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 September 30, 2024


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

For the transition period from to

Commission file number: 001-36870

TopBuild Corp.

(Exact name of Registrant as Specified in its Charter)

Delaware

(State or Other Jurisdiction of Incorporation or
Organization)

47-3096382

(I.R.S. Employer
Identification No.)

475 North Williamson Boulevard

Daytona Beach, Florida

(Address of Principal Executive Offices)

32114

(Zip Code)

(386) 304-2200

(Registrant's telephone number, including area code)

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

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

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

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

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

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

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

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

The registrant had outstanding 29,502,560 shares of Common Stock, par value $0.01 per share as of October 29, 2024.

Table of Contents

TOPBUILD CORP.

TABLE OF CONTENTS


		Page No.
Part I.	Financial Information

Item 1.	Financial Statements (Unaudited)

	Condensed Consolidated Balance Sheets	4

	Condensed Consolidated Statements of Operations	5

	Condensed Consolidated Statements of Comprehensive Income	6

	Condensed Consolidated Statements of Cash Flows	7

	Condensed Consolidated Statements of Changes in Equity	8

	Notes to Condensed Consolidated Financial Statements	9

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	22

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30

Item 4.	Controls and Procedures	30

Part II.	Other Information

Item 1.	Legal Proceedings	30

Item 1A.	Risk Factors	30

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31

Item 3.	Defaults upon Senior Securities	31

Item 4.	Mine Safety Disclosures	31

Item 5.	Other Information	31

Item 6.	Exhibits	31

Index to Exhibits		32

Signature		33

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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
2022 Repurchase Program		$200 million share repurchase program authorized by the Board on July 25, 2022
2024 Repurchase Program		$1 billion share repurchase program authorized by the Board on May 3, 2024
Amendment No. 4		Amendment No. 4 to the Credit Agreement dated July 26, 2023
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
Best		Best Insulation Holdings LLC
Billings		Billings Insulation Service, Inc.
Board		Board of Directors of TopBuild
BofA		Bank of America, N.A.
Brabble		Brabble Insulation, Inc.
CODM		Chief Operating Decision Maker
Credit Agreement		Amended and Restated Credit Agreement, dated March 20, 2020, among TopBuild, BofA as administrative agent, and the other lenders and agents party thereto
Current Report		Current report filed with the SEC on Form 8-K pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
EBITDA		Earnings before interest, taxes, depreciation, and amortization
Exchange Act		The Securities Exchange Act of 1934, as amended
FASB		Financial Accounting Standards Board
Green Space		Nate’s Insulation, LLC d/b/a Green Space Insulation
GAAP		Generally accepted accounting principles in the United States of America
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 $100 million of unrestricted cash, to EBITDA
NYSE		New York Stock Exchange
PCI		Pest Control Insulation, LLC
Quarterly Report		Quarterly report filed with the SEC on Form 10-Q pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Rocky Mountain		Rocky Mountain Spray Foam & Waterproofing, LLC
ROU		Right of use (asset), as defined in ASC 842
RSA		Restricted stock award
SEC		United States Securities and Exchange Commission
Secured Leverage Ratio		As defined in the “Credit Agreement,” the ratio of outstanding indebtedness, including letters of credit, to EBITDA
SOFR		Secured overnight financing rate
SPI		SPI LLC d/b/a Specialty Products & Insulation
SRI		SRI Holdings, LLC
Term Loan		TopBuild's secured borrowings under the "Credit Agreement" due October 7, 2026
Term Facility Two		$550 million delayed draw term loan intended to be used to fund the acquisition of SPI and was terminated in the second quarter of 2024
Texas Insulation		EOAKIS, LLC, d/b/a Texas Insulation
TopBuild		TopBuild Corp. and its wholly-owned consolidated domestic subsidiaries

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PART I – FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

TOPBUILD CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(In thousands except share data)


	As of
	September 30,		December 31,
	2024		2023
ASSETS
Current assets:
Cash and cash equivalents	$	257,342	$	848,565
Receivables, net of an allowance for credit losses of $21,829 at September 30, 2024, and $23,948 at December 31, 2023		827,776		799,009
Inventories		392,208		364,731
Prepaid expenses and other current assets		43,813		36,939
Total current assets		1,521,139		2,049,244

Right of use assets		189,141		204,629
Property and equipment, net		270,022		264,487
Goodwill		2,092,315		2,042,568
Other intangible assets, net		565,440		591,058
Other assets		12,460		10,865
Total assets	$	4,650,517	$	5,162,851

LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	461,478	$	469,585
Current portion of long-term debt		45,137		47,039
Accrued liabilities		180,382		187,217
Short-term operating lease liabilities		67,509		65,780
Short-term finance lease liabilities		1,634		1,917
Total current liabilities		756,140		771,538

Long-term debt		1,341,439		1,373,028
Deferred tax liabilities, net		243,176		243,930
Long-term portion of insurance reserves		60,799		58,783
Long-term operating lease liabilities		130,299		146,213
Long-term finance lease liabilities		2,961		4,150
Other liabilities		1,434		1,554
Total liabilities		2,536,248		2,599,196

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; 39,557,215 shares issued and 29,505,185 outstanding at September 30, 2024, and 39,492,037 shares issued and 31,776,039 outstanding at December 31, 2023		396		394
Treasury stock, 10,052,030 shares at September 30, 2024, and 7,715,998 shares at December 31, 2023, at cost		(1,633,943)		(699,327)
Additional paid-in capital		922,963		906,334
Retained earnings		2,842,983		2,370,919
Accumulated other comprehensive loss		(18,130)		(14,665)
Total equity		2,114,269		2,563,655
Total liabilities and equity	$	4,650,517	$	5,162,851

See notes to our unaudited condensed consolidated financial statements.

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TOPBUILD CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(In thousands except share and per common share data)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Net sales	$	1,373,268	$	1,326,120	$	4,017,597	$	3,908,620
Cost of sales		951,455		905,430		2,784,712		2,695,916
Gross profit		421,813		420,690		1,232,885		1,212,704

Selling, general, and administrative expense		177,820		183,198		563,992		538,679
Operating profit		243,993		237,492		668,893		674,025

Other income (expense), net:
Interest expense		(18,449)		(18,830)		(55,811)		(55,427)
Other, net		2,355		6,015		24,987		12,542
Other expense, net		(16,094)		(12,815)		(30,824)		(42,885)
Income before income taxes		227,899		224,677		638,069		631,140

Income tax expense		(58,939)		(57,075)		(166,005)		(163,270)
Net income	$	168,960	$	167,602	$	472,064	$	467,870

Net income per common share:
Basic	$	5.68	$	5.30	$	15.28	$	14.81
Diluted	$	5.65	$	5.27	$	15.19	$	14.74

Weighted average shares outstanding:
Basic		29,751,713		31,615,110		30,901,788		31,588,740
Diluted		29,925,400		31,788,812		31,083,857		31,744,856

See notes to our unaudited condensed consolidated financial statements.

