UNITED STATES

SECURITIES AND EXCHANGE

COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


(Mark One)
☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period September 30, 2024


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-36870

TopBuild Corp.

(Exact name of Registrant as Specified in its Charter)

Delaware

(State or Other Jurisdiction of Incorporation or
Organization)

47-3096382

(I.R.S. Employer
Identification No.)

475 North Williamson Boulevard

Daytona Beach, Florida

(Address of Principal Executive Offices)

32114

(Zip Code)

(386) 304-2200

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $0.01 per share	BLD	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.⌧ Yes ◻ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ⌧ Yes ◻ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ◻

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

The registrant had outstanding 29,502,560 shares of Common Stock, par value $0.01 per share as of October 29, 2024.

Table of Contents

TOPBUILD CORP.

TABLE OF CONTENTS


		Page No.
Part I.	Financial Information

Item 1.	Financial Statements (Unaudited)

	Condensed Consolidated Balance Sheets	4

	Condensed Consolidated Statements of Operations	5

	Condensed Consolidated Statements of Comprehensive Income	6

	Condensed Consolidated Statements of Cash Flows	7

	Condensed Consolidated Statements of Changes in Equity	8

	Notes to Condensed Consolidated Financial Statements	9

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	22

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30

Item 4.	Controls and Procedures	30

Part II.	Other Information

Item 1.	Legal Proceedings	30

Item 1A.	Risk Factors	30

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31

Item 3.	Defaults upon Senior Securities	31

Item 4.	Mine Safety Disclosures	31

Item 5.	Other Information	31

Item 6.	Exhibits	31

Index to Exhibits		32

Signature		33

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GLOSSARY

We use acronyms, abbreviations, and other defined terms throughout this Quarterly Report, which are defined in the glossary below:


Term		Definition
3.625% Senior Notes		TopBuild's 3.625% senior unsecured notes issued March 15, 2021 and due March 15, 2029
4.125% Senior Notes		TopBuild's 4.125% senior unsecured notes issued October 14, 2021 and due February 15, 2032
2015 LTIP		2015 Long-Term Incentive Program authorizes the Board to grant stock options, stock appreciation rights, restricted shares, restricted share units, performance awards, and dividend equivalents
2022 Repurchase Program		$200 million share repurchase program authorized by the Board on July 25, 2022
2024 Repurchase Program		$1 billion share repurchase program authorized by the Board on May 3, 2024
Amendment No. 4		Amendment No. 4 to the Credit Agreement dated July 26, 2023
Annual Report		Annual report filed with the SEC on Form 10-K pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
ASC		Accounting Standards Codification
ASU		Accounting Standards Update
Best		Best Insulation Holdings LLC
Billings		Billings Insulation Service, Inc.
Board		Board of Directors of TopBuild
BofA		Bank of America, N.A.
Brabble		Brabble Insulation, Inc.
CODM		Chief Operating Decision Maker
Credit Agreement		Amended and Restated Credit Agreement, dated March 20, 2020, among TopBuild, BofA as administrative agent, and the other lenders and agents party thereto
Current Report		Current report filed with the SEC on Form 8-K pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
EBITDA		Earnings before interest, taxes, depreciation, and amortization
Exchange Act		The Securities Exchange Act of 1934, as amended
FASB		Financial Accounting Standards Board
Green Space		Nate’s Insulation, LLC d/b/a Green Space Insulation
GAAP		Generally accepted accounting principles in the United States of America
Insulation Works		Insulation Works, Inc.
Lenders		Bank of America, N.A., together with the other lenders party to "Credit Agreement"
Morris Black		Morris Black & Sons, Inc.
Net Leverage Ratio		As defined in the “Credit Agreement,” the ratio of outstanding indebtedness, less up to $100 million of unrestricted cash, to EBITDA
NYSE		New York Stock Exchange
PCI		Pest Control Insulation, LLC
Quarterly Report		Quarterly report filed with the SEC on Form 10-Q pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Rocky Mountain		Rocky Mountain Spray Foam & Waterproofing, LLC
ROU		Right of use (asset), as defined in ASC 842
RSA		Restricted stock award
SEC		United States Securities and Exchange Commission
Secured Leverage Ratio		As defined in the “Credit Agreement,” the ratio of outstanding indebtedness, including letters of credit, to EBITDA
SOFR		Secured overnight financing rate
SPI		SPI LLC d/b/a Specialty Products & Insulation
SRI		SRI Holdings, LLC
Term Loan		TopBuild's secured borrowings under the "Credit Agreement" due October 7, 2026
Term Facility Two		$550 million delayed draw term loan intended to be used to fund the acquisition of SPI and was terminated in the second quarter of 2024
Texas Insulation		EOAKIS, LLC, d/b/a Texas Insulation
TopBuild		TopBuild Corp. and its wholly-owned consolidated domestic subsidiaries

