0 0 0001633931 false--12-31 2023 Q2 0001633931 us-gaap:CommonStockMember 2023-01-01 2023-03-31 0001633931 us-gaap:CommonStockMember 2022-01-01 2022-03-31 0001633931 us-gaap:TreasuryStockCommonMember 2023-06-30 0001633931 us-gaap:RetainedEarningsMember 2023-06-30 0001633931 us-gaap:CommonStockMember 2023-06-30 0001633931 us-gaap:AdditionalPaidInCapitalMember 2023-06-30 0001633931 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2023-06-30 0001633931 us-gaap:TreasuryStockCommonMember 2023-03-31 0001633931 us-gaap:RetainedEarningsMember 2023-03-31 0001633931 us-gaap:CommonStockMember 2023-03-31 0001633931 us-gaap:AdditionalPaidInCapitalMember 2023-03-31 0001633931 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2023-03-31 0001633931 2023-03-31 0001633931 us-gaap:TreasuryStockCommonMember 2022-12-31 0001633931 us-gaap:RetainedEarningsMember 2022-12-31 0001633931 us-gaap:CommonStockMember 2022-12-31 0001633931 us-gaap:AdditionalPaidInCapitalMember 2022-12-31 0001633931 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2022-12-31 0001633931 us-gaap:TreasuryStockCommonMember 2022-06-30 0001633931 us-gaap:RetainedEarningsMember 2022-06-30 0001633931 us-gaap:CommonStockMember 2022-06-30 0001633931 us-gaap:AdditionalPaidInCapitalMember 2022-06-30 0001633931 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2022-06-30 0001633931 us-gaap:TreasuryStockCommonMember 2022-03-31 0001633931 us-gaap:RetainedEarningsMember 2022-03-31 0001633931 us-gaap:CommonStockMember 2022-03-31 0001633931 us-gaap:AdditionalPaidInCapitalMember 2022-03-31 0001633931 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2022-03-31 0001633931 2022-03-31 0001633931 us-gaap:TreasuryStockCommonMember 2021-12-31 0001633931 us-gaap:RetainedEarningsMember 2021-12-31 0001633931 us-gaap:CommonStockMember 2021-12-31 0001633931 us-gaap:AdditionalPaidInCapitalMember 2021-12-31 0001633931 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-12-31 0001633931 us-gaap:EmployeeStockOptionMember 2022-12-31 0001633931 bld:LongTermIncentivePlanMember 2023-06-30 0001633931 srt:MaximumMember bld:LongTermIncentivePlanMember 2023-06-30 0001633931 us-gaap:RestrictedStockMember 2022-12-31 0001633931 bld:Acquisitions2022Member 2023-01-01 2023-06-30 0001633931 us-gaap:OperatingSegmentsMember bld:ResidentialMember bld:InstallationSegmentMember 2023-04-01 2023-06-30 0001633931 us-gaap:OperatingSegmentsMember bld:ResidentialMember bld:DistributionSegmentMember 2023-04-01 2023-06-30 0001633931 us-gaap:OperatingSegmentsMember bld:RainGuttersMember bld:InstallationSegmentMember 2023-04-01 2023-06-30 0001633931 us-gaap:OperatingSegmentsMember bld:RainGuttersMember bld:DistributionSegmentMember 2023-04-01 2023-06-30 0001633931 us-gaap:OperatingSegmentsMember bld:InsulationAndAccessoriesMember bld:InstallationSegmentMember 2023-04-01 2023-06-30 0001633931 us-gaap:OperatingSegmentsMember bld:InsulationAndAccessoriesMember bld:DistributionSegmentMember 2023-04-01 2023-06-30 0001633931 us-gaap:OperatingSegmentsMember bld:GlassAndWindowsMember bld:InstallationSegmentMember 2023-04-01 2023-06-30 0001633931 us-gaap:OperatingSegmentsMember bld:CommercialAndIndustrialMember bld:InstallationSegmentMember 2023-04-01 2023-06-30 0001633931 us-gaap:OperatingSegmentsMember bld:CommercialAndIndustrialMember bld:DistributionSegmentMember 2023-04-01 2023-06-30 0001633931 us-gaap:OperatingSegmentsMember bld:AllOtherProductsMember bld:InstallationSegmentMember 2023-04-01 2023-06-30 0001633931 us-gaap:OperatingSegmentsMember bld:AllOtherProductsMember bld:DistributionSegmentMember 2023-04-01 2023-06-30 0001633931 bld:EliminationsAndReconcilingItemsMember bld:ResidentialMember 2023-04-01 2023-06-30 0001633931 bld:EliminationsAndReconcilingItemsMember bld:RainGuttersMember 2023-04-01 2023-06-30 0001633931 bld:EliminationsAndReconcilingItemsMember bld:InsulationAndAccessoriesMember 2023-04-01 2023-06-30 0001633931 bld:EliminationsAndReconcilingItemsMember bld:CommercialAndIndustrialMember 2023-04-01 2023-06-30 0001633931 bld:EliminationsAndReconcilingItemsMember bld:AllOtherProductsMember 2023-04-01 2023-06-30 0001633931 bld:ResidentialMember 2023-04-01 2023-06-30 0001633931 bld:RainGuttersMember 2023-04-01 2023-06-30 0001633931 bld:InsulationAndAccessoriesMember 2023-04-01 2023-06-30 0001633931 bld:GlassAndWindowsMember 2023-04-01 2023-06-30 0001633931 bld:EliminationsAndReconcilingItemsMember 2023-04-01 2023-06-30 0001633931 bld:CommercialAndIndustrialMember 2023-04-01 2023-06-30 0001633931 bld:AllOtherProductsMember 2023-04-01 2023-06-30 0001633931 us-gaap:OperatingSegmentsMember bld:ResidentialMember bld:InstallationSegmentMember 2023-01-01 2023-06-30 0001633931 us-gaap:OperatingSegmentsMember bld:ResidentialMember bld:DistributionSegmentMember 2023-01-01 2023-06-30 0001633931 us-gaap:OperatingSegmentsMember bld:RainGuttersMember bld:InstallationSegmentMember 2023-01-01 2023-06-30 0001633931 us-gaap:OperatingSegmentsMember bld:RainGuttersMember bld:DistributionSegmentMember 2023-01-01 2023-06-30 0001633931 us-gaap:OperatingSegmentsMember bld:InsulationAndAccessoriesMember bld:InstallationSegmentMember 2023-01-01 2023-06-30 0001633931 us-gaap:OperatingSegmentsMember bld:InsulationAndAccessoriesMember bld:DistributionSegmentMember 2023-01-01 2023-06-30 0001633931 us-gaap:OperatingSegmentsMember bld:GlassAndWindowsMember bld:InstallationSegmentMember 2023-01-01 2023-06-30 0001633931 us-gaap:OperatingSegmentsMember bld:CommercialAndIndustrialMember bld:InstallationSegmentMember 2023-01-01 2023-06-30 0001633931 us-gaap:OperatingSegmentsMember bld:CommercialAndIndustrialMember bld:DistributionSegmentMember 2023-01-01 2023-06-30 0001633931 us-gaap:OperatingSegmentsMember bld:AllOtherProductsMember bld:InstallationSegmentMember 2023-01-01 2023-06-30 0001633931 us-gaap:OperatingSegmentsMember bld:AllOtherProductsMember bld:DistributionSegmentMember 2023-01-01 2023-06-30 0001633931 bld:EliminationsAndReconcilingItemsMember bld:ResidentialMember 2023-01-01 2023-06-30 0001633931 bld:EliminationsAndReconcilingItemsMember bld:RainGuttersMember 2023-01-01 2023-06-30 0001633931 bld:EliminationsAndReconcilingItemsMember bld:InsulationAndAccessoriesMember 2023-01-01 2023-06-30 0001633931 bld:EliminationsAndReconcilingItemsMember bld:CommercialAndIndustrialMember 2023-01-01 2023-06-30 0001633931 bld:EliminationsAndReconcilingItemsMember bld:AllOtherProductsMember 2023-01-01 2023-06-30 0001633931 bld:ResidentialMember 2023-01-01 2023-06-30 0001633931 bld:RainGuttersMember 2023-01-01 2023-06-30 0001633931 bld:InsulationAndAccessoriesMember 2023-01-01 2023-06-30 0001633931 bld:GlassAndWindowsMember 2023-01-01 2023-06-30 0001633931 bld:EliminationsAndReconcilingItemsMember 2023-01-01 2023-06-30 0001633931 bld:CommercialAndIndustrialMember 2023-01-01 2023-06-30 0001633931 bld:AllOtherProductsMember 2023-01-01 2023-06-30 0001633931 us-gaap:OperatingSegmentsMember bld:ResidentialMember bld:InstallationSegmentMember 2022-04-01 2022-06-30 0001633931 us-gaap:OperatingSegmentsMember bld:ResidentialMember bld:DistributionSegmentMember 2022-04-01 2022-06-30 0001633931 us-gaap:OperatingSegmentsMember bld:RainGuttersMember bld:InstallationSegmentMember 2022-04-01 2022-06-30 0001633931 us-gaap:OperatingSegmentsMember bld:RainGuttersMember bld:DistributionSegmentMember 2022-04-01 2022-06-30 0001633931 us-gaap:OperatingSegmentsMember bld:InsulationAndAccessoriesMember bld:InstallationSegmentMember 2022-04-01 2022-06-30 0001633931 us-gaap:OperatingSegmentsMember bld:InsulationAndAccessoriesMember bld:DistributionSegmentMember 2022-04-01 2022-06-30 0001633931 us-gaap:OperatingSegmentsMember bld:GlassAndWindowsMember bld:InstallationSegmentMember 2022-04-01 2022-06-30 0001633931 us-gaap:OperatingSegmentsMember bld:CommercialAndIndustrialMember bld:InstallationSegmentMember 2022-04-01 2022-06-30 0001633931 us-gaap:OperatingSegmentsMember bld:CommercialAndIndustrialMember bld:DistributionSegmentMember 2022-04-01 2022-06-30 0001633931 us-gaap:OperatingSegmentsMember bld:AllOtherProductsMember bld:InstallationSegmentMember 2022-04-01 2022-06-30 0001633931 us-gaap:OperatingSegmentsMember bld:AllOtherProductsMember bld:DistributionSegmentMember 2022-04-01 2022-06-30 0001633931 bld:EliminationsAndReconcilingItemsMember bld:ResidentialMember 2022-04-01 2022-06-30 0001633931 bld:EliminationsAndReconcilingItemsMember bld:RainGuttersMember 2022-04-01 2022-06-30 0001633931 bld:EliminationsAndReconcilingItemsMember bld:InsulationAndAccessoriesMember 2022-04-01 2022-06-30 0001633931 bld:EliminationsAndReconcilingItemsMember bld:CommercialAndIndustrialMember 2022-04-01 2022-06-30 0001633931 bld:EliminationsAndReconcilingItemsMember bld:AllOtherProductsMember 2022-04-01 2022-06-30 0001633931 bld:ResidentialMember 2022-04-01 2022-06-30 0001633931 bld:RainGuttersMember 2022-04-01 2022-06-30 0001633931 bld:InsulationAndAccessoriesMember 2022-04-01 2022-06-30 0001633931 bld:GlassAndWindowsMember 2022-04-01 2022-06-30 0001633931 bld:EliminationsAndReconcilingItemsMember 2022-04-01 2022-06-30 0001633931 bld:CommercialAndIndustrialMember 2022-04-01 2022-06-30 0001633931 bld:AllOtherProductsMember 2022-04-01 2022-06-30 0001633931 us-gaap:OperatingSegmentsMember bld:ResidentialMember bld:InstallationSegmentMember 2022-01-01 2022-06-30 0001633931 us-gaap:OperatingSegmentsMember bld:ResidentialMember bld:DistributionSegmentMember 2022-01-01 2022-06-30 0001633931 us-gaap:OperatingSegmentsMember bld:RainGuttersMember bld:InstallationSegmentMember 2022-01-01 2022-06-30 0001633931 us-gaap:OperatingSegmentsMember bld:RainGuttersMember bld:DistributionSegmentMember 2022-01-01 2022-06-30 0001633931 us-gaap:OperatingSegmentsMember bld:InsulationAndAccessoriesMember bld:InstallationSegmentMember 2022-01-01 2022-06-30 0001633931 us-gaap:OperatingSegmentsMember bld:InsulationAndAccessoriesMember bld:DistributionSegmentMember 2022-01-01 2022-06-30 0001633931 us-gaap:OperatingSegmentsMember bld:GlassAndWindowsMember bld:InstallationSegmentMember 2022-01-01 2022-06-30 0001633931 us-gaap:OperatingSegmentsMember bld:CommercialAndIndustrialMember bld:InstallationSegmentMember 2022-01-01 2022-06-30 0001633931 us-gaap:OperatingSegmentsMember bld:CommercialAndIndustrialMember bld:DistributionSegmentMember 2022-01-01 2022-06-30 0001633931 us-gaap:OperatingSegmentsMember bld:AllOtherProductsMember bld:InstallationSegmentMember 2022-01-01 2022-06-30 0001633931 us-gaap:OperatingSegmentsMember bld:AllOtherProductsMember bld:DistributionSegmentMember 2022-01-01 2022-06-30 0001633931 bld:EliminationsAndReconcilingItemsMember bld:ResidentialMember 2022-01-01 2022-06-30 0001633931 bld:EliminationsAndReconcilingItemsMember bld:RainGuttersMember 2022-01-01 2022-06-30 0001633931 bld:EliminationsAndReconcilingItemsMember bld:InsulationAndAccessoriesMember 2022-01-01 2022-06-30 0001633931 bld:EliminationsAndReconcilingItemsMember bld:CommercialAndIndustrialMember 2022-01-01 2022-06-30 0001633931 bld:EliminationsAndReconcilingItemsMember bld:AllOtherProductsMember 2022-01-01 2022-06-30 0001633931 bld:ResidentialMember 2022-01-01 2022-06-30 0001633931 bld:RainGuttersMember 2022-01-01 2022-06-30 0001633931 bld:InsulationAndAccessoriesMember 2022-01-01 2022-06-30 0001633931 bld:GlassAndWindowsMember 2022-01-01 2022-06-30 0001633931 bld:EliminationsAndReconcilingItemsMember 2022-01-01 2022-06-30 0001633931 bld:CommercialAndIndustrialMember 2022-01-01 2022-06-30 0001633931 bld:AllOtherProductsMember 2022-01-01 2022-06-30 0001633931 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2023-04-01 2023-06-30 0001633931 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2023-01-01 2023-03-31 0001633931 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2022-04-01 2022-06-30 0001633931 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2022-01-01 2022-03-31 0001633931 us-gaap:OperatingSegmentsMember bld:InstallationSegmentMember 2023-04-01 2023-06-30 0001633931 us-gaap:OperatingSegmentsMember bld:DistributionSegmentMember 2023-04-01 2023-06-30 0001633931 us-gaap:OperatingSegmentsMember 2023-04-01 2023-06-30 0001633931 us-gaap:IntersegmentEliminationMember 2023-04-01 2023-06-30 0001633931 us-gaap:OperatingSegmentsMember bld:InstallationSegmentMember 2023-01-01 2023-06-30 0001633931 us-gaap:OperatingSegmentsMember bld:DistributionSegmentMember 2023-01-01 2023-06-30 0001633931 us-gaap:OperatingSegmentsMember 2023-01-01 2023-06-30 0001633931 us-gaap:IntersegmentEliminationMember 2023-01-01 2023-06-30 0001633931 us-gaap:OperatingSegmentsMember bld:InstallationSegmentMember 2022-04-01 2022-06-30 0001633931 us-gaap:OperatingSegmentsMember bld:DistributionSegmentMember 2022-04-01 2022-06-30 0001633931 us-gaap:OperatingSegmentsMember 2022-04-01 