Business Wire | Nov 5, 2020 07:00AM EST

Installed Building Products Reports Record Third Quarter 2020 Results

Nov. 05, 2020

COLUMBUS, Ohio--(BUSINESS WIRE)--Nov. 05, 2020--Installed Building Products, Inc. (the "Company" or "IBP") (NYSE:IBP), an industry-leading installer of insulation and complementary building products, announced today results for the third quarter ended September 30, 2020.

Third Quarter 2020 Highlights (Comparisons are to Prior Year Period)

* Net revenue increased 6.1% to a record $420.5 million * Residential sales increased 6.2% * Large commercial sales increased 2.0% * Net income increased 32.4% to a record $28.1 million * Adjusted EBITDA* increased 18.4% to a record $66.2 million * Net income per diluted share increased 33.8% to $0.95 * Adjusted net income per diluted share* increased 22.2% to $1.21 * Net cash provided by operating activities for the nine-months ended September 30, 2020, increased 34.5% to $143.3 million * At September 30, 2020, IBP had $268.7 million in cash and cash equivalents, and investments, with nothing drawn on the existing $200 million revolving line of credit * In August 2020, acquired Storm Master Gutters, a New Jersey based provider of gutter installation services to residential and multi-family customers throughout the mid-Atlantic, with annual revenue of approximately $20.0 million * In August 2020, acquired North Charleston, SC and Pooler, GA branches from Energy One America, providers of spray foam, fiberglass, and air barrier installation services to residential, multi-family and commercial customers, with combined annual revenue of approximately $22.0 million

Recent Developments

* In October 2020, acquired Insulation Contractors/Magellan Insulation - known within its local markets as Icon - a Washington based provider of insulation, waterproofing, and firestopping installation services to commercial and multi-family customers throughout the Pacific Northwest, with annual revenue of approximately $26.0 million * In October 2020, acquired Norkote a Washington based installer of specialty coatings for fire protection, insulation, and acoustics in commercial and industrial applications throughout the Pacific Northwest, with annual revenue of approximately $10.0 million

"2020 is shaping up to be a record year reflecting the success of our business model, positive end-market fundamentals, and the dedication and hard work of our employees," stated Jeff Edwards, Chairman and Chief Executive Officer. "I am encouraged with IBP's strong operating and financial performance, given the unprecedented economic and social effects the COVID-19 pandemic has caused throughout 2020. In addition, I am excited by the long-term opportunities within our residential and commercial markets as a result of our ongoing geographic, end-market, and end-product diversification strategies."

"We believe we are well positioned for 2021 to be another strong year for IBP, supported by favorable demand trends within the single-family housing market. While we expect near-term challenges will occur within the large commercial end-market, we believe long-term fundamentals remain intact and diversifying our end-market exposure continues to be an important component of our growth strategy. Our strong operating cash flow and solid balance sheet provides us with significant flexibility to navigate various end-market cycles, providing strong cash flow to fund our compelling acquisition strategy. With approximately $94 million of revenue acquired year to date, 2020 is shaping up to be another strong year of acquisition growth and we continue to have a robust pipeline of acquisition opportunities across multiple geographies, products and end markets," concluded Mr. Edwards.

Third Quarter 2020 Results Overview

For the third quarter of 2020, net revenue was a record $420.5 million, an increase of 6.1% from $396.4 million in the third quarter of 2019. On a same branch basis, net revenue improved 1.7% from the prior year quarter. Residential same branch sales growth was 1.6% in the quarter, attributable to price gains and end-market and product mix, compared to an increase in total completions of 8.9%. Given the timing of completions and when we perform our install work, we believe it is useful to look at our performance over multiple quarters. For the nine months ended September 30, 2020, residential same branch sales grew 4.4% compared to an increase in total completions of 2.2%. Our large commercial construction end-market increased 2.0% for the third quarter of 2020.

Gross profit improved 11.5% to a record $131.6 million from $118.1 million in the prior year quarter. Adjusted gross profit* as a percent of total revenue was 31.4% which adjusts for the Company's share-based compensation expense and employee-related expenses associated with the COVID-19 pandemic, compared to 29.8% for the same period last year. Selling and administrative expense, as a percent of net revenue, was 18.8% consistent with the prior year quarter. Adjusted selling and administrative expense*, as a percent of net revenue, was 18.0% compared to 18.2% in the prior year quarter.

