UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One) | |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the quarterly period
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:
(Exact name of Registrant as Specified in its Charter)
(State or Other Jurisdiction of Incorporation or | (I.R.S. Employer |
(Address of Principal Executive Offices) | (Zip Code) |
(
(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 |
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.⌧
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). ⌧
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.
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).
The registrant had outstanding
TOPBUILD CORP.
TABLE OF CONTENTS
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Management's Discussion and Analysis of Financial Condition and Results of Operations | 22 | |||
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2
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 | |
2024 Repurchase Program | $1 billion share repurchase program authorized by the Board on May 3, 2024. | |
2025 Repurchase Program | $1 billion share repurchase program authorized by the Board on February 17, 2025. | |
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 | |
Board | Board of Directors of TopBuild | |
BofA | Bank of America, N.A. | |
Brabble | Brabble Insulation, Inc. | |
CODM | Chief Operating Decision Maker | |
Cost of sales | Primarily composed of labor, material costs and overhead | |
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 | |
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 | |
ROU | Right of use (asset), as defined in ASC 842 | |
RSA | Restricted stock award | |
Seal-Rite | Seal-Rite Insulation Inc | |
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 | |
Selling, general and administrative expenses | Includes allocation of corporate overhead, bad debt, bank fees, selling expenses, employee compensation, insurance, legal and consulting, office equipment & supplies, telecommunication & subscriptions, and travel & entertainment | |
SOFR | Secured overnight financing rate | |
Term Loan | TopBuild's secured borrowings under the "Credit Agreement" due October 7, 2026 | |
TopBuild | TopBuild Corp. and its wholly-owned consolidated domestic subsidiaries |
3
PART I – FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
TOPBUILD CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(In thousands except share data)
As of | ||||||
March 31, | December 31, | |||||
2025 | 2024 | |||||
ASSETS | ||||||
Current assets: | ||||||
Cash and cash equivalents | $ | | $ | | ||
Receivables, net of an allowance for credit losses of $ | |
| | |||
Inventories | |
| | |||
Prepaid expenses and other current assets | |
| | |||
Total current assets | |
| | |||
Right of use assets | | | ||||
Property and equipment, net | |
| | |||
Goodwill | |
| | |||
Other intangible assets, net | |
| | |||
Other assets | |
| | |||
Total assets | $ | | $ | | ||
LIABILITIES AND EQUITY | ||||||
Current liabilities: | ||||||
Accounts payable | $ | | $ | | ||
Current portion of long-term debt | | | ||||
Accrued liabilities | | | ||||
Short-term operating lease liabilities | | | ||||
Short-term finance lease liabilities | | | ||||
Total current liabilities | | | ||||
Long-term debt | | | ||||
Deferred tax liabilities, net | | | ||||
Long-term portion of insurance reserves | | | ||||
Long-term operating lease liabilities | | | ||||
Long-term finance lease liabilities | | | ||||
Other liabilities | | | ||||
Total liabilities | | | ||||
Commitments and contingencies | ||||||
Equity: | ||||||
Preferred stock, $ | ||||||
Common stock, $ | | | ||||
Treasury stock, | ( | ( | ||||
Additional paid-in capital | | | ||||
Retained earnings | | | ||||
Accumulated other comprehensive loss | ( | ( | ||||
Total equity | | | ||||
Total liabilities and equity | $ | | $ | | ||
See notes to our unaudited condensed consolidated financial statements.
4
TOPBUILD CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands except share and per common share data)
Three Months Ended March 31, | ||||||
2025 | 2024 | |||||
Net sales | $ | |
| $ | | |
Cost of sales | | | ||||
Gross profit | | | ||||
Selling, general, and administrative expense | | | ||||
Operating profit | | | ||||
Other income (expense), net: | ||||||
Interest expense | ( | ( | ||||
Other, net | | | ||||
Other expense, net | ( | ( | ||||
Income before income taxes | | | ||||
Income tax expense | ( | ( | ||||
Net income | $ | | $ | | ||
Net income per common share: | ||||||
Basic | $ | | $ | | ||
Diluted | $ | | $ | | ||
Weighted average shares outstanding: | ||||||
Basic | | | ||||
Diluted | | | ||||
See notes to our unaudited condensed consolidated financial statements.
5
TOPBUILD CORP.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
(In thousands)
Three Months Ended March 31, | |||||
2025 | 2024 | ||||
Net income | $ | | $ | | |
Other comprehensive income (loss): | |||||
Foreign currency translation adjustment | | ( | |||
Comprehensive income | $ | | $ | | |
See notes to our unaudited condensed consolidated financial statements.
6
TOPBUILD CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
Three Months Ended March 31, | ||||||
2025 | 2024 | |||||
Cash Flows Provided by (Used in) Operating Activities: |
|
| ||||
Net income | $ | | $ | | ||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||
Depreciation and amortization | | | ||||
Share-based compensation | | | ||||
Loss (gain) on sale of assets | | ( | ||||
Amortization of debt issuance costs | | | ||||
Provision for bad debt expense | | | ||||
Provision for inventory obsolescence | | | ||||
Impairment losses | | - | ||||
Deferred income taxes, net | ( | ( | ||||
Change in certain assets and liabilities, net of effects of businesses acquired: | ||||||
Receivables, net | ( | ( | ||||
Inventories | ( | ( | ||||
Prepaid expenses and other current assets | | | ||||
Accounts payable | ( | ( | ||||
Accrued liabilities | ( | | ||||
Other, net | ( | ( | ||||
Net cash provided by operating activities | | | ||||
Cash Flows Provided by (Used in) Investing Activities: | ||||||
Purchases of property and equipment | ( | ( | ||||
Acquisition of businesses, net of cash acquired | | ( | ||||
Proceeds from sale of assets | | | ||||
Net cash used in investing activities | ( | ( | ||||
Cash Flows Provided by (Used in) Financing Activities: | ||||||
Repayment of long-term debt | ( | ( | ||||
Taxes withheld and paid on employees' equity awards | ( | ( | ||||
Exercise of stock options | — | | ||||
Repurchase of shares of common stock | ( | — | ||||
Net cash used in financing activities | ( | ( | ||||
Impact of exchange rate changes on cash | | ( | ||||
Net (decrease) increase in cash and cash equivalents | ( | | ||||
Cash and cash equivalents - Beginning of period |
| |
| | ||
Cash and cash equivalents - End of period | $ | | $ | | ||
Supplemental disclosure of noncash activities: | ||||||
Leased assets obtained in exchange for new operating lease liabilities | $ | | $ | | ||
Accruals for property and equipment | | | ||||
Excise taxes capitalized to treasury stock | | — | ||||
See notes to our unaudited condensed consolidated financial statements.
