GlobeNewswire Inc | Aug 4, 2020 06:45AM EDT

August 04, 2020

-- 2.1% decrease in net sales -- 110 bps gross margin expansion, 130 bps on an adjusted basis -- 12.5% operating margin, 12.9% on an adjusted basis, up 130 bps -- $1.67 net income per diluted share, $1.68 on an adjusted basis -- 16.7% adjusted EBITDA margin, up 250 bps

Moving Forward with Capital Allocation Program

DAYTONA BEACH, Fla., Aug. 04, 2020 (GLOBE NEWSWIRE) -- TopBuild Corp.(NYSE:BLD), a leading installer and distributor of insulation and building material products today reported results for the second quarter ended June 30, 2020.

Jerry Volas, Chief Executive Officer, stated, We are extremely pleased with our second quarter results. Our team did an outstanding job flexing our business model and driving further efficiencies throughout our Company as we responded to state shutdowns, project delays and widespread uncertainty related to COVID-19. The strong performance we achieved at both TruTeam and Service Partners is evidence of this success and demonstrates the strength of our uniquely diversified business platform.

As we move through the second half of the year, we are confident in our ability to successfully meet the challenges and opportunities that may lie ahead.

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

-- Net sales declined 2.1% to $646.1 million, primarily driven by volume declines related to the impact of the COVID-19 pandemic. Same branch contributed 99.0% of total revenue. -- Gross margin increased 110 basis points to 27.6%. On an adjusted basis, gross margin increased 130 basis points to 27.8%. -- Operating profit was $80.5 million, compared to operating profit of $76.0 million a 5.8% improvement. On an adjusted basis, operating profit was $83.5 million, compared to $76.4 million, a 9.3% improvement. -- Operating margin was 12.5%, up 100 basis points. Adjusted operating margin improved 130 basis points to 12.9%. -- Net income was $55.5 million, or $1.67 per diluted share, compared to $52.1 million, or $1.51 per diluted share. Adjusted income was $55.7 million, or $1.68 per diluted share, compared to $49.5 million, or $1.43 per diluted share. -- Adjusted EBITDA was $107.8 million, compared to $94.0 million, a 14.6% increase, and adjusted EBITDA margin improved 250 basis points to 16.7%. -- At June 30, 2020, the Company had cash and cash equivalents of $258.8 million and availability under its revolving credit facility of $389.6 million for total liquidity of $648.5 million.

Six Month Financial Highlights(unless otherwise indicated, comparisons are to six months ended June 30, 2019)

-- Net sales increased 1.6% to $1,299.3 million. On a same branch basis, revenue increased 0.6% to $1,287.7 million. -- Gross margin expanded 110 basis points to 26.9%. On an adjusted basis, gross margin expanded 130 basis points to 27.1%. -- Operating profit was $150.4 million, compared to operating profit of $132.7 million, a 13.4% improvement. On an adjusted basis, operating profit was $153.8 million, compared to $135.5 million, a 13.5% improvement. -- Operating margin was 11.6%, a 120-basis point improvement. On an adjusted basis, operating margin improved 120 basis points to 11.8%. -- Net income was $106.3 million, or $3.18 per diluted share, compared to $90.0 million, or $2.60 per diluted share. Adjusted income was $101.6 million, or $3.04 per diluted share, compared to $86.1 million, or $2.49 per diluted share. -- Adjusted EBITDA was $196.1 million, compared to $168.6 million, a 16.4% increase. Adjusted EBITDA margin was 15.1%, a 190-basis point improvement.

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

3 Months 6 Months Service 3 Months 6 Months EndedTruTeam Ended 6/30/ Ended 6/30/ Partners Ended 6/30/ 6/30/20 20 20 20Sales $466,569 $942,442 Sales $216,336 $430,558 Change Change Volume (5.5%) (1.6%) Volume 1.7% 2.8% Price 0.7% 1.4% Price (0.4%) 0.3% M&A 1.4% 1.2% M&A 0.0% 0.0% Total (3.4%) 1.1% Total 1.3% 3.0% Change ChangeOperating 14.9% 13.8% Operating 11.2% 11.3% Margin MarginChange 70 bps 100 bps Change 130 bps 130 bpsAdj. Adj.Operating 15.2% 14.0% Operating 11.6% 11.6% Margin MarginChange 100 bps 110 bps Change 170 bps 160 bps

Capital AllocationAs a result of the uncertainty in early March related to COVID-19, we suspended our acquisition program. As the second quarter progressed, the outlook for the housing industry improved, and we are now moving forward with a number of the companies in our robust acquisition pipeline, noted Volas.

While the Company completed no acquisitions in the second quarter, it did repurchase 262,889 shares at an average price of $76.17 per share.

