Installed Building Products Reports Record Second Quarter 2019 Results

COLUMBUS, Ohio–(BUSINESS WIRE)–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, 2019.

Second Quarter 2019 Highlights

  • Net revenue increased 11.8% to a record $371.8 million
  • Net income increased 16.0% to a record $18.9 million
  • Adjusted EBITDA* increased 8.9% to a record $49.6 million
  • Net income per diluted share increased 21.2% to a record $0.63 per diluted share
  • Adjusted net income per diluted share* increased 11.5% to a record $0.87 per diluted share
  • In June 2019, acquired Expert Insulation, Inc., an insulation installer serving the Minnesota, Wisconsin, Iowa, North Dakota, and South Dakota markets with annual revenues of approximately $12.0 million
  • In June 2019, acquired a Pennsylvania-based insulation installer with annual revenues of approximately $3.6 million

“We continue to benefit from our diversified product and end-market strategy,” stated Jeff Edwards, Chairman and Chief Executive Officer. “Our record financial results for the second quarter 2019 reflects our solid operating performance, strong position in compelling markets and an improving pricing environment. Our price / mix was up nearly 6% in the second quarter compared to the prior year quarter primarily as a result of realizing price increases. In addition, we believe industry dynamics remain positive as we experienced strong year-over-year growth across our single-family, multi-family and commercial end-markets. We expect this, combined with typical seasonal trends, to benefit results for the remainder of the year.”

“Our pipeline of acquisition candidates remains strong as we continue to pursue acquisitions that expand our geography and diversify our end-products and end-markets. I am extremely encouraged by the direction in which we are headed, and the positive business and market trends we are experiencing. As a result, we believe we are well-positioned for continued robust sales and earnings growth in 2019,” concluded Mr. Edwards.

Second Quarter 2019 Results Overview

For the second quarter of 2019, net revenue was $371.8 million, an increase of 11.8% from $332.6 million in the second quarter of 2018. On a same branch basis, net revenue improved 7.8% from the prior year quarter. Residential same branch sales growth was 5.2% in the quarter, attributable to price gains and more favorable customer and product mix. Same branch single-family sales grew 4.4% during the second quarter, compared to growth in U.S. single-family housing completions of 6.1%, while our large commercial construction end market had organic growth of 21.0%.

Gross profit improved 12.1% to $107.3 million from $95.6 million in the prior year quarter. Adjusted gross profit*, as a percent of net revenue, was 29.0%, compared to 28.9% for the same period last year.

Selling and administrative expense, as a percentage of net revenue, was 18.9% compared to 18.3% in the prior year quarter. Adjusted selling and administrative expense*, as a percentage of net revenue, was 18.2% compared to 17.6% for the same quarter last year. The increase in administrative costs as a percent of second quarter revenue was primarily due to reduced liability and medical insurance reserves in the prior year quarter. These accruals impacted the comparable quarter by approximately $1.8 million but will vary from quarter to quarter based on actuarial estimates and trends.

Net income was $18.9 million, or $0.63 per diluted share, compared to $16.3 million, or $0.52 per diluted share in the prior year quarter. Adjusted net income* was $25.9 million, or $0.87 per diluted share, compared to $24.6 million, or $0.78 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 $49.6 million, an 8.9% increase from $45.6 million in the prior year quarter, largely due to higher sales and improved gross profit. Adjusted EBITDA, as a percentage of net revenue, was 13.3%, compared to 13.7% in the prior year quarter.

Conference Call and Webcast

The Company will host a conference call and webcast on Thursday, August 8, 2019 at 10:00 a.m. Eastern Time to discuss these results. To participate in the call, please dial 877-407-0792 (domestic) or 1-201-689-8263 (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 September 8, 2019, by dialing 844-512-2921 (domestic) or 412-317-6671 (international) and entering the passcode 13692668.

