• Revenue: $761 million, an 8% increase from the previous year.
• Same Branch Sales Growth: Residential installation sales increased approximately 5%.
• Adjusted Gross Margin: 33.8%, down from 34.3% in the prior year period.
• Adjusted EBITDA: $132 million, with a margin of 17.4%.
• Adjusted Net Income: $80 million or $2.85 per diluted share.
• Cash Flow from Operations: $265 million for the nine months ended September 30, 2024.
• Net Debt to Adjusted EBITDA Ratio: 0.94 times as of September 30, 2024.
• Capital Expenditures and Finance Leases: Approximately $25 million for the three months ended September 30, 2024.
• Share Repurchases: 100,000 shares repurchased at a total cost of $21 million in the third quarter.
• Dividend: Fourth quarter dividend of 35 per share, a 6% increase over the prior year period.

Release Date: November 07, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Installed Building Products Inc (NYSE:IBP) delivered record third quarter revenue and profitability, supported by organic growth across all end markets.
• Consolidated sales growth of nearly 8% and same branch sales growth of 5% in the largest end market, single-family sales, were achieved.
• The company completed acquisitions with annual revenues of approximately $42 million, indicating strong growth and expansion potential.
• IBP's strategic focus on applying local market expertise contributed to achieving all-time record quarterly diluted net income per share and adjusted EBITDA.
• The company has a strong liquidity position with $342 million in working capital and a net debt to trailing 12-month adjusted EBITDA leverage ratio of 0.94 times, well below the target of two times.

Negative Points

• Profit margins were impacted by a greater proportion of single-family sales shifting to production builders and higher growth in non-insulation product sales.
• The company faced challenges due to hurricanes in the southeast and Mid-Atlantic regions, impacting revenue and EBITDA.
• Spray foam revenue declined mid-single digits, impacting gross margin by less than 100 basis points.
• The multi-family segment is expected to be a headwind in the fourth quarter and into the first half of 2025.
• Higher insurance expenses, facility and warehouse lease expenses, and startup costs related to building out internal sourcing efforts increased administrative expenses.

Q & A Highlights

Q: Can you elaborate on the factors impacting margins this quarter, particularly the startup expenses for internal distribution? A: Michael Miller, CFO, explained that higher growth from production builders and non-insulation products impacted gross margins. The startup expenses for internal distribution involved setting up facilities to internally distribute products, aiming to reduce reliance on external purchases. These costs were estimated at around $1 million for the quarter.

Q: How might a Trump presidency impact your labor base and plans for building to tighter energy codes in 2025? A: Jeffrey Edwards, CEO, stated that they do not rely heavily on government energy efficiency initiatives and expect normal adoption of stricter energy codes. Regarding labor, IBP has historically managed to hire and train a workforce under various circumstances, and they expect to continue doing so.

Q: What is the outlook for volume versus price mix, and does it suggest normalization in operating conditions? A: Michael Miller, CFO, noted that while there is volatility, they expect more normalization between volume and price mix over the next year. They anticipate higher volumes than price mix due to a benign inflationary environment and growth from production builders.

Q: Can you discuss the impact of spray foam pricing on overall price mix and revenue? A: Michael Miller, CFO, mentioned that spray foam accounts for about 10% of revenue and its pricing decline impacted gross margin by less than 100 basis points. This trend is expected to continue into the next few quarters.

Q: How are you positioned from an inventory perspective given ongoing supply constraints? A: Jeffrey Edwards, CEO, stated that while supply is tight, it hasn't led to uncompleted jobs. The internal sourcing strategy is helping manage inventory effectively, ensuring the right materials reach the right branches.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.