GlobeNewswire Inc | Nov 3, 2020 06:45AM EST

November 03, 2020

-- 2.2% increase in net sales -- 210 basis point gross margin expansion to 28.4% -- 280 basis point operating margin expansion to 14.6% -- 270 basis point adjusted EBITDA margin expansion to 17.1% -- $2.11 net income per diluted share

DAYTONA BEACH, Fla., Nov. 03, 2020 (GLOBE NEWSWIRE) -- TopBuild Corp.(NYSE:BLD), a leading installer and distributor of insulation and building material products today reported results for the third quarter ended September 30, 2020.

Jerry Volas, Chief Executive Officer, stated, We are pleased with our overall results that included strong adjusted operating and EBITDA margins. Our team continues to do an outstanding job of generating profitable growth.Sales at TruTeam were adversely impacted by our commercial business where some projects have been delayed due to COVID-19 safety protocols.

Looking ahead, we are bullish on the overall fundamentals of our end markets and our ability to leverage our size and scale to drive market share.

Third Quarter Financial Highlights(unless otherwise indicated, comparisons are to the quarter ended September 30, 2019)

-- Net sales increased 2.2% to $697.2 million, driven by increased volume and sales from acquisitions. -- Gross margin increased 210 basis points to 28.4%. -- Operating profit was $101.5 million, compared to operating profit of $80.4 million. On an adjusted basis, operating profit was $101.7 million, compared to $80.6 million, a 26.2% improvement. -- Operating margin, both reported and adjusted, was 14.6%, up 280 basis points. -- Net income was $70.0 million, or $2.11 per diluted share, compared to $55.0 million, or $1.60 per diluted share. Adjusted income was $69.6 million, or $2.10 per diluted share, compared to $52.7 million, or $1.53 per diluted share. -- Adjusted EBITDA was $119.2 million, compared to $98.0 million, a 21.6% increase, and adjusted EBITDA margin improved 270 basis points to 17.1%. -- At September 30, 2020, the Company had cash and cash equivalents of $315.3 million and availability under its revolving credit facility of $389.6 million for total liquidity of $704.9 million.

Nine Month Financial Highlights(unless otherwise indicated, comparisons are to nine months ended September 30, 2019)

-- Net sales increased 1.8% to $1,996.6 million. -- Gross margin expanded 150 basis points to 27.5%. -- Operating profit was $252.0 million, compared to operating profit of $213.1 million. On an adjusted basis, operating profit was $255.5 million, compared to $216.1 million, a 18.2% improvement. -- Operating margin was 12.6% a 170-basis point improvement. On an adjusted basis, operating margin improved 180 basis points to 12.8%. -- Net income was $176.3 million, or $5.29 per diluted share, compared to $145.0 million, or $4.20 per diluted share. Adjusted income was $171.2 million, or $5.14 per diluted share, compared to $138.8 million, or $4.02 per diluted share. -- Adjusted EBITDA was $315.3 million, compared to $266.5 million, a 18.3% increase. Adjusted EBITDA margin was 15.8%, a 220-basis point improvement.

Operating Segment Highlights ($ in 000s)(comparisons are to the period ended September 30, 2019)

TruTeam 3 Months 9 Months Ended Service 3 Months 9 Months Ended 9/30/20 9/30/20 Partners Ended 9/30/20 Ended 9/30/20Sales $ 492,206 $ 1,434,648 Sales $ 244,113 $ 674,672 Change Change Volume -3.4 % -2.2 % Volume 12.2 % 6.0 %Price 1.2 % 1.3 % Price -1.7 % -0.4 %M&A 0.9 % 1.1 % M&A 0.0 % 0.0 %Total -1.2 % 0.3 % Total 10.5 % 5.6 %Change ChangeOperating 16.9 % 14.9 % Operating 13.4 % 12.1 %Margin MarginChange 290 bps 170 bps Change 280 bps 190 bps Adj. Adj.Operating 17.0 % 15.0 % Operating 13.4 % 12.2 %Margin MarginChange 300 bps 170 bps Change 280 bps 200 bps

Capital AllocationAcquisitionsOn October 1, 2020, the Company completed the acquisition of Garland Insulating, one of the largest locally owned and operated insulation installation companies in Texas. Garland generated approximately $60 million in revenue for the trailing twelve months ended June 30, 2020.

