Investors interested in Building Products - Miscellaneous stocks are likely familiar with TopBuild (BLD) and Advanced Drainage Systems (WMS) . But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The proven Zacks Rank emphasizes companies with positive estimate revision trends, an ...

Financial Data and Key Metrics Changes - Total sales for the nine months increased by 4.4%, with gross margin expanding by 130 basis points to 31% and adjusted EBITDA margin expanding by 160 basis points to 20.4% [4] - Third quarter net sales rose by 1.9% to $1.33 billion, with adjusted EBITDA increasing by 9.4% to $283.7 million and adjusted EBITDA margin at 21.4%, a 150-basis point improvement from the previous year [31][48] - Adjusted earnings per diluted share were $5.43, reflecting a 13.1% increase from the prior year [16] Business Line Data and Key Metrics Changes - The Installation segment's third quarter net sales were $821.7 million, up 4.9%, driven by M&A and price increases, partially offset by a 3.5% decline in volume [31] - Specialty Distribution net sales were $571 million, a 2.1% decline from the prior year, primarily due to lower prices, with residential sales down 7.5% and commercial and industrial sales up 1.7% [32] Market Data and Key Metrics Changes - Commercial sales for the Installation segment grew by 9.4%, driven by strong activity from both light and heavy commercial projects [14] - Maintenance and repair work on commercial and industrial sites is being scheduled, which is expected to stabilize revenue [25] Company Strategy and Development Direction - The company is in the second phase of its growth strategy, focusing on operational improvements and cross-selling opportunities [8] - Plans to co-locate some operations to expand footprint without significant investment are underway, aiming for organic growth [26] - The M&A prospect pipeline remains robust, with expectations to remain active in acquiring residential and commercial installation companies and mechanical insulation specialty distributors [12] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about growth opportunities in both commercial and industrial end markets in the US and Canada [25] - The company anticipates a strong fourth quarter and has adjusted its 2023 guidance for total sales and adjusted EBITDA upwards [35][36] - Material availability has tightened, and single-family starts will be a key indicator for the industry moving into 2024 [27] Other Important Information - The company completed four acquisitions year-to-date, expected to generate approximately $173 million in revenue on a pro forma full-year basis [10] - The MSCI ESG rating improved from A to AA, reflecting the company's commitment to sustainability [52] Q&A Session Summary Question: Outlook for single-family and multifamily markets in early 2024 - Management noted that single-family activity picked up towards the end of Q3, with public builders remaining optimistic about growth [42] Question: Material availability and pricing trends - Management indicated that material availability has tightened, with maintenance impacting product availability, and they expect material to remain tight into 2024 [44][60] Question: Margins in commercial and multifamily projects - Higher margins in commercial and multifamily projects were attributed to operational performance and effective bidding strategies [61] Question: Impact of interest rates on builder orders - Production builders remain optimistic, while smaller builders are more cautious, leading to a flat outlook for them [144] Question: Fourth quarter guidance and pricing power - Management expects flat sales in Q4, with normal seasonal slowdowns and challenges in maintaining prices amid builder affordability concerns [148][153]

Financial Performance - Net sales for the three months ended September 30, 2023, were $1,326.1 million, a 1.9% increase from $1,301.0 million in the same period of 2022[106]. - Operating profit for Q3 2023 was $237.5 million, compared to $222.9 million in Q3 2022, resulting in an operating margin of 17.9%[106]. - Net income for the three months ended September 30, 2023, was $167.6 million, representing a net margin of 12.6%, compared to $153.7 million and a net margin of 11.8% in Q3 2022[106]. - Overall net sales for the nine months ended September 30, 2023, increased by 4.4% to $3,908.6 million, compared to $3,744.2 million in the same period of 2022[120]. - Operating profit for the nine months ended September 30, 2023, was $674.0 million, reflecting a 13.5% increase from $594.0 million in 2022[120]. Profitability Metrics - Gross profit margin improved to 31.7% for Q3 2023, up from 30.4% in Q3 2022, primarily due to productivity initiatives and higher selling prices in the Installation segment[106]. - Operating margins improved to 17.9% in Q3 2023, attributed to productivity initiatives and higher selling prices, despite lower prices in the Distribution segment[100]. - Gross profit margin improved to 31.0% for the nine months ended September 30, 2023, compared to 29.7% in 2022, primarily due to productivity initiatives and higher selling prices[119]. Expenses - Selling, general, and administrative expenses as a percentage of sales increased to 13.8% in Q3 2023 from 13.3% in Q3 2022, driven by higher acquisition-related costs[73]. - Other expense, net, was $42.9 million for the nine months ended September 30, 2023, with interest expense increasing by $15.5 million due to higher interest rates[134]. Taxation - The effective tax rate for Q3 2023 was 25.4%, a decrease from 26.1% in Q3 2022, primarily due to share-based compensation and state tax adjustments[81]. - Income tax expense for the nine months ended September 30, 2023, was $163.3 million, with an effective tax rate of 25.9%, compared to $142.1 million and 25.6% in 2022[124]. Acquisitions and Investments - The company acquired the assets of the residential insulation business of SRI for $45.3 million, enhancing its presence in several states[87]. - Net cash used in investing activities was $181.0 million for the nine months ended September 30, 2023, primarily for acquisitions and property purchases[125]. Liquidity and Debt - Total liquidity as of September 30, 2023, was $1,051.8 million, significantly up from $672.4 million at the end of 2022[127]. - As of September 30, 2023, the applicable interest rate on the Term Loan and Revolving Facility was 6.42%[142]. - There was no outstanding balance under the Revolving Facility as of September 30, 2023[142]. - A 100-basis point increase in the interest rate would result in a $5.3 million increase in annualized interest expense[142]. Sales Performance by Segment - Installation segment net sales increased by $38.6 million, or 4.9%, for the three months ended September 30, 2023, compared to the same period in 2022[109]. - Operating profit margin for the Installation segment improved to 21.3% for the three months ended September 30, 2023, up from 19.7% in 2022, driven by productivity initiatives and higher selling prices[110]. - Specialty Distribution segment sales decreased by $12.5 million, or 2.1%, for the three months ended September 30, 2023, due to lower selling prices and a decline in sales volume[115]. - The company reported a 2.9% increase in sales from acquisitions, contributing to the overall sales growth[99].

