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CST: 25/05/2019 18:35:06   

TopBuild Reports First Quarter 2019 Results

18 Days ago

  • Net sales increased 26.0%
  • Gross margin expanded 250 basis points
  • 9.1% operating margin, 9.5% on an adjusted basis, up 170 basis points
  • Adjusted EBITDA increased 62.0%, adjusted EBITDA margin up 260 basis points
  • $1.09 net income per diluted share, $1.06 on an adjusted basis

Raises 2019 Revenue and EBITDA Outlook

DAYTONA BEACH, Fla., May 07, 2019 (GLOBE NEWSWIRE) -- TopBuild Corp.(NYSE:BLD), a leading installer and distributor of insulation and building material products today reported results for the first quarter ended March 31, 2019. 

Jerry Volas, Chief Executive Officer, stated, “The strength and diversity of the TopBuild operating model produced another outstanding quarter, in both sales and earnings.  Our residential business was solid and our commercial business outperformed expectations.  Our ongoing focus on operational efficiency improvements and fixed cost leveraging drove strong conversion of top line growth, both organic and through acquisitions, to the bottom line.

“We are optimistic 2019 will be another strong year for TopBuild.”

First Quarter Financial Highlights
(unless otherwise indicated, comparisons are to the quarter ended March 31, 2018)

  • Net Sales increased 26.0% to $619.3 million, primarily driven by acquisitions, price increases and sales volume growth at TruTeam. Of the 26.0% revenue growth, same branch sales contributed 7.1%. 
     
  • Gross margin increased 250 basis points to 25.1%.
     
  • Operating profit was $56.6 million, compared to $33.9 million, a 67.0% increase.  On an adjusted basis, operating profit was $59.1 million, compared to $38.2 million, a 54.8% improvement.
     
  • Operating margin was 9.1% compared to 6.9%.  Adjusted operating margin improved 170 basis points to 9.5%. 
     
  • Net income was $38.0 million, or $1.09 per diluted share, compared to net income of $26.4 million or $0.74 per diluted share. 
     
  • Adjusted net income was $36.6 million, or $1.06 per diluted share, compared to $26.2 million, or $0.73 per diluted share. 
     
  • Adjusted EBITDA was $74.5 million, compared to $46.0 million, a 62.0% increase and adjusted EBITDA margin improved 260 basis points to 12.0%.  Incremental adjusted EBITDA margin was 22.3%.
     
  • On a same branch basis, adjusted EBITDA was $57.2 million, a 24.3% increase, and incremental adjusted EBITDA margin was 32.2%.
     
  • Acquisitions contributed $93.2 million of revenue.  Incremental adjusted EBITDA related to these acquisitions was 18.6%.
     
  • At March 31, 2019, the Company had cash and cash equivalents of $98.3 million and availability under the revolving credit facility of $182.7 million for total liquidity of $281.0 million.

Operating Segment Highlights ($ in 000s)
(comparisons are to the period ended March 31, 2018)

             
TruTeam 3 Months
Ended
3/31/19
  Service Partners 3 Months
Ended
3/31/19
Sales $449,383     Sales $204,464  
Change     Change  
Price 6.1 %   Price 6.8 %
Volume 4.4 %   Volume -2.4 %
M&A 26.0 %   M&A 4.5 %
Total Change 36.4 %   Total Change 8.9 %
Operating Margin 11.4 %   Operating Margin 10.1 %
Change 250  bps   Change 60  bps
Adj. Operating Margin 11.5 %   Adj. Operating Margin 10.1 %
Change 250  bps   Change 60  bps
             

 

Capital Allocation
Volas stated, “Since 2016, we have acquired ten companies generating over $500 million of annual revenue and they are performing above our expectations.  Identifying, executing and integrating acquisitions has become a core competency for TopBuild.  Acquisitions remain our number one capital allocation priority and we have a robust pipeline of prospects we are currently evaluating.  In addition, we have a $200 million share repurchase authorization in place.”

Share Repurchases
The Company completed the $50 million accelerated share repurchase program announced on November 6, 2018.  Under the terms of the program, the Company repurchased a total of 973,252 shares of the Company’s common stock at an average price of $51.37 per share.  In addition, in the first quarter the Company repurchased an additional 72,791 shares at an average price of $63.49 per share.  These shares were purchased as part of the Company’s $200 million share repurchase program announced on February 26, 2019.  As of March 31, 2019, approximately $195.4 million of the $200 million authorization remained.

2019 Revenue and Adjusted EBITDA Outlook
The Company has raised the low end of revenue and adjusted EBITDA guidance by $40 million and $20 million, respectively, and the high end of revenue and adjusted EBITDA guidance by $35 million and $20 million, respectively. 

