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TopBuild Reports Fourth Quarter and Full Year 2020 Results

February 23, 2021 6:45 AM

Provides 2021 Sales and Adjusted EBITDA Guidance

DAYTONA BEACH, Fla., Feb. 23, 2021 (GLOBE NEWSWIRE) -- TopBuild Corp. (NYSE: BLD), a leading installer and distributor of insulation and building material products to the U.S. construction industry today reported results for the fourth quarter and year ended December 31, 2020.

Robert Buck, President and Chief Executive Officer, stated, “Our fourth quarter results were strong with operating margins expanding over 200 basis points at both TruTeam and Service Partners. Same branch residential and commercial revenue improved sequentially from the third quarter and continues to strengthen.

“Labor shortages and material constraints are extending the building cycle and the traditional lag time in our business. Our ability to share labor and material across our footprint gives us an advantage in serving our customers and helps us mitigate these challenges.”

Fourth Quarter Financial Highlights

(unless otherwise indicated, comparisons are to the quarter ended December 31, 2019)

Full Year 2020 Financial Highlights

(unless otherwise indicated, comparisons are to twelve months ended December 31, 2019)

Buck added, “Our 2020 financial results demonstrate the strength of our operating model and the hard work and dedication of our entire TopBuild team. Despite the challenges resulting from the pandemic, both of our business segments reported revenue growth and solid margin expansion.

“In addition, during the year we completed three acquisitions, strengthening our footprint in the high growth markets of Texas, Colorado and Tennessee.

“Looking ahead, housing fundamentals remain robust and our Company should continue to benefit from strong demand for new housing construction. Our focus remains on driving top line growth and improving operational efficiencies throughout the Company.”

Operating Segment Highlights ($ in 000s)(comparisons are to the period ended December 31, 2019)

TruTeam3 Months Ended 12/31/2012 Months Ended 12/31/20 Service Partners3 Months Ended 12/31/2012 Months Ended 12/31/20
Sales$508,812$1,943,461 Sales$251,535$926,207
Change Change
Volume2.8%-1.0% Volume13.3%7.9%
Price-0.3%0.9% Price-0.6%-0.5%
M&A4.5%2.0% M&A0.0%0.0%
Total Change6.9%1.9% Total Change12.7%7.4%
Operating Margin16.0%15.2% Operating Margin13.4%12.5%
Change260 bps190 bps Change210 bps200 bps
Adj. Operating Margin16.1%15.3% Adj. Operating Margin13.4%12.5%
Change270 bps200 bps Change210 bps200 bps

Capital AllocationAcquisitions In 2020, the Company completed three acquisitions, Hunter Insulation, an installation company based in Long Island, New York, Cooper Glass a commercial glass company serving the Memphis market, and Garland Insulating, a residential and light commercial installation company serving markets in Texas and Colorado.

In January 2021, the Company acquired LCR Contractors, a residential and heavy commercial insulation company serving markets in Texas and Tennessee. Combined, these four companies are expected to contribute approximately $137 million of annual revenue

“Acquisitions remain our number one capital allocation priority. We have a robust pipeline of prospects with the majority concentrated in our core insulation business. These companies are located in attractive growth regions with strong management teams, solid customer bases and experienced installers,” stated Buck.

Share Repurchase ProgramIn 2020, the Company repurchased a total of 616,227 shares of its common stock for approximately $49.2 million.

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

2021LowHigh
Sales$3,050.0$3,150.0
Adjusted EBITDA*$505.0$535.0

*See table for adjusted EBITDA reconciliation.

