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, 2025
☐
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 orOrganization)
47-3096382
(I.R.S. EmployerIdentification 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 28,138,831 shares of Common Stock, par value $0.01 per share as of July 29, 2025.
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
25
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
33
Item 4.
Controls and Procedures
Part II.
Other Information
Legal Proceedings
34
Item 1A.
Risk Factors
Unregistered Sales of Equity Securities and Use of Proceeds
Defaults upon Senior Securities
Mine Safety Disclosures
Item 5.
Item 6.
Exhibits
Index to Exhibits
35
Signatures
36
2
GLOSSARY
We use acronyms, abbreviations, and other defined terms throughout this Quarterly Report, 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
2024 Repurchase Program
$1 billion share repurchase program authorized by the Board on May 3, 2024.
2025 LTIP
TopBuild Corp. Amended and Restated 2015 Long Term Stock Incentive Plan, as amended April 28, 2025
2025 Repurchase Program
$1 billion share repurchase program authorized by the Board on February 17, 2025.
Amendment No. 5
Amendment No. 5 to the Credit Agreement dated May 16, 2025
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
ASU
Accounting Standards Update
Board
Board of Directors of TopBuild
BofA
Bank of America, N.A.
Brabble
Brabble Insulation, Inc.
CODM
Chief Operating Decision Maker
Cost of sales
Primarily composed of labor, material costs and overhead
Credit Agreement
Amended and Restated Credit Agreement, originally dated March 20, 2020 and amended May 16, 2025, 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
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
Green Space
Nate's Insulation, LLC d/b/a Green Space Insulation
Insulation Works
Insulation Works, Inc.
Lenders
Bank of America, N.A., together with the other lenders party to "Credit Agreement"
Morris Black
Morris Black & Sons, Inc.
Net Leverage Ratio
As defined in the “Credit Agreement,” the ratio of outstanding indebtedness, less up to $350 million of unrestricted cash, to EBITDA
NYSE
PCI
Pest Control Insulation, LLC
Progressive
PR Midco LLC, d/b/a Progressive Roofing
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
RSA
Restricted stock award
Seal-Rite
Seal-Rite Insulation Inc
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
Selling, general and administrative expenses
Includes allocation of corporate overhead, bad debt, bank fees, selling expenses, employee compensation, insurance, legal and consulting, office equipment & supplies, telecommunication & subscriptions, and travel & entertainment
SOFR
Secured overnight financing rate
SPI
SPI LLC d/b/a Specialty Products & Insulation
Term Loan
TopBuild's secured borrowings under the "Credit Agreement" due May 16, 2030
Texas Insulation
EOAKIS, LLC, d/b/a Texas Insulation
TopBuild
TopBuild Corp. and its wholly-owned consolidated domestic subsidiaries
3
PART I – FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(In thousands except share data)
As of
June 30,
December 31,
2025
2024
ASSETS
Current assets:
Cash and cash equivalents
$
842,493
400,318
Receivables, net of an allowance for credit losses of $24,268 at June 30, 2025, and $18,541 at December 31, 2024
752,559
751,612
Inventories
385,466
406,662
Prepaid expenses and other current assets
37,566
40,382
Total current assets
2,018,084
1,598,974
Right of use assets
180,626
189,146
Property and equipment, net
254,127
266,992
Goodwill
2,125,827
2,112,259
Other intangible assets, net
531,411
557,689
Other assets
9,743
10,366
Total assets
5,119,818
4,735,426
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable
417,500
456,446
Current portion of long-term debt
50,000
48,750
Accrued liabilities
178,709
191,786
Short-term operating lease liabilities
66,884
68,713
Short-term finance lease liabilities
1,192
1,487
Total current liabilities
714,285
767,182
Long-term debt
1,833,213
1,327,159
Deferred tax liabilities, net
237,503
240,343
Long-term portion of insurance reserves
58,339
57,700
Long-term operating lease liabilities
129,166
129,360
Long-term finance lease liabilities
1,948
2,618
Other liabilities
1,366
1,446
Total liabilities
2,975,820
2,525,808
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; 39,607,969 shares issued and 28,255,264 outstanding at June 30, 2025, and 39,554,033 shares issued and 29,367,087 outstanding at December 31, 2024
396
Treasury stock, 11,352,705 shares at June 30, 2025, and 10,186,946 shares at December 31, 2024, at cost
(2,041,581)
(1,681,230)
Additional paid-in capital
935,784
926,137
Retained earnings
3,268,508
2,993,521
Accumulated other comprehensive loss
(19,109)
(29,206)
Total equity
2,143,998
2,209,618
Total liabilities and equity
See notes to our unaudited condensed consolidated financial statements.
