TopBuild Reports First Quarter 2022 Results

  • Sales increased 57.4% to $1.2 billion, same branch revenue increased 18.7%
  • Gross margin expanded 170 basis points to 28.3%, same branch gross margin expanded 290 basis points to 29.6%
  • Same branch adjusted EBITDA margin expanded 310 basis points to 18.7%

Raises Revenue and Adjusted EBITDA Outlook

Announces $100 Million Accelerated Share Repurchase

DAYTONA BEACH, Fla., May 05, 2022 (GLOBE NEWSWIRE) -- TopBuild Corp. (NYSE:BLD), a leading installer and specialty distributor of insulation and building material products to the construction industry in the United States and Canada today reported results for the first quarter ended March 31, 2022.

Robert Buck, President and Chief Executive Officer, stated, “TopBuild reported another outstanding quarter, once again demonstrating the strength of our operating model. Strong demand, coupled with our ongoing focus on managing price, achieving operational efficiency improvements, and leveraging fixed costs, drove solid conversion of top line growth to the bottom line.

“We are particularly pleased with our same branch adjusted gross margin and adjusted EBITDA margin, which expanded 290 basis points and 310 basis points, respectively, from the prior year.

“In addition, the integration of Distribution International is proceeding very well and we are confident we will achieve the $35 million to $40 million of synergies per the timeline outlined at the close of the transaction in October 2021.”

First Quarter 2022 Financial Highlights 
($ in 000s)

(comparisons are to the quarter ended March 31, 2021)

3 Months Ended 3/31/22 Reported Change
Sales $1,168,918 57.4%
Gross Margin 28.3% 170 bps
SG&A as % of revenue 14.3% 60 bps
Operating Profit $163,954 71.0%
Operating Margin 14.0% 110 bps
Net Income $114,711 91.7%
Net Income per diluted share $3.47 92.8%

 

3 Months Ended 3/31/22 Adjusted Change
Sales $1,168,918 57.4%
Gross Margin 28.3% 160 bps
SG&A as % of revenue 14.0% 40 bps
Operating Profit $167,503 72.4%
Operating Margin 14.3% 120 bps
Net Income $115,604 72.3%
Net Income per diluted share $3.50 73.3%
EBITDA $201,729 74.2%
EBITDA Margin 17.3% 170 bps

 

3 Months Ended 3/31/22 Same Branch Change
Sales $881,865 18.7%
Adj. Gross Margin 29.6% 290 bps
Adj. Operating Margin 16.4% 330 bps
Adj. EBITDA Margin 18.7% 310 bps
Incremental EBITDA 35.2%  

Operating Segment Highlights ($ in 000s)
(comparisons are to the quarter ended March 31, 2021)

Installation 3 Months Ended 3/31/22   Specialty Distribution 3 Months Ended 3/31/22
Sales $676,693   Sales $543,862
Change     Change  
Volume 3.0%   Volume 0.0%
Price 14.0%   Price 22.9%
M&A 10.0%   M&A 93.3%
Total Change 27.0%   Total Change 116.2%
Operating Margin 16.7%   Operating Margin 12.9%
Change 290 bps   Change (120) bps
Adj. Operating Margin 16.7%   Adj. Operating Margin 13.0%
Change 280 bps   Change (110) bps
Adj. EBITDA Margin 19.1%   Adj. EBITDA Margin 15.6%
Change 270 bps   Change 60 bps

Capital Allocation

  TTM Revenue at Month
Company Acquired Acquisition ($ millions) Acquired
Southwest Insulation (I) $1.7 January
Billings Insulation (I) $6.5 February
Green Energy Solutions (I) $2.0 March
Assured Insulating (I) $5.5 April
Total $15.7  

I = Installation

We have acquired four residential installation companies year-to-date. We continue to look for opportunities to expand our market presence in all three end-markets we serve and generate strong returns for our shareholders.

“We are also pleased to initiate an accelerated share repurchase, demonstrating our Board’s confidence in TopBuild’s present and future business,” stated Buck.

Share Repurchases
In the first quarter, the Company repurchased 238,154 shares at an average price of $209.95 per share.

Additionally, under its current $200 million share repurchase authorization, the Company intends to enter into an agreement to repurchase $100 million of its common stock under an accelerated share repurchase (ASR) program. This will be the fourth ASR the Company has undertaken since first quarter 2017. Since January 1, 2016, through March 31, 2022, the Company has repurchased approximately 6.4 million shares of its common stock for a total investment of $472.2 million.

