TopBuild Reports First Quarter 2023 Results

Sales increased 8.2% to $1.3 billion
Gross margin expanded 100 basis points to 29.3%
Adjusted EBITDA margin expanded 150 basis points to 18.8%

DAYTONA BEACH, Fla., May 04, 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 first quarter ended March 31, 2023.

Robert Buck, President and Chief Executive Officer, stated, “TopBuild reported another strong quarter with solid top line growth and margin expansion at both business segments; Installation and Specialty Distribution. We are particularly pleased with the performance of our commercial business which reflects, in part, the success of our installation branches in capturing light commercial activity across their respective regions.”

“Our overall results demonstrate the strength of our operating model, the diversity of our end-markets, the hard work of our entire TopBuild team, and the operating efficiency initiatives we continue to implement across the organization.”

First Quarter 2023 Financial Highlights ($ in 000s)

(comparisons are to the quarter ended March 31, 2022)

3 Months Ended 3/31/23	Reported	Change
Sales	$1,265,238	8.2%
Gross Margin	29.3%	100 bps
SG&A as % of revenue	13.5%	(80 bps)
Operating Profit	$199,431	21.6%
Operating Margin	15.8%	180 bps
Net Income	$135,870	18.4%
Net Income per diluted share	$4.28	23.3%

3 Months Ended 3/31/23	Adjusted	Change
Sales	$1,265,238	8.2%
Gross Margin	29.3%	100 bps
SG&A as % of revenue	13.2%	(80 bps)
Operating Profit	$203,089	21.2%
Operating Margin	16.1%	180 bps
Net Income	$138,360	19.7%
Net Income per diluted share	$4.36	24.6%
EBITDA	$238,324	18.1%
EBITDA Margin	18.8%	150 bps


3 Months Ended 3/31/23	Same Branch	Change
Sales	$1,250,393	7.0%
Adj. Gross Margin	29.4%	110 bps
Adj. Operating Margin	16.2%	190 bps
Adj. EBITDA Margin	18.9%	160 bps
Incremental EBITDA	43.0%

Operating Segment Highlights ($ in 000s)
(comparisons are to the quarter ended March 31, 2022)

Installation	3 Months Ended 3/31/23	Specialty Distribution	3 Months Ended 3/31/23
Sales	$767,090	Sales	$558,375
Change		Change
Volume	5.4%	Volume	-3.0%
Price	5.8%	Price	5.7%
M&A	2.2%	M&A	0.0%
Total Change	13.4%	Total Change	2.7%
Operating Margin	19.1%	Operating Margin	13.1%
Change	240 bps	Change	20 bps
Adj. Operating Margin	19.2%	Adj. Operating Margin	13.2%
Change	250 bps	Change	20 bps
Adj. EBITDA Margin	21.4%	Adj. EBITDA Margin	15.8%
Change	230 bps	Change	20 bps

Capital Allocation
“Acquiring installation and specialty distribution companies remains our number one capital allocation priority and our prospects center around our core of insulation. The synergies we recognize and operational improvements we achieve through M&A create great returns for our shareholders,” added Buck.

The Company completed one acquisition in the first quarter, SRI Holdings, which is expected to contribute approximately $62 million of annual revenue.

2023 Outlook
The Company’s outlook for 2023 remains unchanged from the outlook it provided in its fourth quarter 2022 financial results press release distributed on February 23, 2023.

Sales and Adjusted EBITDA Outlook ⁽¹⁾
($ in millions)

2023	Low		High
Sales	$	4,700	$	4,900
Adjusted EBITDA*	$	820	$	910

*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. 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 2022 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 Company’s website at www.topbuild.com.

Conference Call
A conference call to discuss first quarter 2023 financial results is scheduled for today, Thursday, May 4, 2023, 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.

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 235 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 180 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 March 31,
	2023			2022
Net sales	$	1,265,238		$	1,168,918
Cost of sales		895,023			837,717
Gross profit		370,215			331,201

Selling, general, and administrative expense		170,784			167,247
Operating profit		199,431			163,954

Other income (expense), net:
Interest expense		(18,039	)		(11,966	)
Other, net		1,923			684
Other expense, net		(16,116	)		(11,282	)
Income before income taxes		183,315			152,672

Income tax expense		(47,445	)		(37,961	)
Net income	$	135,870		$	114,711

Net income per common share:
Basic	$	4.31		$	3.50
Diluted	$	4.28		$	3.47

Weighted average shares outstanding:
Basic		31,550,658			32,738,525
Diluted		31,713,239			33,042,490

TopBuild Corp.
Condensed Consolidated Statements of Comprehensive Income (Unaudited)
(in thousands)

	Three Months Ended March 31,
	2023		2022
Net income	$	135,870	$	114,711
Other comprehensive income:
Foreign currency translation adjustment		1,753		3,218
Comprehensive income	$	137,623	$	117,929

