- Earnings call transcript Q3 2022

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Operator

Greetings. And welcome to TopBuild's Third Quarter 2022 Earnings Call and Webcast. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded. the to turn President, Zane, now Relations. Investor will conference Tabitha over Vice I you. Thank

begin. may You

Tabitha Zane

Thank morning. and you, good

On the Officer. call Chief Executive today are Robert and Kuhns, Buck, Rob Chief Financial Officer; President and

assumes and forward-looking or measures as those We senior a risks known release, with our as on morning's not The statements, as prepared remarks non-GAAP website because have that our and untrue which set no isolation, and call be the update this intended company's our obligation presentation topbuild.com. press Please in of include results management's accordance remarks unknown of comments non-GAAP basis. Many to some posted to at this or forth on to statements will that in that in note be are events. in a subsequent supplement well with company formal a measures are summarizes discussed become including SEC. the PowerPoint uncertainties, considered financial GAAP. forward-looking for be the substitute on of to subject filings will The

press have and quarter a also We now turn found financial to Buck. GAAP today's over measures our Robert of measures in in on provided a these website. presentation, in included which most I will the first table to reconciliation can our comparable be release, the call

Robert Buck

for thank us today. you and joining Good morning,

business our model basis, segments. increased both third focus the XX.X%, quarter operating branch margins a of improving and on same EBITDA and improved continuing Our our financial reflect efficiency. XX.X% results on our adjusted operational at Revenue strength

us work improvements, supply outpace housing to through chains accelerating volume our On ahead the side, our to completions as installation trades backlog. the ability and show of continues

revenue and XX.X%, our light, addition, basis. is installation on resulted This steadily both in XX.X% a third quarter branch heavy improving. same growing business, In commercial

commercial a We basis and XX.X% solid demand same Distribution grew improved the volume. driven from online. Our markets projects as saw execution new strong branch and on came revenue industrial Specialty end segment by

and dedication are driving Our results in a and employees TopBuild operational testament been continued to the it's on in executing evolving this providing Switching closed growing highly a our $X attractive their of and well direct acquisition, efficiencies hard leadership work with us the since year economic and environment. Distribution of on over we entry International, a business. insulation focus billion a just position and mechanical

in end commercial extremely a market, the acquisition in market, supply While optimize. operate now integration on both of talented factors attracted synergies with this and growth billion industrial obviously end of the most going than on DI, are a system housing. The strong by cycle projected new well, increase chains our insulation branches $X opportunities and our which valuation enter to our team, ERP opportunity were we also penetration initial critical of different and residential is the

continue by to opportunities identify distribution through In and streamline operations addition, we to practices. leveraging specialty technologies best our network

we DI of delayed to operational of total million likely very DI's business growth network. with an outstanding the managing leaders are financial pandemic. construction and we have met and meet due performance our projects The and has year, maintenance of also the in $XX American other in the working hand team industrial due part to across and year of $XX between to next our by done our identify North commercial has opportunities large-scale longer in branch exceeded to of expectations, and million our cost at October no hand run first million As highly between savings and projected, cost latest. rate we $XX the savings million $XX exceed ownership, achieving goal confident will job

continue and our to We we're demonstrate to Specialty growth, improving, Installation positive segments, targeted and acquisitions. business Distribution, in will through both see and organically both commercial business commercial pleased optimistic are our

outlook nonresidential to data, but year-to-date also is bidding on own and our backlog, points only not resurgence which on in construction activity based Our demand.

continue However, interest we with putting to projects industry rates also hamper acknowledge supply constraints labor burner on possibly year. chain higher growth, still much and there's some next uncertainty, the and back

Turning to a material. or have fiberglass in early has Fiberglass that cost Despite in December inflation effective by XX% abated, our housing a remains slowdown, of industry all on four allocation. not fact evidenced as either increase manufacturers signs January. the announced

and seeing a other the to in equation, the on of On orders beginning back push slowdown side are general. builders in price

balance between to an has strive timing in and created this market the market will optimal and by to volume. continue strike price While unprecedented situation we our industry,

of The nature acquisition in to Moving million and fragmented commercial to opportunities which our completed to annual continue small markets these light total, acquisition generate revenue. our solid five, are strategy installation three end with side over expected provides In highly on residential companies. year-to-date have and of quarter of are and both M&A. this $XX business. installation our We completed firms us to distribution one all execute

