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, today announced record results for the third quarter ended September 30, 2017.

Third Quarter 2017 Highlights

• Net revenue increased 31.0% to $295.2 million
• Net income increased 4.0% to $12.0 million
• Adjusted EBITDA* increased 33.2% to $39.3 million
• Net income per diluted share increased 3.0% to $0.38
• Adjusted net income per diluted share* increased 29.5% to $0.57
• In July 2017, acquired Energy Savers an insulation installer in Kentucky and annual revenues of $2.0 million
• In September 2017, acquired Red Rock Insulation, an insulation installer with locations in Nevada and Utah and annual revenues of $6.0 million
• In September 2017, acquired Astro Insulation, an insulation installer with locations in Illinois and annual revenues of $7.0 million
• In September 2017, acquired Protective Coating, an installer of level rock floors in Wisconsin with $1.5 million in annual revenues

Recent Developments

• In October 2017, acquired A+ Insulation, LLC, an insulation installer in Kansas City and annual revenues of $3.8 million
• In October 2017, acquired Building Solutions, LLC, an insulation installer in Oklahoma with annual revenues of approximately $2.0

“Record high sales for the 2017 third quarter benefitted from strong residential sales growth, the contribution of recent acquisitions, and a favorable revenue mix and pricing environment,” stated Jeff Edwards, Chairman and Chief Executive Officer. “Hurricanes Harvey and Irma impacted sales in several Texas and Florida markets as a result of temporarily closing locations, and the effects the storms had on the public infrastructure and our customers’ jobsites within these geographies. The hurricanes also impacted profitability by reducing efficiency and productivity, as well as the direct costs associated with paying employees while our locations were closed, and the costs associated with preparing for and cleaning up the damage caused by the hurricanes.”

Mr. Edwards continued, “IBP continues to achieve higher year-over-year sales and earnings, as a result of the growth platform we have created, and the continued strength within the U.S. housing market. IBP continues to attract compelling acquisition opportunities and, since June of this year, we acquired five insulation companies representing a combined $20 million of annual revenues. Our pipeline of potential acquisitions remains strong. As we enter the fourth quarter, we continue to expect 2017 will be another year of record sales and earnings.”

Third Quarter 2017 Results Overview

For the third quarter of 2017, net revenue was $295.2 million, an increase of 31.0% from $225.4 million in the third quarter of 2016. On a same branch basis, despite the impacts of Hurricanes Harvey and Irma, net revenue improved 9.4% from the prior year quarter, with approximately 40% 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. Same branch residential revenue increased 11.7% as compared to an 8.3% increase in total completions.

Gross profit improved 27.2% to $85.6 million from $67.3 million in the prior year quarter. Gross margin declined slightly to 29.0% compared to 29.8% in the prior year quarter, primarily due to the production disruptions Hurricanes Harvey and Irma had on efficiency and productivity, as well as a new stock-based compensation program for installers. Adjusted only for the recently introduced stock-based compensation program, gross margin would have been 29.2%*.

Selling and administrative expense, as a percentage of net revenue, was 19.1% compared to 19.8% in the prior year quarter. Adjusted selling and administrative expense, as a percentage of net revenue, improved 110 basis points to 18.3% from 19.4%*. Higher net revenue in the 2017 third quarter more than offset the higher costs needed to support the company’s growth.

Net income was $12.0 million, or $0.38 per diluted share, compared to $11.5 million, or $0.37 per diluted share in the prior year quarter. Adjusted net income was $18.3 million, or $0.57 per diluted share, compared to $13.9 million, or $0.44 per diluted share in the prior year quarter. Adjusted net income adjusts for the impact of non-core items in both periods.

Adjusted EBITDA was $39.3 million, a 33.2% increase from $29.5 million in the prior year quarter, largely due to higher sales. Adjusted EBITDA, as a percentage of net revenue, grew 20 basis points to 13.3%, compared to 13.1% in the prior year quarter. The company estimates that Hurricanes Harvey and Irma impacted Adjusted EBITDA by approximately $1.5 million to $2.0 million during the quarter, as a result of branch closings, and lost efficiency and productivity when branches reopened following the storms.

