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, 2023~~March 31, 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 ~~31,773,944~~31,817,709 shares of Common Stock, par value $0.01 per share as of ~~October 24, 2023.~~April 30, 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	2221

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2926

Item 4.	Controls and Procedures	2927

Part II.	Other Information

Item 1.	Legal Proceedings	3027

Item 1A.	Risk Factors	3027

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3027

Item 3.	Defaults upon Senior Securities	3027

Item 4.	Mine Safety Disclosures	3027

Item 5.	Other Information	3027

Item 6.	Exhibits	3027

Index to Exhibits		3128

Signature		3229

Table of Contents

GLOSSARY

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


Term		Definition
3.625% Senior Notes		TopBuild's 3.625% senior unsecured notes issued March 15, 2021 and due March 15, 2029
4.125% Senior Notes		TopBuild's 4.125% senior unsecured notes issued October 14, 2021 and due February 15, 2032
2015 LTIP		2015 Long-Term Incentive Program authorizes the Board to grant stock options, stock appreciation rights, restricted shares, restricted share units, performance awards, and dividend equivalents
~~2021 Repurchase Program~~		~~$200 million share repurchase program authorized by the Board on July 26, 2021~~
2022 Repurchase Program		$200 million share repurchase program authorized by the Board on July 25, 2022
Amendment No. 4		Amendment No. 4 to the Credit Agreement dated July 26, 2023
~~2022 ASR Agreement~~		~~$100 million accelerated share repurchase agreement with Bank of America, N.A.~~
Annual Report		Annual report filed with the SEC on Form 10-K pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
ASC		Accounting Standards Codification
~~Assured~~		~~Assured Insulating Inc.~~
ASU		Accounting Standards Update
~~Best~~		~~Best Insulation Holdings LLC~~
Board		Board of Directors of TopBuild
BofA		Bank of America, N.A.
~~Billings~~Brabble		~~Billings~~Brabble Insulation, ~~Service,~~ Inc.
Credit Agreement		Amended and Restated Credit Agreement, dated March 20, 2020, among TopBuild, BofA as administrative agent, and the other lenders and agents party thereto
Current Report		Current report filed with the SEC on Form 8-K pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
EBITDA		Earnings before interest, taxes, depreciation, and amortization
Exchange Act		The Securities Exchange Act of 1934, as amended
FASB		Financial Accounting Standards Board
GAAP		Generally accepted accounting principles in the United States of America
Lenders		Bank of America, N.A., together with the other lenders party to "Credit Agreement"
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~~"Credit Agreement" due October 7, 2026
Term Facility Two		$550 million delayed draw term loan to be used to fund the future acquisition of SPI
TopBuild		TopBuild Corp. and its wholly-owned consolidated domestic subsidiaries

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

TOPBUILD CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(In thousands except share data)


	As of				As of
	September 30,		December 31,		March 31,		December 31,
	2023		2022		2024		2023
ASSETS
Current assets:
Cash and cash equivalents	$	615,612	$	240,069	$	968,809	$	848,565
Receivables, net of an allowance for credit losses of $17,880 at September 30, 2023, and $16,281 at December 31, 2022		870,890		836,071
Inventories, net		357,179		438,644
Receivables, net of an allowance for credit losses of $22,398 at March 31, 2024, and $23,948 at December 31, 2023						829,221		799,009
Inventories						375,056		364,731
Prepaid expenses and other current assets		38,104		34,257		29,376		36,939
Total current assets		1,881,785		1,549,041		2,202,462		2,049,244

Right of use assets		209,707		205,892		201,392		204,629
Property and equipment, net		264,581		253,484		266,422		264,487
Goodwill		2,039,777		1,966,994		2,052,319		2,042,568
Other intangible assets, net		606,940		614,967		578,335		591,058
Other assets		11,300		16,453		9,522		10,865
Total assets	$	5,014,090	$	4,606,831	$	5,310,452	$	5,162,851

LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	455,840	$	487,114	$	467,863	$	469,585
Current portion of long-term debt		48,057		40,068		46,230		47,039
Accrued liabilities		183,084		199,370		201,402		187,217
Short-term operating lease liabilities		64,632		60,880		67,041		65,780
Short-term finance lease liabilities		2,057		2,207		1,829		1,917
Total current liabilities		753,670		789,639		784,365		771,538

Long-term debt		1,383,717		1,417,257		1,362,498		1,373,028
Deferred tax liabilities, net		252,419		251,481		243,622		243,930
Long-term portion of insurance reserves		58,343		59,783		60,179		58,783
Long-term operating lease liabilities		151,970		149,943		142,552		146,213
Long-term finance lease liabilities		4,596		6,673		3,716		4,150
Other liabilities		1,548		2,349		1,487		1,554
Total liabilities		2,606,263		2,677,125		2,598,419		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; 39,489,942 shares issued and 31,774,264 outstanding at September 30, 2023, and 39,325,916 shares issued and 31,642,832 outstanding at December 31, 2022		395		393
Treasury stock, 7,715,678 shares at September 30, 2023, and 7,683,084 shares at December 31, 2022, at cost		(699,149)		(692,799)
Common stock, $0.01 par value: 250,000,000 shares authorized; 39,549,030 shares issued and 31,818,099 outstanding at March 31, 2024, and 39,492,037 shares issued and 31,776,039 outstanding at December 31, 2023						395		394
Treasury stock, 7,730,931 shares at March 31, 2024, and 7,715,998 shares at December 31, 2023, at cost						(705,386)		(699,327)
Additional paid-in capital		900,936		887,367		912,481		906,334
Retained earnings		2,224,537		1,756,665		2,523,300		2,370,919
Accumulated other comprehensive loss		(18,892)		(21,920)		(18,757)		(14,665)
Total equity		2,407,827		1,929,706		2,712,033		2,563,655
Total liabilities and equity	$	5,014,090	$	4,606,831	$	5,310,452	$	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,				Three Months Ended March 31,
	2023		2022		2023		2022		2024		2023
Net sales	$	1,326,120	$	1,300,998	$	3,908,620	$	3,744,201	$	1,278,717	$	1,265,238
Cost of sales		905,430		905,250		2,695,916		2,633,155		891,567		895,023
Gross profit		420,690		395,748		1,212,704		1,111,046		387,150		370,215

Selling, general, and administrative expense		183,198		172,874		538,679		516,997		172,642		170,784
Operating profit		237,492		222,874		674,025		594,049		214,508		199,431

Other income (expense), net:
Interest expense		(18,830)		(14,561)		(55,427)		(39,936)		(18,795)		(18,039)
Other, net		6,015		(303)		12,542		103		11,282		1,923
Other expense, net		(12,815)		(14,864)		(42,885)		(39,833)		(7,513)		(16,116)
Income before income taxes		224,677		208,010		631,140		554,216		206,995		183,315

Income tax expense		(57,075)		(54,264)		(163,270)		(142,060)		(54,614)		(47,445)
Net income	$	167,602	$	153,746	$	467,870	$	412,156	$	152,381	$	135,870

Net income per common share:
Basic	$	5.30	$	4.79	$	14.81	$	12.72	$	4.82	$	4.31
Diluted	$	5.27	$	4.76	$	14.74		12.63	$	4.79	$	4.28

Weighted average shares outstanding:
Basic		31,615,110		32,076,285		31,588,740		32,404,275		31,641,454		31,550,658
Diluted		31,788,812		32,279,820		31,744,856		32,643,161		31,843,818		31,713,239

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,				Three Months Ended March 31,
	2023		2022		2023		2022		2024		2023
Net income	$	167,602	$	153,746	$	467,870	$	412,156	$	152,381	$	135,870
Other comprehensive (loss) income:
Foreign currency translation adjustment		(3,008)		(15,158)		3,029		(14,133)		(4,092)		1,753
Comprehensive income	$	164,594	$	138,588	$	470,899	$	398,023	$	148,289	$	137,623

