TopBuild Q2 2025 Earnings Report

TopBuild EPS Results

• Actual EPS: $5.31
• Consensus EPS: $5.07
• Beat/Miss: Beat by +$0.24
• One Year Ago EPS: $5.42

TopBuild Revenue Results

• Actual Revenue: $1.30 billion
• Expected Revenue: $1.30 billion
• Beat/Miss: Missed by -$4.99 million
• YoY Revenue Growth: -5.00%

TopBuild Announcement Details

• Quarter: Q2 2025
• Date: 8/5/2025
• Time: Before Market Opens
• Conference Call Date: Tuesday, August 5, 2025
• Conference Call Time: 9:00AM ET

TopBuild (NYSE:BLD), together with its subsidiaries, engages in the installation and distribution of insulation and other building material products to the construction industry. The company operates in two segments, Installation and Specialty Distribution. It provides insulation products and accessories, glass and windows, rain gutters, garage doors, fireplaces, roofing materials, closet shelving, and other products. The company also offers insulation installation services for fiberglass batts and rolls, blown-in loose fill fiberglass, polyurethane spray foam, and blown-in loose fill cellulose applications. In addition, it distributes building and mechanical insulation, insulation accessories, and other building product materials for the residential, commercial, and industrial end markets. The company serves single-family homebuilders, single-family custom builders, multi-family builders, commercial general contractors, remodelers, and individual homeowners, as well as insulation contractors, gutter contractors, weatherization contractors, other contractors, dealers, metal building erectors, and modular home builders. It operates installation branches and distribution centers in the United States and Canada. The company was formerly known as Masco SpinCo Corp. and changed its name to TopBuild Corp. in March 2015. TopBuild Corp. was incorporated in 2015 and is headquartered in Daytona Beach, Florida.

TopBuild Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: We completed the acquisition of Progressive Roofing, entering the $75 billion commercial roofing services market and beginning integration of best practices.
• Negative Sentiment: Total top-billed sales in Q2 declined 5% to $1.3 billion, driven by continued weakness in residential new construction despite growth in heavy commercial and industrial.
• Positive Sentiment: Adjusted EBITDA margin improved sequentially to 20.1% in Q2, reflecting cost optimization and supply chain efficiencies.
• Positive Sentiment: The company is prioritizing M&A with a robust pipeline and returned $136 million to shareholders through share repurchases in Q2.
• Neutral Sentiment: For 2025, TopBuild forecasts full-year sales of $5.15 billion to $5.35 billion and adjusted EBITDA of $970 million to $1.07 billion, with residential sales expected to decline low double digits.

Presentation

[Operator]

Greetings, and welcome to the TopBuild Second Quarter twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce Piyah Akino, Vice President of Investor Relations. Please go ahead.

[PI Aquino, VP - IR at TopBuild]

Good morning, and thanks for joining us. With me today are Robert Buck, our President and CEO and Rob Kunins, our CFO. Our earnings release, senior management's formal remarks and a deck summarizing our comments can be found on our website at topbuild.com. Many of our remarks today will include forward looking statements, which are subject to known and unknown risks and uncertainties, including those set forth in this morning's press release and in the company's SEC filings. The company assumes no obligation to update any forward looking statements because of new information, future events or otherwise. Please note that some of the financial measures to be discussed during this call will be on a non GAAP basis. These non GAAP measures are not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP. We've provided a reconciliation of these financial measures to the most comparable GAAP measures in today's press release and in our presentation, both of which are available on our website. Let me now turn the call over to our President and CEO, Robert Buck.

[Robert Buck, CEO, President & Director at TopBuild]

Good morning. Thank you for joining us today for our second quarter twenty twenty five earnings call. With half of 2025 behind us, I want to start by saying how proud I am of everything our teams have accomplished so far this year. In July, we completed the acquisition of Progressive Roofing, establishing a new platform for growth in the large, highly fragmented $75,000,000,000 commercial roofing services market. The transaction aligns very well with our core strengths, expands our installation service offerings for commercial customers and increases our exposure to non cyclical, non discretionary revenue drivers.

[Robert Buck, CEO, President & Director at TopBuild]

Commercial roofing is a natural adjacency to our core insulation business with exciting potential and we're delighted to welcome the talented Progressive Roofing team to TopBuild. Our teams are starting to work together including sharing best practices and thoughts on an integration roadmap. We also took steps in the first quarter to better align our cost structure with the demand environment and optimize our footprint including the consolidation of 33 branches across our network. On a daily basis, our teams put a great deal of effort into driving our performance. And I want to thank everyone on our team for continuing to strive for improvement across our business and delivering solid results.

[Robert Buck, CEO, President & Director at TopBuild]

Our continued solid profitability in the second quarter is a testament to our ability to successfully navigate changes in an uncertain macro environment. We are pleased with our sequential improvement from the first quarter with our second quarter adjusted EBITDA margin of 20.1%, which is a direct reflection of the command we have over our business and is supported by our ongoing work to drive improvements across the business and our supply chain. Softness in residential new construction was partially offset by growth in heavy commercial and industrial, where verticals like technology, education and healthcare continue to flourish. Total top billed sales in the second quarter declined 5% to $1,300,000,000 as the new residential construction market remained weak and single family demand slid further on a year over year basis. While the housing market in The U.

[Robert Buck, CEO, President & Director at TopBuild]

S. Is still under built, mixed economic signals, interest rates and affordability concerns continue to weigh on consumer confidence, keeping some home buyers on the sidelines. We'll continue to closely monitor the macro environment. Turning to capital allocation, we have a robust pipeline of acquisition candidates and M and A is still our highest priority for deploying capital. In addition, the Progressive team has several acquisition opportunities in their pipeline.

