IBP - Installed Building Products Reports Record Quarterly Results for the Third Quarter 2022 and Declares Regular Quarterly Cash Dividend

Installed Building Products, Inc. (the "Company" or "IBP") (NYSE: IBP), an industry-leading installer of insulation and complementary building products, today announced results for the third quarter ended September 30, 2022.

Third Quarter 2022 Highlights (Comparisons are to Prior Year Period)

• Net revenue increased 41.1% to a quarterly record of $719.1 million
  • Installation revenue increased 33.5% to $672.9 million, driven by strong growth across IBP’s residential new construction markets
  • Other revenue, which includes IBP’s manufacturing and distribution operations, increased from $5.6 million to $46.2 million, driven by strong operating results and recent acquisitions
• Net income increased 74.8% to $61.0 million
• Adjusted EBITDA* increased 53.8% to a record $120.2 million
• Net income per diluted share increased 80.5% to $2.13
• Adjusted net income per diluted share* increased 68.5% to $2.51
• Price/mix growth increased by a record 27.1% during the third quarter
• At September 30, 2022, IBP had $228.4 million in cash, cash equivalents and investments
• Published annual 2022 Environmental, Social and Governance ("ESG") report highlighting the positive impact the Company is making for all stakeholders
• Declared third quarter dividend of $0.315 per share which was paid to shareholders on September 30, 2022
• Returned $21.5 million to shareholders in the third quarter through dividends and share repurchases

Recent Developments

• IBP’s Board of Directors declared the fourth quarter regular cash dividend of $0.315 per share

“IBP achieved another quarter of record net revenue, net income, and adjusted EBITDA, which was led by continued strength across our residential end-markets, a favorable pricing environment, and the hard work of our team members,” stated Jeff Edwards, Chairman and Chief Executive Officer. “During the third quarter, residential housing unit completion growth accelerated and our business was supported by a robust backlog of units under construction. In addition, we continue to benefit from positive price/mix trends, which increased 27.1% in the third quarter and drove further growth in incremental margins and earnings.”

Mr. Edwards continued, “Record cash flow through the 2022 first nine months has allowed us to allocate a growing amount of capital across our proven acquisition strategy, dividend policy and share repurchase program. Year-to-date, we have acquired $73 million of annual revenue across numerous geographic regions. In addition, for the first nine months of 2022, we have returned a total of $166.0 million to shareholders through dividend payments and share repurchases, up from $26.4 million in the same period last year.”

“As we outlined in our second annual ESG report, IBP is focused on promoting positive corporate responsibility and creating lasting value for all of its stakeholders. I am extremely proud of our team's ESG progress as well as the record financial results we continue to produce. Despite macroeconomic headwinds, we expect the meaningful backlog of residential units and extended construction cycle times to support demand for our installation services throughout the remainder of 2022 and into 2023,” concluded Mr. Edwards.

Acquisition Update

IBP continues to prioritize profitable growth through its proven strategy of acquiring well-run installers of insulation and complementary building products. To date in 2022, IBP has acquired over $73 million of annual revenue and expects to acquire at least $100 million of revenue for the full year.

During the 2022 third quarter, IBP completed the following acquisition:

• In September 2022, IBP acquired All Florida Insulation, LLC, a Longwood, Florida based installer of spray foam and fiberglass insulation to residential, multifamily, and commercial customers with annual revenue of approximately $2.4 million.

Cash Dividend and Share Repurchases

IBP’s Board of Directors has approved the Company’s quarterly cash dividend of $0.315 per share, payable on December 31, 2022, to stockholders of record on December 15, 2022.

During the 2022 nine month period, IBP has repurchased over 1.2 million shares of its common stock at a total cost of $112.2 million, including commissions. At September 30, 2022, the Company had $187.5 million of availability remaining under its stock repurchase program.

Third Quarter 2022 Results Overview

For the third quarter of 2022, net revenue was a quarterly record of $719.1 million, an increase of 41.1% from $509.8 million for the third quarter of 2021. On a consolidated same branch basis, net revenue improved 28.5% from the prior year quarter, which was attributable to a 7.5% increase in the volume of jobs completed and a 27.1% increase in price/mix during the third quarter relative to the same period last year. Residential sales growth within our Installation segment was 34.9% on a same branch basis in the quarter. Commercial sales growth of 16.0% was largely driven by recent acquisitions with same branch sales up 2.8% from the prior year quarter.

