Installed Building Products Q2 2026 Earnings Report

Installed Building Products EPS Results

• Actual EPS: $2.91
• Consensus EPS: $2.55
• Beat/Miss: Beat by +$0.36
• One Year Ago EPS: $2.95

Installed Building Products Revenue Results

• Actual Revenue: $777.80 million
• Expected Revenue: $743.33 million
• Beat/Miss: Beat by +$34.47 million
• YoY Revenue Growth: +2.30%

Installed Building Products Announcement Details

• Quarter: Q2 2026
• Date: 8/6/2026
• Time: Before Market Opens
• Conference Call Date: Thursday, August 6, 2026
• Conference Call Time: 10:00AM ET

Installed Building Products (NYSE:IBP) (NYSE: IBP) is a leading national installer of specialty building products serving the U.S. residential construction market. The company partners with homebuilders and contractors to deliver a comprehensive range of interior and exterior finishing services, including insulation, drywall finishing, protective coatings and basement waterproofing systems. By offering a single-source solution, Installed Building Products helps streamline project coordination and ensures consistent service quality across multiple trades.

Founded in 1977 and headquartered in Columbus, Ohio, Installed Building Products has expanded from a regional insulation installer into a nationwide platform operating in nearly every state. Its product portfolio encompasses fiberglass batt and blown-in insulation, spray foam, cellulose, radiant barrier, acoustical ceilings, stucco, exterior insulating and finish systems (EIFS), and specialized basement waterproofing. Growth has been driven both organically and through the strategic acquisition of complementary service providers.

In November 2017, the company completed its initial public offering, providing capital to accelerate branch expansion and support integration of acquired businesses. Installed Building Products maintains a decentralized branch model, which combines the benefits of local market expertise with centralized support functions for purchasing, logistics and safety compliance. This structure enables rapid response to builder needs and consistency in installation standards.

Installed Building Products primarily serves single-family and multi-family residential builders across major housing markets in the United States. The company’s emphasis on customer service, combined with its broad geographic reach and diversified service offerings, positions it as a trusted partner for builders seeking to improve project timelines, reduce coordination complexity and deliver enhanced energy efficiency and comfort to homebuyers.

Installed Building Products Q2 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Consolidated revenue increased 2% to $778 million, supported by acquisitions and growth in commercial installation, manufacturing, and distribution.
• Positive Sentiment: Commercial remained a key growth driver, with double-digit installation sales growth for the fifth consecutive quarter and heavy commercial same-branch sales up approximately 16%; backlog also continued to expand.
• Negative Sentiment: Residential conditions remained challenging: installation same-branch sales declined 2%, including a 6% drop in new residential, as affordability concerns and weak consumer confidence pressured demand.
• Neutral Sentiment: Adjusted gross margin declined to 33.3% from 34.2%, mainly due to higher fuel costs and the growing mix of lower-margin distribution and manufacturing revenue, although management expects spray-foam pricing to become more beneficial in the second half.
• Positive Sentiment: IBP completed acquisitions representing roughly $30 million in annual revenue and expects to acquire at least $100 million of annual revenue in 2026; it also repurchased $76 million of stock and raised its quarterly dividend by more than 5%.

Presentation

[Operator]

Greetings. Welcome to the Installed Building Products second quarter 2026 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 Ryan Ricketts, Managing Director, Investor Relations. Thank you, Ryan. You may begin.

[Ryan Ricketts, Director of Investor Relations and Financial Planning at Installed Building Products]

Good morning. Welcome to Installed Building Products second quarter 2026 earnings conference call. Earlier today, we issued a press release on our financial results for the 2026 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 federal securities laws. These forward-looking statements are based on management's current beliefs and expectations and are subject to factors that could cause actual results to differ materially from those described today. Please refer to our SEC filings for cautionary statements and risk factors. We undertake no duty or obligation to update any forward-looking statement as a result of new information or future events, except as required by federal securities laws. In addition, management refers to certain non-GAAP and adjusted financial measures on this call.

[Ryan Ricketts, Director of Investor Relations and Financial Planning at Installed Building Products]

You can find a reconciliation of such non-GAAP measures to the nearest GAAP equivalent in the company's earnings release and investor presentation, both of which are available in the investor relations section of our website. This morning's conference call is hosted by Jeff Edwards, our Chairman and Chief Executive Officer, Michael Miller, our Chief Financial Officer. We are also joined by Jason Niswonger, our Chief Administrative and Sustainability Officer, Brad Wheeler, our Chief Operating Officer. Jeff, I will now turn the call over to you.

[Jeff Edwards, Chairman and CEO at Installed Building Products]

Thanks, Ryan. Good morning to everyone joining us today. As usual, I will start the call with some highlights. Then turn the call over to Michael, who will discuss our financial results in more detail before we take your questions. Our team continued to execute well during the second quarter, working closely with our customers to navigate a challenging residential housing backdrop while maintaining the high level of service they expect from IBP. We delivered positive consolidated revenue growth supported by the contribution from recent acquisitions and growth within our commercial installation, manufacturing, and distribution businesses. These results demonstrate the value of our diversified operating platform and the multiple avenues available to support growth across varying market conditions. Throughout the quarter, the macroeconomic backdrop was impacted by geopolitical factors, which increased the level of uncertainty for U.S. consumers.

