Installed Building Products Reports Results for First Quarter 2019

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 first quarter ended March 31,
2019.

First Quarter 2019 Highlights (year-over-year)

  • Net revenue increased 13.4% to $342.1 million
  • Net income increased 38.2% to $8.8 million
  • Adjusted EBITDA* increased 13.5% to $35.7 million
  • Net cash provided by operating activities increased 161.1% to $15.9
    million
  • Net income per diluted share increased 50.0% to $0.30
  • Adjusted net income per diluted share* increased 13.3% to $0.51
  • In March 2019, acquired 1st State Insulation, LLC, an insulation
    installer in Delaware with annual revenues of approximately $8.8
    million
  • In March 2019, launched the Installed Building Products Foundation a
    foundation led by IBP employees for IBP employees, their families, and
    their communities.

“Demand remains strong throughout our geographies and end markets, as
revenues increased 13.4% to $342.1 million,” stated Jeff Edwards,
Chairman and Chief Executive Officer. “First quarter profitability was
consistent with the normal seasonal trends within the industry. While
builder orders and starts weakened in the fourth quarter of 2018,
industry backlogs actually increased. Some of our installation services
completed during the first quarter was related to this backlog without
the benefit of recent selling price increases. We continue to make
progress on improving pricing throughout our markets and we expect to
see the contribution of these pricing trends as well as overall
profitability improvement in the second half of 2019.”

“Overall I am pleased with the strong start to the year and encouraged
by current demand trends within the housing industry. In addition, we
remain focused on our acquisition strategy, prioritizing geographic
expansion. We have a strong pipeline of acquisition candidates, which
includes insulation installers that expand our footprint and
complementary building product companies that diversify our end markets.
As a result of the strong start to the year, favorable industry trends,
and the benefits of our acquisition strategy, we believe we are
positioned for a strong year of sales growth and expanded profitability
in 2019,” concluded Mr. Edwards.

First Quarter 2019 Results Overview

For the first quarter of 2019, net revenue was $342.1 million, an
increase of 13.4% from $301.7 million in the first quarter of 2018. On a
same branch basis, net revenue improved 7.4% from the prior year
quarter, with more than half of the increase attributable to price gains
and more favorable customer and product mix, and the remainder
attributable to the growth in the number of completed jobs. Residential
same branch sales growth was 7.0%, with same branch single-family sales
growth of 6.5% during the first quarter, compared to an increase in U.S.
single-family housing completions of 4.2%. Our large commercial
construction end-market had growth of 6.6%.

Gross profit improved 11.8% to $89.4 million from nearly $80.0 million
in the prior year quarter. Adjusted gross profit* as a percent of total
revenue was 26.2% which adjusts for the Company’s share-based
compensation expense and branch start-up costs, compared to 27.0% for
the same period last year. The decline in gross profit margin was
predominately attributable to the completion of installation jobs from
the elevated 2018 backlog without the full benefit of recent selling
price increases.

Selling and administrative expense, as a percentage of net revenue, was
19.2% compared to 19.9% in the prior year quarter. Adjusted selling and
administrative expense*, as a percentage of net revenue, improved 80
basis points to 18.4% from 19.2%. Higher net revenue in the 2019 first
quarter more than offset the higher costs needed to support our growth.

Net income was $8.8 million, or $0.30 per diluted share, compared to
$6.4 million, or $0.20 per diluted share in the prior year quarter.
Adjusted net income was $15.3 million, or $0.51 per diluted share,
compared to $14.4 million, or $0.45 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 $35.7 million, a 13.5% increase from $31.4 million
in the prior year quarter, largely due to higher sales and improved
selling and administrative leverage.

Conference Call and Webcast

The Company will host a conference call and webcast on May 2, 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 June 2, 2019, by dialing 844-512-2921 (domestic) or
412-317-6671 (international) and entering the passcode 13690134.

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 from its national network of over 175 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 efforts to
navigate the material pricing environment, our ability to increase
selling prices, 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, and
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, the timing of increases in our selling
prices, 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,
2018, 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 March 31,
2019 2018
Net revenue $ 342,135 $ 301,728
Cost of sales   252,697     221,752
Gross profit 89,438 79,976
Operating expenses
Selling 17,130 15,846
Administrative 48,431 44,203
Amortization   5,888     7,128
Operating income 17,989 12,799
Other expense
Interest expense, net 5,676 4,040
Other   125     122
Income before income taxes 12,188 8,637

Income tax provision

  3,354     2,243
Net income $ 8,834   $ 6,394
Other comprehensive (loss) income, net of tax:

