Topbuild Corporation (NYSE: BLD) stock lost over 8.6% this month (as on 24th August, 2018; Source: Google Finance) on the back of a disappointing quarter second quarter of 2018. The gross margin fell by 70 basis points to 23.9% in an adjusted basis the gross margin too declined 60 basis points to 24%. The operating profit stood at $43.7 million while adjusted basis the operating profit was $57.8 million which had 37% improvement. The operating margin was 7.2% which fell 140 basis points whereas adjusted operating margin increased about 60 basis points to 9.5%.
The group witnessed a higher material costs in the quarter with a second fiberglass cost rising going into effect in April. But the group was able to offset this by rising selling prices in the quarter, to a certain extent. The firm realized selling price rise of 3.3% at TruTeam and 7.7% at Service Partners, which is a rise against first quarter where price increases were 2.3% and 5.6%, respectively.
The net sales increased to 27.7% to $606 million which was mainly due to acquisitions, sales volume growth and increased selling prices in all the segments. Net income is $27.2 million, or $0.76 per diluted share, compared to $23.5 million, or $0.63 per diluted share the last year. Adjusted income was $36.9 million, or $1.03 per diluted share, compared to $25.0 million, or $0.67 per diluted share.
The adjusted EBITDA was $70.6 million which is a 46.4% increase while Incremental EBITDA margin stood at 17.0%. The working capital as a percent of sales for the complete year was 11.1% vs 8.8% last year. The quarter sales increased 33.8% with a boost from USI’s installation branches. Same branch sales are up 11.6%, driven by strong volume growth of 8.3%, which outpaced lagged housing starts. Quarterly results also benefited from a 3.3% increase in selling prices. The adjusted TruTeam operating margin increased 11.6%, a 60 basis point improvement from the same quarter last year. The USI integration is track, while the group expects that in between TruTeam and Service Partners, they have a 40% plus market share.