Installed Building Products, Inc.

on your telephone keypad. Please note, this conference is being recorded. At this time, I'll turn the conference over to Jason Niswonger, Senior Vice President, Finance and Investor Relations. Jason, you may now begin.

Good morning, and welcome to Install Building Products, first quarter 2021 conference call. Earlier today, we issued a press release on our financial results for the first quarter, which can be found in the Investor Relations section on our websites. On today's call, management's prepared remarks and answers to your questions may contain forward-looking statements within the meaning of the federal securities laws. These forward-looking statements include statements with respect to the housing market and the commercial market, industry conditions and trends, our financial and business model, payment of a quarterly cash dividend, labor trends, our efforts to manage material inflation, supply chain constraints, our ability to increase selling prices, the demand for our services and product offerings, the impact of the COVID-19 crisis on our business and end markets, expansion of our national footprint, products and end markets, our expectations for our end markets, including our large commercial business and multifamily business, our ability to strengthen our market position, our ability to pursue and integrate value-enhancing acquisitions and the expected amount of acquired revenue, our diversification efforts, our growth rates and ability to improve sales and profitability, the impact of the COVID-19 crisis on our financial results, and expectations for demand for our services and our earnings in 2021. Forward-looking statements may generally be identified by the use of words such as anticipate, believe, expect, intends, plan, and will, or in each case, their negative or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Any forward-looking statement made by management during this call is not a guarantee of future performance, and actual results may differ materially from those expressed in or suggested by the forward-looking statements as a result of various factors, including without limitation the duration, effect, and severity of the COVID-19 crisis, the adverse impact of the COVID-19 crisis on our business and financial results, the economy, and the markets we serve, general economic and industry conditions, the material price and supply environment, the timing of increases in our selling prices, the risk that the company may reduce, suspend, or eliminate dividend payments in the future, and the factors discussed in the risk factors section of the company's annual report on Form 10-K for the year ended December 31, 2020, as the same may be updated from time to time in subsequent filings with the Securities and Exchange Commission. Any forward-looking statement made by management on this call speaks only as of the date hereof. New risks and uncertainties come up from time to time, and it is impossible for the company to predict these events or their effect. The company has no obligation and does not intend to update any forward-looking statement after the date hereof, except as required by federal securities laws. In addition, management uses certain non-GAAP performance measures on this call, such as adjusted EBITDA, adjusted EBITDA margin, adjusted net income, and adjusted net income per diluted share, adjusted gross profit, adjusted gross profit margin, and adjusted selling and administrative expense. You can find a reconciliation of such measures to their nearest GAAP equivalent in the company's earnings release and additional reconciliation for adjusted EBITDA for earlier fiscal years in our investor presentation, which are available on our website. This morning's conference call is hosted by Jeff Edwards, our Chairman and Chief Executive Officer, and Michael Miller, our Chief Financial Officer. I will now turn the call over to Jeff. Thanks, Jason.