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,
Net sales
1,297,403
1,365,612
2,530,681
2,644,329
903,360
941,690
1,785,165
1,833,257
Gross profit
394,043
423,922
745,516
811,072
Selling, general, and administrative expense
174,254
213,530
348,239
386,172
Operating profit
219,789
210,392
397,277
424,900
Other income (expense), net:
Interest expense
(20,545)
(18,568)
(37,147)
(37,363)
Other, net
4,348
11,350
9,434
22,632
Other expense, net
(16,197)
(7,218)
(27,713)
(14,731)
Income before income taxes
203,592
203,174
369,564
410,169
Income tax expense
(51,990)
(52,451)
(94,578)
(107,065)
Net income
151,602
150,723
274,986
303,104
Net income per common share:
Basic
5.34
4.81
9.58
9.63
Diluted
5.32
4.78
9.53
9.56
Weighted average shares outstanding:
28,371,644
31,324,833
28,698,125
31,483,144
28,515,554
31,524,063
28,858,719
31,693,524
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
(In thousands)
Other comprehensive income (loss):
Foreign currency translation adjustment
9,868
(1,836)
10,096
(5,928)
Comprehensive income
161,470
148,887
285,082
297,176
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Cash Flows Provided by (Used in) Operating Activities:
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
71,677
69,291
Share-based compensation
9,806
9,759
Loss (gain) on sale of assets
711
(131)
Amortization of debt issuance costs
1,549
1,440
Provision for bad debt expense
8,121
9,874
Provision for inventory obsolescence
4,570
4,892
Impairment losses
8,636
—
Deferred income taxes, net
(2,668)
(72)
Change in certain assets and liabilities, net of effects of businesses acquired:
Receivables, net
(4,988)
(58,411)
20,146
(30,758)
2,884
(6,595)
(39,053)
(17,480)
(7,677)
(13,348)
(2,421)
(2,437)
Net cash provided by operating activities
346,279
269,128
Cash Flows Provided by (Used in) Investing Activities:
Purchases of property and equipment
(24,915)
(35,974)
Acquisition of businesses, net of cash acquired
(21,185)
(88,123)
Proceeds from sale of assets
610
2,150
Net cash used in investing activities
(45,490)
(121,947)
Cash Flows Provided by (Used in) Financing Activities:
Proceeds from issuance of long-term debt
1,000,000
Repayment of long-term debt
(487,500)
(23,873)
Excise taxes paid on share repurchases
(9,444)
Payment of debt issuance costs
(6,970)
Taxes withheld and paid on employees' equity awards
(5,374)
(6,059)
Exercise of stock options
3,224
Repurchase of shares of common stock
(351,621)
(505,241)
Net cash provided by (used in) financing activities
139,091
(531,949)
Impact of exchange rate changes on cash
2,295
(576)
Net increase (decrease) in cash and cash equivalents
442,175
(385,344)
Cash and cash equivalents - Beginning of period
848,565
Cash and cash equivalents - End of period
463,221
Supplemental disclosure of noncash activities:
Leased assets obtained in exchange for new operating lease liabilities
33,978
20,180
Accruals for property and equipment
353
277
Excise taxes capitalized to treasury stock
3,516
5,202
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Unaudited)
Accumulated
Common
Treasury
Additional
Other
Stock
Paid-in
Retained
Comprehensive
($0.01 par value)
at cost
Capital
Earnings
(Loss)/Income
Equity
Balance at December 31, 2024
123,385
5,042
Issuance of 51,633 restricted share awards under long-term equity incentive plan, net of forfeitures
Repurchase of 693,881 shares pursuant to the Share Repurchase Programs
(217,784)
14,178 shares withheld to pay taxes on employees' equity awards
(4,307)
(159)
(4,466)
Other comprehensive income, net of tax
229
Balance at March 31, 2025
(1,903,321)
931,020
3,116,906
(28,977)
2,116,024
4,764
Issuance of 2,303 restricted share awards under long-term equity incentive plan, net of forfeitures
Repurchase of 454,802 shares pursuant to the Share Repurchase Programs
(137,352)
2,898 shares withheld to pay taxes on employees' equity awards
(908)
Balance at June 30, 2025
Loss
Balance at December 31, 2023
394
(699,327)
906,334
2,370,919
(14,665)
2,563,655
152,381
5,127
Issuance of 51,236 restricted share awards under long-term equity incentive plan, net of forfeitures
1
14,965 shares withheld to pay taxes on employees' equity awards
5,757 shares issued upon exercise of stock options
1,020
Other comprehensive loss, net of tax
(4,092)
Balance at March 31, 2024
395
(705,386)
912,481
2,523,300
(18,757)
2,712,033
4,632
Issuance of 2,022 restricted share awards under long-term equity incentive plan, net of forfeitures
Repurchase of 1,246,182 shares pursuant to Share Repurchase Programs
(510,443)
10,269 shares issued upon exercise of stock options
2,204
Balance at June 30, 2024
(1,215,829)
919,317
2,674,023
(20,593)
2,357,314
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
TopBuild is a Delaware corporation and trades on the NYSE under the 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 further discussion is included in Note 7 – Segment Information.
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, 2025, our results of operations and comprehensive income for the three and six months ended June 30, 2025 and 2024, and our cash flows for the six months ended June 30, 2025 and 2024. The condensed consolidated balance sheet at December 31, 2024 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, 2024, as filed with the SEC on February 25, 2025.
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
Segment Reporting. In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures”. This standard amends Topic 280 to require all entities to disclose, on an annual and interim basis, significant segment expenses and an amount for other segment items by reportable segment. This standard became effective for us as of December 31, 2024. Its adoption had no impact on our consolidated results of operations, financial position or cash flows. See Note 7 – Segment Information for required disclosures.
Recently Issued Accounting Pronouncements Not Yet Adopted
In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740), Improvements to Income Tax Disclosures”. This standard amends Topic 740 to require all entities to disclose specific categories in the rate reconciliation, income taxes paid and other income tax information. This standard is effective for fiscal years beginning after December 15, 2024, and should be applied on a prospective basis. We do not anticipate that this standard will affect our consolidated results of operations, financial position or cash flows.
