IBP - Installed Building Products Reports Record Results for Fourth Quarter and Fiscal Year 2018

Installed Building Products, Inc. (the "Company" or "IBP") (NYSE:IBP), an industry-leading installer of insulation and complementary building products, today announced record results for the fourth quarter and fiscal year ended December 31, 2018.

Fourth Quarter 2018 Highlights

• Net revenue increased 17.8% to a record $353.1 million
• Net income increased 52.6% to a record $16.5 million
• Adjusted EBITDA* increased 20.5% to $43.6 million
• Net income per diluted share increased 58.8% to $0.54 per diluted share
• Adjusted net income per diluted share increased 38.5% to $0.72 per diluted share*
• In October 2018, acquired Advanced Fiber Technology, a manufacturer of cellulose insulation and industrial fibers in Bucyrus, Ohio with annual revenues of approximately $18.0 million
• In December 2018, acquired Carolina Glass & Mirror, Inc., a commercial and residential glass applications installer in North Carolina with annual revenues of $6.2 million
• In December 2018, acquired Hamilton Benchmark Inc., a commercial fire-stopping solutions installer in Wisconsin with annual revenues of $1.3 million
• During the fourth quarter, IBP repurchased 1.3 million shares of its common stock, for a total price of $46.5 million

“IBP ended the year with strong operating and financial momentum, and I am encouraged by our fourth quarter performance,” stated Jeff Edwards, Chairman and Chief Executive Officer. “Throughout the year we worked with our suppliers and customers to successfully manage the atypical pricing environment. During the 2018 fourth quarter, price / mix contributed 7.8% of sales growth during the quarter, which combined with strong operating leverage helped drive record fourth quarter net income.

“IBP’s record results would not be possible if it wasn’t for the dedication and commitment of our 7,700 employees across the United States. We experienced improved employee retention rates in 2018 as a direct result of our financial wellness program, longevity stock program, and various community engagement programs. In addition, IBP returned $89.4 million of capital back to shareholders through our stock repurchase program.

“For 2018, sales increased 18.0%, outpacing the 3.4% year-over-year growth in total U.S. housing completions. This performance is a direct result of our ability to grow our core insulation installation business, while diversifying our installation services to new geographies, end markets, and product offerings. During 2018, IBP completed 12 acquisitions representing approximately $83 million of annual revenues. We also saw an 11.5% increase in sales of our large commercial construction installation business in 2018. As our financial results show, IBP continues to build upon its national platform of installation services and I am excited by future opportunities to grow and create greater value for our shareholders,” concluded Mr. Edwards.

Fourth Quarter 2018 Results Overview

For the fourth quarter of 2018, net revenue was $353.1 million, an increase of 17.8% from $299.9 million in the fourth quarter of 2017. On a same branch basis, net revenue improved 11.1% from the prior year quarter. Residential same branch sales growth was 10.9% in the quarter, with more than 70% of the increase attributable to price gains and more favorable customer and product mix with the remainder attributable to the growth in the number of completed jobs. Same branch single-family sales grew 8.6% during the fourth quarter, compared to a decline in U.S. single-family housing completions of -1.1%, while our large commercial construction end-market had organic growth of 13.0%.

Gross profit improved 21.3% to $98.6 million from $81.3 million in the prior year quarter. Adjusted gross profit* as a percent of total revenue was 27.9%, which adjusts for the Company’s share-based compensation expense, branch start-up costs and gain on a facility disposal, compared to 28.1% for the same period last year.

Selling and administrative expense, as a percentage of net revenue, was 18.7% compared to 19.2% in the prior year quarter. Adjusted selling and administrative expense*, as a percentage of net revenue, improved 50 basis points to 18.0% from 18.5%. Higher net revenue in the 2018 fourth quarter more than offset the higher costs needed to support the Company’s growth.