[Robert Buck, CEO, President & Director at TopBuild]

As always, we'll stay disciplined around valuation and focused on driving strong shareholder returns. In the second quarter, we also repurchased just under 455,000 shares of our stock, returning a total of $136,000,000 in capital to our shareholders. Before I turn it over to Rob, I want to give you a brief look back at our business, but also share with you some thoughts on how we're positioning TopBuild for the future. This past July 1 marked the ten year anniversary for TopBuild as a public company. When I look back over that time, it's remarkable how much we've grown.

[Robert Buck, CEO, President & Director at TopBuild]

When we spun in 2015, we had $1,600,000,000 in sales and mid single digit profit margins. Last year, we were roughly $5,300,000,000 in sales or about a 14% compounded annual growth rate. With Progressive, we'll be more than $5,500,000,000 on a pro form a basis this year. Since 2015, we've also more than tripled our EBITDA margin. Our safety metrics have also improved as we stay focused on keeping our people safe.

[Robert Buck, CEO, President & Director at TopBuild]

Ten years ago, about 85% of our sales were tied to residential and 15% of our sales were tied to the commercial industrial end markets. Now having completed 44 acquisitions, we've grown our commercial industrial sales to approximately 40% of our total sales this year. We've successfully diversified our business and in doing so, we've also improved our sales resiliency. About 20% of our total sales are considered recurring, non discretionary or non cyclical. As we look out, our runway opportunity for growth is exciting.

[Robert Buck, CEO, President & Director at TopBuild]

We have a total addressable market of nearly $95,000,000,000 for insulation and commercial roofing and are encouraged by our growth prospects. Let me give you just one example of how our business diversification positions us well for our next level of growth and more exposure to commercial, industrial and non discretionary spend and reduced dependence on residential housing. Just last week, our leadership team was on-site at a multi phase data center campus in Arizona. At the same data center campus, our now combined top build family of companies was providing multiple services and products for the same contractor. The Progressive Roofing team was providing new construction roofing services for the first 200,000 square foot facility at the site, while our distribution international team was delivering fabricated mechanical insulation parts.

[Robert Buck, CEO, President & Director at TopBuild]

And prior to that, our local TruTeam business had provided building envelope installation solutions in the form of fiberglass and spray foam installation. Currently, there are three twenty four data center projects under construction and 110 data centers that are in the engineering stage. We're also tracking nearly 2,000 more projects that are in the planning stage. This growing vertical of data centers is just one example of the commercial and industrial projects, which TotBuild can now provide a full suite of service solutions. Let me conclude my remarks today by recognizing and thanking each one of our employees.

[Robert Buck, CEO, President & Director at TopBuild]

Our success over the last ten years would not be possible without the hard work and support of our talented and highly motivated teams. Rob?

[Robert Kuhns, CFO at TopBuild]

Thanks, Robert. First, I'd like to thank our teams for delivering another quarter of strong results in an uncertain macro environment. While weak demand in the residential markets continued, our teams have done an outstanding job adjusting our cost structure and driving profitability. In addition, our teams are continuing to drive profitable growth in heavy commercial and industrial end markets. Turning to the second quarter results, total sales declined 5% to $1,300,000,000 Volume was down 7.8%, partially offset by M and A of 1.9% and pricing of 0.9%.

[Robert Kuhns, CFO at TopBuild]

Our Installation segment sales totaled $780,700,000 down 8.3% driven by a 10.5% volume decline, which was partially offset by acquisitions of 1.4% and pricing of 0.9%. The volume decline was driven by weakness in new residential construction and markets. Heavy commercial projects continued to be a bright spot and posted solid growth in the quarter. Specialty distribution sales improved 1.1% to $599,200,000 in the quarter. Acquisitions grew our sales by 2.3% and price added 0.8%.

[Robert Kuhns, CFO at TopBuild]

This was partially offset by lower volume of 2.1. Lower volumes were driven by slower sales of residential products, which were partially offset by continued strong growth in mechanical insulation for the commercial and industrial end markets. Adjusted gross profit in the second quarter was thirty point three percent and seventy basis points lower than last year. Adjusted SG and A as a percentage of sales in the second quarter was 13.3% versus 13.6% last year. Second quarter adjusted EBITDA for TopBuild was $261,300,000 or 20.1% of sales.

[Robert Kuhns, CFO at TopBuild]

Our EBITDA margin improved 110 basis points from the first quarter and was down only 20 basis points to prior year. This strong profitability was driven by the cost actions we took in the first quarter and supply chain improvements. These savings almost entirely offset the EBITDA margin pressures from lower sales volume and price pressure on residential products in our Specialty Distribution segment. Installation adjusted EBITDA margin was 22.3%, up 120 basis points sequentially and flat versus the second quarter of last year. Specialty Distribution adjusted EBITDA margin of 17.2 was up 90 basis points sequentially and down 50 basis points versus the 2024.

[Robert Kuhns, CFO at TopBuild]

Other expense for the quarter was $16,200,000 compared to $7,200,000 last year. The increase is due to the combination of lower interest income from lower cash balances and higher interest expense from our expanded credit facility. Second quarter adjusted earnings per diluted share was $5.31 and compares to $5.42 last year. Turning to the balance sheet and cash flows, we ended the second quarter with total liquidity of $1,800,000,000 of which $842,500,000 was cash and $938,800,000 was available under our revolver. Our total debt at the end of the quarter was $2,400,000,000 higher than prior year due to the refinancing and expansion of our bank credit facility.

[Robert Kuhns, CFO at TopBuild]

This new $2,250,000,000 credit facility includes a $1,000,000,000 term loan, a $1,000,000,000 revolver and a $250,000,000 delayed draw term loan, all of which mature in May 2030. Net debt at the end of the quarter totaled $1,100,000,000 and our net debt leverage ratio was 1.01 times trailing twelve months pro form a adjusted EBITDA. Year to date, our free cash flow is 3 and $21,400,000 up approximately 38% from the prior year, primarily due to the improvement in timing of working capital. Working capital as a percentage of sales totaled 13.7%, which compares to 14.8% last year. We continue to prioritize our strong free cash flows towards M and A and in July, we closed the acquisition of Progressive Roofing. This acquisition establishes a new platform for growth and expands the building envelope installation services we can provide for commercial contractors.

