-
TopBuild Reports First Quarter 2022 Results
Source: Nasdaq GlobeNewswire / 05 May 2022 06:45:00 America/New_York
- Sales increased 57.4% to $1.2 billion, same branch revenue increased 18.7%
- Gross margin expanded 170 basis points to 28.3%, same branch gross margin expanded 290 basis points to 29.6%
- Same branch adjusted EBITDA margin expanded 310 basis points to 18.7%
Raises Revenue and Adjusted EBITDA Outlook
Announces $100 Million Accelerated Share Repurchase
DAYTONA BEACH, Fla., May 05, 2022 (GLOBE NEWSWIRE) -- TopBuild Corp. (NYSE:BLD), a leading installer and specialty distributor of insulation and building material products to the construction industry in the United States and Canada today reported results for the first quarter ended March 31, 2022.
Robert Buck, President and Chief Executive Officer, stated, “TopBuild reported another outstanding quarter, once again demonstrating the strength of our operating model. Strong demand, coupled with our ongoing focus on managing price, achieving operational efficiency improvements, and leveraging fixed costs, drove solid conversion of top line growth to the bottom line.
“We are particularly pleased with our same branch adjusted gross margin and adjusted EBITDA margin, which expanded 290 basis points and 310 basis points, respectively, from the prior year.
“In addition, the integration of Distribution International is proceeding very well and we are confident we will achieve the $35 million to $40 million of synergies per the timeline outlined at the close of the transaction in October 2021.”
First Quarter 2022 Financial Highlights
($ in 000s)(comparisons are to the quarter ended March 31, 2021)
3 Months Ended 3/31/22 Reported Change Sales $1,168,918 57.4% Gross Margin 28.3% 170 bps SG&A as % of revenue 14.3% 60 bps Operating Profit $163,954 71.0% Operating Margin 14.0% 110 bps Net Income $114,711 91.7% Net Income per diluted share $3.47 92.8% 3 Months Ended 3/31/22 Adjusted Change Sales $1,168,918 57.4% Gross Margin 28.3% 160 bps SG&A as % of revenue 14.0% 40 bps Operating Profit $167,503 72.4% Operating Margin 14.3% 120 bps Net Income $115,604 72.3% Net Income per diluted share $3.50 73.3% EBITDA $201,729 74.2% EBITDA Margin 17.3% 170 bps 3 Months Ended 3/31/22 Same Branch Change Sales $881,865 18.7% Adj. Gross Margin 29.6% 290 bps Adj. Operating Margin 16.4% 330 bps Adj. EBITDA Margin 18.7% 310 bps Incremental EBITDA 35.2% Operating Segment Highlights ($ in 000s)
(comparisons are to the quarter ended March 31, 2021)Installation 3 Months Ended 3/31/22 Specialty Distribution 3 Months Ended 3/31/22 Sales $676,693 Sales $543,862 Change Change Volume 3.0% Volume 0.0% Price 14.0% Price 22.9% M&A 10.0% M&A 93.3% Total Change 27.0% Total Change 116.2% Operating Margin 16.7% Operating Margin 12.9% Change 290 bps Change (120) bps Adj. Operating Margin 16.7% Adj. Operating Margin 13.0% Change 280 bps Change (110) bps Adj. EBITDA Margin 19.1% Adj. EBITDA Margin 15.6% Change 270 bps Change 60 bps Capital Allocation
TTM Revenue at Month Company Acquired Acquisition ($ millions) Acquired Southwest Insulation (I) $1.7 January Billings Insulation (I) $6.5 February Green Energy Solutions (I) $2.0 March Assured Insulating (I) $5.5 April Total $15.7 I = Installation
“We have acquired four residential installation companies year-to-date. We continue to look for opportunities to expand our market presence in all three end-markets we serve and generate strong returns for our shareholders.
“We are also pleased to initiate an accelerated share repurchase, demonstrating our Board’s confidence in TopBuild’s present and future business,” stated Buck.
Share Repurchases
In the first quarter, the Company repurchased 238,154 shares at an average price of $209.95 per share.Additionally, under its current $200 million share repurchase authorization, the Company intends to enter into an agreement to repurchase $100 million of its common stock under an accelerated share repurchase (ASR) program. This will be the fourth ASR the Company has undertaken since first quarter 2017. Since January 1, 2016, through March 31, 2022, the Company has repurchased approximately 6.4 million shares of its common stock for a total investment of $472.2 million.
2022 Outlook
“Our unique operating model and scale are significant competitive advantages that enable us to outperform in any environment. We are optimistic 2022 will be another strong year for TopBuild,” added Buck.