Acquisitions continue to be our number one capital allocation priority. Garland Insulating, which has a great reputation, strong customer base and outstanding leadership, is a good example of the type of quality companies we have in our pipeline, noted Volas.

Year-to-date, the Company has announced three acquisitions, which combined, are expected to generate approximately $79 million in annual revenue.

Share repurchasesIn the third quarter of 2020, the Company repurchased 57,810 shares at an average price of $155.63 per share. These shares were purchased as part of the Companys $200 million share repurchase authorization announced on February 26, 2019. As of September 30, 2020, $46 million of the $200 million authorization remained.

Additional InformationQuarterly supplemental materials, including a presentation that will be referenced on todays conference call, are available on the Investors section of the Companys website at www.topbuild.com.

Conference Call A conference call to discuss third quarter 2020 financial results is scheduled for today, Tuesday, November 3, 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 Investors section of the Companys website at www.topbuild.com.

About TopBuildTopBuild Corp., a Fortune 1000 Company 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 close to 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 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 Companys reported results under GAAP. Additional information may be found in the Companys filings with the Securities and Exchange Commission which are available on TopBuilds website under Investors at www.topbuild.com.

Safe Harbor StatementStatements contained herein reflect our views about future periods, including our future plans and performance, constitute forward-looking statements under the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by 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. We caution you against unduly relying on any of these forward-looking statements. Our future performance may be affected by the duration and impact of the COVID-19 pandemic on the United States economy, specifically with respect to residential and commercial construction; our ability to continue operations in markets affected by the COVID-19 pandemic and our ability to collect receivables from our customers; our reliance on residential new construction, residential repair/remodel, and commercial construction; our reliance on third-party suppliers and manufacturers; our ability to attract, develop, and retain talented personnel and our sales and labor force; our ability to maintain consistent practices across our locations; and our ability to maintain our competitive position. We discuss the material risks we face under the caption entitled Risk Factors in our Annual Report for the year ended December31,2019, as filed with the SEC on February 25, 2020, as well as under the caption entitled Risk Factors in subsequent reports that we file with the SEC. Our forward-looking statements in this filing speak only as of the date of this filing. Factors or events that could cause our actual results to differ may emerge from time to time and it is not possible for us to predict all of them. Unless required by law, we undertake no obligation to update publicly any forward-looking statements as a result of new information, future events, or otherwise. The Company believes that the non-GAAP performance measures and ratios that are contained herein, which management uses to manage our business, provide users of this financial information with additional meaningful comparisons between current results and results in our prior periods. Non-GAAP performance measures and ratios should be viewed in addition, and not as an alternative, to the Company's reported results under accounting principles generally accepted in the United States. Additional information about the Company is contained in the Company's filings with the SEC and is available on TopBuild's website at www.topbuild.com.

Investor Relations and Media ContactTabitha Zanetabitha.zane@topbuild.com386-763-8801

TopBuild Corp. Condensed Consolidated Statements of Operations (Unaudited)(in thousands, except share and per common share amounts) Three Months Ended Nine Months Ended September 30, September30, 2020 2019 2020 2019 Net sales $ 697,223 $ 682,330 $ 1,996,551 $ 1,961,771 Cost of sales 498,895 502,999 1,448,210 1,451,822 Gross profit 198,328 179,331 509,949 548,341 Selling,general, and 96,805 98,886 296,846 administrative 296,372expenseOperating 101,523 80,445 213,103 profit 251,969 Other income(expense), net:Interest (7,692 ) (9,507 ) ) (28,740 ) expense (24,711Loss on extinguishment ? ? (233 ) ? of debtOther, net 86 653 648 1,512Other expense, (7,606 ) (8,854 ) ) (27,228 ) net (24,296Income before 93,917 71,591 185,875 income taxes 227,673 Income tax (23,921 ) (16,615 ) ) (40,864 ) expense (51,407Net income $ 69,996 $ 54,976 $ $ 145,011 176,266 Net income per common share:Basic $ $ $ $ 2.13 1.63 5.35 4.27Diluted $ $ $ $ 2.11 1.60 5.29 4.20 Weightedaverage shares outstanding:Basic 32,847,652 33,790,857 32,960,969 33,977,464 Diluted 33,210,545 34,367,902 33,337,259 34,541,635