[Robert Kuhns, CFO at TopBuild]

We funded the transaction with cash on hand and proceeds from our expanded credit facility. Assuming Progressive Roofing was in our results for the second quarter, our net debt leverage would have been approximately 1.65 times trailing twelve months pro form a adjusted EBITDA. In the second quarter, we also repurchased shares totaling $136,000,000 On a year to date basis, we've returned a total of $351,600,000 in capital to shareholders, representing about 1,100,000.0 shares. We have approximately 836,400,000 remaining under the current authorization. Turning to guidance, as you saw in the release, we are issuing guidance today that includes the impact the Progressive Roofing acquisition for the balance of the year.

[Robert Kuhns, CFO at TopBuild]

We expect full year sales to be between 5,150,000,000 to 5,350,000,000.00 Our assumptions are as follows. On a same branch basis, including price, we are now assuming that residential sales will decline low double digits for the year, driven by continued weakness in both single family and multifamily activity. Commercial and industrial same branch sales are expected to be flattish to up low single digits. We expect heavy commercial to remain strong, while light commercial will continue to be challenged. The full year impact of M and A is expected to add approximately $300,000,000 to sales.

[Robert Kuhns, CFO at TopBuild]

Inclusive of M and A, total net sales will be flattish in the third quarter and up low single digits in the fourth quarter, as the fourth quarter will benefit from a full quarter of Progressive sales and the comparison to prior year is slightly softer. We expect adjusted EBITDA for the year to be between $970,000,000 to $1,070,000,000 At the midpoint of our guidance, adjusted EBITDA margin will be 19.4%, a very strong profit performance. In closing, I want to thank our teams once again for their efforts and I would also like to welcome our new teammates from Progressive Roofing. As TopBuild enters its second decade as a public company, I couldn't be more excited about the growth opportunities that lie ahead for our teams and for our shareholders. With that, I'll turn it back to Robert.

[Robert Buck, CEO, President & Director at TopBuild]

Thanks, Rob. I want to express my confidence in the underlying fundamentals for our business. Our flexible and diversified business model enables us to deliver solid results. We have incredibly focused teams that have great control over our business. We've proven that we can adjust our operations as demand changes and expect to outperform in a changing environment.

[Robert Buck, CEO, President & Director at TopBuild]

As always, we'll stay focused on driving profitable growth and increasing shareholder value. We are planning to host an Investor Day in New York on Tuesday, December 9. We'll be sharing more details in the coming months and look forward to having you join us in person. With that, operator, let's open up the line for questions.

[Operator]

Thank you. We'll now be conducting a question and answer session. Our first question is from Michael Rehaut with JPMorgan.

[Michael Rehaut, Executive Director at JP Morgan]

Yes, thanks. Good morning, everyone. Thanks for taking my questions. First, I wanted to dive in a little bit to Progressive and just the impact on the second half more so from the margin side if you expect that to be dilutive or accretive to margins and how you're thinking about the contribution in 2026? And I guess more broadly how you're seeing early opportunities perhaps even from the sales synergy side as well?

[Robert Kuhns, CFO at TopBuild]

Sure, Michael. This is Rob. I'll start and Robert will jump in with the second half. I mean in terms of our guidance what we have baked in for Progressive, from a sales perspective, it's roughly about $215,000,000 incremental for Progressive. Our guide last time was around $85,000,000 for M and A.

[Robert Kuhns, CFO at TopBuild]

We're up to about $300,000,000 And then the EBITDA that goes with that is going to be right around in the neighborhood of 20% EBITDA. Really not decremental or heavily incremental to where we're running right now, pretty much in line with our core business.

[Robert Buck, CEO, President & Director at TopBuild]

Yes, Michael, relative to the question on cross selling and the synergy piece, yes, really excited about that. I mean, that data center project I gave you the example of in the prepared remarks, I mean, that's one example. As we've started working with the Progressive team and looking at crossover and projects, customer base, verticals, that type of thing, we definitely see an opportunity. And I've already been on a few M and A visits with the Progressive team as well and talking to some, I'm going say future companies that will be coming on board. We see that as well and some crossover where they have relationships with our insulation contractors and stuff as well.

[Robert Buck, CEO, President & Director at TopBuild]

So, think was a part of our model, but we definitely see upside to that as we're starting to work together.

[Michael Rehaut, Executive Director at JP Morgan]

That's great to hear and obviously very exciting in terms of the multi year prospects that that whole vertical can lend itself to. So congrats on that. Secondly, appreciate also the I guess more challenging core business, specifically residential end markets down low double digits versus down high single digits before. Maybe you could just talk about which parts of the business that's hitting more? Is it kind of equally on installation or distribution?

[Michael Rehaut, Executive Director at JP Morgan]

And also just if there's particular areas of the country or any more color in terms of what's driving that softness and if we should expect perhaps down low double digit rate into let's say the 2026?

[Robert Kuhns, CFO at TopBuild]

Yes, Michael, I'll this is Rob. I'll start with kind of what we've got baked into our guidance and what we saw Robert can get into some of the details of what we're seeing kind of across the country. Yes, we've adjusted our midpoint guidance around residential to be down low double digits from high single digits before. And that's really primarily driven by deterioration in single family that we've seen really the guidance we had previously assumed things weren't going to get worse from what we saw in the first quarter and we definitely saw the starts environment slow down here in the second quarter. So we're baking that into the guidance.

[Robert Kuhns, CFO at TopBuild]

I'd say the other piece that's been a little bit softer is light commercial. Heavy commercial as we talked about has been strong, industrial has been strong. So seeing a lot of good growth there, but light commercials remain challenged. So we've eased up a little bit on the commercial guidance as well to being flattish to up low single digits. So that's really the core changes in guidance.