We both are strongest and steadfast will of that term. long returns the capital the best near the and our our are for use belief our in generate acquisitions shareholders in

successful share, our acquisitions. returning we shares, $XX capital building to to to we've XXX,XXX million returned Year-to-date, the shareholders. at million DI is integration per of on $XXX.XX mostly our the our $XXX over behind shareholders. almost approximately of an of With team price and quarter, In slightly shares repurchasing working our million repurchased robust X shareholders targeted average returning a us, pipeline also focused third by

On to improving proud is the particularly our recognition ESG MSCI strong and metric are our on our rating call, we XXXX last the metrics, which since our year-to-date. platform governance One I we mentioned pleased of BBB which and are a disclosures. to that of, learn of continues improvement safety front, upgraded our A, from

total inherently talent time to of While installation we that The provide rates the and of employees reducing business want install business. I again is cost drives distribute friendly. usage and and energy emissions. additional lost to efficiency, safety lowers is including emphasize ability and also our thermal environmentally carbon and the total in improvements our reduces recordable core attract the enhancing our to benefits, paramount, cases retain

We homes across these States Florida impact deliver delivering United facilities Canada. September. the our hit in the commercial operations. benefits savings And was and for far are and outweigh the own existing and as by know, of we new in Energy and Ian leader Hurricane you finally, industrial

paid of While their shut impacting the of we ensure why have several full for another were our branches industry. our employer are storm a of on business, state This example we directly did To branches the impact in material is time, in choice few closed. families remain we for not the a days, their respective down difficult believe with during our team this the employees. our priorities were their in days our

we a there's ahead, uncertainty Looking of around lot the recognize economy.

the a While out, longer slowing see shorter and while growth can calls are eventually in both Regardless there distribution we business is environment. slowdown. a predicting model any believe outperform economy the and the of a down, optimists is plays our installation general consensus testament this how in

improvements excellence. achieving with Our operational a team manages the constant mindset and of business driving

the experienced most group We best and field operators center. our dedicated a in support branch at talented have and and the

to value Rob? operating continuing on in focused strong environment. creating deliver every remains team entire results Our and shareholder

Robert Kuhns

good everyone. and Thanks, Robert, morning,

and report and our Canada. teams talented are pleased the of profitable to We across quarter growth excellent another U.S. delivered experienced by

and improved both volume results Installation mentioned, As strong and sales Distribution profitability. Specialty reported with strong Robert

on model unique to improvements Our with environment. business a outperform positions and competitive driving us to significant operational relentless us provide focus and continues any advantage in

adjustments our environment, closely and We the are aware cost and if quickly variable XX% over economic to warrant. monitoring are make flexible us changing conditions structure with keenly cost enables

to our you financials. our full overview year the guidance. of Moving with results, balance quarter on I'll on and third sheet the latest provide an start the update

installation sales sales by to X.X%. same-branch sales $X.X XX.X%, million, increase million, $XXX.X a acquisitions of added driven segment's for year-over-year Breaking branch sales $XXX.X price on XX.X% that XX.X%. increased sequentially. and On grew selling Distribution's volume net XX.X% in a increase down, quarter were XX% improved X.X% basis, contributed a XX.X% third Third net net quarter volume. increase same-branch Higher an volume XXX.X%. and an prices and increase and billion Specialty were revenue Same of in both basis. a our increased accounted XX.X%

margin XX basis, basis XX.X% increase the gross points offset volume sales in expanded higher to cost to XX.X%. partially adjusted in by efficiencies, basis a same-branch On XXX expanded and gross prices, of points margin quarter selling driven an Third by increase material. an operational

XXX-basis EBITDA from margin Third quarter million, basis, third last was XX.X% increased basis was EBITDA a improvement our XXX quarter of $XXX.X a point XX.X%, XX.X%, to compared year. adjusted an same-branch adjusted EBITDA improvement points our adjusted On margin XXXX. and to

strong by our and came incremental primarily margin margin Our driven results XX.X% third XX.X%, same-branch in EBITDA from quarter acquisition at EBITDA DI. was

Specialty Installation XXX quarter points, our margin XX% improvement segment, Distribution respectively. was basis basis of XX an EBITDA XX.X% and Third adjusted segment points our for and for

