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TopBuild Reports Third Quarter 2020 Results

  • 2.2% increase in net sales
  • 210 basis point gross margin expansion to 28.4%
  • 280 basis point operating margin expansion to 14.6%
  • 270 basis point adjusted EBITDA margin expansion to 17.1%
  • $2.11 net income per diluted share

DAYTONA BEACH, Fla., Nov. 03, 2020 (GLOBE NEWSWIRE) -- TopBuild Corp. (NYSE:BLD), a leading installer and distributor of insulation and building material products today reported results for the third quarter ended September 30, 2020.

Jerry Volas, Chief Executive Officer, stated, “We are pleased with our overall results that included strong adjusted operating and EBITDA margins. Our team continues to do an outstanding job of generating profitable growth. Sales at TruTeam were adversely impacted by our commercial business where some projects have been delayed due to COVID-19 safety protocols.

“Looking ahead, we are bullish on the overall fundamentals of our end markets and our ability to leverage our size and scale to drive market share.”

Third Quarter Financial Highlights
(unless otherwise indicated, comparisons are to the quarter ended September 30, 2019)

  • Net sales increased 2.2% to $697.2 million, driven by increased volume and sales from acquisitions.
  • Gross margin increased 210 basis points to 28.4%.
  • Operating profit was $101.5 million, compared to operating profit of $80.4 million. On an adjusted basis, operating profit was $101.7 million, compared to $80.6 million, a 26.2% improvement.
  • Operating margin, both reported and adjusted, was 14.6%, up 280 basis points.
  • Net income was $70.0 million, or $2.11 per diluted share, compared to $55.0 million, or $1.60 per diluted share. Adjusted income was $69.6 million, or $2.10 per diluted share, compared to $52.7 million, or $1.53 per diluted share.
  • Adjusted EBITDA was $119.2 million, compared to $98.0 million, a 21.6% increase, and adjusted EBITDA margin improved 270 basis points to 17.1%.

  • At September 30, 2020, the Company had cash and cash equivalents of $315.3 million and availability under its revolving credit facility of $389.6 million for total liquidity of $704.9 million.

Nine Month Financial Highlights
(unless otherwise indicated, comparisons are to nine months ended September 30, 2019)

  • Net sales increased 1.8% to $1,996.6 million.
  • Gross margin expanded 150 basis points to 27.5%.
  • Operating profit was $252.0 million, compared to operating profit of $213.1 million. On an adjusted basis, operating profit was $255.5 million, compared to $216.1 million, a 18.2% improvement.
  • Operating margin was 12.6% a 170-basis point improvement. On an adjusted basis, operating margin improved 180 basis points to 12.8%.
  • Net income was $176.3 million, or $5.29 per diluted share, compared to $145.0 million, or $4.20 per diluted share. Adjusted income was $171.2 million, or $5.14 per diluted share, compared to $138.8 million, or $4.02 per diluted share.

  • Adjusted EBITDA was $315.3 million, compared to $266.5 million, a 18.3% increase. Adjusted EBITDA margin was 15.8%, a 220-basis point improvement.

Operating Segment Highlights ($ in 000s)
(comparisons are to the period ended September 30, 2019)

TruTeam3 Months Ended 9/30/209 Months Ended 9/30/20 Service Partners3 Months Ended 9/30/209 Months Ended 9/30/20
Sales$492,206 $1,434,648  Sales$244,113 $674,672 
Change   Change  
Volume -3.4% -2.2% Volume 12.2% 6.0%
Price 1.2% 1.3% Price -1.7% -0.4%
M&A 0.9% 1.1% M&A 0.0% 0.0%
Total Change -1.2% 0.3% Total Change 10.5% 5.6%
Operating Margin 16.9% 14.9% Operating Margin 13.4% 12.1%
Change 290 bps  170 bps  Change 280 bps  190 bps 
Adj. Operating Margin 17.0% 15.0% Adj. Operating Margin 13.4% 12.2%
Change 300 bps  170 bps  Change 280 bps  200 bps 

Capital Allocation
Acquisitions
On October 1, 2020, the Company completed the acquisition of Garland Insulating, one of the largest locally owned and operated insulation installation companies in Texas. Garland generated approximately $60 million in revenue for the trailing twelve months ended June 30, 2020.