[Robert Kuhns, CFO at TopBuild]

Robert can take you around the country a little bit in terms of what we're seeing.

[Robert Buck, CEO, President & Director at TopBuild]

Yes. So it's a mixed bag around the country as you might expect. Mike, I'll give you a few instances. So let's just pick here in Florida where we are. South Florida slow, Orlando, some positive trends, The Panhandle some positive trends, but Jacksonville slow.

[Robert Buck, CEO, President & Director at TopBuild]

You move up to the Southeast, we like what we're seeing coming here in The Carolinas and even not even optimistic up in the Northeast and the Midwest. Texas is the mixed bag again, Like what we're seeing in Dallas and San Antonio, but Austin, Houston slow from that perspective. Just a couple other Colorado, single family slow, building some multifamily backlog in Colorado, so a little bit back there. Some better trends in multifamily, probably Vegas and Southwest. We see some positive things building in the Northwest right now.

[Robert Buck, CEO, President & Director at TopBuild]

So it's kind of mixed as you go around a little mix multi versus single.

[Michael Rehaut, Executive Director at JP Morgan]

Great. And any thoughts about how that might carry over into the first half of next year?

[Robert Buck, CEO, President & Director at TopBuild]

I think you're seeing some of the builders where they're coming out with the public builders as they're talking as you've seen their guidance and stuff. And I think we're aligned across the variety of size of builders there. So we're definitely starting to bid work for in the fourth quarter into the first part of next year. I think some of that multifamily that we're talking about and even seeing some of the starts, that's probably heading into the first quarter of next year. So that's kind of how we think about it and see it.

[Michael Rehaut, Executive Director at JP Morgan]

Great. Thanks so much. Certainly.

[Operator]

Our next question is from Susan Maklari with Goldman Sachs.

[Susan Maklari, Senior Equity Research Analyst at Goldman Sachs]

Thank you. Good morning, everyone.

[Robert Kuhns, CFO at TopBuild]

Good morning.

[Susan Maklari, Senior Equity Research Analyst at Goldman Sachs]

My first question is focused on the commercial industrial side of the business. Can you give us a bit more detail on how you're thinking about the volume versus price breakdown in there? And maybe with that, are you still seeing some of that momentum on the price side within that segment of the business that you talked to in the first quarter?

[Robert Kuhns, CFO at TopBuild]

Yes, Susan, this is Rob. So yes, from a price perspective, what we talked about in the first quarter was we saw some incremental pricing on some of the mechanical insulation products and mineral wool products that we use on that side. Those definitely stuck through the second quarter. So we're continuing to see that. The weakness is really from a volume perspective on the light commercial side of things where we're down double digits, I'd say on a year to date basis.

[Robert Kuhns, CFO at TopBuild]

We're up on the heavy commercial side of things more the high single digits, almost double digits on a year to date basis. So seeing good growth there, but the light commercial weighing a little bit heavier on us right now.

[Susan Maklari, Senior Equity Research Analyst at Goldman Sachs]

Okay. That's helpful. And then one of the things that you mentioned in your prepared remarks was improvements to the supply chain. Can you talk a bit more about what some of those efforts are? How we should think about them continuing to flow through the business in the back half of this year?

[Susan Maklari, Senior Equity Research Analyst at Goldman Sachs]

And any potential for additional opportunities there and what those could mean for the business?

[Robert Buck, CEO, President & Director at TopBuild]

Yes. Good morning, Susan. It's Robert. So a couple of things to talk about. In first quarter, we talked about some of the work we did in optimizing the footprint.

[Robert Buck, CEO, President & Director at TopBuild]

That's obviously coming through in supply chain savings for us relative to logistics, relative to even some productivity measures that we track as we work through that as we make sure we position our resources appropriately based on where work and jobs are happening. So that definitely be part of it. We're obviously working with our supplier partners. I mean, I think we've talked about openly around spray foam as an example. So we're obviously working with those supplier partners as there's been some dynamics change there.

[Robert Buck, CEO, President & Director at TopBuild]

So we'll expect that to continue the back half of the year here as we're in constant discussions and constantly working with working to drive improvements in our business and working with our partners as well.

[Susan Maklari, Senior Equity Research Analyst at Goldman Sachs]

Okay. Thank you for the color. Good luck with the quarter.

[Robert Kuhns, CFO at TopBuild]

Thank you.

[Robert Buck, CEO, President & Director at TopBuild]

Thank you.

[Operator]

Our next question is from Phil Ng with Jefferies.

[Philip Ng, Managing Director at Jefferies Financial Group]

Hey, guys. Congrats on a really strong quarter in a dynamic environment. So I guess question for me is around pricing. Pricing was actually pretty solid in the first half. It's holding despite a pretty tough resi backdrop.

[Philip Ng, Managing Director at Jefferies Financial Group]

Rob, I guess implicit in your guide and your conversations with your big builder customers, how are you seeing that pricing backdrop kind of unfolding? Obviously, they're dealing with a lot of affordability headwinds as well. And on the flip side, the cost side, what are you seeing on that side of things, especially material costs, whether it's fiberglass or spray foam in the back half? So when you kind of think about price cost, what's embedded in your guide and how you're thinking about it? Thank you.

[Robert Kuhns, CFO at TopBuild]

Yes. So Phil, this is Rob. I'll start. Robert will jump in. But I'd say what we've got baked in from a guidance perspective, to what we've talked about last quarter, we do have some price cost headwinds baked roughly $30,000,000 of headwind in the back half of the year.

[Robert Kuhns, CFO at TopBuild]

Knowing that really the price, the first half of this year was driven by carryover benefit of fiberglass pricing that hit kind of middle of last year. So we're going to be rolling over that, no longer benefiting from that. As well as the commercial products that I talked about a little bit earlier, we're seeing the benefits of those. We do expect those to carry forward through the remainder of the year. But obviously with that dynamic, the comparisons are going to get a little tougher on price.