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 and industry conditions, 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 June 30,

 

Six months ended June 30,

2019

 

2018

 

2019

 

2018

Net revenue

$

371,814

 

$

332,584

$

713,949

 

$

634,312

Cost of sales

 

264,557

 

 

236,941

 

517,254

 

 

458,693

Gross profit

 

107,257

 

 

95,643

 

196,695

 

 

175,619

Operating expenses
Selling

 

17,903

 

 

16,020

 

35,033

 

 

31,866

Administrative

 

52,493

 

 

44,971

 

100,924

 

 

89,174

Amortization

 

6,021

 

 

7,322

 

11,909

 

 

14,450

Operating income

 

30,840

 

 

27,330

 

48,829

 

 

40,129

Other expense
Interest expense, net

 

5,649

 

 

5,691

 

11,325

 

 

9,731

Other

 

101

 

 

163

 

226

 

 

285

Income before income taxes

 

25,090

 

 

21,476

 

37,278

 

 

30,113

Income tax provision

 

6,171

 

 

5,161

 

9,525

 

 

7,404

Net income

$

18,919

 

$

16,315

$

27,753

 

$

22,709

 
Other comprehensive (loss) income, net of tax:
Unrealized (loss) gain on cash flow hedge, net of tax benefit (provision) of $1,180 and ($159) for the three months ended June 30, 2019 and 2018, respectively, and $2,101 and ($545) for the six months ended June 30, 2019 and 2018, respectively

 

(3,546

)

 

475

 

(6,295

)

 

1,635

Comprehensive income

$

15,373

 

$

16,790

$

21,458

 

$

24,344

 
Basic net income per share

$

0.64

 

$

0.52

$

0.93

 

$

0.72

Diluted net income per share

$

0.63

 

$

0.52

$

0.93

 

$

0.72

Weighted average shares outstanding:
Basic

 

29,758,071

 

 

31,345,390

 

29,719,194

 

 

31,447,067

Diluted

 

29,834,748

 

 

31,452,583

 

29,820,917

 

 

31,612,581

INSTALLED BUILDING PRODUCTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands, except share and per share amounts)
 

June 30,

 

December 31,

2019

 

2018

ASSETS
Current assets
Cash and cash equivalents

$

95,747

 

$

90,442

 

Investments

 

9,923

 

 

10,060

 

Accounts receivable (less allowance for doubtful accounts of $5,539 and $5,085 at June 30, 2019 and December 31, 2018, respectively)

 

232,111

 

 

214,121

 

Inventories

 

63,951

 

 

61,162

 

Other current assets

 

34,944

 

 

35,760

 

Total current assets

 

436,676

 

 

411,545

 

Property and equipment, net

 

92,655

 

 

90,117

 

Operating lease right-of-use assets

 

46,383

 

 

 

Goodwill

 

183,412

 

 

173,049

 

Intangibles, net

 

148,203

 

 

149,790

 

Other non-current assets

 

9,062

 

 

10,157

 

Total assets

$

916,391

 

$

834,658

 

 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Current maturities of long-term debt

$

25,252

 

$

22,642

 

Current maturities of operating lease obligations

 

15,028

 

 

 

Current maturities of finance lease obligations

 

3,738

 

 

4,806

 

Accounts payable

 

96,235

 

 

96,949

 

Accrued compensation

 

26,964

 

 

27,923

 

Other current liabilities

 

34,760

 

 

29,366

 

Total current liabilities

 

201,977

 

 

181,686

 

Long-term debt

 

431,988

 

 

432,182

 

Operating lease obligations

 

30,964

 

 

 

Finance lease obligations

 

3,943

 

 

3,824

 

Deferred income taxes

 

4,421

 

 

6,695

 

Other long-term liabilities

 

37,096

 

 

27,773

 

Total liabilities

 

710,389

 

 

652,160

 

Commitments and contingencies
Stockholders’ equity
Preferred Stock; $0.01 par value: 5,000,000 authorized and 0 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively

 

 

 

 

Common stock; $0.01 par value: 100,000,000 authorized, 32,871,504 and 32,723,972 issued and 30,017,008 and 29,915,611 shares outstanding at June 30, 2019 and December 31, 2018, respectively

 

329

 

 

327

 

Additional paid in capital

 

186,182

 

 

181,815

 

Retained earnings

 

132,965

 

 

105,212

 