In November 2024, the FASB issued ASU 2024-03, “Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40)”. This standard requires disclosure, in the notes to financial statements, of specified information about certain costs and expenses. This standard is effective for annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted. This standard may be applied either prospectively or retrospectively. We do not anticipate that this standard will affect our consolidated results of operations, financial position or cash flows and we are assessing the impact of its adoption in our disclosures to our consolidated financial statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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):
Installation
Specialty Distribution
Eliminations
Total
Residential
650,925
226,993
(68,418)
809,500
712,827
237,604
(66,331)
884,100
Commercial/Industrial
129,753
372,191
(14,041)
487,903
138,156
355,222
(11,866)
481,512
780,678
599,184
(82,459)
850,983
592,826
(78,197)
1,271,886
437,007
(129,641)
1,579,252
1,387,263
454,001
(122,321)
1,718,943
254,325
721,980
(24,876)
951,429
262,463
684,619
(21,696)
925,386
1,526,211
1,158,987
(154,517)
1,649,726
1,138,620
(144,017)
The following tables present our revenues disaggregated by product (in thousands):
Insulation and accessories
624,743
525,019
(72,461)
1,077,301
685,728
525,242
(68,758)
1,142,212
Glass and windows
60,973
62,322
Gutters
28,855
56,402
(8,888)
76,369
30,371
49,052
(7,924)
71,499
All other
66,107
17,763
(1,110)
82,760
72,562
18,532
(1,515)
89,579
1,221,027
1,025,783
(136,486)
2,110,324
1,329,378
1,015,910
(126,267)
2,219,021
120,489
120,438
53,751
99,838
(15,962)
137,627
89,368
(15,232)
132,475
130,944
33,366
(2,069)
162,241
141,571
33,342
(2,518)
172,395
10
The following table represents our contract assets and contract liabilities with customers, in thousands:
Included in Line Item on
Condensed Consolidated
Balance Sheets
Contract Assets:
Receivables, unbilled
64,462
61,366
Contract Liabilities:
Deferred revenue
13,430
18,651
The aggregate amount remaining on uncompleted performance obligations was $314.9 million as of June 30, 2025. 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 $69.7 million and $74.9 million as of June 30, 2025 and December 31, 2024, respectively.
4. GOODWILL AND OTHER INTANGIBLES
We have two reporting units which are also our operating and reportable 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 such unit and determination of its fair value. 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 2024, 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, 2025.
Changes in the carrying amount of goodwill for the six months ended June 30, 2025, by segment, were as follows, in thousands:
Gross Goodwill
FX Translation
Impairment
Net Goodwill
December 31, 2024
Additions
Adjustment
June 30, 2025
Losses
Goodwill, by segment:
1,946,247
10,332
1,956,579
(762,021)
1,194,558
928,033
3,200
931,269
Total goodwill
2,874,280
10,368
2,887,848
Additions during the six months ended June 30, 2025, primarily reflects the acquisition of Seal Rite on April 7, 2025, as well as measurement period adjustments to the fair value of goodwill assigned to businesses acquired in the last twelve months. See Note 12 – Business Combinations for further details.
11
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:
Gross definite-lived intangible assets
876,300
864,693
Accumulated amortization
(344,889)
(307,004)
The following table sets forth our amortization expense, in thousands:
Amortization expense
18,406
17,947
36,562
35,633
5. LONG-TERM DEBT
The following table reconciles the principal balances of our outstanding debt to our condensed consolidated balance sheets, in thousands:
3.625% Senior Notes due 2029
400,000
4.125% Senior Notes due 2032
500,000
Term loan due 2030
Term loan due 2026
487,500
Unamortized debt issuance costs
(16,787)
(11,591)
Total debt, net of unamortized debt issuance costs
1,883,213
1,375,909
Less: current portion of long-term debt
Total long-term debt
The following table sets forth our remaining principal payments for our outstanding debt balances as of June 30, 2025, in thousands:
2026
2027
2028
2029
Thereafter
Term loan
25,000
775,000
450,000
1,275,000
1,900,000
On May 16, 2025, we entered into Amendment No. 5 to the Credit Agreement, which increased our term loan facility to an aggregate principal amount of $1.0 billion, increased the aggregate borrowing capacity on our revolving credit facility to $1.0 billion, and added a delayed draw term facility with an aggregate borrowing capacity of $250.0 million. The Company is required to pay a ticking fee on the undrawn delayed draw term facility at an annual rate ranging from 0.175% to 0.250%, depending upon the Company’s consolidated secured leverage ratio, through the end of the availability period on November 12, 2025. Once drawn, the delayed draw term facility will be subject to substantially the same scheduled percentage amortization payments and maturity as the Company’s existing term loan facility under Amendment No. 5 to the Credit Agreement.
12
The following table outlines the key terms of Amendment No. 5 to the Credit Agreement (dollars in thousands):
Senior secured term loan facility
Delayed draw term loan (a)
250,000
Revolving facility (b)
Sublimit for issuance of letters of credit under revolving facility
150,000
Sublimit for swingline loans under revolving facility
Interest rate as of June 30, 2025
5.58
%
Scheduled maturity date
May 16, 2030
Interest expense on borrowings under Amendment No. 5 to the Credit Agreement is based on an applicable margin rate plus, at our option, either:
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 0.25 percent to 1.00 percent and in the case of SOFR rate borrowings, the applicable margin ranges from 1.25 percent to 2.00 percent. Borrowings under Amendment No. 5 to 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.
The following table summarizes our availability under the revolving facility, in thousands:
Revolving facility
Less: standby letters of credit
(61,198)
(63,770)
Availability under revolving facility
938,802
436,230
13
We are required to pay commitment fees to the Lenders in respect of any unutilized commitments. The commitment fees range from 0.175 percent to 0.25 percent per annum, depending on our Secured Leverage Ratio. We must also pay customary fees on outstanding letters of credit.
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 plus accrued and unpaid interest if redeemed during the 12 month period commencing March 15 of the years set for: 2025 – 100.906%, 2026 and thereafter – 100.000%.
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.
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.
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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, 2025
Maximum Net Leverage Ratio
3.75:1.00
Minimum Interest Coverage Ratio
3.00:1.00
Compliance as of period end
In Compliance
6. FAIR VALUE MEASUREMENTS
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 measurements were applied to our long-term debt portfolio. We believe the carrying value of our Term Loan approximates the 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, 2025 (Level 1 fair value measurement), we estimate the fair value of each in the table below:
Fair Value
Gross Carrying Value
380,520
465,000
7. SEGMENT INFORMATION
Our business consists of two reportable segments: Installation and Specialty Distribution. We operate primarily in the U.S. and to a lesser extent Canada.