Assumptions(1) ($ in millions)

2021LowHigh
Housing Starts 1,425 1,475
Estimated net income$297.5$326.7
Interest Expense and other, net$24.2$21.2
Income tax expense$104.5$114.8
Depreciation and Amortization$67.0$63.0
Share based compensation$11.8$9.3

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

Metric
Working Capital (% of LTM Sales)9.5% to 10.5%
CapEx (% of Sales)2.0%
Commercial Annual Revenue Growth7.5% to 10.0%
Normalized Tax Rate26.0%
Incremental Adjusted EBITDA (Organic)22.0% to 27.0%
Incremental Adjusted EBITDA (Acquisitions Year One)11.0% to 16.0%
Residential Revenue for Every 50K Increase in Housing Starts$90 million

(1) This guidance and long-term targets reflect management’s current view of present and future market conditions and are based on assumptions such as housing starts, general and administrative expenses, weighted average diluted shares outstanding and interest rates. These targets do not include any effects related to potential acquisitions or divestitures that may occur after the date of this press release. A reconciliation of non-GAAP targets to corresponding GAAP measures is not available on a forward-looking basis without unreasonable effort due to the uncertainty regarding, and the potential variability of, the costs and expenses that may be incurred in the future and therefore, cannot be reasonably predicted. The effect of these excluded items may be significant. Factors that could cause actual long-term results to differ materially from TopBuild’s current expectations are discussed below and are also detailed in the Company’s 2020 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 fourth quarter 2020 financial results is scheduled for today, Tuesday, February 23, 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., 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 approximately 75 branches. We leverage our national footprint to gain economies of scale while capitalizing on our local market presence to forge strong relationships with our customers. To learn more about TopBuild please visit our website at www.topbuild.com.

Use of Non-GAAP Financial Measures Adjusted EBITDA, incremental EBITDA margin, adjusted EBITDA margin, the “adjusted” financial measures presented above, and figures presented on a “same branch basis” are not calculated in accordance with U.S. generally accepted accounting principles (“GAAP”). The Company believes that these non-GAAP financial measures, which are used in managing the business, may provide users of this financial information with additional meaningful comparisons between current results and results in prior periods. We define same branch sales as sales from branches in operation for at least 12 full calendar months. Such non-GAAP financial measures are reconciled to their closest GAAP financial measures in tables contained in this press release. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company’s reported results under GAAP. Additional information may be found in the Company’s filings with the Securities and Exchange Commission which are available on TopBuild’s website under “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 a stock repurchase transaction. These forward-looking statements are distinguished by use of words such as “will,” “would,” “anticipate,” “expect,” “believe,” “designed,” “plan,” or “intend,” the negative of these terms, and similar references to future periods. These views involve risks and uncertainties that are difficult to predict and, accordingly, our actual results may differ materially from the results discussed in our forward-looking statements. Our forward-looking statements contained herein speak only as of the date of this press release. Factors or events that we cannot predict, including those described in the risk factors contained in our filings with the Securities and Exchange Commission, may cause our actual results to differ from those expressed in forward-looking statements. Although TopBuild believes the expectations reflected in such forward-looking statements are based on reasonable assumptions, the Company can give no assurance that its expectations will be achieved and it undertakes no obligation to update any forward-looking statements as a result of new information, future events, or otherwise, except as required by applicable law.

Investor Relations and Media ContactTabitha Zane[email protected] 386-763-8801

TopBuild Corp.
Consolidated Statements of Operations
(in thousands, except share and per common share amounts)
Three Months Ended December 31, Year Ended December 31,
2020 2019 2020 2019
Net sales $721,487 $662,349 $2,718,038 $2,624,121
Cost of sales 523,467 491,030 1,971,677 1,942,854
Gross profit 198,020 171,319 746,361 681,267
Selling, general, and administrative expense 94,943 94,898 391,315 391,744
Operating profit 103,077 76,421 355,046 289,523
Other income (expense), net:
Interest expense (7,745) (9,083) (32,456) (37,823)
Loss on extinguishment of debt — — (233) —
Other, net 85 566 733 2,078
Other expense, net (7,660) (8,517) (31,956) (35,745)
Income before income taxes 95,417 67,904 323,090 253,778
Income tax expense (24,660) (21,919) (76,067) (62,783)
Net income $70,757 $45,985 $247,023 $190,995
Net income per common share:
Basic $2.16 $1.38 $7.50 $5.65
Diluted $2.13 $1.36 $7.42 $5.56
Weighted average shares outstanding:
Basic 32,789,911 33,297,613 32,917,971 33,806,104
Diluted 33,189,104 33,886,904 33,299,986 34,376,555