2022-06-30 0001633931 us-gaap:IntersegmentEliminationMember 2022-04-01 2022-06-30 0001633931 us-gaap:OperatingSegmentsMember bld:InstallationSegmentMember 2022-01-01 2022-06-30 0001633931 us-gaap:OperatingSegmentsMember bld:DistributionSegmentMember 2022-01-01 2022-06-30 0001633931 us-gaap:OperatingSegmentsMember 2022-01-01 2022-06-30 0001633931 us-gaap:IntersegmentEliminationMember 2022-01-01 2022-06-30 0001633931 us-gaap:CorporateNonSegmentMember 2023-04-01 2023-06-30 0001633931 us-gaap:CorporateNonSegmentMember 2023-01-01 2023-06-30 0001633931 us-gaap:CorporateNonSegmentMember 2022-04-01 2022-06-30 0001633931 us-gaap:CorporateNonSegmentMember 2022-01-01 2022-06-30 0001633931 us-gaap:RetainedEarningsMember 2023-04-01 2023-06-30 0001633931 us-gaap:RetainedEarningsMember 2023-01-01 2023-03-31 0001633931 us-gaap:RetainedEarningsMember 2022-04-01 2022-06-30 0001633931 us-gaap:RetainedEarningsMember 2022-01-01 2022-03-31 0001633931 srt:MinimumMember us-gaap:RevolvingCreditFacilityMember 2023-01-01 2023-06-30 0001633931 srt:MaximumMember us-gaap:RevolvingCreditFacilityMember 2023-01-01 2023-06-30 0001633931 bld:AmendmentNo.4ToCreditAgreementMember bld:DelayedDrawTermLoanJuly2023Member us-gaap:SubsequentEventMember 2023-07-26 0001633931 bld:AmendmentNo.4ToCreditAgreementMember us-gaap:SubsequentEventMember 2023-07-26 0001633931 bld:AmendedCreditAgreementDecember2022Member 2023-07-25 0001633931 bld:AmendedCreditAgreementDecember2022Member us-gaap:SecuredDebtMember 2023-06-30 0001633931 us-gaap:RevolvingCreditFacilityMember 2023-06-30 0001633931 us-gaap:RevolvingCreditFacilityMember 2022-12-31 0001633931 bld:InstallationSegmentMember 2023-01-01 2023-06-30 0001633931 2022-10-01 2022-12-31 0001633931 bld:InstallationSegmentMember 2022-12-31 0001633931 bld:DistributionSegmentMember 2022-12-31 0001633931 bld:DistributionSegmentMember 2023-01-01 2023-06-30 0001633931 bld:BillingsInsulationServiceInc.Member 2022-02-03 2022-02-03 0001633931 us-gaap:SeriesOfIndividuallyImmaterialBusinessAcquisitionsMember 2022-01-01 2022-06-30 0001633931 bld:InstallationSegmentMember 2023-06-30 0001633931 bld:DistributionSegmentMember 2023-06-30 0001633931 us-gaap:EmployeeStockOptionMember 2023-06-30 0001633931 us-gaap:RestrictedStockMember 2023-06-30 0001633931 bld:EquipmentNotesMember 2023-01-01 2023-06-30 0001633931 srt:MaximumMember bld:DebtInstrumentRedemptionOptionTwoMember bld:SeniorNotesDue2029Member us-gaap:DebtInstrumentRedemptionPeriodOneMember 2023-01-01 2023-06-30 0001633931 bld:DebtInstrumentRedemptionOptionOneMember bld:SeniorNotesDue2029Member us-gaap:DebtInstrumentRedemptionPeriodOneMember 2023-01-01 2023-06-30 0001633931 bld:SeniorNotesDue2032Member us-gaap:DebtInstrumentRedemptionPeriodTwoMember 2023-01-01 2023-06-30 0001633931 bld:SeniorNotesDue2032Member us-gaap:DebtInstrumentRedemptionPeriodThreeMember 2023-01-01 2023-06-30 0001633931 bld:SeniorNotesDue2032Member us-gaap:DebtInstrumentRedemptionPeriodFourMember 2023-01-01 2023-06-30 0001633931 bld:SeniorNotesDue2032Member us-gaap:DebtInstrumentRedemptionPeriodFiveMember 2023-01-01 2023-06-30 0001633931 bld:ChangeInControlScenarioMember bld:SeniorNotesDue2032Member 2023-01-01 2023-06-30 0001633931 bld:ChangeInControlScenarioMember bld:SeniorNotesDue2029Member 2023-01-01 2023-06-30 0001633931 bld:AmendedCreditAgreementDecember2022Member 2023-01-01 2023-06-30 0001633931 srt:MinimumMember bld:EquipmentNotesMember 2023-06-30 0001633931 srt:MaximumMember bld:EquipmentNotesMember 2023-06-30 0001633931 bld:SeniorNotesDue2032Member us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsNonrecurringMember 2023-06-30 0001633931 bld:SeniorNotesDue2029Member us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsNonrecurringMember 2023-06-30 0001633931 us-gaap:SecuredDebtMember 2023-06-30 0001633931 bld:SeniorNotesDue2032Member 2023-06-30 0001633931 bld:SeniorNotesDue2029Member 2023-06-30 0001633931 bld:EquipmentNotesMember 2023-06-30 0001633931 us-gaap:SecuredDebtMember 2022-12-31 0001633931 bld:SeniorNotesDue2032Member 2022-12-31 0001633931 bld:SeniorNotesDue2029Member 2022-12-31 0001633931 bld:EquipmentNotesMember 2022-12-31 0001633931 bld:BaseRateBorrowingsMember bld:AmendedCreditAgreementDecember2022Member bld:FederalFundsRateMember 2023-01-01 2023-06-30 0001633931 us-gaap:AccruedLiabilitiesMember 2023-06-30 0001633931 us-gaap:AccruedLiabilitiesMember 2022-12-31 0001633931 bld:ReceivablesNetMember 2023-06-30 0001633931 bld:ReceivablesNetMember 2022-12-31 0001633931 2021-12-31 0001633931 bld:SriHoldingsMember us-gaap:TrademarksAndTradeNamesMember 2023-06-30 0001633931 bld:SriHoldingsMember us-gaap:NoncompeteAgreementsMember 2023-06-30 0001633931 bld:SriHoldingsMember us-gaap:CustomerRelationshipsMember 2023-06-30 0001633931 srt:ScenarioForecastMember bld:SpiMember us-gaap:SubsequentEventMember 2023-07-26 2023-07-26 0001633931 bld:BestInsulationMember us-gaap:SubsequentEventMember 2023-07-17 2023-07-17 0001633931 bld:RockyMountainMember us-gaap:SubsequentEventMember 2023-07-10 2023-07-10 0001633931 bld:SriHoldingsMember 2023-01-26 2023-01-26 0001633931 2022-06-30 0001633931 us-gaap:EmployeeStockOptionMember 2023-04-01 2023-06-30 0001633931 bld:VestingBasedOnServiceMember us-gaap:RestrictedStockMember 2023-01-01 2023-06-30 0001633931 bld:VestingBasedOnMarketConditionsMember us-gaap:RestrictedStockMember 2023-01-01 2023-06-30 0001633931 us-gaap:EmployeeStockOptionMember 2023-01-01 2023-06-30 0001633931 bld:VestingBasedOnServiceMember us-gaap:RestrictedStockMember 2022-04-01 2022-06-30 0001633931 bld:VestingBasedOnMarketConditionsMember us-gaap:RestrictedStockMember 2022-04-01 2022-06-30 0001633931 us-gaap:EmployeeStockOptionMember 2022-04-01 2022-06-30 0001633931 bld:VestingBasedOnServiceMember us-gaap:RestrictedStockMember 2022-01-01 2022-06-30 0001633931 bld:VestingBasedOnPerformanceMember us-gaap:RestrictedStockMember 2022-01-01 2022-06-30 0001633931 bld:VestingBasedOnMarketConditionsMember us-gaap:RestrictedStockMember 2022-01-01 2022-06-30 0001633931 us-gaap:EmployeeStockOptionMember 2022-01-01 2022-06-30 0001633931 us-gaap:AdditionalPaidInCapitalMember 2023-04-01 2023-06-30 0001633931 us-gaap:AdditionalPaidInCapitalMember 2023-01-01 2023-03-31 0001633931 us-gaap:AdditionalPaidInCapitalMember 2022-01-01 2022-03-31 0001633931 us-gaap:TreasuryStockCommonMember 2023-01-01 2023-03-31 0001633931 2023-01-01 2023-03-31 0001633931 bld:SriHoldingsMember us-gaap:TrademarksAndTradeNamesMember 2023-01-01 2023-06-30 0001633931 bld:SriHoldingsMember us-gaap:NoncompeteAgreementsMember 2023-01-01 2023-06-30 0001633931 bld:SriHoldingsMember us-gaap:CustomerRelationshipsMember 2023-01-01 2023-06-30 0001633931 bld:SriHoldingsMember 2023-01-01 2023-06-30 0001633931 2023-07-27 0001633931 us-gaap:TreasuryStockCommonMember 2022-01-01 2022-03-31 0001633931 us-gaap:TreasuryStockCommonMember 2022-04-01 2022-06-30 0001633931 us-gaap:AdditionalPaidInCapitalMember 2022-04-01 2022-06-30 0001633931 2022-01-01 2022-03-31 0001633931 bld:ShareBasedCompensationArrangementByShareBasedPaymentAwardPayoutRangeTwoMember bld:VestingBasedOnPerformanceMember us-gaap:RestrictedStockMember 2023-02-21 0001633931 bld:ShareBasedCompensationArrangementByShareBasedPaymentAwardPayoutRangeThreeMember bld:VestingBasedOnPerformanceMember us-gaap:RestrictedStockMember 2023-02-21 0001633931 bld:ShareBasedCompensationArrangementByShareBasedPaymentAwardPayoutRangeOneMember bld:VestingBasedOnPerformanceMember us-gaap:RestrictedStockMember 2023-02-21 0001633931 bld:ShareBasedCompensationArrangementByShareBasedPaymentAwardPayoutRangeFourMember bld:VestingBasedOnPerformanceMember us-gaap:RestrictedStockMember 2023-02-21 0001633931 bld:ShareBasedCompensationArrangementByShareBasedPaymentAwardPayoutRangeTwoMember bld:VestingBasedOnPerformanceMember us-gaap:RestrictedStockMember 2022-02-15 0001633931 bld:ShareBasedCompensationArrangementByShareBasedPaymentAwardPayoutRangeThreeMember bld:VestingBasedOnPerformanceMember us-gaap:RestrictedStockMember 2022-02-15 0001633931 bld:ShareBasedCompensationArrangementByShareBasedPaymentAwardPayoutRangeOneMember bld:VestingBasedOnPerformanceMember us-gaap:RestrictedStockMember 2022-02-15 0001633931 bld:ShareBasedCompensationArrangementByShareBasedPaymentAwardPayoutRangeFourMember bld:VestingBasedOnPerformanceMember us-gaap:RestrictedStockMember 2022-02-15 0001633931 bld:ShareBasedCompensationArrangementByShareBasedPaymentAwardPayoutRangeTwoMember bld:VestingBasedOnPerformanceMember us-gaap:RestrictedStockMember 2021-02-16 0001633931 bld:ShareBasedCompensationArrangementByShareBasedPaymentAwardPayoutRangeThreeMember bld:VestingBasedOnPerformanceMember us-gaap:RestrictedStockMember 2021-02-16 0001633931 bld:ShareBasedCompensationArrangementByShareBasedPaymentAwardPayoutRangeOneMember bld:VestingBasedOnPerformanceMember us-gaap:RestrictedStockMember 2021-02-16 0001633931 bld:ShareBasedCompensationArrangementByShareBasedPaymentAwardPayoutRangeFourMember bld:VestingBasedOnPerformanceMember us-gaap:RestrictedStockMember 2021-02-16 0001633931 bld:VestingBasedOnPerformanceMember us-gaap:RestrictedStockMember 2023-02-21 2023-02-21 0001633931 bld:VestingBasedOnPerformanceMember us-gaap:RestrictedStockMember 2022-02-15 2022-02-15 0001633931 bld:VestingBasedOnPerformanceMember us-gaap:RestrictedStockMember 2021-02-16 2021-02-16 0001633931 bld:VestingBasedOnPerformanceMember bld:RestrictedStockAwardsGrantedFebruary2020Member 2023-01-01 2023-06-30 0001633931 us-gaap:EmployeeStockOptionMember 2023-01-01 2023-06-30 0001633931 us-gaap:RestrictedStockMember 2022-01-01 2022-06-30 0001633931 us-gaap:RestrictedStockMember 2021-01-01 2021-06-30 0001633931 us-gaap:RestrictedStockMember 2023-01-01 2023-06-30 0001633931 bld:VestingBasedOnPerformanceMember us-gaap:RestrictedStockMember 2023-01-01 2023-06-30 0001633931 country:US bld:SpiMember us-gaap:SubsequentEventMember 2023-07-26 2023-07-26 0001633931 country:CA bld:SpiMember us-gaap:SubsequentEventMember 2023-07-26 2023-07-26 0001633931 bld:EventOfDefaultScenarioMember us-gaap:SeniorNotesMember 2023-01-01 2023-06-30 0001633931 bld:SeniorNotesDue2032Member 2023-06-30 0001633931 bld:SeniorNotesDue2029Member 2023-06-30 0001633931 bld:AmendedCreditAgreementDecember2022Member us-gaap:RevolvingCreditFacilityMember 2023-06-30 0001633931 bld:AmendedCreditAgreementDecember2022Member 2023-06-30 0001633931 2023-04-01 2023-06-30 0001633931 2022-04-01 2022-06-30 0001633931 2022-01-01 2022-06-30 0001633931 bld:VestingBasedOnServiceMember 2023-04-01 2023-06-30 0001633931 bld:VestingBasedOnPerformanceMember 2023-04-01 2023-06-30 0001633931 bld:VestingBasedOnMarketConditionsMember 2023-04-01 2023-06-30 0001633931 bld:VestingBasedOnServiceMember 2023-01-01 2023-06-30 0001633931 bld:VestingBasedOnPerformanceMember 2023-01-01 2023-06-30 0001633931 bld:VestingBasedOnMarketConditionsMember 2023-01-01 2023-06-30 0001633931 bld:VestingBasedOnServiceMember 2022-04-01 2022-06-30 0001633931 bld:VestingBasedOnPerformanceMember 2022-04-01 2022-06-30 0001633931 bld:VestingBasedOnMarketConditionsMember 2022-04-01 2022-06-30 0001633931 bld:VestingBasedOnServiceMember 2022-01-01 2022-06-30 0001633931 bld:VestingBasedOnPerformanceMember 2022-01-01 2022-06-30 0001633931 bld:VestingBasedOnMarketConditionsMember 2022-01-01 2022-06-30 0001633931 bld:BaseRateBorrowingsMember bld:AmendedCreditAgreementDecember2022Member us-gaap:SecuredOvernightFinancingRateSofrOvernightIndexSwapRateMember 2023-01-01 2023-06-30 0001633931 bld:SeniorNotesDue2032Member bld:DebtInstrumentRedemptionPeriodSixMember 2023-01-01 2023-06-30 0001633931 bld:SofrRateBorrowingsMember bld:AmendedCreditAgreementDecember2022Member 2023-01-01 2023-06-30 0001633931 bld:SeniorNotesDue2032Member bld:DebtInstrumentRedemptionPeriodSevenMember 2023-01-01 2023-06-30 0001633931 bld:DebtInstrumentRedemptionOptionTwoMember us-gaap:DebtInstrumentRedemptionPeriodOneMember 2023-01-01 2023-06-30 0001633931 srt:MinimumMember bld:SofrRateBorrowingsMember bld:AmendedCreditAgreementDecember2022Member 2023-01-01 2023-06-30 0001633931 srt:MinimumMember bld:BaseRateBorrowingsMember bld:AmendedCreditAgreementDecember2022Member 2023-01-01 2023-06-30 0001633931 srt:MaximumMember bld:SofrRateBorrowingsMember bld:AmendedCreditAgreementDecember2022Member 2023-01-01 2023-06-30 0001633931 srt:MaximumMember bld:BaseRateBorrowingsMember bld:AmendedCreditAgreementDecember2022Member 2023-01-01 2023-06-30 0001633931 bld:SriHoldingsMember 2023-06-30 0001633931 bld:AssuredInsulationServiceInc.Member 2022-04-07 2022-04-07 0001633931 bld:Acquisitions2022Member 2022-01-01 2022-06-30 0001633931 2023-01-01 2023-06-30 0001633931 2023-06-30 0001633931 2022-12-31 iso4217:USD xbrli:pure xbrli:shares bld:item iso4217:USD xbrli:shares bld:segment