Gross profit improved 41.9% to $221.3 million from $155.9 million in the prior year quarter. Adjusted gross profit* as a percent of total revenue was 30.8%, which adjusts for the Company’s share-based compensation expense, as well as expenses directly related to COVID-19, compared to 30.7% for the same period last year. The recently acquired distribution companies disclosed in the Other operating segment have lower gross margins than our Installation operating segment. During the 2022 third quarter, the Other operating segment had a gross margin of 21.1% as compared to 33.1% for the Installation operating segment. Our Other segment includes our more recent acquisitions in the distribution businesses, which had an impact on our consolidated gross profit margin of about 80 basis points. The distribution businesses did not have an impact on the prior year third quarter as they had not been acquired at that time.

Selling and administrative expense, as a percent of net revenue, was 16.1% compared to 18.1% in the prior year quarter. Adjusted selling and administrative expense*, as a percent of net revenue, was 15.7% compared to 17.5% in the prior year quarter.

Net income was $61.0 million, or $2.13 per diluted share, compared to $34.9 million, or $1.18 per diluted share in the prior year quarter. Adjusted net income* was $71.7 million, or $2.51 per diluted share, compared to $44.0 million, or $1.49 per diluted share in the prior year quarter. Adjusted net income accounts for the impact of non-core items in both periods, including an addback for non-cash amortization expense related to acquisitions.

Adjusted EBITDA* was $120.2 million, a 53.8% increase from $78.1 million in the prior year quarter, largely due to strong sales growth and lower selling and administrative expenses as a percent of net revenue compared to the prior year quarter.

Conference Call and Webcast

The Company will host a conference call and webcast on November 3, 2022 at 10:00 a.m. Eastern Time to discuss these results. To participate in the call, please dial 877-407-0792 (domestic) or 201-689-8263 (international). The live webcast will be available at www.installedbuildingproducts.com in the investor relations section. A replay of the conference call will be available through December 3, 2022, by dialing 844-512-2921 (domestic) or 412-317-6671 (international) and entering the passcode 13732584.

About Installed Building Products

Installed Building Products, Inc. is one of the nation's largest new residential insulation installers and is a diversified installer of complementary building products, including waterproofing, fire-stopping, fireproofing, garage doors, rain gutters, window blinds, shower doors, closet shelving and mirrors and other products for residential and commercial builders located in the continental United States. The Company manages all aspects of the installation process for its customers, from direct purchase and receipt of materials from national manufacturers to its timely supply of materials to job sites and quality installation. The Company offers its portfolio of services for new and existing single-family and multi-family residential and commercial building projects in all 48 continental states and the District of Columbia from its national network of over 220 branch locations.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the federal securities laws, including with respect to the housing market and the commercial market, our operations, our ESG initiatives, industry conditions, our financial and business model, payment of dividends, the demand for our services and product offerings, the impact of the COVID-19 crisis on our business and end markets, supply chain and material constraints, expansion of our national footprint and end markets, diversification of our products, our ability to grow and strengthen our market position, our ability to pursue and integrate value-enhancing acquisitions and the expected amount of acquired revenue, our ability to improve sales and profitability, the impact of the COVID-19 crisis on our financial results, and expectations for demand for our services and our earnings. Forward-looking statements may generally be identified by the use of words such as "anticipate," "believe," "expect," "intends," "plan," and "will" or, in each case, their negative, or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Any forward-looking statements that we make herein and in any future reports and statements are not guarantees of future performance, and actual results may differ materially from those expressed in or suggested by such forward-looking statements as a result of various factors, including, without limitation, the duration, effect and severity of the COVID-19 crisis; the adverse impact of the COVID-19 crisis on our business and financial results, our supply chain, the economy and the markets we serve; general economic and industry conditions; increases in mortgage interest rates and rising home prices; inflation and interest rates; the material price and supply environment; the timing of increases in our selling prices; the risk that the Company may reduce, suspend or eliminate dividend payments in the future; and the factors discussed in the “Risk Factors” section of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, as the same may be updated from time to time in our subsequent filings with the Securities and Exchange Commission. In addition, any future declaration of dividends will be subject to the final determination of our Board of Directors. Any forward-looking statement made by the Company in this press release speaks only as of the date hereof. New risks and uncertainties arise from time to time, and it is impossible for the Company to predict these events or how they may affect it. The Company has no obligation, and does not intend, to update any forward-looking statements after the date hereof, except as required by federal securities laws.

