TopBuild(BLD) - 2023 Q4 - Annual Results

Company Overview & Performance Highlights This section introduces TopBuild Corp., detailing its business profile and highlighting key financial achievements for the fourth quarter and full fiscal year 2023 Company Profile TopBuild Corp. is a leading installer and specialty distributor of insulation and related building products, operating through extensive installation and specialty distribution networks - TopBuild Corp. is a leading installer and specialty distributor of insulation and related building products in the U.S. and Canadian construction industries[1][21][43] - The company operates through an installation segment with approximately 240 branches and a specialty distribution segment with approximately 170 branches[21] Fourth Quarter 2023 Performance Highlights TopBuild achieved sales and profitability growth in Q4 2023, with sales increasing by 1.7% to $1.3 billion, alongside improvements in gross and adjusted EBITDA margins 2023 Fourth Quarter Key Financial Metrics (Reported) | Metric | Amount/Percentage | Change | |---|---|---| 2023 Fourth Quarter Key Financial Metrics (Adjusted) | Metric | Amount/Percentage | Change | |---|---|---| - Sales increased by 1.7% to $1.3 billion[1] - Gross margin expanded by 70 basis points to 30.4%[1] - Adjusted EBITDA margin expanded by 80 basis points to 19.6%[1] Full Year 2023 Performance Highlights For fiscal year 2023, TopBuild delivered robust sales growth and significant margin expansion, with sales up 3.7% to $5.2 billion and adjusted EBITDA margin expanding by 140 basis points to 20.2% 2023 Full Year Key Financial Metrics (Reported) | Metric | Amount/Percentage | Change | |---|---|---| 2023 Full Year Key Financial Metrics (Adjusted) | Metric | Amount/Percentage | Change | |---|---|---| - Sales increased by 3.7% to $5.2 billion[12] - Gross margin expanded by 120 basis points to 30.9%[12] - Adjusted EBITDA margin expanded by 140 basis points to 20.2%[12] Financial Performance Analysis This section analyzes TopBuild's consolidated and segment financial results, including balance sheet and cash flow, for 2023 Consolidated Financial Results TopBuild achieved sales and net income growth in both Q4 and full-year 2023, demonstrating stronger operational efficiency and profitability through adjusted financial metrics Fourth Quarter 2023 Financials (Reported & Adjusted) Q4 reported sales were $1.286 billion with net income of $146 million, while adjusted sales and net income grew, leading to an adjusted EBITDA margin of 19.6% Consolidated Statements of Operations Summary for Q4 2023 (Reported) | Metric | Three Months Ended December 31, 2023 (in thousands of dollars) | Three Months Ended December 31, 2022 (in thousands of dollars) | |---|---|---| Key Adjusted Financial Metrics for Q4 2023 | Metric | Three Months Ended December 31, 2023 (in thousands of dollars) | Three Months Ended December 31, 2022 (in thousands of dollars) | Change Rate | |---|---|---|---| - Fourth quarter adjusted net income was $149.3 million, a 6.6% year-over-year increase[1] - Adjusted diluted earnings per share was $4.69, a 6.6% year-over-year increase[1] Full Year 2023 Financials (Reported & Adjusted) FY 2023 reported sales were $5.195 billion with net income of $614 million, showing significant growth in adjusted sales and net income, and an adjusted EBITDA margin of 20.2% Consolidated Statements of Operations Summary for FY 2023 (Reported) | Metric | Year Ended December 31, 2023 (in thousands of dollars) | Year Ended December 31, 2022 (in thousands of dollars) | |---|---|---| Key Adjusted Financial Metrics for FY 2023 | Metric | Year Ended December 31, 2023 (in thousands of dollars) | Year Ended December 31, 2022 (in thousands of dollars) | Change Rate | |---|---|---|---| - Fiscal year 2023 adjusted net income was $626.9 million, a 13.0% year-over-year increase[3] - Adjusted diluted earnings per share was $19.73, a 15.3% year-over-year increase[3] Segment Performance Both installation and specialty distribution segments achieved adjusted operating and EBITDA margin growth in Q4 and full-year 2023, with the installation segment showing particularly strong performance Installation Segment The installation segment saw sales