UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2022~~March 31, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period From _________ To ________

Commission File Number: 001-36307

Installed Building Products, Inc.

(Exact name of registrant as specified in its charter)


Delaware									45-3707650
(State or other jurisdiction of incorporation or organization)									(I.R.S. Employer Identification No.)

495 South High Street, Suite 50
Columbus, Ohio									43215
(Address of principal executive offices)									(Zip Code)

(614) 221-3399

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock,

$0.01 par value per share

IBP

The New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by a check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b–2 of the Exchange Act). Yes ☐ No ☒

On ~~October~~April 27, ~~2022,~~2023, the registrant had ~~28,603,412~~28,404,505 shares of common stock, par value $0.01 per share, outstanding.

Table of Contents

TABLE OF CONTENTS

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

INSTALLED BUILDING PRODUCTS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands, except share and per share amounts)


		September 30,		December 31,			March 31,		December 31,
		2022		2021			2023		2022
ASSETS	ASSETS					ASSETS
Current assets	Current assets					Current assets
Cash and cash equivalents	Cash and cash equivalents	$	203,402	$	333,485	Cash and cash equivalents	$	218,690	$	229,627
Investments		24,996		—
Accounts receivable (less allowance for credit losses of $9,083 and $8,717 at September 30, 2022 and December 31, 2021, respectively)		415,657		312,767

Accounts receivable (less allowance for credit losses of $10,059 and $9,549 at March 31, 2023 and December 31, 2022, respectively)						Accounts receivable (less allowance for credit losses of $10,059 and $9,549 at March 31, 2023 and December 31, 2022, respectively)	397,573		397,222
Inventories	Inventories	182,176		143,039		Inventories	170,115		176,629
Prepaid expenses and other current assets	Prepaid expenses and other current assets	71,790		70,025		Prepaid expenses and other current assets	76,217		80,933
Total current assets	Total current assets	898,021		859,316		Total current assets	862,595		884,411
Property and equipment, net	Property and equipment, net	115,479		105,933		Property and equipment, net	126,384		118,774
Operating lease right-of-use assets	Operating lease right-of-use assets	72,226		69,871		Operating lease right-of-use assets	74,602		76,174
Goodwill	Goodwill	356,612		322,517		Goodwill	392,625		373,555
Customer relationships, net	Customer relationships, net	184,225		178,264		Customer relationships, net	194,850		192,328
Other intangibles, net	Other intangibles, net	91,613		86,157		Other intangibles, net	94,751		91,145
Other non-current assets	Other non-current assets	45,675		31,144		Other non-current assets	33,756		42,545
Total assets	Total assets	$	1,763,851	$	1,653,202	Total assets	$	1,779,563	$	1,778,932
LIABILITIES AND STOCKHOLDERS' EQUITY	LIABILITIES AND STOCKHOLDERS' EQUITY					LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities	Current liabilities					Current liabilities
Current maturities of long-term debt	Current maturities of long-term debt	$	30,494	$	30,839	Current maturities of long-term debt	$	31,165	$	30,983
Current maturities of operating lease obligations	Current maturities of operating lease obligations	25,414		23,224		Current maturities of operating lease obligations	26,000		26,145
Current maturities of finance lease obligations	Current maturities of finance lease obligations	2,275		1,747		Current maturities of finance lease obligations	2,588		2,508
Accounts payable	Accounts payable	156,117		132,705		Accounts payable	134,836		149,186
Accrued compensation	Accrued compensation	61,453		50,964		Accrued compensation	45,613		51,608
Other current liabilities	Other current liabilities	82,809		68,090		Other current liabilities	76,136		67,631
Total current liabilities	Total current liabilities	358,562		307,569		Total current liabilities	316,338		328,061
Long-term debt	Long-term debt	827,906		832,193		Long-term debt	830,225		830,171
Operating lease obligations	Operating lease obligations	46,640		46,075		Operating lease obligations	48,339		49,789
Finance lease obligations	Finance lease obligations	5,469		3,297		Finance lease obligations	6,559		6,397
Deferred income taxes	Deferred income taxes	19,901		4,819		Deferred income taxes	25,993		28,458
Other long-term liabilities	Other long-term liabilities	47,859		42,409		Other long-term liabilities	46,887		42,557
Total liabilities	Total liabilities	1,306,337		1,236,362		Total liabilities	1,274,341		1,285,433
Commitments and contingencies (Note 16)	Commitments and contingencies (Note 16)					Commitments and contingencies (Note 16)
Stockholders’ equity	Stockholders’ equity					Stockholders’ equity
Preferred Stock; $0.01 par value: 5,000,000 authorized and 0 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively		—		—
Common stock; $0.01 par value: 100,000,000 authorized, 33,429,557 and 33,271,659 issued and 28,604,098 and 29,706,401 shares outstanding at September 30, 2022 and December 31, 2021, respectively		334		333
Preferred Stock; $0.01 par value: 5,000,000 authorized and 0 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively						Preferred Stock; $0.01 par value: 5,000,000 authorized and 0 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively	—		—
Common stock; $0.01 par value: 100,000,000 authorized, 33,498,693 and 33,429,557 issued and 28,375,037 and 28,306,482 shares outstanding at March 31, 2023 and December 31, 2022, respectively						Common stock; $0.01 par value: 100,000,000 authorized, 33,498,693 and 33,429,557 issued and 28,375,037 and 28,306,482 shares outstanding at March 31, 2023 and December 31, 2022, respectively	335		334
Additional paid in capital	Additional paid in capital	225,377		211,430		Additional paid in capital	232,503		228,827
Retained earnings	Retained earnings	453,286		352,543		Retained earnings	527,468		513,095
Treasury stock; at cost: 4,825,459 and 3,565,258 shares at September 30, 2022 and December 31, 2021, respectively		(263,896)		(147,239)
Accumulated other comprehensive income (loss)		42,413		(227)
Treasury stock; at cost: 5,123,656 and 5,123,075 shares at March 31, 2023 and December 31, 2022, respectively						Treasury stock; at cost: 5,123,656 and 5,123,075 shares at March 31, 2023 and December 31, 2022, respectively	(289,335)		(289,317)
Accumulated other comprehensive income						Accumulated other comprehensive income	34,251		40,560
Total stockholders’ equity	Total stockholders’ equity	457,514		416,840		Total stockholders’ equity	505,222		493,499
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	1,763,851	$	1,653,202	Total liabilities and stockholders’ equity	$	1,779,563	$	1,778,932

