 120 basis points
  • 11.5% operating margin, 11.6% on an adjusted basis, up 110 basis points
  • Adjusted EBITDA margin expands 110 basis points to 14.0%
  • $1.36 net income per diluted share, $1.48 on an adjusted basis

Provides 2020 Sales and Adjusted EBITDA Guidance

DAYTONA BEACH, Fla., Feb. 25, 2020 (GLOBE NEWSWIRE) -- TopBuild Corp. (NYSE:BLD), a leading installer and distributor of insulation and building material products today reported results for the fourth quarter and full year ended December 31, 2019. 

Jerry Volas, Chief Executive Officer, stated, “We are pleased to once again report a strong quarter with sales volume growth and increased pricing at both TruTeam and Service Partners.  Our team continues to focus on achieving operational efficiencies and implementing best practices across our organization.

Fourth Quarter Financial Highlights
(unless otherwise indicated, comparisons are to the quarter ended December 31, 2018)

  • Net sales increased 3.6% to $662.3 million, driven by increases in price and residential and commercial volume and acquisitions, partially offset by a higher mix of multi-family and smaller, single-family homes which generate lower revenue per unit.
     
  • Gross margin expanded 120 basis points to 25.9%.
     
  • Operating profit was $76.4 million, compared to $65.2 million.  On an adjusted basis, operating profit was $76.6 million, compared to $67.2 million, a 14.1% improvement.
     
  • Operating margin was 11.5%.  Adjusted operating margin improved 110 basis points to 11.6%.
     
  • Net income was $46.0 million, or $1.36 per diluted share, compared to $38.6 million, or $1.10 per diluted share.
     
  • Adjusted net income was $50.0 million, or $1.48 per diluted share, compared to $42.2 million, or $1.20 per diluted share. 
     
  • Adjusted EBITDA was $92.5 million, compared to $82.5 million, a 12.2% increase and adjusted EBITDA margin improved 110 basis points to 14.0%.  Incremental adjusted EBITDA margin was 44.0%.  
     
  • At December 31, 2019, the Company had cash and cash equivalents of $184.8 million, availability under its revolving credit facility of $188.6 million for total liquidity of $373.4 million.

Full Year 2019 Financial Highlights
(unless otherwise indicated, comparisons are to twelve months ended December 31, 2018)

“2019 was another year of profitable growth at TopBuild.  We continue to take advantage of a strong economic environment, our national scale and our focus on operational excellence to drive sales and expand operating margins.  During the year we also completed the integration of USI, garnering substantial synergies that made this acquisition accretive to TopBuild’s margins,” Volas added.

  • Net sales increased 10.1% to $2,624.1 million. On a same branch basis, revenue increased 4.6% to $2,494.5 million. 
     
  • Gross margin expanded 180 basis points to 26.0%.
     
  • Operating profit was $289.5 million, compared to operating profit of $209.0 million.  On an adjusted basis, operating profit was $292.7 million, compared to $232.6 million, a 25.8% improvement.
     
  • Operating margin was 11.0%, up 220 basis points.  Adjusted operating margin improved 140 basis points to 11.2%. 
     
  • Net income was $191.0 million, or $5.56 per diluted share, compared to $134.8 million, or $3.78 per diluted share.  Adjusted net income was $188.9 million, or $5.49 per diluted share, compared to $149.3 million, or $4.19 per diluted share. 
     
  • Adjusted EBITDA was $359.1 million, compared to $283.4 million, a 26.7% increase and adjusted EBITDA margin improved 180 basis points to 13.7%.  Incremental adjusted EBITDA margin was 31.6%.
     
    • On a same branch basis, adjusted EBITDA grew 17.9% to $334.1 million and adjusted incremental EBITDA margin was 46.1%.
       
    • Acquisitions contributed $129.6 million of revenue.  Incremental adjusted EBITDA related to these acquisitions was 19.2%.