Third increased acquisition $XX.X quarter interest variable from DI additional $X.X borrowings of result fourth our to of expense interest and quarter higher primarily the million last as in rates. million from year of a

primarily adjustments to were to quarter $X.X Third acquisition net income related costs. and million integration

per adjusted diluted XX.X% quarter Third increase were earnings share $X.XX, prior year. from a

cash and our to Moving flows. sheet balance

$XXX.X partially year-to-date a trailing industrial flow capital in year increase working increase capital. to chain inventory sales our driven inflation, in a of ago. recovery Working XX.X%, higher basis the was supply requirements buys Our offset from cash This income, growth percent was and $XXX.X than was ongoing which compared our was by This DI, capital XX points last by higher by was million year. of operating certain continued strategic net price to XXX XX.X% XX-month related September business. driven working million as disruptions

term, remains our target to XX% XX%. Over long the capital working

revenue On September million, X.X% consistent CapEx the approximately our of was $XX guidance. allocation long-term year-to-date with capital front, and

over debt allocated year-to-date, to to were There changes acquisitions we and have just at remained significant just under debt and billion. and $XX.X outstanding short-term share our balances addition, no our million $XXX $X.X to long-term million repurchases. In structure,

acquisition of X.XX% is EBITDA. quarter X.XXx debt ago. leverage XX with cost Our adjusted end This of down structure ended second trailing and debt pro at XX% debt the third year maturities. current forma the a of DI We XX% the months variable, quarter our near-term at at leverage of from over just X.XXx net from no down our the average time the and of X.Xx is fixed roughly with and

and $XXX.X is asked revolver and million. covenant often about bank are cash XXXX, Total well we million $XXX.X good $XXX.X range Xx that liquidity for comfortable an accessible us where below Xx XX, and is of leverage, taking a million, noted including of are X.Xx. September we've of We between at our was and

annual to Moving guidance.

strong out to XXXX expect fourth close with a quarter. We

on increase and be of of billion million are the increase billion, We the a low and the end the between sales $XXX high end $X projecting range. total million $X.XX a range XXXX to on $XXX

have increase range end million $XX a adjusted raised EBITDA our the for XXXX also between of to We million and on million, $XX increase the million be a guidance $XXX low $XXX high the end. and on

Our closing remarks. now for long-range call on unchanged published February modeling are those from we back turn XXnd. the I Robert will to targets

Robert Buck

Thank you, Rob.

the Before increases. has business clearly about by call emphasize negatively been opening Starting impacted a Fed's interest we points markets the This end serve. few I up and to want through rate the market for with curb our inflation housing. three efforts questions, to end

on time will of situation, inflationary face The a rates today, back of an we conditions the by but Despite to sidelines stand step the industry buyers take the the and many return to elevated will pressures current supply improve, choosing for is dynamic and across home demand much rising As mortgage fundamentals and when are resolve. housing take this demand, market following stabilize. sidelines Taking industry long-term housing from unprecedented are still solid. mortgage the being some we most chain, be prices, a rates creating approach. the believe believe buyers still impacted may the that economic wait-and-see on

distribution, expanding residential of outlook. bright Our activity economic TopBuild anticipation commercial continued our we Regardless we our cycle Bidding and have focus of and We of a housing our a questions. operational driving spot in enable us end continue healthy and improvements We installation and annual outperform model changes. the contributed on component specialty and critical provide for ready while a any growth. differentiator operate strong, Operator, on adapting our key a remain confident is industrial opportunities and combining should now environment. of backlog. highly both and that which different efficiencies, our business markets, in success, to will see market model, in unique variable revenue, are cost than for to XX% environment,

Operator

KeyBanc with [Operator first from Ken Instructions] Zener is Markets. Capital question Our

Ken Zener

different of Good was buckets. know you part one of that strategic first your schedule, but of keep your power. broke that expand Because synergies one into morning, Is think I everybody. I you into that, synergies? of your have purchasing I strengthening really Could ahead part related two on DI the guess that's you that since I to questions, purchasing the you mentioned is, cost is elements please?

