Q 4 2024 INSTALLED BUILDING PRODUCTS FEBRUARY 27, 2025 NYSE: IBP Safe Harbor This presentation contains "forward-looking statements" as defined under U.S. federal securities laws. Forward -looking statements are generally identified by the use of the words "will," "may," "believes," "expects," "forecast," "intends," "anticipates," "projects," "outlook," "target," "plans" and "seeks," and, in each case their negative, and other variations or comparable terminology. Forward-looking statements are based on man ...

Financial Data and Key Metrics Changes - Consolidated net revenue for Q4 2024 increased 4% to a record $750 million compared to $721 million in the same period last year [17] - Adjusted net income rose to $81 million or $2.88 per diluted share, reflecting strong operational performance [22] - Adjusted EBITDA for Q4 2024 reached a record $132 million, with an adjusted EBITDA margin of 17.6% [21] Business Line Data and Key Metrics Changes - Single-family sales growth was supported by a diverse mix of builders, contributing to nearly 6% consolidated sales growth for the year [10][11] - Multifamily installation sales grew over 6% on a same-branch basis, indicating resilience in this segment [12] - Commercial sales in the installation segment improved modestly from the prior year, reflecting stable demand [12] Market Data and Key Metrics Changes - Single-family starts in 2024 were up 7%, indicating a positive trend in the housing market [14] - The company expects a relatively stable demand environment for single-family installation services in 2025, despite challenges in housing affordability [15] - The multifamily market is anticipated to face a decline of 20% to 25% in units under construction, which may take six months to normalize [35][36] Company Strategy and Development Direction - The company continues to invest in growth opportunities, with approximately $87 million allocated for acquisitions in 2024 [8] - A new stock buyback program has been authorized, expanding repurchase capacity to $500 million, reflecting confidence in financial stability [26] - The company aims to maintain a disciplined approach to capital allocation while focusing on profitable growth and maximizing shareholder returns [9][10] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the long-term demand for installed services, despite current market challenges [15][89] - The company anticipates a slow start to the spring selling season, with expectations of low single-family starts growth in 2025 [38][41] - Management remains committed to delivering high service levels and operational improvements in 2025 and beyond [16] Other Important Information - The board approved a 6% increase in both the regular quarterly cash dividend and the annual variable dividend for 2025 [8][27] - The company generated $340 million in cash flow from operations for the year, maintaining strong liquidity [24] - The net debt to trailing twelve-month adjusted EBITDA leverage ratio was 1.08 times, well below the target of 2 times [25] Q&A Session Summary Question: Expectations for multifamily and single-family work in 2025 - Management believes multifamily will continue to outperform the market, but acknowledges a potential decline in units under construction [34][36] - For single-family, a good case scenario is low single-family starts growth, with expectations of negative comps in the first half of the year [38][41] Question: Outlook on price mix at the beginning of the year - Current price mix benefits are carryover from prior periods, with a benign inflationary environment impacting pricing [42][44] Question: Growth plans for multifamily and CQ's role - CQ is expected to expand into new markets, with significant opportunities for growth in multifamily sales [50][56] Question: Competitive dynamics and pricing pressures - The environment is competitive, but management emphasizes maintaining relationships with builders and prioritizing fair pricing over volume [86][88] Question: Impact of inventory levels on builders - Builders are managing high inventory levels, and the company is observing varied conditions across different markets [136][139] Question: Internal distribution capabilities and margin impact - Progress is being made in expanding internal distribution capabilities, with expectations that it will not significantly drag margins [142][143]

Revenue Breakdown - Insulation installation accounted for approximately 60% of net revenue, totaling $2.9 billion for the year ended December 31, 2024[27]. - The installation and service of garage doors represented approximately 6% of net revenue for the year ended December 31, 2024[33]. - The distribution segment comprised approximately 5% of net revenue for the year ended December 31, 2024[41]. - The manufacturing segment, focused on cellulose insulation, accounted for approximately 1% of net revenue for the year ended December 31, 2024[43]. - The company’s top ten customers accounted for approximately 15% of net revenue for the year ended December 31, 2024[67]. Market Presence and Growth - The company completed over 200 acquisitions since 1999, significantly expanding its market presence