Net income was a record $28.1 million, or $0.95 per diluted share, compared to $21.2 million, or $0.71 per diluted share in the prior year quarter. Adjusted net income* was a record $35.9 million, or $1.21 per diluted share, compared to $29.7 million, or $0.99 per diluted share in the prior year quarter. Adjusted net income adjusts for the impact of non-core items in both periods, including an addback for non-cash amortization expense related to acquisitions.

Adjusted EBITDA* was a record $66.2 million, an 18.4% increase from $55.9 million in the prior year quarter, largely due to higher sales and improved gross profit margin compared to the prior year quarter.

Conference Call and Webcast

The Company will host a conference call and webcast on November 5, 2020 at 10:00 a.m. Eastern Time to discuss these results. To participate in the call, please dial 800-667-9916 (domestic) or 303-223-4361 (international). The live webcast will be available at www.installedbuildingproducts.com in the investor relations section. A replay of the conference call will be available through December 5, 2020, by dialing 844-512-2921 (domestic) or 412-317-6671 (international) and entering the passcode 21971307.

About Installed Building Products

Installed Building Products, Inc. is one of the nation's largest new residential insulation installers and is a diversified installer of complementary building products, including 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 manages all aspects of the installation process for its customers, from direct purchase and receipt of materials from national manufacturers to its timely supply of materials to job sites and quality installation. The Company offers its portfolio of services for new and existing single-family and multi-family residential and commercial building projects from its national network of over 180 branch locations.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the federal securities laws, including with respect to the housing market and the commercial market, our financial and business model, 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 and end markets, diversification of our products, our ability to grow and strengthen our market position, our ability to pursue and integrate value-enhancing acquisitions, our 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 2020 and 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 statements that we make herein and in any future reports and statements are not guarantees of future performance, and actual results may differ materially from those expressed in or suggested by such 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 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 for the year ended December 31, 2019, as the same may be updated from time to time in our subsequent filings with the Securities and Exchange Commission. Any forward-looking statement made by the Company in this press release speaks only as of the date hereof. New risks and uncertainties arise from time to time, and it is impossible for the Company to predict these events or how they may affect it. 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.

*Use of Non-GAAP Financial Measures

In addition to the financial measures prepared in accordance with U.S. generally accepted accounting principles ("GAAP"), this press release contains the non-GAAP financial measures of Adjusted EBITDA, Adjusted EBITDA margin (i.e., Adjusted EBITDA divided by net revenue), Adjusted Net Income, Adjusted Net Income per diluted share, Adjusted Gross Profit and Adjusted Selling and Administrative expense. The reasons for the use of these measures, reconciliations of Adjusted EBITDA, Adjusted Net Income, Adjusted Net Income per diluted share, Adjusted Gross Profit, and Adjusted Selling and Administrative expense to the most directly comparable GAAP measures and other information relating to these measures are included below following the unaudited condensed consolidated financial statements. Non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as a substitute for IBP's financial results prepared in accordance with GAAP.

INSTALLED BUILDING PRODUCTS, INC.CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME(unaudited, in thousands, except share and per share amounts) Three months ended September Nine months ended September 30, 30,

2020 2019 2020 2019

Net revenue $ 420,486 $ 396,449 $ 1,211,756 $ 1,110,398

Cost of sales 288,839 278,362 836,710 795,616

Gross profit 131,647 118,087 375,046 314,782

OperatingexpensesSelling 20,843 19,398 60,209 54,431

Administrative 58,240 55,098 177,495 156,022

Amortization 6,974 6,156 20,378 18,065

Operating 45,590 37,435 116,964 86,264 incomeOther expenseInterest 7,564 8,458 22,679 19,783 expense, netOther 176 155 305 381

Income before 37,850 28,822 93,980 66,100 income taxesIncome tax 9,773 7,610 24,578 17,135 provisionNet income $ 28,077 $ 21,212 $ 69,402 $ 48,965

Othercomprehensiveincome (loss),net of tax:Unrealized gain(loss) on cashflow hedge, netof tax(provision)benefit of($408) and $575for the threemonths ended 1,176 (1,726 ) (4,582 ) (8,021 )September 30,2020 and 2019,respectively,and $1,582 and$2,676 for thenine monthsended September30, 2020 and2019,respectivelyComprehensive $ 29,253 $ 19,486 $ 64,820 $ 40,944 income Basic net $ 0.95 $ 0.71 $ 2.35 $ 1.65 income pershareDiluted net $ 0.95 $ 0.71 $ 2.33 $ 1.64 income pershareWeightedaverage sharesoutstanding:Basic 29,478,816 29,785,548 29,549,460 29,741,555

