TopBuild Corp. Q4 FY2024 earnings call

• TopBuild Corp. had ninth consecutive year of growth and profit expansion, celebrating ten-year anniversary as public company. - Housing market had elevated interest rates, external forecasts for 2025 housing starts trimmed. - Fiberglass supply loosened, new Texas facility started production. - Acquisitions priority, completed eight acquisitions in 2024 totaling ~$153M in annual revenue. - Returned nearly $1B to shareholders via share repurchase, board authorized new $1B buyback. - Core competencies include people business, dispersed network, technology, and financial discipline.

Installation sales were relatively flat year over year at $788.6 million. Volume declined 4.1% and was offset by M&A of 2.3% and pricing of 1.5%. Within specialty distribution, sales grew 6.6% to $601.8 million in the fourth quarter. Volume rose by 4.4% as commercial industrial sales grew and spray foam sales rose ahead of industry cost increases. Acquisitions added 2.2% while pricing was flat in the quarter.

• Sales guidance: $5.05 billion to $5.35 billion. - Adjusted EBITDA guidance: $925 million to $1.075 billion. - Anticipate residential demand improvement but timing unclear. - Commercial and industrial expected to have low single-digit growth. - Volume expected to be down low single digits in 2025, multifamily (10% of sales) down ~30%, single-family (55%) flat, commercial industrial (35%) up low single digits. - EBITDA margin expected to be 18.3% to 20.1%, midpoint ~19.2% of sales, down 100 basis points from prior year.

• Tariffs: Potentially small impact on business, but taking steps to mitigate. - Labor: Deportations in certain markets could slow construction cycle, putting labor at premium, but confident in labor force. - Economic and regulatory uncertainties impacting the industry.

Q: On pricing, how are you seeing it and balancing?

A: Builders face affordability pressure, not chasing share, working with builders, spray foam has pressure but teams working through.

Q: On spray foam and dumping duty, any movement?

A: Miss material available, pressure around Thanksgiving, passing some along but working through first quarter.

Q: On M&A pipeline, color?

A: Pipeline robust, C&I space active with recent acquisitions, adjacency opportunities exist.

Q: On strategic price and volume decisions in residential, elaboration?

A: Pricing pressure on distribution, installation sees labor pressure, being strategic with labor and back-office.

Q: On fiberglass pricing, expectation?

A: Dependent on demand improving, no new increases announced.

Q: On technology use, practical perspective?

A: ERP tool helps with demand visibility, pricing, labor, and productivity management.

Q: On commercial bidding activity, where from?

A: Active across verticals like manufacturing, data centers, etc., diversified.

Q: On commercial industrial outlook, impact on distribution?

A: Commercial industrial expected to grow low single digits, distribution less pressure than installation.

Q: On housing inventory and slowdown, how long?

A: Depends on builder population, big builders buying down, smaller builders adjusting.

Q: On deportation impact and competitive advantage?

A: Cycle time impact possible, but confident in workforce and service levels as advantage.

Q: On labor cost adjustments, what needed?

A: Prolonged weakness needed, but will hold on to productive labor as seen in past choppiness