“Acquisitions continue to be our number one capital allocation priority. Garland Insulating, which has a great reputation, strong customer base and outstanding leadership, is a good example of the type of quality companies we have in our pipeline,” noted Volas.

Year-to-date, the Company has announced three acquisitions, which combined, are expected to generate approximately $79 million in annual revenue.

Share repurchases
In the third quarter of 2020, the Company repurchased 57,810 shares at an average price of $155.63 per share.  These shares were purchased as part of the Company’s $200 million share repurchase authorization announced on February 26, 2019.  As of September 30, 2020, $46 million of the $200 million authorization remained.

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 third quarter 2020 financial results is scheduled for today, Tuesday, November 3, 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 “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 close to 200 branches, and through Service Partners® which distributes insulation and building material products from over 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
Statements contained herein reflect our views about future periods, including our future plans and performance, constitute “forward-looking statements” under the Private Securities Litigation Reform Act of 1995.  Forward-looking statements can be identified by 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.  We caution you against unduly relying on any of these forward-looking statements.  Our future performance may be affected by the duration and impact of the COVID-19 pandemic on the United States economy, specifically with respect to residential and commercial construction; our ability to continue operations in markets affected by the COVID-19 pandemic and our ability to collect receivables from our customers; our reliance on residential new construction, residential repair/remodel, and commercial construction; our reliance on third-party suppliers and manufacturers; our ability to attract, develop, and retain talented personnel and our sales and labor force; our ability to maintain consistent practices across our locations; and our ability to maintain our competitive position.  We discuss the material risks we face under the caption entitled “Risk Factors” in our Annual Report for the year ended December 31, 2019, as filed with the SEC on February 25, 2020, as well as under the caption entitled “Risk Factors” in subsequent reports that we file with the SEC.  Our forward-looking statements in this filing speak only as of the date of this filing.  Factors or events that could cause our actual results to differ may emerge from time to time and it is not possible for us to predict all of them.  Unless required by law, we undertake no obligation to update publicly any forward-looking statements as a result of new information, future events, or otherwise.  The Company believes that the non-GAAP performance measures and ratios that are contained herein, which management uses to manage our business, provide users of this financial information with additional meaningful comparisons between current results and results in our prior periods. Non-GAAP performance measures and ratios should be viewed in addition, and not as an alternative, to the Company's reported results under accounting principles generally accepted in the United States. Additional information about the Company is contained in the Company's filings with the SEC and is available on TopBuild's website at www.topbuild.com.

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
September 30, 
 Nine Months Ended
September 30, 
 
  2020  2019  2020  2019  
Net sales $                 697,223        $                  682,330     $              1,996,551        $               1,961,771  
Cost of sales                   498,895                    502,999                 1,448,210                 1,451,822  
Gross profit                   198,328                    179,331                    548,341                    509,949  
                
Selling, general, and administrative expense                     96,805                      98,886                    296,372                    296,846  
Operating profit                    101,523                      80,445                    251,969                    213,103  
              
Other income (expense), net:             
Interest expense                     (7,692)                     (9,507)                   (24,711)                   (28,740) 
Loss on extinguishment of debt                            —                             —                         (233)                            —  
Other, net                             86                           653                           648                        1,512  
Other expense, net                     (7,606)                     (8,854)                   (24,296)                   (27,228) 
Income before income taxes                     93,917                      71,591                    227,673                    185,875  
                 
Income tax expense                   (23,921)                   (16,615)                   (51,407)                   (40,864) 
Net income $                   69,996  $                   54,976  $                 176,266  $                 145,011  
              
Net income per common share:             
Basic $                       2.13  $                       1.63  $                       5.35  $                       4.27  
Diluted $                       2.11  $                       1.60  $                       5.29  $                       4.20  
                  
Weighted average shares outstanding:                 
Basic              32,847,652               33,790,857               32,960,969               33,977,464  
Diluted              33,210,545               34,367,902               33,337,259               34,541,635  

 


TopBuild Corp.        
Condensed Consolidated Balance Sheets and Other Financial Data (Unaudited)        
(dollars in thousands)        
  As of  
  September 30,     December 31,   
  2020 2019  
ASSETS        
Current assets:        
Cash and cash equivalents $315,338 $184,807  
Receivables, net of an allowance for credit losses of $8,122 at September 30, 2020 and allowance for doubtful accounts of $4,854 at December 31, 2019  436,548  428,844  
Inventories, net  142,517  149,078  
Prepaid expenses and other current assets  32,101  17,098  
Total current assets  926,504  779,827  
         
