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TopBuild Reports Third Quarter 2020 Results

November 3, 2020 6:45 AM

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)

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

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 AllocationAcquisitions 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 repurchasesIn 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 InformationQuarterly 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 TopBuildTopBuild 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 StatementStatements 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 ContactTabitha Zane[email protected] 386-763-8801

TopBuild Corp.
Condensed Consolidated Statements of Operations (Unaudited)
(in thousands, except share and per common share amounts)
Three Months EndedSeptember 30, Nine Months EndedSeptember 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 EndedSeptember 30, Nine Months EndedSeptember 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 EndedSeptember 30, Nine Months EndedSeptember 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 EndedSeptember 30, Nine Months EndedSeptember 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 EndedSeptember 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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Source: TopBuild Corp.

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