7
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 | |||||||||||||
($ | at cost | Capital | Earnings | Loss | Equity | ||||||||||||
Balance at December 31, 2023 | $ | | $ | ( | $ | | $ | | $ | ( | $ | | |||||
Net income | - | - | - | | - | | |||||||||||
Share-based compensation | - | - | | - | - | | |||||||||||
Issuance of | | - | - | - | - | | |||||||||||
- | ( | - | - | - | ( | ||||||||||||
- | - | | - | - | | ||||||||||||
Other comprehensive income, net of tax | - | - | - | - | ( | ( | |||||||||||
Balance at March 31, 2024 | $ | | $ | ( | $ | | $ | | $ | ( | $ | | |||||
Accumulated | |||||||||||||||||
Common | Treasury | Additional | Other | ||||||||||||||
Stock | Stock | Paid-in | Retained | Comprehensive | |||||||||||||
($ | at cost | Capital | Earnings | (Loss)/Income | Equity | ||||||||||||
Balance at December 31, 2024 | $ | | $ | ( | $ | | $ | | $ | ( | $ | | |||||
Net income | - | - | - | | - | | |||||||||||
Share-based compensation | - | - | | - | - | | |||||||||||
Issuance of | - | - | - | - | - | - | |||||||||||
Repurchase of | - | ( | - | - | - | ( | |||||||||||
- | ( | ( | - | - | ( | ||||||||||||
Other comprehensive income, net of tax | - | - | - | - | | | |||||||||||
Balance at March 31, 2025 | $ | | $ | ( | $ | | $ | | $ | ( | $ | | |||||
See notes to our unaudited condensed consolidated financial statements.
8
1. BASIS OF PRESENTATION
TopBuild is a Delaware corporation and trades on the NYSE under the symbol “BLD.” We report our business in
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 March 31, 2025, our results of operations and comprehensive income for the three months ended March 31, 2025 and 2024, and our cash flows for the three months ended March 31, 2025 and 2024. The condensed consolidated balance sheet at December 31, 2024 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, 2024, as filed with the SEC on February 25, 2025.
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 Adopted Accounting Pronouncements
Segment Reporting. 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 became effective for us as of December 31, 2024. Its adoption had no impact on our consolidated results of operations, financial position or cash flows. See Note 7 – Segment Information for required disclosures.
Recently Issued Accounting Pronouncements Not Yet Adopted
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, 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.
In November 2024, the FASB issued ASU 2024-03, “Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40)”. This standard requires disclosure, in the notes to financial statements, of specified information about certain costs and expenses. This standard is effective for annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted. This standard may be applied either prospectively or retrospectively. 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.
9
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.
The following tables present our revenues disaggregated by market (in thousands):
Three Months Ended March 31, | ||||||||||||||||||||||||
2025 | 2024 | |||||||||||||||||||||||
Installation | Specialty | Eliminations | Total | Installation | Specialty | Eliminations | Total | |||||||||||||||||
Residential | $ | | $ | | $ | ( | $ | | $ | | $ | | $ | ( | $ | | ||||||||
Commercial/Industrial | | | ( | | | | ( | | ||||||||||||||||
Net sales | $ | | $ | | $ | ( | $ | | $ | | $ | | $ | ( | $ | | ||||||||
The following tables present our revenues disaggregated by product (in thousands):
Three Months Ended March 31, | ||||||||||||||||||||||||
2025 | 2024 | |||||||||||||||||||||||
Installation | Specialty Distribution | Eliminations | Total | Installation | Specialty | Eliminations | Total | |||||||||||||||||
Insulation and accessories | $ | | $ | | $ | ( | $ | | $ | | $ | | $ | ( | $ | | ||||||||
Glass and windows | | - | - | | | - | - | | ||||||||||||||||
Gutters | | | ( | | | | ( | | ||||||||||||||||
All other | | | ( | | | | ( | | ||||||||||||||||
Net sales | $ | | $ | | $ | ( | $ | | $ | | $ | | $ | ( | $ | | ||||||||
The following table represents our contract assets and contract liabilities with customers, in thousands:
Included in Line Item on | As of | ||||||
Condensed Consolidated | March 31, | December 31, | |||||
Balance Sheets | 2025 | 2024 | |||||
Contract Assets: | |||||||
Receivables, unbilled | Receivables, net | $ | | $ | | ||
Contract Liabilities: | |||||||
Deferred revenue | Accrued liabilities | $ | | $ | | ||
The aggregate amount remaining on uncompleted performance obligations was $
On certain of our long-term contracts, a percentage of the total project cost is withheld and not invoiced to the customer and collected until satisfactory completion of the customer’s project, typically within a year. This amount is referred to as retainage and is common practice in the construction industry. Retainage receivables are classified as a component of Receivables, net on our condensed consolidated balance sheets and were $
10
4. GOODWILL AND OTHER INTANGIBLES
We have
In the fourth quarter of 2024, we performed an annual assessment on our goodwill resulting in
Changes in the carrying amount of goodwill for the three months ended March 31, 2025, by segment, were as follows, in thousands:
|
|
|
| Accumulated |
| |||||||||||||
Gross Goodwill | FX Translation | Gross Goodwill | Impairment | Net Goodwill | ||||||||||||||
December 31, 2024 | Additions | Adjustment | March 31, 2025 | Losses | March 31, 2025 | |||||||||||||
Goodwill, by segment: | ||||||||||||||||||
Installation | $ | | $ | ( | $ | - | $ | | $ | ( | $ | | ||||||
Specialty Distribution |
| |
| | |
| |
| - |
| | |||||||
Total goodwill | $ | | $ | | $ | | $ | | $ | ( | $ | | ||||||
Additions during the three months ended March 31, 2025, pertain to measurement period adjustments to the fair value of goodwill assigned to businesses acquired in the last twelve months.