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TOPBUILD CORP.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

(In thousands)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Net income	$	168,960	$	167,602	$	472,064	$	467,870
Other comprehensive income (loss):
Foreign currency translation adjustment		2,463		(3,008)		(3,464)		3,029
Comprehensive income	$	171,423	$	164,594	$	468,600	$	470,899

See notes to our unaudited condensed consolidated financial statements.

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TOPBUILD CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(In thousands)


	Nine Months Ended September 30,
	2024		2023
Cash Flows Provided by (Used in) Operating Activities:
Net income	$	472,064	$	467,870
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		104,777		98,216
Share-based compensation		13,405		11,080
Loss on sale of assets		672		2,733
Amortization of debt issuance costs		2,161		2,161
Provision for bad debt expense		13,730		7,380
Provision for inventory obsolescence		6,713		3,617
Change in certain assets and liabilities, net of effects of businesses acquired:
Receivables, net		(30,294)		(52,482)
Inventories		(30,916)		82,960
Prepaid expenses and other current assets		(6,849)		(3,267)
Accounts payable		(17,441)		(21,361)
Accrued liabilities		(15,695)		(9,027)
Other, net		(2,529)		(1,402)
Net cash provided by operating activities		509,798		588,478

Cash Flows Provided by (Used in) Investing Activities:
Purchases of property and equipment		(56,794)		(48,076)
Acquisition of businesses, net of cash acquired		(88,460)		(147,614)
Proceeds from sale of assets		2,336		14,674
Net cash used in investing activities		(142,918)		(181,016)

Cash Flows Provided by (Used in) Financing Activities:
Repayment of long-term debt		(35,651)		(27,711)
Taxes withheld and paid on employees' equity awards		(6,088)		(6,350)
Exercise of stock options		3,224		2,489
Repurchase of shares of common stock		(919,186)		—
Payment of contingent consideration		—		(300)
Net cash used in financing activities		(957,701)		(31,872)
Impact of exchange rate changes on cash		(402)		(47)
Net (decrease) increase in cash and cash equivalents		(591,223)		375,543
Cash and cash equivalents - Beginning of period		848,565		240,069
Cash and cash equivalents - End of period	$	257,342	$	615,612

Supplemental disclosure of noncash activities:
Leased assets obtained in exchange for new operating lease liabilities	$	35,718	$	45,525
Accruals for property and equipment		227		305
Excise taxes capitalized to treasury stock		9,342		—

See notes to our unaudited condensed consolidated financial statements.

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TOPBUILD CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Unaudited)

(In thousands except share data)


									Accumulated
	Common		Treasury		Additional				Other
	Stock		Stock		Paid-in		Retained		Comprehensive
	($0.01 par value)		at cost		Capital		Earnings		(Loss) Income		Equity
Balance at December 31, 2022	$	393	$	(692,799)	$	887,367	$	1,756,665	$	(21,920)	$	1,929,706
Net income		-		-		-		135,870		-		135,870
Share-based compensation		-		-		3,135		-		-		3,135
Issuance of 95,012 restricted share awards under long-term equity incentive plan		2		-		-		-		-		2
32,594 shares withheld to pay taxes on employees' equity awards		-		(6,350)		-		-		-		(6,350)
28,840 shares issued upon exercise of stock options		-		-		1,028		-		-		1,028
Other comprehensive income, net of tax		-		-		-		-		1,753		1,753
Balance at March 31, 2023	$	395	$	(699,149)	$	891,530	$	1,892,535	$	(20,167)	$	2,065,144
Net income		-		-		-		164,400		-		164,400
Share-based compensation		-		-		3,751		-		-		3,751
Issuance of 18,768 restricted share awards under long-term equity incentive plan		-		-		-		-		-		-
4,762 shares issued upon exercise of stock options		-		-		468		-		-		468
Other comprehensive income, net of tax		-		-		-		-		4,283		4,283
Balance at June 30, 2023	$	395	$	(699,149)	$	895,749	$	2,056,935	$	(15,884)	$	2,238,046
Net income		-		-		-		167,602		-		167,602
Share-based compensation		-		-		4,194		-		-		4,194
17,409 shares issued upon exercise of stock options		-		-		993		-		-		993
Other comprehensive loss, net of tax		-		-		-		-		(3,008)		(3,008)
Balance at September 30, 2023	$	395	$	(699,149)	$	900,936	$	2,224,537	$	(18,892)	$	2,407,827


									Accumulated
	Common		Treasury		Additional				Other
	Stock		Stock		Paid-in		Retained		Comprehensive
	($0.01 par value)		at cost		Capital		Earnings		(Loss) Income		Equity
Balance at December 31, 2023	$	394	$	(699,327)	$	906,334	$	2,370,919	$	(14,665)	$	2,563,655
Net income		-		-		-		152,381		-		152,381
Share-based compensation		-		-		5,127		-		-		5,127
Issuance of 51,236 restricted share awards under long-term equity incentive plan, net of forfeitures		1		-		-		-		-		1
14,965 shares withheld to pay taxes on employees' equity awards		-		(6,059)		-		-		-		(6,059)
5,757 shares issued upon exercise of stock options		-		-		1,020		-		-		1,020
Other comprehensive loss, net of tax		-		-		-		-		(4,092)		(4,092)
Balance at March 31, 2024	$	395	$	(705,386)	$	912,481	$	2,523,300	$	(18,757)	$	2,712,033
Net income		-						150,723				150,723
Share-based compensation		-		-		4,632		-		-		4,632
Issuance of 2,022 restricted share awards under long-term equity incentive plan, net of forfeitures		1				-		-		-		1
Repurchase of 1,246,182 shares pursuant to 2022 and 2024 Repurchase Programs		-		(510,443)		-		-		-		(510,443)
10,269 shares issued upon exercise of stock options		-		-		2,204		-		-		2,204
Other comprehensive loss, net of tax		-		-		-		-		(1,836)		(1,836)
Balance at June 30, 2024	$	396	$	(1,215,829)	$	919,317	$	2,674,023	$	(20,593)	$	2,357,314
Net income		-		-		-		168,960		-		168,960
Share-based compensation		-		-		3,646		-		-		3,646
Forfeiture of 4,106 restricted share awards under long-term equity incentive plan, net of issuances		-		-		-		-		-		-
Repurchase of 1,074,818 shares pursuant to 2024 Repurchase Program.		-		(418,085)		-		-		-		(418,085)
67 shares withheld to pay taxes on employees' equity awards		-		(29)		-		-		-		(29)
Other comprehensive income, net of tax		-		-		-		-		2,463		2,463
Balance at September 30, 2024	$	396	$	(1,633,943)	$	922,963	$	2,842,983	$	(18,130)	$	2,114,269

See notes to our unaudited condensed consolidated financial statements.