Our Installation segment installs insulation and other building products. Installation sells primarily to the residential new construction market, with increasing activity in the commercial/industrial construction market, along with repair/remodel of residential housing. In addition to insulation, it installs other building products including glass and windows, rain gutters, garage doors, closet shelving, and fireplaces, among other items.
Our Specialty Distribution segment distributes building and mechanical insulation, insulation accessories and other building product materials for the residential and commercial/industrial end markets. In addition to insulation and accessories, it distributes rain gutters, closet shelving, and roofing materials, among other items. Distributed products are sold from distribution centers in various parts of the United States and Canada, primarily to contractors and dealers (including lumber yards) serving a wide variety of commercial/industrial markets.
Intercompany sales from the Specialty Distribution segment to the Installation segment are recorded by the Specialty Distribution segment with a profit margin and by our Installation segment at cost. This intercompany profit is eliminated in consolidation.
Our CODM is our Chief Executive Officer. Our CODM measures performance for our reportable segments based on segment net sales and operating profit. Our CODM uses these measures to evaluate resource allocation and other strategic initiatives (e.g., making acquisitions and internal investments). Segment performance measures are compared to budgeted and forecasted amounts periodically to assist in evaluating performance versus expectations and to inform future allocation and strategic decisions.
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Key information is presented below by segment for our profit measures for the three and six months ended June 30, 2025 and 2024, in thousands:
Three Months Ended June 30, 2025
Net sales from external customers
516,725
Intercompany net sales
82,459
Segment net sales
1,379,862
Reconciliation of Net Sales
Elimination of intercompany net sales
Consolidated net sales
Less (a):
Cost of sales (b)
521,053
451,134
972,187
Selling, general and administrative expenses (c)
104,184
60,568
164,752
Segment operating profit
155,441
87,482
242,923
Reconciliation of Segment Operating Profit
Elimination of intercompany profit
(13,632)
General corporate expense, net (d)
(9,502)
Other expense, net (e)
Consolidated income before taxes
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Three Months Ended June 30, 2024
514,629
78,197
1,443,809
565,600
441,447
1,007,047
114,665
62,006
176,671
170,718
89,373
260,091
(12,840)
(36,859)
Six Months Ended June 30, 2025
1,004,470
154,517
2,685,198
1,032,490
881,633
1,914,123
208,664
120,813
329,477
285,057
156,541
441,598
(25,559)
(18,762)
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Six Months Ended June 30, 2024
994,603
144,017
2,788,346
1,100,291
853,383
1,953,674
221,960
118,286
340,246
327,475
166,951
494,426
(23,600)
(45,926)
(e) Other expense, net is presented on the accompanying condensed consolidated statement of operations and is primarily composed of interest expense and interest income.
Key information by segment is as follows for the three and six months ended June 30, 2025 and 2024, in thousands:
Total Reportable Segments
Other (a)
Consolidated Totals
Depreciation and amortization (b)
19,247
15,096
34,343
1,543
35,886
Property additions (c)
7,308
3,709
11,017
1,244
12,261
2,175,651
2,080,157
4,255,808
864,010
18
18,712
15,047
33,759
1,275
35,034
14,219
3,079
17,298
1,984
19,282
2,303,698
2,099,317
4,403,015
499,978
4,902,993
38,573
30,097
68,670
3,007
14,776
6,968
21,744
2,131
23,875
36,979
29,883
66,862
2,429
26,034
9,003
35,037
3,858
38,895
(a) Represents amounts held at Corporate not specifically attributed to or allocated to the segments.
(b) Represents total by segment, inclusive of amounts presented within cost of sales and selling, general and administrative expenses, as applicable.
(c) Property additions include assets acquired in business combinations in each respective year.
8. INCOME TAXES
Our effective tax rates were 25.5 percent and 25.6 percent for the three and six months ended June 30, 2025, respectively. The effective tax rates for the three and six months ended June 30, 2024, were 25.8 percent and 26.1 percent, respectively. The lower 2025 tax rate for the three months ended June 30, 2025, compared to the three months ended June 30, 2024, was primarily related to a decrease in tax expense related to share-based compensation.
A tax expense of $0.5 million and $2.1 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, 2025 and 2024, respectively.
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9. NET INCOME PER SHARE
Basic net income per share is calculated by dividing net income by the weighted average shares outstanding during the period, without consideration for common stock equivalents. Diluted net income per share is calculated by adjusting 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:
Net income (in thousands)
Weighted average number of common shares outstanding - basic
Dilutive effect of common stock equivalents:
RSAs with service-based conditions
12,893
34,973
21,949
38,083
RSAs with market-based conditions
32,363
61,856
31,218
61,491
RSAs with performance-based conditions
17,918
10,885
25,500
17,474
Stock options
80,736
91,516
81,927
93,332
Weighted average number of common shares outstanding - diluted
Basic net income per common share
Diluted net income per common share
The following table summarizes shares excluded from the calculation of diluted net income per share because their effect would have been anti-dilutive:
Anti-dilutive common stock equivalents:
9,980
10,053
24,852
21,101
Total anti-dilutive common stock equivalents
34,832
31,154
10. SHARE-BASED COMPENSATION
Effective July 1, 2015, our eligible employees commenced participation in the 2015 LTIP. The 2015 LTIP authorized the Board to grant stock options, stock appreciation rights, restricted shares, restricted share units, performance awards, and dividend equivalents. All grants were made by issuing new shares and no more than 4.0 million shares of common stock may be issued under the 2015 LTIP.
On February 18, 2025, the Board of Directors adopted the 2025 LTIP. Shares of our common stock remaining available for awards under the previous 2015 LTIP will continue to be authorized for future awards under the 2025 LTIP. As of June 30, 2025, we had 1.7 million shares remaining available for issuance under the 2025 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.