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,				Three Months Ended March 31,
	2023		2022		2024		2023
Cash Flows Provided by (Used in) Operating Activities:
Net income	$	467,870	$	412,156	$	152,381	$	135,870
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		98,216		93,051		34,257		32,100
Share-based compensation		11,080		9,673		5,127		3,135
Loss on sale of assets		2,733		76
(Gain)/loss on sale of assets						(561)		185
Amortization of debt issuance costs		2,161		2,147		720		720
Provision for bad debt expense		7,380		8,837		4,464		1,338
Loss from inventory obsolescence		3,617		5,127
Provision for inventory obsolescence						2,902		1,642
Deferred income taxes, net						(240)		563
Change in certain assets and liabilities:
Receivables, net		(52,482)		(152,578)		(28,486)		(10,847)
Inventories, net		82,960		(101,148)
Inventories						(12,056)		20,096
Prepaid expenses and other current assets		(3,267)		(807)		7,541		11,579
Accounts payable		(21,361)		49,079		(2,659)		(25,480)
Accrued liabilities		(9,027)		3,469		16,170		(3,339)
Other, net		(1,402)		6,548		(783)		2,239
Net cash provided by operating activities		588,478		335,630		178,777		169,801

Cash Flows Provided by (Used in) Investing Activities:
Purchases of property and equipment		(48,076)		(56,044)		(19,881)		(15,580)
Acquisition of businesses, net of cash acquired		(147,614)		(20,500)		(22,240)		(45,845)
Proceeds from sale of assets		14,674		2,877		1,608		455
Net cash used in investing activities		(181,016)		(73,667)		(40,513)		(60,970)

Cash Flows Provided by (Used in) Financing Activities:
Repayment of long-term debt		(27,711)		(28,968)		(12,059)		(9,743)
Proceeds from revolving credit facility		—		70,000
Repayment of revolving credit facility		—		(70,000)
Taxes withheld and paid on employees' equity awards		(6,350)		(11,719)		(6,059)		(6,350)
Exercise of stock options		2,489		2,028		1,020		1,029
Repurchase of shares of common stock		—		(200,050)
Payment of contingent consideration		(300)		(1,674)
Net cash used in financing activities		(31,872)		(240,383)		(17,098)		(15,064)
Impact of exchange rate changes on cash		(47)		(1,975)		(922)		(58)
Net increase in cash and cash equivalents		375,543		19,605		120,244		93,709
Cash and cash equivalents - Beginning of period		240,069		139,779		848,565		240,069
Cash and cash equivalents - End of period	$	615,612	$	159,384	$	968,809	$	333,778

Supplemental disclosure of noncash activities:
Leased assets obtained in exchange for new operating lease liabilities	$	45,525	$	80,186	$	13,737	$	18,271
Accruals for property and equipment		305		395		307		835

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, 2021
$
391

$
(431,030)

$
873,031

$
1,200,676

$
(6,634)

$
1,636,434
Net income

-

-

-

114,711

-

114,711
Share-based compensation

-

-

3,727

-

-

3,727
Issuance of 52,940 restricted share awards under long-term equity incentive plan

2

-

(2)

-

-

-
Repurchase of 238,154 shares

-

(50,000)

-

-

-

(50,000)
53,073 shares withheld to pay taxes on employees' equity awards

-

(11,658)

-

-

-

(11,658)
12,269 shares issued upon exercise of stock options

-

-

808

-

-

808
Other comprehensive income, net of tax

-

-

-

-

3,218

3,218
Balance at March 31, 2022
$
393

$
(492,688)

$
877,564

$
1,315,387

$
(3,416)

$
1,697,240
Net income

-

-

-

143,697

-

143,697
Share-based compensation

-

-

3,334

-

-

3,334
Repurchase of 409,312 shares pursuant to 2022 ASR Agreement

-

(80,050)

(20,000)

-

-

(100,050)
51 shares withheld to pay taxes on employees' equity awards

-

(9)

-

-

-

(9)
5,835 shares issued upon exercise of stock options

-

-

644

-

-

644
Other comprehensive loss, net of tax

-

-

-

-

(2,193)

(2,193)
Balance at June 30, 2022
$
393

$
(572,747)

$
861,542

$
1,459,084

$
(5,609)

$
1,742,663
Net income

-

-

-

153,746

-

153,746
Share-based compensation

-

-

2,611

-

-

2,611
Repurchase of 142,351 shares pursuant to the settlement of the 2022 ASR Agreement

-

(20,000)

20,000

-

-

-
Repurchase of 269,544 shares

-

(49,999)

-

-

-

(49,999)
7,111 shares issued upon exercise of stock options

-

-

576

-

-

576
Other comprehensive loss, net of tax

-

-

-

-

(15,158)

(15,158)
Balance at September 30, 2022
$
393

$
(642,746)

$
884,729

$
1,612,830

$
(20,767)

$
1,834,439


									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


									Accumulated												Accumulated
	Common		Treasury		Additional				Other				Common		Treasury		Additional				Other
	Stock		Stock		Paid-in		Retained		Comprehensive				Stock		Stock		Paid-in		Retained		Comprehensive
	($0.01 par value)		at cost		Capital		Earnings		(Loss) Income		Equity		($0.01 par value)		at cost		Capital		Earnings		Loss		Equity
Balance at December 31, 2022	$	393	$	(692,799)	$	887,367	$	1,756,665	$	(21,920)	$	1,929,706
Balance at December 31, 2023													$	394	$	(699,327)	$	906,334	$	2,370,919	$	(14,665)	$	2,563,655
Net income		-		-		-		135,870		-		135,870		-		-		-		152,381		-		152,381
Share-based compensation		-		-		3,135		-		-		3,135		-		-		5,127		-		-		5,127
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
Issuance of 51,236 restricted share awards under long-term equity incentive plan, net of forfeitures														1		-		-		-		-		1
14,933 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		-		-		-		-		(3,008)		(3,008)		-		-		-		-		(4,092)		(4,092)
Balance at September 30, 2023	$	395	$	(699,149)	$	900,936	$	2,224,537	$	(18,892)	$	2,407,827
Balance at March 31, 2024													$	395	$	(705,386)	$	912,481	$	2,523,300	$	(18,757)	$	2,712,033

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 chief operating decision maker.

We believe the accompanying unaudited condensed consolidated financial statements contain all adjustments, of a normal recurring nature, necessary to state fairly our financial position as of ~~September 30, 2023,~~March 31, 2024, our results of operations and comprehensive income for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022,~~ and our cash flows for the ~~nine~~three months ended ~~September 30, 2023~~March 31, 2024 and ~~2022.~~2023. The condensed consolidated balance sheet at December 31, ~~2022~~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, ~~2022~~2023, as filed with the SEC on February ~~23, 2023.~~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 Adopted Accounting Pronouncements

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

~~3. REVENUE RECOGNITION~~Recently Issued Accounting Pronouncements Not Yet Adopted

~~Revenue~~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 ~~disaggregated between~~effective for fiscal years beginning after December 15, 2023, with early adoption permitted. We do not anticipate that this standard will affect 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~~consolidated results of ~~revenue and~~operations, financial position or cash flows and we are ~~affected by economic factors.~~assessing the impact of adoption in our disclosures to the consolidated financial statements.

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.

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

Three Months Ended September 30,

2023

2022

Installation

Specialty
Distribution

Eliminations

Total

Installation

Specialty
Distribution

Eliminations

Total
Residential

$
689,232

$
227,245

$
(54,788)

$
861,689

$
662,005

$
245,549

$
(54,533)

$
853,021
Commercial/Industrial

132,441

343,764

(11,774)

464,431

121,051

337,994

(11,068)

447,977
Net sales

$
821,673

$
571,009

$
(66,562)

$
1,326,120

$
783,056

$
583,543

$
(65,601)

$
1,300,998

Table of Contents

TOPBUILD CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Nine Months Ended September 30,

2023

2022

Installation

Specialty
Distribution

Eliminations

Total

Installation

Specialty
Distribution

Eliminations

Total
Residential

$
2,003,107

$
678,824

$
(162,844)

$
2,519,087

$
1,859,386

$
729,787

$
(147,962)

$
2,441,211
Commercial/Industrial

394,711

1,025,047

(30,225)

1,389,533

349,331

985,409

(31,750)

1,302,990
Net sales

$
2,397,818

$
1,703,871

$
(193,069)

$
3,908,620

$
2,208,717

$
1,715,196

$
(179,712)

$
3,744,201

3. REVENUE RECOGNITION

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

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


	Three Months Ended March 31,
	2024								2023
	Installation		Specialty Distribution		Eliminations		Total		Installation		Specialty Distribution		Eliminations		Total
Residential	$	674,436	$	216,397	$	(55,990)	$	834,843	$	645,703	$	224,326	$	(51,390)	$	818,639
Commercial/Industrial		124,307		329,397		(9,830)		443,874		121,387		334,049		(8,837)		446,599
Net sales	$	798,743	$	545,794	$	(65,820)	$	1,278,717	$	767,090	$	558,375	$	(60,227)	$	1,265,238

