BLD - Earnings call transcript Q2 2020

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Operator

Greetings and welcome to the TopBuild Earnings Conference Call.

During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded, Tuesday, August 4, 2020. I would now like to turn the conference over to Tabitha Zane. ahead. go Please

Tabitha Zane

good and Thank morning. you

On the Officer; Peterson, Volas, Executive are Buck, today Chief President Officer. John Jerry Robert and and Chief Officer; call Chief Financial Operating

Relations management's on posted at formal have our website senior the We Investor section of topbuild.com. remarks

or supplement for X forward-looking to Slide presentation, today's as and on be will those measures with risks, statements as include include be on as remarks operations events. and set than many otherwise intended the subsequent including forward-looking specifically this release basis. or a statements are substitute known on to stated, well concerning not company shown in a the with this company's of our call morning's non-GAAP update prepared measures forth financial statements The will discussed company's become because the of non-GAAP considered note be SEC. As the other of forward-looking GAAP. assumes in condition. press untrue Please in isolation obligation accordance These no as that financial unknown filings results in that to The

release a have the most in Volas. will I measures call provided to financial in the accompanying over table call. the in to Jerry included to reconciliation today's measures GAAP We Slide X. presentation comparable of press this and turn these Please now turn

Jerry Volas

and for Good joining you thank today. morning us

is that everyone. of begin for it's on me difficult our understand Let We COVID-XX employees, having stakeholders. a their acknowledging impact ongoing and other the our families all by time

safe remotely, Center our our environment our of in every supplier customers. Support we a work At with we for branches provide country. job continue and Daytona, enforce partners disinfecting, Here continue best have sites. our at keeping effectively of TopBuild, the manage to and connected aspect every broad distancing technology to our Branch to employees, in our of there we on practices social our and and throughout At we implemented one branches, network of terms us and supporting operations, sanitizing

starts key that last builder increase continue reporting improve the quarter second installation they month housing the construction our a states resiliency non-essential early We under reached of the we've lower As as May, and This while little and we also residential to extreme great strong, new the starts are started seen the call progresses. deemed urban escape our with to many are April in were not housing our year, in Yet since country as was Historically, than orders. and last industry. of traffic and reported the in on look lead encouraged still a businesses X to relatively as the progressed. growing rates, seen lockdown, our in levels steady and this quick to second interest quarter to uncertainty back contributing May, inventory distribution improving were rebound. the depression. quarter low unemployment We're environments as should results year are we financial as cramped very national you since customers desire factors the

road nation the of we overall will housing there we manage our in continues U.S. While bumps recognize industry. that the fundamentals bullish remain the be likely on to the pandemic, through as

model the points drove our basis operating point of basis of and we Slide financial flexibility TruTeam once margins at pandemic. COVID-XX which type EPS operating X, and about good $X.XX. strength performance, respectively, We as declined expansion this margin both the our second adjusted to Partners. to which Turning very XXX Despite Service any in TopBuild demonstrates our At EBITDA adjusted our quarter environment. on feel XXX continued a this primarily of and increased results drop, in result net X.X%, and strong total, sales again revenue

we integrating almost prospects of call, a the further deals. last on these that expect pipeline should has few to our we trajectory of on strong and acquisition balance sheet drive current our X, housing supply M&A We developed team, And full several time, and hard a button deals were chain, positive acquisitions. pause given acquisitions clearer months. noted the industry on having number we quarters. our these program next a of past million Slide systems and over the core pipeline of the at are from the expanded that hitting of had liquidity, outlook a the that in with of close quickly our $XXX resuming to uncertainty, and the level Turning meaningful to of work ongoing thanks we competency, onto With a synergies

focus primary companies, in of this on product but well our adjacency. to number evaluate we that insulation business would core existing continue reminder, a fit our As remains companies glass acquiring $XXX within a million

to S&P Before the from S&P turning TopBuild to we to XX. learn the pleased call that moving over I to SmallCap effective June, was in were Robert, note MidCap the XXX, that late June wanted XXX

our Some it over of This move X cap years. turn billion, clearly now to created will recognition growth XXXX, call the over of a Robert. was shareholders you is the market strong the in over and the June the tremendous spin our value I is of $X.X approximately for we've than past a more at may increase. remember $X.X time XXX% our that billion. Today,

Robert Buck

Thank results. our reviewing team warehouse staff, entire for our want our leadership you, push Slide to Jerry. team have Beginning sales I Support Branch thank a Center installers, times. dedication, Partners' and response TruTeam X their COVID-XX, and continued financial ongoing quarter and difficult build deliver pulled operational teamwork operational TopBuild to together and to very on strong workers, results second especially excellence, these before to our and from during office drivers, Service for and Everyone

more all and on in job guiding to and branch We X, our respond our both facilities, remains and safety, including place. operating to decisions. for with push policy our operations environment, at our bringing Daytona become value social supplier-partners inclusion. of the level safety building diversity our and employees us cornerstone win every remains values principle and have helping including our for distancing families, sites, creating Moving important, employees, even team, Slide our better a and our communications the a Center, themes, workplace current together of as Branch work-from-home these we enforced organization, We Support certain in central their customers the stronger throughout sanitizing Internal in marketplace.

