TopBuild Corp. Q3 FY2025 earnings call

• Acquisitions: In the third quarter, acquired Progressive Roofing ($440M annual sales), closed SPI transaction (expected $35-$40M annual run-rate synergies over 2 years), and closed additional acquisitions adding over $50M in annual revenue. - Financial Results: Total sales grew 1.4% to $1.4 billion, adjusted EBITDA margin was 19.8%. - Capital Allocation: Prioritize M&A, repurchased nearly 178,000 shares for $65.5M in Q3, with $770.9M remaining under authorization. - Investor Day: Scheduled for Dec 9 in NY, to discuss business model, growth strategy, culture, digital roadmap, and long-term financial outlook.

Installation Services segment sales totaled $858.3 million, up 0.2%, with M&A adding 11% but offset by a 10.4% volume decline and 0.5% pricing decrease. Specialty Distribution sales grew 1.4% to $608.9 million in the third quarter, driven by acquisitions of 2.3% and pricing of 1.2%, partially offset by a 2.1% volume decline. Adjusted gross profit in the third quarter was 30.1%, and adjusted SG&A as a percentage of sales was 13.6%.

• Full year sales expected between $5.35 to $5.45 billion, with M&A impact on sales ~$450 million. - Adjusted EBITDA guidance raised to $1.01 billion to $1.06 billion, representing adjusted EBITDA margin of 19.2% at midpoint. - Residential same branch sales expected down low double-digits, commercial/industrial same branch sales flattish, with heavy commercial strong and light commercial challenged.

• Macro environment uncertainty, mixed economic signals, and affordability concerns impacting consumer confidence and home buying decisions. - Competitive dynamics in the residential installation segment, including increased bidding pressures in slower markets. - Leverage levels and integration risks associated with recent acquisitions, as well as potential challenges in achieving expected synergies.

Q: Talk about sales contribution for Progressive in the quarter and if on track for full year incremental $215M?

A: Progressive's total contribution in the quarter was about $92 million, still looking at back half of year up low single digits.

Q: Color on recent acquisitions like Diamond Door Products and Insulation Fabrics?

A: Diamond Door Products is a complement to specialty distribution, assembling insulated steel door systems; Insulation Fabrics expands distribution of insulation accessories.

Q: Headwind from insulation pricing baked into guidance? How trended in 3Q?

A: ~$30M headwind still baked in, impacted ~$12M in 3Q, more on distribution side, with commercial products driving positive pricing on distribution.

Q: Confidence in C&I growth for 2026?

A: Feel positive about C&I growth in 2026, with backlogs growing in mechanical, DI, SPI, and commercial roofing.