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

Three Months Ended September 30,

2023

2022

Installation

Specialty
Distribution

Eliminations

Total

Installation

Specialty
Distribution

Eliminations

Total
Insulation and accessories

$
658,765

$
506,420

$
(58,300)

$
1,106,885

$
619,613

$
516,214

$
(56,368)

$
1,079,459
Glass and windows

62,763

-

-

62,763

60,375

-

-

60,375
Gutters

28,215

46,131

(7,422)

66,924

28,729

48,972

(8,110)

69,591
All other

71,930

18,458

(840)

89,548

74,339

18,357

(1,123)

91,573
Net sales

$
821,673

$
571,009

$
(66,562)

$
1,326,120

$
783,056

$
583,543

$
(65,601)

$
1,300,998


	Nine Months Ended September 30,																Three Months Ended March 31,
	2023								2022								2024								2023
	Installation		Specialty Distribution		Eliminations		Total		Installation		Specialty Distribution		Eliminations		Total		Installation		Specialty Distribution		Eliminations		Total		Installation		Specialty Distribution		Eliminations		Total
Insulation and accessories	$	1,893,456	$	1,522,384	$	(167,872)	$	3,247,968	$	1,746,054	$	1,514,481	$	(153,520)	$	3,107,015	$	643,650	$	490,669	$	(57,509)	$	1,076,810	$	600,767	$	502,802	$	(51,973)	$	1,051,596
Glass and windows		195,046		-		-		195,046		168,692		-		-		168,692		58,117		-		-		58,117		63,442		-		-		63,442
Gutters		85,895		130,062		(22,158)		193,799		78,926		146,481		(23,207)		202,200		27,967		40,316		(7,309)		60,974		28,278		39,842		(7,165)		60,955
All other		223,421		51,425		(3,039)		271,807		215,045		54,234		(2,985)		266,294		69,009		14,809		(1,002)		82,816		74,603		15,731		(1,089)		89,245
Net sales	$	2,397,818	$	1,703,871	$	(193,069)	$	3,908,620	$	2,208,717	$	1,715,196	$	(179,712)	$	3,744,201	$	798,743	$	545,794	$	(65,820)	$	1,278,717	$	767,090	$	558,375	$	(60,227)	$	1,265,238

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


	Included in Line Item on	As of				Included in Line Item on	As of
	Condensed Consolidated	September 30,		December 31,			March 31,		December 31,
	Balance Sheets	2023		2022		Condensed Consolidated Balance Sheets	2024		2023
Contract Assets:
Receivables, unbilled	Receivables, net	$	78,379	$	75,481	Receivables, net	$	70,591	$	64,882

Contract Liabilities:
Deferred revenue	Accrued liabilities	$	16,422	$	21,940	Accrued liabilities	$	15,716	$	18,365

The aggregate amount remaining on uncompleted performance obligations was ~~$413.1~~$392.4 million as of ~~September 30, 2023.~~March 31, 2024. We expect to satisfy the performance obligations and recognize revenue on substantially all of these uncompleted contracts over the next 18 months.

On certain of our long-term contracts, a percentage of the total project cost is withheld and not invoiced to the customer and collected until satisfactory completion of the ~~customer~~’scustomer’s project, typically within a year. This amount is referred to as retainage and is common practice in the construction industry. R~~etainage~~Retainage receivables are classified as a component of Receivables, net on our condensed consolidated balance sheets and were ~~$78.0~~$82.2 million and ~~$63.0~~$81.9 million as of ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, respectively.

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TOPBUILD CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

4. GOODWILL AND OTHER INTANGIBLES

We have two reporting units which are also our operating and reporting segments: Installation and Specialty Distribution. Both reporting units contain goodwill. Assets acquired and liabilities assumed are assigned to the applicable reporting unit based on whether the acquired assets and liabilities relate to the operations of such unit and determination of ~~the~~its fair ~~value of such unit.~~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 ~~2022,~~2023, we performed an annual assessment on our goodwill resulting in no impairment and there were no indicators of impairment for the ~~nine~~three months ended ~~September 30, 2023.~~March 31, 2024.

Changes in the carrying amount of goodwill for the ~~nine~~three months ended ~~September 30, 2023,~~March 31, 2024, by segment, were as follows, in thousands:


									Accumulated												Accumulated
	Gross Goodwill				FX Translation		Gross Goodwill		Impairment		Net Goodwill		Gross Goodwill				FX Translation		Gross Goodwill		Impairment		Net Goodwill
	December 31, 2022		Additions/Disposals		Adjustment		September 30, 2023		Losses		September 30, 2023		December 31, 2023		Additions		Adjustment		March 31, 2024		Losses		March 31, 2024
Goodwill, by segment:
Installation	$	1,826,979	$	72,998	$	-	$	1,899,977	$	(762,021)	$	1,137,956	$	1,901,160	$	4,916	$	-	$	1,906,076	$	(762,021)	$	1,144,055
Specialty Distribution		902,036		-		(215)		901,821		-		901,821		903,429		6,261		(1,426)		908,264		-		908,264
Total goodwill	$	2,729,015	$	72,998	$	(215)	$	2,801,798	$	(762,021)	$	2,039,777	$	2,804,589	$	11,177	$	(1,426)	$	2,814,340	$	(762,021)	$	2,052,319

See Note 11 – Business Combinations for goodwill recognized on acquisitions that occurred during the ~~nine~~three months ended ~~September 30, 2023.~~March 31, 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				As of
	September 30, 2023		December 31, 2022		March 31, 2024		December 31, 2023
Gross definite-lived intangible assets	$	825,552	$	782,316	$	832,327	$	827,793
Accumulated amortization		(218,612)		(167,349)		(253,992)		(236,735)
Net definite-lived intangible assets	$	606,940	$	614,967
Other intangible assets, net					$	578,335	$	591,058

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


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
	2023		2022		2023		2022		2024		2023
Amortization expense	$	17,389	$	16,970	$	51,496	$	50,809	$	17,686	$	16,896

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, 2023

December 31, 2022
3.625% Senior Notes due 2029

$
400,000

$
400,000
4.125% Senior Notes due 2032

500,000

500,000
Term loan due 2026

543,750

566,250
Equipment notes

3,216

8,427
Unamortized debt issuance costs

(15,192)

(17,352)
Total debt, net of unamortized debt issuance costs

1,431,774

1,457,325
Less: current portion of long-term debt

48,057

40,068
Total long-term debt

$
1,383,717

$
1,417,257


	As of
	March 31, 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		521,250		532,500
Equipment notes		1,230		2,039
Unamortized debt issuance costs		(13,752)		(14,472)
Total debt, net of unamortized debt issuance costs		1,408,728		1,420,067
Less: current portion of long-term debt		46,230		47,039
Total long-term debt	$	1,362,498	$	1,373,028

Table of Contents

TOPBUILD CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table sets forth our remaining principal payments for our outstanding debt balances as of ~~September 30, 2023,~~March 31, 2024, in thousands:



	2023		2024		2025		2026		2027		Thereafter		Total		2024		2025		2026		2027		2028		Thereafter		Total
3.625% Senior Notes	$	-	$	-	$	-	$	-	$	-	$	400,000	$	400,000	$	-	$	-	$	-	$	-	$	-	$	400,000	$	400,000
4.125% Senior Notes		-		-		-		-		-		500,000		500,000		-		-		-		-		-		500,000		500,000
Term loan		11,250		45,000		48,750		438,750		-		-		543,750		33,750		48,750		438,750		-		-		-		521,250
Equipment notes		1,148		2,068		-		-		-		-		3,216		1,230		-		-		-		-		-		1,230
Total	$	12,398	$	47,068	$	48,750	$	438,750	$	-	$	900,000	$	1,446,966	$	34,980	$	48,750	$	438,750	$	-	$	-	$	900,000	$	1,422,480

Credit Agreement

On July 26, 2023, we entered into Amendment No. 4 to our Credit Agreement, which ~~provides~~provided for a new $550.0 million Term Facility Two, the proceeds of which ~~will~~were intended to be used, in part, to finance the acquisition of SPI, including the payment of related fees and expenses. ~~The~~Refer to Note 14 – Subsequent Events for details regarding the termination of our agreement to acquire SPI and Term Facility Two ~~availability period ends on October 25, 2024, if not drawn.~~ Once drawn, Term Facility Two will mature on October 7, 2026 and will be subject to substantially the same scheduled percentage amortization payments as the Company’s existing term loan facility under the Credit Agreement. Borrowings of Term Facility Two bear interest at SOFR or the Base Rate (each as defined in Credit Agreement) plus an applicable rate ranging from 1.50% to 3.00% for SOFR-based loans and from 0.50% to 2.00% for Base Rate-based loans, depending upon the Company’s consolidated secured leverage ratio. The Company is required to pay a ticking fee on the undrawn Term Facility Two commitments at an annual rate equal to: (i) 0.175% for the first six-month period after the Amendment Effective Date, (ii) 0.200% for the next successive six-month period, and (iii) 0.250% for next successive three-month period..

