IBP(IBP) - 2025 Q2 - Quarterly Report

PART I – FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements for the quarterly period ended June 30, 2025, including balance sheets, statements of operations, comprehensive income, stockholders' equity, and cash flows, along with detailed notes on presentation and accounting policies Condensed Consolidated Balance Sheet Highlights (in millions) | Account | June 30, 2025 (millions) | December 31, 2024 (millions) | | :--- | :--- | :--- | | Total Assets | $2,020.1 | $2,059.9 | | Cash and cash equivalents | $305.2 | $327.6 | | Goodwill | $436.9 | $432.6 | | Total Liabilities | $1,355.6 | $1,354.6 | | Long-term debt | $842.8 | $842.4 | | Total Stockholders' Equity | $664.5 | $705.3 | Condensed Consolidated Statements of Operations Highlights (in millions, except per share amounts) | Metric | Q2 2025 (millions) | Q2 2024 (millions) | H1 2025 (millions) | H1 2024 (millions) | | :--- | :--- | :--- | :--- | :--- | | Net Revenue | $760.3 | $737.6 | $1,445.1 | $1,430.5 | | Gross Profit | $259.9 | $251.4 | $483.6 | $485.9 | | Operating Income | $101.0 | $94.8 | $170.8 | $182.7 | | Net Income | $69.0 | $65.2 | $114.4 | $121.1 | | Diluted EPS | $2.52 | $2.30 | $4.15 | $4.27 | Condensed Consolidated Statements of Cash Flows Highlights (in millions) | Cash Flow Category | Six months ended June 30, 2025 (millions) | Six months ended June 30, 2024 (millions) | | :--- | :--- | :--- | | Net cash provided by operating activities | $182.5 | $163.8 | | Net cash used in investing activities | $(43.2) | $(55.2) | | Net cash used in financing activities | $(161.7) | $(114.8) | | Net change in cash and cash equivalents | $(22.4) | $(6.2) | Note 3 - Revenue Recognition Revenue is primarily generated from the Installation segment, which accounted for 94% of total net revenue in the first six months of 2025, with residential new construction as the largest end market at 72% and insulation as the main product category contributing 60% Net Revenue by End Market (Six months ended June 30) | End Market | 2025 Revenue (millions) | 2025 % | 2024 Revenue (millions) | 2024 % | | :--- | :--- | :--- | :--- | :--- | | Residential new construction | $1,043.2 | 72% | $1,045.2 | 73% | | Repair and remodel | $85.6 | 6% | $82.6 | 6% | | Commercial | $234.0 | 16% | $225.4 | 16% | | Total Installation | $1,362.8 | 94% | $1,353.2 | 95% | Net Revenue by Product (Six months ended June 30) | Product | 2025 Revenue (millions) | 2025 % | 2024 Revenue (millions) | 2024 % | | :--- | :--- | :--- | :--- | :--- | | Insulation | $861.0 | 60% | $875.7 | 61% | | Shower doors, shelving, mirrors | $108.0 | 7% | $102.3 | 7% | | Garage doors | $86.6 | 6% | $85.9 | 6% | | Waterproofing | $74.9 | 5% | $65.2 | 5% | - As of June 30, 2025, the company had $161.4 million in remaining performance obligations, which it expects to recognize as revenue over the next 18 months[38] Note 7 - Long-Term Debt As of June 30, 2025, total long-term debt was $876.1 million, a slight increase from $874.8 million at year-end 2024, primarily composed of a term loan and senior notes, with current maturities of $33.3 million Long-Term Debt Composition (in millions) | Debt Instrument | June 30, 2025 (millions) | December 31, 2024 (millions) | | :--- | :--- | :--- | | Senior Notes due 2028, net | $298.5 | $298.2 | | Term loan, net | $490.3 | $492.5 | | Vehicle and equipment notes | $86.1 | $82.3 | | Total Debt | $876.1 | $874.8 | | Less: current maturities | $(33.3) | $(32.4) | | Long-term debt, less current maturities | $842.8 | $842.4 | Note 12 - Stockholders' Equity The company actively returned capital to shareholders through dividends and share repurchases, repurchasing 500,000 shares for $83.5 million and declaring dividends totaling $2.44 per share in the first six months of 2025 - During the six months ended June 30, 2025, the company repurchased 500,000 shares of its common stock for an aggregate price of $83.5 million[77] - On February 27, 2025, the board authorized a new stock repurchase program for up to $500.0 million, effective through March 1, 2026[78] Dividends Declared (Six months ended June 30, 2025) | Declaration Date | Dividend Per Share ($) | Amount Declared (millions) | | :--- | :--- | :--- | | 2/27/2025 | $1.70 | $47.1 | | 2/27/2025 | $0.37 | $10.2 | | 5/8/2025 | $0.37 | $10.1 | Note 17 - Business Combinations The company continued its acquisition strategy, completing two business combinations and two bolt-on acquisitions in the first six months of 2025 for a total cash payment of $11.3 million, which contributed $1.9 million in revenue since their respective acquisition dates Acquisition Summary (Six months ended June 30, 2025, in millions) | Metric | Value (millions) | | :--- | :--- | | Cash Paid | $11.3 | | Total Purchase Price | $11.9 | | Revenue since acquisition | $1.9 | | Net Income since acquisition | $0.1 | Purchase Price Allocation (Six months ended June 30, 2025, in millions) | Asset/Liability | Estimated Fair Value (millions) | | :--- | :--- | | Intangibles | $7.1 | | Goodwill | $3.6 | | Property and equipment | $0.9 | | Fair value of assets acquired | $11.9 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the financial results for the second quarter of 2025, highlighting a 3.1% increase in net revenue to $760.3 million, driven by 10.0% growth in the commercial end market and contributions from acquisitions, covering key performance metrics, operational results, liquidity, capital resources, and external factors Overview and 2025 Second Quarter Highlights In Q2 2025, net revenue grew 3.1% to $760.3 million, and gross profit increased 3.4% to $259.9 million, primarily fueled by a 10.0% increase in commercial end market sales and recent acquisitions, while maintaining strong liquidity and returning $59.3 million to shareholders - Q2 2025 net revenue increased 3.1% YoY to $760.3 million, while gross profit rose 3.4% to $259.9 million[120] - Growth was driven by a 10.0% increase in commercial end market sales and a 2.6% increase in the residential single-family new construction end market[120] - The company returned $59.3 million to shareholders in Q2 2025, consisting of a $10.1 million dividend payment and $49.2 million in share repurchases[121] Results of Operations For Q2 2025, net revenue growth was driven by a 9.3% increase in commercial same-branch sales and acquisitions, offsetting a 1.1% decline in residential same-branch sales, with gross profit margin improving to 34.2% due to labor efficiency gains, while administrative expenses rose 6.0% to $113.1 million from increased compensation and wage inflation Key Performance Metrics (Q2 2025 vs Q2 2024) | Metric | Growth Rate | | :--- | :--- | | Consolidated Sales Growth | 3.1% | | Consolidated Same Branch Sales Growth | 0.7% | | Residential Same Branch Sales Growth | (1.1)% | | Commercial Same Branch Sales Growth | 9.3% | Operating Expenses (in millions) | Expense Category | Q2 2025 (millions) | Q2 2024 (millions) | % Change | | :--- | :--- | :--- | :--- | | Selling | $35.7 | $34.5 | 3.5% | | Administrative | $113.1 | $106.7 | 6.0% | Key Factors Affecting Operating Results The company's performance is influenced by elevated mortgage rates and home prices curtailing housing demand, potential material price increases due to supplier actions and tariffs, and a tight labor market requiring increased spending on hiring, training, and retention - Elevated mortgage rates and home prices have curtailed housing demand, but the Federal Reserve's signal to potentially lower rates may ease pressure[142] - The company may face increased material pricing due to supplier actions and tariffs, which could impact margins if costs cannot be passed on to customers[145] - The business is labor-intensive, and tight labor availability in the construction industry requires increased spending on hiring, training, and retention[146] Liquidity and Capital Resources As of June 30, 2025, the company had total liquidity of $551.2 million, comprising $305.2 million in cash and $246.0 million available under its ABL credit facility, with primary capital requirements including working capital, acquisitions, and capital expenditures, and cash flow from operations increasing to $182.5 million - Total liquidity as of June 30, 2025, was $551.2 million, consisting of $305.2 million in cash and cash equivalents and $246.0 million in available credit[149][169] - Working capital decreased to $660.8 million from $695.9 million at year-end 2024, primarily due to cash used for dividends and stock repurchases[156] Summary of Cash Flow Activity (Six months ended June 30, in millions) | Cash Flow Activity | 2025 (millions) | 2024 (millions) | | :--- | :--- | :--- | | Net cash provided by operating activities | $182.5 | $163.8 | | Net cash used in investing activities | $(43.2) | $(55.2) | | Net cash used in financing activities | $(161.7) | $(114.8) | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk stems from interest rate fluctuations on its variable-rate debt, with $93.8 million exposed to market risk as of June 30, 2025, after hedging $400.0 million of its Term Loan, meaning a one percentage point change in interest rates would affect annual interest expense by approximately $0.9 million - The company's primary market risk is interest rate fluctuation on its variable-rate debt[182] - After hedging $400.0 million with interest rate swaps, $93.8 million of the Term Loan remained exposed to variable interest rate risk as of June 30, 2025[182] - A hypothetical one percentage point increase or decrease in interest rates would change the company's annual interest expense by approximately $0.9 million[182] Item 4. Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting during the second quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[184] - No changes in internal control over financial reporting occurred during the three months ended June 30, 2025, that materially affected, or are reasonably likely to materially affect, internal controls[185] PART II – OTHER INFORMATION Item 1. Legal Proceedings The company is involved in various claims and litigation arising from the normal course of business, but management does not believe that the ultimate outcome of any pending matters will have a material adverse effect on its financial position, results of operations, or cash flows - The company does not believe that the ultimate outcome of any pending legal matters will have a material adverse effect on its consolidated financial position, results of operations or cash flows[102][187] Item 1A. Risk Factors There have been no material changes from the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended December 31, 2024 - As of the date of this report, there have been no material changes from the risk factors disclosed in the 2024 Form 10-K[188] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the company's stock repurchase activity for the second quarter of 2025, where it repurchased 300,000 shares under its publicly announced program, with approximately $416.5 million remaining available for future repurchases as of June 30, 2025 Issuer Purchases of Equity Securities (Q2 2025) | Period | Total Shares Purchased (shares) | Average Price Paid Per Share ($) | Shares Purchased as Part of Program (shares) | | :--- | :--- | :--- | :--- | | April 2025 | 52,266 | $158.28 | — | | May 2025 | 200,266 | $162.43 | 200,000 | | June 2025 | 100,000 | $166.72 | 100,000 | | Total | 352,532 | $163.03 | 300,000 | - A new stock repurchase program authorizing up to $500.0 million was announced on February 22, 2025, and is effective through March 1, 2026. As of June 30, 2025, $416.5 million remained available under this program[189][194] Item 5. Other Information Effective August 7, 2025, the company entered into new Change in Control Agreements with its executive officers to align severance policies with market practices, providing specific severance benefits, including a lump sum payment and accelerated equity vesting, if employment is terminated for qualifying reasons within 24 months following a change in control - The company entered into new Change in Control Agreements with its executive officers, effective August 7, 2025[193] - The agreements provide for severance benefits in the event of a qualifying termination within 24 months of a change in control, including a lump sum cash payment equal to 300% of annual base salary plus target bonus, 18 months of health benefits, and immediate vesting of all equity awards[195] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including the form of the new Change in Control Agreement for executive officers, an Amended and Restated Employment Agreement for the CEO, CEO and CFO certifications, and financial statements formatted in inline XBRL - Key exhibits filed with this report include the Form of Change in Control Agreement for executive officers (Exhibit 10.1) and the Amended and Restated Employment Agreement for CEO Jeffery W. Edwards (Exhibit 10.2)[199]