[Jeff Edwards, Chairman and CEO at Installed Building Products]

The low consumer confidence, along with affordability concerns, has made new home sales more challenging. Even with industry-specific headwinds expected to continue to affect our new residential installation segment in the near term, our overall business has been resilient. All the credit goes to the hardworking men and women across our more than 250 branches throughout the U.S. and those who support them from our office in Columbus, Ohio. To everyone at IBP, thank you for your hard work and dedication. Looking at our 2026 second quarter performance, consolidated sales increased 2% and same-branch sales declined less than 1%. Our commercial end market continued to show strength, delivering double-digit installation sales growth for the fifth consecutive quarter, with heavy commercial sales growth exceeding 15% during the quarter.

[Jeff Edwards, Chairman and CEO at Installed Building Products]

With respect to our new single-family end market, activity remains challenged as a result of affordability concerns and lower consumer confidence, with some geographic markets feeling more upbeat than others. In our multifamily end market, our contract backlog continues to grow, which is encouraging. Our other segment revenue grew 50% net of eliminations, partially due to acquisitions. We continue to effectively manage both material and labor to meet the needs of our customers and remain flexible to adjust to varying demand across regions. During the 2026 second quarter and in July, we completed acquisitions representing approximately $30 million of annual sales from a diversified product set in residential, commercial, and industrial end markets.

[Jeff Edwards, Chairman and CEO at Installed Building Products]

Acquisitions during the quarter and in July included an installer of mechanical insulation with the majority of its sales derived from retrofit work between industrial and commercial applications throughout the upper Midwest region, with annual sales of approximately $12 million. An installer of shower doors, closet shelving, mirrors, and other accessories across residential markets serving customers throughout Minnesota and surrounding states with annual sales of approximately $7 million, and an installer of door, bath, and fencing hardware primarily in new residential markets throughout South Carolina and Georgia, with annual sales of approximately $7 million. Although deal timing is hard to predict, our current outlook for acquisition opportunities in 2026 is strong, and we expect to acquire at least $100 million of annual revenue this year.

[Jeff Edwards, Chairman and CEO at Installed Building Products]

In terms of broader housing construction activity, U.S. Census Bureau data for the 2026 second quarter showed single-family starts decreased 4% from the prior year, while multifamily starts were up 10% for the same period. I'm proud of our team's continued success and commitment to doing an excellent job for our customers. Once again, to everyone at IBP, thank you. I remain encouraged by the fundamentals of our industry, our competitive positioning, and am optimistic about the prospects ahead for IBP and the broader insulation and complementary building products installation business. With this overview, I'd like to turn the call over to Michael to provide more detail on our 2026 second quarter financial results.

[Michael Miller, CFO at Installed Building Products]

Thank you, Jeff, Good morning, everyone. Consolidated net revenue for the second quarter was up 2% to $778 million compared to $760 million for the same period last year.

[Michael Miller, CFO at Installed Building Products]

Same-branch sales for the installation segment were down 2% for the second quarter as a 6% decline in new residential same-branch sales was partially offset by a 10% increase in commercial same-branch sales. Although the components behind our price mix and volume disclosures have several moving parts that are difficult to forecast and quantify, price mix was up 1% during the second quarter, and when including heavy commercial, price mix increased 3%. Volume during the 2026 second quarter decreased by 5%, primarily due to lower new single-family volume. With respect to profit margins in the second quarter, our business achieved adjusted gross margin of 33.3%, compared to 34.2% in the prior year period. Our consolidated gross margin was influenced by the relative mix of revenue from our installation and other segments. As we have stated before, our installation business generates a higher gross margin than our other segment.

[Michael Miller, CFO at Installed Building Products]

During the quarter, the other segment revenue, net of eliminations, grew 50%, which contributed positively to consolidated gross profit, but also created a mix headwind to our consolidated gross margin percentage of 40 basis points. Second quarter 2026 installation segment gross margin was 36.5%, compared to 37.1% in the prior year. The decline in gross margin for the installation segment was primarily due to increased fuel expense, which reduced gross margin by 50 basis points. Adjusted selling and administrative expenses increased 3% compared to the 2025 second quarter. As a percent of second quarter sales, adjusted selling and administrative expense was 18.9% compared to 18.8% in the prior year period. Administrative costs were impacted by higher medical insurance costs, which were a 30 basis point impact to EBITDA margin.

[Michael Miller, CFO at Installed Building Products]

Adjusted EBITDA for the 2026 second quarter was $131 million, reflecting an adjusted EBITDA margin of 16.9% and adjusted net income was $78 million, or $2.91 per diluted share. Although we do not provide comprehensive financial guidance based on recent acquisitions, we expect third quarter and full-year 2026 amortization expense of approximately $10 million and $42 million respectively. We would expect these estimates to change with any acquisitions we complete in future periods. We continue to expect an effective tax rate of 25%-27% for the full-year ending December 31st, 2026. Our second quarter net interest expense was $11 million compared to $8 million for the 2025 second quarter. We would expect third quarter net interest expense of approximately $10 million.

