Earlier today, QXO reported its third-quarter financial results for the period ended September 30. Net sales rose 79.4% year over year to $4.90 billion, and adjusted EBITDA climbed 85.0% to $557 million, primarily driven by recent acquisitions, while the GAAP net loss narrowed to $123 million from $139 million. Because these headline figures matched the preliminary results shared alongside the November 9 conference call, today’s filing mainly provided the underlying detail. A few developments stood out to me:
TopBuild’s first quarter inside QXO lifted margins, though sales from the businesses the company already owned a year ago edged slightly lower (management noted that momentum picked up in October).
The debt and equity issued to fund the recent deals drove up interest expense and the share count, causing adjusted EPS to fall year over year.
The board authorized a new share buyback program.
Brad Jacobs is launching a new venture while remaining chairman and CEO of QXO.
Below, we will take a closer look at the quarter. Also, be sure to revisit our previous write-up on QXO:
Overview
This was the first quarter to include TopBuild, acquired on July 1, which contributed $1.64 billion of sales. Kodiak, acquired on April 1, contributed $589 million. Neither business was in last year’s third quarter. QXO now has 28,000 employees serving 194,000 customers through 1,150 branches. Brad Jacobs said organic daily revenue trends improved for the second consecutive quarter despite a soft construction market, and companywide pricing rose 2.2% year over year, with 9 of QXO’s 11 areas posting positive pricing.
Profitability below adjusted EBITDA looks very different. GAAP operating income was only $2 million, as amortization of acquired intangibles rose to $288 million from $118 million and selling, general and administrative expenses more than doubled to $1.02 billion. Net interest expense rose to $163 million from $37 million a year ago and $38 million last quarter, reflecting the debt raised for TopBuild. A $27 million tax benefit left a net loss of $123 million. Adjusted EBITDA excludes $79 million of stock-based compensation, $77 million of restructuring, transaction and transformation costs, and a $17 million inventory fair value adjustment.