that equipment retain the business most to ability market model, I to results adapt focus stress our allow due labor, strong conditions; are supply to our our us labor relationships; our to chain integrated factors; and to our want changing flexible next operational importantly, quickly us and On strong many and slide, sales meet inventory; to and our labor; share company-wide demand; can customer our attract ensures productivity. which and efficiency and on enabling partner that long-term supplier we systems customer

pandemic hit, were and when of the steps the our we to such, TopBuild. serve take financial As our we ensure in health customers needed to for the confident employees, care

residential Turning New X, we entered construction the quarter York, where deemed Slide have X of been and to second Michigan; not essential. states, Washington all commercial operating Pennsylvania, and in the

shut-down sales. eliminating take most costs capital Washington reminder, levers overhead, non-essential business, in those fourth was to terms pandemic, due began At of spending including our and the we expenditures, the reducing largest states As out the overall response annual to to non-essential. where discretionary represents that of uncertainty in pulling time, labor and in cutting a state multiple construction and deemed

assistance would to construction deemed has help us quickly a goodwill also essential has provide a of members four and team COVID-XX again to been TopBuild them did they Leave We the create an definitely service. families. increase for to Plan, ramp return implemented where time period conditions this We improved. a to in to when up paying and probability their states impacted those It success, been enabling to

a our branches moved backlog. busy, As stayed strong on we quarter, through most working the

shift moving builder recent addition, rates. buyers our urban grew steadily very interest a be areas. with of rural in more customers' part as along appears increase on In by and they based low buyer Moreover, to saw to traffic there confidence, surveys, fueled builder orders consumer and optimism

Along that We states are June, and by back the non-essential reopened got had May/early will demand with family good this construction shift quickly for homes. to work. single deemed four crews this late had our optimistic news, stimulate

strength quarter shutout of June second being Slide to XX, construction states several TruTeam's compared I commercial improved and increased line revenue, of through same and points to revenue improved operating results ago. adjusted period at of second quarter, on points our business for declined XX.X% year our Looking sales and and areas year basis TruTeam's on our this the due part half in X.X%, Sales to to Despite mentioned metropolitan as large the bottom demonstrating moved in drop XXX results. in clearly XX%, the a focus X the in we the the increased XXX previously. basis to addition in quarter first model flexibility margin

to sales on XX, of XXXX, and the an and half both XX.X%, increased sales X%. year in basis operating for the X.X% margin second Service XXX Partners' total second basis XXX Turning Service of grew quarter first for was points increase Slide Partners the the first respectively. and quarter half points, adjusted of

product see sanitizing Slide Partners, supplies and XX, and can we professional Service you on disinfecting at grade new As a introduced line equipment.

as well as already are to opportunity who to to create an new stream. industry We see in are contractors revenue cleaning contractors may who this marketing commercial as a the

While creativity market minimal generation in relatively of demonstrates far, small investment. meeting our it and team's demand in with flexibility revenue thus new terms

a second down is Moving and the the commercial to same months. XX.X% quarter Slide X declined business, our X.X% on branch XX, in for basis, first

or rules, same site. We have up Obviously, uncommon of social new it was density to large timelines. ramp construction guidelines XX XX working time. have changed to that trades on seen has of projects crews elongating the with governing to delayed project number not a on site the at to distancing commercial job due a Pre-COVID-XX, slow

but of will We during these cancellations. awarded also cancelled, a some have help that some this projects offset new have been of projects same timeframe number seen we

almost and commercial the very first in to close reminder, of quarter same XX% quarter of As a revenue this comps in the XX% quarter last second XXXX difficult and the were as year. increased

an awarded are residential, commercial at distribution commercial the facilities, start through recovery been dates A early are particularly and we and industries, be with we healthcare certain are in in declines available steep business. we those and on centers, than increase remains year. tight, oil long-term potential commercial confident hit see in it's though but still the hospitality believe and projects and Labor looking On remain the pool. will early are the the second be infrastructure costs cost is Material in our holding XXXX. of jobs will we to the of lot markets, a heavy by too there the predict have whether Overall, and projects. slower bidding increase hard side, steady this growth activity could we working gas strong labor

federal will depend, benefits yet determined. this subsidies to in part, on the government's which of are However, be unemployment

Looking continue another strong ahead, monitoring industry through the Thank quarter. John? we, all optimistic TopBuild are call, and year. we strengthen are like see the to Team the as housing and move you closely the you on of on starts again will to congratulations