TopBuild Corp. Condensed ConsolidatedBalance Sheets and Other Financial Data (Unaudited)(dollars in thousands) As of September December31, 30, 2020 2019 ASSETS Current assets: Cash and cash equivalents $ 315,338 $ 184,807 Receivables, net of anallowance for creditlosses of $8,122 atSeptember 30, 2020 and 436,548 428,844 allowance for doubtfulaccounts of $4,854 atDecember 31, 2019Inventories, net 142,517 149,078 Prepaid expenses and other 32,101 17,098 current assetsTotal current assets 926,504 779,827 Right of use assets 81,692 87,134 Property and equipment, 172,099 178,080 netGoodwill 1,379,721 1,367,918 Other intangible assets, 172,390 181,122 netDeferred tax assets, net 4,397 4,259 Other assets 10,998 5,623 Total assets $ 2,747,801 $ 2,603,963 LIABILITIES Current liabilities: Accounts payable $ 311,696 $ 307,970 Current portion of 23,247 34,272 long-term debtAccrued liabilities 117,456 98,418 Short-term lease 32,747 36,094 liabilitiesTotal current liabilities 485,146 476,754 Long-term debt 688,870 697,955 Deferred tax liabilities, 173,597 175,263 netLong-term portion of 49,927 45,605 insurance reservesLong-term lease 52,672 54,010 liabilitiesOther liabilities 15,995 1,487 Total liabilities 1,466,207 1,451,074 EQUITY 1,281,594 1,152,889 Total liabilities and $ 2,747,801 $ 2,603,963 equity As of September30, 2020 2019 Other Financial Data Receivable days 48 51 Inventory days 27 28 Accounts payable days 81 77 Receivables, net plusinventories, net less $ 267,369 $ 301,217 accounts payableReceivables, net plusinventories, net less 10.1 % 11.6 % accounts payable as apercent of sales (TTM)



TopBuild Corp. CondensedConsolidatedStatement of Cash Flows(Unaudited)(in thousands) Nine Months Ended September30, 2020 2019 Cash FlowsProvided by(Used in) OperatingActivities:Net income $ 176,266 $ 145,011 Adjustments toreconcile netincome to net cash providedby operatingactivities:Depreciationand 47,527 39,005 amortizationShare-based 12,159 11,411 compensationLoss on extinguishment 233 ? of debtLoss on saleor abandonment of property 290 885and equipmentAmortization of debt 1,103 1,169 issuance costsProvision for bad debt 5,625 5,697 expenseLoss from inventory 1,908 1,794 obsolescenceDeferred income taxes, (709 ) (381 )netChange incertain assets andliabilitiesReceivables, (13,645 ) (51,585 )netInventories, 20,637 net 4,759Prepaidexpenses and (14,989 ) 10,003 other currentassetsAccounts (12,529 )payable 2,152Accrued 33,436 10,758 liabilitiesPayment of contingent (413 ) ? considerationOther, net 21 904Net cashprovided by 255,723 182,779 operatingactivities Cash FlowsProvided by(Used in) InvestingActivities:Purchases ofproperty and (27,206 ) (34,100 )equipmentAcquisition of (21,450 ) (6,452 )businessesProceeds fromsale of property and 2,332 2,239equipmentOther, net ? 25Net cash usedin investing (46,324 ) (38,288 )activities Cash FlowsProvided by(Used in) FinancingActivities:Proceeds from issuance of 300,000 9,998 long-term debtRepayment of (319,168 ) (19,424 )long-term debtPayment of debt issuance (2,280 ) ? costsTaxes withheldand paid on (14,781 ) (11,135 )employees'equity awardsExercise of stock options 1,438 ?Repurchase ofshares of (43,149 ) (52,177 )common stockPayment of contingent (928 ) (1,091 )considerationNet cash usedin financing (78,868 ) (73,829 )activities Cash and Cash EquivalentsIncrease for 130,531 70,662 the periodBeginning of 184,807 100,929 periodEnd of period $ 315,338 $ 171,591 Supplementaldisclosure of noncashactivities:Leased assetsobtained inexchange for $ 27,098 $ 120,726 new operatingleaseliabilitiesAccruals for property and 278 102 equipment



