Margaret Grady

Margaret Grady asked for more detail on the pricing outlook, specifically the low single-digit decline and the split of the $55 million price-cost headwind between segments, and how margin guidance incorporates productivity initiatives or if they represent upside.

Answer

Robert Kuhns, CFO, explained that pricing is a mixed bag, with positive pricing in Specialty Distribution (commercial products, gutters) offsetting pressure in fiberglass and spray foam, which is expected to continue. He noted that productivity initiatives are ongoing, and M&A synergies (especially SPI) are a significant lever, with over 70% variable costs allowing for quick adjustments if demand weakens further, aiming for a 27% decremental.

Margaret Grady with Jefferies sought clarification on TopBuild's pricing outlook, specifically the low single-digit decline, the split of the $55 million price-cost headwind between segments, and product-specific trends for gutters, spray foam, and fiberglass. Grady also asked if the margin guidance incorporates productivity initiatives and potential levers for weaker demand.

Answer

CFO Robert Kuhns detailed that the price-cost bucket is a mix, with mechanical insulation and gutters seeing price increases, while fiberglass and spray foam face pressure. Kuhns noted that the margin guidance includes cost reductions and productivity, with potential upside from synergies. He reiterated that TopBuild would adjust its cost structure further if demand weakens, aiming for a 27% decremental margin.

Margaret Grady of Jefferies inquired about the framework for TopBuild's 2025 outlook and its ability to drive organic growth amidst market choppiness. She also asked about the price realization for fiberglass and whether spray foam prices are stabilizing.

Answer

CFO Rob Kuhns expressed optimism for a tenth consecutive year of growth in 2025, noting that while multifamily is a headwind, the rest of the business only needs to grow slightly over 3% to achieve overall growth. CEO Robert Buck added that while fiberglass pricing conversations with builders are ongoing, the team has performed well. He noted that competitive supply has pressured spray foam prices but expects the situation to stabilize heading into 2025.

Margaret Grady, on for Phil Ng at Jefferies, asked about the margin profile of railing compared to decking, historical attachment rates, and the potential impact of tariffs.

Answer

CEO Bryan Fairbanks stated that railing margins vary but the company focuses on driving appropriate overall gross margins, and the impact is included in guidance. He estimated the current overall attachment rate is around 20% and expects it to increase significantly. Regarding tariffs, he noted a very low exposure from overseas sourcing, and CFO Brenda Lovcik added that mitigation strategies include dual-sourcing with local suppliers and negotiations.

Margaret Grady, on for Phil Ng, asked about the demand outlook from different customer types, particularly production versus regional builders, given rising interest rates. She also inquired if multifamily expansion opportunities are organic or M&A-driven.

Answer

CEO Jeffrey Edwards noted that demand is more encouraging than expected and that production builders have greater flexibility with rate buydowns, giving them an advantage. On multifamily, both CEO Jeffrey Edwards and CFO Michael Miller confirmed that expansion efforts are organic, focusing on both geographic reach and deeper penetration of other products rather than acquisitions.