Operating Segment Highlights ($ in 000s)
(comparisons are to the period ended December 31, 2018)

TruTeam3 Months Ended
12/31/19
12 Months Ended
12/31/19
 Service Partners3 Months Ended
12/31/19
12 Months Ended
12/31/19
Sales$475,929$1,906,730 Sales$223,244$862,143
Change   Change  
Volume0.7%2.5% Volume2.0%-0.8%
Price2.7%3.8% Price2.3%4.6%
M&A0.6%7.1% M&A0.0%1.3%
Total Change4.0%13.4% Total Change4.3%5.1%
Operating Margin13.4%13.3% Operating Margin11.3%10.5%
Change90 bps160 bps Change120 bps90 bps
Adj. Operating Margin13.4%13.3% Adj. Operating Margin11.3%10.5%
Change90 bps150 bps Change120 bps90 bps


Capital Allocation

Acquisitions
In 2019, the Company completed one acquisition, Viking Insulation, based in Burbank, California.  Viking is expected to generate approximately $9.0 million in annual revenue.  

In February 2020, the Company acquired Hunter Insulation, an installation company based in Long Island, New York and Cooper Glass, a commercial glass company serving the Memphis market.  Combined, these companies are expected to contribute approximately $19 million of annual revenue. 

Share Repurchase Program
In 2019, the Company repurchased a total of 1,291,771 shares of its common stock for approximately $110.9 million.  This includes the receipt of 392,501 shares related to its $50 million accelerated share repurchase (“ASR”) program announced October 2019.  The ASR is expected to settle no later than the end of the first quarter of 2020. 

2020 Sales and Adjusted EBITDA Guidance (1)
Volas stated, “Looking ahead, we see solid fundamentals for the residential new construction market, including strong household formation, low interest rates and very little inventory, all of which should benefit TopBuild.  In addition, we expect continued strength in our commercial business with a solid backlog and greenfield expansion opportunities.

“Our plan in 2020 remains in line with our long-term strategic objectives: generate profitable growth, achieve additional operational efficiencies and acquire companies that meet our investment criteria.”   

2020LowHigh
Sales$  2,765.0$  2,835.0
Adjusted EBITDA*$  387.0$  412.0

*See table for adjusted EBITDA reconciliation


Assumptions
 ($ in millions)

2020LowHigh
Housing Starts 1,300K 1,340K
Estimated net income$  206.5$  232.0
Interest Expense and other, net$  34.0$  31.0
Income tax expense$  72.5$  81.5
Depreciation and Amortization$  60.0$  56.0
Share based compensation$  14.0$  11.5


Long-Term Targets (3-Years) (1)

Metric 
Working Capital (% of LTM Sales)10% to 11%
CapEx (% of Sales)2.0%
Commercial Annual Revenue Growth10.0%
Normalized Tax Rate26%
Incremental Adjusted EBITDA (Organic)22% to 27%
Incremental Adjusted EBITDA (Acquisitions Year One)11% to 16%
Residential revenue for every 50K increase in housing starts$80 million

(1) This guidance and long-term targets reflect management’s current view of present and future market conditions and are based on assumptions such as housing starts, 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.  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 2019 Annual Report on Form 10-K and subsequent SEC reports. 

Additional Information
Quarterly supplemental materials, including a presentation that will be referenced on today’s conference call, are available on the “Investors” section of the Company’s website at www.topbuild.com.

Conference Call
A conference call to discuss fourth quarter 2019 financial results is scheduled for today, Tuesday, February 25, at 9:00 a.m. Eastern Time.  The call may be accessed by dialing (888) 225-2706.  The conference call will be webcast simultaneously on the “Investors” section of the Company’s website at www.topbuild.com.  

About TopBuild
TopBuild Corp., a Fortune 1000 Company headquartered in Daytona Beach, Florida, is a leading installer and distributor of insulation and building material products to the U.S. construction industry.  We provide insulation and building material services nationwide through TruTeam®, which has approximately 200 branches, and through Service Partners® which distributes insulation and building material products from approximately 75 branches.  We leverage our national footprint to gain economies of scale while capitalizing on our local market presence to forge strong relationships with our customers.  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 “Investors” 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 the proposed accelerated stock repurchase transaction.  These forward-looking statements are distinguished by use of words such as “will,” “would,” “anticipate,” “expect,” “believe,” “designed,” “plan,” 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 publicly 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.            
Consolidated Statements of Operations            
(in thousands, except share and per common share amounts)         
             
  Three Months Ended December 31,  Year Ended December 31, 
  2019
 2018
 2019
 2018
Net sales $662,349  $639,547  $2,624,121  $2,384,249 
Cost of sales  491,030   481,321   1,942,854   1,808,097 
Gross profit  171,319   158,226   681,267   576,152 
             
