TopBuild Reports Second Quarter 2023 Results

Sales increased 3.4% to $1.3 billion
Gross margin expanded 190 basis points to 32.0%
Adjusted EBITDA margin expanded 190 basis points to 20.9%

DAYTONA BEACH, Fla., Aug. 03, 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 second quarter ended June 30, 2023.

Robert Buck, President and Chief Executive Officer, stated, “TopBuild once again delivered strong operating results, as we continue to benefit from a favorable operating environment and maintain our focus on driving improvements at both business segments, Installation and Specialty Distribution. We are also encouraged by the increasing optimism we are hearing from the homebuilders.

“Our commercial and industrial business performance remains strong, with a solid backlog of projects and continued robust bidding activity. We are particularly pleased with how well our Installation branches have successfully grown their light commercial work in their respective regions and believe this will continue to be a growth driver over the long term.”

Second Quarter 2023 Financial Highlights ($ in 000s)
(comparisons are to the quarter ended June 30, 2022)

3 Months Ended 6/30/23	Reported	Change
Sales	$1,317,262	3.4%
Gross Margin	32.0%	190 bps
SG&A as % of revenue	14.0%	10 bps
Operating Profit	$237,103	14.4%
Operating Margin	18.0%	170 bps
Net Income	$164,400	14.4%
Net Income per diluted share	$5.18	17.5%

3 Months Ended 6/30/23	Adjusted	Change
Sales	$1,317,262	3.4%
Gross Margin	32.0%	190 bps
SG&A as % of revenue	13.9%	10 bps
Operating Profit	$239,203	14.6%
Operating Margin	18.2%	180 bps
Net Income	$166,685	15.4%
Net Income per diluted share	$5.25	18.5%
EBITDA	$275,505	13.7%
EBITDA Margin	20.9%	190 bps

Six Month Financial Highlights ($ in 000s)
(comparisons are to the six months ended June 30, 2022)

6 Months Ended 6/30/23	Reported	Change
Sales	$2,582,500	5.7%
Gross Margin	30.7%	140 bps
SG&A as % of revenue	13.8%	(30 bps)
Operating Profit	$436,534	17.6%
Operating Margin	16.9%	170 bps
Net Income	$300,270	16.2%
Net Income per diluted share	$9.47	20.3%

6 Months Ended 6/30/23	Adjusted	Change
Sales	$2,582,500	5.7%
Gross Margin	30.7%	140 bps
SG&A as % of revenue	13.5%	(40 bps)
Operating Profit	$442,292	17.5%
Operating Margin	17.1%	170 bps
Net Income	$305,045	17.3%
Net Income per diluted share	$9.62	21.5%
EBITDA	$513,830	15.7%
EBITDA Margin	19.9%	170 bps

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

Installation	3 Months Ended 6/30/23	6 Months Ended 6/30/23
Sales	$809,055	$1,576,145
Change
Volume	2.9%	4.1%
Price	2.9%	4.3%
M&A	2.2%	2.2%
Total Change	8.0%	10.6%
Operating Margin	21.3%	20.3%
Change	260 bps	260 bps
Adj. Operating Margin	21.3%	20.3%
Change	260 bps	250 bps
Adj. EBITDA Margin	23.4%	22.4%
Change	260 bps	240 bps

Specialty Distribution	3 Months Ended 6/30/23	6 Months Ended 6/30/23
Sales	$574,488	$1,132,862
Change
Volume	-2.9%	-2.9%
Price	0.6%	3.0%
M&A	0.0%	0.0%
Total Change	-2.3%	0.1%
Operating Margin	15.0%	14.1%
Change	20 bps	20 bps
Adj. Operating Margin	15.0%	14.1%
Change	20 bps	20 bps
Adj. EBITDA Margin	17.6%	16.7%
Change	40 bps	20 bps

Capital Allocation

“We are pleased with our progress to date on the acquisition front, welcoming three profitable and well-managed companies to the TopBuild family. In late July we also announced that we had signed an agreement to acquire SPI, a leading specialty distributor generating approximately $703 million in annual revenue. This acquisition will further enhance our growth platform in the three end-markets we serve and increase our recurring revenue stream from maintenance and repair operations.” added Buck.

Year-to-date the Company has completed three acquisitions; SRI Holdings, Best Insulation, and Rocky Mountain Spray Foam which, combined, are expected to contribute approximately $170 million of annual revenue.

