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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
OR
| | | | | |
☐ | 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
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 | |
1
See accompanying notes to consolidated financial statements
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 | |
2
See accompanying notes to consolidated financial statements
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 | |
3
See accompanying notes to consolidated financial statements
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 | |
4
See accompanying notes to consolidated financial statements
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) | |
5
See accompanying notes to consolidated financial statements
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 | |
6
See accompanying notes to consolidated financial statements
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 |
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
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 | |
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.
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,
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.
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.
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.
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 | | |