SEC Filing | Installed Building Products, Inc.

View:

ibp-20230630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period From _________ To ________

Commission File Number: 001-36307

Installed Building Products, Inc.

(Exact name of registrant as specified in its charter)


Delaware									45-3707650
(State or other jurisdiction of incorporation or organization)									(I.R.S. Employer Identification No.)

495 South High Street, Suite 50
Columbus, Ohio									43215
(Address of principal executive offices)									(Zip Code)

(614) 221-3399

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock,

$0.01 par value per share

IBP

The New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by a check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b–2 of the Exchange Act). Yes ☐ No ☒

On July 26, 2023, the registrant had 28,410,568 shares of common stock, par value $0.01 per share, outstanding.

Table of Contents

TABLE OF CONTENTS



PART I – FINANCIAL INFORMATION			1
Item 1. Financial Statements			1
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			27
Item 3. Quantitative and Qualitative Disclosures About Market Risk			37
Item 4. Controls and Procedures			37
PART II – OTHER INFORMATION			38
Item 1. Legal Proceedings			38
Item 1A. Risk Factors			38
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			38
Item 3. Defaults Upon Senior Securities			38
Item 4. Mine Safety Disclosures			38
Item 5. Other Information			38
Item 6. Exhibits			39
SIGNATURES			40

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

INSTALLED BUILDING PRODUCTS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands, except share and per share amounts)


	June 30,		December 31,
	2023		2022
ASSETS
Current assets
Cash and cash equivalents	$	255,226	$	229,627

Accounts receivable (less allowance for credit losses of $10,634 and $9,549 at June 30, 2023 and December 31, 2022, respectively)	416,601		397,222
Inventories	163,378		176,629
Prepaid expenses and other current assets	82,897		80,933
Total current assets	918,102		884,411
Property and equipment, net	130,979		118,774
Operating lease right-of-use assets	76,582		76,174
Goodwill	393,493		373,555
Customer relationships, net	187,507		192,328
Other intangibles, net	91,919		91,145
Other non-current assets	37,358		42,545
Total assets	$	1,835,940	$	1,778,932
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt	$	31,661	$	30,983
Current maturities of operating lease obligations	26,389		26,145
Current maturities of finance lease obligations	2,702		2,508
Accounts payable	138,029		149,186
Accrued compensation	51,932		51,608
Other current liabilities	63,821		67,631
Total current liabilities	314,534		328,061
Long-term debt	831,282		830,171
Operating lease obligations	49,975		49,789
Finance lease obligations	6,996		6,397
Deferred income taxes	27,906		28,458
Other long-term liabilities	44,575		42,557
Total liabilities	1,275,268		1,285,433
Commitments and contingencies (Note 16)
Stockholders’ equity
Preferred Stock; $0.01 par value: 5,000,000 authorized and 0 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively	—		—
Common stock; $0.01 par value: 100,000,000 authorized, 33,582,403 and 33,429,557 issued and 28,410,568 and 28,306,482 shares outstanding at June 30, 2023 and December 31, 2022, respectively	336		334
Additional paid in capital	236,123		228,827
Retained earnings	579,691		513,095
Treasury stock; at cost: 5,171,835 and 5,123,075 shares at June 30, 2023 and December 31, 2022, respectively	(295,131)		(289,317)
Accumulated other comprehensive income	39,653		40,560
Total stockholders’ equity	560,672		493,499
Total liabilities and stockholders’ equity	$	1,835,940	$	1,778,932

See accompanying notes to consolidated financial statements

Table of Contents

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,
	2023		2022		2023		2022
Net revenue	$	692,100	$	676,749	$	1,351,409	$	1,264,241
Cost of sales	459,625		460,040		908,512		875,129
Gross profit	232,475		216,709		442,897		389,112
Operating expenses
Selling	32,902		29,371		65,509		54,563
Administrative	95,984		84,030		185,488		163,174
Amortization	11,256		11,261		22,691		22,358
Operating income	92,333		92,047		169,209		149,017
Other expense, net
Interest expense, net	9,828		10,401		19,498		21,001
Other (income) expense	(186)		368		(339)		513
Income before income taxes	82,691		81,278		150,050		127,503
Income tax provision	21,094		21,374		39,179		33,777
Net income	$	61,597	$	59,904	$	110,871	$	93,726
Other comprehensive income (loss), net of tax:
Net change on cash flow hedges, net of tax (provision) benefit of $(1,928) and $(3,603) for the three months ended June 30, 2023 and 2022, respectively, and $324 and $(10,033) for the six months ended June 30, 2023 and 2022, respectively	5,402		10,150		(907)		28,261
Comprehensive income	$	66,999	$	70,054	$	109,964	$	121,987
Earnings Per Share:
Basic	$	2.19	$	2.08	$	3.94	$	3.23
Diluted	$	2.18	$	2.07	$	3.92	$	3.21
Weighted average shares outstanding:
Basic	28,174,279		28,781,866		28,125,251		29,040,693
Diluted	28,273,334		28,894,140		28,276,049		29,235,997