[Robert Kuhns, CFO at TopBuild]

And to your point, builders are pushing out there and where necessary we do adjustments. We're definitely seeing the price impacts a little heavier impacting the margins on distribution side of the business, the residential side of the distribution business. But like I said, we've got some headwinds baked into the second half forecast. That's why the EBITDA margins are a little bit worse than the first half. Hopefully that proves to be conservative, but we got to see how that plays out.

[Robert Buck, CEO, President & Director at TopBuild]

Yes. I think Phil, so to add on to what Rob said, mean, can see the performance in second quarter. You can do the calculation in the back half. I mean, still very solid profitability. So what that equates to is great work by the teams in the field from a few different things.

[Robert Buck, CEO, President & Director at TopBuild]

One, driving productivity, working all elements, including labor productivity, sales productivity, where do we get where do we pick up more volume and how do we leverage that relative to driving our efficiencies in the field. So I think that speaks loudly to that. And then also definitely working with our supply partners. You talked about the foam side, fiberglass as well. So continue to work with our supply partners here because we can provide some uncertainty in an uncertain environment.

[Philip Ng, Managing Director at Jefferies Financial Group]

Got it. No doubt, Robert and Rob. I mean, that margin performance guidance for the year is pretty incredible given the current backdrop. So true testament to the business. On your C and I side of things, any more color on how booking orders are progressing as well as the Progressive deal?

[Philip Ng, Managing Director at Jefferies Financial Group]

Any cancellation project delays? And how is the order book looking into 2026?

[Robert Buck, CEO, President & Director at TopBuild]

Yes. So Phil, Robert, I'd say solid. As we look at so just give a few data points here. As we look at bidding, as we look at bidding activity backlogs here, heavy commercial industrial looks positive, continues. Would say cancellations, nothing on the radar that we're seeing on cancellations.

[Robert Buck, CEO, President & Director at TopBuild]

And I'd say just obviously, we've been working the relationship with Progressive for a while and now being part of our team here for nearly a month, love what we're seeing there. And that team just does a fabulous job of continuing to work their relationships across multiple service areas and continue to build backlogs there as well.

[Robert Kuhns, CFO at TopBuild]

Yes. Phil, I would just add to that. I mean we were in Arizona with the Progressive folks about a week ago and they're really happy with where their backlogs are sitting right now and definitely stronger than a year ago. So feeling really good about that.

[Philip Ng, Managing Director at Jefferies Financial Group]

That's really great color. Any way to size some of these stronger end markets in C and I that you're seeing whether it's data centers or perhaps some of these LNG projects and whatnot? Just trying to give us a perspective on how impactful it is for your C and I franchise?

[Robert Buck, CEO, President & Director at TopBuild]

Yes. So a couple of points there. So data centers, key one. If you think about power generation, which you got to have that infrastructure relative to the data centers, I'd say that's another one to point to. And by the way, as we think about power, you think about LNG, that's U.

[Robert Buck, CEO, President & Director at TopBuild]

S. And Canada. I mean, Canadian team is doing fabulous. If we look at their results and we look at backlog there for the rest of the year, so we're seeing that strength across verticals in Canada. And I'd also point out definitely healthcare, and then manufacturing, food beverage.

[Robert Buck, CEO, President & Director at TopBuild]

And then we're seeing it and again because the relationships we have, seeing in education as well in some key markets.

[Philip Ng, Managing Director at Jefferies Financial Group]

Okay. Appreciate all the great color guys and continue to good work.

[Robert Kuhns, CFO at TopBuild]

Thank you.

[Robert Buck, CEO, President & Director at TopBuild]

Thank you.

[Operator]

Our next question is from Keith Hughes with Truist Securities.

[Keith Hughes, MD - Sell Side Equity Research at Truist Securities]

Thank you. You had said earlier on the call, I think you're about 40% commercial industrial sales. Did that include the roofing transaction or is that before the transaction?

[Robert Kuhns, CFO at TopBuild]

That's inclusive of the roofing transaction.

[Keith Hughes, MD - Sell Side Equity Research at Truist Securities]

Okay. And on Progressive, could you give us a feel how much of their business would be in the heavy commercial versus the light commercial? Is that something you know?

[Robert Buck, CEO, President & Director at TopBuild]

On the Progressive side of the business, by far the majority heavy Yes. Commercial,

[Robert Kuhns, CFO at TopBuild]

The important part to remember there is that it's only 30% new construction. So 70% is reroof and services. To Robert's point, more towards heavy commercial projects.

[Keith Hughes, MD - Sell Side Equity Research at Truist Securities]

Does Progressive slant towards any one of the different applications, PPDM, CPO, anything like that?

[Robert Buck, CEO, President & Director at TopBuild]

No. They're agnostic. They really got a great skill set there to provide any of the solutions, including to Rob's point, can handle it on new construction, but definitely any of the applications from a reroof service maintenance perspective as well. So great skill set across the team there.

[Keith Hughes, MD - Sell Side Equity Research at Truist Securities]

Okay. And final question. As you progress in the second half of the year, those commercial numbers are I think they're weakening. I think you said that in the call. Is there any signs of life in terms of order activity coming in that could paint to something brighter in 2026?

[Robert Kuhns, CFO at TopBuild]

Yes. Keith, this is Rob. I'd say on heavy commercial side and some of the larger projects, we still feel pretty good given the backlogs we have there. Definitely feel good about the back half of the year. We'll have to see on 2026, but we're definitely bidding work out that far.

[Robert Kuhns, CFO at TopBuild]

And like I said, Progressive's backlog is strong there as well. But the headwinds on the light commercial side are what's been the drag on that side of things.

[Keith Hughes, MD - Sell Side Equity Research at Truist Securities]

Okay. So no light at the end of the tunnel on that yet?

[Robert Buck, CEO, President & Director at TopBuild]

Not on light commercial, but to Rob's point, I think we feel solid about heavy commercial on the industrial based on the backlogs.