2022 Outlook

“Our unique operating model and scale are significant competitive advantages that enable us to outperform in any environment. We are optimistic 2022 will be another strong year for TopBuild,” added Buck.

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

2022 Low High
Sales $ 4,650 $ 4,800
Adjusted EBITDA* $ 810 $ 860

*See table for adjusted EBITDA reconciliation.

(1)  This outlook reflects management’s current view of present and future market conditions and are based on assumptions such as housing starts and completions, general and administrative expenses, weighted average diluted shares outstanding and interest rates. These targets do not include any effects related to potential acquisitions or divestitures that may occur after the date of this press release. A reconciliation of non-GAAP targets to corresponding GAAP measures is not available on a forward-looking basis without unreasonable effort due to the uncertainty regarding, and the potential variability of, the costs and expenses that may be incurred in the future and therefore, cannot be reasonably predicted. The effect of these excluded items may be significant. Factors that could cause actual long-term results to differ materially from TopBuild’s current expectations are discussed below and are also detailed in the Company’s 2021 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 first quarter 2022 financial results is scheduled for today, Thursday, May 5, 2022, at 9:00 a.m. Eastern Time. The call may be accessed by dialing (877) 407-9037. The conference call will be webcast simultaneously on the Company’s website at www.topbuild.com

About TopBuild
TopBuild Corp., headquartered in Daytona Beach, Florida, is a leading installer and specialty distributor of insulation and building material products to the construction industry in the United States and Canada. We provide insulation installation services nationwide through our contractor services business which has approximately 235 branches located across the United States. We distribute building and mechanical insulation, insulation accessories and other building product materials for the residential, commercial, and industrial end markets through our Specialty Distribution business. Our specialty distribution network encompasses approximately 175 branches. To learn more about TopBuild please visit our website at www.topbuild.com.

Use of Non-GAAP Financial Measures
Adjusted EBITDA, incremental EBITDA margin, adjusted EBITDA margin, the “adjusted” financial measures presented above, and figures presented on a “same branch basis” are not calculated in accordance with U.S. generally accepted accounting principles (“GAAP”). The Company believes that these non-GAAP financial measures, which are used in managing the business, may provide users of this financial information with additional meaningful comparisons between current results and results in prior periods. We define same branch sales as sales from branches in operation for at least 12 full calendar months. Such non-GAAP financial measures are reconciled to their closest GAAP financial measures in tables contained in this press release. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company’s reported results under GAAP. Additional information may be found in the Company’s filings with the Securities and Exchange Commission which are available on TopBuild’s website under “SEC Filings” at www.topbuild.com.

Safe Harbor Statement

This press release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act. These forward-looking statements may address, among other things, our expected financial and operational results, the related assumptions underlying our expected results, and our plan to repurchase our common stock under stock repurchase transactions. These forward-looking statements 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, 
    2022     2021  
Net sales      $ 1,168,918        $ 742,798  
Cost of sales     837,717       545,039  
Gross profit     331,201       197,759  
             
Selling, general, and administrative expense     167,247       101,872  
Operating profit     163,954       95,887  
             
Other income (expense), net:            
Interest expense     (11,966 )     (6,603 )
Loss on extinguishment of debt           (13,862 )
Other, net     684       77  
Other expense, net     (11,282 )     (20,388 )
Income before income taxes     152,672       75,499  
             
Income tax expense     (37,961 )     (15,657 )
Net income   $ 114,711     $ 59,842  
             
Net income per common share:            
Basic   $ 3.50     $ 1.82  
Diluted   $ 3.47     $ 1.80  
             
Weighted average shares outstanding:            
Basic     32,738,525       32,826,515  
Diluted     33,042,490       33,202,563  
             

TopBuild Corp.            
Condensed Consolidated Statements of Comprehensive Income (Unaudited)
(in thousands)            
             
    Three Months Ended March 31, 
    2022   2021
Net income   $ 114,711   $ 59,842
Other comprehensive income:            
Foreign currency translation adjustment     3,218    
Comprehensive income   $ 117,929   $ 59,842
             

