TopBuild Corp. (BLD) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call reveals several negative factors: declining EBITDA margins, a drop in adjusted EPS, and price/cost headwinds expected to worsen. Residential sales are projected to decline, and the company faces challenges in pricing for key products. While there are some positive trends in commercial sectors and strategic initiatives like M&A synergies, the overall sentiment remains negative due to weak financial performance and uncertain market conditions.
Key Financial Performance
Fourth Quarter Sales $1.49 billion, up 13.2% year-over-year. Growth driven by 7 acquisitions completed last year, including SPI in the fourth quarter.
Full Year Revenue Over $5.4 billion, with adjusted EBITDA of $1.04 billion (19.2% margin).
Acquisitions Capital Deployment $1.9 billion deployed, adding approximately $1.2 billion in annual revenue.
Shareholder Returns $434 million returned through share repurchase program.
Fourth Quarter Net Sales $1.49 billion, up 13.2% year-over-year. Acquisitions contributed 23.0%, pricing added 0.7%, and volume declined 10.5%.
Installation Services Sales $798 million, up 1.2% year-over-year. M&A contributed 16.3%, offsetting a 14.5% volume decline and 0.5% pricing decline.
Specialty Distribution Sales $755 million, up 25.5% year-over-year. Acquisitions added 28.9%, pricing rose 2.2%, and volume declined 5.5%.
Fourth Quarter Adjusted Gross Profit $416 million (28% margin), down 190 basis points year-over-year. Decline driven by higher mix of distribution sales, price/cost pressure, and deleveraging on lower sales volumes.
Fourth Quarter Adjusted SG&A 14.1% of sales, up from 13.2% last year. Increase driven by acquisitions, including amortization of customer lists and trade names.
Fourth Quarter Adjusted EBITDA $265 million (17.9% margin), down 180 basis points year-over-year. Decline driven by gross margin factors.
Installation Services Adjusted EBITDA Margin 21%, down 40 basis points year-over-year.
Specialty Distribution Adjusted EBITDA Margin 15.4%, down 230 basis points year-over-year.
Fourth Quarter Adjusted Earnings Per Share $4.50, down from $5.13 in 2024.
Free Cash Flow (Full Year 2025) $697 million.
Net Debt $2.7 billion, with a net debt leverage of 2.35x trailing 12 months adjusted EBITDA.
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Operating Highlights
Acquisitions: Completed 7 acquisitions in 2025, including SPI in Q4, contributing $1.2 billion in annual revenue. Recently closed acquisitions of Applied Coatings and Upstate Spray Foam, and announced acquisition of Johnson Roofing, generating $29 million in annual sales.
Technology Integration: Transitioning SPI business to TopBuild's technology platform, expected to complete by Q2 2026.
Market Expansion: Commercial and industrial end markets remain solid with healthy bidding and backlogs. Johnson Roofing acquisition expands presence in Texas, Louisiana, and Oklahoma, targeting technology, industrial manufacturing, and education verticals.
Operational Excellence: Leveraging technology for inventory management, installer productivity, job site routing, and shipments. Focused on optimizing cost structure and improving bottom quartile branch performance.
Supply Chain Management: Improved availability of building insulation and spray foam. Managing fiberglass pipe insulation allocation through supplier partnerships.
Capital Allocation: Deployed $1.9 billion in 2025 for acquisitions and returned $434 million to shareholders via share buybacks.
Revenue Guidance: 2026 revenue guidance set at $5.925 billion to $6.225 billion, with adjusted EBITDA of $1.005 billion to $1.155 billion.
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Risk or Challenges
Residential and Light Commercial Market Weakness: Persistent weakness in the residential and light commercial end markets, driven by low consumer confidence, elevated interest rates, and affordability issues, is leading to muted demand.
Supply Chain Challenges: Fiberglass pipe insulation remains on allocation, requiring close collaboration with suppliers to secure adequate supply. Additionally, extended maintenance on fiberglass lines by manufacturers is impacting supply and pricing stability.
Price/Cost Pressure: Lower pricing on residential insulation products and price/cost pressure are contributing to gross margin declines.
