COLUMBUS, Ohio–(BUSINESS WIRE)–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.
INSTALLED BUILDING PRODUCTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(unaudited, in thousands, except share and per share amounts)
Three months ended
September 30,
Nine months ended
September 30,
2022
2021
2022
2021
Net revenue
$
719,114
$
509,763
$
1,983,355
$
1,434,927
Cost of sales
497,837
353,879
1,372,966
1,001,730
Gross profit
221,277
155,884
610,389
433,197
Operating expenses
Selling
31,651
24,188
86,214
67,677
Administrative
84,345
68,056
247,519
199,607
Amortization
11,370
9,224
33,728
26,798
Operating income
93,911
54,416
242,928
139,115
Other expense, net
Interest expense, net
10,668
7,687
31,669
22,781
Other expense (income)
185
(483
)
698
(494
)
Income before income taxes
83,058
47,212
210,561
116,828
Income tax provision
22,080
12,320
55,857
27,432
Net income
$
60,978
$
34,892
$
154,704
$
89,396
Other comprehensive income (loss), net of tax:
Net change on cash flow hedges, net of tax (provision) benefit of $(5,105) and $(454) for the three months ended September 30, 2022 and 2021, respectively, and $(15,138) and $(2,638) for the nine months ended September 30, 2022 and 2021, respectively
14,379
1,292
42,640
7,762
Comprehensive income
$
75,357
$
36,184
$
197,344
$
97,158
Earnings Per Share:
Basic
$
2.14
$
1.19
$
5.36
$
3.05
Diluted
$
2.13
$
1.18
$
5.33
$
3.02
Weighted average shares outstanding:
Basic
28,478,954
29,404,257
28,851,389
29,355,538
Diluted
28,595,707
29,620,748
29,020,509
29,615,162
Cash dividends declared per share
$
0.32
$
0.30
$
1.85
$
0.90
INSTALLED BUILDING PRODUCTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands, except share and per share amounts)
September 30,
December 31,
2022
2021
ASSETS
Current assets
Cash and cash equivalents
$
203,402
$
333,485
Investments
24,996
—
Accounts receivable (less allowance for credit losses of $9,083 and $8,717 at September 30, 2022 and December 31, 2021, respectively)
415,657
312,767
Inventories
182,176
143,039
Prepaid expenses and other current assets
71,790
70,025
Total current assets
898,021
859,316
Property and equipment, net
115,479
105,933
Operating lease right-of-use assets
72,226
69,871
Goodwill
356,612
322,517
Customer relationships, net
184,225
178,264
Other intangibles, net
91,613
86,157
Other non-current assets
45,675
31,144
Total assets
$
1,763,851
$
1,653,202
LIABILITIES AND STOCKHOLDER’S EQUITY
Current liabilities
Current maturities of long-term debt
$
30,494
$
30,839
Current maturities of operating lease obligations
25,414
23,224
Current maturities of finance lease obligations
2,275
1,747
Accounts payable
156,117
132,705
Accrued compensation
61,453
50,964
Other current liabilities
82,809
68,090
Total current liabilities
358,562
307,569
Long-term debt
827,906
832,193
Operating lease obligations
46,640
46,075
Finance lease obligations
5,469
3,297
Deferred income taxes
19,901
4,819
Other long-term liabilities
47,859
42,409
Total liabilities
1,306,337
1,236,362
Commitments and contingencies (Note 16)
Stockholders’ equity
—
—
Preferred Stock; $0.01 par value: 5,000,000 authorized and 0 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively
—
—
Common stock; $0.01 par value: 100,000,000 authorized, 33,429,557 and 33,271,659 issued and 28,604,098 and 29,706,401 shares outstanding at September 30, 2022 and December 31, 2021, respectively
334
333
Additional paid in capital
225,377
211,430
Retained earnings
453,286
352,543
Treasury stock; at cost: 4,825,459and 3,565,258 shares at September 30, 2022 and December 31, 2021, respectively
(263,896
)
(147,239
)
Accumulated other comprehensive income (loss)
42,413
(227
)
Total stockholders’ equity
457,514
416,840
Total liabilities and stockholders’ equity
$
1,763,851
$
1,653,202
INSTALLED BUILDING PRODUCTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
Nine months ended
September 30,
2022
2021
Cash flows from operating activities
Net income
$
154,704
$
89,396
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization of property and equipment
35,153
32,498
Amortization of operating lease right-of-use assets
19,832
16,464
Amortization of intangibles
33,728
26,798
Amortization of deferred financing costs and debt discount
1,436
993
Provision for credit losses
2,754
1,135
Gain on sale of property and equipment
(1,048
)
(1,405
)
Noncash stock compensation
10,290
10,228
Other, net
1,509
2,414
Changes in assets and liabilities, excluding effects of acquisitions
Accounts receivable
(98,528
)
(23,224
)
Inventories
(23,071
)
(37,122
)
Proceeds from termination of interest rate swap agreements
25,462
—
Other assets
4,773
(8,116
)
Accounts payable
20,290
14,120
Income taxes receivable/payable
12,354
(107
)
Other liabilities
(971
)
(7,594
)
Net cash provided by operating activities
198,667
116,478
