TopBuild Corp Q3 2024 Earnings Call Transcript

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

Question: Aatish Shah - Evercore - Analyst : Hi. This is [Atish], on for Steve. Thanks for taking the question. Just sticking with pricing there. Outside of fiberglass and spray foam, how should we think about the pricing dynamics of the other products in the quarter and kind of going forward with our deflation there? So if you could touch on that, that would be helpful.

Question: Michael Rehaut - JPMorgan - Analyst : Hi. Thanks. Good morning, everyone. Thanks for taking my questions. First, maybe a little bit also of a housekeeping question, just to kind of better appreciate the degree of magnitude here given the variety of your end markets and products that you offer. If you could just remind us roughly what percent of sales does commercial represent as well as on the residential side, spray foam, as a percent of your overall sales? Or if it's more relevant, your Installation segment? Just to kind of better appreciate again the impact of some of the mix trends in these areas.

Question: Michael Rehaut - JPMorgan - Analyst : Okay. Great. And I assume when you kind of talk about the commercial projects being delayed, that is kind of, broadly speaking, referring to the overall commercial and industrial numbers that you just quoted? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 05, 2024 / 2:00PM, BLD.N - Q3 2024 TopBuild Corp Earnings Call

Question: Michael Rehaut - JPMorgan - Analyst : Okay. All right. Because I think also a part of that is there is a portion of the commercial and industrial business that's kind of more recurring. So I don't know if that would be kind of outside of those percentages, so to speak.

Question: Michael Rehaut - JPMorgan - Analyst : Great. Second question relates more to the M&A backdrop. We see the continued activity this year. I think going back to the beginning of the year with the SPI deal that fell through for reasons that obviously we're all familiar with, that was a relatively larger deal and I think there is some maybe concern out there that similar larger deals may be harder to come by. So I'm just kind of curious what your thoughts around -- you kind of continue to talk about the M&A backdrop remaining robust, a lot of activity, a lot of opportunity. Kind of on the medium to larger side, I was wondering if you could kind of review your prospects across your three different verticals. I guess it's more relevant to the medium to larger opportunities more on the commercial and industrial side. But kind of where you stand with those types of acquisitions? And how should we think about the next two or three years as it relates to the potential for additional medium to larger deals?

Question: Michael Rehaut - JPMorgan - Analyst : Great. Thanks so much.

Question: Susan Maklari - Goldman Sachs - Analyst : Thank you. Good morning, everyone.

Question: Susan Maklari - Goldman Sachs - Analyst : My first question is around the energy efficiency initiatives that you had mentioned. As the builders are struggling with the affordability headwinds and rates are continuing to have higher versus lower, can you talk about how some of that is perhaps flowing through and how it may come through over the course of the next year or so?

Question: Susan Maklari - Goldman Sachs - Analyst : Okay. That's helpful. And then maybe thinking about the cost environment a bit. Can you just talk about labor? The availability that you're seeing there, has that changed at all? Or has it gotten any better for you? How you're thinking about wage inflation? And then I guess, as it relates to that, also just some of the company-specific efforts that you're pursuing as it relates to being more productive and efficient, especially on some of the distribution efforts there? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 05, 2024 / 2:00PM, BLD.N - Q3 2024 TopBuild Corp Earnings Call

Question: Susan Maklari - Goldman Sachs - Analyst : Okay. Thank you for the color and good luck with everything.

Question: Garik Shmois - Loop Capital - Analyst : Hi. Thanks. It's Garik Shmois, on for Jeff. Thanks for taking my question. I was wondering if supply constraints on the fiberglass side have any impact to volumes similar to what you saw in prior quarters? And maybe just speak broadly how you're positioned from inventories going into the fourth quarter just given the supply constraints you talked about?

Question: Garik Shmois - Loop Capital - Analyst : Okay. Thanks for that. And just wondering if you could provide maybe some more color just geographically, what you're seeing by region. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 05, 2024 / 2:00PM, BLD.N - Q3 2024 TopBuild Corp Earnings Call

Question: Garik Shmois - Loop Capital - Analyst : No, it does. Thanks for that (inaudible).

