Market Overview

Installed Building Products Reports Results for Second Quarter 2018

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Installed Building Products, Inc. (the "Company" or "IBP") (NYSE:IBP),
an industry-leading installer of insulation and complementary building
products, announced today results for the second quarter ended June 30,
2018.

Second Quarter 2018 Highlights

  • Net revenue increased 17.9% to a record $332.6 million
  • Net income increased 36.3% to a record $16.3 million
  • Adjusted EBITDA* increased 16.2% to a record $45.6 million
  • Net income per diluted share increased 36.8% to $0.52
  • Adjusted net income per diluted share* increased 32.2% to $0.78
  • In June 2018, successfully increased the size of its existing Term
    Loan B facility as well as its revolving credit facility and extended
    the maturity date for each by approximately one year.
  • In April 2018, acquired H2H Blinds, LLC, an installer of blinds and
    shutters primarily for the residential construction market in Georgia
    and North Carolina with annual sales of approximately $7.5 million
  • In May 2018, acquired Green Star Plus Insulation, an insulation
    installer located in Southern Indiana with approximately $2.3 million
    in sales.
  • In May 2018, acquired Advanced Insulation, a spray foam and fiberglass
    installer located in St Augustine, Florida with approximately $1.3
    million in sales.

"Record revenues and an improving pricing environment helped IBP produce
record adjusted EBITDA* for the 2018 second quarter," stated Jeff
Edwards, Chairman and Chief Executive Officer. "We continue to
successfully negotiate better pricing with our customers and experienced
strong price momentum during the quarter. Based on current and improving
market conditions, we believe pricing will continue to improve
throughout the remainder of the year, which will benefit margins and
incremental earnings. In addition, IBP produced strong operating
leverage during the quarter with selling and administrative expenses as
a percent of revenues at the lowest level we've reported since the
Company went public in 2014.

"We remain committed to our acquisition growth strategy and believe we
have developed a strong, unique, and experienced platform. Since our IPO
in 2014, we have acquired a diverse group of installation businesses,
representing more than 40 companies and approximately $425 million of
annual revenues at the time of acquisition. IBP's pipeline remains
strong as we continue to pursue accretive acquisitions that expand our
geographic presence and diversify our product and end market mix. We
continue to expect 2018 will be another year of record sales and
earnings."

Second Quarter 2018 Results Overview

For the second quarter of 2018, net revenue was $332.6 million, an
increase of 17.9% from $282.2 million in the second quarter of 2017. On
a same branch basis, net revenue improved 11.3% from the prior year
quarter. Residential same branch sales growth was 12.1% in the quarter,
with more than half of the increase attributable to growth in the number
of completed jobs and the remainder through price gains and more
favorable customer and product mix. Same branch single-family sales grew
14.5% during the second quarter, outpacing the growth in U.S.
single-family housing completions of 6.5%, while our large commercial
construction end market had organic growth of 4.1%.

Gross profit improved 12.6% to $95.6 million from $84.9 million in the
prior year quarter. Adjusted gross profit* as a percent of total revenue
was 28.9% which adjusts for the Company's share-based compensation
expense, financial wellness program and branch start-up costs, compared
to 30.1% for the same period last year.

Selling and administrative expense, as a percentage of net revenue, was
18.3% compared to 19.6% in the prior year quarter. Adjusted selling and
administrative expense*, as a percentage of net revenue, improved 100
basis points to 17.6% from 18.6%. Higher net revenue in the 2018 second
quarter more than offset the higher costs needed to support the
Company's growth.

Net income was $16.3 million, or $0.52 per diluted share, compared to
$12.0 million, or $0.38 per diluted share in the prior year quarter.
Adjusted net income* was $24.6 million, or $0.78 per diluted share,
compared to $18.7 million, or $0.59 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 $45.6 million, a 16.2% increase from $39.2 million
in the prior year quarter, largely due to higher sales and improved
selling and administrative leverage. Adjusted EBITDA, as a percentage of
net revenue, was 13.7%, compared to 13.9% in the prior year quarter.

Conference Call and Webcast

The Company will host a conference call and webcast on Thursday, August
2, 2018 at 10:00 a.m. Eastern Time to discuss these results. To
participate in the call, please dial 855-327-6837 (domestic) or
631-891-4304 (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 September 2, 2018, by dialing 844-512-2921
(domestic) or 412-317-6671 (international) and entering the passcode
10005279.

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, 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 the
housing market, our financial and business model, our ability to
increase selling prices, the demand for our services and product
offerings, expansion of our national footprint and diversification, our
ability to capitalize on the new home and commercial construction
recovery, our ability to strengthen our market position, our ability to
pursue and integrate value-enhancing acquisitions, our ability to
improve sales and profitability, and expectations for demand for our
services and our earnings in 2018. 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 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.