TopBuild Corp.                
Condensed Consolidated Balance Sheets and Other Financial Data (Unaudited)          
(dollars in thousands)                
    As of  
    March 31, 2022     December 31, 2021  
ASSETS                
Current assets:                
Cash and cash equivalents   $ 126,553     $ 139,779  
Receivables, net of an allowance for credit losses of $10,487 at March 31, 2022, and $8,798 at December 31, 2021     735,452       668,419  
Inventories, net     390,061       352,801  
Prepaid expenses and other current assets     29,102       26,692  
Total current assets     1,281,168       1,187,691  
                 
Right of use assets     184,762       177,177  
Property and equipment, net     248,438       244,574  
Goodwill     1,964,297       1,949,763  
Other intangible assets, net     669,797       684,209  
Deferred tax assets, net           1,905  
Other assets     13,101       13,211  
Total assets   $ 4,361,563     $ 4,258,530  
                 
LIABILITIES                
Current liabilities:                
Accounts payable   $ 473,918     $ 461,917  
Current portion of long-term debt     38,723       38,640  
Accrued liabilities     207,377       175,891  
Short-term operating lease liabilities     55,293       54,591  
Short-term finance lease liabilities     2,610       2,387  
Total current liabilities     777,921       733,426  
                 
Long-term debt     1,445,473       1,454,483  
Deferred tax liabilities, net     245,674       248,243  
Long-term portion of insurance reserves     53,111       51,875  
Long-term operating lease liabilities     133,297       125,339  
Long-term finance lease liabilities     7,631       7,770  
Other liabilities     1,216       960  
Total liabilities     2,664,323       2,622,096  
                 
EQUITY     1,697,240       1,636,434  
Total liabilities and equity   $ 4,361,563     $ 4,258,530  
                 
    As of March 31,  
    2022     2021  
Other Financial Data                
Receivable days     47       45  
Inventory days     46       29  
Accounts payable days     63       76  
Receivables, net plus inventories, net less accounts payable   $ 651,595     $ 296,023  
Receivables, net plus inventories, net less accounts payable as a percent of sales (TTM) †     14.8 %     10.2 %
                 
† 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, 
    2022     2021  
Cash Flows Provided by (Used in) Operating Activities:                   
Net income   $ 114,711     $ 59,842  
Adjustments to reconcile net income to net cash provided by operating activities:            
Depreciation and amortization     30,499       15,519  
Share-based compensation     3,727       3,111  
Loss on extinguishment of debt           13,862  
Loss on sale of property and equipment     207       56  
Amortization of debt issuance costs     706       422  
Provision for bad debt expense     2,512       1,765  
Loss from inventory obsolescence     868       653  
Gain on foreign exchange     (649 )      
Deferred income taxes, net     (81 )     (183 )
Change in certain assets and liabilities            
Receivables, net     (65,031 )     (20,831 )
Inventories, net     (38,570 )     (2,088 )
Prepaid expenses and other current assets     (2,347 )     3,517  
Accounts payable     12,663       (2,244 )
Accrued liabilities     29,523       16,591  
Other, net     745       (570 )
Net cash provided by operating activities     89,483       89,422  
             
Cash Flows Provided by (Used in) Investing Activities:            
Purchases of property and equipment     (18,413 )     (12,284 )
Acquisition of businesses, net of cash acquired     (13,967 )     (61,092 )
Proceeds from sale of property and equipment     253       56  
Net cash used in investing activities     (32,127 )     (73,320 )
             
Cash Flows Provided by (Used in) Financing Activities:            
Proceeds from issuance of long-term debt           411,250  
Repayment of long-term debt     (9,634 )     (415,856 )
Payment of debt issuance costs           (6,500 )
Taxes withheld and paid on employees' equity awards     (11,658 )     (11,480 )
Exercise of stock options     808       5,952  
Repurchase of shares of common stock     (50,000 )     (9,856 )
Payment of contingent consideration     (23 )      
Net cash used in financing activities     (70,507 )     (26,490 )
Impact of exchange rate changes on cash     (75 )      
Net decrease in cash and cash equivalents     (13,226 )     (10,388 )
Cash and cash equivalents- Beginning of period     139,779       330,007  
Cash and cash equivalents- End of period   $ 126,553     $ 319,619  
             
Supplemental disclosure of cash paid for:            
Leased assets obtained in exchange for new operating lease liabilities   $ 22,449     $ 20,322  
Accruals for property and equipment     213       524  
             

TopBuild Corp.                        
Segment Data (Unaudited)                        
(dollars in thousands)                        
                         