and product offerings[22]. - The company has diversified its product offerings, with insulation installation decreasing from 74% of revenues in 2013 to 60% in 2024[47]. - Commercial end market revenue increased from approximately 11% in 2013 to 16% in 2024, enhancing revenue visibility[47]. - The company operates approximately 250 branch locations across 48 states and the District of Columbia[21]. - The company’s expansion into new geographic markets may present competitive and operational challenges, potentially affecting future sales growth[141]. Employee and Operational Efficiency - Employee retention efforts have reduced turnover to below industry averages, contributing to operational efficiency[49]. - The average monthly turnover rate for installers was 2.8% in 2024, compared to 3.9% for the U.S. construction industry[74]. - The workforce is comprised of 51.3% Hispanic or Latino employees, exceeding the construction industry average, with over 50% ethnic minorities overall[77][78]. - The company experienced a 5% increase in total hours worked from 2023 to 2024, while the OSHA-defined incident rate per 100 employees decreased by 9% to 5.10 for the year ended December 31, 2024[66]. Financial Performance and Backlog - The company reported a backlog of $126.3 million as of December 31, 2024, down from $115.7 million as of December 31, 2023[68]. - The estimated backlog associated with the commercial end market was approximately $126.3 million as of December 31, 2024[146]. Economic and Market Conditions - Housing starts in 2024 were reported at 1.37 million, a 3.9% decrease from 1.42 million in 2023, with a forecasted decline to 1.32 million in 2025[59]. - Inflation in the U.S. averaged 2.9% in 2024, down from 3.4% in 2023, impacting material costs and housing affordability[62]. - The commercial sector is predicted to see a modest increase of 6% in investment dollars in 2025 over 2024[61]. - The commercial construction market increased by 7% in 2024 compared to 2023, as measured by investment dollars[103]. - Commercial building starts are expected to rise by 6% in 2025 from 2024, while institutional building starts are projected to increase by 4%[104]. Corporate Social Responsibility - The Installed Building Products Foundation supports employee education and community initiatives, enhancing corporate social responsibility[50]. - In 2024, the Foundation and the Company awarded over 750 grants totaling over $4.5 million, an increase from 172 grants totaling $2.5 million in 2023[75]. - The company is committed to socially responsible practices, including giving back to communities and providing financial wellness training to employees[86]. Regulatory and Compliance Risks - The company is subject to various federal, state, and local regulations, including those related to employee safety and environmental compliance, with no material costs incurred to date[86][91]. - Federal and state regulations regarding ESG practices are evolving, potentially increasing compliance costs and impacting access to capital[131]. - The company is subject to various federal, state, and local laws and regulations that could impose substantial costs and restrictions on its operations[165]. Competition and Market Risks - The company faces significant competition in the building products installation industry, which could adversely affect its financial condition and results of operations[109]. - Increased fuel costs could negatively impact the cost of delivering products, affecting net income if selling prices cannot be adjusted accordingly[125]. - The commercial construction market's strength is influenced by various economic factors, including capital availability, material costs, and interest rates[105]. Financial Obligations and Capital Needs - The company has significant debt obligations that may restrict future operations and impair the ability to meet obligations[171]. - A substantial portion of cash flow from operations will be dedicated to interest and principal payments on indebtedness, reducing funds available for operations and growth[171]. - The company anticipates needing additional capital for growth, which may not be available on favorable terms[185]. Cybersecurity and Risk Management - The Board of Directors oversees the company's Enterprise Risk Management program, including cybersecurity risks[208]. - The company maintains a cybersecurity program aligned with industry standards, including the CIS Control framework[204]. - The company has experienced cybersecurity incidents in the normal course of business but is not currently aware of any that materially affect operations[202]. Legal and Liability Risks - The company is exposed to product liability and other claims related to the products it installs or manufactures, which could adversely affect its financial condition[157]. - Legal claims and lawsuits, including wage and hour lawsuits, could materially affect the company's results of operations and financial condition[156]. - Changes in employment laws could adversely impact operating costs, particularly in areas such as wage and hour laws, minimum wage requirements, and workers' compensation rates[152].