Sales and Adjusted EBITDA Guidance (*)
($ in millions)2022 Low High Sales $ 4,650 $ 4,800 Adjusted EBITDA* $ 810 $ 860 *See table for adjusted EBITDA reconciliation.
(1) This outlook reflects management’s current view of present and future market conditions and are based on assumptions such as housing starts and completions, 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 2021 Annual Report on Form 10-K and subsequent SEC reports.
Additional Information
Quarterly supplemental materials, including a presentation that will be referenced on today’s conference call, are available on the Company’s website at www.topbuild.com.
Conference Call
A conference call to discuss first quarter 2022 financial results is scheduled for today, Thursday, May 5, 2022, 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., headquartered in Daytona Beach, Florida, is a leading installer and specialty distributor of insulation and building material products to the construction industry in the United States and Canada. We provide insulation installation services nationwide through our contractor services business which has approximately 235 branches located across the United States. We distribute building and mechanical insulation, insulation accessories and other building product materials for the residential, commercial, and industrial end markets through our Specialty Distribution business. Our specialty distribution network encompasses approximately 175 branches. 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 stock repurchase transactions. 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, 2022 2021 Net sales $ 1,168,918 $ 742,798 Cost of sales 837,717 545,039 Gross profit 331,201 197,759 Selling, general, and administrative expense 167,247 101,872 Operating profit 163,954 95,887 Other income (expense), net: Interest expense (11,966 ) (6,603 ) Loss on extinguishment of debt — (13,862 ) Other, net 684 77 Other expense, net (11,282 ) (20,388 ) Income before income taxes 152,672 75,499 Income tax expense (37,961 ) (15,657 ) Net income $ 114,711 $ 59,842 Net income per common share: Basic $ 3.50 $ 1.82 Diluted $ 3.47 $ 1.80 Weighted average shares outstanding: Basic 32,738,525 32,826,515 Diluted 33,042,490 33,202,563 TopBuild Corp. Condensed Consolidated Statements of Comprehensive Income (Unaudited) (in thousands) Three Months Ended March 31, 2022 2021 Net income $ 114,711 $ 59,842 Other comprehensive income: Foreign currency translation adjustment 3,218 — Comprehensive income $ 117,929 $ 59,842 TopBuild Corp. Condensed Consolidated Balance Sheets and Other Financial Data (Unaudited) (dollars in thousands) As of March 31, 2022 December 31, 2021 ASSETS Current assets: Cash and cash equivalents $ 126,553 $ 139,779 Receivables, net of an allowance for credit losses of $10,487 at March 31, 2022, and $8,798 at December 31, 2021 735,452 668,419 Inventories, net 390,061 352,801 Prepaid expenses and other current assets 29,102 26,692 Total current assets 1,281,168 1,187,691 Right of use assets 184,762 177,177 Property and equipment, net 248,438 244,574 Goodwill 1,964,297 1,949,763 Other intangible assets, net 669,797 684,209 Deferred tax assets, net — 1,905 Other assets 13,101 13,211 Total assets $ 4,361,563 $ 4,258,530 LIABILITIES Current liabilities: Accounts payable $ 473,918 $ 461,917 Current portion of long-term debt 38,723 38,640 Accrued liabilities 207,377 175,891 Short-term operating lease liabilities 55,293 54,591 Short-term finance lease liabilities 2,610 2,387 Total current liabilities 777,921 733,426 Long-term debt 1,445,473 1,454,483 Deferred tax liabilities, net 245,674 248,243 Long-term portion of insurance reserves 53,111 51,875 Long-term operating lease liabilities 133,297 125,339 Long-term finance lease liabilities 7,631 7,770 Other liabilities 1,216 960 Total liabilities 2,664,323 2,622,096 EQUITY 1,697,240 1,636,434 Total liabilities and equity $ 4,361,563 $ 4,258,530 As of March 31, 2022 2021 Other Financial Data Receivable days 47 45 Inventory days 46 29 Accounts payable days 63 76 Receivables, net plus inventories, net less accounts payable $ 651,595 $ 296,023 Receivables, net plus inventories, net less accounts payable as a percent of sales (TTM) † 