Unrealized (loss) gain on cash flow hedge, net of tax benefit

(provision) of $921 and $(386) for the three months ended

March 31, 2019 and 2018, respectively

  (2,749 )   1,160
Comprehensive income $ 6,085   $ 7,554
Basic and diluted net income per share $ 0.30   $ 0.20
Weighted average shares outstanding:
Basic 29,679,884 31,548,745
Diluted 29,806,653 31,772,581
 
 

INSTALLED BUILDING PRODUCTS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

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

     
March 31, December 31,
2019 2018
ASSETS
Current assets

Cash and cash equivalents

$ 88,146 $ 90,442

Investments

10,026 10,060

Accounts receivable (less allowance for doubtful accounts of
$5,442 and

$5,085 at March 31, 2019 and December 31, 2018, respectively

216,997 214,121

Inventories

60,654 61,162

Other current assets

  32,473     35,760  

Total current assets

408,296 411,545
Property and equipment, net 91,391 90,117
Operating lease right-of-use assets 45,280
Goodwill 174,959 173,049
Intangibles, net 147,409 149,790
Other non-current assets   10,374     10,157  

Total assets

$ 877,709   $ 834,658  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities

Current maturities of long-term debt

$ 23,925 $ 22,642

Current maturities of operating lease obligations

14,241

Current maturities of finance lease obligations

4,328 4,806

Accounts payable

88,872 96,949

Accrued compensation

22,371 27,923

Other current liabilities

  28,680     29,366  

Total current liabilities

182,417 181,686
Long-term debt 430,460 432,182
Operating lease obligations 30,682
Finance lease obligations 3,974 3,824
Deferred income taxes 5,774 6,695
Other long-term liabilities   33,801     27,773  

Total liabilities

687,108 652,160
Commitments and contingencies
Stockholders’ equity

Preferred Stock; $0.01 par value: 5,000,000 authorized and 0
shares issued

and outstanding at March 31, 2019 and December 31, 2018,
respectively

Common stock; $0.01 par value: 100,000,000 authorized, 32,780,967
and

32,723,972 issued and 29,971,963 and 29,915,611 shares outstanding
at

March 31, 2019 and December 31, 2018, respectively

328 327

Additional paid in capital

183,836 181,815

Retained earnings

114,046 105,212

Treasury stock; at cost: 2,809,004 and 2,808,361 shares at March
31, 2019

and December 31, 2018, respectively

(104,429 ) (104,425 )

Accumulated other comprehensive loss

  (3,180 )   (431 )

Total stockholders’ equity

  190,601     182,498  

Total liabilities and stockholders’ equity

$ 877,709   $ 834,658  
 
     

INSTALLED BUILDING PRODUCTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)

 
Three months ended March 31,
2019 2018
Net income $ 8,834 $ 6,394
Adjustments to reconcile net income to net cash provided by
operating activities

Depreciation and amortization of property and equipment

9,111 7,978

Amortization of operating lease right-of-use assets

3,798

Amortization of intangibles

5,888 7,128

Amortization of deferred financing costs and debt discount

282 302

Provision for doubtful accounts

828 896

Gain on sale of property and equipment

(19 ) (185 )

Noncash stock compensation

2,022 2,240

Changes in assets and liabilities, excluding effects of
acquisitions

Accounts receivable

(3,704 ) (7,058 )

Inventories

799 (2,420 )

Other assets

(1,048 ) (4,139 )

Accounts payable

(7,807 ) (57 )

Income taxes receivable / payable

2,746 1,303

Other liabilities

  (5,841 )   (6,297 )

Net cash provided by operating activities

  15,889     6,085  
Cash flows from investing activities

Purchases of investments

(7,482 ) (17,782 )

Maturities of short term investments

7,530 19,000

Purchases of property and equipment

(8,658 ) (10,237 )

Acquisitions of businesses

(5,125 ) (11,505 )

Proceeds from sale of property and equipment

196 283

Other

  (420 )   (1,050 )

Net cash used in investing activities

  (13,959 )   (21,291 )
Cash flows from financing activities

Payments on term loan

(1,000 ) (750 )

Proceeds from vehicle and equipment notes payable

4,908 4,510

Debt issuance costs

(1 )

Principal payments on long-term debt

(3,946 ) (3,092 )

Principal payments on finance lease obligations

(1,366 ) (1,629 )
Acquisition-related obligations (2,818 ) (1,740 )
Repurchase of common stock (24,640 )
Surrender of common stock awards by employees   (4 )   (56 )
Net cash used in financing activities   (4,226 )   (27,398 )
Net change in cash and cash equivalents (2,296 ) (42,604 )
Cash and cash equivalents at beginning of period   90,442     62,510  
Cash and cash equivalents at end of period $ 88,146   $ 19,906  
Supplemental disclosures of cash flow information
Net cash paid during the period for:
Interest $ 5,816 $ 3,914
Income taxes, net of refunds 737 899
Supplemental disclosure of noncash activities
Right-of-use assets obtained in exchange for operating lease
obligations
3,851
Property and equipment obtained in exchange for finance lease
obligations
1,108 312
Seller obligations in connection with acquisition of businesses 1,380 3,093
Unpaid purchases of property and equipment included in accounts
payable
1,503 1,485
 

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 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.