Diluted 29,698,028 29,877,056 29,737,716 29,839,873

INSTALLED BUILDING PRODUCTS, INC.CONDENSED CONSOLIDATED BALANCE SHEETS(unaudited, in thousands, except share and per share amounts)September 30,

December 31,

2020

2019

ASSETSCurrent assetsCash and cash equivalents$

267,471

$

177,889

Investments1,220

37,961

Accounts receivable (less allowance for credit losses of $9,366 and $6,878 at September 30, 2020 and December 31, 2019, respectively)258,940

244,519

Inventories70,218

74,606

Other current assets37,607

46,974

Total current assets635,456

581,949

Property and equipment, net104,900

106,410

Operating lease right-of-use assets50,873

45,691

Goodwill206,782

195,652

Intangibles, net155,398

153,562

Other non-current assets12,036

16,215

Total assets$

1,165,445

$

1,099,479

LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilitiesCurrent maturities of long-term debt$

24,156

$

24,164

Current maturities of operating lease obligations17,875

15,459

Current maturities of finance lease obligations2,268

2,747

Accounts payable86,898

98,871

Accrued compensation43,310

33,636

Other current liabilities47,734

39,272

Total current liabilities222,241

214,149

Long-term debt544,276

545,031

Operating lease obligations32,431

29,785

Finance lease obligations2,747

3,597

Deferred income taxes3,704

9,175

Other long-term liabilities55,859

47,711

Total liabilities861,258

849,448

Commitments and contingenciesStockholders' equityPreferred Stock; $0.01 par value: 5,000,000 authorized and 0 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively-

-

Common stock; $0.01 par value: 100,000,000 authorized, 33,127,310 and 32,871,504 issued and 29,800,535 and 30,016,340 shares outstanding at September 30, 2020 and December 31, 2019, respectively331

329

Additional paid in capital197,486

190,230

Retained earnings241,583

173,371

Treasury stock; at cost: 3,326,775 and 2,855,164 shares at September 30, 2020 and December 31, 2019, respectively(123,488

)

(106,756

)

Accumulated other comprehensive loss(11,725

)

(7,143

)

Total stockholders' equity304,187

250,031

Total liabilities and stockholders' equity$

1,165,445

$

1,099,479

INSTALLED BUILDING PRODUCTS, INC.CONDENSED CONSOLIDATED BALANCE SHEETS(unaudited, in thousands, except share and per share amounts) September 30, December 31,

2020 2019

ASSETSCurrent assetsCash and cash equivalents $ 267,471 $ 177,889

Investments 1,220 37,961

Accounts receivable (less allowance for credit 258,940 244,519 losses of $9,366 and $6,878 at September 30,2020 and December 31, 2019, respectively)Inventories 70,218 74,606

Other current assets 37,607 46,974

Total current assets 635,456 581,949

Property and equipment, net 104,900 106,410

Operating lease right-of-use assets 50,873 45,691

Goodwill 206,782 195,652

Intangibles, net 155,398 153,562

Other non-current assets 12,036 16,215

Total assets $ 1,165,445 $ 1,099,479

LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilitiesCurrent maturities of long-term debt $ 24,156 $ 24,164

Current maturities of operating lease 17,875 15,459 obligationsCurrent maturities of finance lease obligations 2,268 2,747

Accounts payable 86,898 98,871

Accrued compensation 43,310 33,636

Other current liabilities 47,734 39,272

Total current liabilities 222,241 214,149

Long-term debt 544,276 545,031

Operating lease obligations 32,431 29,785

Finance lease obligations 2,747 3,597

Deferred income taxes 3,704 9,175

Other long-term liabilities 55,859 47,711

Total liabilities 861,258 849,448

Commitments and contingenciesStockholders' equityPreferred Stock; $0.01 par value: 5,000,000authorized and 0 shares issued and outstanding - - at September 30, 2020 and December 31, 2019,respectivelyCommon stock; $0.01 par value: 100,000,000authorized, 33,127,310 and 32,871,504 issued and 331 329 29,800,535 and 30,016,340 shares outstanding atSeptember 30, 2020 and December 31, 2019,respectivelyAdditional paid in capital 197,486 190,230

Retained earnings 241,583 173,371

Treasury stock; at cost: 3,326,775 and 2,855,164 (123,488 ) (106,756 )shares at September 30, 2020 and December 31,2019, respectivelyAccumulated other comprehensive loss (11,725 ) (7,143 )

Total stockholders' equity 304,187 250,031

Total liabilities and stockholders' equity $ 1,165,445 $ 1,099,479

INSTALLED BUILDING PRODUCTS, INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(unaudited, in thousands)Nine months ended September 30,