Robert Kuhns

Yes, Ken, is Rob. this

of another We folks, be the their volume, choppy the again So from over little to up really couldn't lot the of definitely a synergies realizing. business. ahead that we're want then And Since more nature quarter quarter. DI is of a strong of the performance. project by strong, be DI driving, from And perspective, volume obviously, there can acquisition, the the but M&A similar to quarter, that that. to volumes guided second reminding our we're keep pleased due range, that a and the third makes with really the then, in EBITDA them. obviously driven strong our their XX% seeing also We bit you're

So signed this we'd said we time. up through of be the And there about if go run the million now. we by what to little million you we're -- $XX $XX ahead a rate, right about that for, bit to halfway back

supply all spending. than little perspective, a side, I'd And on efficiencies. probably From side. we but on ERP realized the piece, help less there to things just way from chain We're conversion, of those we We completed synergies. synergies going So we those. us drive to and the continue for those back-office say insurances, from search operations basically a then indirect little over that is of the we're on on driven of halfway which half there a rest have that a the logistics perspective,

numbers, the performance can in happy you with see as really there. the So we're

Ken Zener

but you not paraphrase Robert, Yes. on to No, then, that's builders back good. price. mentioned, beginning push And are you, the to

and can we least data to price starts back been country. the the down price? than What at data, are little public a guys probably would Given It's pushing does have you about cleaner mean, mean recent you margin with run-in Obviously, seem best point from in manufacturer, their very XX% that year-over-year. homebuilders, see the a year. I increases the on that census that that's to the announcing good squeeze.

you had margins 'XX you were looking where down margins actually So XX%, modestly, fourth but when when at volumes. guys the I'm quarter not at your you they -- think today I only are had negative

So operating unfolding could how are XX% to give when to just so year try around going you you see Thank down? you much. next that be leverage starts comfort clearly

Robert Buck

Sure.

builders. the So first relative to that, I'll of the Ken, part take

of obviously, lot So a conversations.

there stuff then. years, but people a of years, If was curve, as in saw past what you there take conversations drivers well. two was and the given the happening was you there two with inflation, the labor demand lot of exist a concerned and about demand the those But conversations as past as lot well, were

the at started it's labor signs to say would is conversations. the would show a is of further say allocation. But still still I also slowing, things on just there. is that premium. I As backlog have Fiberglass still

obviously there but them, will, they the conversations, builders. are lengthier supply So here. But if the constraints. more conversations, on chain horizon They what's recognize still see with you the

They inflation. dynamic see a the is here. There's it So slowdown.

customers also with really conversations, that's well. regionals the So of builders the it's builders, and across further and and smaller big each really those partnerships one the country, builder the as but

Robert Kuhns

cautious, word I where Robert's a as mean, today to as add just that, to as and unprecedented right, it's we I'll forward, the from sit right? margin use, I times, is mean, perspective talked and best far looking about. Ken, we're I think Yes,

right? where here are cautious in see And in bit we're a going for out so side. Our sorted on And to things QX. coming guidance, quarter EBITDA fourth we had that the what get here is little margin you residential down from the our

Operator

is with ISI. question next Our Evercore Stephen from Kim

Stephen Kim

big dynamics versus little within what rise. competitive guys. us like side sense what the multifamily you're trends little There's in in between mid-rise my seeing give high-rise, like far? if could and sense single-family I multifamily in seeing curious difference single-family. related share about us business. look versus a the would thanks more what could your recently. And to information. multifamily guess, you you Perhaps, low And talk of residential for trends specifically the looks are single-family a in residential, Yes, first I give was be question very you a a different much market multifamily versus the been pretty multifamily space. all Maybe the for Thanks. significantly Appreciate bit so

Robert Buck

Stephen, this Robert. is Yes,

I you with working. QX is shown strong very started off say you bidding the the look some right. we're backlog and if into us level. see a single-family that Especially multifamily of never improvement. have had definitely QX strong. as historical side, here, as in you're mean, the backlog ahead performance at that high multifamily So in our I'd But trade we the

no So doubt it. about

I think under here. units that if XXXX percentage of even over data continued has look at to look multifamily you you of the back if census construction, grow

and multifamily across So at in the of a and it out multifamily if seem look today, looked seeing to across I'd the earlier potential -- say we're be our a for strong maybe saturated. But markets, you -- I lot pretty really, on board had the projects there activity I if future, if some side this little work bidding markets year multifamily.

bottom, the we that and that some see that see trends down of of some up I where some you'll the of multiuse the still as exist, multifamily of units well. type to as some you think given retail dynamics top, see

Stephen Kim

ability business? of the in that how your Like share? look of to about that And in service does side market your how terms

Robert Buck

missed I question. good that. Yes,

the pretty we're well So aligned with starts.