         

INSTALLED BUILDING PRODUCTS, INC.

RECONCILIATION OF GAAP TO NON-GAAP MEASURES

ADJUSTED NET INCOME CALCULATIONS

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

 
Three months ended March 31,
2019 2018
 
Net income, as reported $ 8,834 $ 6,394
Adjustments for adjusted net income:
Share based compensation expense 1,938 2,240
Acquisition related expenses 588 516
Financial Wellness Program 1 604
Branch start-up costs 2 261 278
Amortization expense 3 5,888 7,128
Tax impact of adjusted items at normalized tax rate 4   (2,256 )   (2,799 )
Adjusted net income $ 15,253   $ 14,361  
 
Weighted average shares outstanding (diluted) 29,806,653 31,772,581
 
Diluted net income per share, as reported $ 0.30 $ 0.20
Adjustments for adjusted net income, net of tax impact, per diluted
share 5
$ 0.21     0.25  
Diluted adjusted net income per share $ 0.51   $ 0.45  
 

1 Employer match upon completion of the program, net of
waived executive 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 Normalized effective tax rate of 26% applied to both
periods represented

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 March 31,
2019 2018
 
Gross profit $ 89,438 $ 79,976
Share based compensation expense 78 475
Financial Wellness Program 1 711

Branch start-up costs

  261     278  
Adjusted gross profit $ 89,777   $ 81,440  
 
Adjusted gross profit – % Total Revenue 26.2 % 27.0 %
 
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 March 31,
2019 2018
 
Selling expense $ 17,130 $ 15,846
Administrative expense   48,431     44,203  
Selling and Administrative $ 65,561   $ 60,049  
 
Share based compensation expense 1,860 1,765
Acquisition related expenses 588 516
Financial Wellness Program 1       (107 )
Adjusted Selling and Administrative $ 63,113   $ 57,875  
 
Adj. Selling and Administrative – % Total Revenue 18.4 % 19.2 %
 
1   Employer match upon completion of the program, net of waived
executive 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 March 31,
2019 2018
Adjusted EBITDA:
 
Net income (GAAP) $ 8,834 $ 6,394
Interest expense 5,676 4,040
Provision for income taxes 3,354 2,243
Depreciation and amortization   15,000     15,106  
EBITDA   32,864     27,783  
 
Acquisition related expenses 588 516
Share based compensation expense 1,938 2,240
Financial Wellness Program 604
Branch start-up costs   261     278  
Adjusted EBITDA $ 35,651   $ 31,421  
 
Adjusted EBITDA margin 10.4 % 10.4 %
 
         

INSTALLED BUILDING PRODUCTS, INC.

SUPPLEMENTARY TABLE

(unaudited)

 
Three months ended March 31,
2019 2018
 

Period-over-period Growth

Sales Growth 13.4% 18.0%
Same Branch Sales Growth 7.4% 11.3%
 
Single-Family Sales Growth 14.4% 21.9%
Single-Family Same Branch Sales Growth 6.5% 12.6%
 
Residential Sales Growth 13.8% 19.3%
Residential Same Branch Sales Growth 7.0% 11.3%
 

U.S. Housing Market1

Total Completions Growth 5.7% 9.0%
Single-Family Completions Growth 4.2% 10.6%
 

Same Branch Sales Growth
2

Volume Growth 3.4% 7.3%
Price/Mix Growth 4.1% 3.6%
Alpha Sales Growth 6.6% 13.5%
 
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 March 31,
2019 % Total 2018 % Total
Revenue Increase
Same Branch $ 22,294 55.2 % $ 28,796 62.5 %
Acquired   18,113 44.8 %   17,263 37.5 %
Total $ 40,407 100.0 % $ 46,059 100.0 %
 
 
 
Adj EBITDA Adj EBITDA
Contribution Contribution
Adjusted EBITDA
Same Branch $ 2,346 10.5 % $ 3,634 12.6 %
Acquired   1,884 10.4 %   1,469 8.5 %
Total $ 4,230 10.5 % $ 5,103 11.1 %
 

Contacts

Investor Relations:
614-221-9944
[email protected]

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