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


Senior secured term loan facility	$	600,000		$	600,000
Additional delayed draw term loan (a)	$	550,000

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

Interest rate as of September 30, 2023		6.42	%
Interest rate as of March 31, 2024					6.43	%
Scheduled maturity date		10/7/2026			10/7/2026

(a)	~~Represents Term Facility Two which has not been drawn upon as of September 30, 2023.~~

~~(b)~~

Use of the sublimits for the issuance of letters of credit and swingline loans reduces the availability under the ~~Revolving Facility.~~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 1.50 percent (Term Facility Two)~~; or

●

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

The applicable margin rate is determined based on our Secured Leverage Ratio. In the case of base rate borrowings, the applicable margin rate ranges from 0.00 percent to 1.50 percent for Term Facility One and ~~0.50 percent to 2.00 percent for Term Facility Two and~~ in the case of SOFR rate borrowings, the applicable margin ranges from 1.00 percent to 2.50 percent for Term Facility ~~One and 1.50 percent to 3.00 percent for Term Facility Two.~~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.

~~Table of Contents~~

~~TOPBUILD CORP.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

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,~~revolving facility, reduce the availability under the ~~Revolving Facility.~~revolving facility.

Table of Contents

TOPBUILD CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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


	As of				As of
	September 30, 2023		December 31, 2022		March 31, 2024		December 31, 2023
Revolving facility	$	500,000	$	500,000	$	500,000	$	500,000
Less: standby letters of credit		(63,782)		(67,689)		(63,770)		(63,770)
Availability under Revolving facility	$	436,218	$	432,311
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. The Company may also redeem all or part of the 3.625% Senior Notes at any time prior to March 15, 2024 at a redemption price equal to 100% of the principal amount of the notes to be redeemed, plus the Applicable Premium (as defined in the notes), as of, and accrued and unpaid interest to, the redemption date. Additionally, the Company may redeem up to 40% of the aggregate principal amount of the 3.625% Senior Notes prior to March 15, 2024 with the net cash proceeds of certain sales of its capital stock at 103.625% of the principal amount of the notes, plus accrued and unpaid interest, if any, to the date of redemption only if, after the redemption, at least 60% of the aggregate principal amount of the 3.625% Senior Notes originally issued remains outstanding.

4.125% Senior Notes

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

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

Equipment Notes

We did not issue equipment notes during the three months ended March 31, 2024. The balance of equipment notes, which were issued for the purpose of financing vehicles and equipment, was $1.2 million as of March 31, 2024. The Company’s equipment notes each have a five year term maturing in 2024 and bear interest at fixed rates between 2.8% and 4.4%.

Table of Contents

TOPBUILD CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

~~Equipment Notes~~

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

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, 2023~~March 31, 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

Fair Value on Recurring Basis

The carrying values of cash and cash equivalents, receivables, net, and accounts payable are considered to be representative of their respective fair values due to the short-term nature of these instruments. We measure our contingent consideration
liabilities related to business combinations at fair value.

~~Table of Contents~~

~~TOPBUILD CORP.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

Fair Value on Non-Recurring Basis

Fair value measurements were applied to our long-term debt portfolio. We believe the carrying value of our term loan and equipment notes approximate their fair market value primarily due to the fact that the non-performance risk of servicing our debt obligations, as reflected in our business and credit risk profile, has not materially changed since we assumed our debt obligations under the Credit Agreement. In addition, due to the floating-rate nature of our term loan, the market value is not subject to variability solely due to changes in the general level of interest rates as is the case with a fixed-rate debt obligation. Based on market trades of our 3.625% Senior Notes and our 4.125% Senior Notes close to ~~September 30, 2023~~March 31, 2024 (Level 1 fair value measurement), we estimate the fair value of each in the table below:


	As of September 30, 2023				As of March 31, 2024
		Fair Value		Gross Carrying Value		Fair Value		Gross Carrying Value
3.625% Senior Notes	$	345,000	$	400,000	$	364,940	$	400,000
4.125% Senior Notes	$	411,250	$	500,000	$	445,000	$	500,000

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TOPBUILD CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

7. SEGMENT INFORMATION

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

Three Months Ended September 30,

2023

2022

2023

2022

Net Sales

Operating Profit (b)
Operations by segment (a):

Installation

$
821,673

$
783,056

$
175,218

$
154,236
Specialty Distribution

571,009

583,543

88,269

88,364
Intercompany eliminations

(66,562)

(65,601)

(11,501)

(10,806)
Total

$
1,326,120

$
1,300,998

251,986

231,794
General corporate expense, net (c)

(14,494)

(8,920)
Operating profit, as reported

237,492

222,874
Other expense, net

(12,815)

(14,864)
Income before income taxes

$
224,677

$
208,010


	Nine Months Ended September 30,								Three Months Ended March 31,
	2023		2022		2023		2022		2024		2023		2024		2023













	Net Sales				Operating Profit (b)				Net Sales				Operating Profit (b)
Operations by segment (a):
Installation	$	2,397,818	$	2,208,717	$	494,394	$	406,835	$	798,743	$	767,090	$	156,757	$	146,897
Specialty Distribution		1,703,871		1,715,196		247,583		245,534		545,794		558,375		77,579		73,333
Intercompany eliminations		(193,069)		(179,712)		(32,672)		(29,949)		(65,820)		(60,227)		(10,761)		(9,971)
Total	$	3,908,620	$	3,744,201		709,305		622,420	$	1,278,717	$	1,265,238		223,575		210,259
General corporate expense, net (c)						(35,280)		(28,371)						(9,067)		(10,828)
Operating profit, as reported						674,025		594,049						214,508		199,431
Other expense, net						(42,885)		(39,833)						(7,513)		(16,116)
Income before income taxes					$	631,140	$	554,216					$	206,995	$	183,315

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

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

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

8. INCOME TAXES

Our effective tax rates were 26.4 percent and 25.9 percent for the three months ended March 31, 2024 and March 31, 2023, respectively. The higher 2024 tax rate was primarily related to an increase in tax expense related to share-based compensation.

A tax expense of $2.0 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 three months ended March 31, 2024.

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TOPBUILD CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

~~8. INCOME TAXES~~

Our effective tax rates were 25.4 percent and 25.9 percent for the three and nine months ended September 30, 2023, respectively. The effective tax rates for the three and nine months ended September 30, 2022 were 26.1 percent and 25.6 percent, respectively. The lower 2023 tax rate for the three months ended September 30, 2023, compared to the three months ended September 30, 2022, was primarily related to share-based compensation, state tax adjustments, and miscellaneous items.

A tax benefit of $0.7 million and $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 three and nine months ended September 30, 2023, respectively. A tax benefit of $1.5 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, 2022.