14.8 % 10.2 % † 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, 2022 2021 Cash Flows Provided by (Used in) Operating Activities: Net income $ 114,711 $ 59,842 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 30,499 15,519 Share-based compensation 3,727 3,111 Loss on extinguishment of debt — 13,862 Loss on sale of property and equipment 207 56 Amortization of debt issuance costs 706 422 Provision for bad debt expense 2,512 1,765 Loss from inventory obsolescence 868 653 Gain on foreign exchange (649 ) — Deferred income taxes, net (81 ) (183 ) Change in certain assets and liabilities Receivables, net (65,031 ) (20,831 ) Inventories, net (38,570 ) (2,088 ) Prepaid expenses and other current assets (2,347 ) 3,517 Accounts payable 12,663 (2,244 ) Accrued liabilities 29,523 16,591 Other, net 745 (570 ) Net cash provided by operating activities 89,483 89,422 Cash Flows Provided by (Used in) Investing Activities: Purchases of property and equipment (18,413 ) (12,284 ) Acquisition of businesses, net of cash acquired (13,967 ) (61,092 ) Proceeds from sale of property and equipment 253 56 Net cash used in investing activities (32,127 ) (73,320 ) Cash Flows Provided by (Used in) Financing Activities: Proceeds from issuance of long-term debt — 411,250 Repayment of long-term debt (9,634 ) (415,856 ) Payment of debt issuance costs — (6,500 ) Taxes withheld and paid on employees' equity awards (11,658 ) (11,480 ) Exercise of stock options 808 5,952 Repurchase of shares of common stock (50,000 ) (9,856 ) Payment of contingent consideration (23 ) — Net cash used in financing activities (70,507 ) (26,490 ) Impact of exchange rate changes on cash (75 ) — Net decrease in cash and cash equivalents (13,226 ) (10,388 ) Cash and cash equivalents- Beginning of period 139,779 330,007 Cash and cash equivalents- End of period $ 126,553 $ 319,619 Supplemental disclosure of cash paid for: Leased assets obtained in exchange for new operating lease liabilities $ 22,449 $ 20,322 Accruals for property and equipment 213 524 TopBuild Corp. Segment Data (Unaudited) (dollars in thousands) Three Months Ended March 31, 2022 2021 Change Installation Sales $ 676,693 $ 532,753 27.0 % Operating profit, as reported $ 112,679 $ 73,636 Operating margin, as reported 16.7 % 13.8 % Rationalization charges 473 — Acquisition related costs 80 — COVID-19 pay — 489 Operating profit, as adjusted $ 113,232 $ 74,125 Operating margin, as adjusted 16.7 % 13.9 % Share-based compensation 407 341 Depreciation and amortization 15,685 12,826 EBITDA, as adjusted $ 129,324 $ 87,292 48.2 % EBITDA margin, as adjusted 19.1 % 16.4 % Specialty Distribution Sales $ 543,862 $ 251,601 116.2 % Operating profit, as reported $ 70,420 $ 35,385 Operating margin, as reported 12.9 % 14.1 % Acquisition related costs 241 — COVID-19 pay — 34 Operating profit, as adjusted $ 70,661 $ 35,419 Operating margin, as adjusted 13.0 % 14.1 % Share-based compensation 353 243 Depreciation and amortization 14,030 2,088 EBITDA, as adjusted $ 85,044 $ 37,750 125.3 % EBITDA margin, as adjusted 15.6 % 15.0 % TopBuild Corp. Adjusted EBITDA (Unaudited) (dollars in thousands) Three Months Ended March 31, 2022 2021 Change Total net sales Sales before eliminations $ 1,220,555 $ 784,354 Intercompany eliminations (51,637 ) (41,556 ) Net sales after eliminations $ 1,168,918 $ 742,798 57.4 % Operating profit, as reported - segments $ 183,099 $ 109,021 General corporate expense, net (10,437 ) (6,606 ) Intercompany eliminations (8,708 ) (6,528 ) Operating profit, as reported $ 163,954 $ 95,887 Operating margin, as reported 14.0 % 12.9 % Rationalization charges 473 16 Acquisition related costs † 3,076 753 COVID-19 pay — 523 Operating profit, as adjusted $ 167,503 $ 97,179 Operating margin, as adjusted 14.3 % 13.1 % Share-based compensation 3,727 3,111 Depreciation and amortization 30,499 15,519 EBITDA, as adjusted $ 201,729 $ 115,809 74.2 % EBITDA margin, as adjusted 17.3 % 15.6 % Sales change period over period 426,120 EBITDA, as adjusted, change period over period 85,920 Incremental EBITDA, as adjusted, as a percentage of change in sales 20.2 % † 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, 2022 2021 Gross Profit Reconciliation Net sales $ 1,168,918 $ 