2020

2019

Cash flows from operating activitiesNet income$

69,402

$

48,965

Adjustments to reconcile net income to net cash provided by operating activitiesDepreciation and amortization of property and equipment30,850

28,575

Amortization of operating lease right-of-use assets13,281

11,597

Amortization of intangibles20,378

18,065

Amortization of deferred financing costs and debt discount1,000

845

Provision for credit losses3,839

3,173

Write-off of debt issuance costs-

2,774

Gain on sale of property and equipment(592

)

(69

)

Noncash stock compensation8,050

6,442

Deferred income taxes(3,405

)

-

Amortization of terminated interest rate swap508

-

Changes in assets and liabilities, excluding effects of acquisitionsAccounts receivable(9,624

)

(29,144

)

Inventories5,983

(852

)

Other assets9,027

(4,845

)

Accounts payable(14,746

)

2,535

Income taxes receivable/payable14,192

13,487

Other liabilities(4,259

)

4,969

Net cash provided by operating activities143,884

106,517

Cash flows from investing activitiesPurchases of investments(776

)

(17,352

)

Maturities of short term investments37,473

22,560

Purchases of property and equipment(25,515

)

(37,267

)

Acquisitions of businesses(38,825

)

(24,740

)

Proceeds from sale of property and equipment828

563

Other(2,662

)

(1,795

)

Net cash used in investing activities(29,477

)

(58,031

)

Cash flows from financing activitiesProceeds from senior notes-

300,000

Payments on term loan-

(195,750

)

Proceeds from vehicle and equipment notes payable17,759

23,767

Debt issuance costs(157

)

(5,191

)

Principal payments on long-term debt(19,801

)

(15,278

)

Principal payments on finance lease obligations(1,998

)

(3,398

)

Acquisition-related obligations(3,896

)

(5,797

)

Repurchase of common stock(15,759

)

-

Surrender of common stock awards by employees(973

)

(2,331

)

Net cash used in financing activities(24,825

)

96,022

Net change in cash and cash equivalents89,582

144,508

Cash and cash equivalents at beginning of period177,889

90,442

Cash and cash equivalents at end of period$

267,471

$

234,950

Supplemental disclosures of cash flow informationNet cash paid during the period for:Interest$

24,130

$

17,746

Income taxes, net of refunds13,798

3,790

Supplemental disclosure of noncash activitiesRight-of-use assets obtained in exchange for operating lease obligations18,340

11,593

Termination of operating lease obligations and right-of-use assets-

(2,814

)

Property and equipment obtained in exchange for finance lease obligations853

2,175

Seller obligations in connection with acquisition of businesses6,965

4,322

Unpaid purchases of property and equipment included in accounts payable1,229

1,527

Reconciliation of Non-GAAP Financial Measures

Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income, Adjusted Gross Profit and Adjusted Selling and Administrative Expense measure performance by adjusting EBITDA, GAAP net income, gross profit and selling and administrative expense, respectively, for certain income or expense items that are not considered part of our core operations. We believe that the presentation of these measures provides useful information to investors regarding our results of operations because it assists both investors and us in analyzing and benchmarking the performance and value of our business.

We believe the Adjusted EBITDA measure is useful to investors and us as a measure of comparative operating performance from period to period as it measures our changes in pricing decisions, cost controls and other factors that impact operating performance, and removes the effect of our capital structure (primarily interest expense), asset base (primarily depreciation and amortization), items outside our control (primarily income taxes) and the volatility related to the timing and extent of other activities such as asset impairments and non-core income and expenses. Accordingly, we believe that this measure is useful for comparing general operating performance from period to period. In addition, we use various EBITDA-based measures in determining the achievement of awards under certain of our incentive compensation programs. Other companies may define Adjusted EBITDA differently and, as a result, our measure may not be directly comparable to measures of other companies. In addition, Adjusted EBITDA may be defined differently for purposes of covenants contained in our revolving credit facility or any future facility.

Although we use the Adjusted EBITDA measure to assess the performance of our business, the use of the measure is limited because it does not include certain material expenses, such as interest and taxes, necessary to operate our business. Adjusted EBITDA should be considered in addition to, and not as a substitute for, GAAP net income as a measure of performance. Our presentation of this measure should not be construed as an indication that our future results will be unaffected by unusual or non-recurring items. This measure has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. Because of these limitations, this measure is not intended as an alternative to net income as an indicator of our operating performance, as an alternative to any other measure of performance in conformity with GAAP or as an alternative to cash flow provided by operating activities as a measure of liquidity. You should therefore not place undue reliance on this measure or ratios calculated using this measure.