    Three Months Ended March 31,           
      2022       2021     Change   
Installation                        
Sales   $ 676,693     $ 532,753       27.0 %
                         
Operating profit, as reported   $ 112,679     $ 73,636          
Operating margin, as reported     16.7 %     13.8 %        
                         
Rationalization charges     473                
Acquisition related costs     80                
COVID-19 pay           489          
Operating profit, as adjusted   $ 113,232     $ 74,125          
Operating margin, as adjusted     16.7 %     13.9 %        
                         
Share-based compensation     407       341          
Depreciation and amortization     15,685       12,826          
EBITDA, as adjusted   $ 129,324     $ 87,292       48.2 %
EBITDA margin, as adjusted     19.1 %     16.4 %        
                         
Specialty Distribution                        
Sales   $ 543,862     $ 251,601       116.2 %
                         
Operating profit, as reported   $ 70,420     $ 35,385          
Operating margin, as reported     12.9 %     14.1 %        
                         
Acquisition related costs     241                
COVID-19 pay           34          
Operating profit, as adjusted   $ 70,661     $ 35,419          
Operating margin, as adjusted     13.0 %     14.1 %        
                         
Share-based compensation     353       243          
Depreciation and amortization     14,030       2,088          
EBITDA, as adjusted   $ 85,044     $ 37,750       125.3 %
EBITDA margin, as adjusted     15.6 %     15.0 %        
                         

TopBuild Corp.                    
Adjusted EBITDA (Unaudited)                    
(dollars in thousands)                    
                     
    Three Months Ended March 31,         
      2022   2021     Change   
Total net sales                    
Sales before eliminations   $ 1,220,555     $ 784,354          
Intercompany eliminations     (51,637 )     (41,556 )        
Net sales after eliminations   $ 1,168,918     $ 742,798       57.4 %
                     
Operating profit, as reported - segments   $ 183,099     $ 109,021          
General corporate expense, net     (10,437 )     (6,606 )        
Intercompany eliminations     (8,708 )     (6,528 )        
Operating profit, as reported   $ 163,954     $ 95,887          
Operating margin, as reported     14.0     12.9        
                     
Rationalization charges     473       16          
Acquisition related costs     3,076       753          
COVID-19 pay           523          
Operating profit, as adjusted   $ 167,503     $ 97,179          
Operating margin, as adjusted     14.3     13.1        
                     
Share-based compensation     3,727       3,111          
Depreciation and amortization     30,499       15,519          
EBITDA, as adjusted   $ 201,729     $ 115,809       74.2 %
EBITDA margin, as adjusted     17.3     15.6        
                     
Sales change period over period     426,120                
EBITDA, as adjusted, change period over period     85,920                
Incremental EBITDA, as adjusted, as a percentage of change in sales     20.2              
                     
† 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, 
    2022   2021
Gross Profit Reconciliation            
             
Net sales   $ 1,168,918     $ 742,798  
             
Gross profit, as reported   $ 331,201     $ 197,759  
             
Acquisition related costs     121        
COVID-19 pay           470  
Gross profit, as adjusted   $ 331,322     $ 198,229  
             
Gross margin, as reported     28.3     26.6
Gross margin, as adjusted     28.3 %     26.7
             
Selling, General and Administrative Expense Reconciliation            
             
Selling, general, and administrative expense, as reported   $ 167,247     $ 101,872  
             
Rationalization charges     473       16  
Acquisition related costs     2,955       753  
COVID-19 pay           53  
Selling, general, and administrative expense, as adjusted   $ 163,819     $ 101,050  
             
Operating Profit Reconciliation            
             
Operating profit, as reported   $ 163,954     $ 95,887  
             
Rationalization charges     473       16  
Acquisition related costs     3,076       753  
COVID-19 pay           523  
Operating profit, as adjusted   $ 167,503     $ 97,179  
             
Operating margin, as reported     14.0     12.9
Operating margin, as adjusted     14.3     13.1
             
Income Per Common Share Reconciliation            
             
Income before income taxes, as reported   $ 152,672     $ 75,499  
             
Rationalization charges     473       16  
Acquisition related costs     3,076       753  
Refinancing costs and loss on extinguishment of debt           13,862  
COVID-19 pay           523  
Income before income taxes, as adjusted     156,221       90,653  
             
Tax rate at 26.0%     (40,617 )     (23,570 )
Income, as adjusted   $ 115,604     $ 67,083  
             