Question: Keith Hughes - Truist Securities - Analyst : Thank you. In the fourth quarter guide, what do you expect in your multi-family business in terms of dollars in units, however you want to do it, to be down?

Question: Keith Hughes - Truist Securities - Analyst : Do you think -- whatever the numbers is, it seems like that's probably going to get worse at the beginning of the year. Is that directionally where you see the market going?

Question: Keith Hughes - Truist Securities - Analyst : Okay.

Question: Keith Hughes - Truist Securities - Analyst : Yeah. And I guess on the pricing side, just not been up much this year. What do you think it would take to get back to some higher inflation in terms of what you're getting from your suppliers as well as what you can put to your customers?

Question: Keith Hughes - Truist Securities - Analyst : Okay. Thank you.

Question: Shaun Calnan - Bank of America - Analyst : Hi guys. This is actually Shaun Calnan, on for Rafe. First, on the spray foam price changes, can you talk about the cadence of price changes there? Are they consistent or is this more of a dynamic pricing model versus fiberglass? And then how has the spread between fiberglass and spray foam changed over time?

Question: Shaun Calnan - Bank of America - Analyst : Okay. Got it. And then you mentioned that you guys are looking at opportunities to expand the addressable market. Can you just kind of expand on what those opportunities are that you're evaluating? Are these new products or markets? And then is it more on the Installation or Distribution side?

Question: Shaun Calnan - Bank of America - Analyst : Yes. Thank you.

Question: Kenneth Zener - Seaport Research Partners - Analyst : Good morning, everybody. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 05, 2024 / 2:00PM, BLD.N - Q3 2024 TopBuild Corp Earnings Call

Question: Kenneth Zener - Seaport Research Partners - Analyst : Appreciate your comments regionally. I like your positive steady and choppy market definition given that you and a competitor have probably the best data on housing -- new housing activity in terms of bids. Within that context, could you maybe just comment on how your salespeople are conveying positive steady and choppy to you in terms of like the bidding? Is there a price pressure? There's obviously volume pressure given the rising number of finished homes that builders have, right? It seems like they're pulling back on starts a little bit, and obviously, rates have gone up in the last six weeks. But could you maybe give us some context for this if it's a supply issue, it's a demand issue? If your teams are saying pricing is an issue or they're pushing back on it. But also, given your perspective, does this make sense what's happening, just kind of micro cycles where it takes a little bit to get adjusted to interest rates? It's very interesting and I think your view matters. Thank you.

Question: Kenneth Zener - Seaport Research Partners - Analyst : I really appreciate that. And maybe if I could come at it from another angle. Because you have a broad perspective on the national housing and I think people like myself get sometimes overly biased by what the public builders are saying. So many of the public builders are calling for like 10% growth. Is that kind of consistent with the public versus the private delta as they think about their business next year? Because starts probably aren't growing 10% overall, but many builders are looking for 10% growth. Does that mean the publics are still gaining a lot of shares? Or is that really just that we're focused on Orlando, Dallas, and not enough on Michigan or these smaller markets? Thank you.

Question: Kenneth Zener - Seaport Research Partners - Analyst : Thank you very much.

Question: Adam Baumgarten - Zelman & Associates - Analyst : Hey. Good morning, everyone. Just on the pricing side, can you put a finer point on the magnitude of the headwind to overall pricing from the spray foam declines? Just because I know you had talked about the fiberglass side improving on a year-over-year basis from 2Q to 3Q, but I think it was offset by spray foam. So any color on the magnitude just so we can get have a better apples-to-apples comparison on the fiberglass side?

Question: Adam Baumgarten - Zelman & Associates - Analyst : Okay. Got it. That's helpful. And then just to clarify on the kind of tightening of the guidance range and the midpoint coming down, was that solely due to lower single-family or just overall residential growth in general, not any change at this point in your C&I outlooks? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 05, 2024 / 2:00PM, BLD.N - Q3 2024 TopBuild Corp Earnings Call

Question: Adam Baumgarten - Zelman & Associates - Analyst : Got it. Thanks. Best of luck.