Table of Contents

​

UNITED STATES

SECURITIES AND EXCHANGE

COMMISSION

WASHINGTON, D.C. 20549

​

​

FORM 10-Q

​ | ​
(Mark One)
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

​

For the quarterly period June 30, 2023

​

​ | ​
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

​

For the transition period from to

​

Commission file number: 001-36870

​

TopBuild Corp.

(Exact name of Registrant as Specified in its Charter)

​

​ | ​
Delaware (State or Other Jurisdiction of Incorporation or Organization) | 47-3096382 (I.R.S. Employer Identification No.)

​

​

​ | ​
475 North Williamson Boulevard Daytona Beach, Florida (Address of Principal Executive Offices) | 32114 (Zip Code)

​

(386) 304-2200

(Registrant's telephone number, including area code)

​

Securities registered pursuant to Section 12(b) of the Act:

​

Title of each class | Trading Symbol(s) | Name of each exchange on which registered
Common stock, par value $0.01 per share | BLD | New York Stock Exchange

​

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.⌧ Yes ◻ No

​

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ⌧ Yes ◻ No

​

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

​

Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐

​

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ◻

​

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

​

The registrant had outstanding 31,757,295 shares of Common Stock, par value $0.01 per share as of July 27, 2023.

​

​

​

Table of Contents

TOPBUILD CORP.

TABLE OF CONTENTS

​

​ ​ | ​ | ​ | ​
​ | ​ | Page No.
Part I. | Financial Information | ​
​ | ​ | ​
Item 1. | Financial Statements (Unaudited) | ​
​ | ​ | ​
​ | Condensed Consolidated Balance Sheets | 4
​ | ​ | ​
​ | Condensed Consolidated Statements of Operations | 5
​ | ​ | ​
​ | Condensed Consolidated Statements of Comprehensive Income | 6
​ | ​ | ​
​ | Condensed Consolidated Statements of Cash Flows | 7
​ | ​ | ​
​ | Condensed Consolidated Statements of Changes in Equity | 8
​ | ​ | ​
​ | Notes to Condensed Consolidated Financial Statements | 9
​ | ​ | ​
Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 21
​ | ​ | ​
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 28
​ | ​ | ​
Item 4. | Controls and Procedures | 29
​ | ​ | ​
Part II. | Other Information | ​
​ | ​ | ​
Item 1. | Legal Proceedings | 29
​ | ​ | ​
Item 1A. | Risk Factors | 29
​ | ​ | ​
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 29
​ | ​ | ​
Item 3. | Defaults upon Senior Securities | 29
​ | ​ | ​
Item 4. | Mine Safety Disclosures | 29
​ | ​ | ​
Item 5. | Other Information | 29
​ | ​ | ​
Item 6. | Exhibits | 29
​ | ​ | ​
Index to Exhibits | 30
​ | ​ | ​
Signature | 31

​

​

2

Table of Contents

GLOSSARY

​

We use acronyms, abbreviations, and other defined terms throughout this quarterly report on Form 10-Q, which are defined in the glossary below:

​

​ | ​ | ​
Term | ​ | Definition
3.625% Senior Notes | ​ | TopBuild's 3.625% senior unsecured notes issued March 15, 2021 and due March 15, 2029
4.125% Senior Notes | ​ | TopBuild's 4.125% senior unsecured notes issued October 14, 2021 and due February 15, 2032
2015 LTIP | ​ | 2015 Long-Term Incentive Program authorizes the Board to grant stock options, stock appreciation rights, restricted shares, restricted share units, performance awards, and dividend equivalents
2021 Repurchase Program | ​ | $200 million share repurchase program authorized by the Board on July 26, 2021
2022 Repurchase Program | ​ | $200 million share repurchase program authorized by the Board on July 25, 2022
2022 ASR Agreement | ​ | $100 million accelerated share repurchase agreement with Bank of America, N.A.
Annual Report | ​ | Annual report filed with the SEC on Form 10-K pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
ASC | ​ | Accounting Standards Codification
Assured | ​ | Assured Insulating Inc.
ASU | ​ | Accounting Standards Update
Best Insulation | ​ | Best Insulation Holdings LLC
Board | ​ | Board of Directors of TopBuild
BofA | ​ | Bank of America, N.A.
Billings | ​ | Billings Insulation Service, Inc.
Credit Agreement | ​ | Amended and Restated Credit Agreement, dated March 20, 2020, among TopBuild, BofA as administrative agent, and the other lenders and agents party thereto.
Current Report | ​ | Current report filed with the SEC on Form 8-K pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
DI | ​ | DI Super Holdings, Inc.
EBITDA | ​ | Earnings before interest, taxes, depreciation, and amortization
Exchange Act | ​ | The Securities Exchange Act of 1934, as amended
FASB | ​ | Financial Accounting Standards Board
GAAP | ​ | Generally accepted accounting principles in the United States of America
Lenders | ​ | Bank of America, N.A., together with the other lenders party to "Credit Agreement"
Net Leverage Ratio | ​ | As defined in the “Credit Agreement,” the ratio of outstanding indebtedness, less up to $100 million of unrestricted cash, to EBITDA
NYSE | ​ | New York Stock Exchange
Quarterly Report | ​ | Quarterly report filed with the SEC on Form 10-Q pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Rocky Mountain | ​ | Rocky Mountain Spray Foam & Waterproofing, LLC
ROU | ​ | Right of use (asset), as defined in ASC 842
RSA | ​ | Restricted stock award
SEC | ​ | United States Securities and Exchange Commission
Secured Leverage Ratio | ​ | As defined in the “Credit Agreement,” the ratio of outstanding indebtedness, including letters of credit, to EBITDA
SOFR | ​ | Secured overnight financing rate
SPI | ​ | SPI LLC, d/b/a Specialty Products & Insulation
SRI | ​ | SRI Holdings, LLC
Term Loan | ​ | TopBuild's secured borrowings under the Credit Agreement due October 7, 2026.
TopBuild | ​ | TopBuild Corp. and its wholly-owned consolidated domestic subsidiaries.

​

​

​

3

Table of Contents

PART I – FINANCIAL INFORMATION

​

Item 1. FINANCIAL STATEMENTS

TOPBUILD CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(In thousands except share data)

​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | As of
​ |  | June 30, | ​ | December 31,
​ | ​ | 2023 | ​ | 2022
ASSETS | ​ | ​ | ​ | ​ | ​ | ​
Current assets: | ​ | ​ | ​ | ​ | ​ | ​
Cash and cash equivalents | ​ | $ | 526,327 | ​ | $ | 240,069
Receivables, net of an allowance for credit losses of $16,778 at June 30, 2023, and $16,281 at December 31, 2022 | ​ | ​ | 857,664 | ​ |  | 836,071
Inventories, net | ​ | ​ | 385,049 | ​ |  | 438,644
Prepaid expenses and other current assets | ​ | ​ | 25,556 | ​ |  | 34,257
Total current assets | ​ | ​ | 1,794,596 | ​ |  | 1,549,041
​ | ​ | ​ | ​ | ​ | ​ | ​
Right of use assets | ​ | ​ | 204,044 | ​ | ​ | 205,892
Property and equipment, net | ​ | ​ | 258,746 | ​ |  | 253,484
Goodwill | ​ | ​ | 1,991,949 | ​ |  | 1,966,994
Other intangible assets, net | ​ | ​ | 595,706 | ​ |  | 614,967
Other assets | ​ | ​ | 12,905 | ​ |  | 16,453
Total assets | ​ | $ | 4,857,946 | ​ | $ | 4,606,831
​ | ​ | ​ | ​ | ​ | ​ | ​
LIABILITIES AND EQUITY | ​ | ​ | ​ | ​ | ​ | ​
Current liabilities: | ​ | ​ | ​ | ​ | ​ | ​
Accounts payable | ​ | $ | 468,602 | ​ | $ | 487,114
Current portion of long-term debt | ​ | ​ | 45,142 | ​ | ​ | 40,068
Accrued liabilities | ​ | ​ | 180,594 | ​ | ​ | 199,370
Short-term operating lease liabilities | ​ | ​ | 61,825 | ​ | ​ | 60,880
Short-term finance lease liabilities | ​ | ​ | 2,180 | ​ | ​ | 2,207
Total current liabilities | ​ | ​ | 758,343 | ​ | ​ | 789,639
​ | ​ | ​ | ​ | ​ | ​ | ​
Long-term debt | ​ | ​ | 1,394,794 | ​ | ​ | 1,417,257
Deferred tax liabilities, net | ​ | ​ | 254,777 | ​ | ​ | 251,481
Long-term portion of insurance reserves | ​ | ​ | 57,217 | ​ | ​ | 59,783
Long-term operating lease liabilities | ​ | ​ | 148,709 | ​ | ​ | 149,943
Long-term finance lease liabilities | ​ | ​ | 4,519 | ​ | ​ | 6,673
Other liabilities | ​ | ​ | 1,541 | ​ | ​ | 2,349
Total liabilities | ​ | ​ | 2,619,900 | ​ | ​ | 2,677,125
​ | ​ | ​ | ​ | ​ | ​ | ​
Commitments and contingencies | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​
Equity: | ​ | ​ | ​ | ​ | ​ | ​
Preferred stock, $0.01 par value: 10,000,000 shares authorized; 0 shares issued and outstanding | ​ | ​ | - | ​ | ​ | -
Common stock, $0.01 par value: 250,000,000 shares authorized; 39,473,298 shares issued and 31,757,620 outstanding at June 30, 2023, and 39,325,916 shares issued and 31,642,832 outstanding at December 31, 2022 | ​ | ​ | 395 | ​ | ​ | 393
Treasury stock, 7,715,678 shares at June 30, 2023, and 7,683,084 shares at December 31, 2022, at cost | ​ | ​ | (699,149) | ​ | ​ | (692,799)
Additional paid-in capital | ​ | ​ | 895,749 | ​ | ​ | 887,367
Retained earnings | ​ | ​ | 2,056,935 | ​ | ​ | 1,756,665
Accumulated other comprehensive loss | ​ | ​ | (15,884) | ​ | ​ | (21,920)
Total equity | ​ | ​ | 2,238,046 | ​ | ​ | 1,929,706
Total liabilities and equity | ​ | $ | 4,857,946 | ​ | $ | 4,606,831

See notes to our unaudited condensed consolidated financial statements.

4

Table of Contents

TOPBUILD CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(In thousands except share and per common share data)

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended June 30, | ​ | Six Months Ended June 30,
​ | ​ | 2023 | ​ | 2022 | ​ | 2023 | ​ | 2022
Net sales | ​ | $ | 1,317,262 |  | $ | 1,274,285 |  | $ | 2,582,500 |  | $ | 2,443,203
Cost of sales | ​ | ​ | 895,462 | ​ | ​ | 890,188 | ​ | ​ | 1,790,485 | ​ | ​ | 1,727,905
Gross profit | ​ | ​ | 421,800 | ​ | ​ | 384,097 | ​ | ​ | 792,015 | ​ | ​ | 715,298
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Selling, general, and administrative expense | ​ | ​ | 184,697 | ​ | ​ | 176,876 | ​ | ​ | 355,481 | ​ | ​ | 344,123
Operating profit | ​ | ​ | 237,103 | ​ | ​ | 207,221 | ​ | ​ | 436,534 | ​ | ​ | 371,175
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Other income (expense), net: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Interest expense | ​ | ​ | (18,558) | ​ | ​ | (13,410) | ​ | ​ | (36,597) | ​ | ​ | (25,375)
Other, net | ​ | ​ | 4,605 | ​ | ​ | (279) | ​ | ​ | 6,528 | ​ | ​ | 406
Other expense, net | ​ | ​ | (13,953) | ​ | ​ | (13,689) | ​ | ​ | (30,069) | ​ | ​ | (24,969)
Income before income taxes | ​ | ​ | 223,150 | ​ | ​ | 193,532 | ​ | ​ | 406,465 | ​ | ​ | 346,206
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Income tax expense | ​ | ​ | (58,750) | ​ | ​ | (49,835) | ​ | ​ | (106,195) | ​ | ​ | (87,796)
Net income | ​ | $ | 164,400 | ​ | $ | 143,697 | ​ | $ | 300,270 | ​ | $ | 258,410
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Net income per common share: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Basic | ​ | $ | 5.20 | ​ | $ | 4.43 | ​ | $ | 9.51 | ​ | $ | 7.93
Diluted | ​ | $ | 5.18 | ​ | $ | 4.41 | ​ | $ | 9.47 | ​ | $ | 7.87
​ | ​ | ​ | ​ | ​ |  | ​ | ​ | ​ | ​ | ​ | ​ | ​
Weighted average shares outstanding: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Basic | ​ | ​ | 31,599,744 | ​ | ​ | 32,405,292 | ​ | ​ | 31,575,337 | ​ | ​ | 32,570,988
Diluted | ​ | ​ | 31,731,807 | ​ | ​ | 32,614,449 | ​ | ​ | 31,722,660 | ​ | ​ | 32,827,549

See notes to our unaudited condensed consolidated financial statements.

​

5

Table of Contents

TOPBUILD CORP.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

(In thousands)

​

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended June 30, | ​ | Six Months Ended June 30,
​ | ​ | 2023 | ​ | 2022 | ​ | 2023 | ​ | 2022
Net income | ​ | $ | 164,400 | ​ | $ | 143,697 | ​ | $ | 300,270 | ​ | $ | 258,410
Other comprehensive income (loss): | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Foreign currency translation adjustment | ​ | ​ | 4,283 | ​ | ​ | (2,193) | ​ | ​ | 6,037 | ​ | ​ | 1,026
Comprehensive income | ​ | $ | 168,683 | ​ | $ | 141,504 | ​ | $ | 306,307 | ​ | $ | 259,436

​

​

​

​

See notes to our unaudited condensed consolidated financial statement

​

6

Table of Contents

TOPBUILD CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(In thousands)

​

​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Six Months Ended June 30,
​ | ​ | 2023 | ​ | 2022
Cash Flows Provided by (Used in) Operating Activities: | ​ | ​ |  |  | ​ |
Net income | ​ | $ | 300,270 | ​ | $ | 258,410
Adjustments to reconcile net income to net cash provided by operating activities: | ​ | ​ | ​ | ​ | ​ | ​
Depreciation and amortization | ​ | ​ | 64,652 | ​ | ​ | 60,621
Share-based compensation | ​ | ​ | 6,886 | ​ | ​ | 7,061
Loss on sale of property and equipment | ​ | ​ | 621 | ​ | ​ | 525
Amortization of debt issuance costs | ​ | ​ | 1,440 | ​ | ​ | 1,427
Provision for bad debt expense | ​ | ​ | 4,031 | ​ | ​ | 6,404
Loss from inventory obsolescence | ​ | ​ | 3,290 | ​ | ​ | 3,610
Change in certain assets and liabilities: | ​ | ​ | ​ | ​ | ​ | ​
Receivables, net | ​ | ​ | (37,247) | ​ | ​ | (107,739)
Inventories, net | ​ | ​ | 54,623 | ​ | ​ | (82,621)
Prepaid expenses and other current assets | ​ | ​ | 8,897 | ​ | ​ | 648
Accounts payable | ​ | ​ | (8,806) | ​ | ​ | 47,540
Accrued liabilities | ​ | ​ | (13,872) | ​ | ​ | 16,884
Other, net | ​ | ​ | 1,012 | ​ | ​ | 4,927
Net cash provided by operating activities | ​ | ​ | 385,797 | ​ | ​ | 217,697
​ | ​ | ​ | ​ | ​ | ​ | ​
Cash Flows Provided by (Used in) Investing Activities: | ​ | ​ | ​ | ​ | ​ | ​
Purchases of property and equipment | ​ | ​ | (30,672) | ​ | ​ | (36,034)
Acquisition of businesses, net of cash acquired | ​ | ​ | (45,948) | ​ | ​ | (18,746)
Proceeds from sale of property and equipment | ​ | ​ | 782 | ​ | ​ | 618
Net cash used in investing activities | ​ | ​ | (75,838) | ​ | ​ | (54,162)
​ | ​ | ​ | ​ | ​ | ​ | ​
Cash Flows Provided by (Used in) Financing Activities: | ​ | ​ | ​ | ​ | ​ | ​
Repayment of long-term debt | ​ | ​ | (18,829) | ​ | ​ | (19,287)
Proceeds from revolving credit facility | ​ | ​ | — | ​ | ​ | 70,000
Repayment of revolving credit facility | ​ | ​ | — | ​ | ​ | (70,000)
Taxes withheld and paid on employees' equity awards | ​ | ​ | (6,350) | ​ | ​ | (11,667)
Exercise of stock options | ​ | ​ | 1,497 | ​ | ​ | 1,452
Repurchase of shares of common stock | ​ | ​ | — | ​ | ​ | (150,050)
Payment of contingent consideration | ​ | ​ | (300) | ​ | ​ | (35)
Net cash used in financing activities | ​ | ​ | (23,982) | ​ | ​ | (179,587)
Impact of exchange rate changes on cash | ​ | ​ | 281 | ​ | ​ | 142
Net increase (decrease) in cash and cash equivalents | ​ | ​ | 286,258 | ​ | ​ | (15,910)
Cash and cash equivalents- Beginning of period | ​ |  | 240,069 | ​ |  | 139,779
Cash and cash equivalents- End of period | ​ | $ | 526,327 | ​ | $ | 123,869
​ | ​ | ​ | ​ | ​ | ​ | ​
Supplemental disclosure of noncash activities: | ​ | ​ | ​ | ​ | ​ | ​
Leased assets obtained in exchange for new operating lease liabilities | ​ | $ | 26,310 | ​ | $ | 36,129
Accruals for property and equipment | ​ | ​ | 1,449 | ​ | ​ | 563

See notes to our unaudited condensed consolidated financial statements.