See accompanying notes to consolidated financial statements

Table of Contents

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 30,				Nine months ended September 30,					Three months ended March 31,
		2022		2021		2022		2021			2023		2022
Net revenue	Net revenue	$	719,114	$	509,763	$	1,983,355	$	1,434,927	Net revenue	$	659,309	$	587,492
Cost of sales	Cost of sales	497,837		353,879		1,372,966		1,001,730		Cost of sales	448,887		415,089
Gross profit	Gross profit	221,277		155,884		610,389		433,197		Gross profit	210,422		172,403
Operating expenses	Operating expenses									Operating expenses
Selling	Selling	31,651		24,188		86,214		67,677		Selling	32,607		25,192
Administrative	Administrative	84,345		68,056		247,519		199,607		Administrative	89,504		79,144
Amortization	Amortization	11,370		9,224		33,728		26,798		Amortization	11,435		11,097
Operating income	Operating income	93,911		54,416		242,928		139,115		Operating income	76,876		56,970
Other expense, net	Other expense, net									Other expense, net
Interest expense, net	Interest expense, net	10,668		7,687		31,669		22,781		Interest expense, net	9,670		10,600
Other expense (income)		185		(483)		698		(494)
Other (income) expense										Other (income) expense	(153)		145
Income before income taxes	Income before income taxes	83,058		47,212		210,561		116,828		Income before income taxes	67,359		46,225
Income tax provision	Income tax provision	22,080		12,320		55,857		27,432		Income tax provision	18,085		12,403
Net income	Net income	$	60,978	$	34,892	$	154,704	$	89,396	Net income	$	49,274	$	33,822
Other comprehensive income, net of tax:
Net change on cash flow hedges, net of tax provision of $(5,105) and $(454) for the three months ended September 30, 2022 and 2021, respectively, and $(15,138) and $(2,638) for the nine months ended September 30, 2022 and 2021, respectively		14,379		1,292		42,640		7,762
Other comprehensive (loss) income, net of tax:										Other comprehensive (loss) income, net of tax:
Net change on cash flow hedges, net of tax benefit (provision) of $2,252 and $(6,430) for the three months ended March 31, 2023 and 2022, respectively.										Net change on cash flow hedges, net of tax benefit (provision) of $2,252 and $(6,430) for the three months ended March 31, 2023 and 2022, respectively.	(6,309)		18,111
Comprehensive income	Comprehensive income	$	75,357	$	36,184	$	197,344	$	97,158	Comprehensive income	$	42,965	$	51,933
Earnings Per Share:	Earnings Per Share:									Earnings Per Share:
Basic	Basic	$	2.14	$	1.19	$	5.36	$	3.05	Basic	$	1.76	$	1.15
Diluted	Diluted	$	2.13	$	1.18	$	5.33	$	3.02	Diluted	$	1.74	$	1.14
Weighted average shares outstanding:	Weighted average shares outstanding:									Weighted average shares outstanding:
Basic	Basic	28,478,954		29,404,257		28,851,389		29,355,538		Basic	28,075,678		29,302,396
Diluted	Diluted	28,595,707		29,620,748		29,020,509		29,615,162		Diluted	28,278,220		29,580,731

Cash dividends declared per share	Cash dividends declared per share	$	0.32	$	0.30	$	1.85	$	0.90	Cash dividends declared per share	$	1.23	$	1.22

See accompanying notes to consolidated financial statements

Table of Contents

INSTALLED BUILDING PRODUCTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)

FOR THE THREE MONTHS ENDED ~~SEPTEMBER 30, 2021~~MARCH 31, 2022 AND ~~SEPTEMBER 30, 2022~~MARCH 31, 2023

(in thousands, except share and per share amounts)

Common Stock Additional
Paid In
Capital Retained
Earnings Treasury Stock Accumulated
Other
Comprehensive
Loss Stockholders’
Equity
Shares Amount Shares Amount
BALANCE - July 1, 2021 33,264,517 $ 333 $ 205,597 $ 306,107 (3,562,942) $ (147,204) $ (2,293) $ 362,540
Net income 34,892 34,892
Issuance of common stock awards to employees 7,142 — —
Surrender of common stock awards (1,562) (24) (24)
Share-based compensation expense 2,812 2,812
Share-based compensation issued to directors 126 126
Dividend declared ($0.30 per share) (8,912) (8,912)
Other comprehensive income, net of tax 1,292 1,292
BALANCE - September 30, 2021 33,271,659 $ 333 $ 208,535 $ 332,087 (3,564,504) $ (147,228) $ (1,001) $ 392,726
Common Stock Additional
Paid In
Capital Retained
Earnings Treasury Stock Accumulated Other
Comprehensive Income Stockholders’
Equity
Shares Amount Shares Amount
BALANCE - July 1, 2022 33,428,587 $ 334 $ 222,270 $ 401,326 (4,682,973) $ (251,363) $ 28,034 $ 400,601
Net income 60,978 60,978
Surrender of common stock awards (554) (5) (5)
Share-based compensation expense 2,967 2,967
Share-based compensation issued to directors 970 140 140
Dividends declared ($0.32 per share) (9,018) (9,018)
Common stock repurchase (141,932) (12,528) (12,528)
Other comprehensive income, net of tax 14,379 14,379
BALANCE - September 30, 2022 33,429,557 $ 334 $ 225,377 $ 453,286 (4,825,459) $ (263,896) $ 42,413 $ 457,514


	Common Stock			Additional Paid In Capital		Retained Earnings		Treasury Stock			Accumulated Other Comprehensive (Loss) Income		Stockholders’ Equity
	Shares	Amount						Shares	Amount
BALANCE - January 1, 2022	33,271,659	$	333	$	211,430	$	352,543	(3,565,258)	$	(147,239)	$	(227)	$	416,840
Net income						33,822							33,822
Issuance of common stock awards to employees	40,980	1		(1)									—
Surrender of common stock awards								(50)	—				—
Share-based compensation expense				3,089									3,089
Share-based compensation issued to directors				124									124
Issuance of awards previously classified as liability awards	39,204			4,000									4,000
Dividends declared ($1.22 per share)						(35,890)							(35,890)
Common Stock repurchase								(510,943)	(49,865)				(49,865)
Other comprehensive income, net of tax											18,111		18,111
BALANCE - March 31, 2022	33,351,843	$	334	$	218,642	$	350,475	(4,076,251)	$	(197,104)	$	17,884	$	390,231

	Common Stock			Additional Paid In Capital		Retained Earnings		Treasury Stock			Accumulated Other Comprehensive Income		Stockholders’ Equity
	Shares	Amount						Shares	Amount
BALANCE - January 1, 2023	33,429,557	$	334	$	228,827	$	513,095	(5,123,075)	$	(289,317)	$	40,560	$	493,499
Net income						49,274							49,274

Issuance of common stock awards to employees	69,136	1		(1)									—
Surrender of common stock awards								(581)	(18)				(18)
Share-based compensation expense				3,529									3,529
Share-based compensation issued to directors				148									148

Dividends declared ($1.23 per share)						(34,901)							(34,901)