[Michael Miller, CFO at Installed Building Products]

At June 30th, 2026, we had a net debt to trailing 12-month adjusted EBITDA leverage ratio of 1.34x compared to 1.15x at June 30th, 2025, which remains well below our stated target of 2x. At June 30th, 2026, we had $374 million in working capital, excluding cash and cash equivalents. Capital expenditures and total incurred finance leases for the three months ended June 30th, 2026, were approximately $18 million combined, which was approximately 2% of revenue. We ended the second quarter with $395 million in cash on the balance sheet. We will continue to prioritize acquisitions with long-term strategic benefits and attractive returns on invested capital. We expect positive free cash flow will continue to support shareholder returns and stock buybacks based on prevailing market conditions. During the 2026 second quarter, we repurchased approximately 365,000 shares of common stock at a total cost of $76 million.

[Michael Miller, CFO at Installed Building Products]

At June 30th, 2026, the company had approximately $398 million available under its stock repurchase program, which expires March 1st, 2027. IBP's Board of Directors approved the third quarter dividend of $0.39 per share, which is payable on September 30th, 2026 to stockholders of record on September 15th, 2026. The third quarter dividend represents a more than 5% increase over the prior year period. We are committed to continuing to grow the company while returning excess capital to shareholders through our dividend policy and opportunistic share repurchases. With this overview, I will now turn the call back to Jeff for closing remarks.

[Jeff Edwards, Chairman and CEO at Installed Building Products]

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

[Operator]

Thank you. We will now be conducting a question and answer session. We ask that you please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one on your telephone keypad. Confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Our first question is from Susan Maklari with Goldman Sachs. Please proceed with your question.

[Susan Maklari, Senior Equity Research Analyst at Goldman Sachs]

Thank you. Good morning, everyone.

[Jeff Edwards, Chairman and CEO at Installed Building Products]

Good morning.

[Susan Maklari, Senior Equity Research Analyst at Goldman Sachs]

Question is around the activity that you're seeing on the ground. I think as we ended the first quarter, you had talked about the fact that the private builders had not come back the way that you had anticipated going into the spring. Can you talk about what you're seeing on the ground in the quarter and how things moved relative to the different kinds of customers that you have and the geographies?

[Michael Miller, CFO at Installed Building Products]

Sure. Sue, this is Michael. Good morning. Thanks for the question. We're continuing to see relative better performance with the private builders relative to the public builders. Of the public builders that have reported so far their second quarter results, home building revenue is down mid-single-digits on a combined basis. Our revenue with them was similarly down. The revenue profile that we had with the private builders, while down, was not down nearly as much as it was with the publics.

[Michael Miller, CFO at Installed Building Products]

We continue to believe that will be the trend through the rest of the year, although if you look at their guidance/consensus, theirs being the public builders for the back half of the year, it would imply sequential improvement in the third quarter and the fourth quarter, so that the third quarter would be down roughly low single-digits, and actually the fourth quarter would be up low single-digits. That's their guidance/consensus. As we've said a million times, we don't provide guidance. I will say, though, that historically, our sales to them have tracked very closely to their reported home builder revenue.

[Susan Maklari, Senior Equity Research Analyst at Goldman Sachs]

Okay. All right. That's helpful. Moving to the gross margin. Well done there. You were in line with our expectations, and I know you talked a little bit about some of the headwinds that you saw, especially on the install side. Can you just give us a bit more color on the moving parts that are coming through the gross margin and your ability to offset some of those headwinds that you're seeing, especially on the fuel side, and just anything that we should be thinking about in the forward quarters? Appreciating that you don't give guide, but just anything in terms of underlying mix or other factors.

[Michael Miller, CFO at Installed Building Products]

Yeah, Sue, thanks for that question. The gross margin really was consistent certainly with our 32%-34% full-year range that we have talked about. The team is doing a very good job offsetting, not just in cost of goods sold, but also in G&A, some of the inflationary pressure that we're seeing sort of across the board. The one thing that's been, at least initially up to this point, because it was really a second quarter event, is dealing with the increase in fuel, which was a 50 basis points headwind to the installation segment. It's important to note that even though we had headwinds in the installation segment on the residential side, primarily the single-family side, product margin in the installation segment was actually up slightly in the quarter, which we felt very good about.

[Michael Miller, CFO at Installed Building Products]

I would say that there's been a little bit, but it's insignificant at this point, benefit from the selling price increases associated with the selling price or manufactured price increases from spray foam. We expect to see more positive impact from that in the second half of the year. It might be a little bumpy in the third quarter, but ultimately the market is accepting that price increase. As we discussed quite a lot in our last conference call, the customer base that is the natural user of spray foam is a custom, semi-custom home, and they are our customers that are most willing to accept higher prices versus certainly on the entry level side.

[Michael Miller, CFO at Installed Building Products]

The other thing that was pretty significant from a gross margin perspective, again, consistent with our expectations, was the significant growth in our other segment, which just as a reminder, represents our distribution and manufacturing business. That business, on a net basis, grew about 50% in the quarter, which is fantastic, but it structurally has lower gross margins. While the gross margins in that business actually improved to 24.7% from 23%, they are substantially lower than the installation segment gross margins, which were basically flat at 37% year-over-year. That higher percentage of sales or higher relative sales from the other segment was a 40 basis points headwind to gross margin. All of that being said, we continue to expect that the other segment this year will continue to grow at a much faster rate than the installation segment. It will weigh on reported gross margin.

