IBP Installed Building Products Inc

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, 2017.

Second Quarter 2017 Highlights

• Net revenue increased 33.2% to a record $282.2 million
• Net income increased 19.8% to a record $12.0 million
• Adjusted EBITDA* increased 49.6% to a record $39.2 million
• Net income per diluted share increased 18.8% to $0.38
• Adjusted net income per diluted share* increased 47.5% to a record $0.59
• In April 2017, refinanced borrowings and closed a $300 million Term Loan B facility and $100 million ABL Revolving Credit facility
• In April 2017, acquired Minnesota based Horizon Electric Company with 2016 revenues of $1.2 million
• In May 2017, acquired Florida based Legacy, & Glass & Supply, Inc., with 2016 revenues of $5.4 million
• In June 2017, acquired South Carolina based Columbia Shelving and Mirror Inc. and Charleston Shelving & Mirror Inc. with 2016 revenues of $11.0 million

Recent Developments

• In July 2017, acquired Kentucky based Energy Savers, LLC with 2016 revenues of $2.0 million

“As expected, the 2017 second quarter benefitted from normal seasonal installation trends, which helped drive sequential improvements in sales and profitability,” stated Jeff Edwards, Chairman and Chief Executive Officer. “During the 2017 second quarter, IBP’s residential same branch sales increased 14.2%, while multifamily same branch sales grew 59.4%, compared to U.S. housing completions growth of 11.6%. Reflecting IBP’s focus on profitability, I am encouraged by the significant improvement in same branch incremental margins IBP achieved in the second quarter, driven by a 70-basis point improvement in gross margin, and IBP's ability to leverage SG&A expenses.”

“IBP is well positioned to capitalize on the continued strength of the U.S. housing market. In addition, Alpha Insulation and Waterproofing has had a favorable impact on IBP’s sales and profitability and, as a result commercial revenues represented 17% of revenues in the second quarter, compared to 12% for the same period last year. Heading into the second half of 2017, IBP’s pipeline of acquisitions remains strong and we expect to close several acquisitions in the coming quarters. As momentum in our business remains strong, we continue to expect 2017 will be another year of record sales and earnings.”

Second Quarter 2017 Results Overview

For the second quarter of 2017, net revenue was $282.2 million, an increase of 33.2% from $211.9 million in the second quarter of 2016. On a same branch basis, net revenue improved 11.6% from the prior year quarter, with approximately 75.0% of the increase attributable to growth in the number of completed jobs and the remainder achieved through price gains and more favorable customer and product mix.

Gross profit improved 36.4% to $84.9 million from $62.2 million in the prior year quarter. Gross margin expanded to 30.1% from 29.4% in the prior year quarter, primarily due to higher revenue and a more profitable mix of business. Selling, general and administrative expense, as a percentage of net revenue, improved to 19.6% compared to 20.2% in the prior year quarter.

Net income was $12.0 million, or $0.38 per diluted share, compared to $10.0 million, or $0.32 per diluted share in the prior year quarter. Adjusted net income was $18.7 million, or $0.59 per diluted share, compared to $12.5 million, or $0.40 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 $39.2 million, a 49.6% increase from $26.2 million in the prior year quarter, largely due to higher gross profit and improved leverage in SG&A. Adjusted EBITDA, as a percentage of net revenue, grew 150 basis points to 13.9%, compared to 12.4% in the prior year quarter.

Conference Call and Webcast

The Company will host a conference call and webcast on Friday, August 4, 2017 at 9:00 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 September 4, 2017, by dialing 844-512-2921 (domestic) or 412-317-6671 (international) and entering the passcode 13667137.

