Installed Building Products, Inc. Q1 FY2025 earnings call

• Jeff highlighted solid first-quarter financial results, focus on installation service despite housing affordability challenges and slower spring selling season. Mentioned housing demand tied to affordability and macroeconomic factors. The company is in a strong financial position, generating strong operating cash flow, investing in growth, and returning capital to shareholders through dividends and stock repurchases. - Michael discussed financial results: adjusted gross margin 32.7% (down from 33.9% prior year), adjusted EBITDA $102 million, cash flow from operations $92 million. Liquidity position: net debt to trailing twelve-month adjusted EBITDA leverage ratio 1.17 times. Stock repurchases and dividend increase. - Operational highlights: working with suppliers to reduce tariff impacts, strategic growth in multifamily and heavy commercial, and focus on optimizing G&A costs with $15 million targeted savings.

Consolidated net revenue for the first quarter decreased 1% to $685 million compared to $693 million in the same period last year. Same-branch sales were down 4%. New single-family installation sales were down due to fewer selling days and weather. Multifamily sales on a same-branch basis decreased 5% following a strong year-over-year comparison in the prior year. Commercial sales in the installation segment declined modestly, with strong heavy commercial sales driven by data center construction. During the first quarter, the company completed acquisitions: a South Carolina-based installer with nearly $6 million annual revenue and a Wisconsin-based installer with nearly $4 million annual revenue. The company targets over $100 million in annual revenue from acquisitions in 2025.

• Expected second-quarter 2025 amortization expense of approximately $10 million and full-year 2025 expense of approximately $40 million. - Effective tax rate expected to be 25% to 27% for the full year ending 12/31/2025. - Target to acquire over $100 million in annual revenue in 2025 through acquisitions.

• Uncertainty around tariffs, inflation, and consumer sentiment influencing market conditions. - Weather and market conditions impacting volumes, such as the effect of California fires and severe weather on single-family sales in the first quarter.

Q: How is the labor force managed in the pressured demand environment?

A: Installed labor fluctuates with job volume; held during temporary weather events. Salesforce not adjusted unless prolonged volume headwinds. G&A labor optimized with focus on reduction.

Q: How to view different end markets like production, regional, local, and custom in single family?

A: Regional/local builder business slightly better than production/public builder business. Analysis of orders and backlog with public builders shows minus 3% on single family side this quarter.

Q: Talk through near-term cadence of volume progression, especially on resi side and commercial blend?

A: Expect headwinds in residential and commercial throughout 2025. Heavy commercial performing well but light commercial weak. Volumes expected to be lower with continued market challenges.

Q: Thoughts on working capital and free cash flow trends?

A: Working capital improves in volume-challenged environment, expected to continue generating good free cash flow.

Q: Change in M&A appetite given challenged demand?

A: No change in M&A appetite; M&A remains priority though lumpy.

Q: Price mix and risks to fiberglass pricing?

A: Price mix held positive with carryover from last year. Fiberglass pricing expected to be benign, but risks exist if demand headwinds continue.

Q: SG&A trends and cost optimization?

A: SG&A expected to have inflationary pressures but focused on optimizing with $15 million targeted savings starting in third quarter.

Q: Supply and branch consolidation?

A: Material supply normalized, focusing on branch consolidation to optimize footprint.