​

​

​

7

Table of Contents

TOPBUILD CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Unaudited)

(In thousands except share data)

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | Accumulated | ​ | ​ | ​
​ | Common | ​ | Treasury | ​ | Additional | ​ | ​ | ​ | Other | ​ | ​ | ​
​ | Stock | ​ | Stock | ​ | Paid-in | ​ | Retained | ​ | Comprehensive | ​ | ​ | ​
​ | ($0.01 par value) | ​ | at cost | ​ | Capital | ​ | Earnings | ​ | (Loss) Income | ​ | Equity
Balance at December 31, 2021 | $ | 391 | ​ | $ | (431,030) | ​ | $ | 873,031 | ​ | $ | 1,200,676 | ​ | $ | (6,634) | ​ | $ | 1,636,434
Net income | ​ | - | ​ | ​ | - | ​ | ​ | - | ​ | ​ | 114,711 | ​ | ​ | - | ​ | ​ | 114,711
Share-based compensation | ​ | - | ​ | ​ | - | ​ | ​ | 3,727 | ​ | ​ | - | ​ | ​ | - | ​ | ​ | 3,727
Issuance of 52,940 restricted share awards under long-term equity incentive plan | ​ | 2 | ​ | ​ | - | ​ | ​ | (2) | ​ | ​ | - | ​ | ​ | - | ​ | ​ | -
Repurchase of 238,154 shares | ​ | - | ​ | ​ | (50,000) | ​ | ​ | - | ​ | ​ | - | ​ | ​ | - | ​ | ​ | (50,000)
53,073 shares withheld to pay taxes on employees' equity awards | ​ | - | ​ | ​ | (11,658) | ​ | ​ | - | ​ | ​ | - | ​ | ​ | - | ​ | ​ | (11,658)
12,269 shares issued upon exercise of stock options | ​ | - | ​ | ​ | - | ​ | ​ | 808 | ​ | ​ | - | ​ | ​ | - | ​ | ​ | 808
Other comprehensive income, net of tax | ​ | - | ​ | ​ | - | ​ | ​ | - | ​ | ​ | - | ​ | ​ | 3,218 | ​ | ​ | 3,218
Balance at March 31, 2022 | $ | 393 | ​ | $ | (492,688) | ​ | $ | 877,564 | ​ | $ | 1,315,387 | ​ | $ | (3,416) | ​ | $ | 1,697,240
Net income | ​ | - | ​ | ​ | - | ​ | ​ | - | ​ | ​ | 143,697 | ​ | ​ | - | ​ | ​ | 143,697
Share-based compensation | ​ | - | ​ | ​ | - | ​ | ​ | 3,334 | ​ | ​ | - | ​ | ​ | - | ​ | ​ | 3,334
Repurchase of 409,312 shares pursuant to 2022 ASR Agreement | ​ | - | ​ | ​ | (80,050) | ​ | ​ | (20,000) | ​ | ​ | - | ​ | ​ | - | ​ | ​ | (100,050)
51 shares withheld to pay taxes on employees' equity awards | ​ | - | ​ | ​ | (9) | ​ | ​ | - | ​ | ​ | - | ​ | ​ | - | ​ | ​ | (9)
5,835 shares issued upon exercise of stock options | ​ | - | ​ | ​ | - | ​ | ​ | 644 | ​ | ​ | - | ​ | ​ | - | ​ | ​ | 644
Other comprehensive loss, net of tax | ​ | - | ​ | ​ | - | ​ | ​ | - | ​ | ​ | - | ​ | ​ | (2,193) | ​ | ​ | (2,193)
Balance at June 30, 2022 | $ | 393 | ​ | $ | (572,747) | ​ | $ | 861,542 | ​ | $ | 1,459,084 | ​ | $ | (5,609) | ​ | $ | 1,742,663

​

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | Accumulated | ​ | ​ | ​
​ | Common | ​ | Treasury | ​ | Additional | ​ | ​ | ​ | Other | ​ | ​ | ​
​ | Stock | ​ | Stock | ​ | Paid-in | ​ | Retained | ​ | Comprehensive | ​ | ​ | ​
​ | ($0.01 par value) | ​ | at cost | ​ | Capital | ​ | Earnings | ​ | (Loss) Income | ​ | Equity
Balance at December 31, 2022 | $ | 393 | ​ | $ | (692,799) | ​ | $ | 887,367 | ​ | $ | 1,756,665 | ​ | $ | (21,920) | ​ | $ | 1,929,706
Net income | ​ | - | ​ | ​ | - | ​ | ​ | - | ​ | ​ | 135,870 | ​ | ​ | - | ​ | ​ | 135,870
Share-based compensation | ​ | - | ​ | ​ | - | ​ | ​ | 3,135 | ​ | ​ | - | ​ | ​ | - | ​ | ​ | 3,135
Issuance of 95,012 restricted share awards under long-term equity incentive plan | ​ | 2 | ​ | ​ | - | ​ | ​ | - | ​ | ​ | - | ​ | ​ | - | ​ | ​ | 2
32,594 shares withheld to pay taxes on employees' equity awards | ​ | - | ​ | ​ | (6,350) | ​ | ​ | - | ​ | ​ | - | ​ | ​ | - | ​ | ​ | (6,350)
28,840 shares issued upon exercise of stock options | ​ | - | ​ | ​ | - | ​ | ​ | 1,028 | ​ | ​ | - | ​ | ​ | - | ​ | ​ | 1,028
Other comprehensive income, net of tax | ​ | - | ​ | ​ | - | ​ | ​ | - | ​ | ​ | - | ​ | ​ | 1,753 | ​ | ​ | 1,753
Balance at March 31, 2023 | $ | 395 | ​ | $ | (699,149) | ​ | $ | 891,530 | ​ | $ | 1,892,535 | ​ | $ | (20,167) | ​ | $ | 2,065,144
Net income | ​ | - | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 164,400 | ​ | ​ | - | ​ | ​ | 164,400
Share-based compensation | ​ | - | ​ | ​ | - | ​ | ​ | 3,751 | ​ | ​ | - | ​ | ​ | - | ​ | ​ | 3,751
Issuance of 18,768 restricted share awards under long-term equity incentive plan | ​ | - | ​ | ​ | - | ​ | ​ | - | ​ | ​ | - | ​ | ​ | - | ​ | ​ | -
4,762 shares issued upon exercise of stock options | ​ | - | ​ | ​ | - | ​ | ​ | 468 | ​ | ​ | - | ​ | ​ | - | ​ | ​ | 468
Other comprehensive income, net of tax | ​ | - | ​ | ​ | - | ​ | ​ | - | ​ | ​ | - | ​ | ​ | 4,283 | ​ | ​ | 4,283
Balance at June 30, 2023 | $ | 395 | ​ | $ | (699,149) | ​ | $ | 895,749 | ​ | $ | 2,056,935 | ​ | $ | (15,884) | ​ | $ | 2,238,046

See notes to our unaudited condensed consolidated financial statements.

​

8

Table of Contents

TOPBUILD CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

​

1. BASIS OF PRESENTATION

​

TopBuild was formed on June 30, 2015, and is listed on the NYSE under the ticker symbol “BLD.” We report our business in two segments: Installation and Specialty Distribution. Our Installation segment primarily installs insulation and other building products. Our Specialty Distribution segment primarily sells and distributes insulation and other building products. Our segments are based on our operating units, for which financial information is regularly evaluated by our chief operating decision maker.

​

We believe the accompanying unaudited condensed consolidated financial statements contain all adjustments, of a normal recurring nature, necessary to state fairly our financial position as of June 30, 2023, our results of operations and comprehensive income for the three and six months ended June 30, 2023 and 2022, and our cash flows for the six months ended June 30, 2023 and 2022. The condensed consolidated balance sheet at December 31, 2022 was derived from our audited financial statements, but does not include all disclosures required by GAAP.

​

These condensed consolidated financial statements and related notes should be read in conjunction with the audited Consolidated Financial Statements included in the Company’s Annual Report for the year ended December 31, 2022, as filed with the SEC on February 23, 2023.

​

2. ACCOUNTING POLICIES

​

Financial Statement Presentation. Our condensed consolidated financial statements have been developed in conformity with GAAP, which requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosures of contingent liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting periods. Actual results could differ materially from these estimates. All intercompany transactions between TopBuild entities have been eliminated.

​

Recently Adopted Accounting Pronouncements

​

In October 2021, the FASB issued ASU 2021-08, “Accounting for Contract Assets and Contract Liabilities from Contracts with Customers”. This standard improves the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in practice and inconsistency related to recognition of an acquired contract liability, as well as payment terms and their effect on subsequent revenue recognized by the acquirer. This standard became effective for us on January 1, 2023, and did not have a material impact to our financial statements upon adoption.

​

3. REVENUE RECOGNITION

​

Revenue is disaggregated between our Installation and Specialty Distribution segments and further based on market and product, as we believe this best depicts how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors.

​

The following tables present our revenues disaggregated by market (in thousands):

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended June 30,
​ | ​ | 2023 | ​ | 2022
​ | ​ | ​ | Installation | ​ | ​ | Specialty Distribution | ​ | ​ | Eliminations | ​ | ​ | Total | ​ | ​ | Installation | ​ | ​ | Specialty Distribution | ​ | ​ | Eliminations | ​ | ​ | Total
Residential | ​ | $ | 668,172 | ​ | $ | 227,254 | ​ | $ | (56,667) | ​ | $ | 838,759 | ​ | $ | 634,078 | ​ | $ | 247,827 | ​ | $ | (50,007) | ​ | $ | 831,898
Commercial/Industrial | ​ | ​ | 140,883 | ​ | ​ | 347,234 | ​ | ​ | (9,614) | ​ | ​ | 478,503 | ​ | ​ | 114,890 | ​ | ​ | 339,964 | ​ | ​ | (12,467) | ​ | ​ | 442,387
Net sales | ​ | $ | 809,055 | ​ | $ | 574,488 | ​ | $ | (66,281) | ​ | $ | 1,317,262 | ​ | $ | 748,968 | ​ | $ | 587,791 | ​ | $ | (62,474) | ​ | $ | 1,274,285

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​

9

Table of Contents

TOPBUILD CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

​

​ | ​ | Six Months Ended June 30,
​ | ​ | 2023 | ​ | 2022
​ | ​ | ​ | Installation | ​ | ​ | Specialty Distribution | ​ | ​ | Eliminations | ​ | ​ | Total | ​ | ​ | Installation | ​ | ​ | Specialty Distribution | ​ | ​ | Eliminations | ​ | ​ | Total
Residential | ​ | $ | 1,313,875 | ​ | $ | 451,579 | ​ | $ | (108,056) | ​ | $ | 1,657,398 | ​ | $ | 1,197,382 | ​ | $ | 484,238 | ​ | $ | (93,429) | ​ | $ | 1,588,191
Commercial/Industrial | ​ | ​ | 262,270 | ​ | ​ | 681,283 | ​ | ​ | (18,451) | ​ | ​ | 925,102 | ​ | ​ | 228,279 | ​ | ​ | 647,415 | ​ | ​ | (20,682) | ​ | ​ | 855,012
Net sales | ​ | $ | 1,576,145 | ​ | $ | 1,132,862 | ​ | $ | (126,507) | ​ | $ | 2,582,500 | ​ | $ | 1,425,661 | ​ | $ | 1,131,653 | ​ | $ | (114,111) | ​ | $ | 2,443,203

​

The following tables present our revenues disaggregated by product (in thousands):

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended June 30,
​ | ​ | 2023 | ​ | 2022
​ | ​ | Installation | ​ | Specialty Distribution | ​ | Eliminations | ​ | Total | ​ | Installation | ​ | Specialty Distribution | ​ | Eliminations | ​ | Total
Insulation and accessories | ​ | $ | 633,924 | ​ | $ | 513,162 | ​ | $ | (57,599) | ​ | $ | 1,089,487 | ​ | $ | 590,099 | ​ | $ | 518,507 | ​ | $ | (53,343) | ​ | $ | 1,055,263
Glass and windows | ​ | ​ | 68,841 | ​ | ​ | - | ​ | ​ | - | ​ | ​ | 68,841 | ​ | ​ | 57,121 | ​ | ​ | - | ​ | ​ | - | ​ | ​ | 57,121
Gutters | ​ | ​ | 29,401 | ​ | ​ | 44,088 | ​ | ​ | (7,571) | ​ | ​ | 65,918 | ​ | ​ | 27,240 | ​ | ​ | 50,879 | ​ | ​ | (8,094) | ​ | ​ | 70,025
All other | ​ | ​ | 76,889 | ​ | ​ | 17,238 | ​ | ​ | (1,111) | ​ | ​ | 93,016 | ​ | ​ | 74,508 | ​ | ​ | 18,405 | ​ | ​ | (1,037) | ​ | ​ | 91,876
Net sales | ​ | $ | 809,055 | ​ | $ | 574,488 | ​ | $ | (66,281) | ​ | $ | 1,317,262 | ​ | $ | 748,968 | ​ | $ | 587,791 | ​ | $ | (62,474) | ​ | $ | 1,274,285

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Six Months Ended June 30,
​ | ​ | 2023 | ​ | 2022
​ | ​ | Installation | ​ | Specialty Distribution | ​ | Eliminations | ​ | Total | ​ | Installation | ​ | Specialty Distribution | ​ | Eliminations | ​ | Total
Insulation and accessories | ​ | $ | 1,234,691 | ​ | $ | 1,015,964 | ​ | $ | (109,572) | ​ | $ | 2,141,083 | ​ | $ | 1,126,440 | ​ | $ | 998,267 | ​ | $ | (97,153) | ​ | $ | 2,027,554
Glass and windows | ​ | ​ | 132,283 | ​ | ​ | - | ​ | ​ | - | ​ | ​ | 132,283 | ​ | ​ | 108,317 | ​ | ​ | - | ​ | ​ | - | ​ | ​ | 108,317
Gutters | ​ | ​ | 57,679 | ​ | ​ | 83,931 | ​ | ​ | (14,736) | ​ | ​ | 126,874 | ​ | ​ | 50,198 | ​ | ​ | 97,509 | ​ | ​ | (15,096) | ​ | ​ | 132,611
All other | ​ | ​ | 151,492 | ​ | ​ | 32,967 | ​ | ​ | (2,199) | ​ | ​ | 182,260 | ​ | ​ | 140,706 | ​ | ​ | 35,877 | ​ | ​ | (1,862) | ​ | ​ | 174,721
Net sales | ​ | $ | 1,576,145 | ​ | $ | 1,132,862 | ​ | $ | (126,507) | ​ | $ | 2,582,500 | ​ | $ | 1,425,661 | ​ | $ | 1,131,653 | ​ | $ | (114,111) | ​ | $ | 2,443,203

​

​

The following table represents our contract assets and contract liabilities with customers, in thousands:

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | Included in Line Item on | ​ | As of
​ | Condensed Consolidated | ​ | June 30, | ​ | December 31,
​ | Balance Sheets | ​ | 2023 | ​ | 2022
Contract Assets: | ​ | ​ | ​ | ​ | ​ | ​ | ​
Receivables, unbilled | Receivables, net | ​ | $ | 87,305 | ​ | $ | 75,481
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Contract Liabilities: | ​ | ​ | ​ | ​ | ​ | ​ | ​
Deferred revenue | Accrued liabilities | ​ | $ | 16,332 | ​ | $ | 21,940

​

The aggregate amount remaining on uncompleted performance obligations was $419.3 million as of June 30, 2023. We expect to satisfy the performance obligations and recognize revenue on substantially all of these uncompleted contracts over the next 18 months.