Cash flows from investing activities
Purchases of investments
(344,388
)
—
Maturities of short term investments
320,000
—
Purchases of property and equipment
(35,212
)
(27,898
)
Acquisitions of businesses, net of cash acquired of $330 and $1,640 in 2022 and 2021, respectively
(75,779
)
(94,500
)
Proceeds from sale of property and equipment
1,418
2,219
Other
(5,974
)
(1,430
)
Net cash used in investing activities
(139,935
)
(121,609
)
Cash flows from financing activities
Payments on Term Loan
(3,750
)
—
Proceeds from vehicle and equipment notes payable
20,492
20,753
Debt issuance costs
(655
)
—
Principal payments on long-term debt
(23,340
)
(19,688
)
Principal payments on finance lease obligations
(1,661
)
(1,573
)
Dividends paid
(53,821
)
(26,428
)
Acquisition-related obligations
(9,423
)
(2,442
)
Repurchase of common stock
(112,193
)
—
Surrender of common stock awards by employees
(4,464
)
(5,576
)
Net cash used in financing activities
(188,815
)
(34,954
)
Net change in cash and cash equivalents
(130,083
)
(40,085
)
Cash and cash equivalents at beginning of period
333,485
231,520
Cash and cash equivalents at end of period
$
203,402
$
191,435
Supplemental disclosures of cash flow information
Net cash paid during the period for:
Interest
$
40,639
$
23,748
Income taxes, net of refunds
43,512
27,428
Supplemental disclosure of noncash activities
Right-of-use assets obtained in exchange for operating lease obligations
22,056
23,543
Release of indemnification of acquisition-related debt
980
2,036
Property and equipment obtained in exchange for finance lease obligations
4,411
1,918
Seller obligations in connection with acquisition of businesses
25,534
18,987
Unpaid purchases of property and equipment included in accounts payable
857
1,327
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.
INSTALLED BUILDING PRODUCTS, INC.
SEGMENT INFORMATION
(unaudited, in thousands)
Three months ended September 30, 2022
Three months ended September 30, 2021
Installation
Other
Eliminations
Consolidated
Installation
Other
Eliminations
Consolidated
Revenue
$
672,916
$
47,748
$
(1,550
)
$
719,114
$
504,161
$
6,305
$
(703
)
$
509,763
Cost of sales (exclusive of depreciation and amortization shown separately below)
450,017
37,659
(1,116
)
486,560
339,308
4,837
(539
)
343,606
Segment gross profit
222,899
10,089
(434
)
232,554
164,853
1,468
(164
)
166,157
Depreciation and amortization
11,277
10,273
Gross profit, as reported
221,277
155,884
Selling
31,651
24,188
Administrative
84,345
68,056
Amortization
11,370
9,224
Operating income
93,911
54,416
Interest expense, net
10,668
7,687
Other expense (income)
185
(483
)
Income before income taxes
$
83,058
$
47,212
Three months ended June 30, 2022
Three months ended June 30, 2021
Installation
Other
Eliminations
Consolidated
Installation
Other
Eliminations
Consolidated
Segment gross profit percentage
33.1
%
21.1
%
28.0
%
32.3
%
32.7
%
23.3
%
23.3
%
32.6
%
Nine months ended September 30, 2022
Nine months ended September 30, 2021
Installation
Other
Eliminations
Consolidated
Installation
Other
Eliminations
Consolidated
Revenue
$
1,872,544
$
114,690
$
(3,879
)
$
1,983,355
$
1,419,302
$
17,182
$
(1,557
)
$
1,434,927
Cost of sales (exclusive of depreciation and amortization shown separately below)
1,255,521
87,425
(3,015
)
1,339,931
959,384
12,980
(1,207
)
971,157
Segment gross profit
617,023
27,265
(864
)
643,424
459,918
4,202
(350
)
463,770
Depreciation and amortization
33,035
30,573
Gross profit, as reported
610,389
433,197
Selling
86,214
67,677
Administrative
247,519
199,607
Amortization
33,728
26,798
Operating income
242,928
139,115
Interest expense, net
31,669
22,781
Other expense (income)
698
(494
)
Income before income taxes
$
210,561
$
116,828
Nine months ended September 30, 2022
Nine months ended September 30, 2021
Installation
Other
Eliminations
Consolidated
Installation
Other
Eliminations
Consolidated
Segment gross profit percentage
33.0
%
23.8
%
22.3
%
32.4
%
32.4
%
24.5
%
22.5
%
32.3
%
The prior period disclosures in the above table have been recast to conform to the current period segment presentation.
INSTALLED BUILDING PRODUCTS, INC.
REVENUE BY END MARKET
(unaudited, in thousands)
Three months ended September 30,
Nine months ended September 30,
2022
2021
2022
2021
Installation
Residential new construction
$
532,299
74
%
$
385,401
76
%
$
1,480,214
75
%
$
1,082,379
75
%
Repair and remodel
39,139
6
%
31,276
6
%
109,745
5
%
89,810
7
%
Commercial
101,478
14
%
87,484
17
%
282,585
14
%
247,113
17
%
Net revenue – Installation
672,916
94
%
504,161
99
%
1,872,544
94
%
1,419,302
99
%
Other 1
46,198
6
%
5,602
1
%
110,811
6
%
15,625
1
%
Net revenue, as reported
$
719,114
100
%
$
509,763
100
%
$
1,983,355
100
%
$
1,434,927
100
%
Contacts
Investor Relations:
614-221-9944
investorrelations@installed.net