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 second quarter 2020 financial results is scheduled for today, Tuesday, August 4, 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 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 approximately 200 branches, and through Service Partners which distributes insulation and building material products from approximately 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.com 386-763-8801

TopBuild Corp. Condensed ConsolidatedStatements of Operations (Unaudited)(in thousands, except share and per common share amounts) Three Months Ended June30, Six Months Ended June30, 2020 2019 2020 2019 Net sales $ 646,099 $ 660,112 $ 1,299,327 $ 1,279,442 Cost of sales 468,045 485,190 949,316 948,824 Gross profit 178,054 174,922 350,011 330,618 Selling,general, and 97,600 98,883 199,568 197,960 administrativeexpenseOperating 80,454 76,039 150,443 132,658 profit Other income(expense), net:Interest (8,277 ) (9,631 ) (17,018 ) (19,232 ) expenseLoss onextinguishment ? ? (233 ) ? of debtOther, net 89 526 561 858 Other expense, (8,188 ) (9,105 ) (16,690 ) (18,374 ) netIncome before 72,266 66,934 133,753 114,284 income taxes Income tax (16,770 ) (14,883 ) (27,485 ) (24,249 ) expenseNet income $ 55,496 $ 52,051 $ 106,268 $ 90,035 Net income per common share:Basic $ 1.69 $ 1.53 $ 3.22 $ 2.64 Diluted $ 1.67 $ 1.51 $ 3.18 $ 2.60 Weightedaverage shares outstanding:Basic 32,867,842 33,976,169 33,018,148 34,072,314 Diluted 33,202,423 34,557,664 33,401,135 34,630,048

TopBuild Corp. Condensed Consolidated Balance Sheets and Other Financial Data (Unaudited)(dollars in thousands) As of June30, December31, 2020 2019 ASSETS Current assets: Cash and cash equivalents $ 258,837 $ 184,807 Receivables, net of an allowance forcredit losses of $7,541 at June 30, 2020, 423,000 428,844 and allowance for doubtful accounts of$4,854 at December 31, 2019Inventories, net 147,304 149,078 Prepaid expenses and other current assets 7,962 17,098 Total current assets 837,103 779,827 Right of use assets 85,236 87,134 Property and equipment, net 176,179 178,080 Goodwill 1,379,821 1,367,918 Other intangible assets, net 176,871 181,122 Deferred tax assets, net 4,358 4,259 Other assets 11,011 5,623 Total assets $ 2,670,579 $ 2,603,963 LIABILITIES Current liabilities: Accounts payable $ 293,224 $ 307,970 Current portion of long-term debt 23,168 34,272 Accrued liabilities 120,689 98,418 Short-term lease liabilities 34,444 36,094 Total current liabilities 471,525 476,754 Long-term debt 694,320 697,955 Deferred tax liabilities, net 174,229 175,263 Long-term portion of insurance reserves 50,608 45,605 Long-term lease liabilities 54,798 54,010 Other liabilities 7,447 1,487 Total liabilities 1,452,927 1,451,074 EQUITY 1,217,652 1,152,889 Total liabilities and equity $ 2,670,579 $ 2,603,963 As of June30, 2020 2019 Other Financial Data Receivable days 49 53 Inventory days 28 29 Accounts payable days 83 78 Receivables, net plus inventories, net $ 277,080 $ 306,119 less accounts payableReceivables, net plus inventories, net less 10.5 % 11.9 %accounts payable as a percent of sales (TTM)

TopBuild Corp. Condensed Consolidated Statement of Cash Flows (Unaudited)(in thousands) Six Months Ended June30, 2020 2019 Cash Flows Provided by (Used in) Operating Activities:Net income $ 106,268 $ 90,035 Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization 33,311 25,538 Share-based compensation 9,038 7,485 Loss on extinguishment of debt 233 ? Loss on sale or abandonment of property and 320 561 equipmentAmortization of debt issuance costs 716 779 Provision for bad debt expense 3,756 3,688 Loss from inventory obsolescence 1,313 1,251 Deferred income taxes, net (38 ) (21 ) Change in certain assets and liabilities Receivables, net 1,894 (41,489 ) Inventories, net 538 17,391 Prepaid expenses and other current assets 9,151 14,969 Accounts payable (16,390 ) (23,823 ) Accrued liabilities 28,188 (1,131 ) Payment of contingent consideration (413 ) ? Other, net 277 1,031 Net cash provided by operating activities 178,162 96,264 Cash Flows Provided by (Used in) Investing Activities:Purchases of property and equipment (20,937 ) (21,982 ) Acquisition of businesses (20,526 ) ? Proceeds from sale of property and equipment 763 1,961 Other, net ? 22 Net cash used in investing activities (40,700 ) (19,999 ) Cash Flows Provided by (Used in) Financing Activities:Proceeds from issuance of long-term debt 300,000 4,998 Repayment of long-term debt (313,407 ) (11,364 ) Payment of debt issuance costs (2,280 ) ? Taxes withheld and paid on employees' equity (13,165 ) (8,471 ) awardsRepurchase of shares of common stock (34,152 ) (19,499 ) Payment of contingent consideration (428 ) (1,091 ) Net cash used in financing activities (63,432 ) (35,427 ) Cash and Cash Equivalents Increase for the period 74,030 40,838 Beginning of period 184,807 100,929 End of period $ 258,837 $ 141,767 Supplemental disclosure of noncash activities: Leased assets obtained in exchange for new $ 19,257 $ 110,192 operating lease liabilitiesAccruals for property and equipment 323 497