       

INSTALLED BUILDING PRODUCTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE
INCOME

(unaudited, in thousands, except share and per share amounts)

   
Three months ended June 30, Six months ended June 30,
2018 2017 2018 2017
Net revenue $ 332,584 $ 282,196 $ 634,312 $ 537,865
Cost of sales   236,941   197,268     458,693   380,765  
Gross profit 95,643 84,928 175,619 157,100
Operating expenses
Selling 16,020 13,650 31,866 27,676
Administrative 44,971 41,761 89,174 81,022
Amortization   7,322   6,550     14,450   12,966  
Operating income 27,330 22,967 40,129 35,436
Other expense
Interest expense, net 5,691 4,865 9,731 7,035
Other   163   131     285   283  
Income before income taxes 21,476 17,971 30,113 28,118
Income tax provision   5,161   5,998     7,404   9,781  
Net income $ 16,315 $ 11,973   $ 22,709 $ 18,337  
 
Other comprehensive income (loss), net of tax:
Unrealized gain (loss) on cash flow hedge, net of tax (provision)
benefit of ($159) and $50 for the three months ended June 30, 2018
and 2017, respectively, and ($545) and $50 for the six months ended
June 30, 2018 and 2017, respectively
  475   (77 )   1,635   (77 )
Comprehensive income $ 16,790 $ 11,896   $ 24,344 $ 18,260  
 
Basic and diluted net income per share $ 0.52 $ 0.38   $ 0.72 $ 0.58  
Weighted average shares outstanding:
Basic 31,345,390 31,646,460 31,447,067 31,618,624
Diluted 31,452,583 31,709,554 31,612,581 31,698,460
 
   

INSTALLED BUILDING PRODUCTS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited, in thousands, except share and per share amounts)

   
June 30, December 31,
2018 2017
ASSETS
Current assets
Cash and cash equivalents $ 139,746 $ 62,510
Investments 20,312 30,053

Accounts receivable (less allowance for doubtful accounts of
$4,711 and $4,805 at June 30, 2018 and December 31, 2017,
respectively)

202,150 180,725
Inventories 48,574 48,346
Other current assets   40,838     33,308  
Total current assets 451,620 354,942
Property and equipment, net 85,048 81,075
Non-current assets
Goodwill 163,023 155,466
Intangibles, net 134,233 137,991
Other non-current assets   11,246     9,272  
Total non-current assets   308,502     302,729  
Total assets $ 845,170   $ 738,746  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt $ 20,083 $ 16,650
Current maturities of capital lease obligations 5,143 5,666
Accounts payable 87,299 87,425
Accrued compensation 22,117 25,399
Other current liabilities   26,802     24,666  
Total current liabilities 161,444 159,806
Long-term debt 433,324 330,927
Capital lease obligations, less current maturities 4,752 6,479
Deferred income taxes 7,667 6,444
Other long-term liabilities   22,920     24,562  
Total liabilities 630,107 528,218
Commitments and contingencies
Stockholders' equity

Preferred Stock; $0.01 par value: 5,000,000 authorized and 0
shares issued and outstanding at June 30, 2018 and December 31,
2017, respectively

-

 

-

Common Stock; $0.01 par value: 100,000,000 authorized, 32,723,972
and 32,524,934 issued and 31,606,349 and 31,862,146 shares
outstanding at June 30, 2018 and December 31, 2017, respectively

327 325
Additional paid in capital 178,266 174,043
Retained earnings 73,919 48,434
Treasury Stock; at cost: 1,117,623 and 662,788 shares at June 30,
2018 and December 31, 2017, respectively
(39,703 ) (12,781 )
Accumulated other comprehensive income   2,254     507  
Total stockholders' equity   215,063     210,528  
Total liabilities and stockholders' equity $ 845,170   $ 738,746  
 
   

INSTALLED BUILDING PRODUCTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)