Other comprehensive (loss), net of tax											(6,309)		(6,309)
BALANCE - March 31, 2023	33,498,693	$	335	$	232,503	$	527,468	(5,123,656)	$	(289,335)	$	34,251	$	505,222

See accompanying notes to consolidated financial statements

Table of Contents

INSTALLED BUILDING PRODUCTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF ~~STOCKHOLDERS’ EQUITY~~CASH FLOWS (UNAUDITED) ~~FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021 AND SEPTEMBER 30, 2022~~

(in ~~thousands, except share amounts)~~thousands)

Common Stock Additional
Paid In
Capital Retained
Earnings Treasury Stock Accumulated Other
Comprehensive Loss Stockholders’
Equity
Shares Amount Shares Amount
BALANCE - January 1, 2021 33,141,879 $ 331 $ 199,847 $ 269,420 (3,518,607) $ (141,653) $ (8,763) $ 319,182
Net income 89,396 89,396
Issuance of common stock awards to employees 125,550 2 (2) —
Surrender of common stock awards (45,897) (5,575) (5,575)
Share-based compensation expense 8,351 8,351
Share-based compensation issued to directors 4,230 339 339
Dividends declared ($0.90 per share) (26,729) (26,729)
Other comprehensive income, net of tax 7,762 7,762
BALANCE - September 30, 2021 33,271,659 $ 333 $ 208,535 $ 332,087 (3,564,504) $ (147,228) $ (1,001) $ 392,726
Common Stock Additional
Paid In
Capital Retained
Earnings Treasury Stock Accumulated Other
Comprehensive Income (Loss) Stockholders’
Equity
Shares Amount Shares Amount
BALANCE - January 1, 2022 33,271,659 $ 333 $ 211,430 $ 352,543 (3,565,258) $ (147,239) $ (227) $ 416,840
Net income 154,704 154,704
Issuance of common stock awards to employees 112,389 1 (1) —
Surrender of common stock awards (53,599) (4,464) (4,464)
Share-based compensation expense 9,559 9,559
Share-based compensation issued to directors 6,305 389 389
Issuance of awards previously classified as liability awards 39,204 4,000 4,000
Dividends declared ($1.85 per share) (53,961) (53,961)
Common stock repurchase (1,206,602) (112,193) (112,193)
Other comprehensive income, net of tax 42,640 42,640
BALANCE - September 30, 2022 33,429,557 $ 334 $ 225,377 $ 453,286 (4,825,459) $ (263,896) $ 42,413 $ 457,514


	Three months ended March 31,
	2023		2022
Cash flows from operating activities
Net income	$	49,274	$	33,822
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization of property and equipment	12,525		11,329
Amortization of operating lease right-of-use assets	7,316		6,371
Amortization of intangibles	11,435		11,097
Amortization of deferred financing costs and debt discount	475		484
Provision for credit losses	1,678		653
Gain on sale of property and equipment	(639)		(92)
Noncash stock compensation	3,436		3,418

Other, net	(2,523)		790
Changes in assets and liabilities, excluding effects of acquisitions
Accounts receivable	1,716		(32,700)
Inventories	7,699		(16,300)

Other assets	4,434		169
Accounts payable	(16,906)		16,486
Income taxes receivable/payable	16,450		11,433
Other liabilities	(22,537)		1,265
Net cash provided by operating activities	73,833		48,225
Cash flows from investing activities
Purchases of investments	—		(49,957)


Purchases of property and equipment	(14,949)		(10,362)
Acquisitions of businesses, net of cash acquired of $10 and $0 in 2023 and 2022, respectively	(38,008)		(8,050)
Proceeds from sale of property and equipment	741		265

Other	4,602		(614)
Net cash used in investing activities	$	(47,614)	$	(68,718)

See accompanying notes to consolidated financial statements

Table of Contents

INSTALLED BUILDING PRODUCTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS ~~(UNAUDITED)~~(UNAUDITED, CONTINUED)

(in thousands)

Nine months ended September 30,
2022 2021
Cash flows from operating activities
Net income $ 154,704 $ 89,396
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization of property and equipment 35,153 32,498
Amortization of operating lease right-of-use assets 19,832 16,464
Amortization of intangibles 33,728 26,798
Amortization of deferred financing costs and debt discount 1,436 993
Provision for credit losses 2,754 1,135
Gain on sale of property and equipment (1,048) (1,405)
Noncash stock compensation 10,290 10,228
Other, net 1,509 2,414
Changes in assets and liabilities, excluding effects of acquisitions
Accounts receivable (98,528) (23,224)
Inventories (23,071) (37,122)
Proceeds from termination of interest rate swap agreements 25,462 —
Other assets 4,773 (8,116)
Accounts payable 20,290 14,120
Income taxes receivable/payable 12,354 (107)
Other liabilities (971) (7,594)
Net cash provided by operating activities 198,667 116,478
Cash flows from investing activities
Purchases of investments (344,388) —
Maturities of short term investments 320,000 —
Purchases of property and equipment (35,212) (27,898)
Acquisitions of businesses, net of cash acquired of $330 and $1,640 in 2022 and 2021, respectively (75,779) (94,500)
Proceeds from sale of property and equipment 1,418 2,219
Other (5,974) (1,430)
Net cash used in investing activities (139,935) (121,609)
Cash flows from financing activities
Payments on Term Loan (3,750) —
Proceeds from vehicle and equipment notes payable 20,492 20,753
Debt issuance costs (655) —
Principal payments on long-term debt (23,340) (19,688)
Principal payments on finance lease obligations (1,661) (1,573)
Dividends paid (53,821) (26,428)
Acquisition-related obligations (9,423) (2,442)
Repurchase of common stock (112,193) —
Surrender of common stock awards by employees (4,464) (5,576)
Net cash used in financing activities (188,815) (34,954)
Net change in cash and cash equivalents (130,083) (40,085)
Cash and cash equivalents at beginning of period 333,485 231,520
Cash and cash equivalents at end of period $ 203,402 $ 191,435
Supplemental disclosures of cash flow information
Net cash paid during the period for:
Interest $ 40,639 $ 23,748
Income taxes, net of refunds 43,512 27,428
Supplemental disclosure of noncash activities
Right-of-use assets obtained in exchange for operating lease obligations 22,056 23,543
Release of indemnification of acquisition-related debt 980 2,036
Property and equipment obtained in exchange for finance lease obligations 4,411 1,918
Seller obligations in connection with acquisition of businesses 25,534 18,987
Unpaid purchases of property and equipment included in accounts payable 857 1,327




	Three months ended March 31,
	2023		2022
Cash flows from financing activities
Payments on Term Loan	$	(1,250)	$	(1,250)
Proceeds from vehicle and equipment notes payable	8,119		4,752
Debt issuance costs	—		(627)
Principal payments on long-term debt	(7,024)		(6,618)