TopBuild Corp. Segment Data (Unaudited)(dollars in thousands) Three Months Ended Nine Months Ended September 30, September30, 2020 2019 Change 2020 2019 Change TruTeam Sales $ 492,206 $ 498,390 ) % $ 1,434,648 $ 1,430,800 0.3 % (1.2 Operatingprofit, as $ 83,142 $ 69,846 $ 213,136 $ 189,568 reportedOperatingmargin, as 16.9 % 14.0 % 14.9 % 13.2 % reported Rationalization (16 ) 866 charges 9 183Acquisition ? related costs 56 4 459COVID-19 pay 278 ? 916 ?Operatingprofit, as $ 83,429 $ 69,886 $ 214,922 $ 190,210 adjustedOperatingmargin, as 17.0 % 14.0 % 15.0 % 13.3 % adjusted Service PartnersSales $ 244,113 $ 220,947 10.5 % $ 674,672 $ 638,899 5.6 % Operatingprofit, as $ 32,787 $ 23,406 $ 81,612 $ 65,154 reportedOperatingmargin, as 13.4 % 10.6 % 12.1 % 10.2 % reported Rationalization (161 ) ? 783 charges 109COVID-19 pay ? 15 70 ?Operatingprofit, as $ 32,641 $ 23,406 $ 82,464 $ 65,263 adjustedOperatingmargin, as 13.4 % 10.6 % 12.2 % 10.2 % adjusted Total Sales before $ 736,319 $ 719,337 $ 2,109,320 $ 2,069,699 eliminationsIntercompany (39,096 ) (37,007 ) (112,769 ) (107,928 ) eliminationsNet sales after $ 697,223 $ 682,330 2.2 % $ 1,996,551 $ 1,961,771 1.8 % eliminations Operatingprofit, as $ 115,929 $ 93,252 $ 294,748 $ 254,722 reported -segmentsGeneralcorporate (8,032 ) (6,872 ) (24,610 ) (23,606 ) expense, netIntercompany (6,374 ) (5,935 ) (18,169 ) (18,013 ) eliminationsOperatingprofit, as $ 101,523 $ 80,445 $ 251,969 $ 213,103 reportedOperatingmargin, as 14.6 % 11.8 % 12.6 % 10.9 % reported Rationalization (274 ) 2,102 charges ? 8 1,977Acquisition 142 131 338 related costs ? 1,034Refinancing ? ? costs 57 ?COVID-19 pay 293 ? 984 ?Operatingprofit, as $ 101,684 $ 80,584 $ 255,450 $ 216,114 adjustedOperatingmargin, as 14.6 % 11.8 % 12.8 % 11.0 % adjusted Share-based 3,280 3,926 12,317 11,411 compensationDepreciationand 14,216 13,467 47,527 39,005 amortizationEBITDA, as $ 119,180 $ 97,977 $ 315,294 $ 266,530 adjustedEBITDA margin, 17.1 % 14.4 % 15.8 % 13.6 % as adjusted Sales changeperiod over 14,893 34,780 periodEBITDA, asadjusted, 21,203 48,764 change periodover periodIncrementalEBITDA, asadjusted, as a 142.4 % 140.2 % percentage ofchange in sales ? Rationalization charges and acquisition related costs include corporate leveladjustments as well as segment operating adjustments.



TopBuild Corp. Non-GAAPReconciliations (Unaudited)(in thousands,except share and per common shareamounts) Three Months Ended Nine Months Ended September 30, September30, 2020 2019 2020 2019 Gross Profitand Operating ProfitReconciliations Net sales $ 697,223 $ 682,330 $ 1,996,551 $ 1,961,771 Gross profit, $ 198,328 $ 179,331 $ 548,341 $ 509,949 as reported Rationalization ) ? charges (63 1,016 ?COVID-19 pay ? 273 755 ?Gross profit, $ 198,538 $ 179,331 $ 550,111 $ 509,949 as adjusted Gross margin, 28.4 % 26.3 % 27.5 % 26.0 %as reportedGross margin, 28.5 % 26.3 % 27.6 % 26.0 %as adjusted Operatingprofit, as $ 101,523 $ 80,445 $ 251,969 $ 213,103 reported Rationalization ) charges (274 8 2,102 1,977Acquisition 131 related costs 142 338 1,034Refinancing ? costs ? 57 ?COVID-19 pay ? 293 984 ?Operatingprofit, as $ 101,684 $ 80,584 $ 255,450 $ 216,114 adjusted Operatingmargin, as 14.6 % 11.8 % 12.6 % 10.9 %reportedOperatingmargin, as 14.6 % 11.8 % 12.8 % 11.0 %adjusted Income PerCommon Share Reconciliation Income beforeincome taxes, $ 93,917 $ 71,591 $ 227,673 $ 185,875 as reported Rationalization ) charges (274 8 2,102 1,977Acquisition 131 related costs 142 338 1,034Refinancingcosts and loss on ? ? 290 ? extinguishmentof debtCOVID-19 pay ? 293 984 ?Income beforeincome taxes, 94,078 71,730 231,387 188,886 as adjusted Tax rate at26.0% and 26.5%for 2020 and (24,460 ) (19,008 ) (60,161 ) (50,055 )2019,respectivelyIncome, as $ 69,618 $ 52,722 $ 171,226 $ 138,831 adjusted Income percommon share, $ 2.10 $ 1.53 $ 5.14 $ 4.02 as adjusted Weightedaverage diluted 33,210,545 34,367,902 33,337,259 34,541,635 common sharesoutstanding