           
Six months ended June 30,
2018 2017
Cash flows from operating activities
Net income $ 22,709 $ 18,337
Adjustments to reconcile net income to net cash provided by
operating activities
Depreciation and amortization of property and equipment 16,231 13,482
Amortization of intangibles 14,450 12,966
Amortization of deferred financing costs and debt discount 601 424
Provision for doubtful accounts 1,108 1,807
Write-off of debt issuance costs 1,114 1,201
Gain on sale of property and equipment (227 ) (190 )
Noncash stock compensation 4,196 2,570
Changes in assets and liabilities, excluding effects of acquisitions
Accounts receivable (20,192 ) (17,421 )
Inventories (3,995 ) 342
Other assets (3,739 ) (1,263 )
Accounts payable 304 (2,043 )
Income taxes payable/receivable 5,187 (4,102 )
Other liabilities   (4,622 )   2,316  
Net cash provided by operating activities   33,125     28,426  
Cash flows from investing activities
Purchases of investments (17,782 ) (25,328 )
Maturities of short term investments 27,500 -
Purchases of property and equipment (18,478 ) (14,681 )
Acquisitions of businesses, net of cash acquired of $0 and $247,
respectively
(18,626 ) (116,883 )
Proceeds from sale of property and equipment 557 451
Other   (1,540 )   (1,532 )
Net cash used in investing activities   (28,369 )   (157,973 )
Cash flows from financing activities
Proceeds from term loan under credit agreement applicable to
respective period
100,000 300,000
Payments on term loan under credit agreement applicable to
respective period
(750 ) (96,250 )
Proceeds from delayed draw term loan under credit agreement
applicable to respective period
- 112,500
Payments on delayed draw term loan under credit agreement applicable
to respective period
- (125,000 )
Proceeds from vehicle and equipment notes payable 14,271 9,317
Debt issuance costs (1,933 ) (7,940 )
Principal payments on long-term debt (6,863 ) (4,915 )
Principal payments on capital lease obligations (3,028 ) (3,738 )
Acquisition-related obligations (2,295 ) (1,669 )
Repurchase of common stock (24,640 ) -
Surrender of common stock awards by employees   (2,282 )   (550 )
Net cash provided by financing activities   72,480     181,755  
Net change in cash and cash equivalents 77,236 52,208
Cash and cash equivalents at beginning of period   62,510     14,482  
Cash and cash equivalents at end of period $ 139,746   $ 66,690  
Supplemental disclosures of cash flow information
Net cash paid during the period for:
Interest $ 8,349 $ 5,634
Income taxes, net of refunds 1,906 13,401
Supplemental disclosure of noncash investing and financing
activities
Common stock issued for acquisition of business - 10,859
Vehicles capitalized under capital leases and related lease
obligations
814 2,519
Seller obligations in connection with acquisition of businesses 3,801 3,025
Unpaid purchases of property and equipment included in accounts
payable
1,027 658
 

Non-GAAP Financial Measures

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.

INSTALLED BUILDING PRODUCTS, INC.
RECONCILIATION OF GAAP TO
NON-GAAP MEASURES
ADJUSTED NET INCOME CALCULATIONS
(unaudited,
in thousands, except share and per share amounts)

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

Per share figures may reflect rounding adjustments and consequently
totals may not appear to sum.

   
Three months ended June 30, Six months ended June 30,
2018   2017 2018   2017
 
Net income, as reported $ 16,315 $ 11,973 $ 22,709 $ 18,337
Adjustments for adjusted net income:
Writeoff of capitalized loan costs 1,114 1,201 1,114 1,201
Share based compensation expense 1,955 2,091 4,196 2,570
Acquisition related expenses 684 794 1,200 1,347
Financial Wellness Program 1 - - 604 -
Branch start-up costs 2 185 - 463 -
Amortization expense 3 7,322 6,550 14,450 12,966
Tax impact of adjusted items at normalized tax rate 4   (2,928 )   (3,935 )   (5,727 )   (6,691 )
Adjusted net income $ 24,647   $ 18,674   $ 39,009   $ 29,730  
 
Weighted average shares outstanding (diluted) 31,452,583 31,709,554 31,612,581 31,698,460
 
Diluted net income per share, as reported $ 0.52 $ 0.38 $ 0.72 $ 0.58
Adjustments for adjusted net income, net of tax impact, per diluted
share 5
  0.26     0.21     0.51     0.36  
Diluted adjusted net income per share $ 0.78   $ 0.59   $ 1.23   $ 0.94  
 

1

 

Employer match upon completion of the program, net of waived
bonuses

2

Addback of costs related to organic branch expansion for Alpha
locations

3

Addback of all non-cash amortization resulting from business
combinations

4

Estimated tax rate of 26.0% applied to 2018 period, normalized
rate of 37.0% applied to 2017 period

5

Includes adjustments related to the items noted above, net of tax

 
     

INSTALLED BUILDING PRODUCTS, INC.

RECONCILIATION OF GAAP TO NON-GAAP MEASURES

ADJUSTED GROSS PROFIT CALCULATIONS

(unaudited, in thousands)

 
Three months ended June 30, Six months ended June 30,
2018 2017 2018 2017
 
Gross profit $ 95,643 $ 84,928 $ 175,619 $ 157,100
Share based compensation expense 180 - 655 -
Financial Wellness Program 1 - - 711 -
Branch start-up costs 185 - 463 -
       
Adjusted gross profit $ 96,008   $ 84,928   $ 177,448   $ 157,100  
 
Adjusted gross profit - % Total Revenue 28.9 % 30.1 % 28.0 % 29.2 %
 

1

 

Employer match upon completion of the program, partially offset by
waived executive bonuses (see below Adjusted Selling &
Administrative)

 
     

INSTALLED BUILDING PRODUCTS, INC.