[Michael Miller, CFO at Installed Building Products]

We think it is very relevant for investors to look at the difference in margin between installation and the other segment. For those of you that read the release very closely, you'll see that we did provide more detail in the segmentation breakout just to make it a little bit clearer, the margin differential in the two segments.

[Susan Maklari, Senior Equity Research Analyst at Goldman Sachs]

Okay. That's great color, Michael. Thank you for all the detail and good luck with the quarter.

[Michael Miller, CFO at Installed Building Products]

Great. Thank you. Thanks, Sue.

[Operator]

Our next question is from Sam Reid with Wells Fargo. Please proceed with your question.

[Sam Reid, Analyst at Wells Fargo]

Thanks, guys. Going to start with more of an industry question here. We heard from one of the big OEMs yesterday on the installation side that they're bringing a plant back online in the fourth quarter. Just curious your thoughts on implications for capacity utilization. That same OEM, I believe, is also hoping to push through some pricing in September. Just curious, the puts and takes on that pricing in the context of more capacity.

[Jeff Edwards, Chairman and CEO at Installed Building Products]

Are you referring to the Nephi plant that Owens Corning

[Sam Reid, Analyst at Wells Fargo]

Yeah

[Jeff Edwards, Chairman and CEO at Installed Building Products]

coming back up?

[Sam Reid, Analyst at Wells Fargo]

Yeah.

[Jeff Edwards, Chairman and CEO at Installed Building Products]

That's not a particularly large plant or very much volume in the scheme of things. I think between, at least speculation would be that between rebuilds and things that aren't online yet or not fully online yet, or might come down, I don't think it's going to make much of a big splash in any way, shape, or form.

[Michael Miller, CFO at Installed Building Products]

I would say that material is readily available, both loose fill and batts, and I'm sure we'll spend some time talking about the market dynamic, being clearly the, particularly on the single-family side, and I'll emphasize the entry level of the single-family side, continues to be weak, and we don't see dramatic improvement in that, such that you would see material tightness. Even, there's another manufacturer that bought up the largest line in the country, and that's still not running at full capacity yet. There's more supply coming online with that facility.

[Sam Reid, Analyst at Wells Fargo]

Absolutely. Thanks for that helpful context. Let's maybe switch gears and just move down the P&L to SG&A. Just looking at the leverage this quarter, or I guess I should say the de-leverage, it was significantly better than the first quarter. I know that there were a few things you called out last quarter, some facility and liability insurance headwinds. This quarter it sounds like the de-leverage was mostly just a function of medical expenses. Just curious, any sequential dynamics we should be mindful of on the SG&A line, perhaps any points of improvement quarter-over-quarter?

[Michael Miller, CFO at Installed Building Products]

If you strip out medical on a same branch basis, G&A expenses were actually down like 2% in the quarter from last year, which really is a yeoman's job, quite frankly, given the inflationary pressure that we're seeing in other types of insurance within facility costs. The team is doing an excellent job of managing what they can manage, quite frankly. We will continue to pursue that through the course of the year. There's some stuff like the medical, which was up 33% in the quarter from a 40% up last quarter. It's something that we're working on, but there's not a lot of easy fixes, quite frankly, in that one. We've done all the easy fixes when it comes to plan design and negotiating aggressively trying to bring costs down. It's a factor that every company faces these days.

[Sam Reid, Analyst at Wells Fargo]

Understood completely. I'll pass it on. Thanks.

[Michael Miller, CFO at Installed Building Products]

Yep.

[Operator]

Our next question is from Stephen Kim with Evercore ISI. Please proceed with your question.

[Stephen Kim, Analyst at Evercore ISI]

Hey, guys. Thanks for the opportunity to ask you guys some questions. It was a strong quarter from our perspective, particularly in other. I was curious if you could talk a little bit about the drivers of strength in that segment. Any particular verticals to call out there? Similarly in commercial, I think you indicated there was a lot of strength there and even in, I would say specifically in light commercial. If you could give us a sense for, was there anything there that wouldn't sort of extend strength-wise into the back half of the year?

[Michael Miller, CFO at Installed Building Products]

A couple things. Yes, the other division did very well. The 50% is on an as-reported basis and not on a same-branch basis. On a same-branch basis, the other segment grew like 28%, still a phenomenal result. Really, that's sort of across the board, both in distribution and in the manufacturing side. Our manufacturing there is cellulose insulation, as you know, and they're just doing a phenomenal job. The demand drivers there are a little bit different than they are for, say, the residential installation business because it's a lot of R&R and it's also a lot of industrial fibers and road fibers. They're seeing really solid demand there and the team is continuing to execute extremely well. Even though the gross margins are considerably lower than the installation division, they are improving those margins.