742,798 Gross profit, as reported $ 331,201 $ 197,759 Acquisition related costs 121 — COVID-19 pay — 470 Gross profit, as adjusted $ 331,322 $ 198,229 Gross margin, as reported 28.3 % 26.6 % Gross margin, as adjusted 28.3 % 26.7 % Selling, General and Administrative Expense Reconciliation Selling, general, and administrative expense, as reported $ 167,247 $ 101,872 Rationalization charges 473 16 Acquisition related costs 2,955 753 COVID-19 pay — 53 Selling, general, and administrative expense, as adjusted $ 163,819 $ 101,050 Operating Profit Reconciliation Operating profit, as reported $ 163,954 $ 95,887 Rationalization charges 473 16 Acquisition related costs 3,076 753 COVID-19 pay — 523 Operating profit, as adjusted $ 167,503 $ 97,179 Operating margin, as reported 14.0 % 12.9 % Operating margin, as adjusted 14.3 % 13.1 % Income Per Common Share Reconciliation Income before income taxes, as reported $ 152,672 $ 75,499 Rationalization charges 473 16 Acquisition related costs 3,076 753 Refinancing costs and loss on extinguishment of debt — 13,862 COVID-19 pay — 523 Income before income taxes, as adjusted 156,221 90,653 Tax rate at 26.0% (40,617 ) (23,570 ) Income, as adjusted $ 115,604 $ 67,083 Income per common share, as adjusted $ 3.50 $ 2.02 Weighted average diluted common shares outstanding 33,042,490 33,202,563 TopBuild Corp. Same Branch and Acquisition Metrics (Unaudited) (dollars in thousands) Three Months Ended March 31, 2022 2021 Net sales Same branch: Installation $ 623,600 $ 532,753 Specialty Distribution 309,211 251,601 Eliminations (50,946 ) (41,556 ) Total same branch 881,865 742,798 Acquisitions (a): Installation $ 53,093 $ — Specialty Distribution 234,651 — Eliminations (691 ) — Total acquisitions 287,053 — Total $ 1,168,918 $ 742,798 Gross profit, as adjusted Same branch $ 261,115 $ 198,229 Acquisitions (a) 70,207 — Total $ 331,322 $ 198,229 Gross margin, as adjusted Same branch (b) 29.6 % 26.7 % Acquisitions (c) 24.5 % Operating profit, as adjusted Same branch $ 144,616 $ 97,179 Acquisitions (a) 22,887 — Total $ 167,503 $ 97,179 Operating margin, as adjusted Same branch (b) 16.4 % 13.1 % Acquisitions (c) 8.0 % EBITDA, as adjusted Same branch $ 164,769 $ 115,809 Acquisitions (a) 36,960 — Total $ 201,729 $ 115,809 EBITDA, as adjusted, as a percentage of sales Same branch (b) 18.7 % Acquisitions (c) 12.9 % Total (d) 17.3 % 15.6 % As Adjusted Incremental EBITDA, as a percentage of change in sales Same branch (e) 35.2 % Acquisitions (c) 12.9 % Total (f) 20.2 % (a) Represents current year impact of acquisitions in their first twelve months (b) Same branch metric, as adjusted, as a percentage of same branch sales (c) Acquired metric, 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. Reconciliation of Adjusted EBITDA to Net Income (Unaudited) (in thousands) Three Months Ended March 31, 2022 2021 Net income, as reported $ 114,711 $ 59,842 Adjustments to arrive at EBITDA, as adjusted: Interest expense and other, net 11,282 6,526 Income tax expense 37,961 15,657 Depreciation and amortization 30,499 15,519 Share-based compensation 3,727 3,111 Rationalization charges 473 16 Acquisition related costs 3,076 753 Refinancing costs and loss on extinguishment of debt — 13,862 COVID-19 pay — 523 EBITDA, as adjusted $ 201,729 $ 115,809
TopBuild Corp. Acquisition Adjusted Net Sales (Unaudited) (in thousands) 2021 2022 Trailing Twelve Months Ended Q2 Q3 Q4 Q1 March 31, 2022 Net Sales $ 834,255 $ 845,757 $ 1,063,398 $ 1,168,918 $ 3,912,328 Acquisitions proforma adjustment † 220,993 229,760 47,430 2,035 500,218 Net sales, acquisition adjusted $ 1,055,248 $ 1,075,517 $ 1,110,828 $ 1,170,953 $ 4,412,546 † Trailing 12 months sales have been adjusted for the pro forma effect of acquired branches TopBuild Corp. 2022 Estimated Adjusted EBITDA Range (Unaudited) (in millions) Twelve Months Ending December 31, 2022 Low High Estimated net income $ 447.6 495.4 Adjustments to arrive at estimated EBITDA, as adjusted: Interest expense and other, net 56.0 52.0 Income tax expense 157.3 174.1 Depreciation and amortization 126.1 121.0 Share-based compensation 13.0 10.5 Rationalization charges 2.0 1.0 Acquisition related costs 8.0 6.0 Estimated EBITDA, as adjusted $ 810.0 $ 860.0 