Other intangible assets, net includes customer relationships, non-compete agreements, and trademarks / trade names. The following table sets forth our other intangible assets, in thousands:
As of | ||||||
March 31, 2025 | December 31, 2024 | |||||
Gross definite-lived intangible assets |
| $ | | $ | | |
Accumulated amortization |
| ( | ( | |||
Other intangible assets, net | $ | | $ | | ||
The following table sets forth our amortization expense, in thousands:
Three Months Ended March 31, | ||||||
| 2025 |
| 2024 | |||
Amortization expense | $ | | $ | | ||
5. LONG-TERM DEBT
The following table reconciles the principal balances of our outstanding debt to our condensed consolidated balance sheets, in thousands:
As of | ||||||
March 31, 2025 |
| December 31, 2024 | ||||
$ | | $ | | |||
| | |||||
Term loan due 2026 | | | ||||
Unamortized debt issuance costs | ( | ( | ||||
Total debt, net of unamortized debt issuance costs | | | ||||
Less: current portion of long-term debt | | | ||||
Total long-term debt | $ | | $ | | ||
11
The following table sets forth our remaining principal payments for our outstanding debt balances as of March 31, 2025, in thousands:
2025 | 2026 | 2027 | 2028 | 2029 | Thereafter | Total | |||||||||||||||
$ | - | $ | - | $ | - | $ | - | $ | | $ | - | $ | | ||||||||
- | - | - | - | - | | | |||||||||||||||
Term loan | | | - | - | - | - | | ||||||||||||||
Total | $ | | $ | | $ | - | $ | - | $ | | $ | | $ | | |||||||
Credit Agreement
On July 26, 2023, we entered into Amendment No. 4 to our Credit Agreement. The following table outlines the key terms of the Credit Agreement (dollars in thousands):
Senior secured term loan facility | $ | | |
Revolving facility (a) | $ | | |
Sublimit for issuance of letters of credit under revolving facility | $ | | |
Sublimit for swingline loans under revolving facility | $ | | |
Interest rate as of March 31, 2025 | | % | |
Scheduled maturity date |
| (a) | Use of the sublimits for the issuance of letters of credit and swingline loans reduces the availability under the revolving facility. |
Interest expense on borrowings under the Credit Agreement is based on an applicable margin rate plus, at our option, either:
| ● | A base rate determined by reference to the highest of either (i) the federal funds rate plus |
| ● | A SOFR rate determined by reference to the costs of funds for deposits in U.S. dollars for the interest period relevant to such borrowings, subject to a floor of |
The applicable margin rate is determined based on our Secured Leverage Ratio. In the case of base rate borrowings, the applicable margin rate ranges from
Revolving Facility
The Company has outstanding standby letters of credit that secure our financial obligations related to our workers’ compensation, general insurance, and auto liability programs. These standby letters of credit, as well as any outstanding amount borrowed under our revolving facility, reduce the availability under the revolving facility.
The following table summarizes our availability under the revolving facility, in thousands:
As of | ||||||
March 31, 2025 |
| December 31, 2024 | ||||
Revolving facility | $ | | $ | | ||
Less: standby letters of credit | ( | ( | ||||
Availability under revolving facility | $ | | $ | | ||
12
We are required to pay commitment fees to the Lenders in respect of any unutilized commitments. The commitment fees range from
The
The Company may redeem the
The
The Company may redeem the
Covenant Compliance
The indentures governing our
The Credit Agreement contains certain covenants that limit, among other things, the ability of the Company to incur additional indebtedness or liens; to make certain investments or loans; to make certain restricted payments; to enter into consolidations, mergers, sales of material assets, and other fundamental changes; to transact with affiliates; to enter into agreements restricting the ability of subsidiaries to incur liens or pay dividends; or to make certain accounting changes. The Credit Agreement contains customary affirmative covenants and events of default.
13
The Credit Agreement requires that we maintain a Net Leverage Ratio and minimum Interest Coverage Ratio throughout the term of the agreement. The following table outlines the key financial covenants effective for the period covered by this Quarterly Report:
As of March 31, 2025 | ||
Maximum Net Leverage Ratio | ||
Minimum Interest Coverage Ratio | ||
Compliance as of period end | In Compliance |
6. FAIR VALUE MEASUREMENTS
The carrying values of cash and cash equivalents, receivables, net, and accounts payable are considered to be representative of their respective fair values due to the short-term nature of these instruments.
Fair value measurements were applied to our long-term debt portfolio. We believe the carrying value of our Term Loan approximates the fair market value primarily due to the fact that the non-performance risk of servicing our debt obligations, as reflected in our business and credit risk profile, has not materially changed since we assumed our debt obligations under the Credit Agreement. In addition, due to the floating-rate nature of our Term Loan, the market value is not subject to variability solely due to changes in the general level of interest rates as is the case with a fixed-rate debt obligation.
Based on market trades of our
As of March 31, 2025 | ||||||
Fair Value | Gross Carrying Value | |||||
$ | | $ | | |||
$ | | $ | | |||
7. SEGMENT INFORMATION
Our business consists of
Our Installation segment installs insulation and other building products. Installation sells primarily to the residential new construction market, with increasing activity in the commercial/industrial construction market, along with repair/remodel of residential housing. In addition to insulation, it installs other building products including glass and windows, rain gutters, garage doors, closet shelving, and fireplaces, among other items.
Our Specialty Distribution segment distributes building and mechanical insulation, insulation accessories and other building product materials for the residential and commercial/industrial end markets. In addition to insulation and accessories, it distributes rain gutters, closet shelving, and roofing materials, among other items. Distributed products are sold from distribution centers in various parts of the United States and Canada, primarily to contractors and dealers (including lumber yards) serving a wide variety of commercial/industrial markets.
Intercompany sales from the Specialty Distribution segment to the Installation segment are recorded by the Specialty Distribution segment with a profit margin and by our Installation segment at cost. This intercompany profit is eliminated in consolidation.
Our CODM is our Chief Executive Officer. Our CODM measures performance for our reportable segments based on segment net sales and operating profit. Our CODM uses these measures to evaluate resource allocation and other strategic initiatives (e.g., making acquisitions and internal investments). Segment performance measures are compared to budgeted and forecasted amounts periodically to assist in evaluating performance versus expectations and to inform future allocation and strategic decisions.
14
Key information is presented below by segment for our profit measures for the three months ended March 31, 2025 and 2024, in thousands:
Three Months Ended March 31, 2025 | |||||||||
Installation | Specialty Distribution | Total | |||||||
Net sales from external customers | $ | | $ | | $ | | |||
Intercompany net sales | — | | | ||||||
Segment net sales | | | | ||||||
Reconciliation of Net Sales | |||||||||
Elimination of intercompany net sales | ( | ||||||||
Consolidated net sales | $ | | |||||||
Less (a): | |||||||||
Cost of sales (b) | | | | ||||||
Selling, general and administrative expenses (c) | | | | ||||||
Segment operating profit | | | | ||||||
Reconciliation of Segment Operating Profit | |||||||||
Elimination of intercompany profit | ( | ||||||||
General corporate expense, net (d) | ( | ||||||||
Other expense, net (e) | ( | ||||||||
Consolidated income before taxes | $ | | |||||||
15
Three Months Ended March 31, 2024 | |||||||||
Installation | Specialty Distribution | Total | |||||||
Net sales from external customers | $ | | $ | | $ | | |||
Intercompany net sales | — | | | ||||||
Segment net sales | | | | ||||||
Reconciliation of Net Sales | |||||||||
Elimination of intercompany net sales | ( | ||||||||
Consolidated net sales | $ | | |||||||
Less (a): | |||||||||
Cost of sales (b) | | | | ||||||
Selling, general and administrative expenses (c) | | | | ||||||
Segment operating profit | | | | ||||||
Reconciliation of Segment Operating Profit | |||||||||
Elimination of intercompany profit | ( | ||||||||
General corporate expense, net (d) | ( | ||||||||
Other expense, net (e) | ( | ||||||||
Consolidated income before taxes | $ | | |||||||
(a) The significant expense categories align with the segment-level information that is regularly provided to our CODM.