John Peterson

morning, everyone. Good

return field and support able costs respond Jerry as great of business hit. in the helped bolster being X partially how team, strong With in Robert second changing Insulation rapidly, our X.X% due branch Insulation, Glass. levels. the initiate quarter. by of of expansion quarter some as savings our cost To In X.X% did curtailed evidence acquisitions, pandemic from performance expected result to Cooper to to this flex the margin from is savings sales Hunter Starting Slide provides our in and both center, can we impact work a primarily of and model driven to a decreased also such sales are are travel a and of costs, revenue March quickly to offset normalized market the to degree, COVID-XX, variable, fairly expansion Viking have These point hard we conditions. and which XX. on margin which robust expenses, the our benefited entertainment the lesser the COVID-XX As our volume financial outstanding at $XXX.X net million reduction we direct noted, to both at XX% by

net acquisitions, X.X%, impact volume X and prices months the of primarily COVID-XX. by sales For XXXX, increased flat driven increased to selling with due negative overall the of first

first of half in until basis shutout still grew points increased were of XXXX and of in partially to were quarter we expense. reminder, lower beginning reduction by quarter cost higher a the gross by a operating As second quarter of states to operating of all second the $XX.X increased XX.X%, and and late in Early at points. XX.X%, not offset XXX June. our respectively, X May, Adjusted the margin basis costs, the operational with XXX Adjusted profit and depreciation driven corresponding improvement efficiencies, insurance million, initiatives margin markets X.X%

For corresponding margin XX.X% the increased operating $XXX.X improvement basis points. of with to XXX adjusted profit X months, first a million

impacted basis addition for Adjusted the gross points EBITDA adjusted and was entertainment items compared and quarter favorably margins travel adjusted to by were In costs. XX.X%. margin discussed EBITDA margin, in to the in to $XX million operating expanded XXX XXXX, lower $XXX.X million, second

margin improvement For adjusted EBITDA X adjusted over months first the XXX half $XXX.X and XX.X%, grew XXXX, to first XXXX. million, EBITDA point of basis XX.X% was a

in cost ended XXXX of the The $X.XX related compared per travel compared the expense period higher longer primarily carrying offset by was over basis, result $X.X and lower of in the in XXXX. a million year-over-year X-month diluted to the last $XX.X to to increased the expense savings or the for value share. that and quarter increase in depreciation no period This to the $X.X sales X percent the volume expenses, second XX, an Second year purchased for entertainment of as SG&A compared On same increase XX.X% sales to was diluted the quarter second XX% depreciation was million assets was lower share has or older income company year Depreciation was assets reduction primarily June and the Adjusted per months. XX ago. on restructuring the company increase initiatives $XX.X ago. million, compared million $X.XX quarter and a costs. of same from a reduction increased utilizing, months a

income $XX.X diluted $X.XX months For the to diluted was share, million, or per $X.XX XXXX, or adjusted of million, $XXX.X compared per share. X

related quarter $X.X million, to COVID-XX. as first and respectively, result Second X-month $X million costs and primarily of XXXX adjustments a were restructuring

months tax rate tax The and a effective we XX.X% rates benefit of lower million the Our for for of than to quarter and tax normalized discrete X guide due first share-based million the of XX% $X.X XX.X% compensation second rate million average quarter XXX ended was to the primarily year. effective interest tax related the $X.X to are our million of XXXX driven in X XXXX. XXXX decline the XX, months X versus for and point declined June from $X.X rate XXXX. year, a basis expense Interest compared the term on to the to prior quarter in by loan $X.X the second

X.X%. XX. Moving the $XX.X million, of was X X% to Slide long-term to our year range for below targeted sales, X.X% the first of CapEx months of

of as As in have CapEx trailing advent well our our commercial ago. TruTeam portfolio as receivable we months amounts which versus capital XXXX decrease was to with due on year pared the a lower planned longer our for the noted reduced XX.X% back XX.X% as terms. of tends collections the pandemic, to a the last business due Working and past spend. sales percent This across we call, was improved volume XX

quarter ended you and months using to the we million, adjusted XXXX, we June flow EBITDA As pandemic, see and uncertainty revolver providing at time. Total the liquidity XX, million of to was not XXXX continued the related ended EBITDA. $XXX.X COVID-XX for X.XX with net guidance XX. trailing of million cash X of for XX this times, $XXX.X Slide Operating revenue $XXX.X accessible on months at $XXX.X million. leverage Due are cash including June was XX, second

TopBuild's commercial of flexible noted, strong continue our the and serve bullish drive long-term we model are Jerry business to residential as will and health performance. we markets the remain regarding Jerry? confident However,

Jerry Volas

John. Thank you,

business interest and historically our with related Our our focused but their challenges still people dream whatever uncertainty their are them pandemic, urban team strong, pursue is rates, there living Many a we're the of and recognize lie to is home. to escape great successfully is own now a time low owning crowded ahead. we confident for looking is is great future will bright. of We meet to deal

the efficiencies, safe. on As second our move of to keeping while we through employees XXXX, will focus operational achieving TopBuild continue half

work, flexible now team's success. key Operator, hard creativity Our and for with cornerstones business our ready will our questions. model, we're combined of remain

Operator

of Instructions] from question Thank line your Zener with Our proceed, you. [Operator first the Ken coming KeyBanc. is Please is open. line

Kenneth Zener

Good morning, everybody.