About Installed Building Products

Installed Building Products, Inc. is one of the nation's largest insulation installers for the residential new construction market and is also a diversified installer of complementary building products, including waterproofing, fire-stopping and fireproofing, garage doors, rain gutters, shower doors, closet shelving and mirrors, throughout the United States. The Company manages all aspects of the installation process for its customers, including direct purchases of materials from national manufacturers, 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 branch locations.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the federal securities laws, including with respect to our financial model and seasonality, demand for our services, expansion of our national footprint, our ability to capitalize on the new home construction recovery, our ability to strengthen our market position, our ability to pursue, close and integrate value-enhancing acquisitions, the impact of Alpha on our revenue and profitability, our ability to improve sales and profitability, and expectations for demand for our services and our earnings for the remainder of 2017. 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, the factors discussed in the “Risk Factors” section of the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, 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 and Adjusted Net Income per diluted share. The reasons for the use of these measures of Adjusted EBITDA and Adjusted Net Income, reconciliations of Adjusted EBITDA, Adjusted Net Income and Adjusted Net Income per diluted share 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, 2017     2016 2017   2016 Net revenue $ 282,196 $ 211,913 $ 537,865 $ 403,611 Cost of sales   197,268     149,670   380,765     286,777 Gross profit 84,928 62,243 157,100 116,834 Operating expenses Selling 13,650 11,960 27,676 23,211 Administrative 41,761 30,890 81,022 61,173 Amortization   6,550     2,810   12,966     5,289 Operating income 22,967 16,583 35,436 27,161 Other expense Interest expense 4,865 1,509 7,035 3,061 Other   131     121   283     225 Income before income taxes 17,971 14,953 28,118 23,875 Income tax provision   5,998     4,960   9,781     8,069 Net income $ 11,973   $ 9,993 $ 18,337   $ 15,806   Other comprehensive loss, net of tax: Unrealized loss on cash flow hedge, net of tax benefit of $50 for the three and six months ended June 30, 2017   (77 )   -   (77 )   - Comprehensive income   11,896     9,993   18,260     15,806     Basic net income per share $ 0.38   $ 0.32 $ 0.58     $ 0.51 Diluted net income per share $ 0.38   $ 0.32 $ 0.58     $ 0.50 Weighted average shares outstanding: Basic 31,646,460 31,317,632 31,618,624 31,279,935 Diluted 31,709,554 31,347,067 31,698,460 31,339,019                 INSTALLED BUILDING PRODUCTS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited, in thousands, except share and per share amounts)   June 30, December 31,

 

2017 2016 ASSETS Current assets Cash and cash equivalents $ 66,690 $ 14,482 Investments 25,293 -

Accounts receivable (less allowance for doubtful accounts of $4,745 and $3,397 at June 30, 2017 and December 31, 2016, respectively)

176,769 128,466 Inventories 43,198 40,229 Other current assets   16,027     9,214   Total current assets 327,977 192,391 Property and equipment, net 73,971 67,788 Non-current assets Goodwill 148,031 107,086 Intangibles, net 139,426 86,317 Other non-current assets   10,021     8,513   Total non-current assets   297,478     201,916   Total assets $ 699,426   $ 462,095     LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Current maturities of long-term debt $ 13,506 $ 17,192 Current maturities of capital lease obligations 6,204 6,929 Accounts payable 76,103 67,921 Accrued compensation 23,083 18,212 Other current liabilities   24,866     19,851   Total current liabilities 143,762 130,105 Long-term debt 326,968 134,235 Capital lease obligations, less current maturities 7,715 8,364 Deferred income taxes 13,796 14,239 Other long-term liabilities   22,069     21,175   Total liabilities 514,310 308,118 Commitments and contingencies Stockholders' equity

Preferred Stock; $0.01 par value: 5,000,000 authorized and 0 shares issued and outstanding at June 30, 2017 and December 31, 2016, respectively

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Common Stock; $0.01 par value: 100,000,000 authorized, 32,524,934 and 32,135,176 issued and 31,862,945 and 31,484,774 shares outstanding at June 30, 2017 and December 31, 2016, respectively