 
2019 Low High
Revenue $2,610M $2,670M
Adjusted EBITDA* $330M $350M
 

*See table below for adjusted EBITDA reconciliation

Assumptions ($ in millions)

 
2019 Low High
Housing Starts 1,260K 1,300K
Adjusted net income $ 160.1 $ 183.0
Interest Expense and other, net $ 38.9 $ 35.9
Income tax expense $ 57.7 $ 66.0
Depreciation and Amortization $ 54.0 $ 50.0
Share based compensation $ 14.6 $ 12.1
         

This outlook reflects management’s current view of present and future market conditions and is based on assumptions such as housing starts, general and administrative expenses, weighted average diluted shares outstanding and interest rates.  This outlook does not include any effects related to potential acquisitions or divestitures that may occur after the date of this press release.  Factors that could cause actual 2019 results to differ materially from TopBuild’s current expectations are discussed below and are also detailed in the Company’s 2018 Annual Report on Form 10-K and subsequent SEC reports. 

2019 ENERGY STAR® Partner of the Year Sustained Excellence Award Received
TopBuild Home Services Group received the 2019 ENERGY STAR® Partner of the Year Sustained Excellence Award for continued leadership and superior contributions to ENERGY STAR.  TopBuild’s accomplishment was recognized by the U.S. Environmental Protection Agency and the U.S. Department of Energy in Washington, D.C. on April 11, 2019.  The Company’s extensively trained Home Energy Raters provide the evaluation, testing and independent verification required to be considered an ENERGY STAR compliant home. 

“We are honored to once again be recognized for our leadership role in verifying ENERGY STAR compliant homes. TopBuild Home Services has been an ENERGY STAR partner for 17 years, working closely with home builders and consumers to create homes that are more comfortable and energy efficient,” added Volas.

Additional Information
Quarterly supplemental materials, including a presentation that will be referenced on today’s conference call, are available on the “Investors” section of the Company’s website at www.topbuild.com.

Conference Call
A conference call to discuss first quarter 2019 financial results is scheduled for today, Tuesday, May 7, 2019, at 9:00 a.m. Eastern Time.  The call may be accessed by dialing (888) 225-2706.  The conference call will be webcast simultaneously on the “Investors” section of the Company’s website at www.topbuild.com.  

About TopBuild
TopBuild Corp., headquartered in Daytona Beach, Florida, is a leading installer and distributor of insulation and building material products to the U.S. construction industry. We provide insulation and building material services nationwide through TruTeam®, which has over 200 branches, and through Service Partners® which distributes insulation and building material products from over 75 branches.  We leverage our national footprint to gain economies of scale while capitalizing on our local market presence to forge strong relationships with our customers.  To learn more about TopBuild please visit our website at www.topbuild.com.

Use of Non-GAAP Financial Measures
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 “Investors” 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 and the related assumptions underlying our expected results.  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 publicly 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, 
 
  2019   2018
 
Net sales $ 619,330     $ 491,444    
Cost of sales   463,635       380,426    
Gross profit   155,695       111,018    
           
Selling, general, and administrative expense   99,077       77,125    
Operating profit   56,618       33,893    
           
Other income (expense), net:          
Interest expense   (9,602 )     (2,324 )  
Other, net   333       34    
Other expense, net   (9,269 )     (2,290 )  
Income before income taxes   47,349       31,603    
           
Income tax expense   (9,366 )     (5,215 )  
Net income $ 37,983     $ 26,388    
               
Net income per common share:          
Basic $ 1.11     $ 0.75    
Diluted $ 1.09     $ 0.74    
           
Weighted average shares outstanding:          
Basic   34,169,315       35,059,920    
Diluted   34,703,289       35,819,242    
 

 

                 
TopBuild Corp.                
Condensed Consolidated Balance Sheets and Other Financial Data (Unaudited)                
(dollars in thousands)                
   
  As of
 
  March 31,   December 31,
 
  2019   2018
 
ASSETS                
Current assets:                
Cash and cash equivalents $ 98,278     $ 100,929    
Receivables, net of an allowance for doubtful accounts of $4,753 and $3,676 at March 31, 2019, and December 31, 2018, respectively   428,713       407,106    
Inventories, net   160,689       168,977    
Prepaid expenses and other current assets   16,494       27,685    
Total current assets   704,174       704,697    
                 
Right of use assets   94,222          
Property and equipment, net   169,891       167,961    
Goodwill   1,363,292       1,364,016    
Other intangible assets, net   194,214       199,387    
Deferred tax assets, net   11,875       13,176    
Other assets   5,159       5,294    
Total assets $ 2,542,827     $ 2,454,531    
                 
LIABILITIES                
Current liabilities:                
Accounts payable $ 281,346     $ 313,172    
Current portion of long-term debt   29,091       26,852    
Accrued liabilities   103,412       104,236    
Short-term lease liabilities   37,501          
Total current liabilities   451,350       444,260    
                 