Principal payments on finance lease obligations	(727)		(521)
Dividends paid	(34,536)		(35,426)
Acquisition-related obligations	(1,720)		(6,003)

Repurchase of common stock	—		(49,865)
Surrender of common stock awards by employees	(18)		—
Net cash used in financing activities	(37,156)		(95,558)
Net change in cash and cash equivalents	(10,937)		(116,051)
Cash and cash equivalents at beginning of period	229,627		333,485
Cash and cash equivalents at end of period	$	218,690	$	217,434
Supplemental disclosures of cash flow information
Net cash paid during the period for:
Interest	$	14,658	$	14,293
Income taxes, net of refunds	1,524		1,088
Supplemental disclosure of noncash activities
Right-of-use assets obtained in exchange for operating lease obligations	$	5,650	$	5,514

Property and equipment obtained in exchange for finance lease obligations	957		544
Seller obligations in connection with acquisition of businesses	6,035		1,878
Unpaid purchases of property and equipment included in accounts payable	2,316		1,884

See accompanying notes to consolidated financial statements

Table of Contents

INSTALLED BUILDING PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1 - ORGANIZATION

Installed Building Products (“IBP”), a Delaware corporation formed on October 28, 2011, and its wholly-owned subsidiaries (collectively referred to as the “Company,” and “we,” “us” and “our”) primarily install insulation, 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 operates in more than ~~220~~240 locations and its corporate office is located in Columbus, Ohio.

~~In the first quarter of 2022, we realigned our operating segments to reflect recent changes in our business. We have three operating segments consisting~~The vast majority of our ~~Installation, Manufacturing and Distribution operations. The Installation operating segment is also~~sales originate from our one reportable ~~segment. See Note 10, Information on Segments, for further information.~~

segment, Installation. Substantially all of our Installation segment sales are derived from the service-based installation of various products in the residential new construction, repair and remodel and commercial construction end markets from our national network of branch locations. Each of our Installation branches has the capacity to serve all of our end markets. See Note 3, Revenue Recognition, for information on our revenues by product and end ~~market.~~

~~The COVID-19 pandemic ("COVID-19") has caused significant volatility, uncertainty~~market, and ~~economic disruption. Public health organizations and international, federal, state and local governments responded by implementing measures during various points of~~see Note 10, Information on Segments, for information on how we segment the pandemic to contain the spread of COVID-19. We do not believe the various orders and restrictions significantly impacted our business in the first nine months of 2022. However, COVID-19 has caused disruptions in the building products supply chain, impacting our ability to purchase certain materials we install through typical channels and fueling producer price and consumer inflation. The extent to which COVID-19 will impact our future growth, operations, customers, suppliers, employees and financial results is uncertain. The future impact on our financial results will depend on numerous factors including government actions and the resulting impact on construction activity, the effect on our customers’ demand for our services, the effects on our supply chain for materials, and the ability of our customers to pay for our services.business.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Principles of Consolidation

The accompanying consolidated financial statements include all of our wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated.

The information furnished in the Condensed Consolidated Financial Statements includes normal recurring adjustments and reflects all adjustments which are, in the opinion of management, necessary for a fair presentation of the results of operations and statements of financial position for the interim periods presented. Certain information and footnote disclosures normally included in the consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the rules and regulations of the Securities and Exchange Commission (the “SEC”) have been omitted pursuant to such rules and regulations. We believe that the disclosures are adequate to prevent the information presented from being misleading when read in conjunction with our audited consolidated financial statements and the notes thereto included in Part II, Item 8, Financial Statements and Supplementary Data, of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021 (the “2021~~2022 (“2022 Form 10-K”), as filed with the SEC on February ~~24, 2022.~~22, 2023. The December 31, ~~2021~~2022 Condensed Consolidated Balance Sheet data herein was derived from the audited consolidated financial statements but ~~does~~the related footnotes do not include all disclosures required by U.S. GAAP.

Our interim operating results for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 are not necessarily indicative of the results to be expected in future operating quarters.

Note 2 to the audited consolidated financial statements in our ~~2021~~2022 Form 10-K describes the significant accounting policies and estimates used in preparation of the audited consolidated financial statements. Other than the recently implemented accounting ~~policies~~policy described below, there have been no changes to our significant accounting policies during the three ~~or nine~~ months ended ~~September 30, 2022.~~March 31, 2023.

Recently Adopted Accounting Pronouncements

Standard

Effective Date

Adoption

ASU 2021-08, Business Combinations (Topic 805): Accounting for contract assets and contract liabilities from contracts with customers

December 15, 2022

This pronouncement amended Topic 805 to require an acquirer to account for revenue contracts in a business combination in accordance with Topic 606 as if the acquirer had originated the contracts. This did not have a material impact on our consolidated financial statements

Table of Contents

INSTALLED BUILDING PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~Reclassifications~~

The change in reportable segments described in Note 1, Organization and Note 10, Information on Segments, requires certain prior year disclosures in Note 3, Revenue Recognition and Note 6, Goodwill and Intangibles to be recast to conform to the current year presentation.

Recently Issued Accounting Pronouncements Not Yet Adopted

We are currently evaluating the impact of the following Accounting Standards Update ("ASU") on our Condensed Consolidated Financial Statements or Notes to Condensed Consolidated Financial Statements:

Standard

Description

Effective Date

Effect on the financial statements or other significant matters

ASU ~~2021-08,~~ ~~Business Combinations~~2023-01 Leases (Topic ~~805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers~~842): Common Control Arrangements

This pronouncement amends Topic ~~805~~842 to require ~~an acquirer~~all entities to ~~account for revenue contracts in a business combination in accordance~~amortize leasehold improvements associated with ~~Topic 606 as if~~common control leases over the ~~acquirer had originated~~useful life to the ~~contracts.~~common control group.

Annual periods beginning after December 15, ~~2022,~~2023, including interim periods therein. Early adoption is permitted.

We are currently assessing the impact of adoption on our consolidated financial statements.

NOTE 3 - REVENUE RECOGNITION

Revenues for our Installation operating segment are derived primarily through contracts with customers whereby we install insulation and other complementary building products and are recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. We account for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable. We offer assurance-type warranties on certain of our installed products and services that do not represent a separate performance obligation and, as such, do not impact the timing or extent of revenue recognition.

For contracts that are not complete at the reporting date, we recognize revenue over time utilizing a cost-to-cost input method as we believe this represents the best measure of when goods and services are transferred to the customer. When this method is used, we estimate the costs to complete individual contracts and record as revenue that portion of the total contract price that is considered complete based on the relationship of costs incurred to date to total anticipated costs. Under the cost-to-cost method, the use of estimated costs to complete each contract is a significant variable in the process of determining recognized revenue, requires judgment and can change throughout the duration of a contract due to contract modifications and other factors impacting job completion. The costs of earned revenue include all direct material and labor costs and those indirect costs related to contract performance, such as indirect labor, supplies, tools and repairs. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined.