(b) Cost of sales is primarily composed of labor, material costs and overhead. Includes $
(c) Selling, general and administrative expenses include allocation of corporate overhead, bad debt, bank fees, selling expenses, employee compensation, insurance, legal and consulting, office equipment & supplies, telecommunication & subscriptions, and travel & entertainment. Includes $
(d) General corporate expense, net includes expenses for functions such as corporate human resources, finance, and legal, including salaries, benefits, and other related costs.
(e) Other expense, net is presented on the accompanying condensed consolidated statement of operations and is primarily composed of interest expense and interest income.
Key information by segment is as follows for the three months ended March 31, 2025 and 2024, in thousands:
As of March 31, 2025 | |||||||||||||||
Installation | Specialty Distribution | Total Reportable Segments | Other (a) | Consolidated Totals | |||||||||||
Depreciation and amortization (b) | $ | | $ | | $ | | $ | | $ | | |||||
Property additions (c) | | | | | | ||||||||||
Total assets | | | | | | ||||||||||
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As of March 31, 2024 | |||||||||||||||
Installation | Specialty Distribution | Total Reportable Segments | Other (a) | Consolidated Totals | |||||||||||
Depreciation and amortization (b) | $ | | $ | | $ | | $ | | $ | | |||||
Property additions (c) | | | | | | ||||||||||
Total assets | | | | | | ||||||||||
(a) Represents amounts held at Corporate not specifically attributed to or allocated to the segments.
(b) Represents total by segment, inclusive of amounts presented within cost of sales and selling, general and administrative expenses, as applicable.
(c) Property additions include assets acquired in business combinations in each respective year.
8. INCOME TAXES
Our effective tax rates were
A tax expense of $
9. NET INCOME PER SHARE
Basic net income per share is calculated by dividing net income by the weighted average shares outstanding during the period, without consideration for common stock equivalents. Diluted net income per share is calculated by adjusting weighted average shares outstanding for the dilutive effect of common stock equivalents outstanding for the period, determined using the treasury stock method.
Basic and diluted net income per share were computed as follows:
Three Months Ended March 31, | ||||||
2025 | 2024 | |||||
Net income (in thousands) | $ | | $ | | ||
Weighted average number of common shares outstanding - basic | | | ||||
Dilutive effect of common stock equivalents: | ||||||
RSAs with service-based conditions | | | ||||
RSAs with market-based conditions | | | ||||
RSAs with performance-based conditions | | | ||||
Stock options | | | ||||
Weighted average number of common shares outstanding - diluted | | | ||||
Basic net income per common share | $ | | $ | | ||
Diluted net income per common share | $ | | $ | | ||
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The following table summarizes shares excluded from the calculation of diluted net income per share because their effect would have been anti-dilutive:
Three Months Ended March 31, | ||||||
2025 |
| 2024 | ||||
Anti-dilutive common stock equivalents: | ||||||
RSAs with service-based conditions | | | ||||
RSAs with market-based conditions | | - | ||||
RSAs with performance-based conditions | - | - | ||||
Stock options | - | - | ||||
Total anti-dilutive common stock equivalents | | | ||||
10. SHARE-BASED COMPENSATION
Effective July 1, 2015, our eligible employees commenced participation in the 2015 LTIP. The 2015 LTIP authorizes the Board to grant stock options, stock appreciation rights, restricted shares, restricted share units, performance awards, and dividend equivalents. All grants are made by issuing new shares and no more than
Share-based compensation expense is included in selling, general, and administrative expense. The income tax effect associated with share-based compensation awards is included in income tax expense.
The following table presents share-based compensation amounts recognized in our condensed consolidated statements of operations, in thousands:
Three Months Ended March 31, | ||||||
2025 | 2024 | |||||
Share-based compensation expense | $ | | $ | | ||
Income tax (expense)/benefit | $ | ( | $ | ( | ||
The following table presents a summary of our share-based compensation activity for the three months ended March 31, 2025, in thousands, except per share amounts:
RSAs | Stock Options | |||||||||||||||
Number of Shares |
| Weighted Average Grant Date Fair Value Per Share |
| Number of Shares |
| Weighted Average Grant Date Fair Value Per Share |
| Weighted Average Exercise Price Per Share |
| Aggregate | ||||||
Balance December 31, 2024 | | $ | | | $ | | $ | | $ | | ||||||
Granted | | $ | | — | — | — | — | |||||||||
Converted/Exercised | ( | $ | | — | — | — | — | |||||||||
Forfeited/Expired | ( | $ | | — | — | — | — | |||||||||
Balance March 31, 2025 | | $ | | | $ | | $ | | $ | | ||||||
Exercisable March 31, 2025 (a) | | $ | | $ | | $ | | |||||||||
| (a) | The weighted average remaining contractual term for vested stock options is approximately |
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We have unrecognized share-based compensation expense related to unvested awards as shown in the following table, dollars in thousands:
As of March 31, 2025 | ||||||
Unrecognized Compensation Expense | Weighted Average | |||||
RSAs | $ | | ||||
Stock options | — | — | ||||
Total unrecognized compensation expense related to unvested awards | $ | | ||||
Our RSAs with performance-based conditions are evaluated on a quarterly basis with adjustments to compensation expense based on the likelihood of the performance target being achieved or exceeded.