grow 3.8% in Q4 and 7.3% for the full year, with adjusted EBITDA margins reaching 21.4% in Q4 and 22.5% for the full year Installation Segment Performance (Q4 2023 & Full Year) | Metric | Q4 2023 | Change | FY 2023 | Change | |---|---|---|---|---| - Fourth quarter sales increased by 3.8%, primarily driven by acquisitions (5.1%) and price (2.4%), with volume decreasing by 3.0%[4] - Full-year sales increased by 7.3%, primarily driven by price (3.6%) and acquisitions (3.6%), with volume increasing by 0.4%[4] Specialty Distribution Segment The specialty distribution segment's sales slightly increased by 0.2% in Q4 and decreased by 0.4% for the full year, but adjusted EBITDA margins reached 17.5% in Q4 and 17.3% for the full year Specialty Distribution Segment Performance (Q4 2023 & Full Year) | Metric | Q4 2023 | Change | FY 2023 | Change | |---|---|---|---|---| - Fourth quarter sales increased by 0.2%, primarily driven by price (0.5%), with volume decreasing by 0.2%[4] - Full-year sales decreased by 0.4%, primarily due to a 1.6% decrease in volume, offset by a 1.1% increase in price[4] Net Sales by Market Both residential and commercial/industrial markets contributed to sales in Q4 and full-year 2023, with the residential market accounting for a larger share of sales Net Sales by Market (Q4 2023 & Full Year) | Market | Q4 2023 (in thousands of dollars) | Q4 2022 (in thousands of dollars) | FY 2023 (in thousands of dollars) | FY 2022 (in thousands of dollars) | |---|---|---|---|---| - Fiscal year 2023 residential market sales were $3.35 billion, and commercial/industrial market sales were $1.845 billion[67] Balance Sheet & Cash Flow As of December 31, 2023, total assets increased to $5.163 billion, with a significant rise in cash and cash equivalents, strong operating cash flow, and investment activities primarily focused on business acquisitions Consolidated Balance Sheet Summary (As of December 31, 2023) | Metric | December 31, 2023 (in thousands of dollars) | December 31, 2022 (in thousands of dollars) | |---|---|---| Consolidated Statements of Cash Flows Summary (FY 2023) | Cash Flow Type | FY 2023 (in thousands of dollars) | FY 2022 (in thousands of dollars) | |---|---|---| - As of December 31, 2023, cash and cash equivalents increased to $848.6 million, a significant increase from $240.1 million at the end of 2022[28] - Net cash provided by operating activities for FY 2023 was $849.4 million, a significant increase from $495.8 million in FY 2022[29] - Net cash used in investing activities for FY 2023 was $198.2 million, primarily for business acquisitions totaling $149.2 million[29] Strategic Initiatives & Outlook This section outlines TopBuild's capital allocation strategy, including acquisitions, and provides the financial outlook and key assumptions for fiscal year 2024 Capital Allocation & Acquisitions TopBuild views acquisitions as the optimal capital allocation strategy, completing four residential insulation installation company acquisitions in 2023, expected to generate over $172 million in annual revenue, with further acquisitions in early 2024 - The company considers acquisitions the optimal capital allocation strategy, delivering strong returns for shareholders[17] Acquisitions Completed in 2023 | Acquired Company | TTM Revenue at Acquisition (in millions of dollars) | Acquisition Month | |---|---|---| - The four residential insulation installation companies acquired in 2023 are expected to generate over $172 million in annual revenue[16] - In early 2024, TopBuild acquired Brabble Insulation and entered into agreements to acquire Morris Black & Sons and Pest Control Insulation, collectively expected to generate approximately $33 million in annual revenue[17][40] FY 2024 Financial Outlook TopBuild projects 2024 sales between $5.36 billion and $5.56 billion, with adjusted EBITDA expected to range from $1.04 billion to $1.13 billion, reflecting confidence in future growth 2024 Sales and Adjusted EBITDA Guidance | Metric | Low Value (in millions of dollars) | High Value (in millions of dollars) | |---|---|---| - Expected 2024 sales are between $5.36 billion and $5.56 billion[41] - Expected 2024 adjusted EBITDA is between $1.04 billion and $1.13 billion[41] 2024 Key Assumptions