Conference Call and Webcast

The Company will host a conference call and webcast on November 3, 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 December 3, 2017, by dialing 844-512-2921 (domestic) or 412-317-6671 (international) and entering the passcode 13672595.

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, the impact of Hurricanes Harvey and Irma, 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 and integrate value-enhancing acquisitions, 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, 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 September 30,

 

Nine months ended September 30,

2017 2016 2017 2016 Net revenue $ 295,193 $ 225,392 $ 833,058 $ 629,003 Cost of sales   209,612   158,132   590,377     444,909 Gross profit 85,581 67,260 242,681 184,094 Operating expenses Selling 14,865 13,028 42,541 36,239 Administrative 41,657 31,504 122,679 92,677 Amortization   6,824   2,889   19,790     8,178 Operating income 22,235 19,839 57,671 47,000 Other expense Interest expense 4,421 1,544 11,456 4,605 Other   83   23   366     248 Income before income taxes 17,731 18,272 45,849 42,147 Income tax provision   5,721   6,723   15,502     14,792 Net income $ 12,010 $ 11,549 $ 30,347   $ 27,355   Other comprehensive income, net of tax: Unrealized gain (loss) on cash flow hedge, net of tax (provision) benefit of ($21) and $30 for the three and nine months ended September 30, 2017, respectively   32   -   (45 )   - Comprehensive income $ 12,042 $ 11,549 $ 30,302   $ 27,355   Basic and diluted net income per share $ 0.38 $ 0.37 $ 0.96   $ 0.87 Weighted average shares outstanding: Basic 31,659,503 31,323,600 31,632,400 31,294,596 Diluted 31,766,881 31,377,790 31,712,515 31,351,991     INSTALLED BUILDING PRODUCTS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited, in thousands, except share and per share amounts)                 September 30, December 31, 2017 2016 ASSETS Current assets Cash and cash equivalents $ 67,008 $ 14,482 Investments 25,114 -

Accounts receivable (less allowance for doubtful accounts of $4,846 and $3,397 at September 30, 2017 and December 31, 2016, respectively)

185,470 128,466 Inventories 44,074 40,229 Other current assets   19,599     9,214   Total current assets 341,265 192,391 Property and equipment, net 78,045 67,788 Non-current assets Goodwill 153,660 107,086 Intangibles, net 140,714 86,317 Other non-current assets   9,969     8,513   Total non-current assets   304,343     201,916   Total assets $ 723,653   $ 462,095     LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Current maturities of long-term debt $ 15,550 $ 17,192 Current maturities of capital lease obligations 6,044 6,929 Accounts payable 82,329 67,921 Accrued compensation 25,975 18,212 Other current liabilities   23,703     19,851   Total current liabilities 153,601 130,105 Long-term debt 328,295 134,235 Capital lease obligations, less current maturities 7,509 8,364 Deferred income taxes 13,755 14,239 Other long-term liabilities   23,135     21,175   Total liabilities 526,295 308,118 Commitments and contingencies Stockholders' equity

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

-

 

-

Common Stock; $0.01 par value: 100,000,000 authorized, 32,524,934 and 32,135,176 issued and 31,862,561 and 31,484,774 shares outstanding at September 30, 2017 and December 31, 2016, respectively

325 321 Additional paid in capital 172,206 158,581 Retained earnings 37,641 7,294

Treasury Stock; at cost: 662,373 and 650,402 shares at September 30, 2017 and December 31, 2016, respectively

(12,769 ) (12,219 ) Accumulated other comprehensive loss   (45 )   -   Total stockholders' equity   197,358     153,977   Total liabilities and stockholders' equity $ 723,653   $ 462,095       INSTALLED BUILDING PRODUCTS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited, in thousands)              