Jerry Volas

Ken. Hi,

Kenneth Zener

a quarter. What

So XX% variable. of your costs are

talk guidance, you're You you to despite - not up As about believe. are had TruTeam how sales, I tight. especially very leverage A; up recognize incrementals, business again, on Can in be orders dollars given to you for we think it giving sequentially but X is talked have comment generally? your about opens and seems homebuilders, you operating could in labor I should B, like just these strong going down states, very that

seems get So you. for to underlying I'm of margins. that on your cost top the that incremental to to you the pricing happen, structure industry favorable enables as to just whatever opposed understand actions units trying be very

John Peterson

Ken, John. this is

couple So the little of bit just some what performance versus and more down drill terms comments the remarks. in prepared of a I of gave a I'll in

throughout industries puts March been said so reductions. We got indication quickly hit, with we've certainly. And model the what can years cost that take did adapt of great, are service, and So multiple pandemic all, pretty prepared flexible takes it's the get a very we in that to times did past the X it we of in we margins. the talking on we when first certain we've comments, for again, about great pleased we think a our it the

worth we million charges $X.X think I [RAT] we that you data provided. that our basically of in had about saw [ph]

million terms roughly million of an took. quarter, activities reduction benefit did So $X we annualized on the $X get in probably in the cost from some we that, basis

We what probably COVID-XX benefit also expenses, call reduced did delayed get travel expenses entertainment. be and or the a best I'll deferred from would and example or

the terms come million we But received operationally the get So in in we the at worth would of roughly quarter estimate benefit quarter in vast some our to driven. benefit quarter we $X point, probably be the normalize that again, got. certainly of was of $X best back and in it's the that going majority the to million benefit did

really of we reduced So capability about going go-forward, see and on those COVID-XX would a XX% at that's agree back just long-term our that how And things We to going the don't how will in that a look in the term. how model. XX%. we're know when talk normalize with get on we come have number to We to to we other But to plays pandemic the certainly we and that with quickly It over go-forward quarters this costs. X the how or again, I as But out should quickly results, travel the pandemic operationally back depend not by driven say We're standpoint. next or X basis, and we're X can again, a so. any to said. and things guidance, do. you certainly confident on far normally give from X quarters, pleased our going long

Kenneth Zener

in what Because and prices sequentially seemingly I inventory tight seems COVID really you your finished? you for high, it pricing. largest company be time But what's I to the probably ramping is insulation the out and labor, up resurgence think you. different builders ago, appreciate seeing the might have provide of can of lumber this think like you stuff? you're can growth industry being. as terms of in ability as builder the can the I to you and selling industry the excluding talk you to, Can be be might that'll that benefit are what flat Thank terms constraints to to the in year talk a But might of versus obviously, the therefore, industry's a orders' how happening the But that constraints on can in happening that. talk points commercial? data many of insulation, guess, you to through you this side. installer most talk

Robert Buck

hi, Robert. Yeah, Ken, is this

the it's a I trends if the up So, is to look think coming from here, builders. busy positive especially a strong very think a finish everybody seasonally lot yeah, news always follow, you the at, which of out I the And very, time. from year, ramping

You're right.

well given the heavy elongated I from commercial, sites, number some new influx think because are And the that job could as what on whether factors. lag of some new whether is other I recruiting times industry, about constrained. But job some we'll order have a to you we believe that that'd some the that say, of right tight. be residential for been or regulations those the some both, extending think the in the there's We up labor be do said, trades sure. the of you're perspective. into I'd will probably unemployment that industry combination whole, a the on for due well employees think regulations There We lead industry given flow, That some sites, as benefits remain been extra fare being it'd say. seeing as of be have industries of labor some the of hindering until now.

benefits us get we benefited remarks, in I that did the on as references will look some we we think our dependent forward. I as from see new well back, really to So of happen I employment mentioned think COVID I what going relative that's would in. prepared as think lead-plan I us allowed that folks employees attracting the say, some to be bringing back, perspective, to

So will did times? The yes. the lead I is think it elongate answer

carry industry I which think some could with later that, and QX early XXXX. have that into will up backlog extend keeping just into will the struggles

Kenneth Zener

you. Thank

Operator

line Our is line Ng Jefferies. Please coming next question open. your the is of Phil with from proceed,

Philip Ng

guys. Hey,

line flowing appreciating of But from through, Just of do nicely perspective? that and some pretty kind up timing obviously through orders you uptick the to expect more that you if these bottlenecks of questioning, think following picked when kind elongation. a orders lead on of that could in

John Peterson

is John. This Hey, Phil.

one provide it's optimistic. So, not, major not not we're of listen, because reason guidance or reasons the didn't we're the we

One some That's We both or window is normalized really, X primary residential, the certainly. we and reasons. commercial are out of rely on lag of following about now, to type kind tend starts right but seasonalized pattern.