Core Viewpoint - Installed Building Products (IBP) reported quarterly earnings of $2.90 per share, slightly missing the Zacks Consensus Estimate of $2.91 per share, but showing an increase from $2.72 per share a year ago, indicating a mixed performance in earnings expectations [1][2]. Financial Performance - The company posted revenues of $750.2 million for the quarter ended December 2024, which was 2.72% below the Zacks Consensus Estimate, but an increase from $720.7 million in the same quarter last year [2]. - Over the last four quarters, IBP has surpassed consensus EPS estimates two times and topped consensus revenue estimates two times [2]. Stock Performance - IBP shares have declined approximately 1.9% since the beginning of the year, contrasting with the S&P 500's gain of 1.3%, indicating underperformance relative to the broader market [3]. - The current Zacks Rank for IBP is 3 (Hold), suggesting that the shares are expected to perform in line with the market in the near future [6]. Earnings Outlook - The consensus EPS estimate for the upcoming quarter is $2.39, with expected revenues of $692.45 million, and for the current fiscal year, the estimate is $11.53 on $3.07 billion in revenues [7]. - The trend of estimate revisions for IBP is mixed, which could change following the recent earnings report [6]. Industry Context - The Building Products - Miscellaneous industry, to which IBP belongs, is currently ranked in the bottom 25% of over 250 Zacks industries, suggesting potential challenges ahead [8].

Financial Performance - Net revenue for Q4 2024 reached a record $750.2 million, an increase of 4.1% from $720.7 million in Q4 2023[8] - For the full year 2024, net revenue was a record $2.9 billion, up 5.9% from $2.8 billion in 2023[13] - Total consolidated net revenue for the twelve months ended December 31, 2024, reached $2,941.3 million, compared to $2,778.6 million in 2023, reflecting a growth of 5.9%[35] - Net income rose 3.1% to $66.9 million, with net income per diluted share increasing 4.4% to $2.39[11] - Net income for the twelve months ended December 31, 2024, was $256.6 million, compared to $243.7 million in 2023, reflecting a 5.9% increase[26] - The net income for the three months ended December 31, 2024, was $66.9 million, compared to $64.9 million in the same period of 2023[57] Revenue Segmentation - Installation revenue increased by 3.8% to $695.0 million, driven by growth across all end markets and contributions from recent acquisitions[5] - Installation segment revenue for Q4 2024 was $695.0 million, up from $669.8 million in Q4 2023, representing an increase of 3.5%[35] - Residential new construction accounted for 71% of installation revenue in both Q4 2024 and Q4 2023, with revenues of $533.3 million and $510.5 million respectively[38] - Other revenue for Q4 2024 was $60.9 million, up from $53.6 million in Q4 2023, representing an increase of 6.1%[35] Profitability Metrics - Adjusted EBITDA for Q4 2024 was $132.0 million, a 2.9% increase from $128.3 million in the prior year quarter, representing an adjusted EBITDA margin of 17.6%[12] - Adjusted EBITDA for the twelve months ended December 31, 2024, was $511.4 million, compared to $485.9 million for the same period in 2023, reflecting an adjusted EBITDA margin of 17.4%[57] - The total adjusted EBITDA margin for the twelve months ended December 31, 2024, was 16.7%, compared to 41.0% in 2023, indicating a decline in profitability[66] - The total adjusted EBITDA for the three months ended December 31, 2024, was $0.8 million, with a margin of 2.7%, down from $15.2 million and a margin of 37.9% in the same period of 2023[66] Expenses and Dividends - Selling and administrative expenses for the twelve months ended December 31, 2024, totaled $564.6 million, compared to $517.1 million in 2023, with an adjusted selling and administrative expense margin of 18.5%[54] - The Board of Directors declared a 6% increase in the regular quarterly cash dividend to $0.37 per share and an annual variable dividend of $1.70 per share[5] - The company declared cash dividends of $3.00 per share for the year 2024, up from $2.22 in 2023, representing a 35.2% increase[26] Acquisitions and Growth Strategy - The company completed nine acquisitions in 2024, contributing over $100 million in annual revenue, with plans