• 2.1% decrease in net sales
  • 110 bps gross margin expansion, 130 bps on an adjusted basis
  • 12.5% operating margin, 12.9% on an adjusted basis, up 130 bps
  • $1.67 net income per diluted share, $1.68 on an adjusted basis
  • 16.7% adjusted EBITDA margin, up 250 bps

Moving Forward with Capital Allocation Program

DAYTONA BEACH, Fla., Aug. 04, 2020 (GLOBE NEWSWIRE) -- TopBuild Corp. (NYSE:BLD), a leading installer and distributor of insulation and building material products today reported results for the second quarter ended June 30, 2020. 

Jerry Volas, Chief Executive Officer, stated, “We are extremely pleased with our second quarter results.  Our team did an outstanding job flexing our business model and driving further efficiencies throughout our Company as we responded to state shutdowns, project delays and widespread uncertainty related to COVID-19.  The strong performance we achieved at both TruTeam and Service Partners is evidence of this success and demonstrates the strength of our uniquely diversified business platform.

“As we move through the second half of the year, we are confident in our ability to successfully meet the challenges and opportunities that may lie ahead.”

Second Quarter Financial Highlights
(unless otherwise indicated, comparisons are to the quarter ended June 30, 2019)

  • Net sales declined 2.1% to $646.1 million, primarily driven by volume declines related to the impact of the COVID-19 pandemic. Same branch contributed 99.0% of total revenue.
     
  • Gross margin increased 110 basis points to 27.6%.  On an adjusted basis, gross margin increased 130 basis points to 27.8%.
     
  • Operating profit was $80.5 million, compared to operating profit of $76.0 million a 5.8% improvement.  On an adjusted basis, operating profit was $83.5 million, compared to $76.4 million, a 9.3% improvement.
     
  • Operating margin was 12.5%, up 100 basis points.  Adjusted operating margin improved 130 basis points to 12.9%.
     
  • Net income was $55.5 million, or $1.67 per diluted share, compared to $52.1 million, or $1.51 per diluted share. Adjusted income was $55.7 million, or $1.68 per diluted share, compared to $49.5 million, or $1.43 per diluted share. 
     
  • Adjusted EBITDA was $107.8 million, compared to $94.0 million, a 14.6% increase, and adjusted EBITDA margin improved 250 basis points to 16.7%. 
     
  • At June 30, 2020, the Company had cash and cash equivalents of $258.8 million and availability under its revolving credit facility of $389.6 million for total liquidity of $648.5 million.

Six Month Financial Highlights
(unless otherwise indicated, comparisons are to six months ended June 30, 2019)

  • Net sales increased 1.6% to $1,299.3 million. On a same branch basis, revenue increased 0.6% to $1,287.7 million. 
     
  • Gross margin expanded 110 basis points to 26.9%. On an adjusted basis, gross margin expanded 130 basis points to 27.1%.
     
  • Operating profit was $150.4 million, compared to operating profit of $132.7 million, a 13.4% improvement.   On an adjusted basis, operating profit was $153.8 million, compared to $135.5 million, a 13.5% improvement.
     
  • Operating margin was 11.6%, a 120-basis point improvement.  On an adjusted basis, operating margin improved 120 basis points to 11.8%. 
     
  • Net income was $106.3 million, or $3.18 per diluted share, compared to $90.0 million, or $2.60 per diluted share.  Adjusted income was $101.6 million, or $3.04 per diluted share, compared to $86.1 million, or $2.49 per diluted share. 
     
  • Adjusted EBITDA was $196.1 million, compared to $168.6 million, a 16.4% increase.  Adjusted EBITDA margin was 15.1%, a 190-basis point improvement.

Operating Segment Highlights ($ in 000s)
(comparisons are to the period ended June 30, 2019)

TruTeam3 Months Ended 6/30/206 Months Ended 6/30/20 Service Partners3 Months Ended 6/30/206 Months Ended 6/30/20
Sales$466,569 $942,442  Sales$216,336 $430,558 
Change   Change  
Volume (5.5%)  (1.6%)  Volume 1.7%  2.8% 
Price 0.7%  1.4%  Price (0.4%)  0.3% 
M&A 1.4%  1.2%  M&A 0.0%  0.0% 
Total Change (3.4%)  1.1%  Total Change 1.3%  3.0% 
Operating Margin 14.9%  13.8%  Operating Margin 11.2%  11.3% 
Change70 bps100 bps Change130 bps130 bps
Adj. Operating Margin 15.2%  14.0%  Adj. Operating Margin 11.6%  11.6% 
Change100 bps110 bps Change170 bps160 bps


Capital Allocation
“As a result of the uncertainty in early March related to COVID-19, we suspended our acquisition program.  As the second quarter progressed, the outlook for the housing industry improved, and we are now moving forward with a number of the companies in our robust acquisition pipeline,” noted Volas. 

