TopBuild Corp Q1 2025 Earnings Call Summary

The following is excerpted from the question-and-answer section of the transcript.

Question: Aatish Shah - Evercore ISI Institutional Equities - Analyst : This is Aatish on for Steve. I just wanted to touch on the commercial and industrial side. I think at the end of last year, has mentioned that a lot of these projects were delayed mainly due to financing issues. And now you're seeing these projects kind of moving forward. It's not so obvious why the financing environment would have improved. So any color there would be helpful.

Question: Aatish Shah - Evercore ISI Institutional Equities - Analyst : Great, that's. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 06, 2025 / 1:00PM, BLD.N - Q1 2025 TopBuild Corp Earnings Call

Question: Michael Rehaut - J.P. Morgan Securities - Analyst : Thanks, good morning, everyone. Thanks for taking my questions. First, I would love to get a sense in terms of the guidance. Obviously, you reiterated the top line and EBITDA. But I believe, slightly lowered your resi outlook to down high single digits from down mid-single digits. Previously, you reiterated commercial and industrial, up low single. So I just wanted to understand what kind of was the offset to the slightly lower resi outlook. And if it's kind of playing with the ranges here, maybe before you were at the high end of -- to down mid-single, but just any sense of what some of the puts and takes are if you had an incremental slightly more conservative outlook for resi?

Question: Michael Rehaut - J.P. Morgan Securities - Analyst : Great. That's helpful, Rob. I appreciate that walk through. I guess, secondly, it's interesting to hear about the footprint optimization, the consolidation of 33 facilities. That seems a little bigger perhaps then some of the more -- I don't want to say generic, but sort of the ongoing efforts that you have from a productivity standpoint from your special ops teams. So just if you could kind of help us better appreciate the magnitude or the impact of the footprint optimization from a dollar perspective, what that's kind of represents in terms of a tailwind this year, if that indeed was part of the original guidance when you gave it a couple of months ago, or if it's incremental and sort of continuing to help out your ability to realize the EBITDA guidance?

Question: Michael Rehaut - J.P. Morgan Securities - Analyst : Great, thanks so much.

Question: Adam Baumgarten - Zelman Associates - Analyst : Hey guys, good morning. On the pricing side, just given the commentary that you're talking about carryover pricing from mid last year impacting the early part of this year. Should we expect the year-over-year price contribution to moderate as we move through the year given that dynamic?

Question: Adam Baumgarten - Zelman Associates - Analyst : Got it. And then just on the material side, have you started to see prices for the materials you're buying on the insulation side come down? Or have they been kind of flattish for a while? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 06, 2025 / 1:00PM, BLD.N - Q1 2025 TopBuild Corp Earnings Call

Question: Susan Maklari - Goldman Sachs - Analyst : Good morning, everyone. My first question is on labor side. You've talked about in last quarter, taking some of the labor on the install side, especially out just to adjust to the market. I guess with your revised expectations on the resi side, are there any further changes that you're making there? And any thoughts on how you're balancing the near term relative to the longer-term outlook for housing?

Question: Susan Maklari - Goldman Sachs - Analyst : Okay. That's helpful. And then maybe building on that, Rob. Can you talk a bit about the M&A pipeline any changes that you're seeing there? And what you're seeing perhaps on sort of the more traditional install side of the business relative to some of the deals on the C&I side?

Question: Susan Maklari - Goldman Sachs - Analyst : Okay, thanks for the call guys. Good luck with everything. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 06, 2025 / 1:00PM, BLD.N - Q1 2025 TopBuild Corp Earnings Call

Question: Philip Ng - Jefferies LLC - Analyst : Congrats on a strong quarter. I think, Rob, you talked about how margins came in better than you expected. Can you give us some color on what are some of the areas of upside as the branch consolidation headcount, a contributor? And kind of give us a little color on how that kind of progresses. If I look at your full year guidance, the midpoint is calling at 19% EBITDA margin, which is a great outcome given the current backdrop, but it's effectively flat from 1Q and typically, you see that seasonally pick up in 2Q, 3Q -- kind of help us contextualize how that margin progression will kind of shape up this year?

Question: Philip Ng - Jefferies LLC - Analyst : Yes. That's great color, Rob. With pricing coming in a little better, do you still feel pretty good pricing, particularly on the install side, kind of hanging in there just given some of the choppiness on the demand side. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 06, 2025 / 1:00PM, BLD.N - Q1 2025 TopBuild Corp Earnings Call Robert, I think you're expecting, I believe, fiberglass material prices to stay pretty steady here. But there's been some spray foam increases, certainly, tariffs is an element of that. And I think there's been some C&I price increases for July? Like how do you kind of anticipate pricing for your materials that's non-fiberglass, do you see some upward momentum? And does that help margins as well?

Question: Philip Ng - Jefferies LLC - Analyst : And then on some of the material costs, (Inaudible) C&I side, there's some price increases out there?.

Question: Trey Grooms - Stephens - Analyst : Just a point of clarity. Rob, I think you mentioned 2Q seeing the largest decline. And I think you were referring to the top line on that comment. But it seems like the comp is similar in the 3Q to 2Q. So is there -- does the new guide assume any demand pick up anywhere in the business in the back half? Or is there some other kind of timing aspect that we need to be mindful of.

Question: Trey Grooms - Stephens - Analyst : Okay. And kind of on the point of rightsizing, I guess, the footprint, the workforce, et cetera. Is that pretty much behind you right now? And are you where you want to be? And I guess the follow-up to that would be how quickly can you flex up if needed? Or what would you need to -- I guess, what position are you in from that from a footprint standpoint as we look out a little further in an environment where maybe demand a little better..