So to we have of certainly we X see recovery months' worth we weak, very, strong that then July pre-pandemic, expect nice was, very relatively in to a starts what And forward saw profile, had starts roughly started profile. But depleted then the us to it's and it's these how to come them we fully tough job then an new for we backlog project had, get at industry our and as whether orders online quickly June. sites.

one. that's So

and The heavy of Robert other side, quarter we where a distancing social is the almost our commercial have, know, And from impacted that's business. said, disproportionately as standpoint. as been on commercial there you a we've

a this So granularity at sites to point. how any something is just that normalized of back can't those estimate quickly cadence type we job get with

one give we it's of from kind So on that's having is what and what our is guidance. why the listen, customers, forward we of a full conversations But know our with as to everyone and are difficult look know out based we're as projection we there optimistic coming.

Jerry Volas

shorter guess, XX more would say of have it's ago, now days the to one, landscape. that view See, one several we months. The said if would an over pocket. phrase and it's shallow of is had Phil, fair would and there probably I looking is explanation used out have that point we talked probably is here about the our air over be, than that thing a I that add That's people this kind to last Jerry.

there. see here. And responding out that's we think going industry and builders forward consumers to to point, be we are benefit going homes. looking we to Robert's entire So all the buying at think strengths And then, going to John

think quarter, statement. bump maybe. that's As to a overall not But there's summary or strength, whether the I some

Philip Ng

then you take helpful. to you you this for mom-and-pop been And that kind take to has your That's competitors more be surging peers, demand able your TopBuild. is share? your compared to of opportunity ability of can to kind even potentially think your labor so and backdrop, leverage advantage hallmark something really of of a In

Robert Buck

Yeah, is Phil, this Robert.

absolutely. think productivity we're a multiple from And mean, we believe from think working standpoint. how systems, to So around, we coming integrated we're of I how I - mean, the it peaks has angles. hit service through I'll the really we I on if at always and order you and side, flows and shown around able these move customers. demand, equipment There's look labor labor by from in able some spikes that's us. the there's some be going coming coming - fallout of to robust the period think And be that. builders, manage will We'll service to these our to those leverage to big we of that our thing, that labor gain ability are systems, coming. and that the fair orders that, than do type share more we of

we yeah, So have there. level a confidence of high

Philip Ng

labor do centers, What's it. Got stadiums non-res, commercial? for question last and how light weaker. as between me. your kind strokes and have you one data that kind use office are of flex you there's we one ability just then about commercial your little broad maybe appreciating And force XXXX, non-res heavy is pockets some to comps. outlook to And thinking but going versus a tough and of stronger, and appreciating mean define I where it's let's warehouses say,

Jerry Volas

Yeah, it's a question. good

place, kind are the So of some mean construction closer. the at merging the products I taken commercial look and of as that's you applications

some So We're I'll that in give the some can of one of doing and applications, use type would commercial work product crews and board same the do same here. good Amazon we of example light our applications. several today, residential facilities

between that and light And commercial some. commercial So think today we're to that, some continues that around projects. move differentiation the of to leveraging narrow we heavy to labor

among move it So play to benefit our labor to jobs. that bigger will leverage and around be able to

Philip Ng

lot. appreciate a color. Thanks I the Okay.

Operator

Please Benchmark. line Reuben with Garner Our from of question next is coming the proceed.

Your line is open.

Reuben Garner

you. Thank Good everybody. morning,

Jerry Volas

Reuben. morning, Good

Reuben Garner

distribution and profile talk or just of had distribution, same the guys you in already, to on my second than we the I little geographical prepared so remarks, expect then is, increases what in a bit you volume I more But was the whether a in you location. apologize. between end guess, that can outperform on simple said breakup so materials? the the about it's during your difference static should to pricing profiles I selling this And the installation So as are if of as quarter point near-term labor as continue installation

John Peterson

this [ph], [Phil] is Hey, John.

the greater heavy is. So the commercial it that in talked piece quarter, Robert commercial actually, TruTeam was back, commercial, where impacted that's business was a disproportionately impact our of by heavy primarily because and on

say, So up year just slightly when look I'll flat, was TruTeam relatively construction, versus new at ago. residential you the residential, a pure

to business by R&C from side commercial. near our Partners and, close X.X% the not as standpoint of the side On Service was the an probably up other that, though, on volume impacted

residential, I think some strong. considering that what exited June really April, results area. had So certainly and nice in think, in us recovery and the a to and momentum quarter happened especially May with We nice were I

core So talked look the on other that also out all - we a by the but to with the getting of on volume some if took fourth our point way, of back of think job there, a additional customers building bit volume the team where of go-forward actually you way the have. about I'd and go portfolio is has customers. back great I fact Partners, volume doing at hit the of a thing up, the our that customers some little modifying and we We we additional been quarter XXXX, that Service we were fact

So I to of the in continue. and we'd expect that think evidence that you saw quarter, nice