for at least $100 million in additional acquisitions in 2025[6] - The company authorized a new stock repurchase program allowing for the repurchase of up to $500 million of outstanding common stock, effective through March 1, 2026[7] Asset Management - Cash and cash equivalents at December 31, 2024, totaled $328 million[5] - Total assets increased to $2,059.9 million as of December 31, 2024, compared to $1,981.3 million in 2023, marking a growth of 4.0%[28] - The company reported a total stockholders' equity of $705.3 million at the end of 2024, up from $670.3 million in 2023, indicating a 5.2% increase[28] - Cash and cash equivalents decreased to $327.6 million at the end of 2024 from $386.5 million at the end of 2023, a decline of 15.2%[28] Operational Challenges - The company recognized intangible and asset impairment charges of $4.9 million during the twelve months ended December 31, 2024, related to winding down a non-core branch[48] - The company expects to complete the closure of the non-core branch by March 31, 2025, which is anticipated to impact future financial results[56] - The company’s performance metrics suggest a need for strategic adjustments to enhance profitability and revenue growth moving forward[67]

Group 1: Acquisition and Revenue Growth - Installed Building Products, Inc. (IBP) has acquired Capital Insulation, LLC and CBS & Mirror, LLC, adding over $12 million in annual revenues and strengthening its position in the Houston market [1] - IBP has completed acquisitions that contributed to an 8% revenue growth in the third quarter, marking a record performance [5] - The company has acquired more than $100 million in annual revenues to date, indicating a strong growth strategy through acquisitions [3] Group 2: Strategic Expansion - The acquisition of Tatum Insulation III, LLC expands IBP's geographic reach and revenue streams, particularly in North Carolina [4] - Acquisitions are central to IBP's capital allocation strategy, enabling geographic expansion and product diversification [6] - IBP anticipates further deals before year-end and has a strong acquisition pipeline for 2025, driven by demand in residential construction [6] Group 3: Market Performance - Shares of IBP declined 1.7% during trading hours but increased 5% in after-hours trading [2] - Over the past year, IBP's shares have gained 9%, compared to the Zacks Building Products – Miscellaneous industry's growth of 21.7% [7]

Core Insights - Installed Building Products, Inc. (IBP) has acquired Tatum Insulation III, LLC, enhancing its geographic reach and revenue streams in North Carolina [1][2] - The acquisition is expected to add over $17 million in annual revenues, aligning with IBP's growth-focused acquisition strategy [2][3] - IBP's strategy emphasizes acquisitions as a primary growth driver, allowing for market expansion and service diversification [3][4] Revenue Growth and Market Expansion - The acquisition of Tatum contributes more than $17 million in annual revenues, significantly boosting IBP's financial performance [2] - IBP has achieved over $90 million in revenues from acquisitions in 2024, indicating a robust growth strategy [2] - The company reported an 8% revenue growth in the third quarter, marking a record performance [4] Strategic Focus on Acquisitions - Acquisitions are central to IBP's capital allocation strategy, facilitating geographic expansion and product diversification [5] - The integration of Tatum's operations is expected to strengthen IBP's competitive position in the Southeastern U.S. market [3] - IBP anticipates further acquisitions before year-end and has a strong pipeline for 2025 [5] Share Price Performance - IBP's shares have increased by 49.1% over the past year, outperforming the Zacks Building Products – Miscellaneous industry's growth of 43.6% [5]