Cash dividends declared per share	$	0.33	$	0.32	$	1.56	$	1.53

See accompanying notes to consolidated financial statements

Table of Contents

INSTALLED BUILDING PRODUCTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)

FOR THE THREE MONTHS ENDED JUNE 30, 2022 AND JUNE 30, 2023

(in thousands, except share and per share amounts)


	Common Stock			Additional Paid In Capital		Retained Earnings		Treasury Stock			Accumulated Other Comprehensive Income		Stockholders’ Equity
	Shares	Amount						Shares	Amount
BALANCE - April 1, 2022	33,351,843	$	334	$	218,642	$	350,475	(4,076,251)	$	(197,104)	$	17,884	$	390,231
Net income						59,904							59,904
Issuance of common stock awards to employees	71,409	—		—									—
Surrender of common stock awards								(52,995)	(4,459)				(4,459)
Share-based compensation expense				3,503									3,503
Share-based compensation issued to directors	5,335			125									125

Dividends declared ($0.32 per share)						(9,053)							(9,053)
Common Stock repurchase								(553,727)	(49,800)				(49,800)
Other comprehensive income, net of tax											10,150		10,150
BALANCE - June 30, 2022	33,428,587	$	334	$	222,270	$	401,326	(4,682,973)	$	(251,363)	$	28,034	$	400,601

	Common Stock			Additional Paid In Capital		Retained Earnings		Treasury Stock			Accumulated Other Comprehensive Income		Stockholders’ Equity
	Shares	Amount						Shares	Amount
BALANCE - April 1, 2023	33,498,693	$	335	$	232,503	$	527,468	(5,123,656)	$	(289,335)	$	34,251	$	505,222
Net income						61,597							61,597

Issuance of common stock awards to employees	77,172	1		(1)									—
Surrender of common stock awards								(48,179)	(5,796)				(5,796)
Share-based compensation expense				3,461									3,461
Share-based compensation issued to directors	6,538			160									160

Dividends declared ($0.33 per share)						(9,374)							(9,374)

Other comprehensive income, net of tax											5,402		5,402
BALANCE - June 30, 2023	33,582,403	$	336	$	236,123	$	579,691	(5,171,835)	$	(295,131)	$	39,653	$	560,672

See accompanying notes to consolidated financial statements

Table of Contents

INSTALLED BUILDING PRODUCTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED) FOR THE SIX MONTHS ENDED JUNE 30, 2022 AND JUNE 30, 2023

(in thousands, except share and per shares amounts)


	Common Stock			Additional Paid In Capital		Retained Earnings		Treasury Stock			Accumulated Other Comprehensive (Loss) Income		Stockholders’ Equity
	Shares	Amount						Shares	Amount
BALANCE - January 1, 2022	33,271,659	$	333	$	211,430	$	352,543	(3,565,258)	$	(147,239)	$	(227)	$	416,840
Net income						93,726							93,726
Issuance of common stock awards to employees	112,389	1		(1)									—
Surrender of common stock awards								(53,045)	(4,459)				(4,459)
Share-based compensation expense				6,592									6,592
Share-based compensation issued to directors	5,335			249									249
Issuance of awards previously classified as liability awards	39,204			4,000									4,000
Dividends declared ($1.53 per share)						(44,943)							(44,943)
Common stock repurchase								(1,064,670)	(99,665)				(99,665)
Other comprehensive income, net of tax											28,261		28,261
BALANCE - June 30, 2022	33,428,587	$	334	$	222,270	$	401,326	(4,682,973)	$	(251,363)	$	28,034	$	400,601

	Common Stock			Additional Paid In Capital		Retained Earnings		Treasury Stock			Accumulated Other Comprehensive Income		Stockholders’ Equity
	Shares	Amount						Shares	Amount
BALANCE - January 1, 2023	33,429,557	$	334	$	228,827	$	513,095	(5,123,075)	$	(289,317)	$	40,560	$	493,499
Net income						110,871							110,871
Issuance of common stock awards to employees	146,308	2		(2)									—
Surrender of common stock awards								(48,760)	(5,814)				(5,814)
Share-based compensation expense				6,990									6,990
Share-based compensation issued to directors	6,538			308									308