Reuben Garner

that or Is differences business, even site, in on the results. commercial congrats to and you familiar limited a - business fair some have you'll runway to and people through that because a pipeline of what there backlog that coming was that be business works, I say kind visibility, with. able new back quarters, kind get thanks the of And kind for pandemic? the questions in it into guess, again Thanks, already just have to my it can job regulation in of projects on of to the taking differences helpful. if the Is see, your less for that more are piece. coming is the very that how that you strong of piece in couple the the that work most assuming longer let's I was That And think of John. Great. it's follow-up

Robert Buck

Reuben. This Robert. is Yeah, thanks,

it think yeah, longer I times, So commercial had for lead projects.

we're here, XXXX. mentioned projects into I think I bidding

in So exists backlog that there's a business. that

those out been have or of projects delayed. pushed Some

able - projects. call not cancellations we've cancellations, that some but been to it with Some new wouldn't tremendous of a I offset amount

share yeah, little So the commercial ability There's a take back ramp gain really both the prospects as backlog said, about our But some commercial residential. good industry space. than we to to feel well backlog. side, a a will commercial But through. as work there's as long-term on we the in growth continue the to to longer up

Operator

is ISI. Our the Trey Evercore Please next of question line Morrish go from coming with ahead.

Your line is open.

Trey Morrish

backlog a much, about It Thanks very your that talking up. I great quarter, modestly kind and sounds looking stick you're of It's fantastic. absolutely for want as commercial second. in you're is the on commercial to everyone. like way down

So And if that me. clarify you could for commercial. on second, kind of

southeast. about You've previously wanting a south little and further commercial bit talked your to expand footprint

now, have does right you restrictions and going site that are that southeast? the into resulting to job that the restrictions do happening expansion those south - accelerate Given

Robert Buck

Trey, this Robert. is Hey,

be from delayed, I'm we months if be Again, to, some backlog back new our bidding or as projects X we what some I'd stronger would from has went that I - And put ago, X say, and canceled able one leading down we of So into on surprise activity slightly our activity. we would is have I or yeah, indicators pandemic. projects say been very been the into down. going bidding pushed even to would were out, a to it side thinking the But may say, commercial strong, say the went pipeline. positive the

a that's side. So positive

to on industry grow very we're commercial projects. again, And and the piece there. type we to long-term our commercial bullish think of ability stay agnostic the do the I of

So those centers, where pick we well. of see up, At we're projects as we're and high-rise such centers, the thing data of being type potentially may things seeing or offices we're delayed convention as projects a or projects canceled. or same those high-rise residential, seeing infrastructure, time, bidding such manufacturing, lot warehousing, healthcare, that as

we feel and perspective, comfortable from again, on long-term look. think So positive that I the

Trey Morrish

is just last but Got there also Was to a your this EBITDA this higher that could it. only that. you related not new Thanks for last for clarify function looking significantly D&A Or was step something wondering at there? year, if quarter. year, Just just in me. accelerated your And bridge, then higher?

John Peterson

Yes.

John. this So is

we salvage yeah, was the adjusted a utilize. driven the far, by by fact So of that we bit biggest our fact on a talked was that in the our we basically little really majority will company March, values value the about depreciation - carrying have schedule. in And that reduction older driver the assets

That $X.X So the of adjustment. growth. about a we was put period-to-date million

traditionally, we The is was adding we've assets just which seen tied other basically. more piece been what online have to

depreciation it, about of $X.X change million the $X.X to, So assets under a I'll and between, the around $X.X call growth just million policy our depreciation. of about split, million tied growth

Trey Morrish

Got you.

a reverse million thing that that's next is Or just going the Just is a that onetime that that quarter. something clarification, $X.X is that's slight to acceleration, sustainable?

John Peterson

a onetime quarter. second the adjustment It's in

Trey Morrish

Thank Okay. much. you very

John Peterson

Yeah.

Operator

coming [Operator of Adam go ahead. Instructions] Our is line Suisse. from next the question Baumgarten Please Credit with

Adam Baumgarten

Hey, good morning.

Jerry Volas

Good morning.

Adam Baumgarten

and spike in thinking the early from fiberglass the for homebuilders, increase or orders summer be from about tightening Just How guys, the fall? potential price this potentially on some we maybe later should a the capacity.

Robert Buck

Adam, morning, good Hey, Robert. it's

back could a to I stuff, spike in early probably there - I'll So given be tell, little step little you that remember - a as bit. think

pandemic delayed after were pre-pandemic early bringing the remember, there capacity XXXX, that - out they you pushed subsequently additional As of or up manufacturers couple fiberglass new that They XXXX. that a they announced were had late capacity. hit,

considering I be on and increase in could case, labor? depending that's ramp-up orders material tightness said, be. if could year. And they're the of being of probably the there stuff, that Potentially, could maybe like be there looking cost material would another later that at So in and there that speculate, some

Adam Baumgarten

And just tuck-in smaller deals? then pipeline opportunities it. are type larger Thanks. got most with Okay, of some there Or the on front, out acquisition the filled there? is

