TopBuild Reports First Quarter 2021 Results

  • Net sales increased 13.7%
  • Gross margin expanded 30 basis points
  • 12.9% operating margin, 13.1% on an adjusted basis, up 230 basis points
  • Adjusted EBITDA increased 31.1%, adjusted EBITDA margin up 210 basis points
  • $1.80 net income per diluted share, $2.02 on an adjusted basis

DAYTONA BEACH, Fla., May 06, 2021 (GLOBE NEWSWIRE) --  TopBuild Corp. (NYSE:BLD), a leading installer and distributor of insulation and building material products today reported results for the first quarter ended March 31, 2021.

Robert Buck, President and Chief Executive Officer, stated, “TopBuild reported another solid quarter with sales benefitting from the strong growth in both our residential and commercial businesses. Adjusted operating margins expanded at both TruTeam and Service Partners, despite the impact of severe weather in February, most notably in Texas where we have significant operations.

“Our team is executing well and remains focused on profitable growth, which includes successfully managing the multiple material cost increases announced this year, leveraging our fixed cost base and continuing to focus on operational efficiency.”

First Quarter 2021 Financial Highlights

(unless otherwise indicated, comparisons are to the quarter ended March 31, 2020)

  • Net Sales increased 13.7% to $742.8 million, 9.5% on a same branch basis. The increase was primarily driven by increased sales volume, contributions from acquisitions and price.
  • Gross margin increased 30 basis points to 26.6%. On an adjusted basis, gross margin increased 40 basis points to 26.7%.
  • Operating profit was $95.9 million, compared to $70.0 million, a 37.0% increase. On an adjusted basis, operating profit was $97.2 million, compared to $70.3 million, a 38.3% improvement.
  • Operating margin was 12.9% compared to 10.7%. Adjusted operating margin improved 230 basis points to 13.1%.
  • Net income was $59.8 million, or $1.80 per diluted share, compared to net income of $50.8 million or $1.51 per diluted share. Adjusted net income was $67.1 million, or $2.02 per diluted share, compared to $45.9 million, or $1.37 per diluted share.

  • Adjusted EBITDA was $115.8 million, compared to $88.4 million, a 31.1% increase and adjusted EBITDA margin improved 210 basis points to 15.6%. Incremental adjusted EBITDA margin was 30.6%, 39.9% on a same branch basis.

  • At March 31, 2021, the Company had cash and cash equivalents of $319.6 million and availability under the revolving credit facility of approximately $389.6 million for total liquidity of $709.2 million.

Operating Segment Highlights ($ in 000s)
(comparisons are to the quarter ended March 31, 2020)

             
  TruTeam 3 Months
Ended
3/31/21
  Service Partners 3 Months
Ended
3/31/21
 
  Sales $532,753     Sales $251,601    
  Change     Change    
  Volume   5.1%     Volume   13.8%    
  Price   1.1%     Price   3.7%    
  M&A   5.8%     M&A   0.0%    
  Total Change   12.0%     Total Change   17.4%    
  Operating Margin   13.8%     Operating Margin   14.1%    
  Change 110 bps   Change 260 bps  
  Adj. Operating Margin   13.9%     Adj. Operating Margin   14.1%    
  Change 120 bps   Change 260 bps  
             

Capital Allocation
Acquisitions
Year-to-date, the Company has completed four acquisitions.

       
  Forecasted Month  
YTD 2021 Annual Revenue ($millions) Acquired Business Focus
LCR Contractors $58.0 January Heavy Commercial/Fireproofing
Ozark Foam $7.7 March Residential, primarily spray foam
American Building Systems $144.0 April Residential (94%) & Distribution (6%)
Creative Conservation $7.4 April Residential
Total $217.1    
       

“We were pleased to acquire LCR Contractors and Ozark Foam in the first quarter and ABS and Creative Conservation in April. Combined, these four acquisitions are expected to produce approximately $217 million of annual revenue,” added Buck.

“Targeted M&A remains our number one capital allocation priority and our team has demonstrated its skill at identifying, executing and integrating acquisitions, thereby maximizing the synergies inherent in each transaction and creating long-term value for our shareholders.”

Share Repurchases
In the first quarter the Company repurchased 49,284 shares at an average price of $199.98 per share. These shares were purchased as part of the Company’s $200 million share repurchase program announced on February 26, 2019. As of March 31, 2021, approximately $30.1 million of the $200 million authorization remained.

Senior Notes Offering
On March 15, 2021, the Company closed its private offering of $400 million in aggregate principal amount of 3.625% senior notes due 2029. The Company used the net proceeds from the offering, together with cash on hand, to redeem its existing $400 million 5.625% senior unsecured notes maturing in 2026 and to pay fees and expenses related to the offering.