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:

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,				Three Months Ended March 31,
	2023		2022		2023		2022		2024		2023
Net income (in thousands)	$	167,602	$	153,746	$	467,870	$	412,156	$	152,381	$	135,870

Weighted average number of common shares outstanding - basic		31,615,110		32,076,285		31,588,740		32,404,275		31,641,454		31,550,658

Dilutive effect of common stock equivalents:
RSAs with service-based conditions		36,425		17,175		28,040		14,808		41,832		22,643
RSAs with market-based conditions		31,918		44,001		25,606		65,677		50,955		24,861
RSAs with performance-based conditions		17,663		40,995		16,223		48,232		14,429		29,031
Stock options		87,696		101,364		86,247		110,169		95,148		86,046

Weighted average number of common shares outstanding - diluted		31,788,812		32,279,820		31,744,856		32,643,161		31,843,818		31,713,239

Basic net income per common share	$	5.30	$	4.79	$	14.81	$	12.72	$	4.82	$	4.31

Diluted net income per common share	$	5.27	$	4.76	$	14.74	$	12.63	$	4.79	$	4.28

~~Table of Contents~~

~~TOPBUILD CORP.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

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,				Three Months Ended March 31,
	2023		2022		2023		2022		2024		2023
Anti-dilutive common stock equivalents:
RSAs with service-based conditions		-		15,222		3,721		14,782		14		11,163
RSAs with market-based conditions		-		134		2,978		200		-		8,933
RSAs with performance-based conditions		-		14,611		-		7,506		-		-
Stock options		-		22,280		12,360		20,581		-		22,280
Total anti-dilutive common stock equivalents		-		52,247		19,059		43,069		14		42,376

~~During the three months ended September 30, 2023, no shares resulted in an anti-dilutive effect on diluted net income per share.~~

10. SHARE-BASED COMPENSATION

~~Effective July 1, 2015, our eligible~~Eligible employees ~~commenced participation~~participate in the 2015 ~~LTIP. 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, 2023,~~March 31, 2024, we had ~~1.8~~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,

2023

2022

2023

2022
Share-based compensation expense

$
4,194

$
2,611

$
11,080

$
9,673
Income tax benefit/(expense)

$
679

$
(56)

$
455

$
1,517

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

RSAs

Stock Options

Number of Shares

Weighted Average Grant Date Fair Value Per Share

Number of Shares

Weighted Average Grant Date Fair Value Per Share

Weighted Average Exercise Price Per Share

Aggregate
Intrinsic
Value
Balance December 31, 2022

173.2

$
195.06

182.2

$
32.25

$
86.79

$
13,992.3
Granted

105.1

$
202.08

—

$
—

$
—

—
Converted/Exercised

(100.7)

$
147.25

(51.0)

$
18.67

$
50.71

$
9,141.2
Forfeited/Expired

(8.0)

$
229.50

—

$
—

$
—

—
Balance September 30, 2023

169.6

$
227.31

131.2

$
37.67

$
100.82

$
19,777.7

Exercisable September 30, 2023 (a)

123.7

$
34.55

$
93.99

$
19,502.8

~~(a)~~

~~The weighted average remaining contractual term for vested stock options is approximately 5.6 years.~~

~~Table of Contents~~

~~TOPBUILD CORP.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

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

As of September 30, 2023

Unrecognized Compensation Expense
on Unvested Awards

Weighted Average
Remaining
Compensation Expense Period
RSAs

$
19,121

1.0
Stock options

176

0.2
Total unrecognized compensation expense related to unvested awards

$
19,297

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

Payout Ranges and Related Expense
RSAs with Performance-Based Conditions

Grant Date Fair Value

0%

25%

100%

200%
February 16, 2021

$
2,189

$
-

$
547

$
2,189

$
4,378
February 15, 2022

$
3,042

$
-

$
761

$
3,042

$
6,084
February 21, 2023

$
4,128

$
-

$
1,032

$
4,128

$
8,256

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

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

2023

2022

2021

Measurement period (years)

2.86

2.87

2.87

Risk free interest rate

4.42
%

1.76
%

0.22
%
Dividend yield

0.00
%

0.00
%

0.00
%
Estimated fair value of market-based RSAs at grant date

$
270.64

$
298.20

$
298.66

~~11. BUSINESS COMBINATIONS~~

Acquiring businesses is a key part of our ongoing strategy to grow our company and expand our market share. Each acquisition has been accounted for as a business combination under ASC 805, “Business Combinations.” Acquisition related costs were $6.2 million and $9.0 million in the three and nine months ended September 30, 2023, respectively. We incurred no acquisition related costs for the three months ended September 30, 2022 and incurred $1.3 million for the nine months ended September 30, 2022. Acquisition related costs are included in selling, general, and administrative expense in our condensed consolidated statements of operations.

On January 26, 2023, we acquired the assets of the residential insulation business of SRI. This installation acquisition enhanced our presence in Georgia, Michigan, Ohio, Florida, Alabama and South Carolina. The purchase price of $45.3 million was funded by cash on hand.

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

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TOPBUILD CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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


	Three Months Ended March 31,
	2024		2023
Share-based compensation expense	$	5,127	$	3,135
Income tax expense	$	(2,009)	$	(45)

The following table presents a summary of our share-based compensation activity for the three months ended March 31, 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	42.6	$	419.56	—	$	—	$	—		—
Converted/Exercised	(48.2)	$	230.09	(5.8)	$	70.25	$	177.53	$	1,355.3
Forfeited/Expired	(2.2)	$	276.34	—	$	—	$	—		—
Balance March 31, 2024	187.7	$	265.84	122.9	$	35.08	$	94.88	$	42,498.1

Exercisable March 31, 2024 (a)				122.9	$	35.08	$	94.88	$	42,498.1

(a)	The weighted average remaining contractual term for vested stock options is approximately 5.1 years.

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


	As of March 31, 2024
	Unrecognized Compensation Expense on Unvested Awards		Weighted Average Remaining Compensation Expense Period
RSAs	$	31,455		1.2
Stock options		—		—
Total unrecognized compensation expense related to unvested awards	$	31,455


			Payout Ranges and Related Expense
RSAs with Performance-Based Conditions	Grant Date Fair Value		0%		25%		100%		200%
February 15, 2022	$	2,986	$	-	$	747	$	2,986	$	5,972
February 21, 2023	$	4,054	$	-	$	1,014	$	4,054	$	8,108
February 21, 2024	$	4,846	$	-	$	1,212	$	4,846	$	9,692

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.

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TOPBUILD CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


	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. BUSINESS COMBINATIONS

Acquiring businesses is a key part of our ongoing strategy to grow our company and expand our market share. Each acquisition has been accounted for as a business combination under ASC 805, “Business Combinations.” Acquisition related costs were $0.5 million and $1.7 million in the three months ended March 31, 2024 and 2023, respectively. Acquisition related costs are included in selling, general, and administrative expense in our condensed consolidated statements of operations.

On ~~July 17, 2023,~~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 ~~Best.~~Morris Black. This installation acquisition enhanced our presence in ~~Texas, Arizona, Tennessee, and Florida markets.~~the Pennsylvania market. The purchase price of ~~$95.0~~$3.6 million was funded by cash on ~~hand.~~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 $13.3 million was funded by cash on hand and we recognized $6.3 million of goodwill in connection with this acquisition.

The ~~fair values of the assets acquired and liabilities assumed for our 2023 acquisitions are as follows as of September 30, 2023, in thousands:~~

2023 Acquisitions
Purchase price fair values:

SRI

Rocky Mountain

Best

Totals
Accounts receivable

$
5,531

$
584

$
7,537

$
13,652
Inventories

4,383

267

2,132

6,782
Prepaid and other assets

158

—

553

711
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
Goodwill

23,132

3,629

51,213

77,974
Accounts payable

(6,078)

(17)

(2,623)

(8,718)
Lease liabilities (operating)

(4,775)

(165)

(3,241)

(8,181)
All other liabilities

(95)

—

—

(95)
Net assets acquired

$
45,314

$
7,200

$
95,000

$
147,514

~~Estimates~~estimate of acquired ~~intangible assets~~customer relationships related to our ~~2023~~2024 acquisitions ~~are as follows as of September 30, 2023, dollars in thousands:~~was $6.0 million and the weighted average useful life is 12 years.

Estimated Fair Value

Weighted Average Estimated Useful Life (Years)
Customer relationships

$
42,399

12
Trademarks and trade names

4,010

10
Non-compete agreements

200

5
Total intangible assets acquired

$
46,609

12

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

~~On July 26,~~During the three months ended March 31, 2023, we ~~entered into a definitive agreement to acquire SPI. SPI has 85 branches across~~acquired SRI and the ~~United States and 4 branches in Canada. We expect to fund this $960.0 million transaction with Term Facility Two and~~purchase price of $45.3 was funded by cash on ~~hand. The transaction is subject to customary closing conditions, including expiration or termination~~hand and we recognized goodwill of ~~the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.~~ $23.1 million in connection with this acquisition.