[Philip Ng, Managing Director at Jefferies Financial Group]

Okay, great. Thank you.

[Robert Buck, CEO, President & Director at TopBuild]

Thank you.

[Operator]

Our next question is from Stephen Kim with Evercore ISI.

[Stephen Kim, Senior MD at Evercore ISI]

Yeah. Thanks very much guys. Appreciate it all the color. Let me start on the M and A side. I think you had talked previously about the fact that Progressive has superior margins to its competitors in the space.

[Stephen Kim, Senior MD at Evercore ISI]

And I'm curious as to how you think Progressive might go about raising any acquired entities kind of up to their level. If you could sort of just walk us through what you think the opportunity there is and how you would go about capturing that, that would be helpful. Then also, you also have this other vertical where it seems like it's been a little quiet in the mechanical and industrial side on the M and notwithstanding the efforts at SPI or with SPI. Curious if you can give us an update specifically on the mechanical and industrial pipeline, how that's looking? Thanks.

[Robert Buck, CEO, President & Director at TopBuild]

Yes, Stephen, this is Robert. Good morning. So let me start on the Progressive side. It's something that we spend a lot of time with understanding and learning and seeing the track record. So if you think back to our announcement about the transaction, it's really about the business system that Progressive has.

[Robert Buck, CEO, President & Director at TopBuild]

And so their ability to how they target jobs, how they bid jobs, even selecting the job there based on the scope of the bid, if you will, or the spec of the job, if you will. And then obviously, as they get involved, how they engineer and how they track and manage the job, man hours, man days, and they've got certain checkpoints, if you will, throughout the process there of making sure that their jobs are staying on track. So that's really the business system and how they manage those jobs everywhere from what they go after to how they bid it, to how they manage the job to make sure it's landing appropriately, or exceeding. And then I'd say other things around, they're definitely synergy perspective of things they bring to the table whenever they do a transaction. And then there are obviously going to be some of those that top build ads as well.

[Robert Buck, CEO, President & Director at TopBuild]

So you're right, there's a variety of margins that we see across M A landscape in roofing. But as we looked at those and we've looked, Rob and I've looked at some recent ones here, The record of what can happen there, high level confidence and we would say generates a great, great return for our investors. So Progressive, we dug into that a lot of detail and high level confidence in their business system and how that works. I think relative to mechanical, you bring up a great point. So we did two transactions in the space at the 2024 and Shannon Global and then Metro.

[Robert Buck, CEO, President & Director at TopBuild]

So we've got to get things in the pipeline here. Those companies have come on board, have gotten integrated, but we continue to have pipeline opportunities there. But we've had a couple that we've walked away from because we continue to remain disciplined here and going to bring on ones that are going to drive great returns here. So there's definitely activity in that space, but we'll stay targeted there and we see opportunity continue to be on the mechanical side. That's a great question.

[Robert Buck, CEO, President & Director at TopBuild]

And as we said on the M and A standpoint, the core still has a lot of opportunity and Progressive is bringing a ton of opportunity as well.

[Stephen Kim, Senior MD at Evercore ISI]

Thanks for that Robert. On the Progressive, the system that they have, are there proprietary computer systems or software that they utilize? Or is it merely the way in which they utilize or employ just the standard type of computer systems or management systems that everybody else has. It's just they utilize them in a better way.

[Robert Buck, CEO, President & Director at TopBuild]

I'll hit that from two or three different directions. Rob may have some additional comments here. So I think what they've done from a job costing perspective in that, I'd say there's some things others don't have. So you could call that proprietary. But I would just say their training.

[Robert Buck, CEO, President & Director at TopBuild]

I mean, they bring folks on board, how they train the talent development, the focus on talent development, whether it be leadership in the field or whether it be from a sales talent perspective. They've got something they've developed there that works and that's how they've continued to scale the business. I think whenever we made the announcement, we talked about the organic growth rate, Some things that have led to that organic growth rate in that business. I'd say some proprietary, but I'd also say beyond what I call business system, I'd say some great training and talent development as well.

[Robert Kuhns, CFO at TopBuild]

Yes. And this is Rob. I'd just add, I mean, I think similar to our business, it's a relationship business, right? And Nick and team do a great job of building relationships with key contractors and getting bids on jobs where they they're going to have a right to win. And Robert touched on it in terms of their job tracking and cost tracking that they do.

[Robert Kuhns, CFO at TopBuild]

They've developed worked to put together a tool that's really helpful for them with that and it's really integrated not just into their accounting, but into their operations. And that's certainly not something we see with every company we've looked at in that space. And so while as Robert mentioned, the margin profiles of other companies in the space are not as strong as Progressive's, that just makes a bigger opportunity for us in terms of what we can bring them to. So that's another reason we're so excited about the space.

[Stephen Kim, Senior MD at Evercore ISI]

Appreciate that. That's really clear. Last one for me staffing. I think in previous calls you had indicated that you were reluctant to move too quickly on reducing staffing levels on the idea that you might see a recovery in volume and you want to be ready for it. Simply put, do you feel that given the modest deterioration in the market in the last several months that maybe you're taking a harder look at staffing levels?

[Robert Buck, CEO, President & Director at TopBuild]

Yes. I'll start with that, Stephen. So you saw what we did in the first quarter. I think we appropriately calibrated with those actions. But our team continues at a local market and obviously the standard ERP gives us that insights to look at that on a market by market basis.

[Robert Buck, CEO, President & Director at TopBuild]

But we did a lot of calibration there at that first quarter action. And I think what you heard us say is we didn't cut muscle. We feel like we're prepared for if there are updates and things that happen here. But yes, we definitely the team's taken the appropriate action to this point.