Question: Trey Grooms - Stephens - Analyst : Okay, thanks Robert. Thanks, Rob. Take care.

Question: Keith Hughes - Truist Securities - Analyst : Can you just talk about, in the quarter, the relative performance and distribution between Service Partners and the are around this kind of organic number you reported?

Question: Keith Hughes - Truist Securities - Analyst : I'm sorry, those numbers, were those revenue or units or what specific were that. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 06, 2025 / 1:00PM, BLD.N - Q1 2025 TopBuild Corp Earnings Call

Question: Ken Zener - Seaport Research - Analyst : Good morning everybody. So I think Q4 surprised at your held guidance despite the, I guess, decline in housing fundamentals. Obviously, you referred to M&A cost cuts. But I wonder if you could help frame the single-family market for us a little bit in more detail. Kind of in the cut in the public private common, if you could. Because public, right? They're part there, the for start data. They're down about 10% in 1Q. The guidance kind of implies flat for the year. It seems like the privates are doing worse than the public builder or maybe they're doing better from what you could tell us regionally. But could you kind of frame that out if, let's say, the publics, which did take down guidance, and they have visibility of about six months. Rob, if we were to see another 5% decline tied to who does tariffs service to that? And I realize you're giving data as very consistent with the publics and privates have kind of show you, what would a 5% decline in volume for some reason, falls off, what type of incrementals on margins would unfold in that scenario, just to kind of frame out how you think about volatility of your guidance, if we were to see another 5% decline in single family?

Question: Ken Zener - Seaport Research - Analyst : Okay. And then Robert, can you maybe -- if you would, given your guidance visibility into single-family bidding. Can you maybe give us a little feel there's lots of news talking about negative news led by Florida, Texas. But often, I think people are missing right strike in the Midwest. Southeast, if you will, north of Florida. Can you give us a little feel for how those regions are operating differently. We don't assume, right, all your markets are down because you have good markets and bad markets. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 06, 2025 / 1:00PM, BLD.N - Q1 2025 TopBuild Corp Earnings Call

Question: Ken Zener - Seaport Research - Analyst : It does. And I wonder where -- could people say consumer confidence, uncertainty, you can get the politics of it. But like what are the factors you see that are causing those markets like in Dallas? Is it just job growth and confidence is better or in Florida, it's just -- there's too much supply. If you could give us a little more granularity on why those markets are different, that would be great.

Question: Jeffrey Stevenson - Loop Capital Markets - Analyst : I was wondering if you could provide more color on the variance between light and heavy commercial demand in your Installation segment during the quarter. And I wondered whether light commercial bidding activity remains soft? Or you've seen any signs of stabilization since the start of the year. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 06, 2025 / 1:00PM, BLD.N - Q1 2025 TopBuild Corp Earnings Call

Question: Jeffrey Stevenson - Loop Capital Markets - Analyst : Okay. Great. That's helpful. And then I wanted to shift to your M&A pipeline, which sounds like it remains active. But I wanted to focus on the residential side of the business. And I wonder at a high level, whether you believe there could be more opportunities now given reduced seller expectations are potential sellers now focus on navigating this period of market uncertainty.

Question: Reuben Garner - Benchmark Company - Analyst : Thank you, good morning. Everybody. If I heard you correctly, it seems the distribution -- the resi portion of the distribution business outperformed the installation side. Is that in part that sort of hedge dynamic that you have in that business? Or if not, I guess, how far does that business at the -- or does the industry have to fall from a volume perspective where you start to get a return of some customers that can't buy direct?

Question: Reuben Garner - Benchmark Company - Analyst : Okay. Great. That's really helpful. And then what are you guys assuming in terms of the size of homes in your outlook? Or are you assuming that continues to shrink? And how meaningful of an impact does that have on the volume of insulation that you work through.

Question: Reuben Garner - Benchmark Company - Analyst : Great, thanks guys and good luck.

Question: Collin Vernon - Deutsche Bank - Analyst : Good morning. Thank you for taking my questions here. I guess I'm going to start with C&I. It was pretty resilient in the quarter, and you called out the backlog in orders being solid still. Can you just talk about how much visibility into revenue you have in the C&I business? Are you booked out through the end of the year here? And do you see any risk of an air pocket impacting '25 or '26, just as you work through the current backlogs? Or just has bidding activity been strong enough to really replace that backlog?

Question: Collin Vernon - Deutsche Bank - Analyst : Great. That's really helpful color. And then I guess I just wanted to ask one more on the single family side of the business. Just given the macro backdrop, I guess, does your guidance assume any change in the starts pace of the builders here as they get later into 2025? Or do you see it being pretty steady from current levels?

Question: Collin Vernon - Deutsche Bank - Analyst : That's helpful. Thank you for taking.

Question: Rafe Jadrosich - BofA Securities - Analyst : I wanted to follow up on just the price mix. I think last quarter, you were -- last quarter was down. This quarter was up, and you were sort of expecting at the time that, that those pressures would continue and now the outlook is a little bit better. What's the upside versus your initial expectation, how much of the change is price versus mix? And then could you just talk about like the competitive environment relative to what you're expecting?

Question: Rafe Jadrosich - BofA Securities - Analyst : That's helpful. And then just on the rationalization, it sounds like that's more related to the long-term optimization, not really adjusting for the current environment. if single-family starts stay under pressure through the end of '25 and into 2026, when would you anticipate that you would start to adjust expenses to move towards that 27% long-term decremental. I guess how long would you anticipate that the decrementals stay elevated? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 06, 2025 / 1:00PM, BLD.N - Q1 2025 TopBuild Corp Earnings Call