Installed Building Products, Inc.

Greetings. Welcome to the Installed Building Products Fiscal 2021 Third Quarter Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded. I will now turn the conference over to your host, Jason Neismonger. You may begin.

Good morning, and welcome to Installed Building Products' third quarter 2021 conference call. Earlier today, we issued a press release on our financial results for the third 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 about future expectations, anticipation, beliefs, estimates, forecasts, plans, and prospects. These forward-looking statements are based on management's current expectations and involve risks and uncertainties. Any forward-looking statement made by management during this call is not a guarantee of future performance, and actual results may differ materially as a result of various factors, including without limitation the adverse impact of the COVID-19 crisis, general economic and industry conditions, the material price and supply environment, the timing of increases in our selling prices, and the factors discussed in the risk factors section of the company's annual report on Form 10-K, as may be updated from time to time in our SEC filings. Any forward-looking statements speak only as of the date hereof. The company undertakes no duty or obligation to update any forward-looking statements as a result of new information or future events. 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 for 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 a 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, IDP CFO, who will discuss our financial results and capital position in more detail before we take your questions. I'm proud to report another quarter of record revenues and strong profitability as our team members remain focused on serving our customers and strategically growing our business. During the third quarter, we experienced double-digit year-over-year sales growth across our single-family, multifamily, and commercial end markets, reflecting robust demand for our installation services, the benefit of recent price increases, and the contribution of acquired residential and commercial revenue. Third quarter sales increased 21.2% from the third quarter of 2020. Price mix increased 7.2%, which is the highest increase we have experienced in six quarters. This not only reflects the underlying demand for our installation services, but also the hard work of our local branches to keep our pricing aligned with the value we offer our customers. On the same branch basis, volume growth increased nearly 5% from the prior year, demonstrating the high demand we are experiencing for our installation services across our end markets. Importantly, we achieved record third-quarter profitability as GAAP net income increased 24% to $1.18 per diluted share, and our adjusted EBITDA increased 18% to a quarterly record of $78.1 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 IDP's platform. To everyone at the company, thank you for your continued contributions and dedication to IDP. In addition, I am proud to announce that we issued our inaugural Environmental, Social, and Governance Report on October 18th. Our primary insulation installation services are a critical component to improve energy efficiency in residential and commercial structures. Within our report, we've highlighted the environmental benefits of insulation as well as our internal initiatives on topics such as health and safety, greenhouse gas emissions, and diversity and equity and inclusion. We are dedicated to doing our part to improve the world around us by implementing critical ESG initiatives. As our ESG program expands, I'm excited by the opportunities we have to create additional value for our employees, communities, customers, vendors, and shareholders. In the third quarter, we continue to navigate several unique dynamics that exist across our markets. As expected, the supply chain for many of the building products and materials we install remain constrained during the third quarter. We anticipate that supply chain challenges will continue for the foreseeable future, but our asset-light business model enables us to remain flexible and generate strong cash flow in spite of continued disruptions. In addition, we continue to benefit from our national scale, material buying advantage, and strategic plans aimed at diversifying and expanding our products and markets in geographic presence. Overall, trends throughout the U.S. housing industry remain robust. We believe the recent decline in residential completions is attributable to increased cycle times rather than softening market demand, as according to the U.S. Census Bureau housing data, the backlog in units authorized but not started is up 42% from the end of last year, and units under construction continue to remain near cycle highs. During the third quarter of 2021, total residential completions decreased by 1.9% year-over-year. as a 2% increase in single-family completions was offset by a 12.1% decrease in multifamily 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. Our same-branch volume growth increased by nearly 5% during the 2021 third quarter, demonstrating strong demand across our core single-family end markets. Notably, price mix trends have improved sequentially throughout 2021, and for the third quarter, price mix increased 7.2% over the prior year period. Continued realization of higher selling price increases combined with comparable mix of revenue relative to the prior year contributed to the positive price mix trend in the quarter. Turning to our multifamily end market, demand also remains strong within this segment of the housing industry and across many of our markets. As a result, our multifamily sales grew 18.2% during the 2021 third quarter, including a 10.9% increase on the same branch basis. Our commercial markets continue to be impacted by COVID-19 pandemic, less consistent material availability relative to pre-pandemic periods, and supply chain disruptions. Our commercial end market sales increased 16.3% for the third quarter was driven by recent acquisitions as same branch sales declined 5.6%. Large commercial same branch sales decreased modestly by 1.1% on a year-over-year basis as a result of timing related to the completion of projects in our large commercial backlog of business. Bidding activity remains strong, and project bid acceptance continues to improve, which we believe supports a continued improvement in this end market. The large commercial construction market continues to represent a significant long-term growth opportunity for IDP, 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 acquiring well-run installers of insulation and complementary building products. I'm pleased to report that as of today's call, we have completed nine acquisitions representing over $130 million of annual revenues, surpassing our $100 million of acquired revenue target for this year. During the 2021 third quarter, we acquired a Utah-based installer of fiberglass and garage doors for residential and multifamily customers with annual revenue of approximately $25 million. We also acquired a Pennsylvania-based installer of insulation and gutter services to residential and commercial customers with annual revenue of approximately $4 million during the quarter. Since the third quarter ended, we have announced two additional acquisitions, an Oregon-based installer of insulation, gutters, windows, and siding, and a Texas-based installer of glass, mirrors, and related products. Our acquisition pipeline remains robust, and we expect to be active through the end of the year. With less than two months left in 2021, we remain encouraged by our strong year-to-date performance and compelling outlook. According to the U.S. Census Bureau, housing starts are up almost 20% this year, which we believe supports continued demand for our install services. We anticipate the supply chain for many of our products will be constrained for the remainder of the year and into 2022. In addition, materials needed for spray foam applications continue to be in short supply after chemical processing facilities went offline during the February 2021 winter storms and additional supply chain challenges impacted certain suppliers throughout the year. The supply chain issues were compounded by high demand for spray chrome components in other industries. As many of you know, insulation manufacturers, including large fiberglass suppliers, announced price increases that went into effect throughout the summer and as recently as September of this year. Additional fiberglass price increases are set to take effect in December and into the beginning of next year. With access to labor, a strong position with our customers and suppliers, a healthy housing industry, demand dynamics. We believe we are well positioned to navigate the current inflationary environment better than any other period in our history. It's also important to note that although prices have been rising, insulation represents a small portion of the total cost to build a home, which we believe allows us greater flexibility to maintain margins by prudently increasing prices with our customers. I'm pleased with our third quarter and year-to-date performance as our team continues to work tirelessly to respond to customer needs and support the growth of our business. As we enter the fourth quarter, we believe 2021 will be another record year for IBP, and I'm excited by the opportunities ahead in 2022. So with this overview, I'd like to turn the call over to Michael to provide more detail on our third quarter results. Thank you, Jeff, and good morning, everyone.