​

On certain of our long-term contracts, a percentage of the total project cost is withheld and not invoiced to the customer and collected until satisfactory completion of the customer’s project, typically within a year. This amount is referred to as retainage and is common practice in the construction industry. Retainage receivables are classified as a component of Receivables, net on our condensed consolidated balance sheets and were $73.5 million and $63.0 million as of June 30, 2023 and December 31, 2022, respectively.

​

10

Table of Contents

TOPBUILD CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

​

4. GOODWILL AND OTHER INTANGIBLES

​

We have two reporting units which are also our operating and reporting segments: Installation and Specialty Distribution. Both reporting units contain goodwill. Assets acquired and liabilities assumed are assigned to the applicable reporting unit based on whether the acquired assets and liabilities relate to the operations of and determination of the fair value of such unit. Goodwill assigned to the reporting unit is the excess of the fair value of the acquired business over the fair value of the individual assets acquired and liabilities assumed for the reporting unit.

​

In the fourth quarter of 2022, we performed an annual assessment on our goodwill resulting in no impairment and there were no indicators of impairment for the six months ended June 30, 2023.

​

Changes in the carrying amount of goodwill for six months ended June 30, 2023, by segment, were as follows, in thousands:

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | ​ | ​ |  | ​ |  | ​ | ​ | ​ | ​ |  | Accumulated |  | ​ | ​
​ | ​ | Gross Goodwill | ​ | ​ | ​ | FX Translation | ​ | Gross Goodwill | ​ | Impairment | ​ | Net Goodwill
​ | ​ | December 31, 2022 | ​ | Additions | ​ | Adjustment | ​ | June 30, 2023 | ​ | Losses | ​ | June 30, 2023
Goodwill, by segment: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Installation | ​ | $ | 1,826,979 | ​ | $ | 23,568 | ​ | $ | - | ​ | $ | 1,850,547 | ​ | $ | (762,021) | ​ | $ | 1,088,526
Specialty Distribution | ​ |  | 902,036 | ​ |  | - | ​ | ​ | 1,387 | ​ |  | 903,423 | ​ |  | - | ​ |  | 903,423
Total goodwill | ​ | $ | 2,729,015 | ​ | $ | 23,568 | ​ | $ | 1,387 | ​ | $ | 2,753,970 | ​ | $ | (762,021) | ​ | $ | 1,991,949

​

See Note 11 – Business Combinations for goodwill recognized on acquisitions that occurred during the six months ended June 30, 2023.

Other intangible assets, net includes customer relationships, non-compete agreements, and trademarks / trade names. The following table sets forth our other intangible assets, in thousands:

​

​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | As of
​ |  | June 30, 2023 | ​ | December 31, 2022
Gross definite-lived intangible assets |  | $ | 797,503 | ​ | $ | 782,316
Accumulated amortization |  | ​ | (201,797) | ​ | ​ | (167,349)
Net definite-lived intangible assets |  | $ | 595,706 | ​ | $ | 614,967

​

The following table sets forth our amortization expense, in thousands:

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended June 30, | ​ | Six Months Ended June 30,
​ |  | 2023 |  | 2022 |  | 2023 |  | 2022
Amortization expense | ​ | $ | 17,211 | ​ | $ | 16,809 | ​ | $ | 34,107 | ​ | $ | 33,839

​

5. LONG-TERM DEBT

The following table reconciles the principal balances of our outstanding debt to our condensed consolidated balance sheets, in thousands:

​

​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | As of
​ | ​ | June 30, 2023 |  | December 31, 2022
3.625% Senior Notes due 2029 | ​ | $ | 400,000 | ​ | $ | 400,000
4.125% Senior Notes due 2032 | ​ | ​ | 500,000 | ​ | ​ | 500,000
Term loan due 2026 | ​ | ​ | 551,250 | ​ | ​ | 566,250
Equipment notes | ​ | ​ | 4,598 | ​ | ​ | 8,427
Unamortized debt issuance costs | ​ | ​ | (15,912) | ​ | ​ | (17,352)
Total debt, net of unamortized debt issuance costs | ​ | ​ | 1,439,936 | ​ | ​ | 1,457,325
Less: current portion of long-term debt | ​ | ​ | 45,142 | ​ | ​ | 40,068
Total long-term debt | ​ | $ | 1,394,794 | ​ | $ | 1,417,257

​

11

Table of Contents

TOPBUILD CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

​

The following table sets forth our remaining principal payments for our outstanding debt balances as of June 30, 2023, in thousands:

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | 2023 | ​ | 2024 | ​ | 2025 | ​ | 2026 | ​ | 2027 | ​ | Thereafter | ​ | Total
3.625% Senior Notes | ​ | $ | - | ​ | $ | - | ​ | $ | - | ​ | $ | - | ​ | $ | - | ​ | $ | 400,000 | ​ | $ | 400,000
4.125% Senior Notes | ​ | ​ | - | ​ | ​ | - | ​ | ​ | - | ​ | ​ | - | ​ | ​ | - | ​ | ​ | 500,000 | ​ | ​ | 500,000
Term loan | ​ | ​ | 18,750 | ​ | ​ | 45,000 | ​ | ​ | 48,750 | ​ | ​ | 438,750 | ​ | ​ | - | ​ | ​ | - | ​ | ​ | 551,250
Equipment notes | ​ | ​ | 2,489 | ​ | ​ | 2,109 | ​ | ​ | - | ​ | ​ | - | ​ | ​ | - | ​ | ​ | - | ​ | ​ | 4,598
Total | ​ | $ | 21,239 | ​ | $ | 47,109 | ​ | $ | 48,750 | ​ | $ | 438,750 | ​ | $ | - | ​ | $ | 900,000 | ​ | $ | 1,455,848

​

Credit Agreement

The following table outlines the key terms of the Credit Agreement (dollars in thousands):

​

​ | ​ | ​ | ​
Senior secured term loan facility | $ | 300,000 | ​
Additional delayed draw term loan | $ | 300,000 | ​
​ | ​ | ​ | ​
Additional term loan and/or revolver capacity available under incremental facility (a) | $ | 300,000 | ​
​ | ​ | ​ | ​
Revolving facility | $ | 500,000 | ​
Sublimit for issuance of letters of credit under revolving facility (b) | $ | 100,000 | ​
Sublimit for swingline loans under revolving facility (b) | $ | 35,000 | ​
​ | ​ | ​ | ​
Interest rate as of June 30, 2023 | ​ | 6.20 | %
Scheduled maturity date | ​ | 10/7/2026 | ​

(a) | Additional borrowing capacity is available under the incremental facility, subject to certain terms and conditions (including existing or new lenders providing commitments in respect of such additional borrowing capacity). This incremental facility has not been accessed as of June 30, 2023.

(b) | Use of the sublimits for the issuance of letters of credit and swingline loans reduces the availability under the Revolving Facility.

​

Interest expense on borrowings under the Credit Agreement is based on an applicable margin rate plus, at our option, either:

​

| ● | A base rate determined by reference to the highest of either (i) the federal funds rate plus 0.50 percent, (ii) BofA’s “prime rate,” and (iii) the SOFR rate for U.S. dollar deposits with a term of one month, plus 1.00 percent; or

​

| ● | A SOFR rate determined by reference to the costs of funds for deposits in U.S. dollars for the interest period relevant to such borrowings, subject to a floor of 0%.

​

The applicable margin rate is determined based on our Secured Leverage Ratio. In the case of base rate borrowings, the applicable margin rate ranges from 0.00 percent to 1.50 percent and in the case of SOFR rate borrowings, the applicable margin ranges from 1.00 percent to 2.50 percent. Borrowings under the Credit Agreement are prepayable at the Company’s option without premium or penalty. The Company is required to make prepayments with the net cash proceeds of certain asset sales and certain extraordinary receipts.

​

Revolving Facility

​

The Company has outstanding standby letters of credit that secure our financial obligations related to our workers’ compensation, general insurance, and auto liability programs. These standby letters of credit, as well as any outstanding amount borrowed under our Revolving Facility, reduce the availability under the Revolving Facility.

​

12

Table of Contents

TOPBUILD CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

​

The following table summarizes our availability under the Revolving Facility, in thousands:

​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | As of
​ |  | June 30, 2023 |  | December 31, 2022
Revolving facility | ​ | $ | 500,000 | ​ | $ | 500,000
Less: standby letters of credit | ​ | ​ | (67,539) | ​ | ​ | (67,689)
Availability under revolving facility | ​ | $ | 432,461 | ​ | $ | 432,311

​

We are required to pay commitment fees to the Lenders in respect of any unutilized commitments. The commitment fees range from 0.15 percent to 0.275 percent per annum, depending on our Secured Leverage Ratio. We must also pay customary fees on outstanding letters of credit.

​

3.625% Senior Notes

The 3.625% Senior Notes are $400.0 million senior unsecured obligations and bear interest at 3.625% per year, payable semiannually in arrears on March 15 and September 15, beginning on September 15, 2021. The 3.625% Senior Notes mature on March 15, 2029, unless redeemed early or repurchased. If we undergo a change in control, we must make an offer to repurchase all of the 3.625% Senior Notes then outstanding at a repurchase price equal to 101% of their aggregate principal amount, plus accrued and unpaid interest (if any) to, but not including, the repurchase date.

​

The Company may redeem the 3.625% Senior Notes, in whole or in part, at any time on or after March 15, 2024 at the redemption prices specified in the notes. The Company may also redeem all or part of the 3.625% Senior Notes at any time prior to March 15, 2024 at a redemption price equal to 100% of the principal amount of the notes to be redeemed, plus the Applicable Premium (as defined in the notes), as of, and accrued and unpaid interest to, the redemption date. Additionally, the Company may redeem up to 40% of the aggregate principal amount of the 3.625% Senior Notes prior to March 15, 2024 with the net cash proceeds of certain sales of its capital stock at 103.625% of the principal amount of the notes, plus accrued and unpaid interest, if any, to the date of redemption only if, after the redemption, at least 60% of the aggregate principal amount of the 3.625% Senior Notes originally issued remains outstanding.

​

4.125% Senior Notes

​

The 4.125% Senior Notes are $500.0 million senior unsecured obligations and bear interest at 4.125% per year, payable semiannually in arrears on February 15 and August 15, beginning on August 15, 2022. The 4.125% Senior Notes mature on February 15, 2032, unless redeemed early or repurchased. If we undergo a change in control, we must make an offer to repurchase all of the 4.125% Senior Notes then outstanding at a repurchase price equal to 101% of their aggregate principal amount, plus accrued and unpaid interest (if any) to, but not including, the repurchase date.

​

The Company may redeem the 4.125% Senior Notes, in whole or in part, at any time on or after October 15, 2026 at the redemption prices specified in the notes plus accrued and unpaid interest if redeemed during the 12 month period commencing on October 15 of the years set for: 2026 – 102.063%, 2027 – 101.375%, 2028 – 100.688%, 2029 and thereafter – 100.000%. The Company may also redeem a make-whole redemption of the 4.125% Senior Notes at any time prior to October 15, 2026 at the treasury rate plus 50 basis points. Additionally, the Company may redeem up to 40% of the aggregate principal amount of the 4.125% Senior Notes prior to October 15, 2024 with the net cash proceeds of certain sales of its capital stock at 104.125% of the principal amount of the notes, plus accrued and unpaid interest, if any, to the date of redemption only if, after the redemption, at least 60% of the aggregate principal amount of the notes originally issued remains outstanding.

​

Equipment Notes

We did not issue equipment notes during the six months ended June 30, 2023. The company has issued $41.6 million of equipment notes for the purpose of financing the purchase of vehicles and equipment. The Company’s equipment notes each have a five year term maturing in 2023 and 2024 and bear interest at fixed rates between 2.8% and 4.4%.

​

13

Table of Contents

TOPBUILD CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

​

Covenant Compliance

The indentures governing our 3.625% Senior Notes and our 4.125% Senior Notes (together, our “Senior Notes”) contain restrictive covenants that, among other things, generally limit the ability of the Company and certain of its subsidiaries (subject to certain exceptions) to (i) create liens, (ii) pay dividends, acquire shares of capital stock and make payments on subordinated debt, (iii) place limitations on distributions from certain subsidiaries, (iv) issue or sell the capital stock of certain subsidiaries, (v) sell assets, (vi) enter into transactions with affiliates and (vii) effect mergers. The indentures provide for customary events of default which include (subject in certain cases to customary grace and cure periods), among others: nonpayment of principal or interest; breach of covenants or other agreements in the indenture; defaults in failure to pay certain other indebtedness; and certain events of bankruptcy or insolvency. Generally, if an event of default occurs and is continuing under the indenture, the trustee or the holders of at least 30% in aggregate principal amount of each of our Senior Notes then outstanding may declare the principal of, premium, if any, and accrued interest on the Senior Notes subject to such declaration immediately due and payable. The Senior Notes and related guarantees have not been registered under the Securities Act of 1933, and we are not required to register either the Senior Notes or the guarantees in the future.

​

The Credit Agreement contains certain covenants that limit, among other things, the ability of the Company to incur additional indebtedness or liens; to make certain investments or loans; to make certain restricted payments; to enter into consolidations, mergers, sales of material assets, and other fundamental changes; to transact with affiliates; to enter into agreements restricting the ability of subsidiaries to incur liens or pay dividends; or to make certain accounting changes. The Credit Agreement contains customary affirmative covenants and events of default.

​

The Credit Agreement requires that we maintain a Net Leverage Ratio and minimum Interest Coverage Ratio throughout the term of the agreement. The following table outlines the key financial covenants effective for the period covered by this Quarterly Report:

​

​ | ​ | ​
​ | ​ | As of June 30, 2023
Maximum Net Leverage Ratio | ​ | 3.50:1.00
Minimum Interest Coverage Ratio | ​ | 3.00:1.00
Compliance as of period end | ​ | In Compliance

​

​

6. FAIR VALUE MEASUREMENTS

Fair Value on Recurring Basis

The carrying values of cash and cash equivalents, receivables, net, and accounts payable are considered to be representative of their respective fair values due to the short-term nature of these instruments.