look of multi-families, how well. you side we're share the If orientated same that percentage start at we're more pretty on kind as with with aligned market

Stephen Kim

That's do. I That's And and maybe that question bit then of here. times activity When And multifamily cycle I at you about in folks talk shortages, last then situation another some a know in it that? be talked all? you helpful. Has depressing commercial. great. clarifying extending including improved commercial, time labor may Okay. are think just you about sometimes little

Robert Buck

Yes.

on So do multifamily side, the and not commercial. commercial we include

included on as So we anything that side. census reports the residential units,

And not relative is So your for what question in numbers multifamily commercial. included -- was to second those outlook then our in commercial or there?

Stephen Kim

labor Just like shortages.

Robert Buck

Yes.

So we talked on labor the last to that about relative time commercial.

So say I improved. that wouldn't to -- continued to backlog labor none as say the I'd side, has not work is that's on really shift the of that get commercial. residential

we a and on see So both. commercial heavy still extension cycle both light projects, commercial time

Operator

next Adam & is from with Associates. Our Baumgarten question Zelman

Adam Baumgarten

Hey, good morning, everyone.

you look when versus just the to your given sense recent in us give improvement weakness potentially could starts homebuilder the the maybe the first we cycle third at show results? elevated And times still would to in of Just some half? expect a of you magnitude if saw start you up quarter the backlogs,

Robert Buck

part the Yes. cycle the Rob I'll on time. take discussion. first on can help start

say backlog, start we earlier at of on backlog would even the QX, as So improved, look here that back in of probably the the thus QX, in fourth cycle into we into especially well. quarter. that And say, time, the single-family definitely been we probably going trades side us were in year front we the the reason in

maybe will. but weeks to say, Hard I'd of you a that's it, on if say of couple front-end So piece the actually improved.

up. got some tad I the have really worse said back-end listen the the think builders that in trades even of if public builders, the haven't to quarter. a bit And caught you

have some definitely to similar us, know improved, I pretty I in we we stated on of so the overall for but front So think that say trades seen improvement builders would And we've times sure. saw much, don't cycle what cycle times. very

Robert Kuhns

right volumes you Rob. is year-to-date, the to I at that. completions even quarter add I I now. and mean, Adam, Yes, in significantly our this would just look mean, outpacing we're if

little So that's into that here. to that, looking kind bit the working of say backlog at evidence a we're we're hey,

going our a then but to obviously, to last get estimate, us after best sorted QX, definitely backlog we think that. into So is out the lot

Adam Baumgarten

in as of more And couple you just return next from conversations price the Okay. manufacturers, then the That's capacity? think to do 'XX? given questions. year couple a and helpful. the you do of of increases maybe a a you've And tight they'll to we cadence look stick on normal had, maybe a largely expect One, out upcoming year some fiberglass a

Robert Buck

Yes.

Let is first. question the Robert. second me take This

hard So say. to

I think increases depends that 'XX, through of curve 'XX. cadence it like for that looks demand what on

little one to harder was that say. So a

still where and we're that on right have pushing think available. I inflation is again piece, still going that both and current mean, fiberglass back president Relative allocation. builders of obviously to Labor that, supply the curve is I more I demand dynamic how it definitely piece I that the increase, now. to and of having still think Rob really drives tight, on that to on to spoke are much but is across some conversations industry but there's

are sure. those for some there in-depth where allocation. is working to be dynamics material going conversations are on still So there But more

that we're into and increase So And and it balanced December we as of starts very that January, a we've here, said those effect. outlook taking as kind will conversations about go cautious be conversation.

Operator

Mike is with question next from Our Rehaut JPMorgan.

Doug Wardlaw

Hi, just about should decremental margins, decline. how guys. to amid I revenue Mike. wanted for Wardlaw Good morning. XX% we know Doug think a on

Robert Kuhns

so is Yes, this Rob. Doug,

to that long on depending a of make XX% our in XX% labor decline a vary. But our on bit XX% vary, So to one will couple last, that so things be will longer. we how a to we may hold that's goal incrementals, that decremental it little going somewhere is is think to on to range. similar And that

variabilize still make on bit we thing If related, make that work, obviously volume other But it right? side, is direct got do little then worse much. decremental if bit could as the labor to a will that to price that expect XX% we And sure, price little number. XX% that the is we of a -- could worse. that that the So to don't that decremental decline so based, it's that closer piece for go be the

a So make that that higher through bit little that on flow case. would

Doug Wardlaw

Great. those 'XX? Okay. how both businesses? into moving end environment moving And residential you visibility you markets how industrial have then your forward do this do guys And much in and see in