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The following table presents share-based compensation amounts recognized in our condensed consolidated statements of operations, in thousands:
Share-based compensation expense
Income tax benefit/(expense)
112
(98)
(549)
(2,107)
The following table presents a summary of our share-based compensation activity for the six months ended June 30, 2025, in thousands, except per share amounts:
RSAs
Stock Options
Number of Shares
Weighted Average Grant Date Fair Value Per Share
Weighted Average Exercise Price Per Share
AggregateIntrinsicValue
Balance December 31, 2024
176.0
269.50
112.7
30.10
83.97
25,604.9
Granted
55.9
339.97
Converted/Exercised
(56.6)
240.45
Forfeited/Expired
(14.7)
298.21
Balance June 30, 2025
160.6
301.62
27,001.3
Exercisable June 30, 2025 (a)
We have unrecognized share-based compensation expense related to unvested awards as shown in the following table, dollars in thousands:
Unrecognized Compensation Expense on Unvested Awards
Weighted AverageRemainingCompensation Expense Period
27,167
1.1
Total unrecognized compensation expense related to unvested awards
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 21, 2023
3,780
945
7,560
February 21, 2024
4,370
1,093
8,740
February 18, 2025
4,994
1,249
9,988
During the first quarter of 2025, RSAs with performance-based conditions that were granted on February 15, 2022 vested based on cumulative three-year achievement of 200%. Total compensation expense recognized over the three-year performance period, net of forfeitures, was $5.8 million.
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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 2025, 2024, and 2023:
2023
Measurement period (years)
2.86
Risk free interest rate
4.28
4.36
4.42
Dividend yield
0.00
Estimated fair value of market-based RSAs at grant date
393.39
503.68
270.64
11. SHARE REPURCHASE PROGRAM
On May 3, 2024, our Board authorized the 2024 Repurchase Program, pursuant to which the Company could purchase up to $1.0 billion of our common stock. The Company completed its 2024 Repurchase Program during the first quarter of 2025 for a total of 2,685,478 shares of our common stock at a weighted average cost of $372.37 per share.
On February 17, 2025, our Board authorized the 2025 Repurchase Program, pursuant to which the Company may purchase up to $1.0 billion of our common stock. Share repurchases may be executed through various means including open market purchases, privately negotiated transactions, accelerated share repurchase transactions, or other available means. The 2025 Repurchase Program does not obligate the Company to purchase any shares and has no expiration date. Authorization for the 2025 Repurchase Program may be terminated, increased, or decreased by the Board at its discretion at any time. As of June 30, 2025, the Company has $836.4 million remaining under the 2025 Share Repurchase Program.
Effective January 1, 2023, the Inflation Reduction Act of 2022 mandated a 1% excise tax on all share repurchases. Excise tax obligations that result from our share repurchases are included in the cost of treasury stock. The Company has excise tax liabilities of $3.5 million and $9.4 million as of June 30, 2025 and December 31, 2024, respectively. Excise tax liabilities are included in accrued liabilities on our condensed consolidated balance sheets.
The following table sets forth our share repurchases under the share repurchase programs in 2025.
Number of shares repurchased
454,802
1,246,182
1,148,683
Share repurchase cost (in thousands) (a)
137,352
510,443
355,136
12. BUSINESS COMBINATIONS
Acquiring businesses is a key part of our ongoing strategy to grow our company and expand our offerings. Each acquisition has been accounted for as a business combination under ASC 805, “Business Combinations.” Acquisition related costs were $1.4 million and $1.7 million in the three and six months ended June 30, 2025, respectively. Acquisition related costs were $26.3 million and $26.8 million in the three and six months ended June 30, 2024, respectively, which includes $23.0 million paid in the second quarter in connection with the mutual termination of our previous agreement to acquire SPI. Acquisition related costs are included in selling, general, and administrative expense in our condensed consolidated statements of operations.
On April 7, 2025, we acquired the assets of the residential and commercial insulation business Seal-Rite. This installation acquisition will enhance our presence in the Omaha and Lincoln, Nebraska markets. The purchase price of approximately $23.0 million was funded by cash on hand and we recognized $11.7 million of goodwill in connection with this acquisition.
Customer relationships related to the acquisition completed in the six months ended June 30, 2025, were assigned a total fair value of $6.6 million and are being amortized over their useful life of 12 years.
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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. See Note 4 – Goodwill and Other Intangibles for disclosure of measurement period adjustments.
On February 15, 2024, we acquired the assets of the residential and light commercial insulation business Brabble. This installation acquisition enhanced our presence in North Carolina. The purchase price of $5.4 million was funded by cash on hand and we recognized $2.9 million of goodwill in connection with this acquisition.
On March 1, 2024, we acquired the assets of the residential insulation business Morris Black. This installation acquisition enhanced our presence in Pennsylvania. The purchase price of $3.6 million was funded by cash on hand and we recognized $2.0 million of goodwill in connection with this acquisition.
On March 1, 2024, we acquired the assets of the customized insulation products and accessories business PCI. This specialty distribution acquisition has a national customer base focused on the domestic pest control industry. The purchase price of $13.8 million was funded by cash on hand and we recognized $5.7 million of goodwill in connection with this acquisition.
On April 18, 2024, we acquired the assets of the residential and light commercial insulation business Green Space. This installation acquisition enhanced our presence in Missouri and neighboring states. The purchase price of approximately $4.3 million was funded by cash on hand and we recognized $2.7 million of goodwill in connection with this acquisition.
On May 16, 2024, we acquired the assets of the residential and light commercial insulation business Insulation Works. This installation acquisition enhanced our presence in Arkansas and extended our expertise to the agricultural business. The purchase price of approximately $25.7 million was funded by cash on hand and we recognized $15.1 million of goodwill in connection with this acquisition.