​

Fair Value on Non-Recurring Basis

Fair value measurements were applied to our long-term debt portfolio. We believe the carrying value of our term loan and equipment notes approximate their fair market value primarily due to the fact that the non-performance risk of servicing our debt obligations, as reflected in our business and credit risk profile, has not materially changed since we assumed our debt obligations under the Credit Agreement. In addition, due to the floating-rate nature of our term loan, the market value is not subject to variability solely due to changes in the general level of interest rates as is the case with a fixed-rate debt obligation. Based on market trades of our 3.625% Senior Notes and our 4.125% Senior Notes close to June 30, 2023 (Level 1 fair value measurement), we estimate the fair value of each in the table below:

​

​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | As of June 30, 2023
​ | ​ | ​ | Fair Value | ​ | ​ | Gross Carrying Value
3.625% Senior Notes | ​ | $ | 350,400 | ​ | $ | 400,000
4.125% Senior Notes | ​ | $ | 430,100 | ​ | $ | 500,000

​

14

Table of Contents

TOPBUILD CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

​

7. SEGMENT INFORMATION

​

The following tables set forth our net sales and operating results by segment, in thousands:

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended June 30,
​ | ​ | 2023 | ​ | 2022 | ​ | 2023 | ​ | 2022
​ | ​ | Net Sales | ​ | Operating Profit (b)
Operations by segment (a): | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Installation | ​ | $ | 809,055 | ​ | $ | 748,968 | ​ | $ | 172,278 | ​ | $ | 139,919
Specialty Distribution | ​ | ​ | 574,488 | ​ | ​ | 587,791 | ​ | ​ | 85,980 | ​ | ​ | 86,749
Intercompany eliminations | ​ | ​ | (66,281) | ​ | ​ | (62,474) | ​ | ​ | (11,198) | ​ | ​ | (10,435)
Total | ​ | $ | 1,317,262 | ​ | $ | 1,274,285 | ​ | ​ | 247,060 | ​ | ​ | 216,233
General corporate expense, net (c) | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | (9,957) | ​ | ​ | (9,012)
Operating profit, as reported | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 237,103 | ​ | ​ | 207,221
Other expense, net | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | (13,953) | ​ | ​ | (13,689)
Income before income taxes | ​ | ​ | ​ | ​ | ​ | ​ | ​ | $ | 223,150 | ​ | $ | 193,532

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Six Months Ended June 30,
​ | ​ | 2023 | ​ | 2022 | ​ | 2023 | ​ | 2022
​ | ​ | Net Sales | ​ | Operating Profit (b)
Operations by segment (a): | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Installation | ​ | $ | 1,576,145 | ​ | $ | 1,425,661 | ​ | $ | 319,176 | ​ | $ | 252,598
Specialty Distribution | ​ | ​ | 1,132,862 | ​ | ​ | 1,131,653 | ​ | ​ | 159,313 | ​ | ​ | 157,170
Intercompany eliminations | ​ | ​ | (126,507) | ​ | ​ | (114,111) | ​ | ​ | (21,169) | ​ | ​ | (19,144)
Total | ​ | $ | 2,582,500 | ​ | $ | 2,443,203 | ​ | ​ | 457,320 | ​ | ​ | 390,624
General corporate expense, net (c) | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | (20,786) | ​ | ​ | (19,449)
Operating profit, as reported | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 436,534 | ​ | ​ | 371,175
Other expense, net | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | (30,069) | ​ | ​ | (24,969)
Income before income taxes | ​ | ​ | ​ | ​ | ​ | ​ | ​ | $ | 406,465 | ​ | $ | 346,206

​

(a) | All of our operations are located primarily in the U.S and to a lesser extent Canada.

(b) | Segment operating profit includes an allocation of general corporate expenses attributable to the operating segments which is based on direct benefit or usage (such as salaries of corporate employees who directly support the segment).

(c) | General corporate expense, net includes expenses not specifically attributable to our segments for functions such as corporate human resources, finance, and legal, including salaries, benefits, and other related costs.

​

​

8. INCOME TAXES

​

Our effective tax rates were 26.3 percent and 26.1 percent for the three and six months ended June 30, 2023, and 2022, respectively. The effective rates for the three and six months ended June 30, 2022 were 25.8 percent and 25.4 percent, respectively. The higher 2023 tax rate for the three months ended June 30, 2023, compared to the three months ended June 30, 2022, was primarily related to state tax adjustments and miscellaneous items.

​

A tax expense of $0.2 million related to share-based compensation was recognized in our condensed consolidated statements of operations as a discrete item in income tax expense for the six months ended June 30, 2023. A tax benefit of $1.6 million related to share-based compensation was recognized in our condensed consolidated statements of operations as a discrete item in income tax expense for the six months ended June 30, 2022.

​

9. NET INCOME PER SHAR E

​

Basic net income per share is calculated by dividing net income by the number of weighted average shares outstanding during the period, without consideration for common stock equivalents.

​

15

Table of Contents

TOPBUILD CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

​

Diluted net income per share is calculated by adjusting the number of weighted average shares outstanding for the dilutive effect of common stock equivalents outstanding for the period, determined using the treasury stock method.

​

Basic and diluted net income per share were computed as follows:

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended June 30, |  | Six Months Ended June 30,
​ | ​ | 2023 | ​ | 2022 |  | 2023 | ​ | 2022
Net income (in thousands) | ​ | $ | 164,400 | ​ | $ | 143,697 | ​ | $ | 300,270 | ​ | $ | 258,410
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Weighted average number of common shares outstanding - basic | ​ | ​ | 31,599,744 | ​ | ​ | 32,405,292 | ​ | ​ | 31,575,337 | ​ | ​ | 32,570,988
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Dilutive effect of common stock equivalents: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
RSAs with service-based conditions | ​ | ​ | 25,052 | ​ | ​ | 12,123 | ​ | ​ | 23,848 | ​ | ​ | 13,625
RSAs with market-based conditions | ​ | ​ | 20,039 | ​ | ​ | 52,871 | ​ | ​ | 22,450 | ​ | ​ | 76,515
RSAs with performance-based conditions | ​ | ​ | 1,974 | ​ | ​ | 39,677 | ​ | ​ | 15,503 | ​ | ​ | 51,851
Stock options | ​ | ​ | 84,998 | ​ | ​ | 104,486 | ​ | ​ | 85,522 | ​ | ​ | 114,570
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Weighted average number of common shares outstanding - diluted | ​ | ​ | 31,731,807 | ​ | ​ | 32,614,449 | ​ | ​ | 31,722,660 | ​ | ​ | 32,827,549
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Basic net income per common share | ​ | $ | 5.20 | ​ | $ | 4.43 | ​ | $ | 9.51 | ​ | $ | 7.93
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Diluted net income per common share | ​ | $ | 5.18 | ​ | $ | 4.41 | ​ | $ | 9.47 | ​ | $ | 7.87

​

The following table summarizes shares excluded from the calculation of diluted net income per share because their effect would have been anti-dilutive:

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended June 30, |  | Six Months Ended June 30,
​ | ​ | 2023 |  | 2022 |  | 2023 |  | 2022
Anti-dilutive common stock equivalents: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
RSAs with service-based conditions | ​ | ​ | - | ​ | ​ | 18,880 | ​ | ​ | 5,582 | ​ | ​ | 14,562
RSAs with market-based conditions | ​ | ​ | - | ​ | ​ | 82 | ​ | ​ | 4,467 | ​ | ​ | 232
RSAs with performance-based conditions | ​ | ​ | - | ​ | ​ | - | ​ | ​ | - | ​ | ​ | 3,954
Stock options | ​ | ​ | 14,801 | ​ | ​ | 22,875 | ​ | ​ | 18,541 | ​ | ​ | 19,731
Total anti-dilutive common stock equivalents | ​ | ​ | 14,801 | ​ | ​ | 41,837 | ​ | ​ | 28,590 | ​ | ​ | 38,479

​

​

10. SHARE-BASED COMPENSATION

​

Effective July 1, 2015, our eligible employees commenced participation in the 2015 LTIP. The 2015 LTIP authorizes the Board to grant stock options, stock appreciation rights, restricted shares, restricted share units, performance awards, and dividend equivalents. All grants are made by issuing new shares and no more than 4.0 million shares of common stock may be issued under the 2015 LTIP. As of June 30, 2023, we had 1.8 million shares remaining available for issuance under the 2015 LTIP.

​

Share-based compensation expense is included in selling, general, and administrative expense. The income tax effect associated with share-based compensation awards is included in income tax expense.

​

16

Table of Contents

TOPBUILD CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

​

The following table presents share-based compensation amounts recognized in our condensed consolidated statements of operations, in thousands:

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended June 30, | ​ | Six Months Ended June 30,
​ | ​ | 2023 | ​ | 2022 | ​ | 2023 | ​ | 2022
Share-based compensation expense | ​ | $ | 3,751 | ​ | $ | 3,334 | ​ | $ | 6,886 | ​ | $ | 7,061
Income tax (expense)/benefit | ​ | $ | (180) | ​ | $ | (32) | ​ | $ | (225) | ​ | $ | 1,573

​

The following table presents a summary of our share-based compensation activity for six months ended June 30, 2023, in thousands, except per share amounts:

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | RSAs | ​ | Stock Options
​ | ​ | Number of Shares |  | Weighted Average Grant Date Fair Value Per Share |  | Number of Shares |  | Weighted Average Grant Date Fair Value Per Share |  | Weighted Average Exercise Price Per Share |  | Aggregate Intrinsic Value
Balance December 31, 2022 | ​ | 173.2 | ​ | $ | 195.06 | ​ | 182.2 | ​ | $ | 32.25 | ​ | $ | 86.79 | ​ | $ | 13,992.3
Granted | ​ | 101.3 | ​ | $ | 200.90 | ​ | — | ​ | $ | — | ​ | $ | — | ​ | ​ | —
Converted/Exercised | ​ | (99.4) | ​ | $ | 147.26 | ​ | (33.6) | ​ | $ | 16.81 | ​ | $ | 47.42 | ​ | $ | 5,041.0
Forfeited/Expired | ​ | (7.2) | ​ | $ | 231.79 | ​ | — | ​ | $ | — | ​ | $ | — | ​ | ​ | —
Balance June 30, 2023 | ​ | 167.9 | ​ | $ | 226.51 | ​ | 148.6 | ​ | $ | 35.87 | ​ | $ | 95.69 | ​ | $ | 25,306.8
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Exercisable June 30, 2023 (a) | ​ | ​ | ​ | ​ | 141.2 | ​ | $ | 33.04 | ​ | $ | 89.44 | ​ | $ | 24,924.8

(a) | The weighted average remaining contractual term for vested stock options is approximately 5.6 years.

​

We have unrecognized share-based compensation expense related to unvested awards as shown in the following table, dollars in thousands:

​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | As of June 30, 2023
​ | ​ | Unrecognized Compensation Expense on Unvested Awards | ​ | Weighted Average Remaining Compensation Expense Period
RSAs | ​ | $ | 22,105 | ​ | ​ | 1.1
Stock options | ​ | ​ | 287 | ​ | ​ | 0.4
Total unrecognized compensation expense related to unvested awards | ​ | $ | 22,392 | ​ | ​ | ​

​

Our RSAs with performance-based conditions are evaluated on a quarterly basis with adjustments to compensation expense based on the likelihood of the performance target being achieved or exceeded. The following table shows the range of payouts and the related expense for our outstanding RSAs with performance-based conditions, in thousands:

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | Payout Ranges and Related Expense
RSAs with Performance-Based Conditions | ​ | Grant Date Fair Value | ​ | 0% | ​ | 25% | ​ | 100% | ​ | 200%
February 16, 2021 | ​ | $ | 2,177 | ​ | $ | - | ​ | $ | 544 | ​ | $ | 2,177 | ​ | $ | 4,354
February 15, 2022 | ​ | $ | 3,062 | ​ | $ | - | ​ | $ | 766 | ​ | $ | 3,062 | ​ | $ | 6,124
February 21, 2023 | ​ | $ | 4,156 | ​ | $ | - | ​ | $ | 1,039 | ​ | $ | 4,156 | ​ | $ | 8,312

​

During the first quarter of 2023, RSAs with performance-based conditions that were granted on February 17, 2020 vested based on cumulative three-year achievement of 200%. Total compensation expense recognized over the three-year performance period, net of forfeitures, was $5.0 million.

​

17

Table of Contents

TOPBUILD CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

​

The fair value of our RSAs with a market-based condition granted under the 2015 LTIP was determined using a Monte Carlo simulation. The following are key inputs in the Monte Carlo analysis for awards granted in 2023, 2022, and 2021:

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | 2023 | ​ | ​ | 2022 | ​ | ​ | 2021 | ​
Measurement period (years) | ​ | ​ | 2.86 | ​ | ​ | ​ | 2.87 | ​ | ​ | ​ | 2.87 | ​
Risk free interest rate | ​ | ​ | 4.42 | % | ​ | ​ | 1.76 | % | ​ | ​ | 0.22 | %
Dividend yield | ​ | ​ | 0.00 | % | ​ | ​ | 0.00 | % | ​ | ​ | 0.00 | %
Estimated fair value of market-based RSAs at grant date | ​ | $ | 270.64 | ​ | ​ | $ | 298.20 | ​ | ​ | $ | 298.66 | ​

​

​

​

11. BUSINESS COMBINATIONS

​

Acquiring businesses is a key part of our ongoing strategy to grow our company and expand our market share. Each acquisition has been accounted for as a business combination under ASC 805, “Business Combinations.” Acquisition related costs were $1.1 million and $2.8 million in the three and six months ended June 30, 2023, respectively, and $0.9 million and $1.3 million for the three and six months ended June 30, 2022, respectively. Acquisition related costs are included in selling, general, and administrative expense in our condensed consolidated statements of operations.

​

On January 26, 2023, we acquired the assets of the residential insulation business of SRI. This installation acquisition enhanced our presence in Georgia, Michigan, Ohio, Florida, Alabama and South Carolina. The purchase price of $45.8 million was funded by cash on hand and the fair values of the assets acquired and liabilities assumed are as follows as of June 30, 2023, in thousands:

​

​ | ​ | ​ | ​
Purchase price fair values: | ​ | ​ | ​
Accounts receivable | ​ | $ | 5,751
Inventories | ​ | ​ | 4,377
Prepaid and other assets | ​ | ​ | 203
Property and equipment | ​ | ​ | 4,623
ROU asset (operating) | ​ | ​ | 4,695
Intangible assets | ​ | ​ | 13,740
Goodwill | ​ | ​ | 23,687
Accounts payable | ​ | ​ | (6,368)
Lease liabilities (operating) | ​ | ​ | (4,771)
All other liabilities | ​ | ​ | (89)
Net assets acquired | ​ | $ | 45,848

​

Estimates of acquired intangible assets related to the acquisition of SRI are as follows as of June 30, 2023, dollars in thousands:

​

​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | Estimated Fair Value |  | Weighted Average Estimated Useful Life (Years)
Customer relationships | ​ | $ | 12,020 | ​ | ​ | 12
Trademarks and trade names | ​ | ​ | 1,520 | ​ | ​ | 10
Non-compete agreements | ​ | ​ | 200 | ​ | ​ | 5
Total intangible assets acquired | ​ | $ | 13,740 | ​ | ​ | 12

​

As third-party or internal valuations are finalized, certain tax aspects of the foregoing transactions are completed, and customer post-closing reviews are concluded, adjustments may be made to the fair value of assets acquired, and in some cases total purchase price, through the end of each measurement period, generally one year following the applicable acquisition date.

​

18

Table of Contents

TOPBUILD CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

​

The table below provides a summary as of June 30, 2023 for the businesses acquired during the six months ended June 30, 2022, in thousands:

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
2022 Acquisitions | ​ | Date |  | Cash Paid | ​ | Contingent Consideration | ​ | Goodwill Acquired
Billings | ​ | ​ | 2/3/2022 | ​ | $ | 7,005 | ​ | $ | — | ​ | $ | 3,313
Assured | ​ | ​ | 4/7/2022 | ​ | ​ | 4,719 | ​ | ​ | 600 | ​ | ​ | 3,406
All others | ​ | ​ | Various | ​ | ​ | 1,500 | ​ | ​ | — | ​ | ​ | 780
Total | ​ | ​ | ​ | ​ | $ | 13,224 | ​ | $ | 600 | ​ | $ | 7,499

​

Goodwill to be recognized in connection with acquisitions is attributable to the synergies expected to be realized and improvements in the businesses after the acquisitions. Primarily all of the $23.7 million and $7.5 million of goodwill recorded from acquisitions completed in the six months ended June 30, 2023 and 2022, respectively, is expected to be deductible for income tax purposes.

12. ACCRUED LIABILITIES

​

The following table sets forth the components of accrued liabilities, in thousands:

​

​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | As of
​ |  | June 30, 2023 |  | December 31, 2022
Accrued liabilities: | ​ | ​ | ​ | ​ | ​ | ​
Salaries, wages, and bonus/commissions | ​ | $ | 68,353 | ​ | $ | 75,237
Insurance liabilities | ​ | ​ | 28,663 | ​ | ​ | 28,870
Customer rebates | ​ | ​ | 12,492 | ​ | ​ | 21,561
Deferred revenue | ​ | ​ | 16,332 | ​ | ​ | 21,940
Sales and property taxes | ​ | ​ | 15,765 | ​ | ​ | 15,757
Interest payable on long-term debt | ​ | ​ | 11,978 | ​ | ​ | 12,146
Other | ​ | ​ | 27,011 | ​ | ​ | 23,859
Total accrued liabilities | ​ | $ | 180,594 | ​ | $ | 199,370

​

​

See Note 3 – Revenue Recognition for discussion of our deferred revenue balances.