325 321 Additional paid in capital 172,006 158,581 Retained earnings 25,631 7,294 Treasury Stock; at cost: 661,989 and 650,402 shares at June 30, 2017 and December 31, 2016, respectively (12,769 ) (12,219 ) Accumulated other comprehensive loss   (77 )   -   Total stockholders' equity   185,116     153,977   Total liabilities and stockholders' equity $ 699,426   $ 462,095                     INSTALLED BUILDING PRODUCTS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited, in thousands)   Six months ended June 30, 2017   2016 Cash flows from operating activities Net income $ 18,337 $ 15,806 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization of property and equipment 13,482 11,281 Amortization of intangibles 12,966 5,289 Amortization of deferred financing costs and debt discount 424 179 Provision for doubtful accounts 1,807 1,181 Write-off of debt issuance costs 1,201 286 Gain on sale of property and equipment (190 ) (173 ) Noncash stock compensation 2,570 1,171 Deferred income taxes - 708 Changes in assets and liabilities, excluding effects of acquisitions Accounts receivable (17,421 ) (9,742 ) Inventories 342 (3,310 ) Other assets (1,263 ) 2,442 Accounts payable (2,043 ) 6,632 Income taxes payable/receivable (4,102 ) (873 ) Other liabilities   2,316     5,283   Net cash provided by operating activities   28,426     36,160   Cash flows from investing activities Purchases of investments (25,328 ) - Purchases of property and equipment (14,681 ) (13,424 ) Acquisitions of businesses, net of cash acquired of $247 and $0, respectively (116,883 ) (29,948 ) Proceeds from sale of property and equipment 451 384 Other   (1,532 )   -   Net cash used in investing activities   (157,973 )   (42,988 ) Cash flows from financing activities Proceeds from revolving line of credit under credit agreement applicable to respective period - 37,975 Payments on revolving line of credit under credit agreement applicable to respective period - (37,975 ) Proceeds from term loan under credit agreement applicable to respective period 300,000 100,000 Payments on term loan under credit agreement applicable to respective period (96,250 ) (49,375 ) Proceeds from delayed draw term loan under credit agreement applicable to respective period 112,500 12,500 Payments on delayed draw term loan under credit agreement applicable to respective period (125,000 ) (50,000 ) Proceeds from vehicle and equipment notes payable 9,317 11,039 Debt issuance costs (7,940 ) (1,238 ) Principal payments on long term debt (4,915 ) (2,591 ) Principal payments on capital lease obligations (3,738 ) (4,556 ) Acquisition-related obligations (1,669 ) (1,191 ) Surrender of common stock awards by employees   (550 )   (836 ) Net cash provided by financing activities   181,755     13,752   Net change in cash 52,208 6,924 Cash at beginning of period   14,482     6,818   Cash at end of period $ 66,690   $ 13,742   Supplemental disclosures of cash flow information Net cash paid during the period for: Interest $ 5,634 $ 2,537 Income taxes, net of refunds 13,401 8,355 Supplemental disclosure of noncash investing and financing activities Common stock issued for acquisition of business 10,859 - Vehicles capitalized under capital leases and related lease obligations 2,519 2,033 Seller obligations in connection with acquisition of businesses 3,025 2,430 Unpaid purchases of property and equipment included in accounts payable 658 -  

Non-GAAP Financial Measures

Adjusted EBITDA, Adjusted EBITDA margin and Adjusted Net Income measure performance by adjusting EBITDA and GAAP net income, 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 (loss) 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 (loss) 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 (used in) 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, 2017   2016 2017   2016   Net income, as reported $ 11,973 $ 9,993 $ 18,337 $ 15,806 Adjustments for adjusted net income: Write-off of capitalized loan costs 1,201 - 1,201 286 Share based compensation expense 2,091 635 2,570 1,171 Acquisition related expenses 794 460 1,347 823 Amortization expense 1 6,550 2,810 12,966 5,289 Tax impact of adjusted items at normalized tax rate 2   (3,935 )   (1,445 )   (6,691 )   (2,801 ) Adjusted net income $ 18,674   $ 12,453   $ 29,730   $ 20,574     Weighted average shares outstanding (diluted) 31,709,554 31,347,067 31,698,460 31,339,019   Diluted net income per share, as reported $ 0.38 $ 0.32 $ 0.58 $ 0.50 Adjustments for adjusted net income, net of tax impact, per diluted share 3   0.21   $ 0.08     0.36     0.16   Diluted adjusted net income per share $ 0.59   $ 0.40   $ 0.94   $ 0.66  

