TopBuild Reports First Quarter 2021 Results

5/6/2021, 12:45 PM (Source: GlobeNewswire)
  • Net sales increased 13.7%
  • Gross margin expanded 30 basis points
  • 12.9% operating margin, 13.1% on an adjusted basis, up 230 basis points
  • Adjusted EBITDA increased 31.1%, adjusted EBITDA margin up 210 basis points
  • $1.80 net income per diluted share, $2.02 on an adjusted basis

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

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

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

First Quarter 2021 Financial Highlights

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

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

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

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

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

       
 TruTeam3 Months
Ended
3/31/21
 Service Partners3 Months
Ended
3/31/21
 
 Sales$532,753  Sales$251,601  
 Change  Change  
 Volume 5.1%  Volume 13.8%  
 Price 1.1%  Price 3.7%  
 M&A 5.8%  M&A 0.0%  
 Total Change 12.0%  Total Change 17.4%  
 Operating Margin 13.8%  Operating Margin 14.1%  
 Change110 bps Change260 bps 
 Adj. Operating Margin 13.9%  Adj. Operating Margin 14.1%  
 Change120 bps Change260 bps 
       

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

    
 ForecastedMonth 
YTD 2021Annual Revenue ($millions)AcquiredBusiness Focus
LCR Contractors$58.0JanuaryHeavy Commercial/Fireproofing
Ozark Foam$7.7MarchResidential, primarily spray foam
American Building Systems$144.0AprilResidential (94%) & Distribution (6%)
Creative Conservation$7.4AprilResidential
Total$217.1   
    

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

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

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

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

2021 Outlook

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

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

*See table for adjusted EBITDA reconciliation.

Assumptions (1)
($ in millions)

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

(1) This guidance and long-term targets reflect management’s current view of present and future market conditions and are based on assumptions such as housing starts, general and administrative expenses, weighted average diluted shares outstanding and interest rates. These targets do not include any effects related to potential acquisitions or divestitures that may occur after the date of this press release. A reconciliation of non-GAAP targets to corresponding GAAP measures is not available on a forward-looking basis without unreasonable effort due to the uncertainty regarding, and the potential variability of, the costs and expenses that may be incurred in the future and therefore, cannot be reasonably predicted. The effect of these excluded items may be significant. Factors that could cause actual long-term results to differ materially from TopBuild’s current expectations are discussed below and are also detailed in the Company’s 2020 Annual Report on Form 10-K and subsequent SEC reports.

Conference Call
A conference call to discuss first quarter 2021 financial results is scheduled for today, Thursday, May 6, 2021, at 9:00 a.m. Eastern Time. The call may be accessed by dialing (877) 407-9037. The conference call will be webcast simultaneously on the Company’s website at www.topbuild.com.

About TopBuild

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

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

Safe Harbor Statement

This press release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act. These forward-looking statements may address, among other things, our expected financial and operational results, the related assumptions underlying our expected results, and our plan to repurchase our common stock under a stock repurchase transaction. These forward-looking statements are distinguished by use of words such as “will,” “would,” “anticipate,” “expect,” “believe,” “designed,” “plan,” or “intend,” the negative of these terms, and similar references to future periods. These views involve risks and uncertainties that are difficult to predict and, accordingly, our actual results may differ materially from the results discussed in our forward-looking statements.  Our forward-looking statements contained herein speak only as of the date of this press release.  Factors or events that we cannot predict, including those described in the risk factors contained in our filings with the Securities and Exchange Commission, may cause our actual results to differ from those expressed in forward-looking statements.  Although TopBuild believes the expectations reflected in such forward-looking statements are based on reasonable assumptions, the Company can give no assurance that its expectations will be achieved and it undertakes no obligation to update any forward-looking statements as a result of new information, future events, or otherwise, except as required by applicable law.