Selling, general, and administrative expense  94,898   93,065   391,744   367,199 
Operating profit  76,421   65,161   289,523   208,953 
             
Other income (expense), net:            
Interest expense  (9,083)  (9,661)  (37,823)  (28,687)
Other, net  566   266   2,078   558 
Other expense, net  (8,517)  (9,395)  (35,745)  (28,129)
Income before income taxes  67,904   55,766   253,778   180,824 
             
Income tax expense  (21,919)  (17,213)  (62,783)  (46,072)
Net income $45,985  $38,553  $190,995  $134,752 
             
Net income per common share:            
Basic $1.38  $1.12  $5.65  $3.86 
Diluted $1.36  $1.10  $5.56  $3.78 
             
Weighted average shares outstanding:            
Basic  33,297,613   34,436,518   33,806,104   34,921,318 
Diluted  33,886,904   35,012,535   34,376,555   35,613,319 
             


       
TopBuild Corp.      
Consolidated Balance Sheets and Other Financial Data      
(dollars in thousands)      
  As of December 31,
  December 31,  December 31, 
  2019 2018
ASSETS      
Current assets:      
Cash and cash equivalents $184,807 $100,929
Receivables, net of an allowance for doubtful accounts of $4,854 and $3,676 at December 31, 2019, and December 31, 2018, respectively  428,844  407,106
Inventories, net  149,078  168,977
Prepaid expenses and other current assets  17,098  27,685
Total current assets  779,827  704,697
       
Right of use assets  87,134  
Property and equipment, net  178,080  167,961
Goodwill  1,367,918  1,364,016
Other intangible assets, net  181,122  199,387
Deferred tax assets, net  4,259  13,176
Other assets  5,623  5,294
Total assets $2,603,963 $2,454,531
       
LIABILITIES      
Current liabilities:      
Accounts payable $307,970 $313,172
Current portion of long-term debt  34,272  26,852
Accrued liabilities  98,418  104,236
Short-term lease liabilities  36,094  
Total current liabilities  476,754  444,260
       
Long-term debt  697,955  716,622
Deferred tax liabilities, net  175,263  176,212
Long-term portion of insurance reserves  45,605  43,434
Long-term lease liabilities  54,010  
Other liabilities  1,487  1,905
Total liabilities  1,451,074  1,382,433
       
EQUITY  1,152,889  1,072,098
Total liabilities and equity $2,603,963 $2,454,531
       
       
  As of December 31,
  December 31,  December 31, 
  2019 2018
Other Financial Data      
Receivable days †  53  51
Inventory days †  28  34
Accounts payable days †  80  80
Receivables, net plus inventories, net less accounts payable † $269,952 $262,911
Receivables, net plus inventories, net less accounts payable as a percent of sales (TTM)‡  10.3% 10.4
       
† Adjusted for remaining acquisition day one balance sheet items      
‡ Trailing 12 months sales have been adjusted for the pro forma effect of acquired branches      
       


       
TopBuild Corp.      
Consolidated Statement of Cash Flows      
(in thousands)      
       
  Year Ended December 31, 
  2019
 2018
Cash Flows Provided by (Used in) Operating Activities:     
Net income $190,995  $134,752 
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation and amortization  52,700   39,419 
Share-based compensation  13,658   11,317 
Loss on sale or abandonment of property and equipment  1,399   1,204 
Amortization of debt issuance costs  1,558   1,201 
Provision for bad debt expense  7,065   3,240 
Loss from inventory obsolescence  2,622   2,187 
Deferred income taxes, net  8,888   12,936 
Change in certain assets and liabilities      
Receivables, net  (27,146)  (35,522)
Inventories, net  17,433   (23,297)
Prepaid expenses and other current assets  9,361   (8,360)
Accounts payable  (5,124)  29,687 
Accrued liabilities  (2,690)  (660)
Other, net  1,058   (932)
Net cash provided by operating activities  271,777   167,172 
       
Cash Flows Provided by (Used in) Investing Activities:      
Purchases of property and equipment  (45,536)  (52,504)
Acquisition of businesses, net of cash acquired of $15,756 in 2018  (6,952)  (500,202)
Proceeds from sale of property and equipment  2,321   849 
Other, net  25   38 
Net cash used in investing activities  (50,142)  (551,819)
       