Income per common share, as adjusted   $ 3.50     $ 2.02  
             
Weighted average diluted common shares outstanding     33,042,490       33,202,563  
             

TopBuild Corp.            
Same Branch and Acquisition Metrics (Unaudited)            
(dollars in thousands)            
             
    Three Months Ended March 31, 
    2022   2021
Net sales            
Same branch:            
Installation   $ 623,600     $ 532,753  
Specialty Distribution     309,211       251,601  
Eliminations     (50,946 )     (41,556 )
Total same branch     881,865       742,798  
             
Acquisitions (a):            
Installation   $ 53,093     $  
Specialty Distribution     234,651        
Eliminations     (691 )      
Total acquisitions     287,053        
Total   $ 1,168,918     $ 742,798  
             
Gross profit, as adjusted            
Same branch   $ 261,115     $ 198,229  
Acquisitions (a)     70,207        
Total   $ 331,322     $ 198,229  
             
Gross margin, as adjusted            
Same branch (b)     29.6     26.7
Acquisitions (c)     24.5      
             
Operating profit, as adjusted            
Same branch   $ 144,616     $ 97,179  
Acquisitions (a)     22,887        
Total   $ 167,503     $ 97,179  
             
Operating margin, as adjusted            
Same branch (b)     16.4     13.1
Acquisitions (c)     8.0      
             
EBITDA, as adjusted            
Same branch   $ 164,769     $ 115,809  
Acquisitions (a)     36,960        
Total   $ 201,729     $ 115,809  
             
EBITDA, as adjusted, as a percentage of sales            
Same branch (b)     18.7      
Acquisitions (c)     12.9      
Total (d)     17.3     15.6
             
As Adjusted Incremental EBITDA, as a percentage of change in sales            
Same branch (e)     35.2      
Acquisitions (c)     12.9      
Total (f)     20.2      
             
(a) Represents current year impact of acquisitions in their first twelve months            
(b) Same branch metric, as adjusted, as a percentage of same branch sales            
(c) Acquired metric, as adjusted, as a percentage of acquired sales            
(d) Total EBITDA, as adjusted, as a percentage of total sales            
(e) Change in same branch EBITDA, as adjusted, as a percentage of change in same branch sales      
(f) Change in total EBITDA, as adjusted, as a percentage of change in total sales            
             

TopBuild Corp.            
Reconciliation of Adjusted EBITDA to Net Income (Unaudited)            
(in thousands)            
             
    Three Months Ended March 31, 
    2022   2021
Net income, as reported   $ 114,711   $ 59,842
Adjustments to arrive at EBITDA, as adjusted:            
Interest expense and other, net     11,282     6,526
Income tax expense     37,961     15,657
Depreciation and amortization     30,499     15,519
Share-based compensation     3,727     3,111
Rationalization charges     473     16
Acquisition related costs     3,076     753
Refinancing costs and loss on extinguishment of debt         13,862
COVID-19 pay         523
EBITDA, as adjusted   $ 201,729   $ 115,809
             



TopBuild Corp.                            
Acquisition Adjusted Net Sales (Unaudited)                            
(in thousands)                            
  2021   2022   Trailing Twelve Months Ended
  Q2   Q3   Q4   Q1   March 31, 2022
Net Sales $ 834,255   $ 845,757   $ 1,063,398   $ 1,168,918   $ 3,912,328
Acquisitions proforma adjustment †   220,993     229,760     47,430     2,035     500,218
Net sales, acquisition adjusted $ 1,055,248   $ 1,075,517   $ 1,110,828   $ 1,170,953   $ 4,412,546
                             
                             
† Trailing 12 months sales have been adjusted for the pro forma effect of acquired branches                      
                             

TopBuild Corp.          
2022 Estimated Adjusted EBITDA Range (Unaudited)        
(in millions)          
           
  Twelve Months Ending December 31, 2022
    Low     High
Estimated net income $ 447.6     495.4
Adjustments to arrive at estimated EBITDA, as adjusted:        
Interest expense and other, net   56.0     52.0
Income tax expense   157.3     174.1
Depreciation and amortization   126.1     121.0
Share-based compensation   13.0     10.5
Rationalization charges   2.0     1.0
Acquisition related costs   8.0     6.0
Estimated EBITDA, as adjusted $ 810.0   $ 860.0
           
 
           

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Source: TopBuild Corp.