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TOPBUILD CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION

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

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 September 30, 2024, our results of operations and comprehensive income for the three and nine months ended September 30, 2024 and 2023, and our cash flows for the nine months ended September 30, 2024 and 2023. The condensed consolidated balance sheet at December 31, 2023 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, 2023, as filed with the SEC on February 28, 2024.

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 Issued Accounting Pronouncements Not Yet Adopted

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 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. This standard will not affect our consolidated results of operations, financial position or cash flows. We will update our disclosures in future filings to comply with the disclosure requirements.

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, with early adoption permitted 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 and we are assessing the impact of its adoption in our disclosures to our consolidated financial statements.

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.

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TOPBUILD CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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


	Three Months Ended September 30,
	2024								2023
	Installation		Specialty Distribution		Eliminations		Total		Installation		Specialty Distribution		Eliminations		Total
Residential	$	714,911	$	246,519	$	(71,074)	$	890,356	$	689,232	$	227,245	$	(54,788)	$	861,689
Commercial/Industrial		141,439		353,868		(12,395)		482,912		132,441		343,764		(11,774)		464,431
Net sales	$	856,350	$	600,387	$	(83,469)	$	1,373,268	$	821,673	$	571,009	$	(66,562)	$	1,326,120


	Nine Months Ended September 30,
	2024								2023
	Installation		Specialty Distribution		Eliminations		Total		Installation		Specialty Distribution		Eliminations		Total
Residential	$	2,102,174	$	700,520	$	(193,395)	$	2,609,299	$	2,003,107	$	678,824	$	(162,844)	$	2,519,087
Commercial/Industrial		403,902		1,038,487		(34,091)		1,408,298		394,711		1,025,047		(30,225)		1,389,533
Net sales	$	2,506,076	$	1,739,007	$	(227,486)	$	4,017,597	$	2,397,818	$	1,703,871	$	(193,069)	$	3,908,620

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


	Three Months Ended September 30,
	2024								2023
	Installation		Specialty Distribution		Eliminations		Total		Installation		Specialty Distribution		Eliminations		Total
Insulation and accessories	$	688,002	$	532,341	$	(74,070)	$	1,146,273	$	658,765	$	506,420	$	(58,300)	$	1,106,885
Glass and windows		64,558		-		-		64,558		62,763		-		-		62,763
Gutters		30,562		52,086		(8,209)		74,439		28,215		46,131		(7,422)		66,924
All other		73,228		15,960		(1,190)		87,998		71,930		18,458		(840)		89,548
Net sales	$	856,350	$	600,387	$	(83,469)	$	1,373,268	$	821,673	$	571,009	$	(66,562)	$	1,326,120


	Nine Months Ended September 30,
	2024								2023
	Installation		Specialty Distribution		Eliminations		Total		Installation		Specialty Distribution		Eliminations		Total
Insulation and accessories	$	2,017,380		1,548,251		(200,337)	$	3,365,294	$	1,893,456	$	1,522,384	$	(167,872)	$	3,247,968
Glass and windows		184,996		-		-		184,996		195,046		-		-		195,046
Gutters		88,901		141,455		(23,441)		206,915		85,895		130,062		(22,158)		193,799
All other		214,799		49,301		(3,708)		260,392		223,421		51,425		(3,039)		271,807
Net sales	$	2,506,076	$	1,739,007	$	(227,486)	$	4,017,597	$	2,397,818	$	1,703,871	$	(193,069)	$	3,908,620

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


	Included in Line Item on	As of
		September 30,		December 31,
	Condensed Consolidated Balance Sheets	2024		2023
Contract Assets:
Receivables, unbilled	Receivables, net	$	76,610	$	64,882

Contract Liabilities:
Deferred revenue	Accrued liabilities	$	17,951	$	18,365

The aggregate amount remaining on uncompleted performance obligations was $378.0 million as of September 30, 2024. We expect to satisfy the performance obligations and recognize revenue on substantially all of these uncompleted contracts over the next 18 months.

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TOPBUILD CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 $77.9 million and $81.9 million as of September 30, 2024 and December 31, 2023, 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 2023, we performed an annual assessment on our goodwill resulting in no impairment and there were no indicators of impairment for the nine months ended September 30, 2024.

Changes in the carrying amount of goodwill for the nine months ended September 30, 2024, by segment, were as follows, in thousands:


									Accumulated
	Gross Goodwill				FX Translation		Gross Goodwill		Impairment		Net Goodwill
	December 31, 2023		Additions		Adjustment		September 30, 2024		Losses		September 30, 2024
Goodwill, by segment:
Installation	$	1,901,160	$	45,334	$	-	$	1,946,494	$	(762,021)	$	1,184,473
Specialty Distribution		903,429		5,720		(1,307)		907,842		-		907,842
Total goodwill	$	2,804,589	$	51,054	$	(1,307)	$	2,854,336	$	(762,021)	$	2,092,315

See Note 12 – Business Combinations for goodwill recognized on acquisitions that occurred during the nine months ended September 30, 2024.