Cash Flows Provided by (Used in) Financing Activities:      
Proceeds from issuance of long-term debt  14,989   526,604 
Repayment of long-term debt  (27,793)  (18,399)
Payment of debt issuance costs     (7,819)
Proceeds from revolving credit facility     90,000 
Repayment of revolving credit facility     (90,000)
Taxes withheld and paid on employees' equity awards  (12,951)  (5,465)
Repurchase of shares of common stock  (110,911)  (65,025)
Payment of contingent consideration  (1,091)  (841)
Net cash (used in) provided by financing activities  (137,757)  429,055 
       
Cash and Cash Equivalents      
Increase for the period  83,878   44,408 
Beginning of period  100,929   56,521 
End of period $184,807  $100,929 
       
Supplemental disclosure of cash paid for:      
Interest on long-term debt $36,244  $23,733 
Income taxes  43,310   39,010 
       
Supplemental disclosure of noncash activities:      
Leased assets obtained in exchange for new operating lease liabilities $128,838  $ 
Accruals for property and equipment  542   860 
       


                     
TopBuild Corp.                    
Segment Data (Unaudited)                    
(dollars in thousands)                    
                     
  Three Months Ended December 31,      Year Ended December 31,     
   2019   2018  Change    2019   2018  Change  
TruTeam                    
Sales $475,929  $457,610   4.0% $1,906,730  $1,680,967   13.4%
                     
Operating profit, as reported $63,661  $57,016      $253,230  $196,986     
Operating margin, as reported  13.4 % 12.5 %     13.3 % 11.7 %   
                     
Rationalization charges  (24)  216       159   845     
Acquisition related costs  177          636        
Operating profit, as adjusted $63,814  $57,232      $254,025  $197,831     
Operating margin, as adjusted  13.4 % 12.5 %     13.3 % 11.8 %   
                     
Service Partners                    
Sales $223,244  $213,974   4.3% $862,143  $820,309   5.1%
                     
Operating profit, as reported $25,234  $21,598      $90,388  $78,739     
Operating margin, as reported  11.3 % 10.1 %     10.5 % 9.6 %   
                     
Rationalization charges            109   159     
Operating profit, as adjusted $25,234  $21,598      $90,497  $78,898     
Operating margin, as adjusted  11.3 % 10.1 %     10.5 % 9.6 %   
                     
Total                    
Sales before eliminations $699,173  $671,584      $2,768,873  $2,501,276     
Intercompany eliminations  (36,824)  (32,037)      (144,752)  (117,027)    
Net sales after eliminations $662,349  $639,547   3.6% $2,624,121  $2,384,249   10.1%
                     
Operating profit, as reported - segments $88,895  $78,614      $343,618  $275,725     
General corporate expense, net  (6,568)  (7,936)      (30,174)  (45,873)    
Intercompany eliminations  (5,906)  (5,517)      (23,921)  (20,899)    
Operating profit, as reported $76,421  $65,161      $289,523  $208,953     
Operating margin, as reported  11.5 % 10.2 %     11.0 % 8.8 %   
                     
Rationalization charges   15   929       1,992   7,736     
Acquisition related costs  166   1,066       1,200   15,925     
Operating profit, as adjusted $76,602  $67,156      $292,715  $232,614     
Operating margin, as adjusted  11.6 % 10.5 %     11.2 % 9.8 %   
                     
Share-based compensation  2,246   3,072       13,658   11,317     
Depreciation and amortization  13,696   12,286       52,700   39,419     
EBITDA, as adjusted $92,544  $82,514      $359,073  $283,350     
EBITDA margin, as adjusted  14.0 % 12.9 %     13.7 % 11.9 %   
                     
Sales change period over period  22,802          239,872        
EBITDA, as adjusted, change period over period  10,030          75,723        
EBITDA, as adjusted, as percentage of sales change  44.0 %        31.6 %      
                     
† Rationalization charges 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 December 31,  Year Ended December 31,  
  2019  2018  2019  2018  
Gross Profit and Operating Profit Reconciliations             
              
Net sales $662,349  $639,547  $2,624,121  $2,384,249  
              
Gross profit, as reported $171,319  $158,226  $681,267  $576,152  
              
Rationalization charges           176  
Gross profit, as adjusted $171,319  $158,226  $681,267  $576,328  
              