While the Company completed no acquisitions in the second quarter, it did repurchase 262,889 shares at an average price of $76.17 per share. 

Additional Information
Quarterly supplemental materials, including a presentation that will be referenced on today’s conference call, are available on the “Investors” section of the Company’s website at www.topbuild.com.

Conference Call
A conference call to discuss second quarter 2020 financial results is scheduled for today, Tuesday, August 4, at 9:00 a.m. Eastern time.  The call may be accessed by dialing (888) 225-2706.  The conference call will be webcast simultaneously on the “Investors” section of the Company’s website at www.topbuild.com.  

About TopBuild
TopBuild Corp., a Fortune 1000 Company headquartered in Daytona Beach, Florida, is a leading installer and distributor of insulation and building material products to the U.S. construction industry. We provide insulation and building material services nationwide through TruTeam®, which has approximately 200 branches, and through Service Partners® which distributes insulation and building material products from approximately 75 branches.  We leverage our national footprint to gain economies of scale while capitalizing on our local market presence to forge strong relationships with our customers.  To learn more about TopBuild please visit our website at www.topbuild.com.

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

Safe Harbor Statement
Statements contained herein 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,” “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.  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 the COVID-19 pandemic on the United States economy, specifically with respect to residential and commercial construction; our ability to continue operations in markets affected by the COVID-19 pandemic and our ability to collect receivables from our customers; our reliance on residential new construction, residential repair/remodel, and commercial 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; and our ability to maintain our competitive position.  We discuss the material risks we face under the caption entitled “Risk Factors” in our Annual Report for the year ended December 31, 2019, as filed with the SEC on February 25, 2020, 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.  The Company believes that the non-GAAP performance measures and ratios that are contained herein, which management uses to manage our business, provide users of this financial information with additional meaningful comparisons between current results and results in our prior periods. Non-GAAP performance measures and ratios should be viewed in addition, and not as an alternative, to the Company's reported results under accounting principles generally accepted in the United States. Additional information about the Company is contained in the Company's filings with the SEC and is available on TopBuild's website at www.topbuild.com.

Investor Relations and Media Contact
Tabitha Zane
tabitha.zane@topbuild.com
386-763-8801

              
              
TopBuild Corp.             
Condensed Consolidated Statements of Operations (Unaudited)          
(in thousands, except share and per common share amounts)          
              
  Three Months Ended June 30,  Six Months Ended June 30,  
  2020  2019  2020  2019  
Net sales $646,099  $660,112  $1,299,327  $1,279,442  
Cost of sales  468,045   485,190   949,316   948,824  
Gross profit  178,054   174,922   350,011   330,618  
              
Selling, general, and administrative expense  97,600   98,883   199,568   197,960  
Operating profit  80,454   76,039   150,443   132,658  
              
Other income (expense), net:             
Interest expense  (8,277)  (9,631)  (17,018)  (19,232) 
Loss on extinguishment of debt  —   —   (233)  —  
Other, net  89   526   561   858  
Other expense, net  (8,188)  (9,105)  (16,690)  (18,374) 
Income before income taxes  72,266   66,934   133,753   114,284  
              
Income tax expense  (16,770)  (14,883)  (27,485)  (24,249) 
Net income $55,496  $52,051  $106,268  $90,035  
              
Net income per common share:             
Basic $1.69  $1.53  $3.22  $2.64  
Diluted $1.67  $1.51  $3.18  $2.60  
              
Weighted average shares outstanding:             
Basic  32,867,842   33,976,169   33,018,148   34,072,314  
Diluted  33,202,423   34,557,664   33,401,135   34,630,048  
                  