Dividends declared ($1.56 per share)						(44,275)							(44,275)

Other comprehensive (loss), net of tax											(907)		(907)
BALANCE - June 30, 2023	33,582,403	$	336	$	236,123	$	579,691	(5,171,835)	$	(295,131)	$	39,653	$	560,672

See accompanying notes to consolidated financial statements

Table of Contents

INSTALLED BUILDING PRODUCTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)


	Six months ended June 30,
	2023		2022
Cash flows from operating activities
Net income	$	110,871	$	93,726
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization of property and equipment	25,416		23,162
Amortization of operating lease right-of-use assets	14,446		13,224
Amortization of intangibles	22,691		22,358
Amortization of deferred financing costs and debt discount	951		961
Provision for credit losses	3,196		1,887
Gain on sale of property and equipment	(1,203)		(511)
Noncash stock compensation	7,121		7,078

Other, net	(5,543)		1,668
Changes in assets and liabilities, excluding effects of acquisitions
Accounts receivable	(17,492)		(66,719)
Inventories	14,724		(33,481)

Other assets	4,933		(1,474)
Accounts payable	(16,300)		19,259
Income taxes receivable/payable	(4,841)		11,466
Other liabilities	(20,877)		6,855
Net cash provided by operating activities	138,093		99,459
Cash flows from investing activities
Purchases of investments	—		(124,713)
Maturities of short term investments	—		30,000

Purchases of property and equipment	(28,330)		(24,512)
Acquisitions of businesses, net of cash acquired of $10 and $337 in 2023 and 2022, respectively	(40,182)		(72,463)
Proceeds from sale of property and equipment	1,457		830
Settlements with interest rate swap counterparties	7,760		—
Other	(225)		(7,047)
Net cash used in investing activities	$	(59,520)	$	(197,905)

See accompanying notes to consolidated financial statements

Table of Contents

INSTALLED BUILDING PRODUCTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED, CONTINUED)

(in thousands)




	Six months ended June 30,
	2023		2022
Cash flows from financing activities
Payments on Term Loan	$	(2,500)	$	(2,500)
Proceeds from vehicle and equipment notes payable	18,299		13,325
Debt issuance costs	—		(657)
Principal payments on long-term debt	(14,793)		(16,158)

Principal payments on finance lease obligations	(1,449)		(1,085)
Dividends paid	(44,471)		(44,877)
Acquisition-related obligations	(2,246)		(9,024)

Repurchase of common stock	—		(99,665)
Surrender of common stock awards by employees	(5,814)		(4,459)
Net cash used in financing activities	(52,974)		(165,100)
Net change in cash and cash equivalents	25,599		(263,545)
Cash and cash equivalents at beginning of period	229,627		333,485
Cash and cash equivalents at end of period	$	255,226	$	69,940
Supplemental disclosures of cash flow information
Net cash paid during the period for:
Interest	$	20,807	$	22,586
Income taxes, net of refunds	44,096		22,311
Supplemental disclosure of noncash activities
Right-of-use assets obtained in exchange for operating lease obligations	$	14,713	$	16,561
Release of indemnification of acquisition-related debt	—		980
Property and equipment obtained in exchange for finance lease obligations	2,232		2,600
Seller obligations in connection with acquisition of businesses	7,714		25,278
Unpaid purchases of property and equipment included in accounts payable	4,860		1,058

See accompanying notes to consolidated financial statements

Table of Contents

INSTALLED BUILDING PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1 - ORGANIZATION

Installed Building Products (“IBP”), a Delaware corporation formed on October 28, 2011, and its wholly-owned subsidiaries (collectively referred to as the “Company,” and “we,” “us” and “our”) primarily install insulation, waterproofing, fire-stopping, fireproofing, garage doors, rain gutters, window blinds, shower doors, closet shelving and mirrors and other products for residential and commercial builders located in the continental United States. The Company operates in more than 240 locations and its corporate office is located in Columbus, Ohio.

The vast majority of our sales originate from our one reportable segment, Installation. Substantially all of our Installation segment sales are derived from the service-based installation of various products in the residential new construction, repair and remodel and commercial construction end markets from our national network of branch locations. Each of our Installation branches has the capacity to serve all of our end markets. See Note 3, Revenue Recognition, for information on our revenues by product and end market, and see Note 10, Information on Segments, for information on how we segment the business.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Principles of Consolidation

The accompanying consolidated financial statements include all of our wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated.