Right of use assets  81,692  87,134  
Property and equipment, net  172,099  178,080  
Goodwill  1,379,721  1,367,918  
Other intangible assets, net  172,390  181,122  
Deferred tax assets, net  4,397  4,259  
Other assets  10,998  5,623  
Total assets $2,747,801 $2,603,963  
         
LIABILITIES        
Current liabilities:        
Accounts payable $311,696 $307,970  
Current portion of long-term debt  23,247  34,272  
Accrued liabilities  117,456  98,418  
Short-term lease liabilities  32,747  36,094  
Total current liabilities  485,146  476,754  
         
Long-term debt  688,870  697,955  
Deferred tax liabilities, net  173,597  175,263  
Long-term portion of insurance reserves  49,927  45,605  
Long-term lease liabilities  52,672  54,010  
Other liabilities  15,995  1,487  
Total liabilities  1,466,207  1,451,074  
         
EQUITY  1,281,594  1,152,889  
Total liabilities and equity $2,747,801 $2,603,963  
         
         
  As of September 30,   
     2020 2019  
Other Financial Data        
Receivable days   48  51  
Inventory days   27  28  
Accounts payable days   81  77  
Receivables, net plus inventories, net less accounts payable  $267,369 $301,217  
Receivables, net plus inventories, net less accounts payable as a percent of sales (TTM)  10.1% 11.6% 
         

 


TopBuild Corp.      
Condensed Consolidated Statement of Cash Flows (Unaudited)      
(in thousands)      
       
  Nine Months Ended
September 30, 
  2020  2019 
Cash Flows Provided by (Used in) Operating Activities:               
Net income $                  176,266  $                  145,011 
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation and amortization                      47,527                       39,005 
Share-based compensation                      12,159                       11,411 
Loss on extinguishment of debt                           233                              — 
Loss on sale or abandonment of property and equipment                           290                            885 
Amortization of debt issuance costs                        1,103                         1,169 
Provision for bad debt expense                        5,625                         5,697 
Loss from inventory obsolescence                        1,908                         1,794 
Deferred income taxes, net                         (709)                         (381)
Change in certain assets and liabilities        
Receivables, net                    (13,645)                    (51,585)
Inventories, net                        4,759                       20,637 
Prepaid expenses and other current assets                    (14,989)                      10,003 
Accounts payable                        2,152                     (12,529)
Accrued liabilities                      33,436                       10,758 
Payment of contingent consideration                         (413)                             — 
Other, net                             21                            904 
Net cash provided by operating activities                    255,723                     182,779 
       
Cash Flows Provided by (Used in) Investing Activities:      
Purchases of property and equipment                    (27,206)                    (34,100)
Acquisition of businesses                    (21,450)                      (6,452)
Proceeds from sale of property and equipment                        2,332                         2,239 
Other, net                             —                              25 
Net cash used in investing activities                    (46,324)                      (38,288)
       
Cash Flows Provided by (Used in) Financing Activities:      
Proceeds from issuance of long-term debt                    300,000                         9,998 
Repayment of long-term debt                  (319,168)                    (19,424)
Payment of debt issuance costs                      (2,280)                             — 
Taxes withheld and paid on employees' equity awards                    (14,781)                    (11,135)
Exercise of stock options                        1,438                              — 
Repurchase of shares of common stock                    (43,149)                    (52,177)
Payment of contingent consideration                         (928)                      (1,091)
Net cash used in financing activities                    (78,868)                      (73,829)
       
Cash and Cash Equivalents      
Increase for the period                    130,531                       70,662 
Beginning of period                    184,807                     100,929 
End of period $                  315,338   $                  171,591 
       
Supplemental disclosure of noncash activities:      
Leased assets obtained in exchange for new operating lease liabilities $                    27,098  $                  120,726 
Accruals for property and equipment                           278                            102 

 


TopBuild Corp.                     
Segment Data (Unaudited)                     
(dollars in thousands)                     
                      
