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Operator: Greetings, and welcome to the Installed Building Products Fiscal 2023 First Quarter Financial Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Darren Hicks, Managing Director of Investor Relations. Thank you, sir. You may begin.

Darren Hicks: Good morning, and welcome to Installed Building Products first quarter 2023 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 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 ongoing COVID-19 pandemic, general economic and industry conditions, rising home prices, inflation and interest rates, the material price and supply environment, the timing of increases in our selling prices and 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 statement speaks 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, 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; and joined by Jason Niswonger, our Chief Administrative and Sustainability Officer. I will now turn the call over to Jeff.

Jeff Edwards: Thanks, Darren. Good morning to everyone joining us on today’s call. As usual, I will start the call with some highlights and then turn the call over to Michael, who will discuss our financial results and capital position in more detail before we take your questions. IBP produced record first quarter sales and profitability due to the exceptional efforts of our employees and the excellent service they provide our residential and commercial customers everyday. First quarter sales benefited from our recent acquisitions and robust same-branch growth within our multifamily and light commercial end markets. The ongoing strength in multi-family helped drive first quarter residential sales growth by 7%, which more than offset a modest deceleration in single-family revenue.

Our first quarter results reflect the resiliency of our business model, the hard work of our employees nationwide and the benefits of our product, market and geographic diversification strategies. Looking at our first quarter results in more detail, we experienced same sales growth in both our residential and commercial end markets. For the quarter, within our installation segment, we experienced a 4% increase in residential same-branch sales from the prior-year period. A 38% increase in multifamily same-branch revenue more than offset a 3% decline in single-family same branch sales. By comparison, total U.S. residential completions increased 12% during the first quarter, which was driven by significant year-over-year growth in multifamily completions.

IBP’s multifamily sales growth accelerated to 38% on a same-branch basis, up from 23% on a same-branch basis last year. We acquired C. Q. Insulation, a Florida-based insulation installer uniquely focused on the new multifamily end market in 2015, and the company has been successful in selling IBP’s insulation services across branches and other markets that historically have not served multifamily customers. Within our commercial business, first quarter same-branch installation sales increased 22%, driven by light commercial project strength. Bidding activity and project bid acceptance rates in our heavy commercial business remained steady in the first quarter relative to the fourth quarter, and same-branch sales have begun to show improvement, increasing modestly from the prior year.

We are focusing on improving our operational efficiency while pursuing projects with favorable economics. Our first quarter performance reflects our continued strategic focus, which prioritizes the profitability of a given job over job volume. We have worked hard to align with national, regional and local builders, who value our local market knowledge and job efficiency. We believe this approach is needed now more than ever as builders strive for more normalized construction cycle times. During the quarter, price mix increased by 16.5% over the prior-year period. The inflationary trends we experienced in the construction industry throughout 2022 carried forward into the first quarter, and we continue to make the necessary adjustments to align our pricing with the value that we offer our customers.

We believe our strategy focusing on profitable work to help us achieve same-branch incremental EBITDA margin of 39.4%, a first quarter record. With a focus on growth, our profitability standards extend to our acquisition targets, and we have closed three deals so far this year with over $46 million of annual revenue. We expect to acquire at least $100 million of revenue once again in 2023. During the 2023 first quarter, we completed two acquisitions, including a Maryland and West Virginia-based installer of fiberglass and spray foam insulation into residential projects with annual revenues of approximately $4 million and a Rhode Island-based installer of residential mechanical and industrial installations serving residential, commercial and industrial customers across the Northeast with annual revenue of approximately $39 million.

In April of 2023, we also completed the acquisition of a Florida-based installer of fiberglass and spray foam insulation serving residential and commercial customers with annual revenue of approximately $3 million. Although we are still in the first half of 2023, indications from recent public homebuilder earnings commentary supports our belief that the housing market is returning to more normal seasonality and housing demand during the spring selling season has been fairly well supported. We believe the residential housing market will be more resilient in the back half of 2023 as a result of strong employment trends and a relatively low existing home inventory levels. In addition, the backlog of our multifamily business extends beyond 1 year.

We expect strong execution in our repair and remodel business to continue with incentives from the inflation Reduction Act of 2022 likely to support demand this year. We believe we are well positioned to navigate future changes in the U.S. housing market given our strong customer relationships, experienced leadership team, national scale and diverse product categories and end markets. In addition, our strong balance sheet, coupled with our high operating cash flow generating capability, supports ongoing acquisitions, dividends and opportunistic share repurchase activity. I am proud of our continued success and excited by the direction in which IBP is headed. So with this overview, I would like to turn the call over to Michael to provide more detail on our first quarter financial results.

Michael Miller: Thank you, Jeff and good morning everyone. Consolidated net revenue increased to a first quarter record of $659 million, compared to $587 million for the same period last year. The 12% year-over-year improvement in sales during the quarter was primarily driven by an increase in price mix from the prior-year period and the revenue contribution from recent acquisitions. This quarter, the price mix calculation benefited significantly from the strong growth in our multifamily and light commercial end markets, which favorably impact mix due to higher average job prices. This growth contributed to an 11% increase in our installation segment revenue to $623 million. Our other revenue, which includes IBP’s manufacturing and distribution operations, increased from $26 million to $37 million, driven by organic manufacturing and distribution revenue growth as well as the April 2022 acquisition of Central Aluminum.