The information furnished in the Condensed Consolidated Financial Statements includes normal recurring adjustments and reflects all adjustments which are, in the opinion of management, necessary for a fair presentation of the results of operations and statements of financial position for the interim periods presented. Certain information and footnote disclosures normally included in the consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the rules and regulations of the Securities and Exchange Commission (the “SEC”) have been omitted pursuant to such rules and regulations. We believe that the disclosures are adequate to prevent the information presented from being misleading when read in conjunction with our audited consolidated financial statements and the notes thereto included in Part II, Item 8, Financial Statements and Supplementary Data, of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (“2022 Form 10-K”), as filed with the SEC on February 22, 2023. The December 31, 2022 Condensed Consolidated Balance Sheet data herein was derived from the audited consolidated financial statements but the related footnotes do not include all disclosures required by U.S. GAAP.

Our interim operating results for the three and six months ended June 30, 2023 are not necessarily indicative of the results to be expected in future operating quarters.

Note 2 to the audited consolidated financial statements in our 2022 Form 10-K describes the significant accounting policies and estimates used in preparation of the audited consolidated financial statements. Other than the recently implemented accounting policy described below, there have been no changes to our significant accounting policies during the six months ended June 30, 2023.

Recently Adopted Accounting Pronouncements

Standard

Effective Date

Adoption

ASU 2021-08, Business Combinations (Topic 805): Accounting for contract assets and contract liabilities from contracts with customers

December 15, 2022

This pronouncement amended Topic 805 to require an acquirer to account for revenue contracts in a business combination in accordance with Topic 606 as if the acquirer had originated the contracts. This did not have a material impact on our consolidated financial statements

Table of Contents

INSTALLED BUILDING PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Recently Issued Accounting Pronouncements Not Yet Adopted

We are currently evaluating the impact of the following Accounting Standards Update ("ASU") on our Condensed Consolidated Financial Statements or Notes to Condensed Consolidated Financial Statements:

Standard

Description

Effective Date

Effect on the financial statements or other significant matters

ASU 2023-01 Leases (Topic 842): Common Control Arrangements

This pronouncement amends Topic 842 to require all entities to amortize leasehold improvements associated with common control leases over the useful life to the common control group.

Annual periods beginning after December 15, 2023, including interim periods therein. Early adoption is permitted.

We are currently assessing the impact of adoption on our consolidated financial statements.

NOTE 3 - REVENUE RECOGNITION

We disaggregate our revenue from contracts with customers for our Installation segment by end market and product, as we believe it best depicts how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors. Revenues for the Other category are presented net of intercompany sales in the tables below. The following tables present our net revenues disaggregated by end market and product (in thousands):


	Three months ended June 30,								Six months ended June 30,
	2023				2022				2023				2022
Installation:
Residential new construction	$	495,699	71	%	$	505,513	75	%	$	970,795	72	%	$	947,916	75	%
Repair and remodel	38,939		6	%	37,965		5	%	76,613		5	%	70,606		6	%
Commercial	117,227		17	%	94,520		14	%	227,200		17	%	181,107		14	%
Net revenue, Installation	$	651,865	94	%	$	637,998	94	%	$	1,274,608	94	%	$	1,199,629	95	%

Other	40,235		6	%	38,751		6	%	76,801		6	%	64,612		5	%
Net revenue, as reported	$	692,100	100	%	$	676,749	100	%	$	1,351,409	100	%	$	1,264,241	100	%


	Three months ended June 30,								Six months ended June 30,
	2023				2022				2023				2022
Installation:
Insulation	$	416,847	60	%	$	409,602	61	%	$	810,892	60	%	$	774,546	62	%
Shower doors, shelving and mirrors	47,839		7	%	41,264		6	%	93,352		7	%	77,604		6	%
Garage doors	40,862		6	%	42,512		6	%	84,174		6	%	78,491		6	%
Waterproofing	32,988		5	%	35,197		5	%	62,927		5	%	64,218		5	%
Rain gutters	29,566		4	%	28,723		4	%	57,366		4	%	52,269		4	%
Fireproofing/firestopping	19,865		3	%	16,166		3	%	35,040		3	%	32,088		3	%
Window Blinds	16,319		2	%	15,414		2	%	32,200		2	%	28,472		2	%
Other building products	47,579		7	%	49,120		7	%	98,657		7	%	91,941		7	%
Net revenue, Installation	$	651,865	94	%	$	637,998	94	%	$	1,274,608	94	%	$	1,199,629	95	%
Other	40,235		6	%	38,751		6	%	76,801		6	%	64,612		5	%
Net revenue, as reported	$	692,100	100	%	$	676,749	100	%	$	1,351,409	100	%	$	1,264,241	100	%

Contract Assets and Liabilities

Our contract assets consist of unbilled amounts typically resulting from sales under contracts when the cost-to-cost method of revenue recognition is utilized and revenue recognized, based on costs incurred, exceeds the amount billed to the customer. Our contract assets are recorded in other current assets in our Condensed Consolidated Balance Sheets. Our contract liabilities

Table of Contents

INSTALLED BUILDING PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

consist of customer deposits and billings in excess of revenue recognized, based on costs incurred and are included in other current liabilities in our Condensed Consolidated Balance Sheets.