Payout Ranges and Related Expense | |||||||||||||||
RSAs with Performance-Based Conditions | Grant Date Fair Value | ||||||||||||||
February 21, 2023 | $ | | $ | - | $ | | $ | | $ | | |||||
February 21, 2024 | $ | | $ | - | $ | | $ | | $ | | |||||
February 18, 2025 | $ | | $ | - | $ | | $ | | $ | | |||||
During the first quarter of 2025, RSAs with performance-based conditions that were granted on February 15, 2022 vested based on cumulative
The fair value of our RSAs with a market-based condition granted under the 2015 LTIP was determined using a Monte Carlo simulation. The following are key inputs in the Monte Carlo analysis for awards granted in 2025, 2024, and 2023:
2025 | 2024 | 2023 | ||||||||||
Measurement period (years) | ||||||||||||
Risk free interest rate | | % | | % | | % | ||||||
Dividend yield | | % | | % | | % | ||||||
Estimated fair value of market-based RSAs at grant date | $ | | $ | | $ | | ||||||
11. SHARE REPURCHASE PROGRAM
On May 3, 2024, our Board authorized the 2024 Repurchase Program, pursuant to which the Company could purchase up to $
On February 17, 2025, our Board authorized the 2025 Repurchase Program, pursuant to which the Company may purchase up to $
Effective January 1, 2023, the Inflation Reduction Act of 2022 mandated a 1% excise tax on all share repurchases. Excise tax obligations that result from our share repurchases are included in the cost of treasury stock. The Company has excise tax liabilities of $
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The following table sets forth our share repurchases under the share repurchase programs in 2025.
Three Months Ended | ||||
| March 31, 2025 | |||
Number of shares repurchased | | |||
Share repurchase cost (in thousands) (a) | $ | |
| |
| (a) | Includes $ |
12. BUSINESS COMBINATIONS
Acquiring businesses is a key part of our ongoing strategy to grow our company and expand our offerings. Each acquisition has been accounted for as a business combination under ASC 805, “Business Combinations.” Acquisition related costs were $
As third-party or internal valuations are finalized, certain tax aspects of the foregoing transactions are completed, and customer post-closing reviews are concluded, adjustments may be made to the fair value of assets acquired, and in some cases total purchase price, through the end of each measurement period, generally one year following the applicable acquisition date. See Note 4 – Goodwill and Other Intangibles for disclosure of measurement period adjustments.
On February 15, 2024, we acquired the assets of the residential and light commercial insulation business Brabble. This installation acquisition enhanced our presence in North Carolina. The purchase price of $
On March 1, 2024, we acquired the assets of the residential insulation business Morris Black. This installation acquisition enhanced our presence in Pennsylvania. The purchase price of $
On March 1, 2024, we acquired the assets of the customized insulation products and accessories business PCI. This specialty distribution acquisition has a national customer base focused on the domestic pest control industry. The purchase
price of $
Customer relationships related to acquisitions completed in the three months ended March 31, 2024, were assigned a total fair value of $
Goodwill to be recognized in connection with acquisitions is attributable to the synergies expected to be realized and improvements in the businesses after the acquisitions. Primarily all of the $
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13. ACCRUED LIABILITIES
The following table sets forth the components of accrued liabilities, in thousands:
As of | ||||||
March 31, 2025 | December 31, 2024 | |||||
Accrued liabilities: | ||||||
Salaries, wages, and bonus/commissions | $ | | $ | | ||
Income tax payable | | | ||||
Short-term portion of insurance reserves | | | ||||
Deferred revenue | | | ||||
Sales and property taxes | | | ||||
Excise taxes | | | ||||
Customer rebates | | | ||||
Interest payable on long-term debt | | | ||||
Other | | | ||||
Total accrued liabilities | $ | | $ | | ||
See Note 3 – Revenue Recognition for discussion of our deferred revenue balances. Accrued income taxes payable increased compared to December 31, 2024, due to the timing of tax payments, which typically occur later in the year.
14. OTHER COMMITMENTS AND CONTINGENCIES
Litigation. We are subject to certain claims, charges, litigation, and other proceedings in the ordinary course of our business, including those arising from or related to contractual matters, intellectual property, personal injury, environmental matters, product liability, product recalls, construction defects, insurance coverage, personnel and employment disputes, antitrust, and other matters, including class actions. We believe we have adequate defenses in these matters, and we do not believe that the ultimate outcome of these matters will have a material adverse effect on us. However, there is no assurance that we will prevail in any of these pending matters, and we could in the future incur judgments, enter into settlements of claims, or revise our expectations regarding the outcome of these matters, which could materially impact our liquidity and our results of operations.
Other Matters. We enter into contracts, which include customary indemnities that are standard for the industries in which we operate. Such indemnities include, among other things, claims against our builder customers for issues relating to our workmanship. We generally exclude from our contracts with builder customers indemnity relating to product quality and warranty claims, as we pass such claims directly to the manufacturers of the products we install or distribute. In conjunction with divestitures and other transactions, we occasionally provide customary indemnities relating to various items including, among others, the enforceability of trademarks, legal and environmental issues, and asset valuations. We evaluate the probability that we may incur liabilities under these customary indemnities and appropriately record an estimated liability when deemed probable.
We also maintain indemnification agreements with our directors and officers that may require us to indemnify them against liabilities that arise by reason of their status or service as directors or officers, except as prohibited by applicable law.
15. SUBSEQUENT EVENTS
On April 7, 2025, we acquired the assets of the residential and commercial insulation business Seal-Rite. This installation acquisition will enhance our presence in the Omaha and Lincoln, Nebraska markets. The purchase price of approximately $
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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
TopBuild, headquartered in Daytona Beach, Florida, is a leading installer and specialty distributor of insulation and other building material products to the construction industry in the United States and Canada.
We operate in two segments: Installation and Specialty Distribution. Our Installation segment installs insulation and other building products nationwide. As of March 31, 2025, we had more than 200 Installation branches located across the United States. We install various insulation applications, including fiberglass batts and rolls, blown-in loose fill fiberglass, polyurethane spray foam, and blown-in loose fill cellulose. Additionally, we install other building products including glass and windows, rain gutters, garage doors, closet shelving, and fireplaces, among other items. We handle every stage of the installation process, including material procurement supplied by leading manufacturers, project scheduling and logistics, multi-phase professional installation, and installation quality assurance.
Our Specialty Distribution segment distributes building and mechanical insulation, insulation accessories, rain gutters, and other building product materials for the residential and commercial/industrial end markets. As of March 31, 2025, we had more than 150 distribution centers across North America including 18 distribution centers in Canada. Our Specialty Distribution customer base consists of thousands of insulation contractors of all sizes serving a wide variety of residential and commercial/industrial industries, gutter contractors, weatherization contractors, other contractors, dealers, metal building erectors, and modular home builders.