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


	As of
	September 30, 2024		December 31, 2023
Gross definite-lived intangible assets	$	855,693	$	827,793
Accumulated amortization		(290,253)		(236,735)
Other intangible assets, net	$	565,440	$	591,058

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Amortization expense	$	18,243	$	17,389	$	53,876	$	51,496

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TOPBUILD CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

5. LONG-TERM DEBT

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


	As of
	September 30, 2024		December 31, 2023
3.625% Senior Notes due 2029	$	400,000	$	400,000
4.125% Senior Notes due 2032		500,000		500,000
Term loan due 2026		498,750		532,500
Equipment notes		137		2,039
Unamortized debt issuance costs		(12,311)		(14,472)
Total debt, net of unamortized debt issuance costs		1,386,576		1,420,067
Less: current portion of long-term debt		45,137		47,039
Total long-term debt	$	1,341,439	$	1,373,028

The following table sets forth our remaining principal payments for our outstanding debt balances as of September 30, 2024, in thousands:



	2024		2025		2026		2027		2028		Thereafter		Total
3.625% Senior Notes	$	-	$	-	$	-	$	-	$	-	$	400,000	$	400,000
4.125% Senior Notes		-		-		-		-		-		500,000		500,000
Term loan		11,250		48,750		438,750		-		-		-		498,750
Equipment notes		137		-		-		-		-		-		137
Total	$	11,387	$	48,750	$	438,750	$	-	$	-	$	900,000	$	1,398,887

Credit Agreement

On July 26, 2023, we entered into Amendment No. 4 to our Credit Agreement, which provided for a new $550.0 million Term Facility Two, the proceeds of which were intended to be used, in part, to finance the acquisition of SPI, including the payment of related fees and expenses. On April 22, 2024, we agreed to a mutual termination of our previous agreement to acquire SPI. In connection with the termination of the SPI acquisition, the Company terminated the commitments with respect to its undrawn Term Facility Two which was provided pursuant to Amendment No. 4. All other terms of the Company’s Credit Agreement, as amended, remain in full force and effect.

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


Senior secured term loan facility	$	600,000

Revolving facility (a)	$	500,000
Sublimit for issuance of letters of credit under revolving facility	$	100,000
Sublimit for swingline loans under revolving facility	$	35,000

Interest rate as of September 30, 2024		5.95	%
Scheduled maturity date		10/7/2026

(a)	Use of the sublimits for the issuance of letters of credit and swingline loans reduces the availability under the revolving facility.

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

●

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

●

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

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TOPBUILD CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

Revolving Facility

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

The following table summarizes our availability under the revolving facility, in thousands:


	As of
	September 30, 2024		December 31, 2023
Revolving facility	$	500,000	$	500,000
Less: standby letters of credit		(63,770)		(63,770)
Availability under revolving facility	$	436,230	$	436,230

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

3.625% Senior Notes

The 3.625% Senior Notes are $400.0 million senior unsecured obligations and bear interest at 3.625% per year, payable semiannually in arrears on March 15 and September 15, beginning on September 15, 2021. The 3.625% Senior Notes mature on March 15, 2029, unless redeemed early or repurchased. If we undergo a change in control, we must make an offer to repurchase all of the 3.625% Senior Notes then outstanding at a repurchase price equal to 101% of their aggregate principal amount, plus accrued and unpaid interest (if any) to, but not including, the repurchase date. The Company may redeem the 3.625% Senior Notes, in whole or in part, at any time on or after March 15, 2024 at the redemption prices specified in the notes.

4.125% Senior Notes

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

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

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TOPBUILD CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Equipment Notes

We did not issue equipment notes during the nine months ended September 30, 2024. The balance of equipment notes, which were issued for the purpose of financing vehicles and equipment, was $0.1 million as of September 30, 2024 and matures in the fourth quarter of 2024.

Covenant Compliance

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

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

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


		As of September 30, 2024
Maximum Net Leverage Ratio		3.50:1.00
Minimum Interest Coverage Ratio		3.00:1.00
Compliance as of period end		In Compliance

6. FAIR VALUE MEASUREMENTS

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 and equipment notes approximate their fair market value primarily due to the fact that the non-performance risk of servicing our debt obligations, as reflected in our business and credit risk profile, has not materially changed since we assumed our debt obligations under the Credit Agreement. In addition, due to the floating-rate nature of our term loan, the market value is not subject to variability solely due to changes in the general level of interest rates as is the case with a fixed-rate debt obligation.

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TOPBUILD CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Based on market trades of our 3.625% Senior Notes and our 4.125% Senior Notes close to September 30, 2024 (Level 1 fair value measurement), we estimate the fair value of each in the table below:


	As of September 30, 2024
		Fair Value		Gross Carrying Value
3.625% Senior Notes	$	375,520	$	400,000
4.125% Senior Notes	$	461,900	$	500,000

7. SEGMENT INFORMATION

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


	Three Months Ended September 30,
	2024		2023		2024		2023

	Net Sales				Operating Profit (c)
Operations by segment (a):
Installation	$	856,350	$	821,673	$	172,243	$	175,218
Specialty Distribution		600,387		571,009		94,911		88,269
Intercompany eliminations (b)		(83,469)		(66,562)		(13,476)		(11,501)
Total	$	1,373,268	$	1,326,120		253,678		251,986
General corporate expense, net (d)						(9,685)		(14,494)
Operating profit, as reported						243,993		237,492
Other expense, net						(16,094)		(12,815)
Income before income taxes					$	227,899	$	224,677


	Nine Months Ended September 30,
	2024		2023		2024		2023

	Net Sales				Operating Profit (c)
Operations by segment (a):
Installation	$	2,506,076	$	2,397,818	$	499,717	$	494,394
Specialty Distribution		1,739,007		1,703,871		261,862		247,583
Intercompany eliminations (b)		(227,486)		(193,069)		(37,076)		(32,672)
Total	$	4,017,597	$	3,908,620		724,503		709,305
General corporate expense, net (d)						(55,610)		(35,280)
Operating profit, as reported						668,893		674,025
Other expense, net						(30,824)		(42,885)
Income before income taxes					$	638,069	$	631,140

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

(b)	Intercompany net sales and operating profit resulted from sales made by Specialty Distribution to Installation which are eliminated in consolidation.

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

(d)

General corporate expense, net includes expenses not specifically attributable to our segments for functions such as corporate human resources, finance, and legal, including salaries, benefits, and other related costs. In our second quarter of 2024, we incurred an acquisition termination fee of $23.0 million (see Note 12. Business Combinations).

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TOPBUILD CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8. INCOME TAXES

Our effective tax rates were 25.9 percent and 26.0 percent for the three and nine months ended September 30, 2024, respectively. The effective tax rates for the three and nine months ended September 30, 2023, were 25.4 percent and 25.9 percent, respectively. The higher 2024 tax rate for the three months ended September 30, 2024, compared to the three months ended September 30, 2023, was primarily related to share-based compensation.

A tax expense of $2.0 million and a tax benefit of $0.5 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 nine months ended September 30, 2024 and 2023, respectively.

9. NET INCOME PER SHARE

Basic net income per share is calculated by dividing net income by the number of weighted average shares outstanding during the period, without consideration for common stock equivalents. Diluted net income per share is calculated by adjusting the number of weighted average shares outstanding for the dilutive effect of common stock equivalents outstanding for the period, determined using the treasury stock method.