RECONCILIATION OF GAAP TO NON-GAAP MEASURES

ADJUSTED SELLING AND ADMINISTRATIVE EXPENSE CALCULATIONS

(unaudited, in thousands)

 
Three months ended June 30, Six months ended June 30,
2018 2017 2018 2017
 
Selling expense $ 16,020 $ 13,650 $ 31,866 $ 27,676
Administrative expense 44,971 41,761 89,174 81,022
       
Selling and Administrative $ 60,991   $ 55,411   $ 121,040   $ 108,698  
 
Share based compensation expense 1,775 2,091 3,541 2,570
Acquisition related expenses 684 794 1,200 1,347
Financial Wellness Program 1 - - (107 ) -
       
Adjusted Selling and Administrative $ 58,532   $ 52,526   $ 116,406   $ 104,781  
 
Adj. Selling and Administrative - % Total Revenue 17.6 % 18.6 % 18.4 % 19.5 %
 
1   Employer match upon completion of the program, net of waived bonuses
 

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

       

RECONCILIATION OF GAAP TO NON-GAAP MEASURES

ADJUSTED EBITDA CALCULATIONS

(unaudited, in thousands)

     
Three months ended June 30, Six months ended June 30,
2018 2017 2018 2017
Adjusted EBITDA:
 
Net income (GAAP) $ 16,315 $ 11,973 $ 22,709 $ 18,337
Interest expense 5,691 4,865 9,731 7,035
Provision for income taxes 5,161 5,998 7,404 9,781
Depreciation and amortization   15,576     13,481     30,682     26,448  
EBITDA   42,743     36,317     70,526     61,601  
 
Acquisition related expenses 684 794 1,200 1,347
Share based compensation expense 1,955 2,091 4,196 2,570
Financial Wellness Program - - 604 -
Branch start-up costs   185     -     463     -  
Adjusted EBITDA $ 45,567   $ 39,202   $ 76,989   $ 65,518  
 
Adjusted EBITDA margin 13.7 % 13.9 % 12.1 % 12.2 %
 
       

INSTALLED BUILDING PRODUCTS, INC.

SUPPLEMENTARY TABLE

(unaudited)

 
Three months ended June 30, Six months ended June 30,
2018 2017 2018 2017
 

Period-over-period Growth

Sales Growth 17.9% 33.2% 17.9% 33.3%
Same Branch Sales Growth 11.3% 11.6% 11.3% 10.2%
 
Single-Family Sales Growth 22.4% 19.4% 22.2% 17.0%
Single-Family Same Branch Sales Growth 14.5% 9.8% 13.6% 7.2%
 
Residential Sales Growth 18.9% 28.1% 19.1% 25.9%
Residential Same Branch Sales Growth 12.1% 14.2% 11.7% 11.2%
 

U.S. Housing Market1

Total Completions Growth 7.8% 14.2% 8.3% 12.4%
Single-Family Completions Growth 6.5% 9.1% 8.4% 9.9%
 

Same Branch Sales Growth
2

Volume Growth 6.6% 8.7% 7.0% 6.8%
Price/Mix Growth 5.5% 2.8% 4.6% 3.4%
Alpha Sales Growth 4.1% 0.0% 8.6% 0.0%
 

1

 

U.S. Census Bureau data, as revised

2

Same branch volume and price/mix growth excludes Alpha sales growth

 
           

INSTALLED BUILDING PRODUCTS, INC.

INCREMENTAL REVENUE AND ADJUSTED EBITDA MARGINS

(unaudited, in thousands)

 
Three months ended June 30, Six months ended June 30,
2018 % Total 2017 % Total 2018 % Total 2017 % Total
Revenue Increase
 
Same Branch $ 31,887 63.3% $ 24,510 34.9% $ 60,682 62.9% $ 41,193 30.7%
Acquired 18,502 36.7% 45,774 65.1% 35,765 37.1% 93,062 69.3%
Total $ 50,389 100.0% $ 70,284 100.0% $ 96,447 100.0% $ 134,255 100.0%
 
 
 
Adj EBITDA Adj EBITDA Adj EBITDA Adj EBITDA
Contribution     Contribution     Contribution     Contribution
Adjusted EBITDA
 
Same Branch $ 3,977 12.5% $ 6,202 25.3% $ 7,611 12.5% $ 6,398 15.5%
Acquired 2,388 12.9% 6,795 14.8% 3,857 10.8% 13,623 14.6%
Total $ 6,365 12.6% $ 12,997 18.5% $ 11,468 11.9% $ 20,021 14.9%
 

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