TopBuild Corp.
Consolidated Balance Sheets and Other Financial Data
(dollars in thousands)
As of December 31,
2020 2019
ASSETS
Current assets:
Cash and cash equivalents $330,007 $184,807
Receivables, net of an allowance for credit losses of $6,926 at December 31, 2020 and allowance for doubtful accounts of $4,854 at December 31, 2019 427,340 428,844
Inventories, net 161,369 149,078
Prepaid expenses and other current assets 17,689 17,098
Total current assets 936,405 779,827
Right of use assets 83,490 87,134
Property and equipment, net 180,053 178,080
Goodwill 1,410,685 1,367,918
Other intangible assets, net 190,605 181,122
Deferred tax assets, net 2,728 4,259
Other assets 11,317 5,623
Total assets $2,815,283 $2,603,963
LIABILITIES
Current liabilities:
Accounts payable $331,710 $307,970
Current portion of long-term debt 23,326 34,272
Accrued liabilities 107,949 98,418
Short-term lease liabilities 33,492 36,094
Total current liabilities 496,477 476,754
Long-term debt 683,396 697,955
Deferred tax liabilities, net 168,568 175,263
Long-term portion of insurance reserves 50,657 45,605
Long-term lease liabilities 53,749 54,010
Other liabilities 13,642 1,487
Total liabilities 1,466,489 1,451,074
EQUITY 1,348,794 1,152,889
Total liabilities and equity $2,815,283 $2,603,963
As of December 31,
2020 2019
Other Financial Data
Receivable days 48 53
Inventory days 30 28
Accounts payable days 76 80
Receivables, net plus inventories, net less accounts payable $256,999 $269,952
Receivables, net plus inventories, net less accounts payable as a percent of sales (TTM) †9.3%10.3%
† Trailing 12 months sales have been adjusted for the pro forma effect of acquired branches

TopBuild Corp.
Consolidated Statement of Cash Flows
(in thousands)
Year Ended December 31,
2020 2019
Cash Flows Provided by (Used in) Operating Activities:
Net income $247,023 $190,995
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 62,410 52,700
Share-based compensation 14,752 13,658
Loss on extinguishment of debt 233 —
(Gain) loss on sale or abandonment of property and equipment (88) 1,399
Amortization of debt issuance costs 1,491 1,558
Provision for bad debt expense 6,270 7,065
Loss from inventory obsolescence 2,512 2,622
Deferred income taxes, net (4,070) 8,888
Change in certain assets and liabilities
Receivables, net 2,612 (27,146)
Inventories, net (11,843) 17,433
Prepaid expenses and other current assets (460) 9,361
Accounts payable 16,844 (5,124)
Accrued liabilities 20,545 2,690
Payment of contingent consideration (413) —
Other, net 66 1,058
Net cash provided by operating activities 357,884 271,777
Cash Flows Provided by (Used in) Investing Activities:
Purchases of property and equipment (40,938) (45,536)
Acquisition of businesses (83,408) (6,952)
Proceeds from sale of property and equipment 2,463 2,321
Other, net — 25
Net cash used in investing activities (121,883) (50,142)
Cash Flows Provided by (Used in) Financing Activities:
Proceeds from issuance of long-term debt 300,000 14,989
Repayment of long-term debt (324,948) (27,793)
Payment of debt issuance costs (2,280) —
Taxes withheld and paid on employees' equity awards (14,932) (12,951)
Exercise of stock options 1,438 —
Repurchase of shares of common stock (49,151) (110,911)
Payment of contingent consideration (928) (1,091)
Net cash (used in) provided by financing activities (90,801) (137,757)
Cash and Cash Equivalents
Increase for the period 145,200 83,878
Beginning of period 184,807 100,929
End of period $330,007 $184,807
Supplemental disclosure of cash paid for:
Interest on long-term debt $30,896 $36,244
Income taxes 77,689 43,310
Supplemental disclosure of noncash activities:
Leased assets obtained in exchange for new operating lease liabilities $38,646 $128,838
Accruals for property and equipment 645 542