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PART I – FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

TOPBUILD CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(In thousands except share data)


	As of
	September 30,		December 31,
	2024		2023
ASSETS
Current assets:
Cash and cash equivalents	$	257,342	$	848,565
Receivables, net of an allowance for credit losses of $21,829 at September 30, 2024, and $23,948 at December 31, 2023		827,776		799,009
Inventories		392,208		364,731
Prepaid expenses and other current assets		43,813		36,939
Total current assets		1,521,139		2,049,244

Right of use assets		189,141		204,629
Property and equipment, net		270,022		264,487
Goodwill		2,092,315		2,042,568
Other intangible assets, net		565,440		591,058
Other assets		12,460		10,865
Total assets	$	4,650,517	$	5,162,851

LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	461,478	$	469,585
Current portion of long-term debt		45,137		47,039
Accrued liabilities		180,382		187,217
Short-term operating lease liabilities		67,509		65,780
Short-term finance lease liabilities		1,634		1,917
Total current liabilities		756,140		771,538

Long-term debt		1,341,439		1,373,028
Deferred tax liabilities, net		243,176		243,930
Long-term portion of insurance reserves		60,799		58,783
Long-term operating lease liabilities		130,299		146,213
Long-term finance lease liabilities		2,961		4,150
Other liabilities		1,434		1,554
Total liabilities		2,536,248		2,599,196

Commitments and contingencies

Equity:
Preferred stock, $0.01 par value: 10,000,000 shares authorized; 0 shares issued and outstanding		-		-
Common stock, $0.01 par value: 250,000,000 shares authorized; 39,557,215 shares issued and 29,505,185 outstanding at September 30, 2024, and 39,492,037 shares issued and 31,776,039 outstanding at December 31, 2023		396		394
Treasury stock, 10,052,030 shares at September 30, 2024, and 7,715,998 shares at December 31, 2023, at cost		(1,633,943)		(699,327)
Additional paid-in capital		922,963		906,334
Retained earnings		2,842,983		2,370,919
Accumulated other comprehensive loss		(18,130)		(14,665)
Total equity		2,114,269		2,563,655
Total liabilities and equity	$	4,650,517	$	5,162,851

See notes to our unaudited condensed consolidated financial statements.

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TOPBUILD CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(In thousands except share and per common share data)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Net sales	$	1,373,268	$	1,326,120	$	4,017,597	$	3,908,620
Cost of sales		951,455		905,430		2,784,712		2,695,916
Gross profit		421,813		420,690		1,232,885		1,212,704

Selling, general, and administrative expense		177,820		183,198		563,992		538,679
Operating profit		243,993		237,492		668,893		674,025

Other income (expense), net:
Interest expense		(18,449)		(18,830)		(55,811)		(55,427)
Other, net		2,355		6,015		24,987		12,542
Other expense, net		(16,094)		(12,815)		(30,824)		(42,885)
Income before income taxes		227,899		224,677		638,069		631,140

Income tax expense		(58,939)		(57,075)		(166,005)		(163,270)
Net income	$	168,960	$	167,602	$	472,064	$	467,870

Net income per common share:
Basic	$	5.68	$	5.30	$	15.28	$	14.81
Diluted	$	5.65	$	5.27	$	15.19	$	14.74

Weighted average shares outstanding:
Basic		29,751,713		31,615,110		30,901,788		31,588,740
Diluted		29,925,400		31,788,812		31,083,857		31,744,856

See notes to our unaudited condensed consolidated financial statements.

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TOPBUILD CORP.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

(In thousands)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Net income	$	168,960	$	167,602	$	472,064	$	467,870
Other comprehensive income (loss):
Foreign currency translation adjustment		2,463		(3,008)		(3,464)		3,029
Comprehensive income	$	171,423	$	164,594	$	468,600	$	470,899

See notes to our unaudited condensed consolidated financial statements.