TopBuild Corp.
Condensed Consolidated Balance Sheets and Other Financial Data (Unaudited)
(dollars in thousands)
	As of
	March 31, 2023			December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	333,778		$	240,069
Receivables, net of an allowance for credit losses of $16,007 at March 31, 2023, and $16,281 at December 31, 2022		833,959			836,071
Inventories, net		422,229			438,644
Prepaid expenses and other current assets		22,861			34,257
Total current assets		1,612,827			1,549,041

Right of use assets		211,381			205,892
Property and equipment, net		260,146			253,484
Goodwill		1,992,394			1,966,994
Other intangible assets, net		607,683			614,967
Other assets		16,483			16,453
Total assets	$	4,700,914		$	4,606,831

LIABILITIES
Current liabilities:
Accounts payable	$	450,963		$	487,114
Current portion of long-term debt		42,371			40,068
Accrued liabilities		193,347			199,370
Short-term operating lease liabilities		62,110			60,880
Short-term finance lease liabilities		2,452			2,207
Total current liabilities		751,243			789,639

Long-term debt		1,405,931			1,417,257
Deferred tax liabilities, net		252,044			251,481
Long-term portion of insurance reserves		61,466			59,783
Long-term operating lease liabilities		154,844			149,943
Long-term finance lease liabilities		4,983			6,673
Other liabilities		5,259			2,349
Total liabilities		2,635,770			2,677,125

EQUITY		2,065,144			1,929,706
Total liabilities and equity	$	4,700,914		$	4,606,831

	As of March 31,
	2023			2022
Other Financial Data
Receivable days		52			47
Inventory days		43			46
Accounts payable days		60			63
Receivables, net plus inventories, net less accounts payable	$	805,225		$	651,595
Receivables, net plus inventories, net less accounts payable as a percent of sales (TTM) †		15.6	%		14.8	%

† 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,
	2023			2022
Cash Flows Provided by (Used in) Operating Activities:
Net income	$	135,870		$	114,711
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		32,100			30,499
Share-based compensation		3,135			3,727
Loss on sale of property and equipment		185			207
Amortization of debt issuance costs		720			706
Provision for bad debt expense		1,338			2,512
Loss from inventory obsolescence		1,642			868
Deferred income taxes, net		563			(81	)
Change in certain assets and liabilities:
Receivables, net		(10,847	)		(65,031	)
Inventories, net		20,096			(38,570	)
Prepaid expenses and other current assets		11,579			(2,347	)
Accounts payable		(25,480	)		12,663
Accrued liabilities		(3,339	)		29,523
Other, net		2,239			96
Net cash provided by operating activities		169,801			89,483

Cash Flows Provided by (Used in) Investing Activities:
Purchases of property and equipment		(15,580	)		(18,413	)
Acquisition of businesses, net of cash acquired		(45,845	)		(13,967	)
Proceeds from sale of property and equipment		455			253
Net cash used in investing activities		(60,970	)		(32,127	)

Cash Flows Provided by (Used in) Financing Activities:
Repayment of long-term debt		(9,743	)		(9,634	)
Taxes withheld and paid on employees' equity awards		(6,350	)		(11,658	)
Exercise of stock options		1,029			808
Repurchase of shares of common stock		—			(50,000	)
Payment of contingent consideration		—			(23	)
Net cash used in financing activities		(15,064	)		(70,507	)
Impact of exchange rate changes on cash		(58	)		(75	)
Net increase (decrease) in cash and cash equivalents		93,709			(13,226	)
Cash and cash equivalents- Beginning of period		240,069			139,779
Cash and cash equivalents- End of period	$	333,778		$	126,553

Supplemental disclosure of noncash activities:
Leased assets obtained in exchange for new operating lease liabilities	$	18,271		$	22,449
Accruals for property and equipment		835			213

TopBuild Corp.
Segment Data (Unaudited)
(dollars in thousands)

	Three Months Ended March 31,
		2023			2022		Change
Installation
Sales	$	767,090		$	676,693			13.4	%

Operating profit, as reported	$	146,897		$	112,679
Operating margin, as reported		19.1	%		16.7	%

Rationalization charges		—			473
Acquisition related costs		263			80
Operating profit, as adjusted	$	147,160		$	113,232
Operating margin, as adjusted		19.2	%		16.7	%

Share-based compensation		379			407
Depreciation and amortization		16,493			15,685
EBITDA, as adjusted	$	164,032		$	129,324			26.8	%
EBITDA margin, as adjusted		21.4	%		19.1	%

Specialty Distribution
Sales	$	558,375		$	543,862			2.7	%

Operating profit, as reported	$	73,333		$	70,420
Operating margin, as reported		13.1	%		12.9	%

Acquisition related costs		340			241
Operating profit, as adjusted	$	73,673		$	70,661
Operating margin, as adjusted		13.2	%		13.0	%

Share-based compensation		238			353
Depreciation and amortization		14,572			14,030
EBITDA, as adjusted	$	88,483		$	85,044			4.0	%
EBITDA margin, as adjusted		15.8	%		15.6	%

TopBuild Corp.
Adjusted EBITDA (Unaudited)
(dollars in thousands)