Long-term debt   709,172       716,622    
Deferred tax liabilities, net   174,227       176,212    
Long-term portion of insurance reserves   43,935       43,434    
Long-term lease liabilities   59,750          
Other liabilities   1,540       1,905    
Total liabilities   1,439,974       1,382,433    
                 
EQUITY   1,102,853       1,072,098    
Total liabilities and equity $ 2,542,827     $ 2,454,531    
                 
                 
  As of
 
  March 31,   March 31,
 
  2019   2018
 
Other Financial Data                
Receivable days †   53       49    
Inventory days †   31       34    
Accounts payable days †   80       80    
Receivables, net plus inventories, net less accounts payable † $ 308,056     $ 197,631    
Receivables, net plus inventories, net less accounts payable as a percent of sales (TTM)‡   12.1   %   10.0   %
                 
† Adjusted for remaining acquisition day one balance sheet items.                
‡ Trailing 12 months sales have been adjusted for the pro forma effect of acquired branches.                
                 

 

           
TopBuild Corp.          
Condensed Consolidated Statements of Cash Flows (Unaudited)          
(dollars in thousands)          
           
           
  Three Months Ended March 31,
 
  2019   2018
 
Cash Flows Provided by (Used in) Operating Activities:              
Net income $ 37,983     $ 26,388    
Adjustments to reconcile net income to net cash provided by operating activities:          
Depreciation and amortization   12,475       5,442    
Share-based compensation   2,972       2,402    
Loss on sale or abandonment of property and equipment   487       200    
Amortization of debt issuance costs   390       107    
Change in fair value of contingent consideration   44       70    
Provision for bad debt expense   1,676       760    
Loss from inventory obsolescence   1,109       468    
Deferred income taxes, net   95          
Change in certain assets and liabilities          
Receivables, net   (23,341 )     (1,092 )  
Inventories, net   7,125       (5,143 )  
Prepaid expenses and other current assets   11,192       3,912    
Accounts payable   (31,407 )     (11,429 )  
Accrued liabilities   2,100       (3,923 )  
Other, net   622       (597 )  
Net cash provided by operating activities   23,522       17,565    
               
Cash Flows Provided by (Used in) Investing Activities:          
Purchases of property and equipment   (10,213 )     (11,266 )  
Acquisition of businesses, net of cash acquired of $239 in 2018         (26,956 )  
Proceeds from sale of property and equipment   75       70    
Other, net   16       13    
Net cash used in investing activities   (10,122 )     (38,139 )  
               
Cash Flows Provided by (Used in) Financing Activities:          
Proceeds from issuance of long-term debt         10,066    
Repayment of long-term debt   (5,601 )     (3,125 )  
Payment of debt issuance costs         (1,040 )  
Proceeds from revolving credit facility         55,000    
Repayment of revolving credit facility         (55,000 )  
Taxes withheld and paid on employees' equity awards   (5,578 )     (4,514 )  
Repurchase of shares of common stock   (4,622 )        
Payment of contingent consideration   (250 )        
Net cash (used in) provided by financing activities   (16,051 )     1,387    
               
Cash and Cash Equivalents          
Decrease for the period   (2,651 )     (19,187 )  
Beginning of period   100,929       56,521    
End of period $ 98,278     $ 37,334    
               
Supplemental disclosure of noncash activities:          
Leased assets obtained in exchange for new operating lease liabilities $ 105,249     $    
Accruals for property and equipment   441     1,116    
               

 

                     
TopBuild Corp.                    
Segment Data (Unaudited)                    
(dollars in thousands)                    
                     
                     
  Three Months Ended March 31,           
  2019   2018   Change  
Installation                    
Sales $ 449,383     $ 329,394       36.4   %
                     
Operating profit, as reported $ 51,299     $ 29,330            
Operating margin, as reported   11.4   %   8.9   %        
                     
Rationalization charges   118       217            
Acquisition related costs   125                  
Operating profit, as adjusted $ 51,542     $ 29,547            
Operating margin, as adjusted   11.5   %   9.0   %        
                     
Distribution                      
Sales $ 204,464     $ 187,766       8.9   %
                     
Operating profit, as reported $ 20,597     $ 17,902            
Operating margin, as reported   10.1   %   9.5   %        
                     
Rationalization charges   109       25            
Operating profit, as adjusted $ 20,706     $ 17,927            
Operating margin, as adjusted   10.1   %   9.5   %        
                     
Total                    
Sales before eliminations $ 653,847     $ 517,160            
Intercompany eliminations   (34,517 )     (25,716 )          
Net sales after eliminations $ 619,330     $ 491,444       26.0   %
                     