We also believe the Adjusted Net Income measure is useful to investors and us as a measure of comparative operating performance from period to period as it measures our changes in pricing decisions, cost controls and other factors that impact operating performance, and removes the effect of certain non-core items such as discontinued operations, acquisition related expenses, amortization expense, the tax impact of these certain non-core items, and the volatility related to the timing and extent of other activities such as asset impairments and non-core income and expenses. To make the financial presentation more consistent with other public building products companies, beginning in the fourth quarter 2016 we included an addback for non-cash amortization expense related to acquisitions. Accordingly, we believe that this measure is useful for comparing general operating performance from period to period. Other companies may define Adjusted Net Income differently and, as a result, our measure may not be directly comparable to measures of other companies. In addition, Adjusted Net Income may be defined differently for purposes of covenants contained in our revolving credit facility or any future facility.

INSTALLED BUILDING PRODUCTS, INC. RECONCILIATION OF GAAP TO NON-GAAP MEASURES ADJUSTED NET INCOME CALCULATIONS (unaudited, in thousands, except share and per share amounts)

The table below reconciles Adjusted Net Income to the most directly comparable GAAP financial measure, net income, for the periods presented therein.

Per share figures may reflect rounding adjustments and consequently totals may not appear to sum.

INSTALLED BUILDING PRODUCTS, INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(unaudited, in thousands) Nine months ended September 30,

2020 2019

Cash flows from operating activitiesNet income $ 69,402 $ 48,965

Adjustments to reconcile net income to net cashprovided by operating activitiesDepreciation and amortization of property and 30,850 28,575 equipmentAmortization of operating lease right-of-use assets 13,281 11,597

Amortization of intangibles 20,378 18,065

Amortization of deferred financing costs and debt 1,000 845 discountProvision for credit losses 3,839 3,173

Write-off of debt issuance costs - 2,774

Gain on sale of property and equipment (592 ) (69 )

Noncash stock compensation 8,050 6,442

Deferred income taxes (3,405 ) -

Amortization of terminated interest rate swap 508 -

Changes in assets and liabilities, excluding effectsof acquisitionsAccounts receivable (9,624 ) (29,144 )

Inventories 5,983 (852 )

Other assets 9,027 (4,845 )

Accounts payable (14,746 ) 2,535

Income taxes receivable/payable 14,192 13,487

Other liabilities (4,259 ) 4,969

Net cash provided by operating activities 143,884 106,517

Cash flows from investing activitiesPurchases of investments (776 ) (17,352 )

Maturities of short term investments 37,473 22,560

Purchases of property and equipment (25,515 ) (37,267 )

Acquisitions of businesses (38,825 ) (24,740 )

Proceeds from sale of property and equipment 828 563

Other (2,662 ) (1,795 )

Net cash used in investing activities (29,477 ) (58,031 )

Cash flows from financing activitiesProceeds from senior notes - 300,000

Payments on term loan - (195,750 )

Proceeds from vehicle and equipment notes payable 17,759 23,767

Debt issuance costs (157 ) (5,191 )

Principal payments on long-term debt (19,801 ) (15,278 )

Principal payments on finance lease obligations (1,998 ) (3,398 )

Acquisition-related obligations (3,896 ) (5,797 )

Repurchase of common stock (15,759 ) -

Surrender of common stock awards by employees (973 ) (2,331 )

Net cash used in financing activities (24,825 ) 96,022

Net change in cash and cash equivalents 89,582 144,508

Cash and cash equivalents at beginning of period 177,889 90,442

Cash and cash equivalents at end of period $ 267,471 $ 234,950

Supplemental disclosures of cash flow informationNet cash paid during the period for:Interest $ 24,130 $ 17,746

Income taxes, net of refunds 13,798 3,790

Supplemental disclosure of noncash activitiesRight-of-use assets obtained in exchange for 18,340 11,593 operating lease obligationsTermination of operating lease obligations and - (2,814 )right-of-use assetsProperty and equipment obtained in exchange for 853 2,175 finance lease obligationsSeller obligations in connection with acquisition of 6,965 4,322 businessesUnpaid purchases of property and equipment included 1,229 1,527 in accounts payable Reconciliation of Non-GAAP Financial Measures

Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income, Adjusted Gross Profit and Adjusted Selling and Administrative Expense measure performance by adjusting EBITDA, GAAP net income, gross profit and selling and administrative expense, respectively, for certain income or expense items that are not considered part of our core operations. We believe that the presentation of these measures provides useful information to investors regarding our results of operations because it assists both investors and us in analyzing and benchmarking the performance and value of our business.