Contract assets and liabilities related to our uncompleted contracts and customer deposits were as follows (in thousands):


	June 30, 2023		December 31, 2022
Contract assets	$	33,648	$	29,431
Contract liabilities	(17,492)		(18,884)

Uncompleted contracts were as follows (in thousands):


	June 30, 2023		December 31, 2022
Costs incurred on uncompleted contracts	$	250,313	$	273,788
Estimated earnings	104,934		114,781
Total	355,247		388,569
Less: Billings to date	331,514		368,009
Net under billings	$	23,733	$	20,560

Net under billings were as follows (in thousands):


	June 30, 2023		December 31, 2022
Costs and estimated earnings in excess of billings on uncompleted contracts (contract assets)	$	33,648	$	29,431
Billings in excess of costs and estimated earnings on uncompleted contracts (contract liabilities)	(9,915)		(8,871)
Net under billings	$	23,733	$	20,560

The difference between contract assets and contract liabilities as of June 30, 2023 compared to December 31, 2022 is primarily the result of timing differences between our performance of obligations under contracts and customer payments and billings. During the three and six months ended June 30, 2023, we recognized $1.6 million and $17.4 million of revenue that was included in the contract liability balance at December 31, 2022. We did not recognize any impairment losses on our receivables and contract assets during the three and six months ended June 30, 2023 or 2022.

Remaining performance obligations represent the transaction price of contracts for which work has not been performed and excludes unexercised contract options and potential modifications. As of June 30, 2023, the aggregate amount of the transaction price allocated to remaining uncompleted contracts was $135.5 million. We expect to satisfy remaining performance obligations and recognize revenue on substantially all of these uncompleted contracts over the next 18 months.

NOTE 4 - CREDIT LOSSES

Our expected loss allowance methodology for accounts receivable is developed using historical experience, present economic conditions and other relevant factors management considers relevant to estimate expected credit losses. We also perform ongoing evaluations of creditworthiness of our existing and potential customers.

Changes in our allowance for credit losses were as follows (in thousands):


Balance as of January 1, 2023	$	9,549
Current period provision	3,196
Recoveries collected and additions	159
Amounts written off	(2,270)
Balance as of June 30, 2023	$	10,634

Table of Contents

INSTALLED BUILDING PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 5 - CASH AND CASH EQUIVALENTS

Cash and cash equivalents include highly liquid instruments with insignificant interest rate risk and original or remaining maturities of three months or less at the time of purchase. These instruments amounted to approximately $217.1 million and $191.9 million as of June 30, 2023 and December 31, 2022, respectively. See Note 9, Fair Value Measurements, for additional information.

NOTE 6 - GOODWILL AND INTANGIBLES

Goodwill

The change in carrying amount of goodwill was as follows (in thousands):


	Installation		Other		Consolidated

Goodwill (gross) - January 1, 2023	$	355,226	$	88,333	$	443,559
Business combinations	14,325		—		14,325
Other	340		5,273		5,613
Goodwill (gross) - June 30, 2023	369,891		93,606		463,497
Accumulated impairment losses	(70,004)		—		(70,004)
Goodwill (net) - June 30, 2023	$	299,887	$	93,606	$	393,493

Other changes presented in the above table primarily include one immaterial acquisition and adjustments for the allocation of certain acquisitions still under measurement made during the six months ended June 30, 2023, including a change in tax election that resulted in a $4.4 million change in purchase price for a 2022 acquisition. For additional information regarding changes to goodwill resulting from acquisitions, see Note 17, Business Combinations.

We test goodwill for impairment annually during the fourth quarter of our fiscal year or earlier if there is an impairment indicator. Accumulated impairment losses included within the above table were incurred over multiple periods and were all associated with the Installation segment, with the latest impairment charge being recorded during the year ended December 31, 2010.