We believe that having both Installation and Specialty Distribution provides us with several distinct competitive advantages. First, the combined buying power of our two business segments, along with our scale, strengthens our ties to the major manufacturers of insulation and other building material products. This helps to ensure we are buying competitively and ensures the availability of supply to our local branches and distribution centers. The overall effect is driving efficiencies through our supply chain. Second, being a leader in both installation and specialty distribution allows us to reach a broader set of builders and contractors more effectively, regardless of their size or geographic location in the U.S. and Canada, and leverage housing and commercial/industrial construction growth wherever it occurs. Third, during housing industry downturns, many insulation contractors who buy directly from manufacturers during industry peaks return to purchasing through specialty distributors. As a result, this helps to reduce our exposure to cyclical swings in our business.
For additional details pertaining to our operating results by segment, see Note 7 – Segment Information to our unaudited condensed consolidated financial statements contained in Part I, Item 1 of this Quarterly Report. For additional details regarding our strategy, material trends in our business and seasonality, please refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report for the year ended December 31, 2024, as filed with the SEC on February 25, 2025.
Recent Developments
In recent months, the U.S. government has announced tariffs and trade restrictions on certain goods produced outside the United States. As a result, certain jurisdictions, including China, Mexico, Canada, and the European Union, have also imposed tariffs and restrictions on certain goods produced in the United States. While we have a limited number of products that we purchase directly or indirectly from jurisdictions that could be exposed to effected or proposed tariffs, such products represent a relatively small portion of our current material spend and we believe the direct impact for our business is minimal. We are actively working with our supply base to mitigate the anticipated impact of current applicable tariffs and expect to take pricing actions to the extent we believe necessary or appropriate. The potential direct and indirect impacts of tariffs on the broad economy and, in particular, housing demand, are uncertain and we continue to closely monitor and evaluate the ongoing situation.
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First Quarter Highlights
In the first quarter of 2025, we executed a network optimization project to consolidate facilities across both our Installation and Specialty Distribution segments. We recorded one-time charges of $13.9 million in connection with these consolidations, the majority of which relate to non-cash facility impairment. We also made headcount reductions in the first quarter to align our cost structure with current demand levels, resulting in one-time severance charges of $1.5 million.
The following discussion and analysis contains forward-looking statements and should be read in conjunction with the unaudited condensed consolidated financial statements, the notes thereto, and the section entitled “Forward-Looking Statements” included in this Quarterly Report.
FIRST QUARTER 2025 VERSUS FIRST QUARTER 2024
The following table sets forth our net sales, gross profit, operating profit, and margins, as reported in our condensed consolidated statements of operations, in thousands:
Three Months Ended March 31, | ||||||||
2025 | 2024 | |||||||
Net sales | $ | 1,233,278 | $ | 1,278,717 | ||||
Cost of sales | 881,805 | 891,567 | ||||||
Cost of sales ratio | 71.5 | % | 69.7 | % | ||||
Gross profit | 351,473 | 387,150 | ||||||
Gross profit margin | 28.5 | % | 30.3 | % | ||||
Selling, general, and administrative expense | 173,984 | 172,642 | ||||||
Selling, general, and administrative expense to sales ratio | 14.1 | % | 13.5 | % | ||||
Operating profit | 177,489 | 214,508 | ||||||
Operating profit margin | 14.4 | % | 16.8 | % | ||||
Other expense, net | (11,516) | (7,513) | ||||||
Income tax expense | (42,588) | (54,614) | ||||||
Net income | $ | 123,385 | $ | 152,381 | ||||
Net margin | 10.0 | % | 11.9 | % | ||||
Sales and Operations
Net sales declined by 3.6% for the three months ended March 31, 2025, from the comparable period of 2024. The decline was primarily driven by a 7.4% decrease in volume as housing demand has softened, partially offset by 2.6% increase in sales from acquisitions, and a 1.2% impact from higher selling prices.
Gross profit margins were 28.5% and 30.3% for the three months ended March 31, 2025 and 2024, respectively. The decline in gross profit margin is primarily due to $13.5 million of one-time expenses incurred in connection with our branch consolidations and headcount reductions, lower sales volume, and customer price pressures on residential products within our distribution business. Excluding the impact of the one-time expenses, our gross profit margin would have been 29.6%.
Selling, general, and administrative expenses as a percentage of sales were 14.1% and 13.5% for the three months ended March 31, 2025 and 2024, respectively. Selling, general, and administrative expenses as a percentage of sales were higher primarily due to lower sales volume and $1.9 million of one-time expenses incurred in connection with our branch consolidations and headcount reductions.
Operating margins were 14.4% and 16.8% for the three months ended March 31, 2025 and 2024, respectively. The decrease in operating margins was primarily due to $15.4 million of one-time expenses incurred in connection with our branch consolidations and headcount reductions, lower sales volume and customer price pressures on residential products within our distribution business. Excluding the impact of the one-time expenses, our operating margin would have been 15.6%.
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Business Segment Results
The following table sets forth our net sales and operating profit margins by business segment, in thousands:
Three Months Ended March 31, | |||||||||
| 2025 |
| 2024 |
| Percent Change |
| |||
Net sales by business segment: | |||||||||
Installation | $ | 745,533 | $ | 798,743 | (6.7) | % | |||
Specialty Distribution | 559,804 | 545,794 | 2.6 | % | |||||
Intercompany eliminations | (72,059) | (65,820) | |||||||
Net sales | $ | 1,233,278 | $ | 1,278,717 | (3.6) | % | |||
Operating profit by business segment: | |||||||||
Installation | $ | 129,616 | $ | 156,757 | (17.3) | % | |||
Specialty Distribution | 69,059 | 77,579 | (11.0) | % | |||||
Intercompany eliminations | (11,927) | (10,761) | |||||||
Operating profit before general corporate expense | 186,748 | 223,575 | (16.5) | % | |||||
General corporate expense, net | (9,259) | (9,067) | |||||||
Operating profit | $ | 177,489 | $ | 214,508 | (17.3) | % | |||
Operating profit margins: | |||||||||
Installation | 17.4 | % | 19.6 | % | |||||
Specialty Distribution | 12.3 | % | 14.2 | % | |||||
Operating profit margin before general corporate expense | 15.1 | % | 17.5 | % | |||||
Operating profit margin | 14.4 | % | 16.8 | % | |||||
Installation
Sales
Sales in our Installation segment decreased $53.2 million, or 6.7%, for the three months ended March 31, 2025, as compared to the same period in 2024. The sales decline was primarily due to 9.6% lower sales volume, partially offset by 1.8% increase from acquisitions, and 1.1% from higher selling prices.