On a same-branch basis, residential installation revenue improved 4% from the prior-year quarter as multifamily growth of 38% offset a 3% decline in single-family same-branch sales. Same-branch commercial sales increased 22% in the quarter. Adjusted gross profit margin improved 250 basis points year-over-year to 31.9% in the first quarter, which benefited from strong price mix growth during the quarter. It’s important to highlight that our operating segments have different gross profit profiles and segment gross profit is exclusive of depreciation and amortization and the cost of sales. During the 2023 third quarter, our installation operating segment’s gross profit margin was 34.1%, compared to the other operating segment gross margin of 26.5%.

Again, both of these margins are before depreciation and amortization and cost of goods sold. Adjusted selling and administrative expense as a percent of first quarter sales was 17.9%, compared to 16.9% for the prior year period. Higher selling and administrative expenses relative to the same period last year primarily reflects higher variable compensation, including selling commissions and bonuses due to the higher gross margin and improved profitability. On a GAAP basis, our first quarter net income per diluted share of $1.74 increased 53% from the prior-year quarter, and our adjusted net income per diluted share improved 40% to $2.15. During the 2023 and 2022 first quarters, we recorded amortization expense of approximately $11 million related to the acquisition of new businesses.

This non-cash adjustment impacts net income, which is why we continue to believe that adjusted EBITDA is the most useful measure of profitability. Based on recent acquisitions, we expect second quarter 2023 amortization expense of approximately $11.2 million and full year 2023 expense of approximately $44.3 million. We would expect these estimates to change with any acquisitions we close in future periods. Adjusted EBITDA for the 2023 first quarter improved 25% to $105 million. Adjusted EBITDA as a percent of net revenue was 15.9% for the 2023 first quarter, a 160 basis point improvement from the same period last year. Same-branch incremental adjusted EBITDA margin was a first quarter record of 39.4%, compared to 22.9% for the same period last year.

We continue to target full year long-term incremental adjusted EBITDA margins in the range of 20% to 25%. For the 2023 first quarter, our effective tax rate was approximately 26.8%, and we continue to expect an effective tax rate of 25% to 27% for the full year ending December 31, 2023. Now let’s look at our liquidity, balance sheet and capital requirements in more detail. Our business model continues to generate strong operating cash flows. For the 3 months ended March 31, 2023, we generated $74 million in cash flow from operations compared to $48 million in the prior-year period. The year-over-year increase in operating cash flow was primarily associated with higher net income and lower net working capital requirements. Through interest rate swap agreements, we have fixed the interest rate on $400 million of our existing variable rate debt until December 2028, limiting our interest rate exposure.

In addition, we have no significant debt maturities until 2028. Our first quarter net interest expense fell to $9.7 million from $10.6 million in the prior-year period as we were able to earn a higher interest rate on cash and cash equivalents invested throughout the quarter. At March 31, 2023, we had a net debt to adjust as trailing 12-month EBITDA leverage ratio of 1.4x compared to 1.46x at December 31, 2022, which is well below our stated target of 2x. At March 31, 2023, we had $328 million in working capital, excluding cash and cash equivalents and investments. Capital expenditures and total incurred finance leases for the 3 months ended March 31, 2023, were approximately $16 million combined, which was 2.4% of revenue compared to 1.9% for the same period last year.

With our strong liquidity position and modest financial leverage, we continue to expand the business through acquisition and return capital to shareholders. IBP’s Board of Directors approved a second quarter dividend of $0.33 per share, which is payable on June 30, 2023, to stockholders of record on June 15 and 2023. We are committed to continuing to grow the company while returning excess capital to shareholders through cash dividend payments and opportunistically repurchasing our shares. With this overview, I will now turn the call back to Jeff for closing remarks.

Jeff Edwards: Thanks, Michael. I’d like to conclude our prepared remarks by once again thanking IBP employees for their hard work, dedication and commitment to our company. Our success over the years is made possible because of all of you. Operator, let’s open up the call for questions.

Operator: [Operator Instructions] Our first question comes from Susan Maklari with Goldman Sachs. Please proceed with your question.

Operator: Our next question comes from Mike Dahl with RBC Capital Markets. Please proceed with your question.

Operator: Our next question is from Phil Ng with Jefferies. Please proceed with your question.

Operator: Our next question comes from Adam Baumgarten with Zelman & Associates. Please proceed with your question.

Operator: Our next question comes from Joe Ahlersmeyer with Deutsche Bank. Please proceed with your question.

Operator: Our next question comes from Trey Grooms with Stephens. Please proceed with your question.

Operator: Our next question comes from Stephen Kim with Evercore ISI. Please proceed with your question.

Operator: Our next question is from Carl Reichardt with BTIG. Please proceed with your question.

Operator: We have reached the end of our question-and-answer session. I would now like to turn the floor back over to Jeff Edwards for closing comments.

Jeff Edwards: Thank you for your questions. And I look forward to our call next quarter. Thank you.

Operator: This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.