[Robert Kuhns, CFO at TopBuild]

Yes. And I'll just add, Stephen, we did we talked about last quarter those cost actions we took, it's between the lease cost and the people cost north of $30,000,000 a year in savings. And you can see the benefit of that in this quarter's results, right? Our decremental was 23% for the quarter, same branch decremental when you pull out the impact of M and A. So below what we've talked about as a target from 27%.

[Robert Kuhns, CFO at TopBuild]

Our full year guidance is closer to 29%, but that's because of the price cost headwind we've got baked in that I talked about. But I definitely feel like we've calibrated from a headcount standpoint to the volumes we're seeing right now. And as Robert points out, we're going to continue to monitor that and we'll take further actions if necessary.

[Stephen Kim, Senior MD at Evercore ISI]

Perfect. Thanks so much guys.

[Operator]

Our next question is from Colin Veron with Deutsche Bank.

[Collin Verron, Director at Deutsche Bank]

Hey, good morning. Thank you for taking my questions. I just want to start just to follow-up on the Progressive Roofing here. I know you've only owned it for less than a month, but any early reads on how quickly you can start executing M and A in Commercial Roofing? And what the deals in the Progressive pipeline look like from a size perspective when you acquired it?

[Robert Buck, CEO, President & Director at TopBuild]

Yes. So good morning, Colin. This is Robert. I'll start off. We said a few things.

[Robert Buck, CEO, President & Director at TopBuild]

We made the announcement about a month ago. Number one is there's some nice chunkier deals in the pipeline there. We've seen that, like I mentioned, maybe on one of the previous questions, visited a few of those and Rob and I've started getting involved with the process. But Progressive got a team there that's focused on it. So that's why it is exciting.

[Robert Buck, CEO, President & Director at TopBuild]

I think we said earlier, we think the multiples stay pretty close to what you've seen in some of our traditional multiples for some of those side deals on the roofing side. So good activity there. We're I don't mind saying this, we're making an investment to make sure that the momentum of M and A keeps up on that side, at the same time staying disciplined. So we think there's good opportunity there and we'll be excited to be talking to you about that in the future as well.

[Collin Verron, Director at Deutsche Bank]

Great. I appreciate the color. And then just one follow-up question on the pricecost question. I think Rob, you mentioned that it was a $30,000,000 headwind in the back half of the year. Was that just a price comment? Or was that a total pricecost headwind?

[Robert Kuhns, CFO at TopBuild]

It's both really, right? It's more driven by the top line, but it's the net impact between

[Collin Verron, Director at Deutsche Bank]

it.

[Collin Verron, Director at Deutsche Bank]

Great. Thank you. I'll leave it there and pass along pass it on.

[Robert Buck, CEO, President & Director at TopBuild]

Thank you.

[Operator]

Our next question is from Ken Zener with Seaport Research Partners.

[Kenneth Zener, Senior Analyst - Housing Sector at Seaport Research Partners]

Good morning, everybody.

[Operator]

Morning, Ken.

[Kenneth Zener, Senior Analyst - Housing Sector at Seaport Research Partners]

Ten years, Robert, long time. That makes me think like this quarter, you guys had a big footprint. You all said you're going to grow into your branches that would provide you operating leverage with your IT system, etcetera, etcetera. We by and large seen that. Then the concern was during a contraction, which volume down 10% res, that's a modest one.

[Kenneth Zener, Senior Analyst - Housing Sector at Seaport Research Partners]

You guys cut costs, your SG and A is still percentage wise the same. Rob, you're talking about the second half price cost headwinds that are baked into your guidance. It's just you guys have been able to handle the incrementals better, right? So specific to the second half positive, negative factors, what kind of gets you if you're guiding conservative to that 29%, what are kind of the things that you think about it in the positive bucket that could get you more to what you saw in the first half? And what are the things that could go against you to get to that midpoint? Is it volume predominantly? Yes,

[Robert Kuhns, CFO at TopBuild]

Ken, this is Rob. Yes, I mean volume is definitely a player in that, right? I mean, the residential single family in particular environment continues to get worse from here, that could be a potential headwind. We're not hearing that at this point or projecting it to get a whole lot worse. I'd say it's going to be our guidance has it a little worse the back half than the first half, but not a dramatic fall off there.

[Robert Kuhns, CFO at TopBuild]

I think commercial industrial potential upside, right? I mean, as we talked about in the past, there's large projects can fluctuate quarter to quarter in terms of timing, but our backlogs are good. So we feel like that could be an opportunity in the back half of the year. I think the big ones that's different than the first half is price cost. We've had kind of a price cost headwind baked in throughout the year being cautious.

[Robert Kuhns, CFO at TopBuild]

It hasn't cost us a ton so far this year. I'd say on the distribution side, see a little bit of impact there. On the install side, not as strong at this point. So hopefully potentially that's a conservative assumption that gets us maybe in a little better spot. But there's a lot of potential puts and takes there, but I think all in all we feel really good about the midpoint of our guidance.

[Robert Kuhns, CFO at TopBuild]

I think roofing is new. We got to see how they do. But like I was saying before, we feel good about the backlog of work they do or the backlog of work they have and the results we've seen so far. Feel pretty good about that as well as the potential upside potential in the back half of the year.

[Kenneth Zener, Senior Analyst - Housing Sector at Seaport Research Partners]

And then we estimate to the public builders the res exposure you guys are call it 30% give or take to the larger builders top 10. Are you doing better with the publics would you say or with the private builders? And given your guidance, do you think that the public builders, which kind of more the smile states, we all kind of know where they are, but like is inventory more of an issue in those markets where the publics are? Or is it in more on the private side? Thank you very much.

[Robert Kuhns, CFO at TopBuild]

Yes, Ken, I'll start on that and Robert will add on here. But I'd say overall what we're seeing year to date, the private and regional builders have held up pretty well. Custom builders especially I think have done pretty well so far this year. So in a tough environment pretty well relative, right? But they're hanging in there.

[Robert Kuhns, CFO at TopBuild]

I wouldn't say they're doing significantly worse than the big builders this year.