We believe the Adjusted EBITDA measure is useful to investors and us as a measure of comparative operating performance from period to period as it measures our changes in pricing decisions, cost controls and other factors that impact operating performance, and removes the effect of our capital structure (primarily interest expense), asset base (primarily depreciation and amortization), items outside our control (primarily income taxes) and the volatility related to the timing and extent of other activities such as asset impairments and non-core income and expenses. Accordingly, we believe that this measure is useful for comparing general operating performance from period to period. In addition, we use various EBITDA-based measures in determining the achievement of awards under certain of our incentive compensation programs. Other companies may define Adjusted EBITDA differently and, as a result, our measure may not be directly comparable to measures of other companies. In addition, Adjusted EBITDA may be defined differently for purposes of covenants contained in our revolving credit facility or any future facility.

Although we use the Adjusted EBITDA measure to assess the performance of our business, the use of the measure is limited because it does not include certain material expenses, such as interest and taxes, necessary to operate our business. Adjusted EBITDA should be considered in addition to, and not as a substitute for, GAAP net income as a measure of performance. Our presentation of this measure should not be construed as an indication that our future results will be unaffected by unusual or non-recurring items. This measure has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. Because of these limitations, this measure is not intended as an alternative to net income as an indicator of our operating performance, as an alternative to any other measure of performance in conformity with GAAP or as an alternative to cash flow provided by operating activities as a measure of liquidity. You should therefore not place undue reliance on this measure or ratios calculated using this measure.

We also believe the Adjusted Net Income measure is useful to investors and us as a measure of comparative operating performance from period to period as it measures our changes in pricing decisions, cost controls and other factors that impact operating performance, and removes the effect of certain non-core items such as discontinued operations, acquisition related expenses, amortization expense, the tax impact of these certain non-core items, and the volatility related to the timing and extent of other activities such as asset impairments and non-core income and expenses. To make the financial presentation more consistent with other public building products companies, beginning in the fourth quarter 2016 we included an addback for non-cash amortization expense related to acquisitions. Accordingly, we believe that this measure is useful for comparing general operating performance from period to period. Other companies may define Adjusted Net Income differently and, as a result, our measure may not be directly comparable to measures of other companies. In addition, Adjusted Net Income may be defined differently for purposes of covenants contained in our revolving credit facility or any future facility.

INSTALLED BUILDING PRODUCTS, INC. RECONCILIATION OF GAAP TO NON-GAAP MEASURES ADJUSTED NET INCOME CALCULATIONS (unaudited, in thousands, except share and per share amounts)

The table below reconciles Adjusted Net Income to the most directly comparable GAAP financial measure, net income, for the periods presented therein.

Per share figures may reflect rounding adjustments and consequently totals may not appear to sum.

Three months ended September Nine months ended September 30, 30,

2020 2019 2020 2019

Net income, $ 28,077 $ 21,212 $ 69,402 $ 48,965 as reportedAdjustmentsfor adjustednet income:Write-off of - 2,774 - 2,774 capitalizedloan costsShare based 2,635 2,099 8,050 6,441 compensationexpenseAcquisition 801 303 2,006 1,497 relatedexpensesCOVID-19 148 - 798 - expenses ^1Branch - 129 - 746 start-upcosts ^2Amortization 6,974 6,156 20,378 18,065 expense ^3Miscellaneous - - (279 ) - non-operatingincomeTax impact ofadjusted (2,745 ) (2,980 ) (8,048 ) (7,676 )items atnormalizedtax rate ^4Adjusted net $ 35,890 $ 29,693 $ 92,307 $ 70,812 incomeWeightedaverage 29,698,028 29,877,056 29,737,716 29,839,873 sharesoutstanding(diluted)Diluted netincome per $ 0.95 $ 0.71 $ 2.33 $ 1.64 share, asreportedAdjustmentsfor adjustednet income, 0.26 0.28 0.77 0.73 net of taximpact, perdiluted share^5Dilutedadjusted net $ 1.21 $ 0.99 $ 3.10 $ 2.37 income pershare1 Addback of employee pay, employee medical expenses, and legal fees directly attributable to COVID-19

2 Addback of costs related to organic branch expansion for Alpha locations

3 Addback of all non-cash amortization resulting from business combinations

4 Normalized effective tax rate of 26.0% applied to both periods presented

5 Includes adjustments related to the items noted above, net of tax

^1 Addback of employee pay, employee medical expenses, and legal fees directlyattributable to COVID-19