2023 Outlook

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

2023	Low		High
Sales	$	5,025	$	5,175
Adjusted EBITDA*	$	950	$	1,000

*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 second quarter 2023 financial results is scheduled for today, Thursday, August 3, 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 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

TopBuild Corp.
Condensed Consolidated Statements of Operations (Unaudited)
(in thousands, except share and per common share amounts)

	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Net sales	$	1,317,262		$	1,274,285		$	2,582,500		$	2,443,203
Cost of sales		895,462			890,188			1,790,485			1,727,905
Gross profit		421,800			384,097			792,015			715,298

Selling, general, and administrative expense		184,697			176,876			355,481			344,123
Operating profit		237,103			207,221			436,534			371,175

Other income (expense), net:
Interest expense		(18,558	)		(13,410	)		(36,597	)		(25,375	)
Other, net		4,605			(279	)		6,528			406
Other expense, net		(13,953	)		(13,689	)		(30,069	)		(24,969	)
Income before income taxes		223,150			193,532			406,465			346,206

Income tax expense		(58,750	)		(49,835	)		(106,195	)		(87,796	)
Net income	$	164,400		$	143,697		$	300,270		$	258,410

Net income per common share:
Basic	$	5.20		$	4.43		$	9.51		$	7.93
Diluted	$	5.18		$	4.41		$	9.47		$	7.87

Weighted average shares outstanding:
Basic		31,599,744			32,405,292			31,575,337			32,570,988
Diluted		31,731,807			32,614,449			31,722,660			32,827,549

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

	Three Months Ended June 30,					Six Months Ended June 30,
	2023		2022			2023		2022
Net income	$	164,400	$	143,697		$	300,270	$	258,410
Other comprehensive income (loss):
Foreign currency translation adjustment		4,283		(2,193	)		6,037		1,026
Comprehensive income	$	168,683	$	141,504		$	306,307	$	259,436

TopBuild Corp.
Condensed Consolidated Balance Sheets and Other Financial Data (Unaudited)
(dollars in thousands)
	As of
	June 30, 2023			December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	526,327		$	240,069
Receivables, net of an allowance for credit losses of $16,778 at June 30, 2023, and $16,281 at December 31, 2022		857,664			836,071
Inventories, net		385,049			438,644
Prepaid expenses and other current assets		25,556			34,257
Total current assets		1,794,596			1,549,041

Right of use assets		204,044			205,892
Property and equipment, net		258,746			253,484
Goodwill		1,991,949			1,966,994
Other intangible assets, net		595,706			614,967
Other assets		12,905			16,453
Total assets	$	4,857,946		$	4,606,831

LIABILITIES
Current liabilities:
Accounts payable	$	468,602		$	487,114
Current portion of long-term debt		45,142			40,068
Accrued liabilities		180,594			199,370
Short-term operating lease liabilities		61,825			60,880
Short-term finance lease liabilities		2,180			2,207
Total current liabilities		758,343			789,639

Long-term debt		1,394,794			1,417,257
Deferred tax liabilities, net		254,777			251,481
Long-term portion of insurance reserves		57,217			59,783
Long-term operating lease liabilities		148,709			149,943
Long-term finance lease liabilities		4,519			6,673
Other liabilities		1,541			2,349
Total liabilities		2,619,900			2,677,125

EQUITY		2,238,046			1,929,706
Total liabilities and equity	$	4,857,946		$	4,606,831

	As of June 30,
	2023			2022
Other Financial Data
Receivable days		50			46
Inventory days		39			48
Accounts payable days		64			62
Receivables, net plus inventories, net less accounts payable	$	774,111		$	696,615
Receivables, net plus inventories, net less accounts payable as a percent of sales (TTM) †		14.9	%		15.0	%

† 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)

	Six Months Ended June 30,
	2023			2022
Cash Flows Provided by (Used in) Operating Activities:
Net income	$	300,270		$	258,410
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		64,652			60,621
Share-based compensation		6,886			7,061
Loss on sale of property and equipment		621			525
Amortization of debt issuance costs		1,440			1,427
Provision for bad debt expense		4,031			6,404
Loss from inventory obsolescence		3,290			3,610
Change in certain assets and liabilities:
Receivables, net		(37,247	)		(107,739	)
Inventories, net		54,623			(82,621	)
Prepaid expenses and other current assets		8,897			648
Accounts payable		(8,806	)		47,540
Accrued liabilities		(13,872	)		16,884
Other, net		1,012			4,927
Net cash provided by operating activities		385,797			217,697

Cash Flows Provided by (Used in) Investing Activities:
Purchases of property and equipment		(30,672	)		(36,034	)
Acquisition of businesses, net of cash acquired		(45,948	)		(18,746	)
Proceeds from sale of property and equipment		782			618
Net cash used in investing activities		(75,838	)		(54,162	)