        
TopBuild Corp.       
Condensed Consolidated Balance Sheets and Other Financial Data (Unaudited)       
(dollars in thousands)       
  As of 
  June 30,  December 31,  
  2020 2019 
ASSETS       
Current assets:       
Cash and cash equivalents $258,837 $184,807 
Receivables, net of an allowance for credit losses of $7,541 at June 30, 2020, and allowance for doubtful accounts of $4,854 at December 31, 2019  423,000  428,844 
Inventories, net  147,304  149,078 
Prepaid expenses and other current assets  7,962  17,098 
Total current assets  837,103  779,827 
        
Right of use assets  85,236  87,134 
Property and equipment, net  176,179  178,080 
Goodwill  1,379,821  1,367,918 
Other intangible assets, net  176,871  181,122 
Deferred tax assets, net  4,358  4,259 
Other assets  11,011  5,623 
Total assets $2,670,579 $2,603,963 
        
LIABILITIES       
Current liabilities:       
Accounts payable $293,224 $307,970 
Current portion of long-term debt  23,168  34,272 
Accrued liabilities  120,689  98,418 
Short-term lease liabilities  34,444  36,094 
Total current liabilities  471,525  476,754 
        
Long-term debt  694,320  697,955 
Deferred tax liabilities, net  174,229  175,263 
Long-term portion of insurance reserves  50,608  45,605 
Long-term lease liabilities  54,798  54,010 
Other liabilities  7,447  1,487 
Total liabilities  1,452,927  1,451,074 
        
EQUITY  1,217,652  1,152,889 
Total liabilities and equity $2,670,579 $2,603,963 
        
        
  As of June 30,  
  2020 2019 
Other Financial Data       
Receivable days  49  53 
Inventory days  28  29 
Accounts payable days  83  78 
Receivables, net plus inventories, net less accounts payable $277,080 $306,119 
Receivables, net plus inventories, net less accounts payable as a percent of sales (TTM) 10.5% 11.9%
        


        
TopBuild Corp.       
Condensed Consolidated Statement of Cash Flows (Unaudited)       
(in thousands)       
        
  Six Months Ended June 30,  
  2020  2019  
Cash Flows Provided by (Used in) Operating Activities:      
Net income $106,268  $90,035  
Adjustments to reconcile net income to net cash provided by operating activities:       
Depreciation and amortization  33,311   25,538  
Share-based compensation  9,038   7,485  
Loss on extinguishment of debt  233   —  
Loss on sale or abandonment of property and equipment  320   561  
Amortization of debt issuance costs  716   779  
Provision for bad debt expense  3,756   3,688  
Loss from inventory obsolescence  1,313   1,251  
Deferred income taxes, net  (38)  (21) 
Change in certain assets and liabilities       
Receivables, net  1,894   (41,489) 
Inventories, net  538   17,391  
Prepaid expenses and other current assets  9,151   14,969  
Accounts payable  (16,390)  (23,823) 
Accrued liabilities  28,188   (1,131) 
Payment of contingent consideration  (413)  —  
Other, net  277   1,031  
Net cash provided by operating activities  178,162   96,264  
        
Cash Flows Provided by (Used in) Investing Activities:       
Purchases of property and equipment  (20,937)  (21,982) 
Acquisition of businesses  (20,526)  —  
Proceeds from sale of property and equipment  763   1,961  
Other, net  —   22  
Net cash used in investing activities  (40,700)  (19,999) 
        
Cash Flows Provided by (Used in) Financing Activities:       
Proceeds from issuance of long-term debt  300,000   4,998  
Repayment of long-term debt  (313,407)  (11,364) 
Payment of debt issuance costs  (2,280)  —  
Taxes withheld and paid on employees' equity awards  (13,165)  (8,471) 
Repurchase of shares of common stock  (34,152)  (19,499) 
Payment of contingent consideration  (428)  (1,091) 
Net cash used in financing activities  (63,432)  (35,427) 
        
Cash and Cash Equivalents       
Increase for the period  74,030   40,838  
Beginning of period  184,807   100,929  
End of period $258,837  $141,767  
        
Supplemental disclosure of noncash activities:       
Leased assets obtained in exchange for new operating lease liabilities $19,257  $110,192  
Accruals for property and equipment  323   497  
          


                    
TopBuild Corp.                   
Segment Data (Unaudited)                   
(dollars in thousands)                   
                    
