Installed Building Products Inc.
May 5, 2017

Installed Building Products Reports Results for First Quarter 2017

COLUMBUS, Ohio--(BUSINESS WIRE)-- 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 first quarter ended March 31, 2017.

First Quarter 2017 Highlights

Recent Developments

"The year is off to an excellent start, driven by strong first quarter operating and financial results," stated Jeff Edwards, Chairman and Chief Executive Officer. "The 2017 first quarter is more in line with historical seasonal trends than we experienced in the first quarter of 2016, as our sales and margins are consistent with our expectations for a typical first quarter. As the year progresses, we expect this normal seasonality to continue, helping drive further improvements in sales and profitability.

"The 2017 first quarter also represents the first quarter contribution of the Alpha Insulation and Waterproofing acquisition, which we successfully closed and began integrating into our operations in January. Alpha has exceeded our initial expectations helping drive a significant increase in acquired revenues, while improving the company's margins from acquired businesses. I am encouraged by the strong start to the year and expect 2017 will be another record year as we are positioned to achieve over $1.0 billion in revenues," concluded Mr. Edwards.

First Quarter 2017 Results Overview

For the first quarter of 2017, net revenue was $255.7 million, an increase of 33.4% from $191.7 million in the first quarter of 2016. On a same branch basis, net revenue improved 8.7% from the prior year quarter, with approximately 54% 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. During the last twelve months, same branch new residential sales have increased 11.4%, compared to growth in U.S. housing completions of 7.7%.

Gross profit improved 32.2% to $72.2 million from $54.6 million in the prior year quarter. Gross margin was 28.2% versus 28.5% in the prior year as a result of a return to a more normal seasonal mix of installation services. Selling, general and administrative expense, as a percentage of net revenue, was 20.8% compared to 21.7% in the prior year.

Net income was $6.4 million, or $0.20 per diluted share, compared to $5.8 million, or $0.19 per diluted share in the prior year quarter. Adjusted net income was $11.1 million, or $0.35 per diluted share, compared to $8.1 million, or $0.26 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 $26.3 million, a 36.4% increase from $19.3 million in the prior year quarter, largely due to higher sales and operating leverage. Adjusted EBITDA, as a percentage of net revenue, increased 20 basis points to 10.3%, compared to 10.1% in the prior year quarter.

Conference Call and Webcast

The Company will host a conference call and webcast on Friday May 5, 2017 at 10:00 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 June 5, 2017, by dialing 844-512-2921 (domestic) or 412-317-6671 (international).

About Installed Building Products

Installed Building Products, Inc. is the nation's second largest insulation installer for the residential new construction market and 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 diverse portfolio of services for new and existing single-family and multifamily 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 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 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
(unaudited, in thousands, except share and per share amounts)

       
Three months ended March 31,
2017 2016
Net revenue $ 255,669 $ 191,698
Cost of sales   183,497   137,107
Gross profit 72,172 54,591
Operating expenses
Selling 14,026 11,251
Administrative 39,261 30,283
Amortization   6,416   2,479
Operating income 12,469 10,578
Other expense
Interest expense 2,170 1,553
Other   152   104
Income before income taxes 10,147 8,921
Income tax provision   3,783   3,108
Net income $ 6,364 $ 5,813
 
Basic and diluted net income per share $ 0.20 $ 0.19
Weighted average shares outstanding:
Basic 31,590,478 31,242,237
Diluted 31,687,056 31,330,971
 

INSTALLED BUILDING PRODUCTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands, except share and per share amounts)

 

   

 

           
March 31, December 31,
2017 2016
ASSETS
Current assets
Cash $ 24,607 $ 14,482

Accounts receivable (less allowance for doubtful accounts of $4,512 and $3,397 at March 31, 2017 and December 31, 2016, respectively)

161,936 128,466
Inventories 43,661 40,229
Other current assets   15,868     9,214  
Total current assets 246,072 192,391
Property and equipment, net 71,530 67,788
Non-current assets
Goodwill 144,244 107,086
Intangibles, net 139,197 86,317
Other non-current assets   8,955     8,513  

Total non-current assets

  292,396     201,916  
Total assets $ 609,998   $ 462,095  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt $ 27,350 $ 17,192
Current maturities of capital lease obligations 6,484 6,929
Accounts payable 76,223 67,921
Accrued compensation 17,879 18,212
Other current liabilities   26,866     19,851  
Total current liabilities 154,802 130,105
Long-term debt 236,827 134,235
Capital lease obligations, less current maturities 7,671 8,364
Deferred income taxes 14,007 14,239
Other long-term liabilities   25,065     21,175  
Total liabilities 438,372 308,118
Commitments and contingencies
Stockholders' equity

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

-

 

-

Common Stock; $0.01 par value: 100,000,000 authorized, 32,417,753 and 32,135,176 issued and 31,765,959 and 31,484,774 shares outstanding at March 31, 2017 and December 31, 2016, respectively

324 321
Additional paid in capital 169,917 158,581
Retained earnings 13,658 7,294
Treasury Stock; at cost: 651,794 and 650,402 shares at March 31, 2017 and December 31, 2016, respectively   (12,273 )   (12,219 )
Total stockholders' equity   171,626     153,977  
Total liabilities and stockholders' equity $ 609,998   $ 462,095  
 