Financial Data and Key Metrics Changes - Consolidated net revenue for Q3 2024 increased 8% to a record $761 million compared to $707 million in Q3 2023 [19] - Adjusted net income rose to $80 million or $2.85 per diluted share [24] - Adjusted EBITDA reached an all-time record of $132 million, reflecting an adjusted EBITDA margin of 17.4% [23] - Adjusted gross margin was 33.8%, down from 34.3% in the prior-year period [21] Business Line Data and Key Metrics Changes - Residential same-branch installation sales increased approximately 5% during Q3 2024 [19] - Multifamily installation sales growth was resilient, with same-branch sales increasing over 2% [11] - Commercial organic sales increased 6%, driven primarily by the heavy commercial business [88] Market Data and Key Metrics Changes - Single-family starts year-to-date through September 2024 increased by 10% [15] - The company noted a favorable long-term demand outlook for installed services across residential and commercial markets [9] Company Strategy and Development Direction - Acquisitions remain a top priority for the company, with over $73 million of annual revenue acquired to date [14] - The company is focused on expanding geographic presence and diversifying the mix of building products installed [13] - The management emphasized the importance of local market expertise to efficiently complete attractive jobs [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term demand for installed services, citing favorable trends in residential and commercial markets [9] - The company remains focused on profitability and effective capital allocation to drive earnings growth [17] - Management acknowledged challenges from recent hurricanes but noted that all employees were safe and operations were being restored [8] Other Important Information - The company repurchased 100,000 shares of common stock for a total cost of $21 million during Q3 2024 [29] - A fourth quarter dividend of $0.35 per share was approved, representing a 6% increase over the prior-year period [29] Q&A Session Summary Question: Can you elaborate on the margin factors and their impacts? - Management noted that production builder growth and non-insulation sales impacted gross margin, with spray foam pricing decline affecting EBITDA by $1 million to $1.5 million [32][34] Question: What is the impact of the election on energy efficiency initiatives? - Management stated they do not bank on significant changes from the election and expect gradual adoption of stricter energy codes [40][41] Question: How do you see the demand outlook by customer type? - Management indicated that production builders are growing faster than regional builders, but both are seeing positive demand despite rate increases [72] Question: What is the expectation for price/mix normalization? - Management expects price/mix to show headwinds due to a shift towards production builders and other products, impacting overall margins [95] Question: How is the company positioned regarding supply constraints? - Management confirmed that supply remains tight but has not led to uncompleted jobs, and internal sourcing is helping manage inventory effectively [91][92]

Financial Performance - Net revenue for the three months ended September 30, 2024, increased by 7.7% to $760.6 million compared to $706.5 million in 2023[132]. - Gross profit for the same period rose by 6.1% to $256.8 million, with a gross profit margin of 33.8%[139]. - The residential single-family new construction market saw an 8.8% revenue increase, contributing significantly to overall growth[132]. - Same branch sales growth for the Installation segment was 5.4% for the three months ended September 30, 2024, compared to a decline of 5.4% in 2023[137]. - The company experienced a 2.6% increase in sales volume and a 2.7% improvement in price/mix metrics for the Installation segment[139]. - Total completions in the U.S. housing market grew by 22.7% year-over-year, indicating a robust market environment[137]. - The Distribution and Manufacturing segments contributed to net revenue growth with a 9.1% increase during the quarter[140]. - Net cash provided by operating activities increased to $265.2 million for the nine months ended September 30, 2024, compared to $250.5 million in 2023[168]. Shareholder Returns - The company returned $30.5 million to shareholders through a 6% increase in quarterly dividends and stock repurchases during the quarter[133]. Expenses and Impairments - Operating expenses increased, with selling expenses rising by 11.9% to $35.8 million and administrative expenses increasing by 12.8% to $109.2 million[141]. - In Q2 2024, the company recognized an intangible impairment charge of $4.6 million and an asset impairment charge of $0.3 million related to its Installation segment[145]. Tax and Interest - The income tax provision for the three months ended September 30, 2024, was $25.3 million, with an effective tax rate of 26.9%, compared to $24.8 million and 26.7% in 2023[148]. - Interest expense, net decreased by 20.6% to $7.7 million for the three months ended September 30, 2024, and by 4.8% to $27.8 million for the nine months ended September 30, 2024, compared to the same periods in 2023[147]. Cash and Liquidity - Cash and cash equivalents as of September 30, 2024, stood at $406.2 million, with no draw on the revolving line of credit[133]. - Working capital increased to $748.1 million as of September 30, 2024, from $723.6 million at the end of 2023, primarily due to higher accounts receivable and inventory[167]. - As of September 30, 2024, the company had total liquidity of $650.4 million, including cash and cash equivalents of $406.2 million[159]. Debt and Financing - The company issued $300.0 million in 5.75% senior unsecured notes, maturing on February 1, 2028, with net proceeds of $295.0 million after debt issuance costs[176]. - As of September 30, 2024, the company had $493.2 million due on the New Term Loan, which matures on March 28, 2031[181]. - The ABL Revolver increased its commitment to $250.0 million from $200.0 million, with a maturity date extended to February 17, 2027[184]. - Total outstanding loan balances under Master Loan and Equipment Agreements were $79.7 million as of September 30, 2024, down from $83.0 million as of December 31, 2023[192]. - The company had $161.4 million in total bonds and letters of credit as of September 30, 2024, including $62.9 million in unsecured insurance letters of credit[194]. - The New Term Loan does not have financial maintenance covenants and bears interest at Term SOFR plus 2.00% per annum[181]. - As of September 30, 2024, the company was in compliance with all applicable covenants under the Term Loan Agreement, ABL Credit Agreement, and the Senior Notes[188]. - The company has three active interest rate swaps hedging $400.0 million of variable cash flows on its Term Loan[189]. - As of September 30, 2024, the company had $497.5 million outstanding on its Term Loan, with no outstanding borrowings on its ABL Revolver or finance leases subject to variable interest rates[199]. - Total variable rate debt exposed to market risks as of September 30, 2024, was $97.5 million[199]. - A hypothetical one percentage point increase in interest rates on variable rate debt would increase annual interest expense by approximately $1.0 million[199]. - The company's Senior Notes accrue interest at a fixed rate of 5.75%[199]. Market Outlook - Forward-looking statements indicate expectations for demand for services and earnings in 2024 and 2025, with potential risks including economic conditions and material pricing[197]. - The company anticipates continued price increases in 2024 due to supply shortages and inflationary pressures, which may impact operational results[155]. - Residential homebuilding market activity increased by 10.1% for single-family starts for the nine months ended September 30, 2024, compared to the same period in 2023[153].

Core Insights - Installed Building Products (IBP) reported quarterly earnings of $2.85 per share, missing the Zacks Consensus Estimate of $2.98 per share, but showing an increase from $2.79 per share a year ago, resulting in an earnings surprise of -4.36% [1] - The company posted revenues of $760.6 million for the quarter ended September 2024, surpassing the Zacks Consensus Estimate by 0.36% and increasing from $706.47 million year-over-year [2] - The stock has gained approximately 24.5% since the beginning of the year, slightly outperforming the S&P 500's gain of 24.3% [3] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $3.04 on revenues of $781.84 million, while for the current fiscal year, the estimate is $11.42 on revenues of $2.97 billion [7] - The trend of estimate revisions for Installed Building Products has been unfavorable, leading to a Zacks Rank 4 (Sell) for the stock, indicating expected underperformance in the near future [6] Industry Context - The Building Products - Miscellaneous industry is currently ranked in the top 37% of over 250 Zacks industries, suggesting that stocks in the top 50% tend to outperform those in the bottom 50% by more than 2 to 1 [8]