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Net income (in thousands)	$	168,960	$	167,602	$	472,064	$	467,870

Weighted average number of common shares outstanding - basic		29,751,713		31,615,110		30,901,788		31,588,740

Dilutive effect of common stock equivalents:
RSAs with service-based conditions		35,034		36,425		35,566		28,040
RSAs with market-based conditions		38,187		31,918		38,840		25,606
RSAs with performance-based conditions		11,297		17,663		15,735		16,223
Stock options		89,169		87,696		91,928		86,247

Weighted average number of common shares outstanding - diluted		29,925,400		31,788,812		31,083,857		31,744,856

Basic net income per common share	$	5.68	$	5.30	$	15.28	$	14.81

Diluted net income per common share	$	5.65	$	5.27	$	15.19	$	14.74

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Anti-dilutive common stock equivalents:
RSAs with service-based conditions		-		-		-		3,721
RSAs with market-based conditions		9,006		-		7,341		2,978
RSAs with performance-based conditions		-		-		-		-
Stock options		-		-		-		12,360
Total anti-dilutive common stock equivalents		9,006		-		7,341		19,059

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TOPBUILD CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

10. SHARE-BASED COMPENSATION

Eligible employees participate in the 2015 LTIP, which authorizes the Board to grant stock options, stock appreciation rights, restricted shares, restricted share units, performance awards, and dividend equivalents. All grants are made by issuing new shares and no more than 4.0 million shares of common stock may be issued under the 2015 LTIP. As of September 30, 2024, we had 1.7 million shares remaining available for issuance under the 2015 LTIP.

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

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Share-based compensation expense	$	3,646	$	4,194	$	13,405	$	11,080
Income tax benefit/(expense)	$	127	$	679	$	(1,980)	$	455

The following table presents a summary of our share-based compensation activity for the nine months ended September 30, 2024, in thousands, except per share amounts:


	RSAs			Stock Options
	Number of Shares	Weighted Average Grant Date Fair Value Per Share		Number of Shares	Weighted Average Grant Date Fair Value Per Share		Weighted Average Exercise Price Per Share		Aggregate Intrinsic Value
Balance December 31, 2023	195.5	$	223.49	128.7	$	36.65	$	98.58	$	35,462.8
Granted	45.0	$	419.27	—	$	—	$	—		—
Converted/Exercised	(52.9)	$	229.40	(16.0)	$	82.64	$	201.27	$	3,312.8
Forfeited/Expired	(6.2)	$	299.42	—	$	—	$	—		—
Balance September 30, 2024	181.4	$	269.25	112.7	$	30.10	$	83.97	$	36,356.0

Exercisable September 30, 2024 (a)				112.7	$	30.10	$	83.97	$	36,356.0

(a)	The weighted average remaining contractual term for vested stock options is approximately 4.4 years.

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


	As of September 30, 2024
	Unrecognized Compensation Expense on Unvested Awards		Weighted Average Remaining Compensation Expense Period
RSAs	$	22,584		1.0
Stock options		—		—
Total unrecognized compensation expense related to unvested awards	$	22,584

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TOPBUILD CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 15, 2022	$	2,907	$	-	$	727	$	2,907	$	5,814
February 21, 2023	$	3,845	$	-	$	961	$	3,845	$	7,690
February 21, 2024	$	4,496	$	-	$	1,124	$	4,496	$	8,992

During the first quarter of 2024, RSAs with performance-based conditions that were granted on February 16, 2021 vested based on cumulative three-year achievement of 200%. Total compensation expense recognized over the three-year performance period, net of forfeitures, was $4.4 million.

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 2024, 2023, and 2022:


	2024			2023			2022
Measurement period (years)		2.86			2.86			2.87
Risk free interest rate		4.36	%		4.42	%		1.76	%
Dividend yield		0.00	%		0.00	%		0.00	%
Estimated fair value of market-based RSAs at grant date	$	503.68		$	270.64		$	298.20

11. SHARE REPURCHASE PROGRAM

On July 25, 2022, our Board authorized the 2022 Repurchase Program, pursuant to which the Company may purchase up to $200 million of our common stock. As of September 30, 2024, the Company has utilized all amounts authorized under the 2022 Program. We repurchased a total of 677,657 shares of our common stock under the 2022 Repurchase Program at an average price of $295.13.

On May 3, 2024, our Board authorized the 2024 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 2024 Repurchase Program does not obligate the Company to purchase any shares and has no expiration date. Authorization for the 2024 Repurchase Program may be terminated, increased, or decreased by the Board at its discretion at any time. As

of September 30, 2024, the Company has $235.2 million remaining under the 2024 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. As of September 30, 2024, the Company had an estimated excise tax liability of $9.3 million for stock repurchases during the nine months ended September 30, 2024, which is included in “Accrued liabilities” in our Condensed Consolidated Balance Sheet.

The following table sets forth our share repurchases under the share repurchases programs in 2024. No shares were repurchased during 2023.


	Three Months Ended		Nine Months Ended
	September 30, 2024		September 30, 2024
Number of shares repurchased		1,074,818		2,321,000
Share repurchase cost (in thousands) (a)	$	418,085	$	928,528

(a)	The three and nine months ended September 30, 2024 include $4.1 million and $9.3 million of excise taxes, respectively

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TOPBUILD CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 $0.5 million and $27.2 million in the three and nine months ended September 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 were $6.2 million and $9.0 million for the three and nine months ended September 30, 2023, respectively. Acquisition related costs are included in selling, general, and administrative expense in our condensed consolidated statements of operations.

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 $3.0 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 $2.6 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 $25.5 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 $35.9 million was funded by cash on hand and we recognized $22.9 million of goodwill in connection with this acquisition.

The estimated fair values of the assets acquired and liabilities assumed for our 2024 acquisitions are as follows as of September 30, 2024, in thousands:



Purchase price fair values:
Accounts receivable	$	11,082
Inventories		3,355
Prepaid and other assets		40
Property and equipment		3,474
ROU asset (operating)		2,138
Intangible assets		29,287
Goodwill		51,198
Accounts payable		(9,963)
Lease liabilities (operating)		(2,138)
Net assets acquired	$	88,473

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TOPBUILD CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The estimate of acquired customer relationships related to our 2024 acquisitions was $29.3 million and the weighted average useful life is 12 years.

During the nine months ended September 30, 2023, we made the following acquisitions:

On January 26, 2023, we acquired the assets of the residential insulation business of SRI. The purchase price of $45.3 was funded by cash on hand.

On July 10, 2023, we acquired the assets of the residential insulation installer business Rocky Mountain. The purchase price of $7.2 million was funded by cash on hand.