​

13. OTHER COMMITMENTS AND CONTINGENCIES

​

Litigation. We are subject to certain claims, charges, litigation, and other proceedings in the ordinary course of our business, including those arising from or related to contractual matters, intellectual property, personal injury, environmental matters, product liability, product recalls, construction defects, insurance coverage, personnel and employment disputes, antitrust, and other matters, including class actions. We believe we have adequate defenses in these matters, and we do not believe that the ultimate outcome of these matters will have a material adverse effect on us. However, there is no assurance that we will prevail in any of these pending matters, and we could in the future incur judgments, enter into settlements of claims, or revise our expectations regarding the outcome of these matters, which could materially impact our liquidity and our results of operations.

​

Other Matters. We enter into contracts, which include customary indemnities that are standard for the industries in which we operate. Such indemnities include, among other things, claims against our builder customers for issues relating to our workmanship. We generally exclude from our contracts with builder customers indemnity relating to product quality and warranty claims, as we pass such claims directly to the manufacturers of the products we install or distribute. In conjunction with divestitures and other transactions, we occasionally provide customary indemnities relating to various items including, among others, the enforceability of trademarks, legal and environmental issues, and asset valuations. We evaluate the probability that we may incur liabilities under these customary indemnities and appropriately record an estimated liability when deemed probable.

​

19

Table of Contents

TOPBUILD CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

​

We also maintain indemnification agreements with our directors and officers that may require us to indemnify them against liabilities that arise by reason of their status or service as directors or officers, except as prohibited by applicable law.

​

We occasionally use performance bonds to ensure completion of our work on certain larger customer contracts that can span multiple accounting periods. Performance bonds generally do not have stated expiration dates; rather, we are released from the bonds as the contractual performance is completed. We also have bonds outstanding for license and insurance.

​

The following table summarizes our outstanding performance, licensing, insurance, and other bonds, in thousands:

​

​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | As of
​ | ​ | June 30, 2023 | ​ | December 31, 2022
Outstanding bonds: | ​ | ​ | ​ | ​ | ​ | ​
Performance bonds | ​ | $ | 140,363 | ​ | $ | 152,434
Licensing, insurance, and other bonds | ​ | ​ | 25,559 | ​ | ​ | 25,439
Total bonds | ​ | $ | 165,922 | ​ | $ | 177,873

​

​

​

14. SUBSEQUENT EVENTS

​

On July 10, 2023, we acquired the assets of the residential insulation installer business Rocky Mountain. This installation acquisition enhanced our presence in the Colorado market. The purchase price of approximately $7.2 million was funded by cash on hand.

​

On July 17, 2023, we acquired the assets of the residential insulation business Best Insulation. This installation acquisition enhanced our presence in Texas, Arizona, Tennessee, and Florida markets. The purchase price of approximately $95.0 million was funded by cash on hand.

​

Both acquisitions were accounted for as a business combination under ASC 805, “Business Combinations.” During the measurement period, we expect to receive additional detailed information to complete the purchase price allocation.

​

On July 26, 2023, we entered into an agreement to acquire SPI, a leading installer and specialty distributor of insulation and building material products to the construction industry in the United States and Canada. SPI has 85 branches across the United States and 4 branches in Canada. We expect to fund this $960.0 million transaction with a new $550.0 million delayed draw term loan and cash on hand. The transaction is subject to customary closing conditions, including expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

​

On July 26, 2023, we entered into Amendment No. 4 to our Credit Agreement, which among other things, (i) increases the permitted borrowings from $300.0 million to $850.0 million, and (ii) provides for a new $550.0 million delayed draw term loan, the proceeds of which will be used, in part, to finance the acquisition of SPI.

​

​

​

​

​

​

​

​

​

20

Table of Contents

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

​

TopBuild, headquartered in Daytona Beach, Florida, is a leading installer and specialty distributor of insulation and other building material products to the construction industry in the United States and Canada.

​

We operate in two segments: Installation and Specialty Distribution. Our Installation segment installs insulation and other building products nationwide. As of June 30, 2023, we had approximately 235 Installation branches located across the United States. We install various insulation applications, including fiberglass batts and rolls, blown-in loose fill fiberglass, polyurethane spray foam, and blown-in loose fill cellulose. Additionally, we install other building products including glass and windows, rain gutters, after paint products, fireproofing, garage doors, and fireplaces. We handle every stage of the installation process, including material procurement supplied by leading manufacturers, project scheduling and logistics, multi-phase professional installation, and installation quality assurance.

​

Our Specialty Distribution segment distributes building and mechanical insulation, insulation accessories, rain gutters, and other building product materials for the residential and commercial/industrial end markets. As of June 30, 2023, we had approximately 156 distribution centers located across the United States and 18 distribution centers in Canada. Our Specialty Distribution customer base consists of thousands of insulation contractors of all sizes serving a wide variety of residential and commercial/industrial industries, gutter contractors, weatherization contractors, other contractors, dealers, metal building erectors, and modular home builders.

​

We believe that having both Installation and Specialty Distribution provides us with several distinct competitive advantages. First, the combined buying power of our two business segments, along with our scale, strengthens our ties to the major manufacturers of insulation and other building material products. This helps to ensure we are buying competitively and ensures the availability of supply to our local branches and distribution centers. The overall effect is driving efficiencies through our supply chain. Second, being a leader in both installation and specialty distribution allows us to reach a broader set of builders and contractors more effectively, regardless of their size or geographic location in the U.S. and Canada, and leverage housing and commercial/industrial construction growth wherever it occurs. Third, during housing industry downturns, many insulation contractors who buy directly from manufacturers during industry peaks return to purchasing through specialty distributors. As a result, this helps to reduce our exposure to cyclical swings in our business.

​

For additional details pertaining to our operating results by segment, see Note 7 – Segment Information to our unaudited condensed consolidated financial statements contained in Part I, Item 1 of this Quarterly Report. For additional details regarding our strategy, material trends in our business and seasonality, please refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report for the year ended December 31, 2022, as filed with the SEC on February 23, 2023.

​

The following discussion and analysis contains forward-looking statements and should be read in conjunction with the unaudited condensed consolidated financial statements, the notes thereto, and the section entitled “Forward-Looking Statements” included in this Quarterly Report.

​

21

Table of Contents

​

SECOND QUARTER 2023 VERSUS SECOND QUARTER 2022

​

The following table sets forth our net sales, gross profit, operating profit, and margins, as reported in our condensed consolidated statements of operations, in thousands:

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended June 30, | ​
​ | ​ | 2023 | ​ | 2022 | ​
Net sales | ​ | $ | 1,317,262 | ​ | $ | 1,274,285 | ​
Cost of sales | ​ | ​ | 895,462 | ​ | ​ | 890,188 | ​
Cost of sales ratio | ​ | ​ | 68.0 | % | ​ | 69.9 | %
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Gross profit | ​ | ​ | 421,800 | ​ | ​ | 384,097 | ​
Gross profit margin | ​ | ​ | 32.0 | % | ​ | 30.1 | %
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Selling, general, and administrative expense | ​ | ​ | 184,697 | ​ | ​ | 176,876 | ​
Selling, general, and administrative expense to sales ratio | ​ | ​ | 14.0 | % | ​ | 13.9 | %
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Operating profit | ​ | ​ | 237,103 | ​ | ​ | 207,221 | ​
Operating profit margin | ​ | ​ | 18.0 | % | ​ | 16.3 | %
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Other expense, net | ​ | ​ | (13,953) | ​ | ​ | (13,689) | ​
Income tax expense | ​ | ​ | (58,750) | ​ | ​ | (49,835) | ​
Net income | ​ | $ | 164,400 | ​ | $ | 143,697 | ​
Net margin | ​ | ​ | 12.5 | % | ​ | 11.3 | %

​

Sales and Operations

​

Net sales increased 3.4% for the three months ended June 30, 2023, from the comparable period of 2022. The increase was primarily driven by a 1.8% impact from higher selling prices, a 1.3% increase in sales from acquisitions, and a 0.2% increase in sales volume.

Gross profit margins were 32.0% and 30.1% for the three months ended June 30, 2023 and 2022, respectively. Gross profit margin improved primarily due to productivity initiatives, continued synergies from our 2021 acquisition of DI, and higher selling prices partially offset by higher material costs.

​

Selling, general, and administrative expenses as a percentage of sales were 14.0% and 13.9% for the three months ended June 30, 2023 and 2022, respectively. Selling, general, and administrative expenses as a percentage of sales were slightly higher due to increased incentive compensation and headcount costs partially offset by continued realization of synergies on our 2021 acquisition of DI.

​

Operating margins were 18.0% and 16.3% for the three months ended June 30, 2023 and 2022, respectively. The increase in operating margins was due to productivity initiatives, continued realization of synergies from our 2021 acquisition of DI, and higher selling prices partially offset by higher material costs and slightly higher selling, general, and administrative expenses compared to the same quarter in 2022.

​

​

​

​

22

Table of Contents

​

Business Segment Results

​

The following table sets forth our net sales and operating profit margins by business segment, in thousands:

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended June 30, | ​ | ​ | ​
​ |  | 2023 |  | 2022 |  | Percent Change |
Net sales by business segment: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Installation | ​ | $ | 809,055 | ​ | $ | 748,968 | ​ | 8.0 | %
Specialty Distribution | ​ | ​ | 574,488 | ​ | ​ | 587,791 | ​ | (2.3) | %
Intercompany eliminations | ​ | ​ | (66,281) | ​ | ​ | (62,474) | ​ | ​ | ​
Net sales | ​ | $ | 1,317,262 | ​ | $ | 1,274,285 | ​ | 3.4 | %
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Operating profit by business segment: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Installation | ​ | $ | 172,278 | ​ | $ | 139,919 | ​ | 23.1 | %
Specialty Distribution | ​ | ​ | 85,980 | ​ | ​ | 86,749 | ​ | (0.9) | %
Intercompany eliminations | ​ | ​ | (11,198) | ​ | ​ | (10,435) | ​ | ​ | ​
Operating profit before general corporate expense | ​ | ​ | 247,060 | ​ | ​ | 216,233 | ​ | 14.3 | %
General corporate expense, net | ​ | ​ | (9,957) | ​ | ​ | (9,012) | ​ | ​ | ​
Operating profit | ​ | $ | 237,103 | ​ | $ | 207,221 | ​ | 14.4 | %
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Operating profit margins: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Installation | ​ | ​ | 21.3 | % | ​ | 18.7 | % | ​ | ​
Specialty Distribution | ​ | ​ | 15.0 | % | ​ | 14.8 | % | ​ | ​
Operating profit margin before general corporate expense | ​ | ​ | 18.8 | % | ​ | 17.0 | % | ​ | ​
Operating profit margin | ​ | ​ | 18.0 | % | ​ | 16.3 | % | ​ | ​

​

Installation

​

Sales

​

Sales in our Installation segment increased $60.1 million, or 8.0%, for the three months ended June 30, 2023, as compared to the same period in 2022. Sales increased 2.9% from both higher selling prices and sales volume, and 2.2% from acquisitions.

​

Operating margins

​

Operating margins in our Installation segment were 21.3% and 18.7% for the three months ended June 30, 2023 and 2022, respectively. The increase in operating margin was primarily driven by productivity initiatives and higher sales partially offset by higher material costs compared to the same quarter in 2022.

​

Specialty Distribution

​

Sales

​

Sales in our Specialty Distribution segment decreased $13.3 million, or 2.3%, for the three months ended June 30, 2023, as compared to the same period in 2022. Sales decreased 2.9% from lower sales volume, which was partially offset by a 0.6% increase from higher selling prices.

​

Operating margins

​

Operating margins in our Specialty Distribution segment were 15.0% and 14.8% for the three months ended June 30, 2023 and 2022, respectively. The increase in operating margin was driven by productivity initiatives and continued realization of synergies from our 2021 acquisition of DI, partially offset by lower sales volume.

​

23

Table of Contents

​

OTHER ITEMS

​

Other expense, net

​

Other expense, net, was $14.0 million and $13.7 million for the three months ended June 30, 2023 and 2022, respectively. Interest expense increased by $5.1 million for the three months ended June 30, 2023 due to significantly higher interest rates on borrowings under the Credit Agreement compared to the same period in 2022. This increase in interest expense was partially offset by $4.8 million higher interest income over the same period as a result of higher interest rates and cash balances.

​

Income tax expense

​

Income tax expense was $58.8 million, an effective tax rate of 26.3 percent, for the three months ended June 30, 2023, compared to $49.8 million, an effective tax rate of 25.8 percent, for the comparable period in 2022. The tax rate for the three months ended June 30, 2023, was higher primarily related to state tax adjustments and miscellaneous items.

​

FIRST SIX MONTHS 2023 VERSUS FIRST SIX MONTHS 2022

​

The following table sets forth our net sales, gross profit, operating profit, and margins, as reported in our condensed consolidated statements of operations, in thousands:

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Six Months Ended June 30, | ​
​ |  | 2023 |  | 2022 |
Net sales | ​ | $ | 2,582,500 | ​ | $ | 2,443,203 | ​
Cost of sales | ​ | ​ | 1,790,485 | ​ | ​ | 1,727,905 | ​
Cost of sales ratio | ​ | ​ | 69.3 | % | ​ | 70.7 | %
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Gross profit | ​ | ​ | 792,015 | ​ | ​ | 715,298 | ​
Gross profit margin | ​ | ​ | 30.7 | % | ​ | 29.3 | %
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Selling, general, and administrative expense | ​ | ​ | 355,481 | ​ | ​ | 344,123 | ​
Selling, general, and administrative expense to sales ratio | ​ | ​ | 13.8 | % | ​ | 14.1 | %
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Operating profit | ​ | ​ | 436,534 | ​ | ​ | 371,175 | ​
Operating profit margin | ​ | ​ | 16.9 | % | ​ | 15.2 | %
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Other expense, net | ​ | ​ | (30,069) | ​ | ​ | (24,969) | ​
Income tax expense | ​ | ​ | (106,195) | ​ | ​ | (87,796) | ​
Net income | ​ | $ | 300,270 | ​ | $ | 258,410 | ​
Net margin | ​ | ​ | 11.6 | % | ​ | 10.6 | %

​

Sales and Operations

​

Net sales increased 5.7% for the six months ended June 30, 2023, from the comparable period of 2022. The increase was primarily driven by a 3.7% increase due to higher selling prices, a 1.3% impact from our acquisitions and a 0.7% increase in sales volume.

Gross profit margins were 30.7% and 29.3% for the six months ended June 30, 2023 and 2022, respectively. Gross profit margin improved primarily due to productivity initiatives, continued realization of synergies from our 2021 acquisition of DI, and higher selling prices partially offset by higher material costs.

​

Selling, general, and administrative expense, as a percent of sales, was 13.8% and 14.1% for the six months ended June 30, 2023 and 2022, respectively. The decrease in selling, general, and administrative expenses as a percentage of sales was driven primarily by higher sales and continued realization of synergies from our 2021 acquisition of DI, partially offset by increased incentive compensation and headcount costs.

​

24

Table of Contents

​

Operating margins were 16.9% and 15.2% for the six months ended June 30, 2023 and 2022, respectively. The increase in operating margins was due to higher selling prices and sales from acquisitions, productivity initiatives and continued realization of synergies from our 2021 acquisition of DI partially offset by higher material costs and selling, general and administrative expenses compared to the same period in 2022.