On May 31, 2024, we acquired the assets of the residential and light commercial insulation business Texas Insulation. This installation acquisition enhanced our presence in Texas. The purchase price of approximately $33.9 million was funded by cash on hand and we recognized $21.1 million of goodwill in connection with this acquisition.
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 $11.7 million and $49.6 million of goodwill recorded from acquisitions completed in the six months ended June 30, 2025 and 2024, respectively, is expected to be deductible for income tax purposes.
13. ACCRUED LIABILITIES
The following table sets forth the components of accrued liabilities, in thousands:
Accrued liabilities:
Salaries, wages, and bonus/commissions
58,687
64,713
Short-term portion of insurance liabilities
36,850
31,013
Sales and property taxes
17,363
13,884
Interest payable on long-term debt
12,419
12,307
Customer rebates
10,951
17,898
Excise taxes
9,444
25,493
23,876
Total accrued liabilities
See Note 3 – Revenue Recognition for discussion of our deferred revenue balances.
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14. 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.
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.
15. SUBSEQUENT EVENTS
On July 4, 2025, the One Big Beautiful Bill Act (“the Act”) was signed into law, enacting significant changes to tax and spending policies. We are currently assessing the Act and the potential impacts to the Company.
On July 14, 2025, we acquired Progressive, a leader in commercial roofing installation services based in Phoenix, Arizona. Progressive employs more than 1,700 people across 12 branches in the United States and serves in commercial and industrial roofing and roof maintenance. The purchase price of approximately $810.0 million was funded by a $250.0 million borrowing on our delayed draw term facility that we borrowed on July 11, 2025, and cash on hand. This acquisition will be accounted for as a business combination under ASC 805, “Business Combinations”, and a preliminary purchase price allocation will be included in the third quarter 10-Q.
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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, 2025, we had more than 200 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, garage doors, closet shelving, and fireplaces, among other items. 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, 2025, we had more than 150 distribution centers across North America including 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, 2024, as filed with the SEC on February 25, 2025.
Recent Developments
In recent months, the U.S. government has announced tariffs and trade restrictions on certain goods produced outside the United States. As a result, certain jurisdictions, including China, Mexico, Canada, and the European Union, have also imposed tariffs and restrictions on certain goods produced in the United States. While we have a limited number of products that we purchase directly or indirectly from jurisdictions exposed to effected or proposed tariffs, such products represent a relatively small portion of our current material spend and we believe the direct impact for our business is minimal. We actively work with our supply base to mitigate the anticipated impact of current applicable tariffs and evaluate pricing actions to the extent we believe necessary or appropriate. The potential direct and indirect impacts of tariffs on the broad economy and, in particular, housing demand, are uncertain and we continue to closely monitor and evaluate the ongoing situation.
On July 14, the Company closed on its acquisition of Progressive, a leader in commercial roofing installation services in the United States. Progressive provides a comprehensive offering that includes re-roofing, recurring maintenance services, and new construction. The acquisition of Progressive will enable us to offer commercial customers more comprehensive building envelope solutions, increase our revenue exposure to non-discretionary demand drivers and serve as a significant growth platform for our Company. Progressive will be reflected in our financial results beginning with the third quarter of 2025.
SECOND QUARTER 2025 VERSUS SECOND QUARTER 2024
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:
Cost of sales ratio
69.6
69.0
Gross profit margin
30.4
31.0
Selling, general, and administrative expense to sales ratio
13.4
15.6
Operating profit margin
16.9
15.4
Net margin
11.7
11.0
Sales and Operations
Net sales declined by 5.0% for the three months ended June 30, 2025, from the comparable period of 2024. The decline was primarily driven by a 7.8% decrease in volume as housing demand has softened, partially offset by 1.9% increase in sales from acquisitions, and a 0.9% impact from higher selling prices.
Gross profit margins were 30.4% and 31.0% for the three months ended June 30, 2025, and 2024, respectively. The decline in gross profit margin is primarily due to lower sales volume, and customer price pressures on residential products within our distribution business, partially offset by savings from the branch consolidations and headcount reductions we made in the first quarter of 2025.
Selling, general, and administrative expenses as a percentage of sales were 13.4% and 15.6% for the three months ended June 30, 2025 and 2024, respectively. Selling, general, and administrative expenses as a percentage of sales were lower, benefiting from headcount reductions taken in the first quarter of 2025. Additionally, the three months ended June 30, 2024 reflects a $23.0 million fee paid to terminate our previous agreement to acquire SPI.
Operating margins were 16.9% and 15.4% for the three months ended June 30, 2025, and 2024, respectively. Operating margins during the six months ended June 30, 2025 benefited from branch consolidations and headcount reductions taken in the first quarter of 2025. In addition, the three months ended June 30, 2024 reflects a $23.0 million fee paid to terminate our previous agreement to acquire SPI.
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Business Segment Results
The following table sets forth our net sales and operating profit margins by business segment, in thousands:
Percent Change
Net sales by business segment:
(8.3)
Intercompany eliminations
(5.0)
Operating profit by business segment:
(8.9)
(2.1)
Operating profit before general corporate expense
229,291
247,251
(7.3)
General corporate expense, net
4.5
Operating profit margins:
19.9
20.1
14.6
15.1
Operating profit margin before general corporate expense
17.7
18.1
Sales
Sales in our Installation segment decreased $70.3 million, or 8.3%, for the three months ended June 30, 2025, as compared to the same period in 2024. The sales decline was primarily due to 10.5% lower sales volume, partially offset by 1.4% increase from acquisitions, and 0.9% from higher selling prices.
Operating margins
Operating margins in our Installation segment were 19.9% and 20.1% for the three months ended June 30, 2025 and 2024, respectively. The decline in operating margin is primarily due to lower sales volume, almost entirely offset by savings from the branch consolidations and headcount reductions we made in the first quarter of 2025.