*Use of Non-GAAP Financial Measures

In addition to the financial measures prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), this press release contains the non-GAAP financial measures of Adjusted EBITDA, Adjusted EBITDA margin (i.e., Adjusted EBITDA divided by net revenue), Adjusted Net Income, Adjusted Net Income per diluted share, Adjusted Gross Profit and Adjusted Selling and Administrative expense. The reasons for the use of these measures, reconciliations of Adjusted EBITDA, Adjusted Net Income, Adjusted Net Income per diluted share, Adjusted Gross Profit, and Adjusted Selling and Administrative expense to the most directly comparable GAAP measures and other information relating to these measures are included below following the unaudited condensed consolidated financial statements. Non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as a substitute for IBP’s financial results prepared in accordance with GAAP.

Information on Segments

In the first quarter of 2022, we realigned our operating segments. This change resulted in our Company having three operating segments consisting of Installation, Distribution and Manufacturing. The Other category reported below reflects the operations of our Distribution and Manufacturing operating segments.

The prior period disclosures in the above table have been recast to conform to the current period segment presentation.

Reconciliation of Non-GAAP Financial Measures

Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income, Adjusted Gross Profit and Adjusted Selling and Administrative Expense measure performance by adjusting EBITDA, GAAP net income, gross profit and selling and administrative expense, respectively, for certain income or expense items that are not considered part of our core operations. We believe that the presentation of these measures provides useful information to investors regarding our results of operations because it assists both investors and us in analyzing and benchmarking the performance and value of our business.

We believe the Adjusted EBITDA measure is useful to investors and us as a measure of comparative operating performance from period to period as it measures our changes in pricing decisions, cost controls and other factors that impact operating performance, and removes the effect of our capital structure (primarily interest expense), asset base (primarily depreciation and amortization), items outside our control (primarily income taxes) and the volatility related to the timing and extent of other activities such as asset impairments and non-core income and expenses. Accordingly, we believe that this measure is useful for comparing general operating performance from period to period. In addition, we use various EBITDA-based measures in determining the achievement of awards under certain of our incentive compensation programs. Other companies may define Adjusted EBITDA differently and, as a result, our measure may not be directly comparable to measures of other companies. In addition, Adjusted EBITDA may be defined differently for purposes of covenants contained in our revolving credit facility or any future facility.

Although we use the Adjusted EBITDA measure to assess the performance of our business, the use of the measure is limited because it does not include certain material expenses, such as interest and taxes, necessary to operate our business. Adjusted EBITDA should be considered in addition to, and not as a substitute for, GAAP net income as a measure of performance. Our presentation of this measure should not be construed as an indication that our future results will be unaffected by unusual or non-recurring items. This measure has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. Because of these limitations, this measure is not intended as an alternative to net income as an indicator of our operating performance, as an alternative to any other measure of performance in conformity with GAAP or as an alternative to cash flow provided by operating activities as a measure of liquidity. You should therefore not place undue reliance on this measure or ratios calculated using this measure.

We also believe the Adjusted Net Income measure is useful to investors and us as a measure of comparative operating performance from period to period as it measures our changes in pricing decisions, cost controls and other factors that impact operating performance, and removes the effect of certain non-core items such as discontinued operations, acquisition related expenses, amortization expense, the tax impact of these certain non-core items, and the volatility related to the timing and extent of other activities such as asset impairments and non-core income and expenses. To make the financial presentation more consistent with other public building products companies, beginning in the fourth quarter 2016 we included an addback for non-cash amortization expense related to acquisitions. Accordingly, we believe that this measure is useful for comparing general operating performance from period to period. Other companies may define Adjusted Net Income differently and, as a result, our measure may not be directly comparable to measures of other companies. In addition, Adjusted Net Income may be defined differently for purposes of covenants contained in our revolving credit facility or any future facility.