[Robert Buck, CEO, President & Director at TopBuild]

And I think your custom builders doing well. I mean, you think about that client base for the majority of them. But then I'd say regional builders look regional builders to sell what's coming out of the ground. So they've done well, but they got to sell their inventory and we see that in our discussions with them and our bidding with them as well. So I think that's where you see the pressure point there with the regionals.

[Kenneth Zener, Senior Analyst - Housing Sector at Seaport Research Partners]

Thank you very much.

[Robert Kuhns, CFO at TopBuild]

Thank you.

[Operator]

Our next question is from Ralph Dudrowski with Bank of America.

[Rafe Jadrosich, MD & Senior Equity Analyst - U.S. Homebuilders & Building Products at Bank of America]

Hi, good morning. It's Rafe. Thanks for taking my question.

[Robert Kuhns, CFO at TopBuild]

Good morning, Rafe.

[Robert Buck, CEO, President & Director at TopBuild]

Good morning.

[Rafe Jadrosich, MD & Senior Equity Analyst - U.S. Homebuilders & Building Products at Bank of America]

I wanted to just follow-up on some of the price cost commentary for the second half of the year. The 30,000,000 headwind, it sounds like that's predominantly price on the installation side. Are you getting any relief? Are you able to push back on the manufacturers yet? And if we go into 2026 and say the market stays like stable with where it is, remains soft, will there be more opportunity on the cost side of that price cost equation?

[Rafe Jadrosich, MD & Senior Equity Analyst - U.S. Homebuilders & Building Products at Bank of America]

Like could that narrow going forward, if the backdrop stays consistent?

[Robert Buck, CEO, President & Director at TopBuild]

Morning, Rick. It's Robert. So look, there's an abundance of supply out there now, no doubt about it. So obviously, it's constant conversations with the supply partners to make sure we're calibrating. Obviously, they're important to them.

[Robert Buck, CEO, President & Director at TopBuild]

So we're definitely having constant dialogue and conversations there. Mentioned spray foam earlier is a good example of that. So there's definitely a consistent dialogue happening with the supply partners right now across the business quite honestly.

[Rafe Jadrosich, MD & Senior Equity Analyst - U.S. Homebuilders & Building Products at Bank of America]

You haven't seen anything on the fiberglass side yet though it sounds like in terms of the relief from manufacturers?

[Robert Buck, CEO, President & Director at TopBuild]

I'd say there's been equal discussions there as well.

[Rafe Jadrosich, MD & Senior Equity Analyst - U.S. Homebuilders & Building Products at Bank of America]

Okay. And then in terms of the outlook for M and A on the commercial roofing side with Progressive, can you talk about your willingness of the level of leverage you would be willing to take for larger deals, just given some of the weakness on the core business?

[Robert Kuhns, CFO at TopBuild]

Yes, Rafe, this is Rob. So as we've talked historically, we're very comfortable between one and two times net debt leverage. That's where we've spent most of our time. But we have gone above that and we'll go above that for the right deals. With DI and USI, we went up kind of north of 2.5 times.

[Robert Kuhns, CFO at TopBuild]

So I think between two and three times, certainly very comfortable there if we see a good opportunity from an M and A perspective. And as we have in the past, we've always delevered pretty quickly after that. And so we would anticipate doing that if we saw the right opportunity there to do that.

[Rafe Jadrosich, MD & Senior Equity Analyst - U.S. Homebuilders & Building Products at Bank of America]

Great. Thank you.

[Operator]

Our next question is from Reuben Garner with The Benchmark.

[Reuben Garner, Managing Director at The Benchmark Company LLC]

Thanks. Good morning, guys. Congrats on the strong results. Just one question from me. In the past few years, not a ton of focus, I don't think, from you guys on kind of growing your R and R business on the residential side, not didn't have the time, didn't have the resources, didn't have the materials.

[Reuben Garner, Managing Director at The Benchmark Company LLC]

Can you talk about that market? Is this kind of down cycle in new housing an opportunity to focus more there? Or is that still not kind of top of mind for you guys?

[Robert Buck, CEO, President & Director at TopBuild]

Yes. Good morning, Ruben. This is Robert. So I'd say our Service Partners team gets after that on the R and R side. So relative to the smaller contractor that's doing that work, that's definitely a focus of our distribution business on the Service Partners side.

[Robert Buck, CEO, President & Director at TopBuild]

So that continues to be a good part of the business, continues to be a healthy part of the business there because there are definitely smaller projects going on in the residential side. And so definitely our service partners team gets after that and that continues to be a focus for our distribution side of the business.

[Reuben Garner, Managing Director at The Benchmark Company LLC]

Thanks guys. Good luck.

[Robert Buck, CEO, President & Director at TopBuild]

Thank you.

[Robert Kuhns, CFO at TopBuild]

Thank you.

[Operator]

Thank you. There are no further questions at this time. I'd like to hand the floor back over to Robert for any closing comments.

[Robert Buck, CEO, President & Director at TopBuild]

Okay. Thank you for joining us today and we look forward to talking with you in early November where we'll be talking our Q3 results. Thank you.

[Operator]

This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.

Participants

Executives

• PI Aquino, VP - IR
• Robert Buck, CEO, President & Director
• Robert Kuhns, CFO

Analysts

• Michael Rehaut, Executive Director at JP Morgan
• Susan Maklari, Senior Equity Research Analyst at Goldman Sachs
• Philip Ng, Managing Director at Jefferies Financial Group
• Keith Hughes, MD - Sell Side Equity Research at Truist Securities
• Stephen Kim, Senior MD at Evercore ISI
• Collin Verron, Director at Deutsche Bank
• Kenneth Zener, Senior Analyst - Housing Sector at Seaport Research Partners
• Rafe Jadrosich, MD & Senior Equity Analyst - U.S. Homebuilders & Building Products at Bank of America
• Reuben Garner, Managing Director at The Benchmark Company LLC