The company's 2024 outlook is based on assumptions including mid-single-digit revenue growth in residential and commercial/industrial markets, capital expenditures of 1.5% to 2.0% of sales, and an income tax rate of 25% to 27% Key Assumptions for 2024 | Assumption | Range/Target | |---|---| - Residential and commercial/industrial revenue is expected to achieve mid-single-digit growth[6] - Capital expenditures are projected to be 1.5% to 2.0% of sales[6] - The income tax rate is expected to be between 25% and 27%[6] Additional Information & Disclosures This section provides details on the conference call, the use of non-GAAP financial measures, a safe harbor statement, and investor relations contact information Conference Call Information The company held a conference call on February 28, 2024, to discuss Q4 2023 financial results, with details provided for webcast access and related materials - A conference call to discuss Q4 2023 financial results was held on February 28, 2024, at 9:00 AM ET[8][20] - The conference call was accessible by dialing (877) 407-9037 and simultaneously webcast on the company's website at www.topbuild.com[8](index=8&type=chunk) Use of Non-GAAP Financial Measures The company utilizes non-GAAP financial measures like adjusted EBITDA and incremental EBITDA margin to manage its business and provide additional meaningful comparisons to historical performance, emphasizing their supplementary role to GAAP results - The company uses non-GAAP financial measures, such as adjusted EBITDA and incremental EBITDA margin, to manage its business and provide additional meaningful comparisons to historical performance[9][69] - Non-GAAP financial measures have been reconciled to the most directly comparable GAAP financial measures in tables within the press release[9] - Non-GAAP financial measures should be considered supplementary to, and not a substitute for, the company's GAAP reported results[9] Safe Harbor Statement This press release contains forward-looking statements regarding expected financial and operational results, which involve risks and uncertainties that could cause actual results to differ materially - This press release contains "forward-looking statements" as defined by the Private Securities Litigation Reform Act[22][45] - These forward-looking statements involve the company's expected financial and operational results but are subject to unpredictable risks and uncertainties, where actual results may differ materially from those discussed[45] - The company undertakes no obligation to update any forward-looking statements due to new information, future events, or otherwise, unless required by applicable law[45] Investor Relations and Media Contact Investors and media can contact Tabitha Zane for further information - Investor Relations and Media Contact: Tabitha Zane, email: tabitha.zane@topbuild.com, phone: 386-763-8801[10] Detailed Financial Statements & Reconciliations This section provides comprehensive GAAP financial statements and non-GAAP reconciliations for TopBuild Corp.'s performance in 2023 Consolidated Statements of Operations This section provides TopBuild Corp.'s consolidated statements of operations for Q4 and full-year 2023 compared to 2022, detailing key financial data such as net sales, cost of sales, gross profit, operating profit, and net income Consolidated Statements of Operations (Q4 2023 & Full Year) | Metric (in thousands of dollars) | Q4 2023 | Q4 2022 | FY 2023 | FY 2022 | |---|---|---|---|---| Consolidated Statements of Comprehensive Income This section presents TopBuild Corp.'s consolidated statements of comprehensive income for Q4 and full-year 2023 compared to 2022, including net income and other comprehensive income items like foreign currency translation adjustments Consolidated Statements of Comprehensive Income (Q4 2023 & Full Year) | Metric (in thousands of dollars) | Q4 2023 | Q4 2022 | FY 2023 | FY 2022 | |---|---|---|---|---| Consolidated Balance Sheets This section provides the consolidated balance sheets as of December 31, 2023, and December 31, 2022, detailing the company's assets, liabilities, and stockholders' equity Consolidated Balance Sheets (As of December 31, 2023) | Metric (in thousands of dollars) | December 