Sales in our Specialty Distribution segment increased $6.4 million, or 1.1%, for the three months ended June 30, 2025, as compared to the same period in 2024. Sales increased 2.3% from acquisitions and 0.8% from higher selling prices, partially offset by 2.1% decline in sales volume.
Operating margins in our Specialty Distribution segment were 14.6% and 15.1% for the three months ended June 30, 2025 and 2024, respectively. The decline in operating margin is primarily due to lower sales volume and price pressures on residential products within our distribution business, partially offset by savings from the branch consolidations and headcount reductions we made in the first quarter of 2025.
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OTHER ITEMS
Other expense, net, increased to $16.2 million from $7.2 million in the three months ended June 30, 2025, and 2024, respectively. The increase was primarily driven by $5.4 million lower interest income due to lower cash balances as well as $2.0 million higher interest expense due to the refinancing of our Term Loan during the second quarter of 2025, which increased the associated outstanding principal balance to $1.0 billion.
Income tax expense was $52.0 million, an effective tax rate of 25.5 percent, for the three months ended June 30, 2025, compared to $52.4 million, an effective tax rate of 25.8 percent, for the comparable period in 2024. The tax rate for the three months ended June 30, 2025 was lower, primarily related to a decrease in tax expense related to share-based compensation.
FIRST SIX MONTHS 2025 VERSUS FIRST SIX MONTHS 2024
70.5
69.3
29.5
30.7
13.8
15.7
16.1
10.9
11.5
Net sales decreased 4.3% for the six months ended June 30, 2025, from the comparable period in 2024. The decline was primarily driven by a 7.6% decrease in volume as housing demand has softened, partially offset by 2.2% increase in sales from acquisitions, and a 1.1% impact from higher selling prices.
Gross profit margins were 29.5% and 30.7% for the six months ended June 30, 2025 and 2024. The decline in gross profit margin is primarily due to $12.4 million of one-time expenses incurred in connection with our branch consolidations and headcount reductions, lower sales volume, and customer price pressures on residential products within our distribution business, partially offset by savings from the branch consolidations and headcount reductions we made in the first quarter of 2025.
Selling, general, and administrative expenses as a percentage of sales were 13.8% and 14.6% for the six months ended June 30, 2025 and 2024, respectively. Selling, general, and administrative expenses as a percentage of sales were lower, benefiting from headcount reductions taken in the first quarter of 2025. Additionally, the six months ended June 30, 2024 reflects a $23.0 million fee paid to terminate our previous agreement to acquire SPI.
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Operating margins were 15.7% and 16.1% for the six months ended June 30, 2025 and 2024, respectively. The decrease in operating margins was primarily due to $14.3 million of one-time expenses incurred in connection with our branch consolidations and headcount reductions, lower sales volume and customer price pressures on residential products within our distribution business. These were partially offset by savings from the branch consolidations and headcount reductions we made in the first quarter of 2025 and the $23.0 million fee paid to terminate our previous agreement to acquire SPI last year.
(7.5)
1.8
(4.3)
Operating profit by business segment (a):
(13.0)
(6.2)
416,039
470,826
(11.6)
General corporate expense, net (b)
(6.5)
18.7
13.5
14.7
16.4
17.8
Sales in our Installation segment decreased $123.5 million, or 7.5%, for the six months ended June 30, 2025, as compared to the same period in 2024. The sales decline was primarily due to 10.1% lower sales volume, partially offset by a 1.6% increase from acquisitions, and 1.0% from higher selling prices.
Operating margins in our Installation segment were 18.7% and 19.9% for the six months ended June 30, 2025 and 2024, respectively. The decline in operating margin is primarily due to $7.3 million of one-time expenses incurred during the six months ended June 30, 2025, in connection with our branch consolidations and headcount reductions, and lower sales volume, which was partially offset by savings from the branch consolidations and headcount reductions we made in the first quarter of 2025.
Sales in our Specialty Distribution segment increased $20.4 million, or 1.8%, for the six months ended June 30, 2025, as compared to same period in 2024. Sales increased 2.8% from acquisitions and 1.1% from higher selling prices, partially offset by a 2.1% decline in sales volume.
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Operating margins in our Specialty Distribution segment were 13.5% and 14.7% for the six months ended June 30, 2025 and 2024, respectively. The decline in operating margin is primarily due to $6.8 million of one-time expenses incurred during the six months ended June 30, 2025, in connection with our branch consolidations and headcount reductions, lower sales volume, and price pressures on residential products within our distribution business, partially offset by savings from the branch consolidations and headcount reductions we made in the first quarter of 2025.
Other expense, net, decreased to $27.7 million for the six months ended June 30, 2025 from $14.7 million in the six months ended June 30, 2024. The decrease was driven by $12.7 million lower interest income due to lower cash balances held prior to the refinancing of our Term Loan in the second quarter of 2025.
Income tax expense was $94.6 million, an effective tax rate of 25.6 percent, for the six months ended June 30, 2025 compared to $107.1 million, an effective tax rate of 26.1 percent, for the comparable period in 2024. The tax rate for six months ended June 30, 2025 was lower, primarily related to a decrease in tax expense 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:
Changes in cash and cash equivalents:
Net cash flows provided by operating activities increased $77.2 million for the six months ended June 30, 2025, as compared to the prior year period. The increase was driven by favorable changes in working capital, specifically accounts receivable and inventory, compared to the six months ended June 30, 2024. This increase was partially offset by $28.1 million lower net income.
