TopBuild Q1 Earnings Top, Sales Miss Expectations, Both Down Y/Y

Core Viewpoint - TopBuild Corp. reported mixed results for Q1 2025, with adjusted earnings exceeding estimates while net sales fell short, reflecting a year-over-year decline in both metrics [1][4]. Financial Performance - Adjusted EPS was $4.63, surpassing the Zacks Consensus Estimate of $4.43 by 4.5%, but down from $4.81 in the previous year [4]. - Net sales reached $1.23 billion, missing the consensus mark of $1.24 billion by 0.6% and declining 3.6% year over year [4]. - M&A contributed a 2.6% increase in sales, while prices rose by 1.2%, but volume decreased by 7.4% [4]. Segment Performance - Installation Segment: - Accounted for 57.1% of total net sales, with net sales of $745.5 million, down 6.7% year over year. M&A contributed 1.8% and pricing added 1.1%, while volume declined by 9.6% [5]. - Adjusted operating margin contracted by 110 basis points to 18.5% [5]. - Specialty Distribution Segment: - Represented 42.9% of total net sales, with net sales rising 2.6% year over year to $559.8 million. M&A contributed 3.4% and pricing added 1.4%, while volume decreased by 2.2% [6]. - Adjusted operating margin reduced by 50 basis points to 13.6% [7]. Operating Highlights - Adjusted gross margin contracted by 70 basis points to 29.6% [8]. - Adjusted SG&A expenses as a percentage of sales increased by 40 basis points to 13.9% [8]. - Adjusted EBITDA fell 7.5% year over year to $234.8 million, with the adjusted EBITDA margin contracting by 80 basis points to 19% [8]. Financial Position - As of March 31, 2025, cash and cash equivalents were $308.8 million, down from $400.3 million at the end of 2024 [9]. - Long-term debt was $1.31 billion, a decrease from $1.33 billion at the end of 2024 [9]. - Net cash provided by operations was $152.6 million, down from $178.8 million a year ago [9]. - The company repurchased 693,881 shares for a total of $215.6 million during the quarter [9]. Strategic Moves - In April 2025, TopBuild completed the acquisition of Seal-Rite Insulation, which generates approximately $15 million in annual revenues, aimed at expanding its market base [10]. Guidance - TopBuild expects net sales for the full year to be between $5.05 billion and $5.35 billion, compared to $5.33 billion reported last year [11]. - Adjusted EBITDA is projected to be between $925 million and $1.075 billion, compared to $725.8 million in 2024 [11]. - Residential sales are expected to decline in the high-single digits, while Commercial/Industrial sales are anticipated to grow in the low-single digits [11]. - M&As are expected to contribute about $85 million to full-year net sales [12].