  Three Months Ended June 30,     Six Months Ended June 30,     
  2020  2019  Change  2020  2019  Change  
TruTeam                   
Sales $466,569  $483,028  (3.4)% $942,442  $932,410  1.1% 
                    
Operating profit, as reported $69,643  $68,423     $129,994  $119,722     
Operating margin, as reported  14.9%  14.2%     13.8%  12.8%    
                    
Rationalization charges  857   81      857   199     
Acquisition related costs  —   277      4   403     
COVID-19 pay  638   —      638   —     
Operating profit, as adjusted $71,138  $68,781     $131,493  $120,324     
Operating margin, as adjusted  15.2%  14.2%     14.0%  12.9%    
                    
Service Partners                   
Sales $216,336  $213,487  1.3% $430,558  $417,951  3.0% 
                    
Operating profit, as reported $24,155  $21,151     $48,825  $41,748     
Operating margin, as reported  11.2%  9.9%     11.3%  10.0%    
                    
Rationalization charges  944   —      944   109     
COVID-19 pay  54   —      54   —     
Operating profit, as adjusted $25,153  $21,151     $49,823  $41,857     
Operating margin, as adjusted  11.6%  9.9%     11.6%  10.0%    
                    
Total                   
Sales before eliminations $682,905  $696,515     $1,373,000  $1,350,361     
Intercompany eliminations  (36,806)  (36,403)     (73,673)  (70,919)    
Net sales after eliminations $646,099  $660,112  (2.1)% $1,299,327  $1,279,442  1.6% 
                    
Operating profit, as reported - segments $93,798  $89,574     $178,819  $161,470     
General corporate expense, net  (7,383)  (7,130)     (16,581)  (16,734)    
Intercompany eliminations  (5,961)  (6,405)     (11,795)  (12,078)    
Operating profit, as reported $80,454  $76,039     $150,443  $132,658     
Operating margin, as reported  12.5%  11.5%     11.6%  10.4%    
                    
Rationalization charges †  2,376   142      2,376   1,969     
Acquisition related costs  (40)  251      196   903     
Refinancing costs  20   —      57   —     
COVID-19 pay  692   —      692   —     
Operating profit, as adjusted $83,502  $76,432     $153,764  $135,530     
Operating margin, as adjusted  12.9%  11.6%     11.8%  10.6%    
                    
Share-based compensation  5,130   4,513      9,038   7,485     
Depreciation and amortization  19,121   13,062      33,311   25,538     
EBITDA, as adjusted $107,753  $94,007     $196,113  $168,553     
EBITDA margin, as adjusted  16.7%  14.2%     15.1%  13.2%    
                    
Sales change period over period  (14,013
)         19,885         
EBITDA, as adjusted, change period over period  13,746         27,560         
EBITDA, as adjusted, as percentage of sales change  N/A         138.6%        
                    
† Rationalization charges 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 June 30,  Six Months Ended June 30,   
  2020  2019  2020  2019   
Gross Profit and Operating Profit Reconciliations              
               
Net sales $646,099  $660,112  $1,299,327  $1,279,442   
               
Gross profit, as reported $178,054  $174,922  $350,011  $330,618   
               
Rationalization charges  1,079   —   1,079   —   
COVID-19 pay  482   —   482   —   
Gross profit, as adjusted $179,615  $174,922  $351,572  $330,618   
               
Gross margin, as reported  27.6%  26.5%  26.9%  25.8%  
Gross margin, as adjusted  27.8%  26.5%  27.1%  25.8%  
               
Operating profit, as reported $80,454  $76,039  $150,443  $132,658   
               
Rationalization charges  2,376   142   2,376   1,969   
Acquisition related costs  (40)  251   196   903   
Refinancing costs  20   —   57   —   
COVID-19 pay  692   —   692   —   
Operating profit, as adjusted $83,502  $76,432  $153,764  $135,530   
               
Operating margin, as reported  12.5%  11.5%  11.6%  10.4%  
Operating margin, as adjusted  12.9%  11.6%  11.8%  10.6%  
               
Income Per Common Share Reconciliation              
               
Income before income taxes, as reported $72,266  $66,934  $133,753  $114,284   
               
Rationalization charges  2,376   142   2,376   1,969   
Acquisition related costs  (40)  251   196   903   
Refinancing costs and loss on extinguishment of debt  20   —   290   —   
COVID-19 pay  692   —   692   —   
Income before income taxes, as adjusted  75,314   67,327   137,307   117,156   
               