Our long-term contracts can be subject to modification to account for changes in contract specifications and requirements. We consider contract modifications to exist when the modification either creates new, or changes the existing, enforceable rights and obligations. Most of our contract modifications are for goods or services that are not distinct from the existing contract due to the significant integration service provided in the context of the contract and are accounted for as if they were part of that existing contract. The effect of a contract modification on the transaction price and our measure of progress for the performance obligation to which it relates, is recognized as an adjustment to revenue (either as an increase in or a reduction of revenue) on a cumulative catch-up basis.

Payment terms typically do not exceed 30 days for short-term contracts and typically do not exceed 60 days for long-term contracts with customers. All contracts are billed either contractually or as work is performed. Billing on our long-term contracts occurs primarily on a monthly basis throughout the contract period whereby we submit invoices for customer payment based on actual or estimated costs incurred during the billing period. On certain of our long-term contracts the customer may withhold payment on an invoice equal to a percentage of the invoice amount, which will be subsequently paid after satisfactory completion of each installation project. This amount is referred to as retainage and is common practice in the construction industry, as it allows for customers to ensure the quality of the service performed prior to full payment. Retainage receivables are classified as current or long-term assets based on the expected time to project completion.

~~Table of Contents~~

~~INSTALLED BUILDING PRODUCTS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

Revenues for our Distribution and Manufacturing operating segments included in the Other category are accounted for on a point-in-time basis when the sale occurs, adjusted accordingly for any return provisions. Sales taxes are not included in revenue as we act as a conduit for collecting and remitting sales taxes to the appropriate government authorities. The point-in-time recognition is when we transfer the promised products to the customer and the customer obtains control of the products depending upon the agreed upon terms in the contract.

We disaggregate our revenue from contracts with customers for our Installation segment by end market and product, as we believe it best depicts how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors. Revenues for the Other category are presented net of intercompany sales in the tables below. The following tables present our net revenues disaggregated by end market and product (in thousands):


		Three months ended September 30,								Nine months ended September 30,									Three months ended March 31,
		2022				2021				2022				2021					2023				2022
Installation:	Installation:																	Installation:
Residential new construction	Residential new construction	$	532,299	74	%	$	385,401	76	%	$	1,480,214	75	%	$	1,082,379	75	%	Residential new construction	$	475,095	72	%	$	442,404	75	%
Repair and remodel	Repair and remodel	39,139		6	%	31,276		6	%	109,745		5	%	89,810		7	%	Repair and remodel	37,675		6	%	32,641		6	%
Commercial	Commercial	101,478		14	%	87,484		17	%	282,585		14	%	247,113		17	%	Commercial	109,972		16	%	86,586		15	%
Net revenue, Installation	Net revenue, Installation	$	672,916	94	%	$	504,161	99	%	$	1,872,544	94	%	$	1,419,302	99	%	Net revenue, Installation	$	622,742	94	%	$	561,631	96	%

Other ~~(1)~~	Other ~~(1)~~	46,198		6	%	5,602		1	%	110,811		6	%	15,625		1	%	Other ~~(1)~~	36,567		6	%	25,861		4	%
Net revenue, as reported	Net revenue, as reported	$	719,114	100	%	$	509,763	100	%	$	1,983,355	100	%	$	1,434,927	100	%	Net revenue, as reported	$	659,309	100	%	$	587,492	100	%

Three months ended September 30, Nine months ended September 30,
2022 2021 2022 2021
Installation:
Insulation $ 429,091 60 % $ 318,753 63 % $ 1,203,635 61 % $ 905,553 63 %
Shower doors, shelving and mirrors 46,735 7 % 35,411 7 % 124,339 6 % 101,830 7 %
Garage doors 45,224 6 % 26,951 5 % 123,715 6 % 77,434 5 %
Waterproofing 31,088 4 % 34,514 7 % 95,306 5 % 98,726 7 %
Rain gutters 31,065 4 % 21,807 4 % 83,334 4 % 62,270 4 %
Fireproofing/firestopping 17,159 3 % 17,684 3 % 49,247 3 % 43,155 3 %
Window blinds 16,585 2 % 13,197 3 % 45,058 2 % 37,398 3 %
Other building products 55,969 8 % 35,844 7 % 147,910 7 % 92,936 7 %
Net revenue, Installation $ 672,916 94 % $ 504,161 99 % $ 1,872,544 94 % $ 1,419,302 99 %
Other (1)
46,198 6 % 5,602 1 % 110,811 6 % 15,625 1 %
Net revenue, as reported $ 719,114 100 % $ 509,763 100 % $ 1,983,355 100 % $ 1,434,927 100 %

~~(1) Net revenue for manufacturing operations are included in the Other category for all periods presented to conform with our change in composition of operating segments.~~


	Three months ended March 31,
	2023				2022
Installation:
Insulation	$	394,043	60	%	$	364,943	63	%
Shower doors, shelving and mirrors	45,513		7	%	36,340		6	%
Garage doors	43,312		7	%	35,979		6	%
Waterproofing	29,939		4	%	29,022		5	%
Rain gutters	27,800		4	%	23,546		4	%
Window Blinds	15,881		2	%	13,058		2	%
Fireproofing/firestopping	15,175		2	%	15,922		3	%
Other building products	51,079		8	%	42,821		7	%
Net revenue, Installation	$	622,742	94	%	$	561,631	96	%

Other	36,567		6	%	25,861		4	%
Net revenue, as reported	$	659,309	100	%	$	587,492	100	%

Contract Assets and Liabilities

Our contract assets consist of unbilled amounts typically resulting from sales under contracts when the cost-to-cost method of revenue recognition is utilized and revenue recognized, based on costs incurred, exceeds the amount billed to the customer. Our contract assets are recorded in other current assets in our Condensed Consolidated Balance Sheets. Our contract liabilities

Table of Contents

INSTALLED BUILDING PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

consist of customer deposits and billings in excess of revenue recognized, based on costs incurred and are included in other current liabilities in our Condensed Consolidated Balance Sheets.