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

2022 Acquisitions

Date

Cash Paid

Contingent Consideration

Goodwill Acquired
Billings

2/3/2022

$
7,005

$
—

$
3,313
Assured

4/7/2022

4,719

600

3,406
All others

Various

3,257

—

1,726
Total

$
14,981

$
600

$
8,445

~~Table of Contents~~

~~TOPBUILD CORP.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

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 ~~$78.0~~$11.2 million and ~~$8.4~~$23.1 million of goodwill recorded from acquisitions completed in the ~~nine~~three months ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022,~~ respectively, is expected to be deductible for income tax purposes.

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TOPBUILD CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

12. ACCRUED LIABILITIES

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


	As of				As of
	September 30, 2023		December 31, 2022		March 31, 2024		December 31, 2023
Accrued liabilities:
Salaries, wages, and bonus/commissions	$	74,120	$	75,237	$	53,145	$	67,471
Income tax payable						46,554		389
Insurance liabilities		30,699		28,870		31,197		29,920
Sales and property taxes						15,986		17,002
Deferred revenue						15,716		18,365
Customer rebates		15,039		21,561		12,177		17,326
Deferred revenue		16,422		21,940
Sales and property taxes		19,800		15,757
Interest payable on long-term debt		3,365		12,146		3,357		12,139
Other		23,639		23,859		23,270		24,605
Total accrued liabilities	$	183,084	$	199,370	$	201,402	$	187,217

See Note 3 – Revenue Recognition for discussion of our deferred revenue balances.Accrued income taxes payable increased significantly compared to December 31, 2023 due to timing of tax payments, which typically occur later in the year.

13. OTHER COMMITMENTS AND CONTINGENCIES

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

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

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

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

2019

Table of Contents

TOPBUILD CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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


	As of				As of
	September 30, 2023		December 31, 2022		March 31, 2024		December 31, 2023
Outstanding bonds:
Performance bonds	$	148,163	$	152,434	$	141,380	$	145,982
Licensing, insurance, and other bonds		27,567		25,439		27,979		27,415
Total bonds	$	175,730	$	177,873	$	169,359	$	173,397

14. SUBSEQUENT EVENTS

On April 22, 2024, we agreed to a mutual termination of our previous agreement to acquire SPI, originally announced on July 27, 2023. We withdrew our Hart-Scott Rodino filings and were required to pay a termination fee of $23.0 million to the seller under the terms of the purchase agreement. 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.

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.

On May 3, 2024, we entered into an agreement to acquire the assets of the residential insulation business Insulation Works, Inc., which is expected to close in mid-May 2024. This installation acquisition will enhance our presence in the Arkansas market and extend our expertise to the agricultural market. The purchase price of approximately $25.2 million is expected to be funded by cash on hand. This acquisition will be accounted for as a business combination under ASC 805, “Business Combinations.”

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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 otherbuilding products nationwide. As of ~~September 30, 2023,~~March 31, 2024, we had approximately 240 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 loosefill cellulose. Additionally, we install other building products including glass and windows,rain gutters, ~~after paint products, fireproofing,~~ garage doors, closet shelving, and ~~fireplaces.~~fireplaces, among other items. We handle every stage of the installationprocess, including material procurement supplied by leading manufacturers, project scheduling and logistics, multi-phaseprofessional 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~~.markets. As of ~~September 30, 2023,~~March 31, 2024, we had approximately ~~151~~150 distribution centers locatedacross 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 unauditedcondensed consolidated financial statements contained in Part I, Item 1 of this Quarterly Report. For additional detailsregarding our strategy, material trends in our business and seasonality, please refer to Part II, Item 7, “Management’sDiscussion and Analysis of Financial Condition and Results of Operations” in our Annual Report for the year endedDecember 31, ~~2022~~2023, as filed with the SEC on February ~~23, 2023.~~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~~FIRST QUARTER ~~2023~~2024 VERSUS ~~THIRD~~FIRST QUARTER ~~2022~~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,						Three Months Ended March 31,
	2023			2022			2024			2023
Net sales	$	1,326,120		$	1,300,998		$	1,278,717		$	1,265,238
Cost of sales		905,430			905,250			891,567			895,023
Cost of sales ratio		68.3	%		69.6	%		69.7	%		70.7	%

Gross profit		420,690			395,748			387,150			370,215
Gross profit margin		31.7	%		30.4	%		30.3	%		29.3	%

Selling, general, and administrative expense		183,198			172,874			172,642			170,784
Selling, general, and administrative expense to sales ratio		13.8	%		13.3	%		13.5	%		13.5	%

Operating profit		237,492			222,874			214,508			199,431
Operating profit margin		17.9	%		17.1	%		16.8	%		15.8	%

Other expense, net		(12,815)			(14,864)			(7,513)			(16,116)
Income tax expense		(57,075)			(54,264)			(54,614)			(47,445)
Net income	$	167,602		$	153,746		$	152,381		$	135,870
Net margin		12.6	%		11.8	%		11.9	%		10.7	%

Sales and Operations

Net sales increased ~~1.9%~~1.1% for the three months ended ~~September 30, 2023,~~March 31, 2024, from the comparable period of ~~2022.~~2023. The increase was primarily driven by a ~~2.9%~~2.3% increase in sales from acquisitions and a ~~0.8%~~1.3% impact from higher selling prices, partially offset by a ~~1.7%~~2.0% decline in sales ~~volume.~~volume and a decline of 0.5% driven by the disposition of a non-core business.

Gross profit margins were ~~31.7%~~30.3% and ~~30.4%~~29.3% for the three months ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022,~~ respectively. Gross profit margin improved primarily due to productivity initiatives and higher selling ~~prices in our Installation segment, partially offset by lower prices in our Distribution segment.~~prices.

Selling, general, and administrative expenses as a percentage of sales were ~~13.8% and 13.3%~~13.5% for the three months ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022,~~ respectively. Selling, general, and administrative expenses ~~as a percentage of sales~~ were ~~higher driven by increased acquisition related costs.~~relatively flat to the prior year period.

Operating margins were ~~17.9%~~16.8% and ~~17.1%~~15.8% for the three months ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022,~~ respectively. The increase in operating margins was due to productivity initiatives and higher selling prices, ~~in our Installation segment,~~ partially offset by higher material costs and lower ~~prices~~sales volume in our Specialty Distribution ~~segment and higher acquisition related costs.~~

segment.

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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,								Three Months Ended March 31,
	2023			2022			Percent Change		2024			2023			Percent Change
Net sales by business segment:
Installation	$	821,673		$	783,056		4.9	%	$	798,743		$	767,090		4.1	%
Specialty Distribution		571,009			583,543		(2.1)	%		545,794			558,375		(2.3)	%
Intercompany eliminations		(66,562)			(65,601)					(65,820)			(60,227)
Net sales	$	1,326,120		$	1,300,998		1.9	%	$	1,278,717		$	1,265,238		1.1	%

Operating profit by business segment:
Installation	$	175,218		$	154,236		13.6	%	$	156,757		$	146,897		6.7	%
Specialty Distribution		88,269			88,364		(0.1)	%		77,579			73,333		5.8	%
Intercompany eliminations		(11,501)			(10,806)					(10,761)			(9,971)
Operating profit before general corporate expense		251,986			231,794		8.7	%		223,575			210,259		6.3	%
General corporate expense, net		(14,494)			(8,920)					(9,067)			(10,828)
Operating profit	$	237,492		$	222,874		6.6	%	$	214,508		$	199,431		7.6	%

Operating profit margins:
Installation		21.3	%		19.7	%				19.6	%		19.1	%
Specialty Distribution		15.5	%		15.1	%				14.2	%		13.1	%
Operating profit margin before general corporate expense		19.0	%		17.8	%				17.5	%		16.6	%
Operating profit margin		17.9	%		17.1	%				16.8	%		15.8	%

Installation

Sales

Sales in our Installation segment increased ~~$38.6~~$31.7 million, or ~~4.9%~~4.1%, for the three months ended ~~September 30, 2023,~~March 31, 2024, as compared to the same period in ~~2022.~~2023. Sales increased ~~4.8%~~3.5% from acquisitions, ~~and 3.6%~~1.2% from higher selling prices, and 0.3% due to higher sales volume, partially offset by ~~3.5%~~a decline ~~in sales volume.~~of 0.9% driven by the disposition of a non-core business.

Operating margins

Operating margins in our Installation segment were ~~21.3%~~19.6% and ~~19.7%~~19.1% for the three months ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022,~~ respectively. The increase in operating margin was driven by productivity initiatives and higher selling prices which were partially offset by higher material costs.