^2 Addback of costs related to organic branch expansion for Alpha locations

^3 Addback of all non-cash amortization resulting from business combinations

^4 Normalized effective tax rate of 26.0% applied to both periods presented

^5 Includes adjustments related to the items noted above, net of tax



INSTALLED BUILDING PRODUCTS, INC.RECONCILIATION OF GAAP TO NON-GAAP MEASURESADJUSTED GROSS PROFIT CALCULATIONS(unaudited, in thousands)Three months ended September 30,

Nine months ended September 30,

2020

2019

2020

2019

Gross profit$

131,647

$

118,087

$

375,046

$

314,782

Share based compensation expense60

97

221

280

COVID-19 expenses 1117

-

425

-

Branch start-up costs 2-

129

-

746

Adjusted gross profit$

131,824

$

118,313

$

375,692

$

315,808

Adjusted gross profit - % Total Revenue31.4

%

29.8

%

31.0

%

28.4

%

INSTALLED BUILDING PRODUCTS, INC.RECONCILIATION OF GAAP TO NON-GAAP MEASURESADJUSTED GROSS PROFIT CALCULATIONS(unaudited, in thousands) Three months ended Nine months ended September 30, September 30,

2020 2019 2020 2019

Gross profit $ 131,647 $ 118,087 $ 375,046 $ 314,782

Share based compensation 60 97 221 280 expenseCOVID-19 expenses ^1 117 - 425 -

Branch start-up costs ^2 - 129 - 746

Adjusted gross profit $ 131,824 $ 118,313 $ 375,692 $ 315,808

Adjusted gross profit - % 31.4 % 29.8 % 31.0 % 28.4 %Total Revenue1 Addback of employee pay and employee medical expenses directly attributable to COVID-19

2 Addback of costs related to organic branch expansion for Alpha locations

^1 Addback of employee pay and employee medical expenses directly attributableto COVID-19

^2 Addback of costs related to organic branch expansion for Alpha locations

INSTALLED BUILDING PRODUCTS, INC.RECONCILIATION OF GAAP TO NON-GAAP MEASURESADJUSTED SELLING AND ADMINISTRATIVE EXPENSE CALCULATIONS(unaudited, in thousands)Three months ended September 30,

Nine months ended September 30,

2020

2019

2020

2019

Selling expense$

20,843

$

19,398

$

60,209

$

54,431

Administrative expense58,240

55,098

177,495

156,022

Selling and Administrative$

79,083

$

74,496

$

237,704

$

210,453

Share based compensation expense2,575

2,002

7,829

6,161

Acquisition related expenses801

303

2,006

1,497

COVID-19 expenses 131

-

373

-

Adjusted Selling and Administrative$

75,676

$

72,191

$

227,496

$

202,795

Adj. Selling and Administrative - % Total Revenue18.0

%

18.2

%

18.8

%

18.3

%

INSTALLED BUILDING PRODUCTS, INC.RECONCILIATION OF GAAP TO NON-GAAP MEASURESADJUSTED SELLING AND ADMINISTRATIVE EXPENSE CALCULATIONS(unaudited, in thousands) Three months ended Nine months ended September 30, September 30,

2020 2019 2020 2019

Selling expense $ 20,843 $ 19,398 $ 60,209 $ 54,431

Administrative expense 58,240 55,098 177,495 156,022

Selling and Administrative $ 79,083 $ 74,496 $ 237,704 $ 210,453

Share based compensation 2,575 2,002 7,829 6,161 expenseAcquisition related expenses 801 303 2,006 1,497

COVID-19 expenses ^1 31 - 373 -

Adjusted Selling and $ 75,676 $ 72,191 $ 227,496 $ 202,795 AdministrativeAdj. Selling and 18.0 % 18.2 % 18.8 % 18.3 %Administrative - % TotalRevenue1 Addback of employee pay, employee medical expenses and legal fees directly attributable to COVID-19

The table below reconciles Adjusted EBITDA to the most directly comparable GAAP financial measure, net income, for the periods presented therein.

^1 Addback of employee pay, employee medical expenses and legal fees directlyattributable to COVID-19

The table below reconciles Adjusted EBITDA to the most directly comparable GAAP financial measure, net income, for the periods presented therein.