Contract assets and liabilities related to our uncompleted contracts and customer deposits were as follows (in thousands):

September 30, 2022 December 31, 2021
Contract assets $ 37,956 $ 32,679
Contract liabilities (18,364) (14,153)

~~Table of Contents~~

~~INSTALLED BUILDING PRODUCTS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~


	March 31, 2023		December 31, 2022
Contract assets	$	36,048	$	29,431
Contract liabilities	(17,331)		(18,884)

Uncompleted contracts were as follows (in thousands):


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Costs incurred on uncompleted contracts	Costs incurred on uncompleted contracts	$	246,867	$	206,050	Costs incurred on uncompleted contracts	$	279,994	$	273,788
Estimated earnings	Estimated earnings	108,241		106,163		Estimated earnings	116,621		114,781
Total	Total	355,108		312,213		Total	396,615		388,569
Less: Billings to date	Less: Billings to date	324,130		285,978		Less: Billings to date	369,686		368,009
Net under billings	Net under billings	$	30,978	$	26,235	Net under billings	$	26,929	$	20,560

Net under billings were as follows (in thousands):


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Costs and estimated earnings in excess of billings on uncompleted contracts (contract assets)	Costs and estimated earnings in excess of billings on uncompleted contracts (contract assets)	$	37,956	$	32,679	Costs and estimated earnings in excess of billings on uncompleted contracts (contract assets)	$	36,048	$	29,431
Billings in excess of costs and estimated earnings on uncompleted contracts (contract liabilities)	Billings in excess of costs and estimated earnings on uncompleted contracts (contract liabilities)	(6,978)		(6,444)		Billings in excess of costs and estimated earnings on uncompleted contracts (contract liabilities)	(9,119)		(8,871)
Net under billings	Net under billings	$	30,978	$	26,235	Net under billings	$	26,929	$	20,560

The difference between contract assets and contract liabilities as of ~~September 30, 2022~~March 31, 2023 compared to December 31, ~~2021~~2022 is primarily the result of timing differences between our performance of obligations under contracts and customer ~~payments.~~payments and billings. During ~~the~~ three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, we recognized ~~$0.4 million and $13.6~~$15.8 million of revenue that was included in the contract liability balance at December 31, ~~2021.~~2022. We did not recognize any impairment losses on our receivables and contract assets during the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 or ~~2021.~~2022.

Remaining performance obligations represent the transaction price of contracts for which work has not been performed and excludes unexercised contract options and potential modifications. As of ~~September 30, 2022,~~March 31, 2023, the aggregate amount of the transaction price allocated to remaining uncompleted contracts was ~~$161.6~~$154.3 million. We expect to satisfy remaining performance obligations and recognize revenue on substantially all of these uncompleted contracts over the next 18 months.

~~Practical Expedients and Exemptions~~

We generally expense sales commissions and other incremental costs of obtaining a contract when incurred because the amortization period is usually one year or less. Sales commissions are recorded within selling expenses on the Condensed Consolidated Statements of Operations and Comprehensive Income.

~~We do not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less.~~

NOTE 4 - CREDIT LOSSES

Our expected loss allowance methodology for accounts receivable is developed using historical ~~losses, current~~experience, present economic conditions and ~~future market forecasts.~~other relevant factors management considers relevant to estimate expected credit losses. We also perform ongoing evaluations of creditworthiness of our existing and potential customers.

Changes in our allowance for credit losses were as follows (in thousands):


Balance as of January 1, ~~2022~~2023	$	~~8,717~~9,549
Current period provision	~~2,754~~1,678
Recoveries collected and additions	~~181~~61
Amounts written off	~~(2,569)~~(1,229)
Balance as of ~~September 30, 2022~~March 31, 2023	$	~~9,083~~10,059

Table of Contents

INSTALLED BUILDING PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 5 - ~~INVESTMENTS AND~~ CASH AND CASH EQUIVALENTS

Cash and cash equivalents include highly liquid instruments with insignificant interest rate risk and original or remaining maturities of three months or less at the time of purchase. These instruments amounted to approximately ~~$173.3~~$197.9 million and ~~$258.1~~$191.9 million as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively. See Note 9, Fair Value Measurements, for additional information.

All other investments are classified as held-to-maturity and consist of highly liquid instruments, namely treasury bills. As of September 30, 2022, the amortized cost of these investments equaled the net carrying value, which was approximately $25.0 million. All held-to-maturity securities as of September 30, 2022 mature in one year or less. We held no such investments as of December 31, 2021. See Note 9, Fair Value Measurements, for additional information.

NOTE 6 - GOODWILL AND INTANGIBLES

We anticipate that the COVID-19 pandemic could continue to have an impact on the homebuilding industry in general, as it could result in further business interruptions (government-mandated or otherwise) and could affect, among other factors, inflation, interest rates, employment levels, consumer spending and consumer confidence, which could decrease demand for homes, adversely affecting our business. As such, we considered whether impairment indicators arose through the date of filing of this Quarterly Report on Form 10-Q for our goodwill, long-lived assets and other intangible assets and concluded that no such factors existed to cause us to test for goodwill impairment during the nine months ended September 30, 2022. While we ultimately concluded that our goodwill, long-lived assets and other intangibles assets were not impaired as of September 30, 2022, we will continue to assess impairment indicators related to the impact of the COVID-19 pandemic on our business.

Goodwill

In the first quarter of 2022, we changed our reporting units to align with our change in operating and reportable segments. See Note 10, Information on Segments, for details about our change in segment structure. Effective January 1, 2022, our Installation reporting unit is comprised of our Installation operating and reportable segment, and our Other category is comprised of our Manufacturing and Distribution operating segments which are also reporting units. All three reporting units contain goodwill and were previously combined and recorded as a single operating and reportable segment as of December 31, 2021.

The change in carrying amount of goodwill was as follows (in thousands):


		Installation		Other		Consolidated			Installation		Other		Consolidated

Goodwill (gross) - January 1, 2022, after change in reporting units		$	331,782	$	60,739	$	392,521
Goodwill (gross) - January 1, 2023								Goodwill (gross) - January 1, 2023	$	355,226	$	88,333	$	443,559
Business combinations	Business combinations	6,389		27,595		33,984		Business combinations	13,540		—		13,540
Other	Other	111		—		111		Other	257		5,273		5,530
Goodwill (gross) - September 30, 2022		338,282		88,334		426,616
Goodwill (gross) - March 31, 2023								Goodwill (gross) - March 31, 2023	369,023		93,606		462,629
Accumulated impairment losses	Accumulated impairment losses	(70,004)		—		(70,004)		Accumulated impairment losses	(70,004)		—		(70,004)
Goodwill (net) - September 30, 2022		$	268,278	$	88,334	$	356,612
Goodwill (net) - March 31, 2023								Goodwill (net) - March 31, 2023	$	299,019	$	93,606	$	392,625

Other changes presented in the above table primarily include ~~minor~~ adjustments for the allocation of certain acquisitions still under measurement made during the ~~nine~~three months ended ~~September 30, 2022.~~March 31, 2023, including a change in tax election that resulted in a $4.9 million change in purchase price for a 2022 acquisition. For additional information regarding changes to goodwill resulting from acquisitions, see Note 17, Business Combinations.

We test goodwill for impairment annually during the fourth quarter of our fiscal year or earlier if there is an impairment indicator. Accumulated impairment losses included within the above table were incurred over multiple periods and were all associated with the Installation segment, with the latest impairment charge being recorded during the year ended December 31, 2010.