Nine months ended September 30,

2017 2016 Cash flows from operating activities Net income $ 30,347 $ 27,355

Adjustments to reconcile net income to net cash provided by operating activities

Depreciation and amortization of property and equipment 20,732 17,240 Amortization of intangibles 19,790 8,178 Amortization of deferred financing costs and debt discount 768 282 Provision for doubtful accounts 2,208 1,960 Write-off of debt issuance costs 1,201 286 Gain on sale of property and equipment (329 ) (218 ) Noncash stock compensation 4,750 1,531 Deferred income taxes - 708 Changes in assets and liabilities, excluding effects of acquisitions Accounts receivable (24,636 ) (17,878 ) Inventories 68 (3,158 ) Other assets 695 4,727 Accounts payable 2,665 3,879 Income taxes payable/receivable (10,167 ) 3,652 Other liabilities   5,249     6,033   Net cash provided by operating activities   53,341     54,577   Cash flows from investing activities Purchases of investments (25,195 ) - Purchases of property and equipment (22,947 ) (19,169 ) Acquisitions of businesses, net of cash acquired of $247 and $0, respectively (130,994 ) (36,427 ) Proceeds from sale of property and equipment 682 523 Other   (1,845 )   -   Net cash used in investing activities   (180,299 )   (55,073 ) 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 (97,000 ) (50,625 ) 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 15,817 16,310 Debt issuance costs (8,175 ) (1,238 ) Principal payments on long term debt (7,201 ) (4,055 ) Principal payments on capital lease obligations (5,583 ) (6,596 ) Acquisition-related obligations (3,434 ) (2,732 ) Surrender of common stock awards by employees (550 ) (836 ) Purchase of remaining interest in subsidiary   (1,890 )   -   Net cash provided by financing activities   179,484     12,728   Net change in cash 52,526 12,232 Cash at beginning of period   14,482     6,818   Cash at end of period $ 67,008   $ 19,050   Supplemental disclosures of cash flow information Net cash paid during the period for: Interest $ 9,733 $ 3,904 Income taxes, net of refunds 26,292 10,428 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 4,073 2,956 Seller obligations in connection with acquisition of businesses 3,759 2,849 Unpaid purchases of property and equipment included in accounts payable 1,108 2,140  

Reconciliation of Non-GAAP Financial Measures

Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income and Adjusted Gross Profit measure performance by adjusting EBITDA, GAAP net income and gross profit, 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 MEASURESADJUSTED 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 September 30,

Nine months ended September 30,

2017   2016 2017   2016   Net income, as reported $ 12,010 $ 11,549 $ 30,347 $ 27,355 Adjustments for adjusted net income: Write-off of capitalized loan costs - - 1,201 286 Share based compensation expense 2,179 361 4,749 1,531 Acquisition related expenses 926 508 2,273 1,331

Amortization expense1

6,824 2,889 19,790 8,178

Tax impact of adjusted items at normalized tax rate2

(3,674) (1,390) (10,365) (4,191) Adjusted net income $ 18,265 $ 13,917 $ 47,995 $ 34,490   Weighted average shares outstanding (diluted) 31,766,881 31,377,790 31,712,515 31,351,991   Diluted net income per share, as reported $ 0.38 $ 0.37 $ 0.96 $ 0.87

Adjustments for adjusted net income, net of tax impact, per diluted share3

0.19 $ 0.07 0.56 0.23 Diluted adjusted net income per share $ 0.57 $ 0.44 $ 1.51 $ 1.10

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

   

INSTALLED BUILDING PRODUCTS, INC.

RECONCILIATION OF GAAP TO NON-GAAP MEASURES ADJUSTED GROSS PROFIT CALCULATIONS (unaudited, in thousands)         Three months ended September 30, Nine months ended September 30, 2017 2016 2017 2016   Gross profit $ 85,581 $ 67,260 $ 242,681 $ 184,094 Share based compensation expense   507   -   507   - Adjusted gross profit $ 86,088 $ 67,260 $ 243,188 $ 184,094        

INSTALLED BUILDING PRODUCTS, INC.