Gross margin, as reported  25.9 % 24.7 % 26.0 % 24.2 %
Gross margin, as adjusted  25.9 % 24.7 % 26.0 % 24.2 %
              
Operating profit, as reported $76,421  $65,161  $289,523  $208,953  
              
Rationalization charges  15   929   1,992   7,736  
Acquisition related costs  166   1,066   1,200   15,925  
Operating profit, as adjusted $76,602  $67,156  $292,715  $232,614  
              
Operating margin, as reported  11.5 % 10.2 % 11.0 % 8.8 %
Operating margin, as adjusted  11.6 % 10.5 % 11.2 % 9.8 %
              
Income Per Common Share Reconciliation             
              
Income before income taxes, as reported $67,904  $55,766  $253,778  $180,824  
              
Rationalization charges  15   929   1,992   7,736  
Acquisition related costs  166   1,066   1,200   15,925  
Income before income taxes, as adjusted  68,085   57,761   256,970   204,485  
              
Tax rate at 26.5% and 27.0% for 2019 and 2018, respectively  (18,043)  (15,595)  (68,097)  (55,211) 
Income, as adjusted $50,042  $42,166  $188,873  $149,274  
              
Income per common share, as adjusted $1.48  $1.20  $5.49  $4.19  
              
Weighted average diluted common shares outstanding  33,886,904   35,012,535   34,376,555   35,613,319  
              


              
TopBuild Corp.             
Same Branch and Acquisition Net Sales and Adjusted EBITDA (Unaudited)       
(dollars in thousands)             
              
  Three Months Ended December 31,  Year Ended December 31,  
  2019
 2018
 2019
 2018
 
Net sales             
Same branch:             
Installation segment $473,298  $457,610  $1,787,357  $1,680,967  
Distribution segment  223,244   213,974   851,073   820,309  
Eliminations  (36,824)  (32,037)  (143,890)  (117,027) 
Total same branch  659,718   639,547   2,494,540   2,384,249  
              
Acquisitions (a):             
Installation segment $2,631  $  $119,373  $  
Distribution segment        11,070     
Eliminations        (862)    
Total acquisitions  2,631      129,581     
Total $662,349  $639,547  $2,624,121  $2,384,249  
              
EBITDA, as adjusted             
Same branch $91,781  $82,514  $334,146  $283,350  
Acquisitions (a)  763      24,927     
Total $92,544  $82,514  $359,073  $283,350  
              
EBITDA, as adjusted, as a percentage of sales             
Same branch (b)  13.9 %    13.4 %   
Acquisitions (c)  29.0 %    19.2 %   
Total (d)  14.0 % 12.9 % 13.7 % 11.9 %
              
As Adjusted Incremental EBITDA, as a percentage of incremental sales             
Same branch (e)  45.9 %    46.1 %   
Acquisitions (c)  29.0 %    19.2 %   
Total (f)  44.0 %    31.6 %   
              
(a) Represents current year impact of acquisitions in their first twelve months       
(b) Same branch EBITDA, as adjusted, as a percentage of same branch sales        
(c) Acquired EBITDA, 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       
              


             
TopBuild Corp.            
Reconciliation of Adjusted EBITDA to Net Income          
(in thousands)            
             
  Three Months Ended December 31,  Year Ended December 31, 
  2019 2018 2019 2018
Net income, as reported $45,985 $38,553 $190,995 $134,752
Adjustments to arrive at EBITDA, as adjusted:            
Interest expense and other, net  8,517  9,395  35,745  28,129
Income tax expense  21,919  17,213  62,783  46,072
Depreciation and amortization  13,696  12,286  52,700  39,419
Share-based compensation  2,246  3,072  13,658  11,317
Rationalization charges  15  929  1,992  7,736
Acquisition related costs  166  1,066  1,200  15,925
EBITDA, as adjusted $92,544 $82,514 $359,073 $283,350
             


      
TopBuild Corp.     
2020 Estimated Adjusted EBITDA Range (Unaudited)    
(dollars in millions)     
      
 Twelve Months Ending December 31, 2020
  Low  High
Estimated net income$206.5 $232.0
Adjustments to arrive at estimated EBITDA, as adjusted:    
Interest expense and other, net 34.0  31.0
Income tax expense 72.5  81.5
Depreciation and amortization 60.0  56.0
Share-based compensation 14.0  11.5
Estimated EBITDA, as adjusted$387.0 $412.0