Operating margins
Operating margins in our Installation segment were 17.4% and 19.6% for the three months ended March 31, 2025 and 2024, respectively. The decline in operating margin is primarily due to $8.3 million of one-time expenses incurred in connection with our branch consolidations and headcount reductions, and lower sales volume. Excluding the impact of the one-time expenses, our operating margin would have been 18.5%.
Specialty Distribution
Sales
Sales in our Specialty Distribution segment increased $14.0 million, or 2.6%, for the three months ended March 31, 2025, as compared to the same period in 2024. Sales increased 3.4% from acquisitions and 1.4% from higher selling prices, partially offset by 2.2% decline in sales volume.
Operating margins
Operating margins in our Specialty Distribution segment were 12.3% and 14.2% for the three months ended March 31, 2025 and 2024, respectively. The decline in operating margin is primarily due to $6.9 million of one-time expenses incurred in connection with our branch consolidations and headcount reductions, lower sales volume, and price pressures on residential products within our distribution business. Excluding the impact of the one-time expenses, our operating margin would have been 13.6%.
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OTHER ITEMS
Other expense, net
Other expense, net, increased to $11.5 million from $7.5 million in the three months ended March 31, 2025 and 2024, respectively. The increase was primarily driven by $7.3 million lower interest income due to lower cash balances partially offset by a decline of $2.2 million in interest expense from lower debt and interest rates compared to the prior year period.
Income tax expense
Income tax expense was $42.6 million, an effective tax rate of 25.7 percent, for the three months ended March 31, 2025, compared to $54.6 million, an effective tax rate of 26.4 percent, for the comparable period in 2024. The tax rate for the three months ended March 31, 2025, was lower primarily related to a decrease in tax expense related to share-based compensation.
Cash Flows and Liquidity
Significant sources (uses) of cash and cash equivalents are summarized for the periods indicated, in thousands:
| Three Months Ended March 31, | |||||
2025 |
| 2024 | ||||
Changes in cash and cash equivalents: | ||||||
Net cash provided by operating activities | $ | 152,589 | $ | 178,777 | ||
Net cash used in investing activities |
| (12,853) |
| (40,513) | ||
Net cash used in financing activities | (231,344) | (17,098) | ||||
Impact of exchange rate changes on cash | 101 | (922) | ||||
Net (decrease) increase in cash and cash equivalents | $ | (91,507) | $ | 120,244 | ||
Net cash flows provided by operating activities decreased $26.2 million for the three months ended March 31, 2025, as compared to the prior year period. Net income decreased $29.0 million, or 19.0%, compared with the prior year period, driven by lower sales volume and $15.4 million of one-time expenses incurred in connection with our branch consolidations and headcount reductions.
Net cash used in investing activities was $12.9 million for the three months ended March 31, 2025, primarily composed of $13.4 million for purchases of property and equipment, mainly vehicles. Net cash used in investing activities was $40.5 million for the three months ended March 31, 2024, primarily composed of $22.2 million for our acquisitions and $19.9 million for purchases of property and equipment, mainly vehicles and equipment, partially offset by $1.6 million proceeds received from the sale of assets.
Net cash used in financing activities was $231.3 million for the three months ended March 31, 2025. During the three months ended March 31, 2025, we used $215.6 million to repurchase shares of our common stock under the 2024 and 2025 Repurchase Programs, $11.3 million for debt repayments and incurred $4.5 million cash outflow related to exercise of share-based incentive awards. Net cash used in financing activities was $17.1 million for the three months ended March 31, 2024. During the three months ended March 31, 2024, we used $12.1 million for debt repayments and incurred $5.0 million net cash outflow related to exercise of share-based incentive awards and stock options.
We have access to liquidity through our cash from operations and available borrowing capacity under our Credit Agreement, which provides for borrowing and/or standby letter of credit issuances of up to $500 million under the Revolving facility. Additional information regarding our outstanding debt and borrowing capacity is incorporated by reference from Note 5 – Long-term Debt to our unaudited condensed consolidated financial statements contained in Part 1, Item 1 of this Quarterly Report.
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The following table summarizes our liquidity, in thousands:
As of | ||||||
March 31, | December 31, | |||||
| 2025 |
| 2024 | |||
Cash and cash equivalents (a) | $ | 308,811 | $ | 400,318 | ||
Revolving facility | 500,000 | 500,000 | ||||
Less: standby letters of credit | (62,448) | (63,770) | ||||
Availability under Revolving facility | 437,552 | 436,230 | ||||
Total liquidity | $ | 746,363 | $ | 836,548 | ||
| (a) | Our cash and cash equivalents consist of AAA-rated money market funds as well as cash held in our demand deposit accounts. |
We believe that our cash flows from operations, combined with our current cash levels and available borrowing capacity, will be adequate to support our ongoing operations and known contractual obligations including funding our debt service requirements, capital expenditures, lease obligations and working capital needs for at least the next twelve months. We also have adequate liquidity to maintain off-balance sheet arrangements for short-term leases, letters of credit, and performance and license bonds. Information regarding our outstanding bonds as of March 31, 2025, is incorporated by reference from Note 14 – Other Commitments and Contingencies to our unaudited condensed consolidated financial statements contained in Part I, Item 1 of this Quarterly Report.
OUTLOOK
Residential New Construction
Demand for single-family homes continues to be uneven across the country. Multi-family activity has slowed considerably as the lower housing starts of 2024 are beginning to impact the industry. While the residential end-markets are facing near-term uncertainty around tariffs, inflation, and interest rates, we remain optimistic about the longer-term fundamentals due to underbuilding in the United States in prior years.
Commercial and Industrial Construction
Our commercial backlog is strong, and our bidding activity is active, both of which continue to support our positive view of commercial/industrial sales at our Installation and Specialty Distribution segments. We remain optimistic that lower interest rates in the future will unlock additional projects across many industries. In addition, recurring maintenance and repair work on industrial sites serves as a continued driver for our Specialty Distribution business.
OFF-BALANCE SHEET ARRANGEMENTS
We had no material off-balance sheet arrangements during the three months ended March 31, 2025, other than short-term leases, letters of credit, and performance and license bonds, which have been disclosed in Part 1, Item 1 of this Quarterly report.
We occasionally use performance bonds to ensure completion of our work on certain larger customer contracts that can span multiple accounting periods. Performance bonds generally do not have stated expiration dates; rather, we are released from the bonds as the contractual performance is completed. We also have bonds outstanding for license and insurance.