Robert Buck

think you Yes, into space. that, was visibility, on good the recovering, as industrial, industrial coming some mid-'XX. of as COVID, projects commercial 'XX so in slower especially if And about mechanical visibility. think insulation the we're to that round in really space far I now of side, first commercial 'XX and some think pretty you I of in later well so mean, call about bidding that and the if I recover will, or of started out it, the

I'd with how bidding, projects differentiated now on business that about based think a say that's of model on key getting we're we a revenue. again, started, industrial being that TopBuild as projects based we based part we of projects, said, spot see we XX% commercial that on our here. are So And and bright the

and some space. there's spend commercial good and So industrial that projects capital across both up coming really

Robert Kuhns

We just is towards others a Doug, would well, at the And of this pointing Rob. at and definitely, are as the ABI those Dodge that look lot leading to growth. Index. Momentum I add indicators that. and look

as But front. well. we for rates, there's that area we cautiously could said, in sure. like for rise, that that space optimism interest on have knowing continue if to we're they reason that an impact Obviously, optimistic think on So

Operator

with Phil from question is Our Jefferies. Ng next

Margaret Grady

labor guess, guys. Maggie managing kind spread? my this Hey, how that backdrop demand you demand increase is and This how for Maybe yourself a pricing around in XXXX pricing. pricing, a just your I you is see first with yes, weaker weaker see I December question installation your past declining on into looking out potentially do do of guess Particularly Phil. with playing backdrop? piece,

Robert Buck

Yes.

Robert. is this So

So more the if side that, think just on here. labor and you I'll of equation the about focus

a you million, starts still $X.X even So back $X.X labor to was our were million, if constraint. housing

say going going enough of at to you're really in equation. to think And side piece That's value-add running have fiberglass on the so starts. maintenance million X.X going There's of industry to there's as be capacity. We still I that the for housing the well. labor what's full in issue that

think will I play that in the discussions. So

great will and it provide think depend curve at service. where I a And it But to demand obviously, think does will labor that premium. again, I on continue be go. we

have footprint. relationships great across We the

So some relative labor there, I think the but of unknown capacity to the little there bit are in knowns industry.

Margaret Grady

Got it. looks you deals then in small change some or the M&A backdrop? it going quarter. Okay. to what demand about the That's this market helpful. seeing And more into acquisitions does you're approach And types you out a M&A talk multiples with closed of just Can like there? how challenging potentially your

Robert Kuhns

is Maggie, Yes, Rob. this

M&A we've an perspective, So from less a this done obviously, little on that front year.

various that front. we're Knowing deals the the forward. pick even perspective, going getting modeling things downturn, any a is part we're that making to And We ahead, we're Our sure mean, getting if from don't focus I and disciplined to continue in there we be But is assets. looking a great. in on on a downside up M&A cash, times we're know, to really our uncertain gone there's focused we scenarios, hoping so getting filled on scenarios, to strategy frame. it's big now, overpay the generate pipeline got for to be time of DI obviously, certainly has us some that integration, financial which going really front. up going at

Operator

from is with Loop question Capital. next Stevenson Our Jeff

Jeff Stevenson

gains driven I questions. there were strong the the this there my to on share for the dive Was into quarter. quarter. Or by catch-up still wanted taking congrats in volume nice Thanks Hi. elevated And the just primarily improvement as completions? well? on

Robert Kuhns

is this estimate Jeff, be mean, gains best that's perspective, I I is we're mean, I best out in but our that backlog our there, estimate our some there is that Yes. that, through share there. mean, working from could Rob.

there's historic we're right how in into pretty row, that level exceeded we're for backlog. of a certain construction So we've eating quarters number completions that units several a as under now. And

Robert Buck

And this is is -- Jeff, Robert. this

say nice good of service see honestly, there mean, I were commercial going some quarter. on said, think and there, Rob what probably the on build easier volume to both we'd comp, But the we and whenever in the partners to have what's that's just we We job industrial, it a servicing quite signs work ability So improvements compare customers right teams well. in the commercial stuff. great to QX did if that backlog we an field was really side, of the it 'XX and to as

in volume really happy we're quarter. happened the with So the what and

Jeff Stevenson

And wondering, a just had Great. strategic they're That's see potential you levels, of destocking any future? then now? wondering for do And And And in now? helpful. is with right then buys that particularly current the largely I'm you inventory kind need where DI. inventory done at last just quarter,

Robert Kuhns

Yes.