Operating profit, as reported - segment $ 71,896     $ 47,232            
General corporate expense, net   (9,604 )     (8,893 )          
Intercompany eliminations and other adjustments   (5,674 )     (4,446 )          
Operating profit, as reported $ 56,618     $ 33,893            
Operating margin, as reported   9.1   %   6.9   %        
                     
Rationalization charges †   1,827       797            
Acquisition related costs   652       3,482            
Operating profit, as adjusted $ 59,097     $ 38,172            
Operating margin, as adjusted   9.5   %   7.8   %        
                     
Share-based compensation   2,972       2,402            
Depreciation and amortization   12,475       5,442            
EBITDA, as adjusted $ 74,544     $ 46,016            
EBITDA margin, as adjusted   12.0   %   9.4   %        
                     
Sales change period over period   127,886                  
EBITDA, as adjusted, change period over period   28,528                  
EBITDA, as adjusted, as percentage of sales change   22.3   %              
                     
† Rationalization charges 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,   
  2019   2018  
Gross Profit and Operating Profit Reconciliations            
             
Net sales $ 619,330     $ 491,444    
             
Gross profit, as reported $ 155,695     $ 111,018    
             
Gross profit, as adjusted $ 155,695     $ 111,018    
             
Gross margin, as reported   25.1   %   22.6   %
Gross margin, as adjusted   25.1   %   22.6   %
             
Operating profit, as reported $ 56,618     $ 33,893    
             
Rationalization charges   1,827       797    
Acquisition related costs   652       3,482    
Operating profit, as adjusted $ 59,097     $ 38,172    
             
Operating margin, as reported   9.1   %   6.9   %
Operating margin, as adjusted   9.5   %   7.8   %
             
Income Per Common Share Reconciliation            
             
Income before income taxes, as reported $ 47,349     $ 31,603    
             
Rationalization charges   1,827       797    
Acquisition related costs   652       3,482    
Income before income taxes, as adjusted   49,828       35,882    
             
Tax rate at 26.5% and 27.0% for 2019 and 2018, respectively   (13,204 )     (9,688 )  
Income, as adjusted $ 36,624     $ 26,194    
             
Income per common share, as adjusted $ 1.06     $ 0.73    
             
Weighted average diluted common shares outstanding   34,703,289       35,819,242    
                 


             
TopBuild Corp.            
  Same Branch and Acquisition Net Sales and Adjusted EBITDA (Unaudited)              
(dollars in thousands)            
   
             
  Three Months Ended March 31,   
  2019   2018  
Net sales            
Same branch:            
Installation segment $ 363,898     $ 329,394    
Distribution segment   196,076       187,766    
Eliminations   (33,817 )     (25,716 )  
Total same branch   526,157       491,444    
             
Acquisitions (a):            
Installation segment $ 85,485     $    
Distribution segment   8,388          
Eliminations   (700 )        
Total acquisitions   93,173          
Total $ 619,330     $ 491,444    
             
EBITDA, as adjusted            
Same branch $ 57,202     $ 46,016    
Acquisitions (a)   17,342          
Total $ 74,544     $ 46,016    
             
EBITDA, as adjusted, as a percentage of sales            
Same branch (b)   10.9   %      
Acquisitions (c)   18.6   %      
Total (d)   12.0   %   9.4   %
             
As Adjusted Incremental EBITDA, as a percentage of incremental sales            
Same branch (e)   32.2   %      
Acquisitions (c)   18.6   %      
Total (f)   22.3   %      
____________________________________            
(a) Represents current year impact of acquisitions in their first twelve months            
(b) Same branch EBITDA, as adjusted, as a percentage of same branch sales            
(c) Acquired EBITDA, 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)            
(dollars in thousands)                
   
                 
  Three Months Ended March 31,   
  2019   2018  
Net income, as reported $   37,983       $     26,388    
Adjustments to arrive at EBITDA, as adjusted:                
Interest expense and other, net   9,269       2,290    
Income tax expense   9,366       5,215    
Depreciation and amortization   12,475       5,442    
Share-based compensation   2,972       2,402    
Rationalization charges   1,827       797    
Acquisition related costs   652       3,482    
EBITDA, as adjusted $   74,544       $     46,016    
                 

 

                 
TopBuild Corp.                
2019 Estimated Adjusted EBITDA Range (Unaudited)              
(dollars in millions)                
   
                 
  Twelve Months Ending December 31, 2019
 
  Low
  High
 
Estimated net income $ 160.1     $ 183.0    
Adjustments to arrive at estimated EBITDA, as adjusted:                
Interest expense and other, net   38.9       35.9    
Income tax expense   57.7       66.0    
Depreciation and amortization   54.0       50.0    
Share-based compensation   14.6       12.1    
Rationalization charges   4.0       2.0    
Acquisition related costs   0.7       1.0    
Estimated EBITDA, as adjusted $ 330.0     $ 350.0    
   

 

 

 

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