[Michael Miller, CFO at Installed Building Products]

We feel really good about what the team is doing there. On the commercial side, particularly the light commercial side, it has turned a little bit sooner than we expected, so we feel good about that. We believe it'll continue to be positive. Not significantly positive, but positive throughout the rest of the year. Of course, the heavy commercial business is clearly the star within the company right now in terms of their ability to continue to grow at a high rate of growth. Their same-branch sales growth for the heavy commercial business was roughly 16% in the quarter, down from higher percentages in the most recent couple of quarters, but clearly the comps are getting tougher and tougher. They continue to increase their backlog, despite the fact that they're putting up record revenue every month, and at good margins.

[Michael Miller, CFO at Installed Building Products]

We feel really good about the visibility we have into that business, and that it should continue to perform well through the rest of the back half of the year, albeit the rate of sales growth will come down as it hits the very difficult comps from the back half of last year.

[Stephen Kim, Analyst at Evercore ISI]

Gotcha. Yeah. Okay, it sounds like there wasn't anything really that should drive lumpiness in either other or commercial. You did indicate, though, that in the spray foam pricing dynamic, while certainly the trend is moving higher there, you indicated that there could be some lumpiness in 3Q. I was just curious, one, what is driving the lumpiness call-out in spray foam? Is it significant? Secondly, just to sort of clean up, you do not expect to see any kind of lumpiness in other or commercial in either 3Q or 4Q, right?

[Michael Miller, CFO at Installed Building Products]

Lumpiness, I would say no. Consistency, yes. Particularly, again, on the commercial side, I'll reiterate that the rate of growth is just coming against those really hard comps in the second half. My comment around the spray foam was really just that the price realization is new, and it's such a significant price increase. Just as a reference, it was approximately 25% increase in material cost. Some market participants are still kind of adjusting to that. We feel ultimately that we're going to come out of this, at minimum, margin neutral, obviously much higher from a dollars perspective, given the discipline in the spray foam contractor base. Just given the magnitude of the increase, there might be a little bit of churning lumpiness that goes on. It's still a little early to tell.

[Michael Miller, CFO at Installed Building Products]

We haven't really seen any demand destruction, if you will, in terms of conversion from spray foam to fiberglass. We'll have a much clearer picture as to how much of that happens when we report third quarter results.

[Stephen Kim, Analyst at Evercore ISI]

Yep. Gotcha. Okay, thanks so much, guys. Appreciate it.

[Michael Miller, CFO at Installed Building Products]

Sure.

[Operator]

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

[Phil Ng, Analyst at Jefferies]

Hey, guys. Congrats on a really strong quarter in a tough environment. Michael, your words, heavy commercial was a star yet again. Is there an opportunity to kind of scale that business up in a much bigger way, whether it's organically, M&A? Historically, your M&A on the resi install side has been smaller, bolt-on in nature. Are there chunkier assets on the heavy commercial side for insulation or maybe even pursuing commercial roofing on the contractor side? Any color there?

[Michael Miller, CFO at Installed Building Products]

I mean, the simple answer is yes, and yes. I'll let Brad talk about the organic opportunity on the heavy commercial side.

[Brad Wheeler, COO at Installed Building Products]

Sure. This is Brad. On the heavy side, yeah, we're doing our growth through our customer base. As they spread out, we're following those. Once we obviously build up additional contracts, we'll open up a brick and mortar and service that area. It's a little bit slower growth on the expansion, I should say, on that, but it's in our plan, and we continue to do it every day.

[Michael Miller, CFO at Installed Building Products]

Do you want to talk about M&A, other?

[Brad Wheeler, COO at Installed Building Products]

Well, I think you said it. There are absolutely larger prospects in terms of commercial contractors that would be there potentially on the acquisition side, we continue to be interested in commercial roofing business, you also mentioned so.

[Michael Miller, CFO at Installed Building Products]

Yeah.

[Brad Wheeler, COO at Installed Building Products]

Mechanical and industrial insulation.

[Michael Miller, CFO at Installed Building Products]

Yeah.

[Phil Ng, Analyst at Jefferies]

Okay. Super. Then, certainly your largest competitor on the resi installation side got taken out, right? Like any deal of that size, there will be change. Does that present an opportunity for you guys, whether it's share, talent, M&A? Just kind of help us think through potentially any ripple effects that could be good or bad for you guys.

[Michael Miller, CFO at Installed Building Products]

Yeah. I think it's still too early to tell. They're trying to figure out exactly what they have. Our continued belief is that on the installation side, they will continue to be a really good competitor and we'll continue to compete with them the same way we are today. We extend success.

[Phil Ng, Analyst at Jefferies]

Okay. Well, thank you. Appreciate the color, guys.

[Michael Miller, CFO at Installed Building Products]

Sure.

[Operator]

Our next question is from Keith Hughes with Truist Securities. Please proceed with your question.

[Keith Hughes, Analyst at Truist Securities]

Thank you. My question's on M&A. Jeff, you addressed a little bit a second ago on the opportunities and the various parts of non-residential. It's been a success for you here. Would you start to pick individual trades where you really ramp up and do a slug of deals around a certain commercial install trade? Or do you think it'll be more opportunistic in terms of doing different trades in that area?

