Installed Building Products Q1 Earnings Call Highlights

Key Points

• Installed Building Products’ Q1 revenue fell 4% to $661 million as extreme weather and softer new residential demand hurt results, with same-branch sales down 6%. Management said residential weakness, especially in entry-level production builders, offset strength elsewhere.
• Commercial business remained a bright spot, with same-branch commercial installation sales up 11% and heavy commercial up about 22%. The company also said commercial backlogs kept growing, helping offset weakness in multifamily and residential work.
• Profitability and cash flow stayed solid despite cost pressure, as adjusted EBITDA was $92 million and operating cash flow rose 11% to $102 million. IBP also completed four acquisitions, repurchased shares, and raised its quarterly dividend by more than 5%.

Installed Building Products NYSE: IBP reported lower first-quarter revenue as weather disruptions and weaker new residential demand weighed on results, while management pointed to continued strength in commercial work, acquisitions and cash generation as offsets.

Chairman and Chief Executive Officer Jeffrey Edwards said the company delivered “solid top-line results” despite extreme weather that reduced working days at several branches and created a previously disclosed $20 million missed revenue opportunity. He also said the macroeconomic backdrop shifted midway through the quarter, with geopolitical factors increasing uncertainty for U.S. consumers and making new home sales more challenging.

For the first quarter of 2026, consolidated net revenue fell 4% to $661 million from $685 million in the prior-year period. Same-branch sales declined 6%, with strength in commercial installation more than offset by residential weakness.

Residential Weakness Offsets Commercial Growth

Edwards said new single-family activity was “slower than we had hoped” by this point in the spring selling season, though some geographic markets were more upbeat than others. Chief Financial Officer Michael Miller said same-branch sales in the installation segment declined 7%, as an 11% drop in new residential same-branch sales was partially offset by an 11% increase in commercial same-branch sales.

Volume declined 10% in the quarter, which Miller said was partially caused by adverse weather. Price mix was flat overall, though it increased 3% when including heavy commercial.

Management said the entry-level production builder market remained the weakest part of residential demand. Miller said that segment represents about 14% of total revenue and has experienced pricing pressure. By contrast, he said pricing with private, regional, local and custom or semi-custom builders remained solid, and private builder business turned positive in April.

The company cited U.S. Census Bureau data showing first-quarter single-family starts declined 6% from a year earlier, while multifamily starts rose 21%. However, Miller cautioned that management was not placing much confidence in month-to-month Census data, particularly given the potential for revisions and volatility in multifamily figures.

Heavy Commercial Remains a Bright Spot

Commercial remained the strongest part of the business. Edwards said same-branch commercial sales in the installation segment rose 11% from the prior-year quarter, driven primarily by heavy commercial, which more than offset weakness in light commercial.

Miller said heavy commercial sales grew about 22% in the quarter and were up more than 20% in April. He said the growth was not driven by data centers, where the company is under-indexed, but instead came across multiple verticals. Management said heavy commercial backlogs continued to grow even as that business produced record revenue levels.

On multifamily, Miller said management remained encouraged by the company’s backlog and market share gains, though some projects are being “slow walked” by general contractors. Same-branch multifamily revenue declined about 10% in the quarter, while high-rise multifamily, a small portion of total revenue, fell nearly 50%. Miller said high-rise multifamily backlogs turned positive in the mid-single digits during the quarter, while traditional multifamily backlogs continued to grow.

Margins Pressured by Lower Volume and Insurance Costs

Adjusted gross margin was 32.2%, down from 32.7% a year earlier. Miller said the figure remained within the company’s full-year target range of 32% to 34%, but lower volume pressured margins because some costs are semi-variable rather than directly tied to sales.

Miller said product margin improved 70 basis points year over year, and heavy commercial contributed 20 basis points of gross margin improvement. Those gains were offset by several headwinds, including a 20-basis-point impact from complementary products, a 40-basis-point impact from distribution and manufacturing operations, a 30-basis-point impact from depreciation within cost of goods sold and a 30-basis-point impact from vehicle insurance.

Adjusted selling and administrative expenses were stable in dollar terms compared with the prior-year quarter, but increased to 20.9% of sales from 20.1%. Miller said administrative costs were affected by higher medical and general liability insurance costs, which were 36% higher than a year earlier, along with higher facility costs. During the question-and-answer session, he said medical insurance rose almost 40%, facility costs rose 12% and liability insurance rose 35% in the quarter.

Adjusted EBITDA was $92 million, with an adjusted EBITDA margin of 13.9%. Adjusted net income was $48 million, or $1.79 per diluted share.

Management Discusses Pricing and Cost Inflation

In response to an analyst question about insulation pricing, Miller said the current fiberglass market does not support a price increase because demand is not strong and material supply is readily available. He added that one manufacturer is preparing to bring a significant amount of capacity back online, and Edwards said there is “absolutely no tightness” in material flow.

Spray foam was a different story. Miller said manufacturers had announced two price increases amounting to about 25%, and management believes the market will absorb a substantial percentage of the increase because manufacturers’ costs have risen significantly. Spray foam represents about 11% of Installed Building Products’ total sales, according to Miller, and he said the increases should benefit price mix in the back half of the year.

Miller also pointed to cost pressure in gutters, which account for about 6% of revenue, as aluminum costs are up 20%. He said fuel costs could add $15 million to $20 million to other cost of goods sold for the rest of the year, or a little more than $5 million per quarter, based on current fuel prices.

Acquisitions, Cash Flow and Capital Returns

Installed Building Products completed four acquisitions during the quarter, representing about $28 million of annual sales across residential and commercial end markets. Edwards said the acquisitions included insulation installers in Texas, Louisiana, Arkansas, Oklahoma and Kansas, a mechanical insulation services provider serving several Midwestern states, and a waterproofing installer in Minnesota.

Edwards said the company’s acquisition outlook for 2026 is strong and management expects to acquire at least $100 million of annual revenue this year. He said the mechanical and industrial insulation area remains a focus.

Cash flow from operations increased 11% year over year to $102 million. The company ended the quarter with $474 million in cash and a net debt to trailing 12-month adjusted EBITDA leverage ratio of 1.2 times, below its stated target of 2 times.

During the quarter, the company repurchased about 91,000 shares for $25 million. As of March 31, it had approximately $475 million remaining under its stock repurchase program, which expires March 1, 2027. The board approved a quarterly dividend of $0.39 per share, payable June 30 to stockholders of record on June 15, representing an increase of more than 5% from the prior-year period.

Edwards also noted a leadership change in investor relations, thanking Darren for his contributions over the past five years and announcing that Ryan Ricketts has been appointed director of investor relations and financial planning.

About Installed Building Products NYSE: IBP

Installed Building Products, Inc 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.

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