Cash Flows Provided by (Used in) Financing Activities:
Repayment of long-term debt		(18,829	)		(19,287	)
Proceeds from revolving credit facility		—			70,000
Repayment of revolving credit facility		—			(70,000	)
Taxes withheld and paid on employees' equity awards		(6,350	)		(11,667	)
Exercise of stock options		1,497			1,452
Repurchase of shares of common stock		—			(150,050	)
Payment of contingent consideration		(300	)		(35	)
Net cash used in financing activities		(23,982	)		(179,587	)
Impact of exchange rate changes on cash		281			142
Net increase (decrease) in cash and cash equivalents		286,258			(15,910	)
Cash and cash equivalents- Beginning of period		240,069			139,779
Cash and cash equivalents- End of period	$	526,327		$	123,869

Supplemental disclosure of noncash activities:
Leased assets obtained in exchange for new operating lease liabilities	$	26,310		$	36,129
Accruals for property and equipment		1,449			563

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

	Three Months Ended June 30,								Six Months Ended June 30,
		2023			2022		Change			2023			2022		Change
Installation
Sales	$	809,055		$	748,968		8.0	%	$	1,576,145		$	1,425,661		10.6	%

Operating profit, as reported	$	172,278		$	139,919				$	319,176		$	252,598
Operating margin, as reported		21.3	%		18.7	%				20.3	%		17.7	%

Rationalization charges		—			—					—			473
Acquisition related costs		227			16					490			96
Operating profit, as adjusted	$	172,505		$	139,935				$	319,666		$	253,167
Operating margin, as adjusted		21.3	%		18.7	%				20.3	%		17.8	%

Share-based compensation		310			282					689			689
Depreciation and amortization		16,791			15,319					33,284			31,004
EBITDA, as adjusted	$	189,606		$	155,536		21.9	%	$	353,639		$	284,860		24.1	%
EBITDA margin, as adjusted		23.4	%		20.8	%				22.4	%		20.0	%

Specialty Distribution
Sales	$	574,488		$	587,791		(2.3	)%	$	1,132,862		$	1,131,653		0.1	%

Operating profit, as reported	$	85,980		$	86,749				$	159,313		$	157,170
Operating margin, as reported		15.0	%		14.8	%				14.1	%		13.9	%

Acquisition related costs		—			334					340			575
Operating profit, as adjusted	$	85,980		$	87,083				$	159,653		$	157,745
Operating margin, as adjusted		15.0	%		14.8	%				14.1	%		13.9	%

Share-based compensation		316			287					554			641
Depreciation and amortization		14,740			14,005					29,312			28,034
EBITDA, as adjusted	$	101,036		$	101,375		(0.3	)%	$	189,519		$	186,420		1.7	%
EBITDA margin, as adjusted		17.6	%		17.2	%				16.7	%		16.5	%

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

	Three Months Ended June 30,								Six Months Ended June 30,
	2023			2022			Change		2023			2022			Change
Total net sales
Sales before eliminations	$	1,383,543		$	1,336,759				$	2,709,007		$	2,557,314
Intercompany eliminations		(66,281	)		(62,474	)				(126,507	)		(114,111	)
Net sales after eliminations	$	1,317,262		$	1,274,285		3.4	%	$	2,582,500		$	2,443,203			5.7	%

Operating profit, as reported - segments	$	258,258		$	226,668				$	478,489		$	409,768
General corporate expense, net		(9,957	)		(9,012	)				(20,786	)		(19,449	)
Intercompany eliminations		(11,198	)		(10,435	)				(21,169	)		(19,144	)
Operating profit, as reported	$	237,103		$	207,221				$	436,534		$	371,175
Operating margin, as reported		18.0	%		16.3	%				16.9	%		15.2	%

Rationalization charges		—			—					—			473
Acquisition related costs ^†		2,100			1,577					5,758			4,654
Operating profit, as adjusted	$	239,203		$	208,798				$	442,292		$	376,302
Operating margin, as adjusted		18.2	%		16.4	%				17.1	%		15.4	%

Share-based compensation		3,751			3,334					6,886			7,061
Depreciation and amortization		32,551			30,122					64,652			60,621
EBITDA, as adjusted	$	275,505		$	242,254		13.7	%	$	513,830		$	443,984			15.7	%
EBITDA margin, as adjusted		20.9	%		19.0	%				19.9	%		18.2	%

Sales change period over period		42,977								139,297
EBITDA, as adjusted, change period over period		33,251								69,846
Incremental EBITDA, as adjusted, as a percentage of change in sales		77.4	%							50.1	%

† 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 June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Gross Profit Reconciliation