[Michael Miller, CFO at Installed Building Products]

I think clearly we've kind of signaled and are continuing to try to signal that we'd like to buy a platform business in one of these kind of adjacent market segments or industry segments. I think clearly once we do that, the word will be out, and we will identify more deals that are kind of concentrated in one or two of those areas.

[Keith Hughes, Analyst at Truist Securities]

Your current heavy commercial, what kind of trade are you the biggest in right now? Is there one that sort of stands out?

[Michael Miller, CFO at Installed Building Products]

Waterproofing is probably our largest product right now, followed by fireproofing.

[Keith Hughes, Analyst at Truist Securities]

Okay, great. Thank you.

[Michael Miller, CFO at Installed Building Products]

Sure.

[Operator]

Our next question is from Trey Grooms with Stephens. Please proceed with your question.

[Ethan Roberts, Analyst at Stephens]

Hey, good morning, everyone. This is Ethan on for Trey. Thanks for taking the questions. I wanted to start off with multifamily. There's been some discussion recently around the validity of the census numbers, you guys mentioned that you guys feel pretty good about multifamily heading into the second half, your backlog continues to grow. That's maybe despite perhaps some projects slowing down. Any updated thoughts on the multifamily business would be great. Thanks.

[Michael Miller, CFO at Installed Building Products]

Yeah, we continue to feel good about it. I would agree that not so sure about the census numbers. Our kind of feeling is that at least where we sit today, that multifamily, excuse me, single family is probably going to be down, call it mid-single-digits, maybe even a little bit more, this year from a starts perspective. Year-to-date, multifamily starts are up like what? 10% or something like that. I think it would be more realistic to assume that multifamily starts are up mid-ish single-digits this year. I will say, and we feel pretty encouraged by this, our multifamily sales actually inflected positively in June and were positive in July as well. We're definitely seeing an inflection there based upon the growth in the backlog. Now, does that mean that we're going to have growth for the back half of the year?

[Michael Miller, CFO at Installed Building Products]

Certainly not going to guarantee that, but we are feeling encouraged by the trends that we're seeing there, sort of across the board. The team there continues to add to the backlog. Something to provide a little bit of color for you on the multifamily side, and we talked a little bit about this, I believe, last quarter, but our sales, so if you look at our sales, as a percentage of our sales, the South Census region represents roughly 60% of our multifamily revenue, whereas it only represents, this is the South Census region, is only 43% of total U.S. completions. Obviously, the implication there is our market share in the South Census region in multifamily is very strong, which it is. The growth that we're seeing from that South Census region right now in multifamily has been very solid.

[Ethan Roberts, Analyst at Stephens]

Okay. Yeah, that's great color. Shifting gears maybe, you guys bought back a decent amount of stock in the quarter. Really this is just a high level question around your thoughts internally around balancing M&A with buybacks, given where we are in the cycle, and then of course, understanding your signaled ambitions for a larger platform deal. If you could just remind us of any criteria you have around M&A, perhaps in terms of like a margin profile, returns, maybe where you'd be willing to flex from a leverage standpoint. Just any high level thoughts there would be great. Thanks.

[Michael Miller, CFO at Installed Building Products]

Sure. From an M&A perspective, especially if it's a platform deal, I think we would target a margin that is certainly not dilutive, potentially be accretive to the overall margin profile of the company. Right now, we are significantly below our stated two times of leverage. I think we've been very clear with investors that for the right deal or for the right set of deals, that we would take leverage up to as high as maybe three, recognizing that any businesses we buy and the existing business generate a tremendous amount of free cash flow, and that we would de-lever very quickly.

[Michael Miller, CFO at Installed Building Products]

One of the things that I think is absolutely worth highlighting. We've been in a very challenging operating environment for the past really four to five years. If you look at the consistency of performance of the business and our ability to produce record results year after year, gives us a lot of confidence in our ability to maybe put a little more leverage on the balance sheet and use the free cash flow generating capabilities of both the existing, the current business, and any future business that we buy. We feel very good about that. Going back to the first part of your question, M&A is definitely priority number one. At the same time, stock repurchases are important to us. The reality is we've done extremely well financially by repurchasing our shares.

[Michael Miller, CFO at Installed Building Products]

We will continue to do that. I will caveat that with saying that M&A is number one.

[Ethan Roberts, Analyst at Stephens]

Right. That's all very helpful. Thanks so much.

[Michael Miller, CFO at Installed Building Products]

Sure.

[Operator]

Our next question is from Ken Zener with Seaport Research. Please proceed with your question.

[Ken Zener, Analyst at Seaport Research]

Good morning, everybody.

[Michael Miller, CFO at Installed Building Products]

Good morning.

[Ken Zener, Analyst at Seaport Research]

I'm sure I'll take some of this offline with you, Michael, it seems like you're disclosing more information again. These gross margins in installation that you highlighted, 36.5% versus 37.1%, and on the product side, 24.7% versus 23%. You said you'd disclose some more information. Can you tie off when you say those gross margins just for my benefit, I guess others as well, what part sales is the installation that you're referring to on gross margin? Is which in your new disclosure or your expanded disclosure in your presentation? Is that the normal installation for just commercial and residential, not the other products, which would be fireproofing, closets, et cetera?