On July 17, 2023, we acquired the assets of the residential insulation business Best. The purchase price of $94.6 million was funded by cash on hand.

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.

The table below represents the finalized fair values of assets acquired and liabilities assumed for the acquisitions made during the nine months ended September 30, 2023:


	2023 Acquisitions
	SRI		Rocky Mountain		Best		Totals
Finalized purchase price fair values:
Accounts receivable	$	5,531	$	586	$	7,537	$	13,654
Inventories		4,383		267		2,132		6,782
Prepaid and other assets		158		—		43		201
Property and equipment		4,623		338		5,518		10,479
ROU asset (operating)		4,695		165		3,441		8,301
Intangible assets		13,740		2,399		30,470		46,609
Deferred taxes		67		19		45		131
Goodwill		23,065		3,609		51,418		78,092
Accounts payable		(6,078)		(18)		(2,623)		(8,719)
Lease Liabilities (operating)		(4,775)		(165)		(3,241)		(8,181)
All other liabilities		(95)		—		(150)		(245)
Net assets acquired	$	45,314	$	7,200	$	94,590	$	147,104

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 $51.2 million and $78.1 million of goodwill recorded from acquisitions completed in the nine months ended September 30, 2024 and 2023, respectively, is expected to be deductible for income tax purposes.

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TOPBUILD CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

13. ACCRUED LIABILITIES

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


	As of
	September 30, 2024		December 31, 2023
Accrued liabilities:
Salaries, wages, and bonus/commissions	$	68,195	$	67,471
Insurance liabilities		29,951		29,920
Deferred revenue		17,951		18,365
Sales and property taxes		16,877		17,002
Customer rebates		14,607		17,326
Excise taxes		9,342		-
Interest payable on long-term debt		3,358		12,139
Other		20,101		24,994
Total accrued liabilities	$	180,382	$	187,217

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

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.

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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 September 30, 2024, we had approximately 250 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 September 30, 2024, we had approximately 150 distribution centers located across the United States and 18 distribution centers in Canada. Our Specialty Distribution customer base consists of thousands of insulation contractors of all sizes serving a wide variety of residential and commercial/industrial industries, gutter contractors, weatherization contractors, other contractors, dealers, metal building erectors, and modular home builders.

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

For additional details pertaining to our operating results by segment, see Note 7 – Segment Information to our unaudited condensed consolidated financial statements contained in Part I, Item 1 of this Quarterly Report. For additional details regarding our strategy, material trends in our business and seasonality, please refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report for the year ended December 31, 2023, as filed with the SEC on February 28, 2024.

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

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THIRD QUARTER 2024 VERSUS THIRD QUARTER 2023

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


	Three Months Ended September 30,
	2024			2023
Net sales	$	1,373,268		$	1,326,120
Cost of sales		951,455			905,430
Cost of sales ratio		69.3	%		68.3	%

Gross profit		421,813			420,690
Gross profit margin		30.7	%		31.7	%

Selling, general, and administrative expense		177,820			183,198
Selling, general, and administrative expense to sales ratio		12.9	%		13.8	%

Operating profit		243,993			237,492
Operating profit margin		17.8	%		17.9	%

Other expense, net		(16,094)			(12,815)
Income tax expense		(58,939)			(57,075)
Net income	$	168,960		$	167,602
Net margin		12.3	%		12.6	%

Sales and Operations

Net sales increased 3.6% for the three months ended September 30, 2024, from the comparable period of 2023. The increase was primarily driven by a 2.4% increase in sales from acquisitions, a 1.0% impact from higher selling prices and a 0.4% increase in sales volume, partially offset by a decline of 0.1% driven by the disposition of a non-core business.

Gross profit margins were 30.7% and 31.7% for the three months ended September 30, 2024 and 2023, respectively. The decline in gross profit margin is primarily due to higher material costs and lower benefit of sales mix compared to the same period of the prior year, partially offset by improved productivity and higher pricing.

Selling, general, and administrative expenses as a percentage of sales were 12.9% and 13.8% for the three months ended September 30, 2024 and 2023, respectively. Selling, general, and administrative expenses as a percentage of sales were lower primarily due to less acquisition related costs in 2024.

Operating margins were 17.8% and 17.9% for the three months ended September 30, 2024 and 2023, respectively. The decrease in operating margins was due to higher material costs and lower benefit of sales mix, partially offset by higher selling prices, productivity initiatives, and lower acquisition related costs in 2024.

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Business Segment Results

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


	Three Months Ended September 30,
	2024			2023			Percent Change
Net sales by business segment:
Installation	$	856,350		$	821,673		4.2	%
Specialty Distribution		600,387			571,009		5.1	%
Intercompany eliminations		(83,469)			(66,562)
Net sales	$	1,373,268		$	1,326,120		3.6	%

Operating profit by business segment:
Installation	$	172,243		$	175,218		(1.7)	%
Specialty Distribution		94,911			88,269		7.5	%
Intercompany eliminations		(13,476)			(11,501)
Operating profit before general corporate expense		253,678			251,986		0.7	%
General corporate expense, net		(9,685)			(14,494)
Operating profit	$	243,993		$	237,492		2.7	%

Operating profit margins:
Installation		20.1	%		21.3	%
Specialty Distribution		15.8	%		15.5	%
Operating profit margin before general corporate expense		18.5	%		19.0	%
Operating profit margin		17.8	%		17.9	%

Installation

Sales

Sales in our Installation segment increased $34.7 million, or 4.2%, for the three months ended September 30, 2024, as compared to the same period in 2023. Sales increased 2.9% from acquisitions, 1.1% from higher selling prices, and 0.5% due to higher sales volume, partially offset by a decline of 0.2% driven by the disposition of a non-core business.

Operating margins

Operating margins in our Installation segment were 20.1% and 21.3% for the three months ended September 30, 2024 and 2023, respectively. The decline in operating margin was driven by higher material costs and lower benefit of sales mix, which was partially offset by higher selling prices and productivity initiatives.

Specialty Distribution

Sales

Sales in our Specialty Distribution segment increased $29.4 million, or 5.1%, for the three months ended September 30, 2024, as compared to the same period in 2023. Sales increased 3.0% due to higher sales volume, 1.4% from acquisitions and 0.8% from higher selling prices.

Operating margins

Operating margins in our Specialty Distribution segment were 15.8% and 15.5% for the three months ended September 30, 2024 and 2023, respectively. The increase in operating margin was driven by productivity initiatives, higher sales volume and higher selling prices, partially offset by higher material costs.