INSTALLED BUILDING PRODUCTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)

             
Three Months Ended March 31,
2017 2016
Cash flows from operating activities
Net income $ 6,364 $ 5,813

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

Depreciation and amortization of property and equipment 6,552 5,443
Amortization of intangibles 6,416 2,479
Amortization of deferred financing costs and debt discount 102 77
Provision for doubtful accounts 1,231 521
Write-off of debt issuance costs - 286
Gain on sale of property and equipment (107 ) (79 )
Noncash stock compensation 480 536
Deferred income taxes - 708
Changes in assets and liabilities, excluding effects of acquisitions
Accounts receivable (3,200 ) (3,045 )
Inventories (894 ) (1,364 )
Other assets (722 ) 1,619
Accounts payable (1,781 ) 3,557
Income taxes payable/receivable 3,106 284
Other liabilities   (1,873 )   2,992  
Net cash provided by operating activities   15,674     19,827  
Cash flows from investing activities
Purchases of property and equipment (7,776 ) (6,503 )
Acquisitions of businesses, net of cash acquired of $247 and $0, respectively (106,873 ) (8,797 )
Proceeds from sale of property and equipment 203 190
Other   (550 )   -  
Net cash used in investing activities   (114,996 )   (15,110 )
Cash flows from financing activities
Proceeds from term loan under credit agreement applicable to respective period - 100,000
Payments on term loan under credit agreement applicable to respective period (1,250 ) (48,125 )
Proceeds from delayed draw term loan under credit agreement applicable to respective period 112,500 -
Payments on delayed draw term loan under credit agreement applicable to respective period - (50,000 )
Proceeds from vehicle and equipment notes payable 4,331 4,933
Debt issuance costs (833 ) (1,228 )
Principal payments on long term debt (2,117 ) (1,119 )
Principal payments on capital lease obligations (1,882 ) (2,348 )
Acquisition-related obligations (1,248 ) (1,112 )
Surrender of common stock awards by employees   (54 )   (836 )
Net cash provided by financing activities   109,447     165  
Net change in cash 10,125 4,882
Cash at beginning of period   14,482     6,818  
Cash at end of period $ 24,607   $ 11,700  
Supplemental disclosures of cash flow information
Net cash paid during the period for:
Interest $ 2,044 $ 1,155
Income taxes, net of refunds 650 2,398
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 816 1,247
Seller obligations in connection with acquisition of businesses 2,503 1,052
Unpaid purchases of property and equipment included in accounts payable 609

-

 

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 March 31,
2017   2016
 
Net income, as reported $ 6,364 $ 5,813
Adjustments for adjusted net income:
Write-off of capitalized loan costs - 286
Share based compensation expense 480 536
Acquisition related expenses 553 363
Amortization expense 1 6,416 2,479
Tax impact of adjusted items at normalized tax rate 2   (2,756 )   (1,356 )
Adjusted net income $ 11,057   $ 8,121  
 
Weighted average shares outstanding (diluted) 31,687,056 31,330,971
 
Diluted net income per share, as reported $ 0.20 $ 0.19
Adjustments for adjusted net income, net of tax impact, per diluted share 3   0.15     0.07  
Diluted adjusted net income per share $ 0.35   $ 0.26  
 

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 March 31,
2017 2016
Adjusted EBITDA:
 
Net income (GAAP) $ 6,364 $ 5,813
Interest expense 2,170 1,553
Provision for income taxes 3,783 3,108
Depreciation and amortization   12,968     7,921  
EBITDA   25,285     18,395  
 
Acquisition related expenses 553 363
Share based compensation expense   480     536  
Adjusted EBITDA $ 26,318   $ 19,294  
 
Adjusted EBITDA margin 10.3 % 10.1 %
 

Installed Building Products, Inc.
Supplementary Table
(unaudited)

   
Three months ended March 31,
2017 2016
 

Period-over-period Growth

Sales Growth 33.4% 47.5%
Same Branch Sales Growth 8.7% 26.1%
 
Single-Family Sales Growth 14.4% 47.9%
Single-Family Same Branch Sales Growth 4.4% 27.8%
 
Residential Sales Growth 23.5% 48.2%
Residential Same Branch Sales Growth 8.0% 26.6%
 

U.S. Housing Market 1

Total Completions Growth 10.7% 20.3%
Single-Family Completions Growth 10.9% 16.5%
 

Same Branch Sales Growth

Volume Growth 4.7% 13.8%
Price/Mix Growth 4.0% 12.3%
 
1 U.S. Census Bureau data, as revised
 
Installed Building Products, Inc.
Incremental Revenue and Adjusted EBITDA Margins
(in thousands)
       
Three months ended March 31,
2017 % Total 2016 % Total
Revenue Increase
 
Same Branch $ 16,683 26.1 % $ 33,949 55.0 %
Acquired   47,288 73.9 %   27,801 45.0 %
Total $ 63,971 100.0 % $ 61,750 100.0 %
 
 
 
Adj EBITDA Adj EBITDA
Contribution Contribution
Adjusted EBITDA
 
Same Branch $ 196 1.2 % $ 8,617 25.4 %
Acquired   6,828 14.4 %   3,104 11.2 %
Total $ 7,024 11.0 % $ 11,721 19.0 %

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

Source: Installed Building Products, Inc.

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