[Michael Miller, CFO at Installed Building Products]

No, it's anything that's installed. It's the entire installation segment, including the complementary products. What it excludes is the manufacturing operations, which are the cellulose manufacturing facilities, and then the distribution business.

[Ken Zener, Analyst at Seaport Research]

Okay. Okay, good. That's what I thought. I just wanted to make sure that I wasn't missing something. The private mix, which has more spray foam and has absorbed, you're saying favorably to spray foam. Is that really your market share is better there, or the price increase is so big that they just have no choice but to take it from you and for others?

[Michael Miller, CFO at Installed Building Products]

Yeah, it's still very early, right? The price increase from the manufacturers really took effect later in the quarter. The early signs are that, yes, the market is taking the price increase. That happens for two reasons. One, I would say, generally speaking, the spray foam contractor base is very disciplined around price. Two, it is a semi-custom, custom product, and that homeowner is much more able to accept price increases than, say, an entry-level home.

[Ken Zener, Analyst at Seaport Research]

Related to that last point, if you would, appreciate it. Could you describe the revenue mix as you describe the publics in terms of the public share of revenue and units? Thank you very much.

[Michael Miller, CFO at Installed Building Products]

Well, the publics are roughly 25% of total single-family revenue, which translates into about 15% of total revenue.

[Ken Zener, Analyst at Seaport Research]

Units?

[Michael Miller, CFO at Installed Building Products]

Yeah. The units, generally speaking, it's like 10 points more. That would be, say, 35% of single-family jobs, if you will. We like to look at it in terms of revenue. We think that's the more accurate way to do it. Because their average selling price, their average ASP and our average selling price to them, average job price is much lower. Obviously, that means the volume number of jobs is going to be considerably higher. Just as a reference too for everybody, the difference between spray foam and, excuse me, fiberglass, just sort of the level set for people is that fiberglass excuse me, is roughly 50% of revenue, whereas spray foam is roughly 11% of revenue.

[Ken Zener, Analyst at Seaport Research]

Thank you very much.

[Michael Miller, CFO at Installed Building Products]

Sure.

[Operator]

Our next question is from Mike Dahl with RBC Capital Markets. Please proceed with your question.

[Mike Dahl, Analyst at RBC Capital Markets]

Morning. Thanks for taking my questions. Quick follow-up just on the spray foam dynamic. I think you mentioned that ultimately you expect this to be at least margin neutral. The comments about the potential bumpy 3Q, is that meant to suggest that in 3Q specifically, it might end up being a drag to margin percentage as there's a lag with that pass through?

[Michael Miller, CFO at Installed Building Products]

Yes, that was the implication.

[Mike Dahl, Analyst at RBC Capital Markets]

Okay. Thanks. Just wanted to clarify that. On the single-family side, obviously a lot of the publics are talking about and trying to execute at least somewhat of a shift back towards build to order and more actively reducing spec inventory. When you think about the back half of the year, appreciating that your comments that you historically have tracked what those public builder results would be, do you think that given that dynamic, there's a couple quarters, either late this year or early next year, where you end up kind of lagging what the builders are reporting on closings as they execute that shift, and there's maybe a little bit more of a timing difference between when your products are going in if they're not actively starting as many spec homes?

[Michael Miller, CFO at Installed Building Products]

Yeah, I think that's definitely the case. I do think a lot of that has already happened. Certainly it's going to be subdivision specific and builder specific. What is benefiting us, definitely to offset some of that spec inventory de-content, or not de-contenting, but declining in the spec inventory is the fact that community counts continue to be up. Obviously, if you open up a community, you have to have model homes and a couple homes just to make it look like a real subdivision. That is supporting the other side of your comment in terms of them trying to reduce spec inventory. That's really been going on for the past couple of quarters, quite frankly. We saw it pretty heavy in the first quarter, and we definitely saw a little bit of it in the second quarter for sure.

[Michael Miller, CFO at Installed Building Products]

All in all, I would say that it's pretty fair. Again, if we look at historical results, we track very closely their reported home building revenue.

[Mike Dahl, Analyst at RBC Capital Markets]

Okay. Yeah, that makes sense. Thinking about going forward, you'll revert back to what's historic norm in terms of timing of how we think about orders, starts, and your products.

[Michael Miller, CFO at Installed Building Products]

Correct. Yep. Their cycle times right now are phenomenal, right? It's incredible how tight their cycle times are.

[Mike Dahl, Analyst at RBC Capital Markets]

Yeah, for sure. Yep. Okay. Thank you.

[Operator]

Our next question is from Adam Baumgarten with Vertical Research Partners. Please proceed with your question.

[Adam Baumgarten, Analyst at Vertical Research Partners]

Hey, good morning, guys. Maybe this is a question for Jeff Heyer, just on the push out of the June fiberglass insulation manufacturer price increases to September. You think there's any chance that that sticks?

[Michael Miller, CFO at Installed Building Products]

Jeff's not here.

[Jeff Edwards, Chairman and CEO at Installed Building Products]

Jeff's not in the room, this is Jeff Edwards, and it's a healthy supply's still tight. As mentioned earlier, we're not having a problem or anything like that getting product. I guess it's probably anybody's guess at this point as to whether it sticks or not. As we talked about most of this call, it's not exactly an environment that probably warrants and accepts easily a price increase from a builder's perspective or anywhere in the chain, to be honest with you.