  Three Months Ended
September 30, 
      Nine Months Ended
September 30, 
    
  2020  2019  Change   2020  2019  Change 
TruTeam                     
Sales $492,206  $498,390           (1.2)%  $1,434,648  $1,430,800  0.3% 
                      
Operating profit, as reported $                  83,142  $69,846       $213,136  $189,568     
Operating margin, as reported  16.9 % 14.0 %      14.9 % 13.2 %   
                      
Rationalization charges                             9                          (16)                              866                          183     
Acquisition related costs                           —                            56                                   4                          459     
COVID-19 pay                         278                            —                               916                            —     
Operating profit, as adjusted $83,429  $69,886       $214,922  $190,210     
Operating margin, as adjusted  17.0 % 14.0 %      15.0 % 13.3 %   
                      
Service Partners                     
Sales $244,113  $220,947   10.5 %  $674,672  $638,899  5.6% 
                      
Operating profit, as reported $32,787  $23,406       $81,612  $65,154     
Operating margin, as reported  13.4 % 10.6 %      12.1 % 10.2 %   
                      
Rationalization charges                       (161)                           —                               783                          109     
COVID-19 pay                           15                            —                                 70                            —     
Operating profit, as adjusted $32,641  $23,406       $82,464  $65,263     
Operating margin, as adjusted  13.4 % 10.6 %      12.2 % 10.2 %   
                      
Total                     
Sales before eliminations $                736,319  $                719,337       $             2,109,320  $             2,069,699     
Intercompany eliminations                   (39,096)                  (37,007)                     (112,769)                (107,928)    
Net sales after eliminations $697,223  $682,330   2.2 %  $1,996,551  $1,961,771  1.8% 
                      
Operating profit, as reported - segments $                115,929  $                  93,252       $                294,748  $                254,722     
General corporate expense, net                    (8,032)                    (6,872)                       (24,610)                  (23,606)    
Intercompany eliminations                    (6,374)                    (5,935)                       (18,169)                  (18,013)    
Operating profit, as reported $                101,523  $                  80,445       $                251,969  $                213,103     
Operating margin, as reported  14.6 % 11.8 %      12.6 % 10.9 %   
                      
Rationalization charges †                       (274)                             8                            2,102                       1,977     
Acquisition related costs †                         142                          131                               338                       1,034     
Refinancing costs                           —                            —                                 57                            —     
COVID-19 pay                         293                            —                               984                            —     
Operating profit, as adjusted $                101,684  $                  80,584       $                255,450  $                216,114     
Operating margin, as adjusted  14.6 % 11.8 %      12.8 % 11.0 %   
                      
Share-based compensation                      3,280                       3,926                          12,317                     11,411     
Depreciation and amortization                    14,216                     13,467                          47,527                     39,005     
EBITDA, as adjusted $119,180  $97,977       $315,294  $266,530     
EBITDA margin, as adjusted  17.1 % 14.4 %      15.8 % 13.6 %   
                      
Sales change period over period                   14,893                                   34,780           
EBITDA, as adjusted, change period over period                   21,203                                  48,764           
Incremental EBITDA, as adjusted, as a percentage of change in sales                    142.4  %                            140.2  %      
                      
† Rationalization charges and 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, 
  2020  2019  2020  2019 
Gross Profit and Operating Profit Reconciliations            
             
Net sales $697,223  $682,330  $1,996,551  $1,961,771 
             
Gross profit, as reported $198,328  $179,331  $548,341  $509,949 
             
Rationalization charges                             (63)                               —                           1,016                                — 
COVID-19 pay                             273                                —                              755                                — 
Gross profit, as adjusted $198,538  $179,331  $550,111  $509,949 
             
Gross margin, as reported  28.4%  26.3%  27.5%  26.0%
Gross margin, as adjusted  28.5%  26.3%  27.6%  26.0%
             
Operating profit, as reported $101,523  $80,445  $251,969  $213,103 
             
Rationalization charges                           (274)                                 8                           2,102                           1,977 
Acquisition related costs                             142                              131                              338                           1,034 
Refinancing costs                               —                                —                                57                                — 
COVID-19 pay                             293                                —                              984                                — 
Operating profit, as adjusted $101,684  $80,584  $255,450  $216,114 
             
Operating margin, as reported  14.6%  11.8%  12.6%  10.9%
Operating margin, as adjusted  14.6%  11.8%  12.8%  11.0%
             