Net cash used in investing activities was $45.5 million for the six months ended June 30, 2025, primarily composed of $24.9 million for purchases of property and equipment, mainly vehicles and equipment, and $21.2 million for our acquisitions. Net cash used in investing activities was $121.9 million for the six months ended June 30, 2024, primarily composed of $88.1 million for our acquisitions and $36.0 million for purchases of property and equipment, mainly vehicles and equipment, partially offset by $2.2 million proceeds received from the sale of assets.
Net cash provided by financing activities was $139.1 million for the six months ended June 30, 2025. During the six months ended June 30, 2025, we refinanced our Term Loan resulting in the issuance of $1.0 billion long-term debt, repayment of $487.5 million long-term debt, and payment of $7.0 million on debt issuance costs. Additionally, we used $351.6 million to repurchase shares of our common stock, paid $9.4 million of excise taxes on share repurchases, and incurred $5.4 million cash outflow related to exercise of share-based incentive awards. Net cash used in financing activities was $531.9 million for the six months ended June 30, 2024. During the six months ended June 30, 2024, we used $505.2 million to repurchase shares of our common stock, $23.9 million for debt repayments and incurred $2.8 million net cash outflow related to exercise of share-based incentive awards and stock options.
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We have access to liquidity through our cash from operations and available borrowing capacity under Amendment No. 5 to our Credit Agreement, which provides for borrowing and/or standby letter of credit issuances of up to $1.0 billion 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:
Cash and cash equivalents (a)
Availability under Revolving facility
Total liquidity
1,781,295
836,548
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, 2025, is incorporated by reference from Note 14 – 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
Demand for single-family homes continues to be uneven across the country. Multi-family activity has slowed considerably as the lower housing starts of 2024 began to impact the industry in 2025. While the residential end-markets are facing near-term uncertainty around tariffs, inflation, and interest rates, we remain optimistic about the longer-term fundamentals due to underbuilding in the United States in prior years.
Commercial and Industrial Construction
Our commercial backlog is strong, our bidding activity is active, and our third quarter acquisition of Progressive, all continue to support our positive view of commercial/industrial sales at our Installation and Specialty Distribution segments. We remain optimistic that declining interest rates in the future will continue to unlock projects across many industries. In addition, recurring maintenance and repair work on industrial sites serves as a continued driver for our business.
31
OFF-BALANCE SHEET ARRANGEMENTS
We had no material off-balance sheet arrangements during the three months ended June 30, 2025, 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.
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:
Outstanding bonds:
Performance bonds
152,169
146,479
Licensing, insurance, and other bonds
28,794
28,462
Total bonds
180,963
174,941
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, 2024, as filed with the SEC on February 25, 2025, except as follows:
On May 16, 2025, we entered into Amendment No. 5 to the Credit Agreement, which increased our term loan facility, increased the aggregate borrowing capacity on our revolving credit facility, and added a delayed draw term facility. See Note 5 – Long-Term Debt for discussion of our obligations in connection with Amendment No. 5, which is incorporated by reference to our unaudited condensed consolidated financial statements contained in Part I, Item 1 of this Quarterly Report.
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, 2024, as filed with the SEC on February 25, 2025.
APPLICATION OF NEW ACCOUNTING STANDARDS
Information regarding the 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.
32
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, 2024, as filed with the SEC on February 25, 2025, 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 $1.0 billion and a revolving facility with an aggregate borrowing capacity of $1.0 billion. 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, 2025, the applicable interest rate as of such date was 5.58%. Based on our outstanding borrowings as of June 30, 2025, a 100-basis point increase in the interest rate would result in a $9.8 million increase in our annualized interest expense. There was no outstanding balance under the revolving facility as of June 30, 2025.
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, 2025.
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, 2025, 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, 2024, as filed with the SEC on February 25, 2025 which are incorporated by reference herein.
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following table provides information regarding the repurchase of our common stock for the three months ended June 30, 2025, in thousands, except share and per share data:
Period
Total Number of Shares Purchased
Average Price Paid per Common Share (a)
Number of Shares Purchased as Part of Publicly Announced Plans or Programs
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
April 1, 2025 - April 30, 2025
123,690
300.79
935,221
May 1, 2025 - May 31, 2025
80,970
281.55
912,423
June 1, 2025 - June 30, 2025
250,142
303.79
836,433
299.01
Excluded from this disclosure are share repurchased to settle statutory employee tax withholdings related to the vesting of stock awards.
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
Item 4. MINE SAFETY DISCLOSURES
Item 5. OTHER INFORMATION
During the quarter ended June 30, 2025, 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), except as follows:
On May 21, 2025, Alec Covington, a director of the Company, adopted a Rule 10b5-1 trading arrangement providing for the sale of up to 3,500 shares of common stock of the Company, subject to certain conditions (including a cooling-off period). The expiration date of Mr. Covington’s Rule 10b5-1 trading arrangement is July 24, 2026.
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.
INDEX TO EXHIBITS
Incorporated by Reference
Filed
Exhibit No.
Exhibit Title
Form
Exhibit
Filing Date
Herewith
10.16
Amendment No. 5 to Amended and Restated Credit Agreement, dated as of May 16, 2025, among TopBuild Corp., Bank of America, N.A. as administrative agent, and the other guarantors, lenders and agents party thereto
8-K
5/19/2025
10.17
Form of Restricted Stock Award Agreement for Non-Employee Directors under the 2025 LTIP
X
10.18
Form of Restricted Stock Unit Award Agreement under the 2025 LTIP
10.19
Form of Performance Restricted Stock Unit Award Agreement under the 2025 LTIP
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
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
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
101.SCH
Inline XBRL Taxonomy Extension Schema Document
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
‡Furnished herewith
SIGNATURES
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.
By:
/s/ Madeline Otero
Name:
Madeline Otero
Title:
Vice President and Chief Accounting Officer
(Principal Accounting Officer)
August 5, 2025
/s/ Robert Kuhns
Robert Kuhns
Vice President and Chief Financial Officer
(Principal Financial Officer)