~~Table of Contents~~

~~INSTALLED BUILDING PRODUCTS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

Intangibles, net

The following table provides the gross carrying amount, accumulated amortization and net book value for each major class of intangibles (in thousands):


		As of September 30,						As of December 31,							As of March 31,						As of December 31,
		2022						2021							2023						2022
		Gross Carrying Amount		Accumulated Amortization		Net Book Value		Gross Carrying Amount		Accumulated Amortization		Net Book Value			Gross Carrying Amount		Accumulated Amortization		Net Book Value		Gross Carrying Amount		Accumulated Amortization		Net Book Value
Amortized intangibles:	Amortized intangibles:													Amortized intangibles:
Customer relationships	Customer relationships	$	321,720	$	137,495	$	184,225	$	292,113	$	113,849	$	178,264	Customer relationships	$	349,019	$	154,169	$	194,850	$	338,050	$	145,722	$	192,328
Covenants not-to-compete	Covenants not-to-compete	30,015		19,204		10,811		27,717		16,471		11,246		Covenants not-to-compete	31,207		21,028		10,179		30,899		20,086		10,813
Trademarks and tradenames	Trademarks and tradenames	116,246		37,833		78,413		103,007		32,623		70,384		Trademarks and tradenames	125,078		41,518		83,560		119,612		39,638		79,974
Backlog	Backlog	23,725		21,336		2,389		23,724		19,197		4,527		Backlog	21,635		20,623		1,012		20,815		20,457		358
		$	491,706	$	215,868	$	275,838	$	446,561	$	182,140	$	264,421		$	526,939	$	237,338	$	289,601	$	509,376	$	225,903	$	283,473

The gross carrying amount of intangibles increased approximately ~~$45.1~~$17.6 million during the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 primarily due to business combinations. For more information, see Note 17, Business Combinations. ~~Remaining estimated aggregate annual amortization expense is as follows (amounts, in thousands, are for the fiscal year ended):~~

Remainder of 2022 $ 11,113
2023 41,441
2024 37,520
2025 31,199
2026 27,241
Thereafter 127,324

~~NOTE 7 - LONG-TERM DEBT~~

~~Long-term debt consisted of the following (in thousands):~~

As of September 30, As of December 31,
2022 2021
Senior Notes due 2028, net of unamortized debt issuance costs of $3,185 and $3,633, respectively $ 296,815 $ 296,367
Term loan, net of unamortized debt issuance costs of $6,009 and $6,735, respectively 490,241 493,265
Vehicle and equipment notes, maturing through September 2027; payable in various monthly installments, including interest rates ranging from 1.9% to 5.6% 69,371 69,228
Various notes payable, maturing through April 2025; payable in various monthly installments, including interest rates ranging from 2.0% to 5.0% 1,973 4,172
858,400 863,032
Less: current maturities (30,494) (30,839)
Long-term debt, less current maturities $ 827,906 $ 832,193

119

Table of Contents

INSTALLED BUILDING PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Remaining estimated aggregate annual amortization expense is as follows (amounts, in thousands, are for the fiscal year ended):


Remainder of 2023	$	32,834
2024	39,843
2025	34,301
2026	30,350
2027	26,064
Thereafter	126,209

NOTE 7 - LONG-TERM DEBT

Long-term debt consisted of the following (in thousands):


	As of March 31,		As of December 31,
	2023		2022
Senior Notes due 2028, net of unamortized debt issuance costs of $2,887 and $3,036, respectively	$	297,113	$	296,964
Term loan, net of unamortized debt issuance costs of $5,524 and $5,767, respectively	488,226		489,233
Vehicle and equipment notes, maturing through March 2028; payable in various monthly installments, including interest rates ranging from 1.9% to 6.2%	74,078		72,984
Various notes payable, maturing through April 2025; payable in various monthly installments, including interest rates ranging from 2.0% to 5.0%	1,973		1,973
	861,390		861,154
Less: current maturities	(31,165)		(30,983)
Long-term debt, less current maturities	$	830,225	$	830,171

Remaining required repayments of debt principal, gross of unamortized debt issuance costs, as of ~~September 30, 2022~~March 31, 2023 are as follows (in thousands):

Remainder of 2022 $ 7,896
2023 29,159
2024 23,626
2025 17,547
2026 12,369
Thereafter 776,997

~~Asset-Based Lending Credit Agreement Amendment~~

In February 2022, we amended and extended the term of our asset-based lending credit agreement (the “ABL Credit Agreement”). The ABL Credit Agreement increased the commitment under the asset-based lending credit facility (the “ABL Revolver”) to $250.0 million from $200.0 million, and permits us to further increase the commitment amount up to $300.0 million. The amendment also extends the maturity date from September 26, 2024 to February 17, 2027. The ABL Revolver bears interest at either the base rate or the Secured Overnight Financing Rate ("Term SOFR"), at our election, plus a margin of 0.25% or 0.50% in the case of base rate loans or 1.25% or 1.50% for Term SOFR advances (in each case based on a measure of availability under the ABL Credit Agreement). The amendment also allows for modification of specified fees dependent upon achieving certain sustainability targets, in addition to making other modifications to the ABL Credit Agreement. Including outstanding letters of credit, our remaining availability under the ABL Revolver as of September 30, 2022 was $197.6 million.

All of the obligations under the ABL Revolver are guaranteed by all of the Company’s existing restricted subsidiaries and will be guaranteed by the Company’s future restricted subsidiaries. Additionally, all obligations under the ABL Revolver, and the guarantees of those obligations, are secured by substantially all of the assets of the Company and the guarantors, subject to certain exceptions and permitted liens, including a first-priority security interest in such assets that constitute ABL Priority Collateral, as defined in the ABL Credit Agreement.

The ABL Revolver provides incremental revolving credit facility commitments of up to $50.0 million. The terms and conditions of any incremental revolving credit facility commitments must be no more favorable than the terms of the ABL Revolver. The ABL Revolver also allows for the issuance of letters of credit of up to $100.0 million in aggregate and borrowing of swingline loans of up to $25.0 million in aggregate.

The ABL Credit Agreement contains a financial covenant requiring the satisfaction of a minimum fixed charge coverage ratio of 1.0x in the event that we do not meet a minimum measure of availability under the ABL Revolver. The ABL Credit Agreement and the Term Loan Agreement contain restrictive covenants that, among other things, limit the ability of the Company and certain of our subsidiaries (subject to certain exceptions) to: (i) incur additional debt and issue preferred stock; (ii) pay dividends on, redeem or repurchase stock in an aggregate amount exceeding the greater of 2.0% of market capitalization per fiscal year or certain applicable restricted payment basket amounts; (iii) prepay subordinated debt; (iv) create liens; (v) make specified types of investments; (vi) apply net proceeds from certain asset sales; (vii) engage in transactions with affiliates; (viii) merge, consolidate or sell substantially all of our assets; and (ix) pay dividends and make other distributions from subsidiaries.