Specialty Distribution

Sales

Sales in our Specialty Distribution segment decreased ~~$12.5~~$12.6 million, or ~~2.1%~~2.3%, for the three months ended ~~September 30, 2023,~~March 31, 2024, as compared to the same period in ~~2022.~~2023. Sales decreased ~~1.9%~~4.2% from ~~lower~~decline of sales volume, partially offset by 1.5% increase in higher selling prices and ~~0.2%~~0.4% increase from ~~decline in sales volume.~~acquisitions.

Operating margins

Operating margins in our Specialty Distribution segment were ~~15.5%~~14.2% and ~~15.1%~~13.1% for the three months ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022,~~ respectively. ~~The increase in operating margin was driven by productivity initiatives, partially offset by lower selling prices.~~

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~~OTHER ITEMS~~

~~Other expense, net~~

Other expense, net, was $12.8 million and $14.9 million for the three months ended September 30, 2023 and 2022, respectively. Interest expense increased by $4.3 million for the three months ended September 30, 2023 due to higher interest rates on borrowings under the Credit Agreement compared to the same period in 2022. This increase in interest expense was partially offset by $5.7 million higher interest income over the same period as a result of higher interest rates and cash balances.

~~Income tax expense~~

Income tax expense was $57.1 million, an effective tax rate of 25.4 percent, for the three months ended September 30, 2023, compared to $54.3 million, an effective tax rate of 26.1 percent, for the comparable period in 2022. The tax rate for the three months ended September 30, 2023, was lower primarily due to share-based compensation, state tax adjustments and miscellaneous items.

~~FIRST NINE MONTHS 2023 VERSUS FIRST NINE MONTHS 2022~~

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

Nine Months Ended September 30,


2023

2022

Net sales

$
3,908,620

$
3,744,201

Cost of sales

2,695,916

2,633,155

Cost of sales ratio

69.0
%

70.3
%

Gross profit

1,212,704

1,111,046

Gross profit margin

31.0
%

29.7
%

Selling, general, and administrative expense

538,679

516,997

Selling, general, and administrative expense to sales ratio

13.8
%

13.8
%

Operating profit

674,025

594,049

Operating profit margin

17.2
%

15.9
%

Other expense, net

(42,885)

(39,833)

Income tax expense

(163,270)

(142,060)

Net income

$
467,870

$
412,156

Net margin

12.0
%

11.0
%

~~Sales and Operations~~

Net sales increased 4.4% for the nine months ended September 30, 2023, from the comparable period of 2022. The increase was primarily driven by a 2.7% increase due to higher selling prices and a 1.9% impact from our acquisitions, partially offset by 0.1% decline in sales volume.

Gross profit margins were 31.0% and 29.7% for the nine months ended September 30, 2023 and 2022, respectively. Gross profit margin improved primarily due to productivity initiatives and higher selling prices, partially offset by higher material costs.

Selling, general, and administrative expense, as a percent of sales, was 13.8% for the nine months ended September 30, 2023 and 2022. Selling, general, and administrative expenses as a percentage of sales remained flat due to higher sales, partially offset by higher acquisition related costs and increased headcount costs.

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Operating margins were 17.2% and 15.9% for the nine months ended September 30, 2023 and 2022, respectively. The increase in operating margins was due to productivity initiatives and higher selling prices, partially offset by higher material costs and increased selling, general and administrative expenses compared to the same period in 2022.

~~Business Segment Results~~

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

Nine Months Ended September 30,


2023

2022


Percent Change

Net sales by business segment:

Installation
$
2,397,818

$
2,208,717

8.6
%
Specialty Distribution

1,703,871

1,715,196

(0.7)
%
Intercompany eliminations

(193,069)

(179,712)

Net sales
$
3,908,620

$
3,744,201

4.4
%

Operating profit by business segment (a):

Installation
$
494,394

$
406,835

21.5
%
Specialty Distribution

247,583

245,534

0.8
%
Intercompany eliminations

(32,672)

(29,949)

Operating profit before general corporate expense

709,305

622,420

14.0
%
General corporate expense, net (b)

(35,280)

(28,371)

Operating profit
$
674,025

$
594,049

13.5
%

Operating profit margins:

Installation

20.6
%

18.4
%

Specialty Distribution

14.5
%

14.3
%

Operating profit margin before general corporate expense

18.1
%

16.6
%

Operating profit margin

17.2
%

15.9
%

~~Installation~~

~~Sales~~

Sales in our Installation segment increased $189.1 million, or 8.6%, for the nine months ended September 30, 2023, as compared to the same period in 2022. Sales increased 4.0% from higher selling prices, 3.1% from our acquisitions and 1.4% from higher sales volume.

~~Operating margins~~

~~Operating margins in our Installation segment were 20.6% and 18.4% for the nine months ended September 30, 2023 and 2022, respectively.~~ The increase in operating margin was driven by productivity initiatives and higher selling prices, partially offset by higher material costs ~~compared to the same period in 2022.~~

~~Specialty Distribution~~

~~Sales~~

Sales in our Specialty Distribution segment decreased $11.3 million, or 0.7%, for the nine months ended September 30, 2023, as compared to the same period in 2022. Sales decreased from a 2.0% decline in sales volume, partially offset by an increase of 1.4% from higher selling prices.

~~Operating margins~~

Operating margins in our Specialty Distribution segment were 14.5% and 14.3% for the nine months ended September 30, 2023 and 2022, respectively. The slight increase in operating margins was driven by productivity initiatives and higher selling prices, partially offset by higher material costs and lower sales volume.

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OTHER ITEMS

Other expense, net

Other expense, net, ~~which primarily consisted of interest expense, was $42.9 million and $39.8~~decreased to $7.5 million for the ~~nine~~three months ended ~~September 30, 2023~~March 31, 2024 from $16.1 million in the three months ended March 31, 2023. The decrease was driven by $9.0 million higher interest income due to increased cash balances and ~~2022, respectively.~~higher deposit rates compared to the three months ended March 31, 2023. Interest expense increased by ~~$15.5~~$0.8 million for the ~~nine~~three months ended ~~September 30, 2023~~March 31, 2024 due to ~~significantly~~ higher interest rates on ~~our~~ borrowings under the Credit Agreement compared to the same period in ~~2022. This increase in interest expense was partially offset by $12.9 million higher interest income over the same period due to higher interest rates and cash balances.~~2023.

Income tax expense

Income tax expense was ~~$163.3~~$54.6 million, an effective tax rate of 26.4 percent, for the three months ended March 31, 2024, compared to $47.4 million, an effective tax rate of 25.9 percent, for the ~~nine months ended September 30, 2023 compared to $142.1 million, an effective tax rate of 25.6 percent, for the~~ comparable period in ~~2022.~~2023. The tax rate for the ~~nine~~three months ended ~~September 30, 2023~~March 31, 2024, was higher primarily related to ~~a decrease~~an increase in ~~the benefit~~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,				Three Months Ended March 31,
	2023		2022		2024		2023
Changes in cash and cash equivalents:
Net cash provided by operating activities	$	588,478	$	335,630	$	178,777	$	169,801
Net cash used in investing activities		(181,016)		(73,667)		(40,513)		(60,970)
Net cash used in financing activities		(31,872)		(240,383)		(17,098)		(15,064)
Impact of exchange rate changes on cash		(47)		(1,975)		(922)		(58)
Net increase in cash and cash equivalents	$	375,543	$	19,605	$	120,244	$	93,709

Net cash flows provided by operating activities increased ~~$252.8~~$9.0 million for the ~~nine~~three months ended ~~September 30, 2023,~~March 31, 2024, as compared to the prior year ~~period. Net~~period primarily due to the increase of net income ~~increased $55.7~~of $16.5 million ~~or 13.5%,~~ compared with the prior year period, driven by productivity initiatives and higher selling prices, partially offset by higher material costs and increased acquisition related costs. Cash flows provided by operating activities were also higher in the nine months ended September 30, 2023 as compared to the same period in 2022, due to changes in inventory and accounts receivable.period.