*See Appendix for Reconciliation 13 ☎TopBuild Core Strengths ▪ Laser focus on core business, insulation ▪ Multiple avenues for growth ▪ Unrivaled North American size and scale ▪ Operational excellence and performance driven ▪ M&A a core competency ▪ Recognized for exceptional labor, service and reliability ▪ Emphasis on talent development ▪ Safety of our people always comes first ▪ Business is inherently environmentally friendly Our Values | --- | --- | --- | --- | |----------------------------------------- ...

TopBuild Corp. (NYSE:BLD) Q2 2023 Earnings Conference Call August 3, 2023 9:00 AM ET Company Participants Tabitha Zane - Vice President, Investor Relations Robert Buck - President and Chief Executive Officer Robert Kuhns - Chief Financial Officer Conference Call Participants Kenneth Zener - Seaport Research Partners Stephen Kim - Evercore Joseph Ahlersmeyer - Deutsche Bank Jeffrey Stevenson - Loop Capital Markets Adam Baumgarten - Zelman & Associates Phil Ng - Jefferies Keith Hughes - Truist Securities Noah ...

FORM 10-Q Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period June 30, 2023 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 193 For the transition period from to Commission file number: 001-36870 TopBuild Corp. (Exact name of Registrant as Specified in its Charter) Delaware (State or Other Jurisdiction of Inc ...

Financial Data and Key Metrics Changes - Revenue increased by 8.2% to $1.3 billion in Q1 2023, with adjusted EBITDA rising by 18.1% to $238.3 million, resulting in an adjusted EBITDA margin of 18.8%, a 150-basis point improvement compared to Q1 2022 [3][11][39] - Adjusted earnings per diluted share were $4.36, reflecting a 25% increase from the prior year [23] - Operating cash flow for Q1 was $169.8 million, compared to $89.5 million in the prior year, driven by an 18.4% increase in net income and improvements in working capital [23][24] Business Segment Data and Key Metrics Changes - Installation segment sales increased by 13.4% to $767.1 million, driven by strong volume growth and higher selling prices [39] - Specialty Distribution segment sales increased by 2.7% to $558.4 million, with a decline in residential distribution volume offset by an 8.7% increase in sales from commercial and industrial channels [6][39] - Adjusted EBITDA margin for the Installation segment was 21.4%, an improvement of 230 basis points, while the Specialty Distribution segment's margin was 15.8%, a 20-basis point improvement [11] Market Data and Key Metrics Changes - The company expects sales in the commercial and industrial end markets to expand by low to mid-single digits, with residential sales anticipated to decline in the mid to upper single digits [25][42] - The total addressable market for installation is estimated at over $17.5 billion, with the company holding a 20% market share [8] Company Strategy and Development Direction - The company emphasizes operational efficiency and excellence, leveraging supply chain efficiencies and best practices across its network [4][9] - Acquisitions remain the number one capital allocation priority, with a robust pipeline of prospects and a focus on high-quality installation-focused companies [12][37] - The company aims to enhance its presence in all three end markets: residential, commercial, and industrial, with a commitment to continuous improvement [8][43] Management's Comments on Operating Environment and Future Outlook - Management remains cautiously optimistic about the future, noting strong fundamentals in the housing industry supported by limited supply and favorable demographic trends [16][30] - The company has not seen an impact on demand in commercial or industrial markets despite recent banking turmoil, with a robust backlog and ongoing bidding for projects into late 2024 and early 2025 [18][25] - Management highlighted the importance of their advanced ERP system for real-time monitoring of productivity and operational control [17][43] Other Important Information - The company generated $154 million of free cash flow in Q1, up 117% year-over-year, and expects to exceed $600 million in free cash flow for the full year [99] - The company ended Q1 with net debt leverage of 1.15x trailing 12 months adjusted EBITDA and total liquidity of $766.1 million [24] Q&A Session Summary Question: Why did the company not raise guidance despite strong results? - Management indicated that while Q1 results were in line with expectations, there is still uncertainty in the back half of the year, leading to a cautious approach [30] Question: What is the outlook for single-family starts? - Management noted that single-family starts have been significantly below completions, but there is cautious optimism for potential increases in starts, which would be upside to forecasts [30][50] Question: How is the multifamily market expected to perform? - Management expects strong performance in the multifamily sector, with a healthy backlog and product availability for loosefill installations [32] Question: What are the expectations for pricing in the residential business? - Management stated that pricing has remained steady due to tightness in materials and labor, with no significant competitive pressures noted [53] Question: What is the outlook for commercial and industrial growth? - Management expects low to mid-single-digit growth in commercial and industrial markets, with strong performance in Q1 exceeding initial expectations [55][74]