​

Business Segment Results

​

The following table sets forth our net sales and operating profit margins by business segment, in thousands:

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | Six Months Ended June 30, | ​ | ​ | ​ | ​
| 2023 |  | 2022 |  | ​ | Percent Change | ​
Net sales by business segment: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Installation | $ | 1,576,145 | ​ | $ | 1,425,661 | ​ | ​ | 10.6 | %
Specialty Distribution | ​ | 1,132,862 | ​ | ​ | 1,131,653 | ​ | ​ | 0.1 | %
Intercompany eliminations | ​ | (126,507) | ​ | ​ | (114,111) | ​ | ​ | ​ | ​
Net sales | $ | 2,582,500 | ​ | $ | 2,443,203 | ​ | ​ | 5.7 | %
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Operating profit by business segment (a): | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Installation | $ | 319,176 | ​ | $ | 252,598 | ​ | ​ | 26.4 | %
Specialty Distribution | ​ | 159,313 | ​ | ​ | 157,170 | ​ | ​ | 1.4 | %
Intercompany eliminations | ​ | (21,169) | ​ | ​ | (19,144) | ​ | ​ | ​ | ​
Operating profit before general corporate expense | ​ | 457,320 | ​ | ​ | 390,624 | ​ | ​ | 17.1 | %
General corporate expense, net (b) | ​ | (20,786) | ​ | ​ | (19,449) | ​ | ​ | ​ | ​
Operating profit | $ | 436,534 | ​ | $ | 371,175 | ​ | ​ | 17.6 | %
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Operating profit margins: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Installation | ​ | 20.3 | % | ​ | 17.7 | % | ​ | ​ | ​
Specialty Distribution | ​ | 14.1 | % | ​ | 13.9 | % | ​ | ​ | ​
Operating profit margin before general corporate expense | ​ | 17.7 | % | ​ | 16.0 | % | ​ | ​ | ​
Operating profit margin | ​ | 16.9 | % | ​ | 15.2 | % | ​ | ​ | ​

​

Installation

​

Sales

​

Sales in our Installation segment increased $150.5 million, or 10.6%, for the six months ended June 30, 2023, as compared to the same period in 2022. Sales increased 4.3% from higher selling prices, 4.1% from higher sales volume and 2.2% from our acquisitions.

​

Operating margins

​

Operating margins in our Installation segment were 20.3% and 17.7% for the six months ended June 30, 2023 and 2022, respectively. The increase in operating margin was primarily driven by productivity initiatives, higher sales volume, and higher selling prices partially offset by higher material costs compared to the same quarter in 2022.

​

Specialty Distribution

​

Sales

​

Sales in our Specialty Distribution segment increased $1.2 million, or 0.1%, for the six months ended June 30, 2023, as compared to the same period in 2022. Sales increased 3.0% from higher selling prices which was offset by a 2.9% decline in sales volume.

​

25

Table of Contents

​

Operating margins

​

Operating margins in our Specialty Distribution segment were 14.1% and 13.9% for the six months ended June 30, 2023 and 2022, respectively. The increase in operating margins was driven by productivity initiatives, continued realization of synergies from our 2021 acquisition of DI, and higher selling prices partially offset by lower sales volume and higher material costs.

​

OTHER ITEMS

​

Other expense, net

​

Other expense, net, which primarily consisted of interest expense, was $30.1 million and $25.0 million for the six months ended June 30, 2023 and 2022, respectively. Interest expense increased by $11.2 million for the six months ended June 30, 2023 due to significantly higher interest rates on our borrowings under the Credit Agreement compared to the same period in 2022. This increase in interest expense was partially offset by $7.2 million higher interest income over the same period due to higher interest rates and cash balances.

​

Income tax expense

​

Income tax expense was $106.2 million, an effective tax rate of 26.1 percent, for the six months ended June 30, 2023 compared to $87.8 million, an effective tax rate of 25.4 percent, for the comparable period in 2022. The tax rate for the six months ended June 30, 2023 was higher primarily related to a decrease in the benefit related to share-based compensation.

​

Cash Flows and Liquidity

​

Significant sources (uses) of cash and cash equivalents are summarized for the periods indicated, in thousands:

​

​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Six Months Ended June 30,
​ |  | 2023 |  | 2022
Changes in cash and cash equivalents: | ​ | ​ | ​ | ​ | ​ | ​
Net cash provided by operating activities | ​ | $ | 385,797 | ​ | $ | 217,697
Net cash used in investing activities | ​ |  | (75,838) | ​ |  | (54,162)
Net cash used in financing activities | ​ | ​ | (23,982) | ​ |  | (179,587)
Impact of exchange rate changes on cash | ​ | ​ | 281 | ​ | ​ | 142
Net increase (decrease) in cash and cash equivalents | ​ | $ | 286,258 | ​ | $ | (15,910)

​

Net cash flows provided by operating activities increased $168.1 million for the six months ended June 30, 2023, as compared to the prior year period. Net income was up $41.9 million, or 16.2%, compared with the prior year period, driven by productivity initiatives, continued realization of synergies from our acquisition of DI and higher selling prices partially offset by lower sales volume and higher material costs. Cash flows provided by operating activities was higher in the six months ended June 30, 2023 as compared to the same period in 2022, due to changes in inventory and accounts receivable.

Net cash used in investing activities was $75.8 million for the six months ended June 30, 2023, primarily composed of $45.9 million for the acquisition of SRI and $30.7 million for purchases of property and equipment, mainly vehicles and equipment. Net cash used in investing activities was $54.2 million for the six months ended June 30, 2022, primarily composed of $36.0 million for purchases of property and equipment, mainly vehicles, and $18.7 million for acquisitions.

Net cash used in financing activities was $24.0 million for the six months ended June 30, 2023. During the six months ended June 30, 2023, we used $18.8 million for debt repayments and incurred $4.9 million net cash outflow related to exercise of share-based incentive awards and stock options. Net cash used in financing activities was $179.6 million for the six months ended June 30, 2022. During the six months ended June 30, 2022, we used $150.1 million for the repurchase of common stock pursuant to the 2021 Repurchase Program, $19.3 million for debt repayments, and $10.2 million net activity related to exercise of share-based incentive awards and stock options. Additionally, we borrowed and repaid $70.0 million on our Revolving Facility, all within the second quarter of 2022.

26

Table of Contents

​

We have access to liquidity through our cash from operations and available borrowing capacity under our Credit Agreement, which provides for borrowing and/or standby letter of credit issuances of up to $500 million under the revolving facility. Additional information regarding our outstanding debt and borrowing capacity is incorporated by reference from Note 5 – Long-term Debt to our unaudited condensed consolidated financial statements contained in Part 1, Item 1 of this Quarterly Report.

The following table summarizes our liquidity, in thousands:

​

​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | As of
​ | ​ | June 30, | ​ | December 31,
​ |  | 2023 |  | 2022
Cash and cash equivalents (a) | ​ | $ | 526,327 | ​ | $ | 240,069
​ | ​ | ​ | ​ | ​ | ​ | ​
Revolving facility | ​ | ​ | 500,000 | ​ | ​ | 500,000
Less: standby letters of credit | ​ | ​ | (67,539) | ​ | ​ | (67,689)
Availability under revolving facility | ​ | ​ | 432,461 | ​ | ​ | 432,311
​ | ​ | ​ | ​ | ​ | ​ | ​
Total liquidity | ​ | $ | 958,788 | ​ | $ | 672,380

(a) Our cash and cash equivalents consist of AAA-rated money market funds as well as cash held in our demand deposit accounts.

​

We believe that our cash flows from operations, combined with our current cash levels and available borrowing capacity, will be adequate to support our ongoing operations and known contractual obligations including funding our debt service requirements, capital expenditures, lease obligations and working capital needs for at least the next twelve months. We also have adequate liquidity to maintain off-balance sheet arrangements for short-term leases, letters of credit, and performance and license bonds. Information regarding our outstanding bonds as of June 30, 2023, is incorporated by reference from Note 13 – Other Commitments and Contingencies to our unaudited condensed consolidated financial statements contained in Part I, Item 1 of this Quarterly Report.

​

OUTLOOK

Residential New Construction

Recent builder sentiment and May housing starts data have increased optimism for the single family housing market. Coming into 2023, we saw a continued slowdown in single family starts and although we expect this slowdown to impact our single family volume in the second half of this year, we believe it will be less than we originally anticipated. Multifamily starts have remained strong and we expect our multifamily construction volume to remain solid through the end of the year. Our sales the first half of 2023 benefitted from the significant backlog of houses under construction and continued strong multifamily activity. While there is still some uncertainty around the economy and the impacts of higher interest rates, we remain optimistic about the long-term fundamentals of the U.S. housing market, supported by a limited supply of both new and existing homes and favorable demographic trends, including increasing household formations.

​

Commercial and Industrial Construction

We continue to have a strong backlog and bidding activity to support our commercial/industrial sales. We see a lot of major projects being planned across several different industries fueling demand for our Specialty Distribution products. In addition, maintenance and repair on industrial sites will serve as a continued driver for our business.

​

OFF-BALANCE SHEET ARRANGEMENTS

​

We had no material off-balance sheet arrangements during the three months ended June 30, 2023, other than short-term leases, letters of credit, and performance and license bonds, which have been disclosed in Part 1, Item 1 of this Quarterly report.

​

27

Table of Contents

​

CONTRACTUAL OBLIGATIONS

​

There have been no material changes to our contractual obligations from those previously disclosed in our Annual Report for the year ended December 31, 2022, as filed with the SEC on February 23, 2023.

​

CRITICAL ACCOUNTING POLICIES

​

We prepare our condensed consolidated financial statements in conformity with GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of the financial statements, and the reported amounts of sales and expenses during the reporting period. Actual results could differ from those estimates. Our critical accounting policies have not changed from those previously reported in our Annual Report for the year ended December 31, 2022, as filed with the SEC on February 23, 2023.

​

APPLICATION OF NEW ACCOUNTING STANDARDS

​

Information regarding application of new accounting standards is incorporated by reference from Note 2 – Accounting Policies to our unaudited condensed consolidated financial statements contained in Part I, Item 1 of this Quarterly Report.

​

FORWARD-LOOKING STATEMENTS

​

Statements contained in this report that reflect our views about future periods, including our future plans and performance, constitute “forward-looking statements” under the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as “will,” “would,” “should,” “anticipate,” “expect,” “believe,” “designed,” “plan,” “may,” “project,” “estimate” or “intend,” the negative of these terms, and similar references to future periods. These views involve risks and uncertainties that are difficult to predict and, accordingly, our actual results may differ materially from the results discussed in our forward-looking statements. We caution you against unduly relying on any of these forward-looking statements. Our future performance may be affected by the duration and impact of negative macro-economic impacts on the United States economy, specifically with respect to residential, commercial/industrial construction, our ability to collect our receivables from our customers, our reliance on residential new construction, residential repair/remodel, and commercial/industrial construction; our reliance on third-party suppliers and manufacturers; our ability to attract, develop, and retain talented personnel and our sales and labor force; our ability to maintain consistent practices across our locations; our ability to maintain our competitive position; and our ability to realize the expected benefits of our acquisitions. We discuss the material risks we face under the caption entitled “Risk Factors” in our Annual Report for the year ended December 31, 2022, as filed with the SEC on February 23, 2023, as well as under the caption entitled “Risk Factors” in subsequent reports that we file with the SEC. Our forward-looking statements in this filing speak only as of the date of this filing. Factors or events that could cause our actual results to differ may emerge from time to time and it is not possible for us to predict all of them. Unless required by law, we undertake no obligation to update publicly any forward-looking statements as a result of new information, future events, or otherwise.

​

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

​

Interest Rate Risk

​

We have a Term Loan outstanding with a principal balance of $551.3 million and a revolving facility with an aggregate borrowing capacity of $500.0 million. We also have outstanding 3.625% Senior Notes with an aggregate principal balance of $400.0 million and 4.125% Senior Notes with an aggregate principal balance of $500.0 million. The 3.625% Senior Notes and 4.125% Senior Notes bear a fixed rate of interest and therefore are excluded from the calculation below as they are not subject to fluctuations in interest rates.

​

Interest payable on both the aggregate Term Loan and revolving facility is based on a variable interest rate. As a result, we are exposed to market risks related to fluctuations in interest rates on this outstanding indebtedness. As of June 30, 2023, the applicable interest rate as of such date was 6.20%. Based on our outstanding borrowings as of June 30, 2023, a 100-basis point increase in the interest rate would result in a $5.4 million increase in our annualized interest expense. There was no outstanding balance under the revolving facility as of June 30, 2023.

​

28

Table of Contents

​

Item 4. CONTROLS AND PROCEDURES

​

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Quarterly Report, we carried out an evaluation, under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of June 30, 2023.

​

Changes in Internal Control over Financial Reporting

There was no change in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) in the most recent fiscal quarter ended June 30, 2023, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

​

PART II – OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

​

The information set forth under the caption “Litigation” in Note 13 – Other Commitments and Contingencies to our unaudited condensed consolidated financial statements contained in Part I, Item 1 of this Quarterly Report, is incorporated by reference herein.

​

Item 1A. RISK FACTORS

​

There have been no material changes to our risk factors as previously disclosed in our Annual Report for the year ended December 31, 2022, as filed with the SEC on February 23, 2023 which are incorporated by reference herein.

​

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

​

On July 25, 2022, our Board authorized the 2022 Repurchase Program, pursuant to which the Company may purchase up to $200 million of our common stock. There were no share repurchases executed during the six months ended June 30, 2023, leaving $154.4 million remaining under the 2022 Share Repurchase Program.

​

Item 3. DEFAULTS UPON SENIOR SECURITIES

​

Not applicable.

​

Item 4. MINE SAFETY DISCLOSURES

​

Not applicable.

​

Item 5. OTHER INFORMATION

​

During the quarter ended June 30, 2023, no director or officer (as defined in Rule 16a-1(f) promulgated under the Exchange Act) of the Company adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement" (as each term is defined in Item 408 of Regulation S-K).

​

Item 6. EXHIBITS

​

The Exhibits listed on the accompanying Index to Exhibits are filed or furnished (as noted on such Index) as part of this Quarterly Report and incorporated herein by reference.

29

Table of Contents

​

INDEX TO EXHIBITS

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | ​ | ​ | Incorporated by Reference | ​ | Filed
Exhibit No. |  | Exhibit Title |  | Form |  | Exhibit |  | Filing Date |  | Herewith
10.16 | ​ | Amendment No. 4 to Amended and Restated Credit Agreement and Increase Joinder, dated July 26, 2023, among TopBuild Corp., Bank of America, N.A. as administrative agent, and the other lenders and agents party thereto. | ​ | ​ | ​ | ​ | ​ | ​ | ​ | X
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
31.1 | ​ | Principal Executive Officer Certification required by Rules 13a-14 and 15d-14 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | X
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
31.2 | ​ | Principal Financial Officer Certification required by Rules 13a-14 and 15d-14 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | X
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
32.1‡ | ​ | Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
32.2‡ | ​ | Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
101.INS | ​ | Inline XBRL Instance Document - the Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | ​ | ​ | ​ | ​ | ​ | ​ | ​ | X
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
101.SCH | ​ | Inline XBRL Taxonomy Extension Schema Document | ​ | ​ | ​ | ​ | ​ | ​ | ​ | X
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
101.CAL | ​ | Inline XBRL Taxonomy Extension Calculation Linkbase Document | ​ | ​ | ​ | ​ | ​ | ​ | ​ | X
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
101.DEF | ​ | Inline XBRL Taxonomy Extension Definition Linkbase Document | ​ | ​ | ​ | ​ | ​ | ​ | ​ | X
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
101.LAB | ​ | Inline XBRL Taxonomy Extension Label Linkbase Document | ​ | ​ | ​ | ​ | ​ | ​ | ​ | X
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
101.PRE | ​ | Inline XBRL Taxonomy Extension Presentation Linkbase Document | ​ | ​ | ​ | ​ | ​ | ​ | ​ | X
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
104 | ​ | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | ​ | ​ | ​ | ​ | ​ | ​ | ​ | X
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ‡Furnished herewith | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​

​

​

30

Table of Contents

​

SIGNATURE

​

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

​

| ​ |  |
| ​ | TOPBUILD CORP.
| ​ |
| ​ |
| ​ | By: | /s/ Robert Kuhns
| ​ | Name: | Robert Kuhns
| ​ | Title: | Vice President and Chief Financial Officer
| ​ |  | (Principal Financial Officer and Principal Accounting Officer)

August 3, 2023

​

​

​

31