Net cash used in investing activities was ~~$181.0~~$40.5 million for the ~~nine~~three months ended ~~September 30, 2023,~~March 31, 2024, primarily composed of ~~$147.6~~$22.2 million for our acquisitions and ~~$48.1~~$19.9 million for purchases of property and equipment, mainly vehicles, partially offset by ~~$14.7~~$1.6 million proceeds received from the sale of assets. Net cash used in investing activities was ~~$73.7~~$61.0 million for the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, primarily composed of ~~$56.0~~$45.8 million for the acquisition of SRI and $15.6 million for purchases of property and equipment, mainly vehicles and ~~$20.5 million for acquisitions.~~machinery & equipment.

Net cash used in financing activities was ~~$31.9~~$17.1 million for the ~~nine~~three months ended ~~September 30, 2023.~~March 31, 2024. During the ~~nine~~three months ended ~~September 30, 2023,~~March 31, 2024, we used ~~$27.7~~$12.1 million for debt repayments and incurred ~~$3.9~~$5.0 million net cash outflow related to exercise of share-based incentive awards and stock options. Net cash used in financing activities was ~~$240.4~~$15.1 million for the ~~nine~~three months ended ~~September 30, 2022.~~March 31, 2023. During the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, we used ~~$200.0 million for the repurchase of common stock pursuant to the 2021 Repurchase Program, $29.0~~$9.7 million for debt repayments, and ~~$9.7~~$5.3 million net activity related to exercise of share-based incentive awards and stock options. ~~Additionally, we borrowed and repaid $70.0 million on our Revolving Facility, all within the second quarter of 2022.~~

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. In addition, we have access to a new $550.0 million Term Facility Two, the proceeds of which will be used, in part, to finance the acquisition of SPI, including the payment of related fees and expenses. 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.

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The following table summarizes our liquidity, in thousands:


	As of				As of
	September 30,		December 31,		March 31,		December 31,
	2023		2022		2024		2023
Cash and cash equivalents (a)	$	615,612	$	240,069	$	968,809	$	848,565

Revolving facility		500,000		500,000		500,000		500,000
Less: standby letters of credit		(63,782)		(67,689)		(63,770)		(63,770)
Availability under Revolving facility		436,218		432,311		436,230		436,230

Total liquidity	$	1,051,830	$	672,380	$	1,405,039	$	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. Information regarding our outstanding bonds as of ~~September 30, 2023,~~March 31, 2024, is incorporated by reference from Note 13 – Other Commitments and Contingencies to our unaudited condensed consolidated financial statements contained in Part I, Item 1 of this Quarterly Report.

OUTLOOK

Residential New Construction

~~Builders~~Home builders continue to report improving demand resulting in single-family housing starts ~~increasing~~that improved in the ~~third~~first quarter ~~compared~~in comparison to the ~~first half of 2023.~~prior year. Multifamily construction activity also remains strong but starts have slowed, in comparison to the prior year. While there is a strong backlog of multi-family units that need to be completed, we do expect multifamily activity to decline as we move ~~through~~towards 2025. Single-family housing is a larger proportion of the ~~next 12 months.~~overall housing market as well as a larger proportion of our market share. Overall, despite uncertainty around the economy and the impact of higher interest rates, we remain optimistic about the long-term fundamentals of the U.S. housing market, supported by a limited supply of both new and existing homes, favorable demographic trends, 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 optimistic view of commercial/industrial sales at our Installation and Specialty Distribution segments. ~~We see a lot of~~There are many major projects being planned across several different industries fueling ~~demand, in particular, for our Specialty Distribution products.~~demand. In addition, maintenance and repair work on industrial sites will serve as a continued driver for our Specialty Distribution business.

OFF-BALANCE SHEET ARRANGEMENTS

We had no material off-balance sheet arrangements during the three months ~~September 30, 2023,~~ended March 31, 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.

CONTRACTUAL OBLIGATIONS

There have been no material changes to our contractual obligations from those previously disclosed in our Annual Report for the year ended December 31, ~~2022~~2023, as filed with the SEC on February ~~23, 2023.~~28, 2024.

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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

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have not changed from those previously reported in our Annual Report for the year ended December 31, ~~2022~~2023, as filed with the SEC on February ~~23, 2023.~~28, 2024.

APPLICATION OF NEW ACCOUNTING STANDARDS

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

FORWARD-LOOKING STATEMENTS

Statements contained in this report that reflect our views about future periods, including our future plans and performance, constitute “forward-looking statements” under the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as “will,” “would,” “should,” “anticipate,” “expect,” “believe,” “designed,” “plan,” “may,” “project,” “estimate” or “intend,” the negative of these terms, and similar references to future periods. These views involve risks and uncertainties that are difficult to predict and, accordingly, our actual results may differ materially from the results discussed in our forward-looking statements. We caution you against unduly relying on any of these forward-looking statements. Our future performance may be affected by the duration and impact of negative macro-economic impacts on the United States economy, specifically with respect to residential, commercial/industrial construction, our ability to collect our receivables from our customers, our reliance on residential new construction, residential repair/remodel, and commercial/industrial construction; our reliance on third-party suppliers and manufacturers; our ability to attract, develop, and retain talented personnel and our sales and labor force; our ability to maintain consistent practices across our locations; our ability to maintain our competitive position; and our ability to realize the expected benefits of our acquisitions. We discuss the material risks we face under the caption entitled “Risk Factors” in our Annual Report for the year ended December 31, ~~2022~~2023, as filed with the SEC on February ~~23, 2023,~~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.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

We have a Term Loan outstanding with a principal balance of ~~$543.8~~$521.3 million and a revolving facility with an aggregate borrowing capacity of $500.0 million. We also have outstanding 3.625% Senior Notes with an aggregate principal balance of $400.0 million and 4.125% Senior Notes with an aggregate principal balance of $500.0 million. The 3.625% Senior Notes and 4.125% Senior Notes bear a fixed rate of interest and therefore are excluded from the calculation below as they are not subject to fluctuations in interest rates.

Interest payable on both the aggregate Term Loan and Revolving Facility is based on a variable interest rate. As a result, we are exposed to market risks related to fluctuations in interest rates on this outstanding indebtedness. As of ~~September 30, 2023,~~March 31, 2024, the applicable interest rate as of such date was ~~6.42%~~6.43%. Based on our outstanding borrowings as of ~~September 30, 2023,~~March 31, 2024, a 100-basis point increase in the interest rate would result in a ~~$5.3~~$5.0 million increase in our annualized interest expense. There was no outstanding balance under the Revolving Facility as of ~~September 30, 2023.~~March 31, 2024.

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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, 2023.~~March 31, 2024.

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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, 2023,~~March 31, 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, ~~2022~~2023, as filed with the SEC on February ~~23, 2023~~28, 2024 which are incorporated by reference herein.

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

On July 25, 2022, our Board authorized the 2022 Repurchase Program, pursuant to which the Company may purchase up to $200 million of our common stock. There were no share repurchases executed during the ~~nine~~three months ended ~~September 30, 2023,~~March 31, 2024, leaving $154.4 million remaining under the 2022 Share Repurchase Program. Excluded from this disclosure are shares repurchased to settle statutory employee tax withholdings related to the vesting of stock awards.

Item 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

Item 4. MINE SAFETY DISCLOSURES

Not applicable.

Item 5. OTHER INFORMATION

During the quarter ended ~~September 30, 2023,~~March 31, 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
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

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SIGNATURE

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


		TOPBUILD CORP.


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

~~October 31, 2023~~May 7, 2024

3229


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


	2023 Acquisitions
Purchase price fair values:	SRI		Rocky Mountain		Best		Totals
Accounts receivable	$	5,531	$	584	$	7,537	$	13,652
Inventories		4,383		267		2,132		6,782
Prepaid and other assets		158		—		553		711
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
Goodwill		23,132		3,629		51,213		77,974
Accounts payable		(6,078)		(17)		(2,623)		(8,718)
Lease liabilities (operating)		(4,775)		(165)		(3,241)		(8,181)
All other liabilities		(95)		—		—		(95)
Net assets acquired	$	45,314	$	7,200	$	95,000	$	147,514


2022 Acquisitions	Date		Cash Paid		Contingent Consideration		Goodwill Acquired
Billings		2/3/2022	$	7,005	$	—	$	3,313
Assured		4/7/2022		4,719		600		3,406
All others		Various		3,257		—		1,726
Total			$	14,981	$	600	$	8,445

Estimated Fair Value

Weighted Average Estimated Useful Life (Years)

Customer relationships

Trademarks and trade names

Non-compete agreements

Total intangible assets acquired