TopBuild Corp.Same BranchandAcquisitionNet Sales and AdjustedEBITDA(Unaudited)(dollars in thousands) Three Months Ended Nine Months Ended September 30, September30, 2020 2019 2020 2019Net sales Same branch: TruTeam $ 487,590 $ 498,390 $ 1,418,418 $ 1,430,800 Service 244,113 220,947 674,672 638,899 PartnersEliminations (39,096 ) (37,007 ) (112,769 ) (107,928 )Total same 692,607 682,330 1,980,321 1,961,771 branch Acquisitions (a):TruTeam $ $ $ 16,230 $ 4,616 ? ?Service Partners ? ? ? ?Eliminations ? ? ? ?Total 16,230 acquisitions 4,616 ? ?Total $ 697,223 $ 682,330 $ 1,996,551 $ 1,961,771 EBITDA, as adjustedSame branch $ 118,506 $ 97,977 $ 312,099 $ 266,530 Acquisitions (a) 674 ? 3,195 ?Total $ 119,180 $ 97,977 $ 315,294 $ 266,530 EBITDA, asadjusted, as a percentageof salesSame branch 17.1 % 15.8 % (b)Acquisitions 14.6 % 19.7 % (c)Total (d) 17.1 % 14.4 % 15.8 % 13.6 % As AdjustedIncrementalEBITDA, as a percentageof change insalesSame branch 199.8 % 245.7 % (e)Acquisitions 14.6 % 19.7 % (c)Total (f) 142.4 % 140.2 % (a) Represents current year impact of acquisitions in their first twelvemonths(b) Same branch EBITDA, as adjusted, as a percentage of same branchsales(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 insame branch sales(f) Change in total EBITDA, as adjusted, as a percentage of change in totalsales

TopBuild Corp. Same Branch and Acquisition Net Sales by Market (Unaudited)(in thousands) Three Months Ended Nine Months Ended September 30, September30, 2020 2019 2020 2019 Same branch: Residential $ 543,658 $ 522,506 $ 1,553,273 $ 1,503,300 Commercial 148,949 159,824 427,048 458,471 Same branch net sales 692,607 682,330 1,980,321 1,961,771 Acquisitions (a): Residential $ 2,030 $ ? $ 4,681 $ ? Commercial 2,586 ? 11,549 ? Acquisitions net sales 4,616 ? 16,230 ? Total net sales $ 697,223 $ 682,330 $ 1,996,551 $ 1,961,771 (a) Represents current year impact of acquisitions in their first twelve months

TopBuild Corp. Reconciliation of Adjusted EBITDA to Net Income (Unaudited)(in thousands) Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019Net income, as $ 69,996 $ 54,976 $ 176,266 $ 145,011reportedAdjustments toarrive at EBITDA, asadjusted:Interestexpense and 7,606 8,854 24,063 27,228other, netIncome tax 23,921 16,615 51,407 40,864expenseDepreciationand 14,216 13,467 47,527 39,005amortizationShare-based 3,280 3,926 12,317 11,411compensationRationalization (274 ) 8 2,102 1,977chargesAcquisition 142 131 338 1,034related costsRefinancingcosts and losson ? ? 290 ?extinguishmentof debtCOVID-19 pay 293 ? 984 ?EBITDA, as $ $ $ $ adjusted 119,180 97,977 315,294 266,530