| --- | --- | --- | --- | --- | --- | --- | |----------------------------------------------------------------------------|------------------------------|-------|-------|----------------------------------|-------|---------------------------------| | The following table summarizes our \nCash and cash equivalents (a) | liquidity, in thousands: | | | March 31, 2023 \n$ 333,778 | As of | December 31, 2022 \n$ 240,069 | | | | | | | | | | Revolving facility 500,000 500,000 | | | | | | | | Less: standby letters of ...

Financial Data and Key Metrics Changes - Total sales for 2022 increased by 43.7% to $5 billion, with an 18.8% increase on a same-branch basis [12] - Adjusted EBITDA for the full year rose by 55.2% to $940.6 million, with an adjusted EBITDA margin of 18.8%, reflecting a 140 basis point improvement [13] - Fourth quarter net sales increased by 18.9% to $1.3 billion, with adjusted EBITDA rising by 30.4% to $237.4 million [28][29] Business Line Data and Key Metrics Changes - Installation segment revenue grew by 24.9% for the full year, driven by increased prices and volume, while fourth quarter revenue was $761.3 million, a 21.4% increase [12][28] - Specialty Distribution segment saw a revenue increase of 15.9% for the full year, with fourth quarter revenue at $563.1 million, primarily driven by price and M&A [12][28] Market Data and Key Metrics Changes - The company holds over 20% market share in a combined $16 billion total addressable market across residential, commercial, and mechanical insulation [23] - The backlog of single-family homes is expected to support residential sales into the second quarter of 2023, while multifamily units show stronger backlog support for the full year [55] Company Strategy and Development Direction - The company aims to continue improving labor and sales productivity while driving operational improvements as part of its growth strategy [6] - The focus remains on acquiring high-quality residential and commercial installation contractors and specialty distribution companies to enhance scale and customer base [50] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the current economic environment, emphasizing the company's strong track record and diversified business model [32] - There is optimism regarding the backlog of projects and bidding activity, particularly in the commercial and industrial end markets, which are expected to expand by low to mid-single digits [15] Other Important Information - The company completed five strategic residential acquisitions expected to generate over $17 million in net annual revenue [6] - Capital expenditures for 2022 were $76.4 million, consistent with long-term guidance, while approximately $250 million was spent on share repurchases [14] Q&A Session All Questions and Answers Question: Can you give us a sense for when exactly you think sales are going to turn negative year-over-year? - Management estimates that sales will turn negative into the second quarter, with potential upside if housing starts improve [33] Question: Could you speak to the composition of your fourth quarter growth? - Management feels confident about fourth quarter volumes and believes they have secured more work despite potential slowdowns [39] Question: What are your expectations for margins in 2023? - Management expects a benign compression of EBITDA margins, with a focus on managing price and cost effectively [48] Question: How do you see the impact of the backlog on residential sales? - The backlog of single-family units is expected to support residential sales into the second quarter, while multifamily units show stronger support for the full year [55] Question: What is the outlook for your commercial and industrial end markets? - Management is optimistic about strong bidding activity and backlog in these markets, expecting growth throughout the year [15]

The market for the distribution and installation of building product materials is highly fragmented and competitive. Barriers to entry for local competitors are relatively low, increasing the risk that additional competitors will emerge. Our ability to maintain our competitive position depends on a number of factors including our scale, sales channels, diversified product lines, operation capabilities and strong local presence. ● Leverage systems, management, and best practice processes across both our Inst ...