Treasury stock; at cost: 2,854,496 and 2,808,361 shares at June 30, 2019 and December 31, 2018, respectively

 

(106,748

)

 

(104,425

)

Accumulated other comprehensive loss

 

(6,726

)

 

(431

)

Total stockholders’ equity

 

206,002

 

 

182,498

 

Total liabilities and stockholders’ equity

$

916,391

 

$

834,658

 

 
INSTALLED BUILDING PRODUCTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
 

Six months ended June 30,

2019

 

2018

Cash flows from operating activities
Net income

$

27,753

 

$

22,709

 

Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization of property and equipment

 

18,614

 

 

16,231

 

Amortization of operating lease right-of-use assets

 

7,607

 

 

 

Amortization of intangibles

 

11,909

 

 

14,450

 

Amortization of deferred financing costs and debt discount

 

564

 

 

601

 

Provision for doubtful accounts

 

1,605

 

 

1,108

 

Write-off of debt issuance costs

 

 

 

1,114

 

Gain on sale of property and equipment

 

(156

)

 

(227

)

Noncash stock compensation

 

4,345

 

 

4,196

 

Changes in assets and liabilities, excluding effects of acquisitions
Accounts receivable

 

(17,876

)

 

(20,192

)

Inventories

 

(1,650

)

 

(3,995

)

Other assets

 

(1,495

)

 

(3,739

)

Accounts payable

 

(1,253

)

 

304

 

Income taxes receivable / payable

 

6,347

 

 

5,187

 

Other liabilities

 

(3,914

)

 

(4,622

)

Net cash provided by operating activities

 

52,400

 

 

33,125

 

Cash flows from investing activities
Purchases of investments

 

(17,352

)

 

(17,782

)

Maturities of short term investments

 

17,560

 

 

27,500

 

Purchases of property and equipment

 

(17,778

)

 

(18,478

)

Acquisitions of businesses

 

(21,290

)

 

(18,626

)

Proceeds from sale of property and equipment

 

452

 

 

557

 

Other

 

(876

)

 

(1,540

)

Net cash used in investing activities

 

(39,284

)

 

(28,369

)

Cash flows from financing activities
Proceeds from term loan (Note 6)

 

 

 

100,000

 

Payments on term loan (Note 6)

 

(2,000

)

 

(750

)

Proceeds from vehicle and equipment notes payable

 

13,783

 

 

14,271

 

Debt issuance costs

 

 

 

(1,933

)

Principal payments on long-term debt

 

(9,751

)

 

(6,863

)

Principal payments on finance lease obligations

 

(2,481

)

 

(3,028

)

Acquisition-related obligations

 

(5,039

)

 

(2,295

)

Repurchase of common stock

 

 

 

(24,640

)

Surrender of common stock awards by employees

 

(2,323

)

 

(2,282

)

Net cash (used in) provided by financing activities

 

(7,811

)

 

72,480

 

Net change in cash and cash equivalents

 

5,305

 

 

77,236

 

Cash and cash equivalents at beginning of period

 

90,442

 

 

62,510

 

Cash and cash equivalents at end of period

$

95,747

 

$

139,746

 

Supplemental disclosures of cash flow information
Net cash paid during the period for:
Interest

$

11,793

 

$

8,349

 

Income taxes, net of refunds

 

3,595

 

 

1,906

 

Supplemental disclosure of noncash activities
Right-of-use assets obtained in exchange for operating lease obligations

 

8,677

 

 

 

Property and equipment obtained in exchange for finance lease obligations

 

1,830

 

 

814

 

Seller obligations in connection with acquisition of businesses

 

3,162

 

 

3,801

 

Unpaid purchases of property and equipment included in accounts payable

 

2,334

 

 

1,027

 

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,

2019

 

2018

 

2019

 

2018

 
Net income, as reported

$

18,919

 

$

16,315

 

$

27,753

 

$

22,709

 

Adjustments for adjusted net income:
Writeoff of capitalized loan costs

 

 

 

1,114

 

 

 

 

1,114

 

Share based compensation expense

 

2,404

 

 

1,955

 

 

4,342

 

 

4,196

 

Acquisition related expenses

 

606

 