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TOPBUILD CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(In thousands)


	Nine Months Ended September 30,
	2024		2023
Cash Flows Provided by (Used in) Operating Activities:
Net income	$	472,064	$	467,870
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		104,777		98,216
Share-based compensation		13,405		11,080
Loss on sale of assets		672		2,733
Amortization of debt issuance costs		2,161		2,161
Provision for bad debt expense		13,730		7,380
Provision for inventory obsolescence		6,713		3,617
Change in certain assets and liabilities, net of effects of businesses acquired:
Receivables, net		(30,294)		(52,482)
Inventories		(30,916)		82,960
Prepaid expenses and other current assets		(6,849)		(3,267)
Accounts payable		(17,441)		(21,361)
Accrued liabilities		(15,695)		(9,027)
Other, net		(2,529)		(1,402)
Net cash provided by operating activities		509,798		588,478

Cash Flows Provided by (Used in) Investing Activities:
Purchases of property and equipment		(56,794)		(48,076)
Acquisition of businesses, net of cash acquired		(88,460)		(147,614)
Proceeds from sale of assets		2,336		14,674
Net cash used in investing activities		(142,918)		(181,016)

Cash Flows Provided by (Used in) Financing Activities:
Repayment of long-term debt		(35,651)		(27,711)
Taxes withheld and paid on employees' equity awards		(6,088)		(6,350)
Exercise of stock options		3,224		2,489
Repurchase of shares of common stock		(919,186)		—
Payment of contingent consideration		—		(300)
Net cash used in financing activities		(957,701)		(31,872)
Impact of exchange rate changes on cash		(402)		(47)
Net (decrease) increase in cash and cash equivalents		(591,223)		375,543
Cash and cash equivalents - Beginning of period		848,565		240,069
Cash and cash equivalents - End of period	$	257,342	$	615,612

Supplemental disclosure of noncash activities:
Leased assets obtained in exchange for new operating lease liabilities	$	35,718	$	45,525
Accruals for property and equipment		227		305
Excise taxes capitalized to treasury stock		9,342		—

See notes to our unaudited condensed consolidated financial statements.

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TOPBUILD CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Unaudited)

(In thousands except share data)


									Accumulated
	Common		Treasury		Additional				Other
	Stock		Stock		Paid-in		Retained		Comprehensive
	($0.01 par value)		at cost		Capital		Earnings		(Loss) Income		Equity
Balance at December 31, 2022	$	393	$	(692,799)	$	887,367	$	1,756,665	$	(21,920)	$	1,929,706
Net income		-		-		-		135,870		-		135,870
Share-based compensation		-		-		3,135		-		-		3,135
Issuance of 95,012 restricted share awards under long-term equity incentive plan		2		-		-		-		-		2
32,594 shares withheld to pay taxes on employees' equity awards		-		(6,350)		-		-		-		(6,350)
28,840 shares issued upon exercise of stock options		-		-		1,028		-		-		1,028
Other comprehensive income, net of tax		-		-		-		-		1,753		1,753
Balance at March 31, 2023	$	395	$	(699,149)	$	891,530	$	1,892,535	$	(20,167)	$	2,065,144
Net income		-		-		-		164,400		-		164,400
Share-based compensation		-		-		3,751		-		-		3,751
Issuance of 18,768 restricted share awards under long-term equity incentive plan		-		-		-		-		-		-
4,762 shares issued upon exercise of stock options		-		-		468		-		-		468
Other comprehensive income, net of tax		-		-		-		-		4,283		4,283
Balance at June 30, 2023	$	395	$	(699,149)	$	895,749	$	2,056,935	$	(15,884)	$	2,238,046
Net income		-		-		-		167,602		-		167,602
Share-based compensation		-		-		4,194		-		-		4,194
17,409 shares issued upon exercise of stock options		-		-		993		-		-		993
Other comprehensive loss, net of tax		-		-		-		-		(3,008)		(3,008)
Balance at September 30, 2023	$	395	$	(699,149)	$	900,936	$	2,224,537	$	(18,892)	$	2,407,827