2021 Outlook

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

         
  2021 Low High  
  Sales $ 3,220 $ 3,320  
  Adjusted EBITDA* $ 532 $ 562  
         

*See table for adjusted EBITDA reconciliation.

Assumptions (1)
($ in millions)

             
  2021 Low High  
  Housing Starts   1,450   1,500  
  Estimated net income $ 315.3 $ 344.6  
  Interest Expense and other, net $ 23.8 $ 20.8  
  Income tax expense $ 110.8 $ 121.0  
  Depreciation and Amortization $ 70.9 $ 66.9  
  Share based compensation $ 11.2 $ 8.7  
         

(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.

Conference Call
A conference call to discuss first quarter 2021 financial results is scheduled for today, Thursday, May 6, 2021, 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 approximately 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 Contact
Tabitha Zane
tabitha.zane@topbuild.com
386-763-8801

(tables follow)

TopBuild Corp.              
Condensed Consolidated Statements of Operations (Unaudited)          
(in thousands, except share and per common share amounts)        
               
    Three Months Ended March 31,   
    2021     2020    
Net sales   $ 742,798     $ 653,228       
Cost of sales     545,039       481,272    
Gross profit     197,759       171,956    
               
Selling, general, and administrative expense     101,872       101,967    
Operating profit     95,887       69,989    
               
Other income (expense), net:              
Interest expense     (6,603 )     (8,742 )  
Loss on extinguishment of debt     (13,862 )     (233 )  
Other, net     77       472    
Other expense, net     (20,388 )     (8,503 )  
Income before income taxes     75,499       61,486    
               
Income tax expense     (15,657 )     (10,715 )  
Net income   $ 59,842     $ 50,771    
               
Net income per common share:              
Basic   $ 1.82     $ 1.53    
Diluted   $ 1.80     $ 1.51    
               
Weighted average shares outstanding:              
Basic     32,826,515       33,168,453    
Diluted     33,202,563       33,599,847    



TopBuild Corp.              
Condensed Consolidated Balance Sheets and Other Financial Data (Unaudited)              
(dollars in thousands)              
    As of  
    March 31,       December 31,   
ASSETS   2021   2020  
Current assets:              
Cash and cash equivalents   $ 319,619   $ 330,007  
Receivables, net of an allowance for credit losses of $7,171 at March 31, 2021, and $6,926 at December 31, 2020     462,848     427,340  
Inventories, net     163,988     161,369  
Prepaid expenses and other current assets     14,255     17,689  
Total current assets     960,710     936,405  
               
Right of use assets     94,094     83,490  
Property and equipment, net     187,033     180,053  
Goodwill     1,430,913     1,410,685  
Other intangible assets, net     205,513     190,605  
Deferred tax assets, net     2,767     2,728  
Other assets     11,072     11,317  
Total assets   $ 2,892,102   $ 2,815,283  
               
LIABILITIES              
Current liabilities:              
Accounts payable   $ 330,813   $ 331,710  
Current portion of long-term debt     23,406     23,326  
Accrued liabilities     124,946     107,949  
Short-term lease liabilities     35,119     33,492  
Total current liabilities     514,284     496,477  
               
Long-term debt     686,493     683,396  
Deferred tax liabilities, net     168,424     168,568  
Long-term portion of insurance reserves     50,197     50,657  
Long-term lease liabilities     62,688     53,749  
Other liabilities     13,653     13,642  
Total liabilities     1,495,739     1,466,489  
               
EQUITY     1,396,363     1,348,794  
Total liabilities and equity   $ 2,892,102   $ 2,815,283  
               
               
    As of March 31,   
       2021   2020  
Other Financial Data              
Receivable days     45     51  
Inventory days     29     29  
Accounts payable days     76     79  
Receivables, net plus inventories, net less accounts payable   $ 296,023   $ 278,756  
Receivables, net plus inventories, net less accounts payable as a percent of sales (TTM) † 10.2 %   10.5 %
               
† Trailing 12 months sales have been adjusted for the pro forma effect of acquired branches          



TopBuild Corp.            
Condensed Consolidated Statement of Cash Flows (Unaudited)            
(in thousands)            
             
