TopBuild (NYSE:BLD) Q3 2025 Earnings Call November 04, 2025 09:00 AM ET Company ParticipantsStephen Kim - Senior Managing DirectorMichael Rehaut - Executive DirectorRobert Buck - President and CEOPhil Ng - Managing DirectorPI Aquino - VP of Investor RelationsRob Kuhns - CFOKeith Hughes - Managing DirectorJeffrey Stevenson - VP of Equity DivisionConference Call ParticipantsKen Zener - Senior Equity Research AnalystKurt Yinger - SVP and Research AnalystSusan Maklari - Senior Equity Research AnalystCollin Verr ...

TopBuild (NYSE:BLD) Q3 2025 Earnings Call November 04, 2025 09:00 AM ET Speaker5Greetings and welcome to TopBuild's third quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce P.I. Aquino, Vice President, Investor Relation ...

Financial Data and Key Metrics Changes - Total sales grew by 1.4% to $1,400,000,000, driven by M&A contributions of 7.9% and pricing increases of 0.3%, partially offset by a volume decline of 6.7% [9][14][21] - Adjusted EBITDA for the third quarter totaled $275,600,000, with an adjusted EBITDA margin of 19.8%, down 100 basis points compared to the previous year [17][19] - Adjusted earnings per diluted share were $5.36, compared to $5.68 in the previous year [19] Business Line Data and Key Metrics Changes - Installation services segment sales totaled $858,300,000, up 0.2%, with M&A contributing 11%, offset by a volume decline of 10.4% and a pricing decrease of 0.5% [14][15] - Specialty distribution sales grew by 1.4% to $608,900,000, driven by acquisitions of 2.3% and pricing of 1.2%, partially offset by a volume decline of 2.1% [15][16] - Adjusted gross profit in the third quarter was 30.1%, compared to 30.7% last year [15] Market Data and Key Metrics Changes - The residential new construction market remains weak, but growth in heavy commercial and industrial sectors is ongoing [9][10] - The company expects residential sales to decline in low double digits for the year, while commercial and industrial sales are expected to be flattish [21][22] Company Strategy and Development Direction - The company is focused on M&A as a top capital allocation priority, with expectations of delivering $35,000,000 to $40,000,000 in annual run rate synergies from recent acquisitions over the next two years [6][10][20] - The total addressable market has expanded to approximately $90,000,000,000, with a strategy for continued growth both organically and through M&A [12][21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term opportunity in the U.S. housing market despite current challenges, citing underbuilding as a fundamental issue [9][10] - The company anticipates continued mixed economic signals and affordability concerns impacting consumer confidence and home buying decisions [10][22] Other Important Information - The company repurchased nearly 178,000 shares, returning $65,500,000 in capital to shareholders [10][21] - The company plans to host an Investor Day on December 9, where it will discuss its differentiated business model and growth strategy [11][25] Q&A Session Summary Question: Sales contribution from Progressive Roofing and full-year expectations - The total contribution from Progressive Roofing in the quarter was about $92,000,000, with a revised expectation of approximately $205,000,000 for the full year due to project delays [28][29] Question: Insights on recent acquisitions - The acquisitions were strategic to enhance product offerings and customer relationships, particularly in insulated door systems and insulation accessories [31][34] Question: Pricing pressures and insulation pricing trends - The company anticipates a $30,000,000 headwind from pricing pressures, with negative impacts primarily on residential products [40][41] Question: Outlook for residential and commercial markets - The residential market is expected to remain weak, while there are signs of improvement in multifamily backlogs [46][48] Question: Competitive dynamics in residential installation - Increased competitiveness in slower markets has been noted, but the company maintains strong relationships with builders to manage pricing and volume effectively [104][106]

Financial Data and Key Metrics Changes - Total sales in Q2 2025 declined by 5% to $1,300,000,000, with volume down 7.8%, partially offset by M&A contributing 1.9% and pricing contributing 0.9% [13][14] - Adjusted EBITDA for Q2 was $261,300,000, representing a margin of 20.1%, which improved by 110 basis points from Q1 and was down only 20 basis points year-over-year [15][16] - Adjusted earnings per diluted share were $5.31, compared to $5.42 in the previous year [17] Business Line Data and Key Metrics Changes - Installation segment sales totaled $780,700,000, down 8.3%, driven by a 10.5% volume decline, partially offset by acquisitions and pricing [14] - Specialty distribution sales improved by 1.1% to $599,200,000, with acquisitions growing sales by 2.3% and pricing adding 0.8% [14][15] - Adjusted EBITDA margin for the installation segment was 22.3%, up 120 basis points sequentially and flat year-over-year [16] Market Data and Key Metrics Changes - The residential new construction market remained weak, with single-family demand sliding further year-over-year [6][7] - Heavy commercial and industrial sectors showed growth, particularly in technology, education, and healthcare [6][14] - The company noted a mixed economic environment affecting consumer confidence, particularly in the housing market [6][7] Company Strategy and Development Direction - The acquisition of Progressive Roofing aims to establish a new growth platform in the $75 billion commercial roofing services market, enhancing service offerings and exposure to non-cyclical revenue [4][5] - The company has diversified its business, with commercial and industrial sales now accounting for approximately 40% of total sales, up from 15% in 2015 [10] - The total addressable market for insulation and commercial roofing is nearly $95 billion, indicating significant growth opportunities [11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the underlying fundamentals of the business, emphasizing the ability to adjust operations as demand changes [24] - The company anticipates continued challenges in the residential market, projecting low double-digit declines in residential sales for the year [21][33] - Management highlighted a robust pipeline of acquisition candidates and remains disciplined around valuation to drive shareholder returns [7][20] Other Important Information - The company repurchased approximately 455,000 shares, returning $136,000,000 to shareholders in Q2 [8][20] - Total liquidity at the end of Q2 was $1,800,000,000, with total debt at $2,400,000,000 [17][18] Q&A Session Summary Question: Impact of Progressive on margins and future contributions - Management indicated that Progressive is expected to contribute approximately $215,000,000 in incremental sales, with EBITDA around 20%, not significantly dilutive to current margins [27][28] Question: Details on residential market softness - Management noted that the residential market is primarily affected by single-family construction, with light commercial also facing challenges, while heavy commercial remains strong [31][33] Question: Pricing and cost dynamics - Management acknowledged a $30,000,000 headwind in the second half due to pricing pressures, particularly in the residential distribution side, while maintaining solid pricing in commercial products [55][56] Question: Outlook for M&A in commercial roofing - Management expressed optimism about the M&A pipeline in commercial roofing, with several larger deals anticipated and a disciplined approach to acquisitions [99][100] Question: Staffing adjustments in response to market conditions - Management confirmed that they have calibrated staffing levels appropriately and will continue to monitor the situation as market conditions evolve [91][93]