TopBuild Corp. Segment Data (Unaudited)(dollars in thousands) Three Months Ended Six Months Ended June30, June30, 2020 2019 Change 2020 2019 Change TruTeam Sales $ 466,569 $ 483,028 (3.4 ) $ 942,442 $ 932,410 1.1 % % Operatingprofit, as $ 69,643 $ 68,423 $ 129,994 $ 119,722 reportedOperatingmargin, as 14.9 % 14.2 % 13.8 % 12.8 % reported Rationalization 857 81 857 199 chargesAcquisition ? 277 4 403 related costsCOVID-19 pay 638 ? 638 ? Operatingprofit, as $ 71,138 $ 68,781 $ 131,493 $ 120,324 adjustedOperatingmargin, as 15.2 % 14.2 % 14.0 % 12.9 % adjusted Service PartnersSales $ 216,336 $ 213,487 1.3 % $ 430,558 $ 417,951 3.0 % Operatingprofit, as $ 24,155 $ 21,151 $ 48,825 $ 41,748 reportedOperatingmargin, as 11.2 % 9.9 % 11.3 % 10.0 % reported Rationalization 944 ? 944 109 chargesCOVID-19 pay 54 ? 54 ? Operatingprofit, as $ 25,153 $ 21,151 $ 49,823 $ 41,857 adjustedOperatingmargin, as 11.6 % 9.9 % 11.6 % 10.0 % adjusted Total Sales before $ 682,905 $ 696,515 $ 1,373,000 $ 1,350,361 eliminationsIntercompany (36,806 ) (36,403 ) (73,673 ) (70,919 ) eliminationsNet sales after $ 646,099 $ 660,112 (2.1 ) $ 1,299,327 $ 1,279,442 1.6 % eliminations % Operatingprofit, as $ 93,798 $ 89,574 $ 178,819 $ 161,470 reported -segmentsGeneralcorporate (7,383 ) (7,130 ) (16,581 ) (16,734 ) expense, netIntercompany (5,961 ) (6,405 ) (11,795 ) (12,078 ) eliminationsOperatingprofit, as $ 80,454 $ 76,039 $ 150,443 $ 132,658 reportedOperatingmargin, as 12.5 % 11.5 % 11.6 % 10.4 % reported Rationalization 2,376 142 2,376 1,969 charges ?Acquisition (40 ) 251 196 903 related costsRefinancing 20 ? 57 ? costsCOVID-19 pay 692 ? 692 ? Operatingprofit, as $ 83,502 $ 76,432 $ 153,764 $ 135,530 adjustedOperatingmargin, as 12.9 % 11.6 % 11.8 % 10.6 % adjusted Share-based 5,130 4,513 9,038 7,485 compensationDepreciationand 19,121 13,062 33,311 25,538 amortizationEBITDA, as $ 107,753 $ 94,007 $ 196,113 $ 168,553 adjustedEBITDA margin, 16.7 % 14.2 % 15.1 % 13.2 % as adjusted Sales change )period over (14,013 19,885 periodEBITDA, asadjusted, 13,746 27,560 change periodover periodEBITDA, asadjusted, as N/A 138.6 % percentage ofsales change ? Rationalization charges include corporatelevel adjustments as well as segment operating adjustments.