Volume Declines: Ongoing volume declines in residential and light commercial markets are negatively impacting sales and profitability.
Macroeconomic Uncertainty: Significant near-term uncertainty in the residential market due to consumer confidence and affordability challenges, with no clear timing for recovery.
Integration Risks: Ongoing integration of acquisitions like SPI and Progressive involves risks related to IT transitions, synergy realization, and seamless customer experience.
Interest Expense: Increased interest and other expenses due to expanded credit facilities and new bonds are impacting financial performance.
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Guidance & Outlook
2026 Revenue Guidance: Sales are projected to range between $5.925 billion and $6.225 billion, with a midpoint of $6.075 billion. This assumes no significant change in end market conditions.
2026 Adjusted EBITDA Guidance: Adjusted EBITDA is expected to range from $1.005 billion to $1.155 billion, with a midpoint of $1.08 billion. Key assumptions include an EBITDA decremental of approximately 27% on lower volumes, $55 million of price/cost headwinds, and mid-teens EBITDA margin on M&A.
Residential Market Outlook: Residential sales, accounting for 52% of total sales, are expected to decline mid-single digits in 2026, inclusive of both volume and price. External forecasts suggest potential improvement in the second half of the year, but timing remains uncertain.
Commercial and Industrial Market Outlook: Commercial and industrial sales, representing 48% of total sales, are expected to grow low single digits in 2026, inclusive of volume and price. Bidding activity and backlog remain solid, with growth opportunities in expanding verticals.
M&A Contribution to Revenue: M&A completed in the last 12 months is expected to contribute $800 million to $850 million in revenue for 2026.
Quarterly Sales and EBITDA Margins: Quarterly sales are projected to range between $1.4 billion and $1.6 billion, with EBITDA margins between 16.5% and 18.5%. The first quarter is expected to be the weakest, and the third quarter the strongest.
Capital Expenditures and Working Capital: CapEx is expected to be between 1% and 2% of sales, and working capital is projected to range from 15% to 17% of sales.
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Shareholder Return Plan
Share Repurchase Program: Last year, we returned approximately $434 million to shareholders through our share repurchase program, demonstrating our ongoing confidence in our business and long-term strategy.
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Key Q&A
Q:What is the outlook for single-family starts and differences between private and public builders?
A:The company sees no recovery in single-family starts and notes that private regional builders are staying cost-competitive to maintain volumes compared to public builders. Smaller custom builders are less impacted and holding their own relative to demand.
Q:What is the status of backlogs in the commercial industrial sector, particularly light versus heavy commercial?
A:The company sees positive trends in backlogs for light commercial, which typically follows residential trends. Mechanical insulation and commercial roofing are trending at a faster clip, showing optimism in these areas.
Q:What is the impact of $55 million in price/cost headwinds on pricing trends and results?
A:The $55 million price/cost headwinds are due to market pressures and are expected to progressively worsen throughout the year. The company is focusing on cost reductions and operational excellence to mitigate these impacts.
Q:What changes were made in specialty distribution field leadership and their purpose?
A:The company realigned leadership in specialty distribution to ensure the right talent is in place, leveraging experience from the SPI acquisition and existing teams to drive operational excellence and integration.
Q:What are the cross-selling opportunities from the SPI integration?
A:Cross-selling opportunities involve connecting sales teams and managers across businesses to offer additional services to customers. The company plans to invest in digital resources to make this process more seamless.
Q:How is the company managing its cost structure in a challenging macro environment?
A:The company is monitoring the macro situation and adjusting costs as needed. With over 70% of costs being variable, they are able to make quick changes and have already taken actions like branch rationalization and headcount realignment.
Q:What is the pricing outlook for residential fiberglass and other products?
A:Pricing for residential fiberglass and spray foam is under pressure, while mechanical insulation and gutters have seen price increases. The company expects similar trends in 2026, with pricing on mechanical products remaining strong.
Q:What are the margin guidance and key factors influencing it?
A:Margins are expected to vary by quarter, with Q3 being the strongest. Key factors include volume changes, price/cost dynamics, and synergies from acquisitions like SPI. The company is focused on operational excellence and cost control to manage margins.