1 Addback of all non-cash amortization resulting from business combinations

2 Normalized tax rate of 37.0% applied to each period in 2017 and 2016 3 Includes adjustments related to the items noted above, net of tax  

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 June 30,   Six months ended June 30, 2017   2016 2017   2016 Adjusted EBITDA:   Net income (GAAP) $ 11,973 $ 9,993 $ 18,337 $ 15,806 Interest expense 4,865 1,509 7,035 3,061 Provision for income taxes 5,998 4,960 9,781 8,069 Depreciation and amortization   13,481     8,648     26,448     16,569   EBITDA   36,317     25,110     61,601     43,505     Acquisition related expenses 794 460 1,347 823 Share based compensation expense   2,091     635     2,570     1,171   Adjusted EBITDA $ 39,202   $ 26,205   $ 65,518   $ 45,499     Adjusted EBITDA margin 13.9 % 12.4 % 12.2 % 11.3 %       INSTALLED BUILDING PRODUCTS, INC. SUPPLEMENTARY TABLE (unaudited)   Three months ended June 30,   Six months ended June 30, 2017   2016 2017   2016  

Period-over-period Growth

Sales Growth 33.2% 32.7% 33.3% 39.3% Same Branch Sales Growth 11.6% 16.9% 10.2% 21.0%   Single-Family Sales Growth 19.4% 28.1% 17.0% 36.8% Single-Family Same Branch Sales Growth 9.8% 13.2% 7.2% 19.7%   Residential Sales Growth 28.1% 31.4% 25.9% 38.9% Residential Same Branch Sales Growth 14.2% 16.3% 11.2% 20.9%  

U.S. Housing Market1

Total Completions Growth 11.6% 3.6% 11.0% 10.8% Single-Family Completions Growth 8.0% 11.3% 9.3% 13.6%  

Same Branch Sales Growth

Volume Growth 8.7% 10.5% 6.8% 12.0% Price/Mix Growth 2.8% 6.4% 3.4% 9.0%

1 U.S. Census Bureau data, as revised

                  INSTALLED BUILDING PRODUCTS, INC. COMPONENTS OF INCREASE IN REVENUE AND ADJUSTED EBITDA (unaudited, in thousands)   Three months ended June 30, Six months ended June 30, 2017 % Total 2016 % Total 2017 % Total 2016 % Total Revenue Increase   Same Branch $ 24,510 34.9% $ 27,012 51.7% $ 41,193 30.7% $ 60,961 53.5% Acquired   45,774 65.1%   25,208 48.3%   93,062 69.3%   53,009 46.5% Total $ 70,283 100.0% $ 52,220 100.0% $ 134,254 100.0% $ 113,970 100.0%       Adj EBITDA Adj EBITDA Adj EBITDA Adj EBITDA Contribution Contribution Contribution Contribution Adjusted EBITDA   Same Branch $ 6,202 25.3% $ 5,993 22.2% $ 6,398 15.5% $ 14,611 24.0% Acquired   6,795 14.8%   2,543 10.1%   13,623 14.6%   5,647 10.7% Total $ 12,997 18.5% $ 8,536 16.3% $ 20,021 14.9% $ 20,258 17.8%

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Installed Building Products, Inc.Investor Relations, 614-221-9944investorrelations@installed.net