Intangibles, net

The following table provides the gross carrying amount, accumulated amortization and net book value for each major class of intangibles (in thousands):


	As of June 30,						As of December 31,
	2023						2022
	Gross Carrying Amount		Accumulated Amortization		Net Book Value		Gross Carrying Amount		Accumulated Amortization		Net Book Value
Amortized intangibles:
Customer relationships	$	349,761	$	162,254	$	187,507	$	338,050	$	145,722	$	192,328
Covenants not-to-compete	31,289		21,954		9,335		30,899		20,086		10,813
Trademarks and tradenames	125,335		43,461		81,874		119,612		39,638		79,974
Backlog	21,635		20,925		710		20,815		20,457		358
	$	528,020	$	248,594	$	279,426	$	509,376	$	225,903	$	283,473

The gross carrying amount of intangibles increased approximately $18.6 million during the six months ended June 30, 2023 primarily due to business combinations. For more information, see Note 17, Business Combinations.

Table of Contents

INSTALLED BUILDING PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Remaining estimated aggregate annual amortization expense is as follows (amounts, in thousands, are for the fiscal year ended):


Remainder of 2023	$	21,644
2024	39,938
2025	34,396
2026	30,445
2027	26,160
Thereafter	126,843

NOTE 7 - LONG-TERM DEBT

Long-term debt consisted of the following (in thousands):


	As of June 30,		As of December 31,
	2023		2022
Senior Notes due 2028, net of unamortized debt issuance costs of $2,737 and $3,036, respectively	$	297,263	$	296,964
Term loan, net of unamortized debt issuance costs of $5,282 and $5,767, respectively	487,218		489,233
Vehicle and equipment notes, maturing through June 2028; payable in various monthly installments, including interest rates ranging from 1.9% to 6.7%	77,080		72,984
Various notes payable, maturing through April 2025; payable in various monthly installments, including interest rates ranging from 2.0% to 5.0%	1,382		1,973
	862,943		861,154
Less: current maturities	(31,661)		(30,983)
Long-term debt, less current maturities	$	831,282	$	830,171

Remaining required repayments of debt principal, gross of unamortized debt issuance costs, as of June 30, 2023 are as follows (in thousands):


Remainder of 2023	$	16,128
2024	28,825
2025	23,134
2026	18,323
2027	13,220
Thereafter	771,332

Term Loan Benchmark Replacement

In April 2023, we notified the lenders on our $500.0 million, seven-year term loan facility due December 2028 (the "Term Loan") under our credit agreement (the "Term Loan Agreement") that we have elected to trigger a benchmark replacement from LIBOR to the Secured Overnight Financing Rate ("Term SOFR"). The Term Loan was subsequently amended on April 28, 2023 (the "First Amendment") to implement Term SOFR as the benchmark rate and includes a credit spread adjustment of 0.11%, 0.26% and 0.43% for interest periods of one month, three months and six months, respectively, and it is subject to the same floor as currently set forth in the Term Loan Agreement. The Term Loan now bears interest at either the base rate (which approximates the prime rate) or the Term SOFR rate plus the applicable credit spread adjustment, plus a margin of (A) 1.25% in the case of base rate loans or (B) 2.25% in the case of Term SOFR rate loans.

NOTE 8 - LEASES

We lease various assets in the ordinary course of business as follows: warehouses to store our materials and perform staging activities for certain products we install, various office spaces for selling and administrative activities to support our business,

Table of Contents

INSTALLED BUILDING PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

and certain vehicles and equipment to facilitate our operations, including, but not limited to, trucks, forklifts and office equipment.

The table below presents the lease-related assets and liabilities recorded on the Condensed Consolidated Balance Sheets:


		As of June 30,			As of December 31,
(in thousands)	Classification	2023			2022
Assets
Non-Current
Operating	Operating lease right-of-use assets	$	76,582		$	76,174
Finance	Property and equipment, net	9,676			8,928
Total lease assets		$	86,258		$	85,102
Liabilities
Current
Operating	Current maturities of operating lease obligations	$	26,389		$	26,145
Financing	Current maturities of finance lease obligations	2,702			2,508
Non-Current
Operating	Operating lease obligations	49,975			49,789
Financing	Finance lease obligations	6,996			6,397
Total lease liabilities		$	86,062		$	84,839
Weighted-average remaining lease term:
Operating leases		3.8 years			4.0 years
Finance leases		3.8 years			3.6 years
Weighted-average discount rate:
Operating leases		4.86		%	4.41		%
Finance leases		6.71		%	5.76		%

Lease Costs

The table below presents certain information related to the lease costs for finance and operating leases:


		Three months ended June 30,				Six months ended June 30,
(in thousands)	Classification	2023		2022		2023		2022
Operating lease cost(1)	Administrative	$	9,387	$	8,180	$	18,590	$	15,939
Finance lease cost:
Amortization of leased assets(2)	Cost of sales	895		855		1,872		1,571
Interest on finance lease obligations	Interest expense, net	146		68		277		129
Total lease costs		$	10,428	$	9,103	$	20,739	$	17,639

(1)Includes variable lease costs of $1.1 million and $0.8 million for the three months ended June 30, 2023 and 2022, respectively, and $2.3 million and $1.7 million for the six months ended June 30, 2023 and 2022, respectively, and short-term lease costs of $0.3 million for each of the three months ended June 30, 2023 and 2022, and $0.6 million for each of the six months ended June 30, 2023 and 2022.