So Rob, this Jeff. is

do inventory from some It's perspective, hand. about inventory. million roughly still So the buys $XX on of have of an strategic we

certain In chain in times you disruptions and change, and we're lead in. of bunch inventory areas where a addition, little get then heavier had a we've some supply

that's another $XX categories. probably So million certain in

there's focus down, So definitely it's for ours. a definitely and some lean to opportunities us of that

basis five every prior at look the we're year, you year on of with year. last inventory apples-to-apples days about If an

Operator

with Our next question is Stephens. Grooms from Trey

Trey Grooms

light a It's have for as variable taking good you cost well. structure. highly the fairly guys question. Thanks Hey, capital morning. Rob,

any you on of may market? a that starts cash in I maybe But should but generation how change? should what working in impact and environment. free to? year, how begin next on start I flow this, for guess, flow negatively rates is through system And sorry cash once be free quarter demand sure pointed lower maybe first the down move conversion you after additional behave possibly we I'm detail Or any see missed to of source color if cash I to strong think a guys, the capital

Robert Kuhns

our of year. We've So hit our and obviously structure our Yes. it I that. really growing with have variable year, continue get do benefit working kind got light, even been you for first working AR XX% sure. biggest X.X% we year, sales cost gets that to Trey, with on increase. This support on come flow, if of to mean, organic going sales high onetime of in And AR for we system some piece the out cash increased the have roughly inventory capital capital the we'll sales. capital as onetime That's and CapEx, strong pressure over downward with our towards we'll generate the we'll collected. right? of hit a

in for get that's we what the So will back. next downtime, benefit forecasting that year, of if coming you're a

year So definitely a of the first free a flow downturn, there's benefit. cash

Trey Grooms

cash free talked And still at M&A absence kind kind that you of out the having whatever the next in capital of are of cycle. there, don't for But absence you to M&A as for flow, good targets of in a earlier, this with about just through M&A, look work kind kind what of question reason priorities the your the a of out follow-up allocation? appetite

Robert Kuhns

Yes.

certainly bit turns working industry that, on cash we're longer. to to that. if balance And a like out always Trey, focused we we're obviously, the sheet. conservative here, little to on front, M&A always to found we're Right So But -- to air making that we'll sure with just we're hold now, returning and be things continue this stay that most of in we're worse, a conservative on if do, can cash the we pocket, like front. varies, we'll thus knowing that be a going of to to be shareholders, we get said, the be which, But we keep efficient going cyclical evaluate be aggressive an options on so that. focused far, going timing more be choppy that buybacks

be surprised to moving with see that continuing So wouldn't forward. I us

Operator

Garner Our question next from Company. Benchmark with is Reuben

Reuben Garner

Good you. morning, everybody. Thank

been a So credits and participate softness the the your and there the in light the get particularly see housing opportunities your in year? there of in huge business, part remodel to on to of that's bigger but side. are the to maybe thoughts way, know for of a the historically it's you next positive impact Reduction tax likely Inflation wanted or side piece, come new the Act potential I guys any I on repair understand, new not I housing

Robert Buck

Reuben, this Robert. is

to at there possibility will. different the re-insulation, if of to I'd who bigger directions. including, can from definitely ratings our stuff. programs credits So relative coming opportunities because as some back, are people upside going builders to be going credits homes there's some through you testing the is think, some some happen say that There's I look of and of the there multiple maybe a

largest probably So you our with upside Home that from act as TopBuild add there's rater mentioned. that business, with you in more know, side that we're value the U.S. the the Services and that bring perspective that on we

Reuben Garner

housing? seeing industrial softness One, there C&I question. date? you front, dynamic at there how you Okay. similar into early a And cycle are early construction us part guess backlog in kind works Obviously, And then to and the of residential gives then the some year. you the signs to side? of can in pipeline two-part visibility Is relative I next the of prolonged looks on the a any remind and commercial least

Robert Buck

Yes.