Good morning to everyone joining us on today's call. As usual, I will start the call with some highlights on the quarter and then turn the call over to Michael Miller, IVP's CFO, who will discuss our results in capital position in more detail before we take your questions. 2021 is off to a robust start and IBP produced record first quarter results including record sales, net income, and EBITDA. I'm especially pleased with our first quarter performance as we were able to overcome meaningful operating challenges that impacted IBP like many of the trades serving the housing and commercial construction markets. I believe our success results from the resiliency of our business model. the benefits of our product and market geographic diversification strategies, and the continued hard work of our team members nationwide. I want to start my prepared remarks by saying thank you to all of our employees throughout our branch operations and at our headquarters in Columbus. I am humbled by the continued dedication, resiliency, and motivation our team demonstrates day after day, which is especially true over the past 12 months. The strength of our team members is a direct result of the entrepreneurial and empowering culture we have created. Overall labor trends remain strong, and of all the challenges we faced during the first quarter, labor was not one of them. To everyone at IVP, thank you for your commitment, your hard work, and a tough job always done well. So looking at our record first quarter results in more detail, several unique macro-level dynamics occurred during the quarter. We successfully overcame significant supply chain constraints during the quarter and experienced lost production days as a result of the February winter storms. We believe these issues are largely transitory in nature, and our business model continues to benefit from growth in our core single family and multifamily markets, our national scale, and our strategies focused on product and market and geographic diversification. Total U.S. residential completions growth was strong in the first quarter of 2021, increasing by 11.4% year-over-year, led by a 14.1% increase in single-family completions. Single-family housing demand continues to benefit from low mortgage rates and favorable demographics that have driven an increase in demand for entry-level housing. We believe these trends will continue, supporting further growth as the industry approaches stabilization in the years to come. While this activity helped drive our same branch volume growth by 10%, there was a clear shift of sales to higher volume production builders and entry level homes compared to last year, consistent with the fourth quarter of 2020. This shift within the single family end market yielded a lower average insulation selling price than what is typical for a move up or custom home. As expected, this dynamic negatively impacted our Q1 price mix result. Given consumer demand for entry level homes, We believe this end market shift driving relatively higher volume at relatively lower average selling prices may continue over the near term, but we anticipate that our selling price increases will offset the price mix headwind as the year progresses. Beyond the mix shift that has been evident throughout the industry, rising demand-driven backlogs and weather disruptions during the first quarter of 2021 were impactful on our same-brand sales growth rate. While the increasing lag between housing starts and completions has previously been noted within the industry, the February 2021 winter storms, most notably in Texas and Colorado, caused additional production delays. Although our operations are geographically diverse, we note that Texas accounts for approximately 12% of our business. We estimate lost production associated with the winter storms reduced first quarter revenue by $3 million to $3.5 million. and impacted gross profit and adjusted EBITDA by $1 million to $1.5 million. Strong multifamily sales helped support total sales during the quarter. For the 2021 first quarter, our multifamily revenue increased nearly 19% compared to prior year quarter and on a same branch basis was up nearly 7%. We continue to perform well in the multifamily end market as a result of of our enhanced sales strategy as we are growing the end market in locations that have previously been over-indexed to single-family construction. The COVID-19 pandemic, combined with material supply chain issues, had a significant impact on sales within our commercial markets. Our commercial construction end market increased 2.3% for the quarter as a result of recent acquisitions, while same-branch sales within this end market declined 14.5%. The primary driver of this decline is the large commercial portion of the end market, which declined 13% on a same-branch basis. However, bidding activity has continued to be strong in this end market, and we are starting to see project bid acceptance and a recovery in this end market, which strengthens our expectations for second half of 2021 improvement in revenue. We continue to believe the large commercial construction market represents a significant growth opportunity for IVP and despite the near-term challenges within this market, we remain focused on expanding our exposure within compelling commercial markets across the U.S. Turning to our acquisition strategy, we continue to prioritize profitable growth through our proven strategy of acquiring well-run installers of insulation and complementary building products. During the 2021 first quarter, we acquired a Washington-based provider of insulation installation services to residential customers throughout Washington, Oregon, and Idaho, with annual revenue over $34 million. Since the first quarter ended, we have completed two additional acquisitions, a Southern California-based commercial insulation, fireproofing, and sealing system installer, and a Colorado Springs-based installer of fiberglass and spray foam insulation to residential and multifamily customers. The three acquisitions we have completed to date, 2021, represent approximately $65 million of annual revenues. we feel confident that we will exceed the targeted $100 million of acquired revenue for 2021. While the February winter storms impacted our sales during the quarter, we are encouraged by the housing trends for 2021 as a generational shift in demand amongst millennials is increasing the demand for entry-level housing and the supply of existing homes remains tight, supporting the demand for move-up and custom homes. Finally, I'd like to address the material supply environment. During the first quarter, we experienced unprecedented material supply shortages for a variety of products used across our installation services. At the start of the year, the installation supply chain was already tight, and the February winter storms temporarily worsened the environment. Facilities at two of our main fiberglass installation suppliers went temporarily offline, forcing us to buy insulation through distributors as well as local retailers to meet customer demands. In addition, materials needed for spray foam applications were in short supply after the storms, as chemical processing facilities went offline. While our ability to source fiberglass and spray foam had the most significant impact on our financial performance during the quarter, it is important to note that we saw constraints across many of the materials and supplies we used for our installation services. As a result, we estimate the supply chain disruption impacted first quarter gross profit and adjusted EBITDA by at least $2 million and affected our ability to complete spray foam installation work with certain customers, in some instances turning away work due to a lack of spray foam materials. Supply chain efficiencies have steadily improved during April and into May. relative to the first quarter of 2021, but we expect the supply chain to be tight over the remainder of the year for many of the materials and products used throughout our installation work. In addition, manufacturers, including large fiberglass suppliers, announced additional price increases that went into effect in April, and more recently, an additional fiberglass price increase for June. In the current demand environment, we are performing well in realizing selling price increases with our customers in reaction to materials inflation. As the demand for housing continues to rise, we anticipate our favorable pricing environment to continue. With our availability of labor, our strong position with our customers and suppliers, and strong demand dynamics within the housing industry, we believe we are well positioned to navigate the inflationary environment in 2021. It is also important to note that insulation represents a small portion of the total cost to build a home, which we believe provides us greater flexibility to increase prices and maintain margins. Strong demand, increasing material availability, and a robust pricing environment has led to accelerating momentum in our business. We ended the first quarter with the highest monthly sales in our history in March, as sales for the month increased 16% year-over-year on a day's adjusted basis. Positive momentum has continued, and the second quarter is off to a strong start. Adjusted for the branches closed due to COVID restrictions in April of 2020, April 2021 sales growth is approximately 24% compared to the prior year. As mentioned in previous calls, we also anticipate trends within our large commercial business will improve later this year as economies reopen and the impacts of the COVID-19 pandemic subside. As I stated, our bidding activity on large commercial construction projects has been strong and backlog has increased to over $90 million at the end of first quarter. We expect 2021 will be another strong year of sales and earnings growth for IDP, and I look forward to sharing our continued success with investors as the year progresses. With this overview, I would now like to turn the call over to Michael to provide more details on our first quarter results.