(2)Includes variable lease costs of $0.1 million and $0.2 million for the three months ended June 30, 2023 and 2022, respectively, and $0.4 million for each of the six months ended June 30, 2023 and 2022.

Table of Contents

INSTALLED BUILDING PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Other Information

The table below presents supplemental cash flow information related to leases (in thousands):


	Three months ended June 30,				Six months ended June 30,
	2023		2022		2023		2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	7,865	$	6,803	$	15,556	$	13,266
Operating cash flows for finance leases	146		68		277		129
Financing cash flows for finance leases	722		564		1,449		1,085

Undiscounted Cash Flows

The table below reconciles the undiscounted cash flows for each of the first five years and total of the remaining years for the finance lease obligations and operating lease obligations recorded on the Condensed Consolidated Balance Sheet as of June 30, 2023 (in thousands):


	Finance Leases		Operating Leases
			Related Party		Other		Total Operating
Remainder of 2023	$	1,704	$	650	$	14,916	$	15,566
2024	2,992		1,045		24,637		25,682
2025	2,621		894		17,590		18,484
2026	2,290		—		11,719		11,719
2027	1,319		—		6,260		6,260
Thereafter	130		—		6,226		6,226
Total minimum lease payments	11,056		$	2,589	$	81,348	83,937
Less: Amounts representing executory costs	(2)						—
Less: Amounts representing interest	(1,356)						(7,573)
Present value of future minimum lease payments	9,698						76,364
Less: Current obligation under leases	(2,702)						(26,389)
Long-term lease obligations	$	6,996					$	49,975

NOTE 9 - FAIR VALUE MEASUREMENTS

Assets and Liabilities Measured at Fair Value on a Recurring Basis

In many cases, a valuation technique used to measure fair value includes inputs from multiple levels of the fair value hierarchy. The lowest level of significant input determines the placement of the entire fair value measurement in the hierarchy. During the periods presented, there were no transfers between fair value hierarchical levels.

Assets Measured at Fair Value on a Nonrecurring Basis

Certain assets, specifically other intangible and long-lived assets, are measured at fair value on a nonrecurring basis in periods subsequent to initial recognition. Assets measured at fair value on a nonrecurring basis as of June 30, 2023 and December 31, 2022 are categorized based on the lowest level of significant input to the valuation. The assets are measured at fair value when our impairment assessment indicates a carrying value for each of the assets in excess of the asset’s estimated fair value. Undiscounted cash flows, a Level 3 input, are utilized in determining estimated fair values. During each of the three months ended June 30, 2023 and 2022, we did not record any impairments on these assets required to be measured at fair value on a nonrecurring basis.

Table of Contents

INSTALLED BUILDING PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Estimated Fair Value of Financial Instruments

Accounts receivable, accounts payable and accrued liabilities as of June 30, 2023 and December 31, 2022 approximate fair value due to the short-term maturities of these financial instruments. The carrying amounts of certain long-term debt, including the Term Loan and ABL Revolver as of June 30, 2023 and December 31, 2022, approximate fair value due to the variable rate nature of the agreements. The carrying amounts of our operating lease right-of-use assets and the obligations associated with our operating and finance leases as well as our vehicle and equipment notes approximate fair value as of June 30, 2023 and December 31, 2022. All debt classifications represent Level 2 fair value measurements. Derivative financial instruments are measured at fair value based on observable market information and appropriate valuation methods.

Contingent consideration liabilities arise from future earnout payments to the sellers associated with certain acquisitions and are based on predetermined calculations of certain future results. These future payments are estimated by considering various factors, including business risk and projections. The contingent consideration liabilities are measured at fair value by discounting estimated future payments, calculated based on a weighted average of various future forecast scenarios, to their net present value.

