Installed Building Products, Inc.

Hello, and welcome to the Installed Building Products Fiscal 2021 Second Quarter Financial Results Conference Call and Webcast. At this time, all participants are in listen-only mode. If anyone should require operator assistance, please press star zero on your telephone keypad. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Jason Neiswanger, Senior Vice President of Finance and Investor Relations. Please go ahead, sir.

Good morning, and welcome to installed building products second quarter 2021 conference call. Earlier today, we issued a press release on our financial results for the second quarter, which can be found in the investor relations section of our website. 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 and material constraints, our ability to increase selling prices, 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 and multifamily businesses, 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, intend, 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, any recurrence of COVID-19, including through any new variant strains of the virus, and the related surges in positive COVID-19 cases. The adverse impact of the COVID-19 crisis on our business and financial results, our supply chain, 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 31st, 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 statements 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 the 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, and 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, IBP's CFO, who will discuss our financial results and capital position in more detail before we take your questions. IBP delivered another quarter of record revenues and profitability. Our strong operating and financial performance are a testament to the continued hard work of our team members and the valuable services we provide our nationwide customers each day. I am encouraged by the strengthening demand that occurred during the second quarter as sales increased 11.7% from the first quarter of 2021, and we were able to manage through continued supply chain challenges and mostly offset the pandemic's disruptive and inflationary effects on our business. On a same branch basis, volume growth increased 17% from the prior year period, demonstrating the high demand we are experiencing for our installation services across many of our end markets. Most importantly, we achieved record quarterly profitability as gap net income increased nearly 47% to $1.26 per diluted share, and our adjusted EBITDA increased almost 24% to $78 million. We continue to attract, develop, and retain strong team members as a result of the entrepreneurial and empowering culture we have created, and I am proud to report labor trends remain extremely strong across IVP's platform. To everyone at the company, thank you for your continued contributions and dedication to IVP. So looking at our second quarter results in more detail, we continue to overcome several unique dynamics underway across our markets. As expected, the supply chain for many of the building products and materials we install remain constrained during the second quarter. We anticipate the supply chain challenges will continue for the foreseeable future. Our asset-light business model enables strong long-term growth, and we continue to benefit from the growth in our core single-family and multifamily markets, our national scale, buying advantage, and our strategic focus on product and market and geographic diversification. Overall trends throughout the U.S. housing industry remained robust during the second quarter of 2021 as total residential completions increased by 12.2% year over year, led by a 23% increase in multifamily completions and a 7.6% 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. The focus on entry level homes from high volume production builders continued to bolster activity at IBP. Our same branch single family sales grew by 19% during the 2021 second quarter. Notably, price mix trends improved sequentially from the first quarter as selling price increases partially offset the mix shift within the single family end market. A continuation of higher selling prices relative to prior year periods combined with the return to normalized end market mix of revenue is expected to further improve price mix through the back half of 2021. We anticipate that the housing industry's growing focus on the construction of entry level homes is expected to help improve affordability in the future and will continue to provide support to our core single family end market. In addition, Based on the US Census Bureau housing data, the amount of authorized but not started single family units at the end of June 2021 was up over 50% from the end of last year and represents the highest level in nearly 15 years. We believe the significant increase in authorized but not started single family units is indicative of a strong backlog for single family home construction and continued demand for our installation services. Turning to our multifamily end market, Demand remains strong within this segment of the housing industry as U.S. multifamily home completions rose by 23% over the prior year period and nearly 30% above the first quarter of 2021 results. Although our multifamily unit sales grew 14.1% in 2Q21, the continued disruption within the material supply chain limited our same branch sales to 3.5% over the prior year period. The COVID-19 pandemic combined with material supply chain issues also continue to impact sales within our commercial markets. Our commercial and market sales increased 15% for the second quarter as a result of recent acquisitions while same branch sales declined 5.3%. The reduced commercial sales volumes have impacted efficiencies in our large commercial and market impacting gross profit. As a result, we have started to realign our cost basis and improve efficiencies within our various large commercial markets. Despite recent trends within this market, bidding activity remains strong. Project bid acceptance continues to improve, which we believe supports a recovery in this end market and strengthens our expectations for stabilizing trends in the second half of 2021. As of the end of the second quarter 2021, our large commercial backlog, which consists of projects forecast to be completed 12 months or more in the future, exceeds $100 million, up from $90 million in the first quarter of 2021. We continue to believe our large commercial end market has reached the inflection point and look to revenue improvement in the back half of 2021. The large commercial construction market continues to represent a significant long-term growth opportunity for IBP, and we remain focused on improving our operational efficiency while expanding our exposure within compelling commercial markets across the U.S. Looking at our acquisition strategy in more detail, we continue to prioritize profitable growth through our proven strategy of acquiring well-run installers of insulation and complimentary building products. During the 2021 second quarter, we acquired a Colorado Springs-based installer of drywall, framing, ceiling tiles, and fire stoppings and insulation for commercial customers with annual revenue of approximately $11.5 million. We also acquired a Louisiana-based provider of glass and mirror installation services to residential and commercial customers with annual revenues of approximately $2.6 million. The five acquisitions we have completed to date in 2021 represent approximately $79 million of annual revenues. Based on our current acquisition opportunities, we feel confident that we will exceed the targeted $100 million of acquired revenue for 2021. More broadly, our current outlook for the remainder of the year remains encouraging. The strong housing trends for 2021 are in part driven by the generational shift amongst millennials creating demand for entry-level housing. In addition, although the number of existing homes for sale in the U.S. has increased slightly in the past few months, supply remains tight, representing less than three-month sales. We believe this supports continued demand for move-up and custom homes. We anticipate the installation supply chain to remain constrained for the remainder of the year despite two fiberglass facilities coming back online during the second quarter and recently announced manufacturing capacity expansion efforts at one of our main fiberglass suppliers. In addition, materials needed for spray foam applications continue to be in short supply after chemical processing facilities went offline during the February winter storms and demand for spray foam components has been high in other business sectors. We expect this trend will continue throughout the remainder of 2021. As we stated last quarter, manufacturers, including large fiberglass suppliers, announced price increases that went into effect in April, and more recently, an additional fiberglass price increase occurred in June. In the current demand environment, we are performing well through the material inflation environment in realizing selling price increases with our customers. As the demand for housing continues to rise, we anticipate the favorable pricing environment to continue. With access to labor, a strong position with our customers and suppliers, and healthy housing industry demand dynamics, we believe we are well positioned to navigate the 2021 inflationary environment better than any other period in our history. It is also important to note that insulation represents a small portion of the total cost to build a home, which we believe allows for greater flexibility to maintain margins by prudently increasing prices with our customers. With this overview, I would like to turn the call over to Michael to provide more details of our second quarter results.