The following table summarizes our outstanding performance, licensing, insurance, and other bonds, in thousands:
As of | ||||||
March 31, 2025 | December 31, 2024 | |||||
Outstanding bonds: | ||||||
Performance bonds | $ | 147,797 | $ | 146,479 | ||
Licensing, insurance, and other bonds | 28,273 | 28,462 | ||||
Total bonds | $ | 176,070 | $ | 174,941 | ||
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CONTRACTUAL OBLIGATIONS
There have been no material changes to our contractual obligations from those previously disclosed in our Annual Report for the year ended December 31, 2024, as filed with the SEC on February 25, 2025.
CRITICAL ACCOUNTING POLICIES
We prepare our condensed consolidated financial statements in conformity with GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of the financial statements, and the reported amounts of sales and expenses during the reporting period. Actual results could differ from those estimates. Our critical accounting policies have not changed from those previously reported in our Annual Report for the year ended December 31, 2024, as filed with the SEC on February 25, 2025.
APPLICATION OF NEW ACCOUNTING STANDARDS
Information regarding the application of new accounting standards is incorporated by reference from Note 2 – Accounting Policies to our unaudited condensed consolidated financial statements contained in Part I, Item 1 of this Quarterly Report.
FORWARD-LOOKING STATEMENTS
Statements contained in this report that reflect our views about future periods, including our future plans and performance, constitute “forward-looking statements” under the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as “will,” “would,” “should,” “anticipate,” “expect,” “believe,” “designed,” “plan,” “may,” “project,” “estimate” or “intend,” the negative of these terms, and similar references to future periods. These views involve risks and uncertainties that are difficult to predict and, accordingly, our actual results may differ materially from the results discussed in our forward-looking statements. We caution you against unduly relying on any of these forward-looking statements. Our future performance may be affected by the duration and impact of negative macro-economic impacts on the United States economy, specifically with respect to residential, commercial/industrial construction, our ability to collect our receivables from our customers, our reliance on residential new construction, residential repair/remodel, and commercial/industrial construction; our reliance on third-party suppliers and manufacturers; our ability to attract, develop, and retain talented personnel and our sales and labor force; our ability to maintain consistent practices across our locations; our ability to maintain our competitive position; and our ability to realize the expected benefits of our acquisitions. We discuss the material risks we face under the caption entitled “Risk Factors” in our Annual Report for the year ended December 31, 2024, as filed with the SEC on February 25, 2025, as well as under the caption entitled “Risk Factors” in subsequent reports that we file with the SEC. Our forward-looking statements in this filing speak only as of the date of this filing. Factors or events that could cause our actual results to differ may emerge from time to time and it is not possible for us to predict all of them. Unless required by law, we undertake no obligation to update publicly any forward-looking statements as a result of new information, future events, or otherwise.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk
We have a Term Loan outstanding with a principal balance of $476.3 million and a revolving facility with an aggregate borrowing capacity of $500.0 million. We also have outstanding 3.625% Senior Notes with an aggregate principal balance of $400.0 million and 4.125% Senior Notes with an aggregate principal balance of $500.0 million. The 3.625% Senior Notes and 4.125% Senior Notes bear a fixed rate of interest and therefore are excluded from the calculation below as they are not subject to fluctuations in interest rates.
Interest payable on both the aggregate Term Loan and revolving facility is based on a variable interest rate. As a result, we are exposed to market risks related to fluctuations in interest rates on this outstanding indebtedness. As of March 31, 2025, the applicable interest rate as of such date was 5.42%. Based on our outstanding borrowings as of March 31, 2025, a 100-basis point increase in the interest rate would result in a $4.6 million increase in our annualized interest expense. There was no outstanding balance under the revolving facility as of March 31, 2025.
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Item 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this Quarterly Report, we carried out an evaluation, under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of March 31, 2025.
Changes in Internal Control over Financial Reporting
There was no change in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) in the most recent fiscal quarter ended March 31, 2025, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II – OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
The information set forth under the caption “Litigation” in Note 13 – Other Commitments and Contingencies to our unaudited condensed consolidated financial statements contained in Part I, Item 1 of this Quarterly Report, is incorporated by reference herein.
Item 1A. RISK FACTORS
There have been no material changes to our risk factors as previously disclosed in our Annual Report for the year ended December 31, 2024, as filed with the SEC on February 25, 2025 which are incorporated by reference herein.
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Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following table provides information regarding the repurchase of our common stock for the three months ended March 31, 2025, in thousands, except share and per share data:
Period | Total Number of Shares Purchased | Average Price Paid per Common Share (a) | Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs | ||||||
January 1, 2025 - January 31, 2025 | 89,829 | $ | 333.88 | 89,829 | $ | 1,158,062 | ||||
February 1, 2025 - February 28, 2025 | 94,122 | 321.29 | 94,122 | $ | 1,127,821 | |||||
March 1, 2025 - March 31, 2025 | 509,930 | 304.74 | 509,930 | $ | 972,425 | |||||
Total | 693,881 | $ | 310.76 | 693,881 | ||||||
| (a) | These amounts exclude the 1% excise tax mandated by the Inflation Reduction Act on share repurchases. |
Excluded from this disclosure are share repurchased to settle statutory employee tax withholdings related to the vesting of stock awards.
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
Item 4. MINE SAFETY DISCLOSURES
Not applicable.
Item 5. OTHER INFORMATION
During the quarter ended March 31, 2025, no director or officer (as defined in Rule 16a-1(f) promulgated under the Exchange Act) of the
Item 6. EXHIBITS
The Exhibits listed on the accompanying Index to Exhibits are filed or furnished (as noted on such Index) as part of this Quarterly Report and incorporated herein by reference.
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INDEX TO EXHIBITS
| Incorporated by Reference | Filed | ||||||||
Exhibit No. |
| Exhibit Title |
| Form |
| Exhibit |
| Filing Date |
| Herewith |
31.1 | X | |||||||||
31.2 | X | |||||||||
32.1‡ | ||||||||||
32.2‡ | ||||||||||
101.INS | Inline XBRL Instance Document - the Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | X | ||||||||
101.SCH | Inline XBRL Taxonomy Extension Schema Document | X | ||||||||
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | X | ||||||||
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | X | ||||||||
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | X | ||||||||
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | X | ||||||||
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | X | ||||||||
‡Furnished herewith | ||||||||||
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| TOPBUILD CORP. | |||||
|
| |||||
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| |||||
| By: | /s/ Madeline Otero | ||||
| Name: | Madeline Otero | ||||
| Title: | Vice President and Chief Accounting Officer | ||||
(Principal Accounting Officer) | ||||||
May 6, 2025
|
| |
| By: | /s/ Robert Kuhns |
| Name: | Robert Kuhns |
| Title: | Vice President and Chief Financial Officer (Principal Financial Officer) |
May 6, 2025
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