Jerry Volas

of glass of standpoint couple both mean, residential, commercial, of from a the larger ones. insulation well. I target a potential There's there's variety here. always Jerry and then as size

of ones your terms But a So provide they that highly are are call answer to us. in of to there few there that the are, tuck-ins bigger. what are number question, returns that we effective are a that

little that here capital, been have hopefully, color. of a we, close mean, billion since to of XXXX. you well deployed acquisitions we've I bit as know, of gives with yeah, you two-thirds highly acquisition-related. And $X So successful that is

here game the So team in be to number effective sure. of the that train over integrating. And us a got of back terms We've that's to you can quarters continues. yeah, for acquisition next look forward highly in

Adam Baumgarten

Great. Thanks lot. a

Jerry Volas

Sure.

Operator

Our Deutsche coming line go question of with Please from next is the ahead. Clarke Seldon Bank.

Seldon Clarke

Hey, those I thanks, impact operator. and guidance. give in And July, in into be and could Is a there either not where can of what sales X% you're any demand sense of organically from giving were down pent-up seeing in trended months? way June us you sales understand, April you and

how So maybe even if the you just compares that that context Thanks. could and quarter some rate throughout give of around July? improvement how changed - the to

Jerry Volas

And continues Yeah, is it's sure. pace. - how going trough. look we we basis, as a improved. at May, about how July just hard tell of to for stepped And It Jerry - kind us here. of into sales was July here, that is on sort about from the improved that we timeframe, it progressed, you yeah, it for the But that's what it the look. has June which what I'll know tell improves at is into April to August you can from how day it, quarter second that per

the as we would there. and say into QX, it's gotten better I trough, at April move continuing from And that it's So was level.

Seldon Clarke

continuing June continue mean you at of to where improve or the was? Do level

Jerry Volas

July like this June looking in lot time. point I is would at say a

Seldon Clarke

out with increase higher giving it sales And then some a to XQ moving side I little this normal showing margin. elongated either cost Okay. shake various place or how the know moving the and and the the given XQ and seasonality parts way there That's year, again, third creep relates quarter, as not on about helpful. fourth to is taking an EBITDA guidance, quarter. from see just construction but And you're you any typically parts cost the in everything bit think in up cycles, potential of

what about we think we should think normal relative seen this or how we've over several past how do seasonality So about year - the to years?

Jerry Volas

I of of you a has of to lag that. of Yeah. But would said, volatility relationships in on specific the guidance number disrupted COVID as cycle, the we of historic things are give driven. some times more what's around because mean, the John being most kind here happened, love building

we the comments, margin we environment I going have his have. perform of outstanding it the taken are we based And optimistic we're And negative. just Robert more that's And my to giving off making have may that have. level still we're use do table. what take specific some sales really reason whatever team is but not that we comes most are the some on we not we're standpoint a whatever the on that that been would the - of dependable John necessarily be and that guidance to is about because from just when relationships stepping So just in flexibility a and mean really well, into.

to John, would expect if add that you to continue. else know to I that. So don't anything we have

John Peterson

well. Jerry No, said I it think

a side, on I the confident think profitability think very were I we basis. from go-forward

we to on some As degree, due down the were to expect COVID-XX, driven we benefit expenses I that's - time. and said, happen lesser but a got those to normalize, of over was going by that to

the off we've a how as basis. before, get disproportionately commercial So job again, on back we very for quickly bullish the do us struggle about sites, and put been do and go at or The bottom-line said is on also. look that we I top-line how forward challenge seasonality

Seldon Clarke

it. appreciate guys. Okay. That's helpful. I Thanks,

John Peterson

Yeah.

Operator

Our Please go next line Gilbert of with Ryan question coming ahead. the is BTIG. from

Ryan Gilbert

Thanks, Hi. guys.

question First business. on the distribution

sounds thinking you forward. expect wondering Just volume should increases. how like going It about growth I see continued to be

that business, than it a the was little of understanding more my business. think countercyclical I install the

thinking we growth So yeah, how distribution? about should be in just - volume

Robert Buck

is Robert. this Ryan, Hi,

to selling XXXX, So we're live that more existing I attracting to end about we're of think through there. go as business focus as and the of And the some we new customers XXXX that, Service if some and on as through talking back growing I Partners seeing well of well. fruit think the customers our

sanitizing product a rolling about out. I talked line small Although that disinfectant example, the we're

come positive having to we're growth. taking truckloads plays think we'll shipments always back that also, to pretty see value And one levels. they're and time service us smaller that And Service focused of continue a is the improve we to see we've I proposition. if our potentially about then our thing So contractors Partners' hard full on,

that service, type on value. the and for think up, especially thing, focus if of part keen ramping about really more service orders builders, So the even of you things becomes

So improvement. will see some we're Service think both to and on we that. nice TruTeam continue focused And keenly Partners

Ryan Gilbert

Okay. M&A the completing commercial for end-market. can talk question the second versus on end-market the if for about you residential pipeline. that. I'm And wondering you within preference just then is Thank deals your the

Jerry Volas

both have we in Yeah, pipeline. the

we do of that think we get starting. sides is I can types think huge the projects that we number on And legacy that through when be commercial do of both our we're partners, strong as right the acquisition, there. in We're And we're on Robert of on continue of future certainly business, do if improve company, improving had of the we scale our But success really acquisitions. will agnostic. synergies of there's a the good will very bit for We've that's rapidly residential terms that. And anxious to different aisle. to a and finding commercial to we sure, the then to continue the spoke side footprint. side, those a on

Ryan Gilbert

Okay, great. you. Thank

Jerry Volas

Sure.

