© Reuters.
TopBuild (NYSE:) Corp. reported robust Q3 2023 results, surpassing expectations with solid profitable growth. The company also adjusted its 2023 guidance upwards, reflecting optimism about growth in commercial and industrial markets. TopBuild announced its intention to acquire Specialty Products and Insulation (SPI), subject to regulatory review, and plans to co-locate operations for sales expansion.
Key takeaways from the earnings call include:
- Total sales for the first nine months of 2023 increased by 4.4%, and gross margin expanded to 31%.
- The Installation segment grew revenue by 4.9% despite a slowdown in single-family starts, driven by multifamily and light commercial work.
- The Specialty Distribution business saw a decline in sales due to lower prices but experienced growth in commercial and industrial channels.
- TopBuild reported total liquidity of $1.1 billion as of September 30th, 2023, including cash of $615.6 million and an accessible revolver of $436.2 million.
- The company raised its 2023 guidance for sales to be between $5.13 billion and $5.21 billion, and adjusted EBITDA to be between $1.025 billion and $1.055 billion.
- TopBuild plans to co-locate branches to better serve customers and capitalize on existing customer bases.
- The company expressed confidence in the acquisition of SPI, which is expected to increase the revenue contribution of the recurring maintenance and repair segment to about a third.
During the earnings call, the company discussed pressure experienced in the quarter, primarily driven by spray foam and gutters. However, TopBuild does not anticipate this pressure to worsen significantly in Q4 and is focused on maintaining margins through price adjustments. The company also reported healthy high-single-digit commercial installation volume growth and expressed confidence in this business segment’s growth prospects.
The workforce remains stable as the company continues to focus on driving efficiencies. TopBuild highlighted its position as the largest player in mineral wool, used in both commercial and residential spaces. The company expects flat sales for both residential and commercial segments in the fourth quarter. The slowdown in single-family completions compared to the previous year was attributed to the backlog of work from the previous year. TopBuild emphasized its ability to maintain pricing in a softer single-family environment, citing the value it brings to builders in terms of service and labor.
The company’s capital allocation strategy remains unchanged, prioritizing M&A and evaluating stock buybacks. The timing of the acquisition of SPI is expected to be in 2024, with the regulatory process progressing well. The call concluded with management expressing gratitude and looking forward to sharing Q4 and full-year results in February.
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