Income Per Common Share Reconciliation            
             
Income before income taxes, as reported $93,917  $71,591  $227,673  $185,875 
             
Rationalization charges                           (274)                                 8                           2,102                           1,977 
Acquisition related costs                             142                              131                              338                           1,034 
Refinancing costs and loss on extinguishment of debt                               —                                —                              290                                — 
COVID-19 pay                             293                                —                              984                                — 
Income before income taxes, as adjusted  94,078   71,730   231,387   188,886 
             
Tax rate at 26.0% and 26.5% for 2020 and 2019, respectively                      (24,460)                      (19,008)                      (60,161)                      (50,055)
Income, as adjusted $69,618  $52,722  $171,226  $138,831 
             
Income per common share, as adjusted $2.10  $1.53  $5.14  $4.02 
             
Weighted average diluted common shares outstanding  33,210,545   34,367,902   33,337,259   34,541,635 

 


TopBuild Corp.            
Same Branch and Acquisition Net Sales and Adjusted EBITDA (Unaudited)            
(dollars in thousands)            
             
  Three Months Ended
September 30, 
 Nine Months Ended
September 30, 
     2020  2019 2020 2019
Net sales            
Same branch:            
TruTeam $             487,590  $             498,390  $          1,418,418  $          1,430,800 
Service Partners               244,113                220,947                674,672                638,899 
Eliminations                (39,096)                (37,007)              (112,769)              (107,928)
Total same branch               692,607                682,330             1,980,321             1,961,771 
             
Acquisitions (a):            
TruTeam $                 4,616  $                      —  $               16,230  $                      — 
Service Partners                        —                         —                         —                         — 
Eliminations                        —                         —                         —                         — 
Total acquisitions                   4,616                         —                  16,230                         — 
Total $             697,223  $             682,330  $          1,996,551  $          1,961,771 
             
EBITDA, as adjusted            
Same branch $             118,506  $               97,977  $             312,099  $             266,530 
Acquisitions (a)                      674                         —                    3,195                         — 
Total $             119,180  $               97,977  $             315,294  $             266,530 
             
EBITDA, as adjusted, as a percentage of sales            
Same branch (b)  17.1%     15.8%   
Acquisitions (c)  14.6%     19.7%   
Total (d)  17.1%  14.4%  15.8%  13.6%  
             
As Adjusted Incremental EBITDA, as a percentage of change in sales            
Same branch (e)  199.8%     245.7%   
Acquisitions (c)  14.6%     19.7%   
Total (f)  142.4%     140.2%   
             
             
(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.            
 Same Branch and Acquisition Net Sales by Market (Unaudited)          
(in thousands)            
             
 Three Months Ended
September 30, 
 Nine Months Ended
September 30, 
 
 2020 2019 2020 2019 
Same branch:            
Residential$543,658 $522,506 $1,553,273 $1,503,300 
Commercial 148,949  159,824  427,048  458,471 
Same branch net sales 692,607  682,330  1,980,321  1,961,771 
             
Acquisitions (a):            
Residential$2,030 $ $4,681 $ 
Commercial 2,586    11,549   
Acquisitions net sales 4,616    16,230   
Total net sales$697,223 $682,330 $1,996,551 $1,961,771 
             
(a) Represents current year impact of acquisitions in their first twelve months       
             


TopBuild Corp.            
Reconciliation of Adjusted EBITDA to Net Income (Unaudited)         
(in thousands)            
             
  Three Months Ended
September 30, 
 Nine Months Ended
September 30, 
  2020 2019 2020 2019
Net income, as reported $69,996  $54,976 $176,266 $145,011
Adjustments to arrive at EBITDA, as adjusted:            
Interest expense and other, net  7,606   8,854  24,063  27,228
Income tax expense  23,921   16,615  51,407  40,864
Depreciation and amortization  14,216   13,467  47,527  39,005
Share-based compensation  3,280   3,926  12,317  11,411
Rationalization charges  (274)  8  2,102  1,977
Acquisition related costs  142   131  338  1,034
Refinancing costs and loss on extinguishment of debt       290  
COVID-19 pay  293     984  
EBITDA, as adjusted $             119,180   $               97,977  $             315,294  $             266,530
             

 

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