    Three Months Ended March 31, 
    2021     2020  
Cash Flows Provided by (Used in) Operating Activities:                     
Net income   $ 59,842     $ 50,771  
Adjustments to reconcile net income to net cash provided by operating activities:            
Depreciation and amortization     15,519       14,190  
Share-based compensation     3,111       3,908  
Loss on extinguishment of debt     13,862       233  
Loss on sale or abandonment of property and equipment     56       383  
Amortization of debt issuance costs     422       328  
Provision for bad debt expense     1,765       1,670  
Loss from inventory obsolescence     653       529  
Deferred income taxes, net     (183 )     (39 )
Change in certain assets and liabilities            
Receivables, net     (20,831 )     (5,048 )
Inventories, net     (2,088 )     (3,964 )
Prepaid expenses and other current assets     3,517       6,193  
Accounts payable     (2,244 )     (4,173 )
Accrued liabilities     16,591       9,981  
Other, net     (570 )     (2,032 )
Net cash provided by operating activities     89,422       72,930  
             
Cash Flows Provided by (Used in) Investing Activities:            
Purchases of property and equipment     (12,284 )     (15,892 )
Acquisition of businesses     (61,092 )     (20,526 )
Proceeds from sale of property and equipment     56       194  
Other, net            
Net cash used in investing activities     (73,320 )     (36,224 )
             
Cash Flows Provided by (Used in) Financing Activities:            
Proceeds from issuance of long-term debt     411,250       300,000  
Repayment of long-term debt     (415,856 )     (307,668 )
Payment of debt issuance costs     (6,500 )     (2,280 )
Taxes withheld and paid on employees' equity awards     (11,480 )     (10,399 )
Exercise of stock options     5,952        
Repurchase of shares of common stock     (9,856 )     (14,127 )
Net cash used in financing activities     (26,490 )     (34,474 )
             
Cash and Cash Equivalents            
(Decrease) increase for the period     (10,388 )     2,232  
Beginning of period     330,007       184,807  
End of period   $ 319,619     $ 187,039  
             
Supplemental disclosure of noncash activities:            
Leased assets obtained in exchange for new operating lease liabilities   $ 20,322     $ 9,167  
Accruals for property and equipment     524       496  



TopBuild Corp.                    
Segment Data (Unaudited)                    
(dollars in thousands)                    
                     
    Three Months Ended March 31,         
    2021     2020     Change  
TruTeam                    
Sales   $ 532,753     $ 475,873       12.0 %
                     
Operating profit, as reported   $ 73,636     $ 60,351          
Operating margin, as reported     13.8   %   12.7   %      
                     
Acquisition related costs           4          
COVID-19 pay     489                
Operating profit, as adjusted   $ 74,125     $ 60,355          
Operating margin, as adjusted     13.9   %   12.7   %      
                     
Service Partners                    
Sales   $ 251,601     $ 214,223       17.4 %
                     
Operating profit, as reported   $ 35,385     $ 24,669          
Operating margin, as reported     14.1   %   11.5   %      
                     
COVID-19 pay     34                
Operating profit, as adjusted   $ 35,419     $ 24,669          
Operating margin, as adjusted     14.1   %   11.5   %      
                     
Total                    
Sales before eliminations   $ 784,354     $ 690,096          
Intercompany eliminations     (41,556 )     (36,868 )        
Net sales after eliminations   $ 742,798     $ 653,228       13.7 %
                     
Operating profit, as reported - segments   $ 109,021     $ 85,020          
General corporate expense, net     (6,606 )     (9,198 )        
Intercompany eliminations     (6,528 )     (5,833 )        
Operating profit, as reported   $ 95,887     $ 69,989          
Operating margin, as reported     12.9   %   10.7   %      
                     
Rationalization charges     16                
Acquisition related costs †     753       235          
Refinancing costs           37          
COVID-19 pay     523                
Operating profit, as adjusted   $ 97,179     $ 70,261          
Operating margin, as adjusted     13.1   %   10.8   %      
                     
Share-based compensation     3,111       3,908          
Depreciation and amortization     15,519       14,190          
EBITDA, as adjusted   $ 115,809     $ 88,359          
EBITDA margin, as adjusted     15.6   %   13.5   %      
                     
Sales change period over period     89,570                
EBITDA, as adjusted, change period over period     27,450                
Incremental EBITDA, as adjusted, as a percentage of change in sales 30.6   %            
                     
† Acquisition related costs include corporate level adjustments as well as segment operating adjustments.                        
                     



TopBuild Corp.              
Non-GAAP Reconciliations (Unaudited)              
(in thousands, except share and per common share amounts)            
               
    Three Months Ended March 31,   
    2021     2020    
Gross Profit and Operating Profit Reconciliations              
               
Net sales   $ 742,798     $ 653,228    
               
Gross profit, as reported   $ 197,759     $ 171,956    
               
COVID-19 pay     470          
Gross profit, as adjusted   $ 198,229     $ 171,956    
               