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OTHER ITEMS

Other expense, net

Other expense, net, increased to $16.1 million from $12.8 million in the three months ended September 30, 2024 and 2023, respectively. The increase was driven by $3.0 million lower interest income due to lower cash balances than the prior year. Interest and other expenses remained relatively flat compared to the prior period.

Income tax expense

Income tax expense was $58.9 million, an effective tax rate of 25.9 percent, for the three months ended September 30, 2024, compared to $57.1 million, an effective tax rate of 25.4 percent, for the comparable period in 2023. The tax rate for the three months ended September 30, 2024 was higher primarily related to share-based compensation.

FIRST NINE MONTHS 2024 VERSUS FIRST NINE MONTHS 2023

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:


	Nine Months Ended September 30,
	2024			2023
Net sales	$	4,017,597		$	3,908,620
Cost of sales		2,784,712			2,695,916
Cost of sales ratio		69.3	%		69.0	%

Gross profit		1,232,885			1,212,704
Gross profit margin		30.7	%		31.0	%

Selling, general, and administrative expense		563,992			538,679
Selling, general, and administrative expense to sales ratio		14.0	%		13.8	%

Operating profit		668,893			674,025
Operating profit margin		16.6	%		17.2	%

Other expense, net		(30,824)			(42,885)
Income tax expense		(166,005)			(163,270)
Net income	$	472,064		$	467,870
Net margin		11.7	%		12.0	%

Sales and Operations

Net sales increased 2.8% for the nine months ended September 30, 2024, from the comparable period in 2023. The increase was primarily driven by a 2.5% increase in sales from acquisitions and a 1.2% impact from higher selling prices, partially offset by a 0.5% decline in sales volume and a decline of 0.4% driven by the disposition of a non-core business.

Gross profit margins were 30.7% and 31.0% for the nine months ended September 30, 2024 and 2023, respectively. The decline in gross profit margin is primarily due to higher material costs and lower benefit of sales mix compared to the same period of the prior year, partially offset by improved productivity and higher selling prices.

Selling, general, and administrative expenses as a percentage of sales were 14.0% and 13.8% for the nine months ended September 30, 2024 and 2023, respectively. Selling, general, and administrative expenses as a percentage of sales were higher due to a $23.0 million fee paid to terminate our agreement to acquire SPI.

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Operating margins were 16.6% and 17.2% for the nine months ended September 30, 2024 and 2023, respectively. The decline in operating margins was due to higher material costs, lower benefit of sales mix, and increased selling, general, and administrative expenses from a $23.0 million fee paid to terminate our agreement to acquire SPI. These impacts were partially offset by productivity initiatives and higher selling prices.

Business Segment Results

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


	Nine Months Ended September 30,
	2024			2023			Percent Change
Net sales by business segment:
Installation	$	2,506,076		$	2,397,818		4.5	%
Specialty Distribution		1,739,007			1,703,871		2.1	%
Intercompany eliminations		(227,486)			(193,069)
Net sales	$	4,017,597		$	3,908,620		2.8	%

Operating profit by business segment:
Installation	$	499,717		$	494,394		1.1	%
Specialty Distribution		261,862			247,583		5.8	%
Intercompany eliminations		(37,076)			(32,672)
Operating profit before general corporate expense		724,503			709,305		2.1	%
General corporate expense, net		(55,610)			(35,280)
Operating profit	$	668,893		$	674,025		(0.8)	%

Operating profit margins:
Installation		19.9	%		20.6	%
Specialty Distribution		15.1	%		14.5	%
Operating profit margin before general corporate expense		18.0	%		18.1	%
Operating profit margin		16.6	%		17.2	%

Installation

Sales

Sales in our Installation segment increased $108.3 million, or 4.5%, for the nine months ended September 30, 2024, as compared to the same period in 2023. Sales increased 3.4% from acquisitions, 1.2% from higher selling prices, and 0.6% due to higher sales volume, partially offset by a decline of 0.6% driven by the disposition of a non-core business.

Operating margins

Operating margins in our Installation segment were 19.9% and 20.6% for the nine months ended September 30, 2024 and 2023, respectively. The decline in operating margin was driven by higher material costs and change in sales mix which was partially offset by higher selling prices and productivity initiatives.

Specialty Distribution

Sales

Sales in our Specialty Distribution segment increased $35.1 million, or 2.1%, for the nine months ended September 30, 2024, as compared to same period in 2023. Sales increased 1.2% from higher selling prices and 1.0% from acquisitions, partially offset by a decline of 0.2% in sales volume.

Operating margins

Operating margins in our Specialty Distribution segment were 15.1% and 14.5% for the nine months ended September 30, 2024 and 2023, respectively. The increase in operating margin was driven by productivity initiatives and higher selling prices partially offset by higher material costs.

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OTHER ITEMS

Other expense, net

Other expense, net, decreased to $30.8 million for the nine months ended September 30, 2024 from $42.9 million in the nine months ended September 30, 2023. The decrease was driven by $11.6 million of higher interest income due to higher levels of invested cash balances during the period. The increase in interest income was partially offset by higher interest expense of $0.4 million for the nine months ended September 30, 2024 due to higher interest rates on borrowings under the Credit Agreement compared to the same period in 2023.

Income tax expense

Income tax expense was $166.0 million, an effective tax rate of 26.0 percent, for the nine months ended September 30, 2024 compared to $163.3 million, an effective tax rate of 25.9 percent, for the comparable period in 2023. The tax rate for nine months ended September 30, 2024 was higher, driven by an increase 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:


	Nine Months Ended September 30,
	2024		2023
Changes in cash and cash equivalents:
Net cash provided by operating activities	$	509,798	$	588,478
Net cash used in investing activities		(142,918)		(181,016)
Net cash used in financing activities		(957,701)		(31,872)
Impact of exchange rate changes on cash		(402)		(47)
Net (decrease) increase in cash and cash equivalents	$	(591,223)	$	375,543

Net cash flows provided by operating activities decreased $78.7 million for the nine months ended September 30, 2024, as compared to the prior year period. Net income of $472.1 million was essentially flat to the prior year period, even considering the $23.0 million fee paid to terminate our agreement to acquire SPI, while operating profit declined by $5.1 million primarily due material cost increases. We also incurred increases in working capital accounts, leading to more cash used in operations.

Net cash used in investing activities was $142.9 million for the nine months ended September 30, 2024, primarily composed of $88.5 million for our acquisitions and $56.8 million for purchases of property and equipment, mainly vehicles, partially offset by $2.3 million proceeds received from the sale of assets. Net cash used in investing activities was $181.0 million for the nine months ended September 30, 2023, primarily composed of $147.6 million for our acquisitions and $48.1 million for purchases of property and equipment, mainly vehicles and equipment, partially offset by $14.7 million proceeds received from the sale of assets.