 

684

 

 

1,194

 

 

1,200

 

Financial Wellness Program 1

 

 

 

 

 

 

 

604

 

Branch start-up costs 2

 

357

 

 

185

 

 

617

 

 

463

 

Amortization expense 3

 

6,021

 

 

7,322

 

 

11,909

 

 

14,450

 

Tax impact of adjusted items at normalized tax rate 4

 

(2,441

)

 

(2,928

)

 

(4,696

)

 

(5,727

)

Adjusted net income

$

25,866

 

$

24,647

 

$

41,119

 

$

39,009

 

 
Weighted average shares outstanding (diluted)

 

29,834,748

 

 

31,452,583

 

 

29,820,917

 

 

31,612,581

 

 
Diluted net income per share, as reported

$

0.63

 

$

0.52

 

$

0.93

 

$

0.72

 

Adjustments for adjusted net income, net of tax impact, per diluted share 5

 

0.24

 

 

0.26

 

 

0.45

 

 

0.51

 

Diluted adjusted net income per share

$

0.87

 

$

0.78

 

$

1.38

 

$

1.23

 

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 June 30,

 

Six months ended June 30,

2019

 

2018

 

2019

 

2018

 
Gross profit

$

107,257

 

$

95,643

 

$

196,695

 

$

175,619

 

Share based compensation expense

 

105

 

 

180

 

 

183

 

 

655

 

Financial Wellness Program 1

 

 

 

 

 

 

 

711

 

Branch start-up costs

 

357

 

 

185

 

 

617

 

 

463

 

Adjusted gross profit

$

107,719

 

$

96,008

 

$

197,495

 

$

177,448

 

 
Adjusted gross profit – % Total Revenue

 

29.0

%

 

28.9

%

 

27.7

%

 

28.0

%

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 June 30,

 

Six months ended June 30,

2019

 

2018

 

2019

 

2018

 
Selling expense

$

17,903

 

$

16,020

 

$

35,033

 

$

31,866

 

Administrative expense

 

52,493

 

 

44,971

 

 

100,924

 

 

89,174

 

Selling and Administrative

$

70,396

 

$

60,991

 

$

135,957

 

$

121,040

 

 
Share based compensation expense

 

2,298

 

 

1,775

 

 

4,159

 

 

3,541

 

Acquisition related expenses

 

606

 

 

684

 

 

1,194

 

 

1,200

 

Financial Wellness Program 1

 

 

 

 

 

 

 

(107

)

Adjusted Selling and Administrative

$

67,492

 

$

58,532

 

$

130,604

 

$

116,406

 

 
Adj. Selling and Administrative – % Total Revenue

 

18.2

%

 

17.6

%

 

18.3

%

 

18.4

%

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
AJUSTED EBITDA CALCULATIONS
(unaudited, in thousands)
 

Three months ended June 30,

 

Six months ended June 30,

2019

 

2018

 

2019

 

2018

Adjusted EBITDA:
 
Net income (GAAP)

$

18,919

 

$

16,315

 

$

27,753

 

$

22,709

 

Interest expense

 

5,649

 

 

5,691

 

 

11,325

 

 

9,731

 

Provision for income taxes

 

6,171

 

 

5,161

 

 

9,525

 

 

7,404

 

Depreciation and amortization

 

15,523

 

 

15,576

 

 

30,523

 

 

30,682

 

EBITDA

 

46,262

 

 

42,743

 

 

79,126

 

 

70,526

 

 
Acquisition related expenses

 

606

 

 

684

 

 

1,194

 

 

1,200

 

Share based compensation expense

 

2,404

 

 

1,955

 

 

4,342

 

 

4,196

 

Financial Wellness Program

 

 

 

 

 

 

 

604

 

Branch start-up costs

 

357

 

 

185

 

 

617

 

 

463

 

Adjusted EBITDA

$

49,629

 

$

45,567

 

$

85,279

 

$

76,989

 

 
Adjusted EBITDA margin

 

13.3

%

 

13.7

%

 

11.9

%

 

12.1

%

 

Contacts

Investor Relations:

614-221-9944

investorrelations@installed.net

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