because a residential to I kind communities the cycle the those little infrastructure backlog it right, commercial, that that building of about definitely, some you a a new delayed, build such follow and like time And in if So those think the that. a to to but that's further, than have projects backlog. then on you're continued as industrial commercial cycle been and community have different break trends commercial and Heavy It's down different of just follow extended. the if cycle, support residential. commercial projects there's and going on just works a bit like envelope building

piece is different that as the about recovery. some been hasn't Number extended been business. even two side. has if dynamics Then start -- One there's chain the constraints on more many to mechanical cycle that heavy think there there. think the I that I is was of of supply So the insulation, the on commercial later been

lot there's on of good spend capital so going And there. a

be that think on that given are a the thing. maintenance side about forward But real that also that's business, thinking of why infrastructure of about regulatory move positive business repair projects type Some kind and That's that that related. there's could of then that MRO, environments, required to of that.

So trends coming online space. then of positive side side the to industrial some that what envelope piece mechanical whenever go projects customers we look player 'XX. There's Commercial we is, and the both as and good as in at that projects, third projects And you we're call we're here well. been I'll to even there, we and the continue we're some largest expect trends about, there's the the really on bidding, again, as we are to and metal building positive know, into building show positive talking definitely think momentum. projects

Operator

Truist question Securities. is next Hughes Keith with from Our

Keith Hughes

if with Thank do from on you Would the the relief future, it associated get how you get would the you. faster? mechanisms builders do can that a insulation Or from that? other manufacturers? have quickly drag pricing, In in place pressure installed some be make you there

Robert Buck

Keith, Yes, this think that I Robert. is

I the in know exists, hear and We sides the Volumes Rob with dynamic the But on past, pressures how works, inflation this slow. there. while start about, I you you I the that's cost. talk that on right? think mean, right? both the manufacturers input to there's work still

for prepared time we'll here. have think will than and play little So that we to evolve different seen, this to this be dynamic have we -- in folks little as a remarks, to a the take I out and is going said to

across we said, executing So tools and great field. us, the in think some at I across we given leadership that branches, the that from the of given have our seen you've footprint, we're great have the being that

dynamic this you've but I'm to has it can that is continue today sure that you for So been as than been strike around well. so in And a while, balance, recognize industry the very we'll appropriate it a past. different

Keith Hughes

Right.

one foam. question other spray on Just

know and you supply, lot downs there's in of but If prices you a stand? talk about ups chemical, there, availability been and I where

Robert Buck

improvement. definitely Yes,

there. the there see elevated the sale last get Even that to to fiberglass, than that amount the That we although spray ballpark materials. fiberglass. Taxes And on probably improved. some about said, post-sale being comparisons improvement improved. call, escalated improved. had the definitely, of probably think chain relation is of Xx no has question in that still say But we the that still we the sale, are foam we side us costs open of open supply usually in still sale, I closed talked about tighter the the

Operator

Our next question with Credit from Dan is Oppenheim Suisse.

Dan Oppenheim

Great. very much. Thanks

terms the Just environment. of acquisition a quick question in

of look ability some scenarios and of what same of looking make for at of liquidity pressure pushback, the still to you're Given about of in more costs you what with Does the in acquisitions, make understanding cautious as you this environment? the in you thing that the does any looking seeing, terms for terms them? talked you potential being proceed increasing some into from other terms smaller in think sort optimistic that that margin competitors

Robert Buck

will would environment, is in say I tag the a and bit this Robert. Dan, little Yes. a it's of mixed Rob I team. bag.

smaller it to the folks, you that now that You've make got a be some if some of thinking will, contractors, are could time about decision.

business more performing You they got to some runway in some the are left improvement. got there well, still they that drive think and

mixed bit little a bag. So a of

Robert Kuhns

these on we're downside sure of cautious Yes. in we like overpaying. just deals -- And modeling Dan, more critical, we're do now mentioned earlier, that terms I scenarios I'd it's modeling and not the even our being, making where say, is And right?

valuing in risks So those are at as we're looking the deals them. at out look those there dynamics that those and we and

Operator

the like the back to reached session. have We turn would to end our I for question-and-answer over management closing of conference comments.

Robert Buck

joining look Thank quarter reporting results us forward our to you February. today. fourth for We again in

Operator

This does today's conference. conclude

for disconnect may time. at And You this lines you thank participation. your your

TopBuild (BLD) 1 Nov 222022 Q3 Earnings call transcript