									Accumulated
	Common		Treasury		Additional				Other
	Stock		Stock		Paid-in		Retained		Comprehensive
	($0.01 par value)		at cost		Capital		Earnings		(Loss) Income		Equity
Balance at December 31, 2023	$	394	$	(699,327)	$	906,334	$	2,370,919	$	(14,665)	$	2,563,655
Net income		-		-		-		152,381		-		152,381
Share-based compensation		-		-		5,127		-		-		5,127
Issuance of 51,236 restricted share awards under long-term equity incentive plan, net of forfeitures		1		-		-		-		-		1
14,965 shares withheld to pay taxes on employees' equity awards		-		(6,059)		-		-		-		(6,059)
5,757 shares issued upon exercise of stock options		-		-		1,020		-		-		1,020
Other comprehensive loss, net of tax		-		-		-		-		(4,092)		(4,092)
Balance at March 31, 2024	$	395	$	(705,386)	$	912,481	$	2,523,300	$	(18,757)	$	2,712,033
Net income		-						150,723				150,723
Share-based compensation		-		-		4,632		-		-		4,632
Issuance of 2,022 restricted share awards under long-term equity incentive plan, net of forfeitures		1				-		-		-		1
Repurchase of 1,246,182 shares pursuant to 2022 and 2024 Repurchase Programs		-		(510,443)		-		-		-		(510,443)
10,269 shares issued upon exercise of stock options		-		-		2,204		-		-		2,204
Other comprehensive loss, net of tax		-		-		-		-		(1,836)		(1,836)
Balance at June 30, 2024	$	396	$	(1,215,829)	$	919,317	$	2,674,023	$	(20,593)	$	2,357,314
Net income		-		-		-		168,960		-		168,960
Share-based compensation		-		-		3,646		-		-		3,646
Forfeiture of 4,106 restricted share awards under long-term equity incentive plan, net of issuances		-		-		-		-		-		-
Repurchase of 1,074,818 shares pursuant to 2024 Repurchase Program.		-		(418,085)		-		-		-		(418,085)
67 shares withheld to pay taxes on employees' equity awards		-		(29)		-		-		-		(29)
Other comprehensive income, net of tax		-		-		-		-		2,463		2,463
Balance at September 30, 2024	$	396	$	(1,633,943)	$	922,963	$	2,842,983	$	(18,130)	$	2,114,269

See notes to our unaudited condensed consolidated financial statements.

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TOPBUILD CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION

TopBuild is listed on the NYSE under the ticker symbol “BLD.” We report our business in two segments: Installation and Specialty Distribution. Our Installation segment primarily installs insulation and other building products. Our Specialty Distribution segment primarily sells and distributes insulation and other building products. Our segments are based on our operating units, for which financial information is regularly evaluated by our CODM.

We believe the accompanying unaudited condensed consolidated financial statements contain all adjustments, of a normal recurring nature, necessary to state fairly our financial position as of September 30, 2024, our results of operations and comprehensive income for the three and nine months ended September 30, 2024 and 2023, and our cash flows for the nine months ended September 30, 2024 and 2023. The condensed consolidated balance sheet at December 31, 2023 was derived from our audited financial statements, but does not include all disclosures required by GAAP.

These condensed consolidated financial statements and related notes should be read in conjunction with the audited Consolidated Financial Statements included in the Company’s Annual report for the year ended December 31, 2023, as filed with the SEC on February 28, 2024.

2. ACCOUNTING POLICIES

Financial Statement Presentation. Our condensed consolidated financial statements have been developed in conformity with GAAP, which requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosures of contingent liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting periods. Actual results could differ materially from these estimates. All intercompany transactions between TopBuild entities have been eliminated.

Recently Issued Accounting Pronouncements Not Yet Adopted

In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures”. This standard amends Topic 280 to require all entities to disclose, on an annual and interim basis, significant segment expenses and an amount for other segment items by reportable segment. This standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. This standard will not affect our consolidated results of operations, financial position or cash flows. We will update our disclosures in future filings to comply with the disclosure requirements.

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740), Improvements to Income Tax Disclosures”. This standard amends Topic 740 to require all entities to disclose specific categories in the rate reconciliation, income taxes paid and other income tax information. This standard is effective for fiscal years beginning after December 15, 2024, with early adoption permitted and should be applied on a prospective basis. We do not anticipate that this standard will affect our consolidated results of operations, financial position or cash flows and we are assessing the impact of its adoption in our disclosures to our consolidated financial statements.

3. REVENUE RECOGNITION

Revenue is disaggregated between our Installation and Specialty Distribution segments and further based on market and product, as we believe this best depicts how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors.

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TOPBUILD CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following tables present our revenues disaggregated by market (in thousands):


	Three Months Ended September 30,
	2024								2023
	Installation		Specialty Distribution		Eliminations		Total		Installation		Specialty Distribution		Eliminations		Total
Residential	$	714,911	$	246,519	$	(71,074)	$	890,356	$	689,232	$	227,245	$	(54,788)	$	861,689
Commercial/Industrial		141,439		353,868		(12,395)		482,912		132,441		343,764		(11,774)		464,431
Net sales	$	856,350	$	600,387	$	(83,469)	$	1,373,268	$	821,673	$	571,009	$	(66,562)	$	1,326,120


	Nine Months Ended September 30,
	2024								2023
	Installation		Specialty Distribution		Eliminations		Total		Installation		Specialty Distribution		Eliminations	Total
Residential	$	2,102,174	$	700,520	$	(193,395)	$	2,609,299	$	2,003,107	$	678,824