Net sales	$	1,317,262		$	1,274,285		$	2,582,500		$	2,443,203

Gross profit, as reported	$	421,800		$	384,097		$	792,015		$	715,298

Acquisition related costs		—			—			—			121
Gross profit, as adjusted	$	421,800		$	384,097		$	792,015		$	715,419

Gross margin, as reported		32.0	%		30.1	%		30.7	%		29.3	%
Gross margin, as adjusted		32.0	%		30.1	%		30.7	%		29.3	%

Selling, General and Administrative Expense Reconciliation

Selling, general, and administrative expense, as reported	$	184,697		$	176,876		$	355,481		$	344,123

Rationalization charges		—			—			—			473
Acquisition related costs		2,100			1,577			5,758			4,533
Selling, general, and administrative expense, as adjusted	$	182,597		$	175,299		$	349,723		$	339,117

Operating Profit Reconciliation

Operating profit, as reported	$	237,103		$	207,221		$	436,534		$	371,175

Rationalization charges		—			—			—			473
Acquisition related costs		2,100			1,577			5,758			4,654
Operating profit, as adjusted	$	239,203		$	208,798		$	442,292		$	376,302

Operating margin, as reported		18.0	%		16.3	%		16.9	%		15.2	%
Operating margin, as adjusted		18.2	%		16.4	%		17.1	%		15.4	%

Income Per Common Share Reconciliation

Income before income taxes, as reported	$	223,150		$	193,532		$	406,465		$	346,206

Rationalization charges		—			—			—			473
Acquisition related costs		2,100			1,577			5,758			4,654
Income before income taxes, as adjusted		225,250			195,109			412,223			351,333

Tax rate at 26.0%		(58,565	)		(50,728	)		(107,178	)		(91,347	)
Income, as adjusted	$	166,685		$	144,381		$	305,045		$	259,986

Income per common share, as adjusted	$	5.25		$	4.43		$	9.62		$	7.92

Weighted average diluted common shares outstanding		31,731,807			32,614,449			31,722,660			32,827,549

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

	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Net sales
Same branch:
Installation	$	792,529		$	748,968		$	1,544,775		$	1,425,661
Specialty Distribution		574,488			587,791			1,132,862			1,131,653
Eliminations		(66,281	)		(62,474	)		(126,507	)		(114,111	)
Total same branch		1,300,736			1,274,285			2,551,130			2,443,203

Acquisitions (a):
Installation	$	16,526		$	—		$	31,370		$	—
Total acquisitions		16,526			—			31,370			—
Total	$	1,317,262		$	1,274,285		$	2,582,500		$	2,443,203

EBITDA, as adjusted
Same branch	$	272,939		$	242,254		$	509,715		$	443,984
Acquisitions (a)		2,566			—			4,115			—
Total	$	275,505		$	242,254		$	513,830		$	443,984

EBITDA, as adjusted, as a percentage of sales
Same branch (b)		21.0	%					20.0	%
Acquisitions (c)		15.5	%					13.1	%
Total (d)		20.9	%		19.0	%		19.9	%		18.2	%

As Adjusted Incremental EBITDA, as a percentage of change in sales
Same branch (e)		116.0	%					60.9	%
Acquisitions (c)		15.5	%					13.1	%
Total (f)		77.4	%					50.1	%

(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 June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net income, as reported	$	164,400	$	143,697	$	300,270	$	258,410
Adjustments to arrive at EBITDA, as adjusted:
Interest expense and other, net		13,953		13,689		30,069		24,969
Income tax expense		58,750		49,835		106,195		87,796
Depreciation and amortization		32,551		30,122		64,652		60,621
Share-based compensation		3,751		3,334		6,886		7,061
Rationalization charges		—		—		—		473
Acquisition related costs		2,100		1,577		5,758		4,654
EBITDA, as adjusted	$	275,505	$	242,254	$	513,830	$	443,984

TopBuild Corp.
Acquisition Adjusted Net Sales (Unaudited)
(in thousands)
	2022				2023				Trailing Twelve Months Ended
	Q3		Q4		Q1		Q2		June 30, 2023
Net Sales	$	1,300,998	$	1,264,543	$	1,265,238	$	1,317,262	$	5,148,041
Acquisitions proforma adjustment †		17,576		18,279		6,187		-		42,042
Net sales, acquisition adjusted	$	1,318,574	$	1,282,822	$	1,271,425	$	1,317,262	$	5,190,083


† 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	$	543.0		586.0
Adjustments to arrive at estimated EBITDA, as adjusted:
Interest expense and other, net		62.0		59.0
Income tax expense		191.0		206.0
Depreciation and amortization		131.0		128.0
Share-based compensation		15.0		14.0
Acquisition related costs		8.0		7.0
Estimated EBITDA, as adjusted	$	950.0	$	1,000.0