Operator

next [Operator Speer Associates. of the with Please question from ahead. Our Justin Instructions] is line go Zelman & coming

Justin Speer

on roughly Recognizing think rate guys. into second that guess, July, there. to quarter. you revenue if morning, just a exit the you quarter side, on us little you how clarity I did look? the start trends non-residential I the XX%, wanted good Hi, the give exit XX% about down, you. the to could in as were But Thank

Robert Buck

Robert. Hey, good Justin, morning, this is

if So as I it think about Jerry you think mentioned well. it,

continue saw we that second never throughout in July. of We So quarter. comparison. trend improve continue that do trend positive revenue revenue to see to a We the

seen working on the say trends order crews think also from are you've we we're would backlog. think our I right - So still now. busy And We builders.

customers question that Service And trend a some think we're seen. targeting, time. some we've positive value So Partners, as maybe the in and I customers, to combination smaller been of selling nice we what previous that more this existing seeing do on Partners, on coming growth pretty well the Service then we've back in during

in both. think good I trends So

Justin Speer

helpful the your commercial and And in I light split between heavy in Okay. in the I then, the growth too guess, difference designation - maybe be commercial the would differences quarter. terms between think in of growth

John Peterson

disproportionately the some John. job in can distancing social is was numbers This right have don't I sites tell the front impacted you commercial that me, heavy Justin. Yeah, by of but off temporarily. of commercial, I

And so, certainly, the on that's where the the heavy majority of commercial side. quarter, on was was our decline

Justin Speer

juxtaposed across healthcare, this helpful too. exposure vertical But, if it then, I the are is know stronger, there these other distribution the that's of areas provide don't you your areas don't of can are guess, mentioned, I be centers possible. And that any that something that you maybe some obviously know Okay. pressured. would industrial, more some too. to I have if that you clarity

Robert Buck

Robert. Justin, Hey,

we thing, business. the commercial landscape the as quite look agnostic honestly, mix of across pretty of we're So across

including that of think So is the distribution But we're I sites we number. I number say like we're I centers. facilities is on talking I'd talking tremendous. right give Amazon healthcare high-rise were now residential, mentioned high-rise mean, earlier, equally own facilities, commercial. that distribution the I won't centers,

of projects applications the comfortable projects and as example. an agnostic very of Main we're projects I that projects. types bidding, we're those obviously pretty thing the of that. with talked similar, are we're are, mix know we're looking what the at is projects. about infrastructure So We

those also to as time well You but could projects healthcare, still airport say some projects got are doing then on some we're that now go also.

and mix So I'll agnostic, term, just back and say we're commercial projects. landscape across to of go my the

Justin Speer

term. is versus business industrial with bit bit least I little thinking those of at healthcare, better-growing through uncertainty, mix Sure. actual that in about what I guess a And little verticals percentage is about current a little centers? near your differently, a the the and it business may was your distribution be that thinking of but I businesses more challenged guess,

Robert Buck

just really that that breakdown, towards split the one have don't weighted in not way other. I we're negative I Justin. a say Yeah, or would or heavily

Justin Speer

for potentially the was did that Got better in it, I impulse then, got a seems up? guessing, But the me, lot how quarter stability do we And half like recognizing may it last guess, the surprise. the about how inflationary pricing there that back chain? there. positive about you back question be half, and shaping should some a from it. the think think supply I'm you in

John Peterson

is this Yeah, so, Justin, John.

from the depend increase I conditions prior referred market pricing, you the a quarter second So in out listen, time. third And, on to as in not there the And and periods. Robert going recover potential labor speculate quarter. saw that the it's to there's things to we're was mean, pricing going see from all really material to of the at fact or fourth cost continue to how carryover shapes. terms essentially

a pretty think for is able adapt so. now. really, of to any to quickly, and years to confident you've of and any speculate we're this right environment that type inflationary and to tough So environment I we're on But ability of of one us evidence I thing, go got our do forward, think X

Justin Speer

you. I Thank your time. appreciate Excellent.

John Peterson

Thank you.

Operator

at this there other questions And are no time.

Jerry Volas

November. forward look our QX And call we safe to everybody. in out Thanks, there. Stay earnings

Operator

you your lines. disconnect and That for thank call please today. you does ask your conference conclude participation the We that for

TopBuild (BLD) 9 Aug 202020 Q2 Earnings call transcript