The fair values of financial assets and liabilities that are recorded at fair value in the Condensed Consolidated Balance Sheets and not described above were as follows (in thousands):


	As of June 30, 2023								As of December 31, 2022
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Financial assets:
Cash equivalents	$	217,141	$	217,141	$	—	$	—	$	191,881	$	191,881	$	—	$	—
Derivative financial instruments	35,222		—		35,222		—		38,671		—		38,671		—
Total financial assets	$	252,363	$	217,141	$	35,222	$	—	$	230,552	$	191,881	$	38,671	$	—
Financial liabilities:
Contingent consideration	$	980	$	—	$	—	$	980	$	1,858	$	—	$	—	$	1,858

See Note 5, Cash and Cash Equivalents, for more information on cash equivalents included in the table above. Also see Note 11, Derivatives and Hedging Activities, for more information on derivative financial instruments.

The change in fair value of the contingent consideration (a Level 3 input) was as follows (in thousands):


Contingent consideration liability - January 1, 2023	$	1,858


Accretion in value	122


Amounts paid to sellers	(1,000)
Contingent consideration liability - June 30, 2023	$	980

The accretion in value of contingent consideration liabilities is included within administrative expenses on the Condensed Consolidated Statements of Operations and Comprehensive Income.

The carrying value and associated fair value of financial assets and liabilities that are not recorded at fair value in the Condensed Consolidated Balance Sheets and not described above include our Senior Notes. To estimate the fair value of our Senior Notes, we utilized third-party quotes which are derived all or in part from model prices, external sources or market prices. The Senior Notes represent a Level 2 fair value measurement and are as follows (in thousands):


	As of June 30, 2023				As of December 31, 2022
	Carrying Value		Fair Value		Carrying Value		Fair Value

Senior Notes(1)	$	300,000	$	282,741	$	300,000	$	270,993

(1)Excludes the impact of unamortized debt issuance costs.

See Note 5, Cash and Cash Equivalents, for more information on investments included in the table above. Also see Note 7, Long-Term Debt, for more information on our Senior Notes.

Table of Contents

INSTALLED BUILDING PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 10 - INFORMATION ON SEGMENTS

Our segment structure includes three operating segments consisting of Installation, Distribution and Manufacturing. Our Installation operating segment represents the majority of our net revenue and gross profit and forms our one reportable segment. This operating segment represents the service-based installation of insulation and complementary building products in the residential new construction, repair and remodel and commercial construction end markets from our national network of branch locations. These branch locations have similar economic and operating characteristics including the nature of products and services offered, operating procedures and risks, customer bases, employee incentives, material procurement and shared corporate resources and therefore combine to form one operating segment.

The Other category reported below reflects the operations of our two remaining operating segments, Distribution and Manufacturing, which do not meet the quantitative thresholds for separate reporting. Our Distribution operating segment includes our businesses that sell insulation, gutters and accessories primarily to installers of these products who operate in multiple end markets. Our Manufacturing operating segment consists of our cellulose insulation manufacturing operation. In addition to sales of cellulose insulation, revenues from this operating segment consist of sales of asphalt and industrial fibers to distributors and installers of these products.

The Installation reportable segment includes substantially all of our net revenue from services while net revenue included in the Other category includes substantially all of our net revenue from sales of products. The intercompany sales from the Other category to the Installation reportable segment include a profit margin while our Installation segment records these transactions at cost.

The key metrics used to assess the performance of our operating segments are revenue and segment gross profit as these are the metrics used by our Chief Executive Officer, who is also our Chief Operating Decision Maker ("CODM"), to review results, assess performance and allocate resources. We define segment gross profit as revenue less cost of sales, excluding depreciation and amortization. We do not report total assets, depreciation and amortization expenses included in reported cost of sales, operating expenses or other expense, net by segment because our CODM does not use this information to assess segment performance or allocate resources. The following tables represent our segment information for the three and six months ended June 30, 2023 and 2022 (in thousands):


	Three months ended June 30, 2023												Six months ended June 30, 2023
	Installation			Other			Eliminations			Consolidated			Installation			Other			Eliminations			Consolidated
Revenue	$	651,866		$	42,283		$	(2,049)		$	692,100		$	1,274,608		$	81,005		$	(4,204)		$	1,351,409
Cost of sales (1)	418,661			30,371			(1,583)			447,449			829,046			58,829			(3,349)			884,526
Segment gross profit	$	233,205		$	11,912		$	(466)		$	244,651		$	445,562		$	22,176		$	(855)		$	466,883
Segment gross profit percentage	35.8		%	28.2		%	22.7		%	35.3		%	35.0		%	27.4		%	20.3		%	34.5		%

Three months ended June 30, 2022

Six months ended June 30, 2022

Installation

Other

Eliminations

Consolidated

Installation

Other

Eliminations