RECONCILIATION OF GAAP TO NON-GAAP MEASURES ADJUSTED SELLING AND ADMINISTRATIVE EXPENSE CALCULATIONS (unaudited, in thousands)   Three months ended September 30, Nine months ended September 30, 2017 2016 2017 2016   Selling Expense $ 14,865 $ 13,028 $ 42,541 $ 36,239 Administrative Expense 41,657 31,504 122,679 92,677         Selling and Administrative $ 56,522   $ 44,532   $ 165,220   $ 128,916     Share based compensation expense 1,672 361 4,242 1,531 Acquisition related expenses 926 508 2,273 1,331         Adjusted Selling and Administrative $ 53,924   $ 43,663   $ 158,705   $ 126,054     Adj. Selling and Administrative - % Total Revenue 18.3 % 19.4 % 19.1 % 20.0 %  

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 September 30, Nine months ended September 30, 2017 2016 2017 2016 Adjusted EBITDA:   Net income (GAAP) $ 12,010 $ 11,549 $ 30,347 $ 27,355 Interest expense 4,421 1,544 11,456 4,605 Provision for income taxes 5,721 6,723 15,502 14,792 Depreciation and amortization   14,074     8,849     40,522     25,418   EBITDA   36,226     28,665     97,827     72,170     Acquisition related expenses 926 508 2,273 1,331 Share based compensation expense   2,179     361     4,749     1,531   Adjusted EBITDA $ 39,331   $ 29,534   $ 104,849   $ 75,032     Adjusted EBITDA margin 13.3 % 13.1 % 12.6 % 11.9 %    

INSTALLED BUILDING PRODUCTS, INC.

SUPPLEMENTARY TABLE

(unaudited)

        Three months ended September 30, Nine months ended September 30, 2017 2016 2017 2016  

Period-over-period Growth

Sales Growth 31.0% 24.1% 32.4% 33.5% Same Branch Sales Growth 9.4% 12.2% 9.9% 17.6%   Single-Family Sales Growth 18.3% 21.6% 17.5% 30.9% Single-Family Same Branch Sales Growth 7.2% 9.7% 7.2% 15.8%   Residential Sales Growth 25.6% 23.5% 25.8% 33.0% Residential Same Branch Sales Growth 11.7% 12.1% 11.4% 17.5%  

U.S. Housing Market1

Single-Family Completions Growth 7.2% 12.1% 8.9% 13.1% Total Completions Growth 8.3% 2.7% 10.9% 7.6%  

Same Branch Sales Growth

Volume Growth 3.7% 7.4% 5.7% 10.2% Price/Mix Growth 5.7% 4.8% 4.2% 7.4%  

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 September 30, Nine months ended September 30, 2017 % Total 2016 % Total 2017 % Total 2016 % Total Revenue Increase   Same Branch $ 21,094 30.2 % $ 22,151 50.6 % $ 62,287 30.5 % $ 83,112 52.7 % Acquired   48,706 69.8 %   21,662 49.4 %   141,768 69.5 %   74,671 47.3 % Total $ 69,800 100.0 % $ 43,813 100.0 % $ 204,054 100.0 % $ 157,783 100.0 %       Adj EBITDA Adj EBITDA Adj EBITDA Adj EBITDA Contribution Contribution Contribution Contribution Adjusted EBITDA   Same Branch $ 3,352 15.9 % $ 4,318 19.5 % $ 9,749 15.7 % $ 18,928 22.8 % Acquired   6,445 13.2 %   2,777 12.8 %   20,069 14.2 %   8,424 11.3 % Total $ 9,797 14.0 % $ 7,095 16.2 % $ 29,818 14.6 % $ 27,352 17.3 %  

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