Net income was $16.5 million, or $0.54 per diluted share, compared to $10.8 million, or $0.34 per diluted share, in the prior year quarter. Adjusted net income* was $21.8 million, or $0.72 per diluted share, compared to $16.6 million, or $0.52 per diluted share in the prior year quarter. Adjusted net income adjusts for the impact of non-core items in both periods and includes an addback for non-cash amortization expense related to acquisitions.

Adjusted EBITDA* was $43.6 million, a 20.5% increase from $36.2 million in the prior year quarter, largely due to higher sales and better selling and administrative leverage. Adjusted EBITDA, as a percentage of net revenue, was 12.4% compared to 12.1% in the prior year quarter. The incremental Adjusted EBITDA margin* on same branch revenue growth was 15.5% (please refer to the Supplementary Tables at the end of this Press Release).

Full Year 2018 Results Overview

For the year ended December 31, 2018, net revenue was $1,336.4 million, an increase of 18.0% from $1,132.9 million in 2017. On a same branch basis, net revenue improved 11.5% from the prior year, with more than half of the increase attributable to growth in the number of completed jobs and the remainder achieved through price gains and more favorable customer and product mix. Same branch residential revenue increased 11.4% as compared to a 3.4% increase in total U.S. housing completions.

Gross profit improved 14.7% to $371.6 million from $324.0 million in the prior year. Gross margin was 27.8% compared to 28.6% in the prior year. Adjusted gross profit, adjusted for the Company’s share-based compensation expense, financial wellness program, branch start-up costs and gain on a facility disposal, improved 14.0% to $373.2 million for the full year.

Selling and administrative expense, as a percentage of net revenue, was 18.9% compared to 19.7% in the prior year. Adjusted selling and administrative expense, as a percentage of net revenue, improved 80 basis points to 18.1% from 18.9%.

Net income was $54.7 million, or $1.75 per diluted share, compared to $41.1 million, or $1.30 per diluted share in the prior year. Adjusted net income was $83.5 million, or $2.67 per diluted share, compared to $65.0 million, or $2.05 per diluted share in the prior year. Adjusted net income adjusts for the impact of non-core items in both periods, includes an addback for non-cash amortization expense related to acquisitions, and a release of the Company’s deferred tax liability as a result of the Tax Cuts and Jobs Act.

For the full year of 2018, adjusted EBITDA was $164.4 million, a 16.5% increase from $141.1 million in the prior year. Adjusted EBITDA, as a percentage of net revenue was 12.3%, compared to 12.5% in the prior year. Operating income was $93.2 million, a 25.5% increase from $74.3 million in the prior year. The incremental Adjusted EBITDA margin on same branch revenue growth was 11.9% (please refer to the Supplementary Tables at the end of this Press Release).

Net cash from operating activities was $96.6 million, an increase of 40.5% from $68.8 million in the prior year.

Conference Call and Webcast

The Company will host a conference call and webcast on February 28, 2019 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 March 28, 2019, by dialing 844-512-2921 (domestic) or 412-317-6671 (international) and entering the passcode 13686963.

About Installed Building Products

Installed Building Products, Inc. is one of the nation's largest insulation installers for the residential new construction market and is also a diversified installer of complementary building products, including waterproofing, fire-stopping and fireproofing, garage doors, rain gutters, window blinds, shower doors, closet shelving and mirrors, throughout the United States. The Company manages all aspects of the installation process for its customers, including direct purchases of materials from national manufacturers, 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 from its national network of branch locations.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the federal securities laws, including with respect to our financial and business model, the demand for our services and product offerings, expansion of our national footprint and end markets, diversification of our products, our ability to capitalize on the new home and commercial construction recovery, our ability to grow and strengthen our market position, our ability to pursue and integrate value-enhancing acquisitions, our ability to improve sales and profitability, expectations for demand for our services and our earnings in 2019. 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, general economic and industry conditions, the material price environment, 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, 2017, as the same may be updated from time to time in our subsequent filings with the Securities and Exchange Commission. 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.

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.

The table below reconciles Adjusted EBITDA to the most directly comparable GAAP financial measure, net income, for the periods presented therein.

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