	Three Months Ended March 31,
	2023			2022			Change
Total net sales
Sales before eliminations	$	1,325,465		$	1,220,555
Intercompany eliminations		(60,227	)		(51,637	)
Net sales after eliminations	$	1,265,238		$	1,168,918			8.2	%

Operating profit, as reported - segments	$	220,230		$	183,099
General corporate expense, net		(10,828	)		(10,437	)
Intercompany eliminations		(9,971	)		(8,708	)
Operating profit, as reported	$	199,431		$	163,954
Operating margin, as reported		15.8	%		14.0	%

Rationalization charges		—			473
Acquisition related costs ^†		3,658			3,076
Operating profit, as adjusted	$	203,089		$	167,503
Operating margin, as adjusted		16.1	%		14.3	%

Share-based compensation		3,135			3,727
Depreciation and amortization		32,100			30,499
EBITDA, as adjusted	$	238,324		$	201,729			18.1	%
EBITDA margin, as adjusted		18.8	%		17.3	%

Sales change period over period		96,320
EBITDA, as adjusted, change period over period		36,595
Incremental EBITDA, as adjusted, as a percentage of change in sales		38.0	%

† 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 March 31,
	2023			2022
Gross Profit Reconciliation

Net sales	$	1,265,238		$	1,168,918

Gross profit, as reported	$	370,215		$	331,201

Acquisition related costs		—			121
Gross profit, as adjusted	$	370,215		$	331,322

Gross margin, as reported		29.3	%		28.3	%
Gross margin, as adjusted		29.3	%		28.3	%

Selling, General and Administrative Expense Reconciliation

Selling, general, and administrative expense, as reported	$	170,784		$	167,247

Rationalization charges		—			473
Acquisition related costs		3,658			2,955
Selling, general, and administrative expense, as adjusted	$	167,126		$	163,819

Operating Profit Reconciliation

Operating profit, as reported	$	199,431		$	163,954

Rationalization charges		—			473
Acquisition related costs		3,658			3,076
Operating profit, as adjusted	$	203,089		$	167,503

Operating margin, as reported		15.8	%		14.0	%
Operating margin, as adjusted		16.1	%		14.3	%

Income Per Common Share Reconciliation

Income before income taxes, as reported	$	183,315		$	152,672

Rationalization charges		—			473
Acquisition related costs		3,658			3,076
Income before income taxes, as adjusted		186,973			156,221

Tax rate at 26.0%		(48,613	)		(40,617	)
Income, as adjusted	$	138,360		$	115,604

Income per common share, as adjusted	$	4.36		$	3.50

Weighted average diluted common shares outstanding		31,713,239			33,042,490

TopBuild Corp.
Same Branch and Acquisition Metrics (Unaudited)
(dollars in thousands)

	Three Months Ended March 31,
	2023			2022
Net sales
Same branch:
Installation	$	752,245		$	676,693
Specialty Distribution		558,375			543,862
Eliminations		(60,227	)		(51,637	)
Total same branch		1,250,393			1,168,918

Acquisitions (a):
Installation	$	14,845		$	—
Total acquisitions		14,845			—
Total	$	1,265,238		$	1,168,918

EBITDA, as adjusted
Same branch	$	236,775		$	201,729
Acquisitions (a)		1,549			—
Total	$	238,324		$	201,729

EBITDA, as adjusted, as a percentage of sales
Same branch (b)		18.9	%
Acquisitions (c)		10.4	%
Total (d)		18.8	%		17.3	%

As Adjusted Incremental EBITDA, as a percentage of change in sales
Same branch (e)		43.0	%
Acquisitions (c)		10.4	%
Total (f)		38.0	%

(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

TopBuild Corp.
Reconciliation of Adjusted EBITDA to Net Income (Unaudited)
(in thousands)

	Three Months Ended March 31,
	2023		2022
Net income, as reported	$	135,870	$	114,711
Adjustments to arrive at EBITDA, as adjusted:
Interest expense and other, net		16,116		11,282
Income tax expense		47,445		37,961
Depreciation and amortization		32,100		30,499
Share-based compensation		3,135		3,727
Rationalization charges		—		473
Acquisition related costs		3,658		3,076
EBITDA, as adjusted	$	238,324	$	201,729

TopBuild Corp.
Acquisition Adjusted Net Sales (Unaudited)
(in thousands)
	2022						2023		Trailing Twelve Months Ended
	Q2		Q3		Q4		Q1		March 31, 2023
Net Sales	$	1,274,285	$	1,300,998	$	1,264,543	$	1,265,238	$	5,105,064
Acquisitions proforma adjustment †		15,575		17,576		18,279		6,187		57,617
Net sales, acquisition adjusted	$	1,289,860	$	1,318,574	$	1,282,822	$	1,271,425	$	5,162,681


† 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	$	445.0		521.0
Adjustments to arrive at estimated EBITDA, as adjusted:
Interest expense and other, net		67.0		63.0
Income tax expense		157.0		183.0
Depreciation and amortization		129.0		125.0
Share-based compensation		15.0		13.0
Acquisition related costs		7.0		5.0
Estimated EBITDA, as adjusted	$	820.0	$	910.0