Tax rate at 26.0% and 26.5% for 2020 and 2019, respectively  (19,582)  (17,842)  (35,700)  (31,046)  
Income, as adjusted $55,732  $49,485  $101,607  $86,110   
               
Income per common share, as adjusted $1.68  $1.43  $3.04  $2.49   
               
Weighted average diluted common shares outstanding  33,202,423   34,577,664   33,401,135   34,630,048   
                   


              
TopBuild Corp.             
Same Branch and Acquisition Net Sales and Adjusted EBITDA (Unaudited)             
(dollars in thousands)             
              
  Three Months Ended June 30,  Six Months Ended June 30,  
  2020  2019  2020  2019  
Net sales             
Same branch:             
Installation segment $459,820  $483,028  $930,828  $932,410  
Distribution segment  216,336   213,487   430,558   417,951  
Eliminations  (36,806)  (36,403)  (73,673)  (70,919) 
Total same branch  639,350   660,112   1,287,713   1,279,442  
              
Acquisitions (a):             
Installation segment $6,749  $—  $11,614  $—  
Distribution segment  —   —   —   —  
Eliminations  —   —   —   —  
Total acquisitions  6,749   —   11,614   —  
Total $646,099  $660,112  $1,299,327  $1,279,442  
              
EBITDA, as adjusted             
Same branch $106,325  $94,007  $193,592  $168,553  
Acquisitions (a)  1,428   —   2,521   —  
Total $107,753  $94,007  $196,113  $168,553  
              
EBITDA, as adjusted, as a percentage of sales             
Same branch (b)  16.6%     15.0%    
Acquisitions (c)  21.2%     21.7%    
Total (d)  16.7%  14.2%  15.1%  13.2% 
              
As Adjusted Incremental EBITDA, as a percentage of change in sales             
Same branch (e)  N/A      302.7%    
Acquisitions (c)  21.2%     21.7%    
Total (f)  N/A      138.6%    
              
(a) Represents current year impact of acquisitions in their first twelve months             
(b) Same branch EBITDA, as adjusted, as a percentage of same branch sales             
(c) Acquired EBITDA, as adjusted, as a percentage of acquired sales             
(d) Total EBITDA, as adjusted, as a percentage of total sales             
(e) Change in same branch EBITDA, as adjusted, as a percentage of change in same branch sales          
(f) Change in total EBITDA, as adjusted, as a percentage of change in total sales             
              


             
TopBuild Corp.            
 Same Branch and Acquisition Net Sales by Market (Unaudited)       
(dollars in thousands)            
             
 Three Months Ended June 30,  Six Months Ended June 30,  
 2020 2019 2020 2019 
Same branch:            
Residential$503,928 $504,659 $1,009,615 $980,794 
Commercial 135,422  155,453  278,098  298,648 
Same branch net sales 639,350  660,112  1,287,713  1,279,442 
             
Acquisitions (a):            
Residential$1,606 $— $2,651 $— 
Commercial 5,143  —  8,963  — 
Acquisitions net sales 6,749  —  11,614  — 
Total net sales$646,099 $660,112 $1,299,327 $1,279,442 
             
(a) Represents current year impact of acquisitions in their first twelve months       
             


             
TopBuild Corp.            
Reconciliation of Adjusted EBITDA to Net Income (Unaudited)         
(in thousands)            
             
  Three Months Ended June 30,  Six Months Ended June 30, 
  2020  2019 2020 2019
Net income, as reported $55,496  $52,051 $106,268 $90,035
Adjustments to arrive at EBITDA, as adjusted:            
Interest expense and other, net  8,188   9,105  16,457  18,374
Income tax expense  16,770   14,883  27,485  24,249
Depreciation and amortization  19,121   13,062  33,311  25,538
Share-based compensation  5,130   4,513  9,038  7,485
Rationalization charges  2,376   142  2,376  1,969
Acquisition related costs  (40)  251  196  903
Refinancing costs and loss on extinguishment of debt  20   —  290  —
COVID-19 pay  692   —  692  —
EBITDA, as adjusted $107,753  $94,007 $196,113 $168,553
             

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