TopBuild Corp. Non-GAAPReconciliations (Unaudited)(in thousands,except share and per common shareamounts) Three Months Ended June30, Six Months Ended June30, 2020 2019 2020 2019 Gross Profitand Operating ProfitReconciliations Net sales $ 646,099 $ 660,112 $ 1,299,327 $ 1,279,442 Gross profit, $ 178,054 $ 174,922 $ 350,011 $ 330,618 as reported Rationalization 1,079 ? 1,079 ? chargesCOVID-19 pay 482 ? 482 ? Gross profit, $ 179,615 $ 174,922 $ 351,572 $ 330,618 as adjusted Gross margin, 27.6 % 26.5 % 26.9 % 25.8 % as reportedGross margin, 27.8 % 26.5 % 27.1 % 25.8 % as adjusted Operatingprofit, as $ 80,454 $ 76,039 $ 150,443 $ 132,658 reported Rationalization 2,376 142 2,376 1,969 chargesAcquisition (40 ) 251 196 903 related costsRefinancing 20 ? 57 ? costsCOVID-19 pay 692 ? 692 ? Operatingprofit, as $ 83,502 $ 76,432 $ 153,764 $ 135,530 adjusted Operatingmargin, as 12.5 % 11.5 % 11.6 % 10.4 % reportedOperatingmargin, as 12.9 % 11.6 % 11.8 % 10.6 % adjusted Income PerCommon Share Reconciliation Income beforeincome taxes, $ 72,266 $ 66,934 $ 133,753 $ 114,284 as reported Rationalization 2,376 142 2,376 1,969 chargesAcquisition (40 ) 251 196 903 related costsRefinancingcosts and losson 20 ? 290 ? extinguishmentof debtCOVID-19 pay 692 ? 692 ? Income beforeincome taxes, 75,314 67,327 137,307 117,156 as adjusted Tax rate at26.0% and 26.5%for 2020 and (19,582 ) (17,842 ) (35,700 ) (31,046 ) 2019,respectivelyIncome, as $ 55,732 $ 49,485 $ 101,607 $ 86,110 adjusted Income percommon share, $ 1.68 $ 1.43 $ 3.04 $ 2.49 as adjusted Weightedaverage diluted 33,202,423 34,577,664 33,401,135 34,630,048 common sharesoutstanding

TopBuild Corp. Same Branch andAcquisition NetSales and Adjusted EBITDA(Unaudited)(dollars in thousands) Three Months Ended Six Months Ended June30, June30, 2020 2019 2020 2019 Net sales Same branch: Installation $ 459,820 $ 483,028 $ 930,828 $ 932,410 segmentDistribution 216,336 213,487 430,558 417,951 segmentEliminations (36,806 ) (36,403 ) (73,673 ) (70,919 ) Total same branch 639,350 660,112 1,287,713 1,279,442 Acquisitions (a): Installation $ 6,749 $ ? $ 11,614 $ ? segmentDistribution ? ? ? ? segmentEliminations ? ? ? ? Total 6,749 ? 11,614 ? acquisitionsTotal $ 646,099 $ 660,112 $ 1,299,327 $ 1,279,442 EBITDA, as adjustedSame branch $ 106,325 $ 94,007 $ 193,592 $ 168,553 Acquisitions (a) 1,428 ? 2,521 ? Total $ 107,753 $ 94,007 $ 196,113 $ 168,553 EBITDA, asadjusted, as a percentage ofsalesSame branch (b) 16.6 % 15.0 % Acquisitions (c) 21.2 % 21.7 % Total (d) 16.7 % 14.2 % 15.1 % 13.2 % As AdjustedIncrementalEBITDA, as a percentage ofchange in salesSame branch (e) N/A 302.7 % Acquisitions (c) 21.2 % 21.7 % Total (f) N/A 138.6 % (a) Representscurrent yearimpact of acquisitions intheir firsttwelve months(b) Same branchEBITDA, asadjusted, as a percentage ofsame branch sales(c) AcquiredEBITDA, asadjusted, as a percentage ofacquired sales(d) Total EBITDA,as adjusted, as a percentage oftotal sales(e) Change in same branchEBITDA, as adjusted, as a percentage of change in samebranch sales(f) Change intotal EBITDA, asadjusted, as a percentage ofchange in totalsales

TopBuild Corp. Same Branch and Acquisition Net Sales by Market (Unaudited)(dollars in thousands) Three Months Ended Six Months Ended June30, June30, 2020 2019 2020 2019 Same branch: Residential $ 503,928 $ 504,659 $ 1,009,615 $ 980,794 Commercial 135,422 155,453 278,098 298,648 Same branch net sales 639,350 660,112 1,287,713 1,279,442 Acquisitions (a): Residential $ 1,606 $ ? $ 2,651 $ ? Commercial 5,143 ? 8,963 ? Acquisitions net sales 6,749 ? 11,614 ? Total net sales $ 646,099 $ 660,112 $ 1,299,327 $ 1,279,442 (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 Six Months Ended June30, June30, 2020 2019 2020 2019Net income, as reported $ 55,496 $ 52,051 $ 106,268 $ 90,035Adjustments to arrive at EBITDA, as adjusted:Interest expense and other, 8,188 9,105 16,457 18,374netIncome tax expense 16,770 14,883 27,485 24,249Depreciation and amortization 19,121 13,062 33,311 25,538Share-based compensation 5,130 4,513 9,038 7,485Rationalization charges 2,376 142 2,376 1,969Acquisition related costs (40 ) 251 196 903Refinancing costs and loss on 20 ? 290 ?extinguishment of debtCOVID-19 pay 692 ? 692 ?EBITDA, as adjusted $ 107,753 $ 94,007 $ 196,113 $ 168,553