31, 2023 | December 31, 2022 | |---|---|---| Other Financial Data (As of December 31, 2023) | Metric | 2023 | 2022 | |---|---|---| Consolidated Statements of Cash Flows This section presents TopBuild Corp.'s consolidated statements of cash flows for FY 2023 and FY 2022, detailing cash flows from operating, investing, and financing activities Consolidated Statements of Cash Flows (FY 2023) | Cash Flow Type (in thousands of dollars) | FY 2023 | FY 2022 | |---|---|---| Segment Data (Unaudited) This section provides unaudited segment data for the installation and specialty distribution businesses, including sales, operating profit, and adjusted EBITDA, with comparisons to prior periods Installation Segment Data (Q4 2023 & Full Year) | Metric (in thousands of dollars) | Q4 2023 | Q4 2022 | Change | FY 2023 | FY 2022 | Change | |---|---|---|---|---|---|---| Specialty Distribution Segment Data (Q4 2023 & Full Year) | Metric (in thousands of dollars) | Q4 2023 | Q4 2022 | Change | FY 2023 | FY 2022 | Change | |---|---|---|---|---|---|---| Non-GAAP Reconciliations This section provides reconciliation tables for several non-GAAP financial measures to the most directly comparable GAAP financial measures, including adjusted EBITDA, gross profit, SG&A expenses, operating profit, income per common share, and acquisition-adjusted net sales Adjusted EBITDA Reconciliation This reconciliation details the calculation from net income to adjusted EBITDA, including interest expense, income tax expense, depreciation and amortization, share-based compensation, rationalization expenses, and acquisition-related costs Adjusted EBITDA Reconciliation (Q4 2023 & Full Year) | Metric (in thousands of dollars) | Q4 2023 | Q4 2022 | FY 2023 | FY 2022 | |---|---|---|---|---| Gross Profit Reconciliation This reconciliation shows the difference between reported and adjusted gross profit, primarily involving adjustments for acquisition-related costs Gross Profit Reconciliation (Q4 2023 & Full Year) | Metric (in thousands of dollars) | Q4 2023 | Q4 2022 | FY 2023 | FY 2022 | |---|---|---|---|---| Selling, General, and Administrative Expense Reconciliation This reconciliation shows the difference between reported and adjusted selling, general, and administrative expenses, primarily including adjustments for rationalization and acquisition-related costs Selling, General, and Administrative Expense Reconciliation (Q4 2023 & Full Year) | Metric (in thousands of dollars) | Q4 2023 | Q4 2022 | FY 2023 | FY 2022 | |---|---|---|---|---| Operating Profit Reconciliation This reconciliation shows the difference between reported and adjusted operating profit, primarily involving adjustments for rationalization and acquisition-related costs Operating Profit Reconciliation (Q4 2023 & Full Year) | Metric (in thousands of dollars) | Q4 2023 | Q4 2022 | FY 2023 | FY 2022 | |---|---|---|---|---| Income Per Common Share Reconciliation This reconciliation shows the difference between reported and adjusted pre-tax income and adjusted earnings per share, primarily involving adjustments for rationalization and acquisition-related costs Income Per Common Share Reconciliation (Q4 2023 & Full Year) | Metric (in thousands of dollars) | Q4 2023 | Q4 2022 | FY 2023 | FY 2022 | |---|---|---|---|---| Acquisition Adjusted Net Sales This section provides net sales by quarter and pro forma adjustments for acquisitions to illustrate the full impact of acquisitions on sales Acquisition Adjusted Net Sales (Q1-Q4 2023 & Full Year) | Metric (in thousands of dollars) | Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 | FY 2023 | |---|---|---|---|---|---| Same Branch vs. Acquisitions/Dispositions Analysis This section analyzes the contributions of same-branch sales, acquisitions, and dispositions to total net sales and adjusted EBITDA, offering detailed insights into performance drivers Net Sales by Same Branch, Acquisitions, and Dispositions (Q4 2023 & Full Year) | Category (in thousands of dollars) | Q4 2023 | Q4 2022 | FY 2023 | FY 2022 | |---|---|---|---|---| Adjusted EBITDA by Same Branch, Acquisitions, and Dispositions (Q4 2023 & Full Year) | Category (in thousands of dollars) | Q4 2023 | Q4 2022 | FY 2023 | FY 2022 | |---|---|---|---|---|