Net cash used in financing activities was $957.7 million for the nine months ended September 30, 2024. During the nine months ended September 30, 2024, we used $919.2 million to repurchase shares of our common stock under the 2022 and 2024 Repurchase Programs, $35.7 million for debt repayments and incurred $2.9 million net cash outflow related to exercise of share-based incentive awards and stock options. Net cash used in financing activities was $31.9 million for the nine months ended September 30, 2023. During the nine months ended September 30, 2023, we used $27.7 million for debt repayments, and incurred $3.9 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 our Credit Agreement, which provides for borrowing and/or standby letter of credit issuances of up to $500 million under the Revolving Facility. Additional information regarding our outstanding debt and borrowing capacity is incorporated by reference from Note 5 – Long-term Debt to our unaudited condensed consolidated financial statements contained in Part 1, Item 1 of this Quarterly Report.

The following table summarizes our liquidity, in thousands:


	As of
	September 30,		December 31,
	2024		2023
Cash and cash equivalents (a)	$	257,342	$	848,565

Revolving facility		500,000		500,000
Less: standby letters of credit		(63,770)		(63,770)
Availability under Revolving facility		436,230		436,230

Total liquidity	$	693,572	$	1,284,795

(a)

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

We believe that our cash flows from operations, combined with our current cash levels and available borrowing capacity, will be adequate to support our ongoing operations and known contractual obligations including funding our debt service requirements, capital expenditures, lease obligations and working capital needs for at least the next twelve months. We also have adequate liquidity to maintain off-balance sheet arrangements for short-term leases, letters of credit, and performance and license bonds.

OUTLOOK

Residential New Construction

Several key inflation metrics improved in the third quarter and the labor market remains strong. Demand for single-family housing has improved more gradually than anticipated as growth slowed in the second half of the year compared to the first two quarters. Demand continues to be uneven across the country.

Demand for multi-family homes has declined in comparison to last year, however our 2024 multi-family sales have grown due to the strong backlog we brought into the year. We expect multi-family sales will continue to slow as we move into 2025. Multi-family housing units typically require approximately 40% of the insulation that a single-family unit requires.

As a result of years of underbuilding in the United States, an overall shortage of housing across the country persists, and we continue to be optimistic about the long-term fundamentals of our business. We believe demand for homes will be supported by strengthening energy efficiency requirements, moderating interest rates and increasing household formations.

Commercial and Industrial Construction

Our commercial backlog is strong, and our bidding activity is active, both of which continue to support our positive view of commercial/industrial sales at our Installation and Specialty Distribution segments. Some projects have been delayed in 2024, but we have not seen an uptick in cancellations. We remain optimistic that lower interest rates in the future will unlock projects across many industries. In addition, recurring maintenance and repair work on industrial sites serves as a continued driver for our Specialty Distribution business.

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OFF-BALANCE SHEET ARRANGEMENTS

We had no material off-balance sheet arrangements during the nine months ended September 30, 2024, 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:


	As of
	September 30, 2024		December 31, 2023
Outstanding bonds:
Performance bonds	$	152,259	$	145,982
Licensing, insurance, and other bonds		28,472		27,415
Total bonds	$	180,731	$	173,397

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, 2023, as filed with the SEC on February 28, 2024.

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, 2023, as filed with the SEC on February 28, 2024.

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.

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, 2023, as filed with the SEC on February 28, 2024, 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.

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Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

We have a Term Loan outstanding with a principal balance of $498.8 million and a revolving facility with an aggregate borrowing capacity of $500.0 million. We also have outstanding 3.625% Senior Notes with an aggregate principal balance of $400.0 million and 4.125% Senior Notes with an aggregate principal balance of $500.0 million. The 3.625% Senior Notes and 4.125% Senior Notes bear a fixed rate of interest and therefore are excluded from the calculation below as they are not subject to fluctuations in interest rates.

Interest payable on both the aggregate Term Loan and Revolving Facility is based on a variable interest rate. As a result, we are exposed to market risks related to fluctuations in interest rates on this outstanding indebtedness. As of September 30, 2024, the applicable interest rate as of such date was 5.95%. Based on our outstanding borrowings as of September 30, 2024, a 100-basis point increase in the interest rate would result in a $4.8 million increase in our annualized interest expense. There was no outstanding balance under the Revolving Facility as of September 30, 2024.

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 September 30, 2024.

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 September 30, 2024, 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, 2023, as filed with the SEC on February 28, 2024 which are incorporated by reference herein.

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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 September 30, 2024, 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
July 1, 2024 - July 31, 2024	415,999	$	394.15	415,999	$	485,197
August 1, 2024 - August 31, 2024	538,944	$	381.45	538,944	$	279,619
September 1, 2024 - September 30, 2024	119,875	$	370.38	119,875	$	235,220
Total	1,074,818	$	385.13	1,074,818

(a)	These amounts exclude the 1% excise tax mandated by the Inflation Reduction Act on share repurchases.

Item 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

Item 4. MINE SAFETY DISCLOSURES

Not applicable.

Item 5. OTHER INFORMATION

During the quarter ended September 30, 2024, no director or officer (as defined in Rule 16a-1(f) promulgated under the Exchange Act) of the Company adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement" (as each term is defined in Item 408 of Regulation S-K).

Item 6. EXHIBITS

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

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INDEX TO EXHIBITS


		Incorporated by Reference			Filed
Exhibit No.	Exhibit Title	Form	Exhibit	Filing Date	Herewith
10.16†	TopBuild Corp. Executive Severance Plan, as amended October 28, 2024				X

31.1	Principal Executive Officer Certification required by Rules 13a-14 and 15d-14 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002				X

31.2	Principal Financial Officer Certification required by Rules 13a-14 and 15d-14 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002				X

32.1‡	Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002

32.2‡	Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002

101.INS	Inline XBRL Instance Document - the Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document				X

101.SCH	Inline XBRL Taxonomy Extension Schema Document				X

101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document				X

101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document				X

101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document				X

101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document				X

104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)				X

	‡Furnished herewith
†Indicates management contract or compensatory plan, contract or arrangement.

Table of Contents

SIGNATURE

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


		TOPBUILD CORP.


		By:	/s/ Madeline Otero
		Name:	Madeline Otero
		Title:	Vice President and Chief Accounting Officer
			(Principal Accounting Officer)

November 5, 2024