TopBuild Corp.
Segment Data
(dollars in thousands)
Three Months Ended December 31, Year Ended December 31,
2020 2019 Change 2020 2019 Change
TruTeam
Sales $508,812 $475,929 6.9% $1,943,461 $1,906,730 1.9%
Operating profit, as reported $81,657 $63,661 $294,793 $253,230
Operating margin, as reported 16.0% 13.4% 15.2% 13.3%
Rationalization charges — (24) 866 159
Acquisition related costs — 177 4 636
COVID-19 pay 363 — 1,278 —
Operating profit, as adjusted $82,020 $63,814 $296,941 $254,025
Operating margin, as adjusted 16.1% 13.4% 15.3% 13.3%
Service Partners
Sales $251,535 $223,244 12.7% $926,207 $862,143 7.4%
Operating profit, as reported $33,731 $25,234 $115,343 $90,388
Operating margin, as reported 13.4% 11.3% 12.5% 10.5%
Rationalization charges — — 783 109
COVID-19 pay 21 — 90 —
Operating profit, as adjusted $33,752 $25,234 $116,216 $90,497
Operating margin, as adjusted 13.4% 11.3% 12.5% 10.5%
Total
Sales before eliminations $760,347 $699,173 $2,869,668 $2,768,873
Intercompany eliminations (38,860) (36,824) (151,630) (144,752)
Net sales after eliminations $721,487 $662,349 8.9% $2,718,038 $2,624,121 3.6%
Operating profit, as reported - segments $115,388 $88,895 $410,136 $343,618
General corporate expense, net (6,174) (6,568) (30,785) (30,174)
Intercompany eliminations (6,137) (5,906) (24,305) (23,921)
Operating profit, as reported $103,077 $76,421 $355,046 $289,523
Operating margin, as reported 14.3% 11.5% 13.1% 11.0%
Rationalization charges † (4) 15 2,097 1,992
Acquisition related costs † 518 166 855 1,200
Refinancing costs — — 57 —
COVID-19 pay 384 — 1,368 —
Operating profit, as adjusted $103,975 $76,602 $359,423 $292,715
Operating margin, as adjusted 14.4% 11.6% 13.2% 11.2%
Share-based compensation 2,593 2,246 14,910 13,658
Depreciation and amortization 14,883 13,696 62,410 52,700
EBITDA, as adjusted $121,451 $92,544 $436,743 $359,073
EBITDA margin, as adjusted 16.8% 14.0% 16.1% 13.7%
Sales change period over period 59,138 93,917
EBITDA, as adjusted, change period over period 28,907 77,670
Incremental EBITDA, as adjusted, as a percentage of change in sales48.9% 82.7%
† Rationalization charges and acquisition related costs include corporate level adjustments as well as segment operating adjustments

TopBuild Corp.
Non-GAAP Reconciliations
(in thousands, except share and per common share amounts)
Three Months Ended December 31, Year Ended December 31,
2020 2019 2020 2019
Gross Profit and Operating Profit Reconciliations
Net sales $721,487 $662,349 $2,718,038 $2,624,121
Gross profit, as reported $198,020 $171,319 $746,361 $681,267
Rationalization charges — — 1,016 —
COVID-19 pay 380 — 1,135 —
Gross profit, as adjusted $198,400 $171,319 $748,512 $681,267
Gross margin, as reported 27.4% 25.9% 27.5% 26.0%
Gross margin, as adjusted 27.5% 25.9% 27.5% 26.0%
Operating profit, as reported $103,077 $76,421 $355,046 $289,523
Rationalization charges (4) 15 2,097 1,992
Acquisition related costs 518 166 855 1,200
Refinancing costs — — 57 —
COVID-19 pay 384 — 1,368 —
Operating profit, as adjusted $103,975 $76,602 $359,423 $292,715
Operating margin, as reported 14.3% 11.5% 13.1% 11.0%
Operating margin, as adjusted 14.4% 11.6% 13.2% 11.2%
Income Per Common Share Reconciliation
Income before income taxes, as reported $95,417 $67,904 $323,090 $253,778
Rationalization charges (4) 15 2,097 1,992
Acquisition related costs 518 166 855 1,200
Refinancing costs and loss on extinguishment of debt — — 290 —
COVID-19 pay 384 — 1,368 —
Income before income taxes, as adjusted 96,315 68,085 327,700 256,970
Tax rate at 26.0% and 26.5% for 2020 and 2019, respectively (25,042) (18,043) (85,202) (68,097)
Income, as adjusted $71,273 $50,042 $242,498 $188,873
Income per common share, as adjusted $2.15 $1.48 $7.28 $5.49
Weighted average diluted common shares outstanding 33,189,104 33,886,904 33,299,986 34,376,555