[Michael Miller, CFO at Installed Building Products]

Yeah, the dynamic's just not there. With more capacity coming online, that lends less likelihood of acceptance. I will say that we are in daily conversations with all the manufacturers around price right now.

[Adam Baumgarten, Analyst at Vertical Research Partners]

Okay, got it. Makes sense. Then, saw you did a relatively small mechanical insulation acquisition or an insulation acquisition in 2Q.

[Michael Miller, CFO at Installed Building Products]

Yeah

[Adam Baumgarten, Analyst at Vertical Research Partners]

That's a focus area for you guys. Can you talk about why that area of the insulation universe is attractive to you guys?

[Brad Wheeler, COO at Installed Building Products]

Yeah, this is Brad. Yeah. It's pretty much an adjacent product to a degree, right? When you compare a heavy and a residential, it's lots of light commercial and heavy, obviously. It's a semi-skilled to skilled trade, and obviously, it's in the insulation world, right? It's not a stretch for us to have the relationships with the manufacturers and understand the product. Over the time, over the years, it's become a more, not just with data centers, but with all heavy commercial, more insulation requirements, more content, and it's still a somewhat fragmented segment. It lends an opportunity for M&A as well.

[Jeff Edwards, Chairman and CEO at Installed Building Products]

Margins are good, the average contract is probably a little larger, too.

[Brad Wheeler, COO at Installed Building Products]

Right.

[Jeff Edwards, Chairman and CEO at Installed Building Products]

It's probably less cyclical in a lot of ways than the residential construction business and even some of the other commercial businesses. I think it's pretty attractive.

[Michael Miller, CFO at Installed Building Products]

Yeah. Has a big MRO component.

[Adam Baumgarten, Analyst at Vertical Research Partners]

You guys have the ability to buy direct in that as well, right?

[Michael Miller, CFO at Installed Building Products]

Actually, it really goes through distribution because of the number of SKUs. Unlike residential fiberglass, that you really have very few SKUs. You really need the distributor to hold, actually both the distributors and the manufacturers hold a lot of inventory in this product line, just given that there's so many SKUs. Really where the margin and differentiation comes in is in the labor force and managing the labor force. There is opportunity to improve, we believe, with scale volume advantage. That business for us, the M&I business for us, mechanical industrial business for us right now is about $50 million in revenue. We have a lot of opportunity there.

[Adam Baumgarten, Analyst at Vertical Research Partners]

Okay, great. Thanks. Best of luck.

[Michael Miller, CFO at Installed Building Products]

Sure.

[Operator]

Once again, if you would like to ask a question, please press star one on your telephone keypad. Our next question is from Kurt Yinger with D.A. Davidson. Please proceed with your question.

[Kurt Yinger, Analyst at D.A. Davidson]

Great. Thank you. Just one on price cost. I was kind of curious, looking at it through the lens of volume versus margin trade-offs with production builders. Can you just talk about maybe what you've seen over the last couple quarters and whether there's been any progression towards maybe needing to walk away from some business or be maybe even more disciplined in terms of how you're pricing jobs? That'd be great. Thank you.

[Michael Miller, CFO at Installed Building Products]

Yes. It's no surprise that at the entry level, builders are looking for any opportunity to reduce cost and make the house more affordable. The team does an excellent job of being selective when they need to, and continue to work very closely with our customers to make sure that we are paid a fair price for the installed solution that we're providing. The key is, and it is always been the case, that we're providing an installed solution or providing material and the labor, and that our pricing is not set at the national level. It's set at a very local level. We might be having pricing pressure with a customer in one market, but in another market that might be really strong, we're getting price. It is a constant negotiation, particularly in this kind of environment.

[Michael Miller, CFO at Installed Building Products]

I believe our results clearly reflect our team's ability to manage very effectively in what is, on the single-family side, a pretty challenging environment.

[Kurt Yinger, Analyst at D.A. Davidson]

Makes sense. Thank you.

[Michael Miller, CFO at Installed Building Products]

Sure.

[Operator]

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

[Jeff Edwards, Chairman and CEO at Installed Building Products]

I'd just like to thank you for your questions. I look forward to our next quarterly call. Thank you.

[Operator]

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Participants

Executives

• Ryan Ricketts, Director of Investor Relations and Financial Planning
• Jeff Edwards, Chairman and CEO
• Michael Miller, CFO
• Brad Wheeler, COO

Analysts

• Susan Maklari, Senior Equity Research Analyst at Goldman Sachs
• Sam Reid, Analyst at Wells Fargo
• Stephen Kim, Analyst at Evercore ISI
• Phil Ng, Analyst at Jefferies
• Keith Hughes, Analyst at Truist Securities
• Ethan Roberts, Analyst at Stephens
• Ken Zener, Analyst at Seaport Research
• Mike Dahl, Analyst at RBC Capital Markets
• Adam Baumgarten, Analyst at Vertical Research Partners
• Kurt Yinger, Analyst at D.A. Davidson