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

(tables follow)

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



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



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



TopBuild Corp.          
Segment Data (Unaudited)          
(dollars in thousands)          
           
  Three Months Ended March 31,     
  2021  2020  Change 
TruTeam          
Sales $532,753  $475,873   12.0%
           
Operating profit, as reported $73,636  $60,351     
Operating margin, as reported  13.8 % 12.7 %   
           
Acquisition related costs     4     
COVID-19 pay  489        
Operating profit, as adjusted $74,125  $60,355     
Operating margin, as adjusted  13.9 % 12.7 %   
           
Service Partners          
Sales $251,601  $214,223   17.4%
           
Operating profit, as reported $35,385  $24,669     
Operating margin, as reported  14.1 % 11.5 %   
           
COVID-19 pay  34        
Operating profit, as adjusted $35,419  $24,669     
Operating margin, as adjusted  14.1 % 11.5 %   
           
Total          
Sales before eliminations $784,354  $690,096     
Intercompany eliminations  (41,556)  (36,868)    
Net sales after eliminations $742,798  $653,228   13.7%
           
Operating profit, as reported - segments $109,021  $85,020     
General corporate expense, net  (6,606)  (9,198)    
Intercompany eliminations  (6,528)  (5,833)    
Operating profit, as reported $95,887  $69,989     
Operating margin, as reported  12.9 % 10.7 %   
           
Rationalization charges  16        
Acquisition related costs †  753   235     
Refinancing costs     37     
COVID-19 pay  523        
Operating profit, as adjusted $97,179  $70,261     
Operating margin, as adjusted  13.1 % 10.8 %   
           
Share-based compensation  3,111   3,908     
Depreciation and amortization  15,519   14,190     
EBITDA, as adjusted $115,809  $88,359     
EBITDA margin, as adjusted  15.6 % 13.5 %   
           
Sales change period over period  89,570        
EBITDA, as adjusted, change period over period  27,450        
Incremental EBITDA, as adjusted, as a percentage of change in sales30.6 %      
           
† Acquisition related costs include corporate level adjustments as well as segment operating adjustments.            
           



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



TopBuild Corp.       
Same Branch and Acquisition Net Sales and Adjusted EBITDA (Unaudited)       
(dollars in thousands)       
        
  Three Months Ended March 31,  
  2021  2020  
Net sales       
Same branch:       
TruTeam $505,297  $475,873  
Service Partners  251,601   214,223  
Eliminations  (41,556)  (36,868) 
Total same branch  715,342   653,228  
        
Acquisitions (a):       
TruTeam $27,456  $  
Service Partners       
Eliminations       
Total acquisitions  27,456     
Total $742,798  $653,228  
        
EBITDA, as adjusted       
Same branch $113,132  $88,359  
Acquisitions (a)  2,677     
Total $115,809  $88,359  
        
EBITDA, as adjusted, as a percentage of sales       
Same branch (b)  15.8 %   
Acquisitions (c)  9.8 %   
Total (d)  15.6 % 13.5 %
        
As Adjusted Incremental EBITDA, as a percentage of change in sales       
Same branch (e)  39.9 %   
Acquisitions (c)  9.8 %   
Total (f)  30.6 %   
        
(a) Represents current year impact of acquisitions in their first twelve months       
(b) Same branch EBITDA, as adjusted, as a percentage of same branch sales       
(c) Acquired EBITDA, as adjusted, as a percentage of acquired sales       
(d) Total EBITDA, as adjusted, as a percentage of total sales       
(e) Change in same branch EBITDA, as adjusted, as a percentage of change in same branch sales       
(f) Change in total EBITDA, as adjusted, as a percentage of change in total sales       
        


TopBuild Corp.      
Same Branch and Acquisition Net Sales by Market (Unaudited)   
(in thousands)      
       
 Three Months Ended March 31,  
 2021 2020 
Same branch:      
Residential$556,993 $506,731 
Commercial 158,349  146,497 
Same branch net sales 715,342  653,228 
       
Acquisitions (a):      
Residential$19,791 $ 
Commercial 7,665   
Acquisitions net sales 27,456   
Total net sales$742,798 $653,228 
       
(a) Represents current year impact of acquisitions in their first twelve months   
       


TopBuild Corp.       
Reconciliation of Adjusted EBITDA to Net Income (Unaudited)    
(in thousands)       
        
  Three Months Ended March 31,  
  2021 2020 
Net income, as reported $59,842 $50,771 
Adjustments to arrive at EBITDA, as adjusted:       
Interest expense and other, net  6,526  8,270 
Income tax expense  15,657  10,715 
Depreciation and amortization  15,519  14,190 
Share-based compensation  3,111  3,908 
Rationalization charges  16   
Acquisition related costs  753  235 
Refinancing costs and loss on extinguishment of debt  13,862  270 
COVID-19 pay  523   
EBITDA, as adjusted $115,809 $88,359 
        


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


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

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