RECONCILIATION OF GAAP TO NON-GAAP MEASURESADJUSTED EBITDA CALCULATIONS(unaudited, in thousands) Three months ended Nine months ended September 30, September 30,

2020 2019 2020 2019

Adjusted EBITDA:Net income (GAAP) $ 28,077 $ 21,212 $ 69,402 $ 48,965

Interest expense 7,564 8,458 22,679 19,783

Provision for income 9,773 7,610 24,578 17,135 taxes Depreciation and 17,201 16,117 51,230 46,640 amortization Miscellaneous - - (279 ) - non-operating incomeEBITDA 62,615 53,397 167,610 132,523

Acquisition related 801 303 2,006 1,497 expenses Share based compensation 2,635 2,099 8,050 6,441 expense COVID-19 expenses ^1 148 - 798 -

Branch start-up costs - 129 - 746

Adjusted EBITDA $ 66,199 $ 55,928 $ 178,464 $ 141,207

Adjusted EBITDA margin 15.7 % 14.1 % 14.7 % 12.7 %

1 Addback of employee pay, employee medical expenses and legal fees directly attributable to COVID-19

^1 Addback of employee pay, employee medical expenses and legal fees directlyattributable to COVID-19

INSTALLED BUILDING PRODUCTS, INC.SUPPLEMENTARY TABLE(unaudited)Three months ended September 30,

Nine months ended September 30,

2020

2019

2020

2019

Period-over-period GrowthSales Growth6.1%

13.6%

9.1%

12.9%

Same Branch Sales Growth1.7%

9.3%

5.1%

8.2%

Single-Family Sales Growth1.8%

10.3%

4.0%

11.3%

Single-Family Same Branch Sales Growth-3.1%

4.9%

-0.5%

5.3%

Residential Sales Growth6.2%

10.7%

8.5%

11.2%

Residential Same Branch Sales Growth1.6%

6.0%

4.4%

6.0%

Same Branch Sales GrowthVolume Growth12.2%

2.9%

0.0%

2.3%

Price/Mix Growth10.2%

5.4%

5.5%

5.1%

Large Commercial Construction Sales Growth2.0%

19.4%

7.5%

15.7%

U.S. Housing Market2Total Completions Growth8.9%

1.5%

2.2%

2.6%

Single-Family Completions Growth2.6%

3.7%

1.7%

4.8%

INSTALLED BUILDING PRODUCTS, INC.SUPPLEMENTARY TABLE(unaudited) Three months ended Nine months ended September 30, September 30,

2020 2019 2020 2019

Period-over-period GrowthSales Growth 6.1% 13.6% 9.1% 12.9%

Same Branch Sales Growth 1.7% 9.3% 5.1% 8.2%

Single-Family Sales Growth 1.8% 10.3% 4.0% 11.3%

Single-Family Same Branch -3.1% 4.9% -0.5% 5.3%Sales Growth Residential Sales Growth 6.2% 10.7% 8.5% 11.2%

Residential Same Branch Sales 1.6% 6.0% 4.4% 6.0%Growth Same Branch Sales GrowthVolume Growth^1 2.2% 2.9% 0.0% 2.3%

Price/Mix Growth^1 0.2% 5.4% 5.5% 5.1%

Large Commercial Construction 2.0% 19.4% 7.5% 15.7%Sales Growth U.S. Housing Market^2Total Completions Growth 8.9% 1.5% 2.2% 2.6%

Single-Family Completions 2.6% 3.7% 1.7% 4.8%Growth1 Excludes the large commercial end market

2 U.S. Census Bureau data, as revised

^1 Excludes the large commercial end market

^2 U.S. Census Bureau data, as revised

INSTALLED BUILDING PRODUCTS, INC.INCREMENTAL REVENUE AND ADJUSTED EBITDA MARGINS(unaudited, in thousands)Three months ended September 30,

Nine months ended September 30,

2020

% Total

2019

% Total

2020

% Total

2019

% Total

Revenue IncreaseSame Branch$

6,756

28.1

%

$

32,570

68.6

%

$

56,884

56.1

%

$

80,754

63.5

%

Acquired17,282

71.9

%

14,880

31.4

%

44,474

43.9

%

46,333

36.5

%

Total$

24,038

100.0

%

$

47,450

100.0

%

$

101,358

100.0

%

$

127,087

100.0

%

Adj EBITDAAdj EBITDAAdj EBITDAAdj EBITDAContributionContributionContributionContributionAdjusted EBITDASame Branch$

8,126

120.3

%

$

9,589

29.4

%

$

30,629

53.8

%

$

14,037

17.4

%

Acquired2,145

12.4

%

2,589

17.4

%

6,626

14.9

%

6,433

13.9

%

Total$

10,271

42.7

%

$

12,178

25.7

%

$

37,255

36.8

%

$

20,470

16.1

%

View source version on businesswire.com: https://www.businesswire.com/news/home/20201105005076/en/

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