Q:What is the outlook for residential markets in regions like Florida and Texas?
A:Florida shows signs of recovery, while Texas remains flat to slow. Other regions like the Northeast and Midwest are mixed, with some areas showing optimism and others, like California, still facing challenges.
Q:What is the impact of weather on Q1 performance?
A:Weather has significantly impacted Q1 performance, particularly in the Northeast, but the full extent is still being assessed.
Q:What are the dynamics in the commercial roofing market?
A:Commercial roofing backlogs are growing, with strong performance in regions like the Southwest. The company is expanding its footprint through acquisitions and sees a positive outlook for 2026.
Q:What are the key verticals driving growth in the mechanical and commercial segments?
A:Key verticals include education, healthcare, manufacturing, and food and beverage. The company is bidding across these verticals to ensure diversification and sees upside potential in these areas.
Q:What is the pricing environment for commercial roofing?
A:The pricing environment for commercial roofing is generally flat, with some variations depending on the mix of new roof versus reroof projects and the end markets they serve.
Q:Review of Unclear Management Responses
A:Management avoided directly addressing the specific impact of weather on Q1 performance, stating that it is still being assessed. Additionally, they provided limited details on the exact breakdown of the $55 million price/cost headwinds across segments and the specific pricing dynamics within the residential fiberglass market.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Achille COO
Acquisitions Progressive
Applied
Installation Services
Investor Day
Johnson Roofing
Progressive SPI
SPI acquisition
affordability
availability
capital sale
cash flow
decline margin
demand pricing
effort excellence
inclusive
insulation fiberglass
market term
network
people culture
point basis
pricing volume
projection
quarter
result sale
roofing
sale Acquisitions
sale volume
space
supplier
synergy
target
technology platform
vertical
volume decline
weakness end
week Johnson
BLD Transcript
TopBuild Corp. (BLD) Q4 2025 Earnings Call Transcript
Unknown2-26
The earnings call reveals several negative factors: declining EBITDA margins, a drop in adjusted EPS, and price/cost headwinds expected to worsen. Residential sales are projected to decline, and the company faces challenges in pricing for key products. While there are some positive trends in commercial sectors and strategic initiatives like M&A synergies, the overall sentiment remains negative due to weak financial performance and uncertain market conditions.
TopBuild Corp. (BLD) Q3 2025 Earnings Call Transcript
Unknown11-5
The earnings call summary presents mixed signals: strong performance in commercial sectors and successful M&A activities, but challenges in residential sales and margin pressures. The Q&A reveals solid backlogs and growth potential, yet concerns remain about residential market softness and unclear guidance for 2026. Overall, the sentiment is balanced, with positive commercial prospects offset by residential market challenges and margin pressures, leading to a neutral outlook.
TopBuild Corp. (BLD) Q2 2025 Earnings Call Transcript
Unknown8-5
The earnings call presents a mixed picture: strong free cash flow and effective cost management are positives, but declining EBITDA margins and lower EPS indicate challenges. The Q&A section reveals optimism in certain markets and strong backlog, yet concerns persist over residential softness and pricing headwinds. Management's unclear responses on price relief and backlog performance add uncertainty. Given the balanced positives and negatives, a neutral sentiment is appropriate for the stock price over the next two weeks.
TopBuild Corp. (NYSE:BLD) Q1 2025 Earnings Call Transcript
Unknown5-7
The earnings call reveals a decline in total sales and adjusted EBITDA margin, indicating profitability issues. The guidance suggests low single-digit volume declines, and the Q&A highlights uncertainties in the residential market and vague management responses. Despite a strong share buyback program, the negative financial performance and market uncertainties suggest a negative sentiment, likely leading to a stock price decline of -2% to -8%.
BLD Slides
TopBuild Q3 2025 slides: acquisition-driven growth offsets residential weakness2025-11-04
TopBuild Q2 2025 slides: Revenue drops 5% as diversification strategy offsets residential weakness2025-08-05
TopBuild Q1 2025 slides: Sales decline amid residential weakness, commercial growth continues2025-05-06
BLD Report
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