TopBuild Corp.
Same Branch and Acquisition Net Sales and Adjusted EBITDA
(dollars in thousands)
Three Months Ended December 31, Year Ended December 31,
2020 2019 2020 2019
Net sales
Same branch:
TruTeam $487,593 $475,929 $1,906,012 $1,906,730
Service Partners 251,535 223,244 926,207 862,143
Eliminations (38,860) (36,824) (151,630) (144,752)
Total same branch 700,268 662,349 2,680,589 2,624,121
Acquisitions (a):
TruTeam $21,219 $— $37,449 $—
Service Partners — — — —
Eliminations — — — —
Total acquisitions 21,219 — 37,449 —
Total $721,487 $662,349 $2,718,038 $2,624,121
Acquisitions proforma adjustment † $48,469
TTM net sales, acquisition adjusted $2,766,507
EBITDA, as adjusted
Same branch $118,413 $92,544 $430,510 $359,073
Acquisitions (a) 3,038 — 6,233 —
Total $121,451 $92,544 $436,743 $359,073
EBITDA, as adjusted, as a percentage of sales
Same branch (b) 16.9% 16.1%
Acquisitions (c) 14.3% 16.6%
Total (d) 16.8% 14.0% 16.1% 13.7%
As Adjusted Incremental EBITDA, as a percentage of change in sales
Same branch (e) 68.2% 126.5%
Acquisitions (c) 14.3% 16.6%
Total (f) 48.9% 82.7%
(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
† Trailing 12 months sales have been adjusted for the pro forma effect of acquired branches

TopBuild Corp.
Same Branch and Acquisition Net Sales by Market
(in thousands)
Three Months Ended December 31, Year Ended December 31,
2020 2019 2020 2019
Same branch:
Residential$550,960 $512,715 $2,104,233 $2,016,016
Commercial 149,308 149,364 576,356 608,105
Same branch net sales 700,268 662,349 2,680,589 2,624,121
Acquisitions (a):
Residential$18,969 $— $23,650 $—
Commercial 2,250 — 13,799 —
Acquisitions net sales 21,219 — 37,449 —
Total net sales$721,487 $662,349 $2,718,038 $2,624,121
(a) Represents current year impact of acquisitions in their first twelve months

TopBuild Corp.
Reconciliation of Adjusted EBITDA to Net Income
(in thousands)
Three Months Ended December 31, Year Ended December 31,
2020 2019 2020 2019
Net income, as reported $70,757 $45,985 $247,023 $190,995
Adjustments to arrive at EBITDA, as adjusted:
Interest expense and other, net 7,660 8,517 31,723 35,745
Income tax expense 24,660 21,919 76,067 62,783
Depreciation and amortization 14,883 13,696 62,410 52,700
Share-based compensation 2,593 2,246 14,910 13,658
Rationalization charges (4) 15 2,097 1,992
Acquisition related costs 518 166 855 1,200
Refinancing costs and loss on extinguishment of debt — — 290 —
COVID-19 pay 384 — 1,368 —
EBITDA, as adjusted $121,451 $92,544 $436,743 $359,073

TopBuild Corp.
2021 Estimated Adjusted EBITDA Range
(in millions)
Twelve Months Ending December 31, 2021
Low High
Estimated net income$297.5 $326.7
Adjustments to arrive at estimated EBITDA, as adjusted:
Interest expense and other, net 24.2 21.2
Income tax expense 104.5 114.8
Depreciation and amortization 67.0 63.0
Share-based compensation 11.8 9.3
Estimated EBITDA, as adjusted$505.0 $535.0

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