Gross margin, as reported     26.6   % 26.3   %
Gross margin, as adjusted     26.7   % 26.3   %
               
Operating profit, as reported   $ 95,887     $ 69,989    
               
Rationalization charges     16          
Acquisition related costs     753       235    
Refinancing costs           37    
COVID-19 pay     523          
Operating profit, as adjusted   $ 97,179     $ 70,261    
               
Operating margin, as reported     12.9   % 10.7   %
Operating margin, as adjusted     13.1   % 10.8   %
               
Income Per Common Share Reconciliation              
               
Income before income taxes, as reported   $ 75,499     $ 61,486    
               
Rationalization charges     16          
Acquisition related costs     753       235    
Refinancing costs and loss on extinguishment of debt     13,862       270    
COVID-19 pay     523          
Income before income taxes, as adjusted     90,653       61,991    
               
Tax rate at 26.0%     (23,570 )     (16,118 )  
Income, as adjusted   $ 67,083     $ 45,873    
               
Income per common share, as adjusted   $ 2.02     $ 1.37    
               
Weighted average diluted common shares outstanding     33,202,563       33,599,847    



TopBuild Corp.              
Same Branch and Acquisition Net Sales and Adjusted EBITDA (Unaudited)              
(dollars in thousands)              
               
    Three Months Ended March 31,   
    2021     2020    
Net sales              
Same branch:              
TruTeam   $ 505,297     $ 475,873    
Service Partners     251,601       214,223    
Eliminations     (41,556 )     (36,868 )  
Total same branch     715,342       653,228    
               
Acquisitions (a):              
TruTeam   $ 27,456     $    
Service Partners              
Eliminations              
Total acquisitions     27,456          
Total   $ 742,798     $ 653,228    
               
EBITDA, as adjusted              
Same branch   $ 113,132     $ 88,359    
Acquisitions (a)     2,677          
Total   $ 115,809     $ 88,359    
               
EBITDA, as adjusted, as a percentage of sales              
Same branch (b)     15.8   %      
Acquisitions (c)     9.8   %      
Total (d)     15.6   %   13.5   %
               
As Adjusted Incremental EBITDA, as a percentage of change in sales              
Same branch (e)     39.9   %      
Acquisitions (c)     9.8   %      
Total (f)     30.6   %      
               
(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 March 31,   
  2021   2020  
Same branch:            
Residential $ 556,993   $ 506,731  
Commercial   158,349     146,497  
Same branch net sales   715,342     653,228  
             
Acquisitions (a):            
Residential $ 19,791   $  
Commercial   7,665      
Acquisitions net sales   27,456      
Total net sales $ 742,798   $ 653,228  
             
(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 March 31,   
    2021   2020  
Net income, as reported   $ 59,842   $ 50,771  
Adjustments to arrive at EBITDA, as adjusted:              
Interest expense and other, net     6,526     8,270  
Income tax expense     15,657     10,715  
Depreciation and amortization     15,519     14,190  
Share-based compensation     3,111     3,908  
Rationalization charges     16      
Acquisition related costs     753     235  
Refinancing costs and loss on extinguishment of debt     13,862     270  
COVID-19 pay     523      
EBITDA, as adjusted   $ 115,809   $ 88,359  
               

TopBuild Corp.                            
Acquisition Adjusted Net Sales (Unaudited)                        
(in thousands)                            
  2020   2021   Trailing Twelve
Months Ended
  Q2   Q3   Q4   Q1   March 31, 2021
Net Sales $ 646,099   $ 697,223   $ 721,487   $ 742,798   $ 2,807,607
Acquisitions proforma adjustment †   32,607     34,823     16,056     3,652     87,138
Net sales, acquisition adjusted $ 678,706   $ 732,046   $ 737,543   $ 746,450   $ 2,894,745
                             
                             
† Trailing 12 months sales have been adjusted for the pro forma effect of acquired branches

TopBuild Corp.            
2021 Estimated Adjusted EBITDA Range (Unaudited)            
(in millions)            
             
  Twelve Months Ending December 31, 2021  
    Low     High  
Estimated net income $ 315.3   $ 344.6  
Adjustments to arrive at estimated EBITDA, as adjusted:            
Interest expense and other, net   23.8     20.8  
Income tax expense   110.8     121.0  
Depreciation and amortization   70.9     66.9  
Share-based compensation   11.2     8.7  
Estimated EBITDA, as adjusted $ 532.0   $ 562.0  
             

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Source: TopBuild Corp.