Remainder of 2023	$	23,976
2024	27,027
2025	21,201
2026	16,250
2027	11,002
Thereafter	770,345

NOTE 8 - LEASES

We lease various assets in the ordinary course of business as follows: warehouses to store our materials and perform staging activities for certain products we install, various office spaces for selling and administrative activities to support our business, and certain vehicles and equipment to facilitate our operations, including, but not limited to, trucks, forklifts and office equipment.

1210

Table of Contents

INSTALLED BUILDING PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The table below presents the lease-related assets and liabilities recorded on the Condensed Consolidated Balance Sheets:


			As of September 30,			As of December 31,					As of March 31,			As of December 31,
(in thousands)	(in thousands)	Classification	2022			2021			(in thousands)	Classification	2023			2022
Assets	Assets								Assets
Non-Current	Non-Current								Non-Current
Operating	Operating	Operating lease right-of-use assets	$	72,226		$	69,871		Operating	Operating lease right-of-use assets	$	74,602		$	76,174
Finance	Finance	Property and equipment, net	7,828			5,266			Finance	Property and equipment, net	9,159			8,928
Total lease assets	Total lease assets		$	80,054		$	75,137		Total lease assets		$	83,761		$	85,102
Liabilities	Liabilities								Liabilities
Current	Current								Current
Operating	Operating	Current maturities of operating lease obligations	$	25,414		$	23,224		Operating	Current maturities of operating lease obligations	$	26,000		$	26,145
Financing	Financing	Current maturities of finance lease obligations	2,275			1,747			Financing	Current maturities of finance lease obligations	2,588			2,508
Non-Current	Non-Current								Non-Current
Operating	Operating	Operating lease obligations	46,640			46,075			Operating	Operating lease obligations	48,339			49,789
Financing	Financing	Finance lease obligations	5,469			3,297			Financing	Finance lease obligations	6,559			6,397
Total lease liabilities	Total lease liabilities		$	79,798		$	74,343		Total lease liabilities		$	83,486		$	84,839
Weighted-average remaining lease term:	Weighted-average remaining lease term:								Weighted-average remaining lease term:
Operating leases	Operating leases		4.0 years			4.3 years			Operating leases		3.9 years			4.0 years
Finance leases	Finance leases		3.8 years			3.3 years			Finance leases		3.8 years			3.6 years
Weighted-average discount rate:	Weighted-average discount rate:								Weighted-average discount rate:
Operating leases	Operating leases		4.06		%	3.38		%	Operating leases		4.60		%	4.41		%
Finance leases	Finance leases		5.21		%	4.96		%	Finance leases		6.08		%	5.76		%

Lease Costs

The table below presents certain information related to the lease costs for finance and operating leases:


			Three months ended September 30,				Nine months ended September 30,						Three months ended March 31,
(in thousands)	(in thousands)	Classification	2022		2021		2022		2021		(in thousands)	Classification	2023		2022
Operating lease cost(1)	Operating lease cost(1)	Administrative	$	8,355	$	6,927	$	24,293	$	19,947	Operating lease cost(1)	Administrative	$	9,203	$	7,759
Finance lease cost:	Finance lease cost:										Finance lease cost:
Amortization of leased assets(2)	Amortization of leased assets(2)	Cost of sales	817		769		2,388		2,342		Amortization of leased assets(2)	Cost of sales	977		716
Interest on finance lease obligations	Interest on finance lease obligations	Interest expense, net	87		54		216		161		Interest on finance lease obligations	Interest expense, net	131		61
Total lease costs	Total lease costs		$	9,259	$	7,750	$	26,897	$	22,450	Total lease costs		$	10,311	$	8,536

(1)Includes variable lease costs of ~~$0.9~~$1.2 million and ~~$0.7~~$0.9 million for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, respectively, and $2.6 million and $2.2 million for the nine months ended September 30, 2022 and 2021,~~ respectively, and short-term lease costs of $0.3 million for ~~both~~each of the three months ended ~~September 30, 2022~~March 31, 2023 and ~~2021, respectively, and $0.9 million and $0.8 million for the nine months ended September 30, 2022 and 2021, respectively.~~2022.

(2)Includes variable lease costs of $0.2 million for each of the three months ended ~~September 30, 2022~~March 31, 2023 and ~~2021 and $0.6 million and $0.5 million for the nine months ended September 30, 2022 and 2021, respectively.~~2022.

Other Information

The table below presents supplemental cash flow information related to leases (in thousands):


	Three months ended March 31,
	2023		2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	7,691	$	6,463
Operating cash flows for finance leases	131		61
Financing cash flows for finance leases	727		521

1311

Table of Contents

INSTALLED BUILDING PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~Other Information~~

~~The table below presents supplemental cash flow information related to leases (in thousands):~~

Three months ended September 30, Nine months ended September 30,
2022 2021 2022 2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases $ 7,030 $ 5,821 $ 20,296 $ 16,763
Operating cash flows for finance leases 87 54 216 161
Financing cash flows for finance leases 576 532 1,661 1,573

Undiscounted Cash Flows

The table below reconciles the undiscounted cash flows for each of the first five years and total of the remaining years for the finance lease obligations and operating lease obligations recorded on the Condensed Consolidated Balance Sheet as of ~~September 30, 2022~~March 31, 2023 (in thousands):


		Finance Leases		Operating Leases							Finance Leases		Operating Leases
				Related Party		Other		Total Operating					Related Party		Other		Total Operating
Remainder of 2022		$	742	$	374	$	6,952	$	7,326
2023		2,443		1,421		24,687		26,108
Remainder of 2023										Remainder of 2023	$	2,354	$	1,068	$	21,268	$	22,336
2024	2024	2,015		1,175		16,450		17,625		2024	2,668		1,175		21,565		22,740
2025	2025	1,647		1,017		10,288		11,305		2025	2,299		1,017		14,742		15,759
2026	2026	1,315		—		7,232		7,232		2026	1,968		—		9,616		9,616
2027										2027	997		—		5,252		5,252
Thereafter	Thereafter	411		—		8,714		8,714		Thereafter	17		—		5,559		5,559
Total minimum lease payments	Total minimum lease payments	8,573		$	3,987	$	74,323	78,310		Total minimum lease payments	10,303		$	3,260	$	78,002	81,262
Less: Amounts representing executory costs	Less: Amounts representing executory costs	(11)						—		Less: Amounts representing executory costs	(2)						—
Less: Amounts representing interest	Less: Amounts representing interest	(818)						(6,256)		Less: Amounts representing interest	(1,154)						(6,923)
Present value of future minimum lease payments	Present value of future minimum lease payments	7,744						72,054		Present value of future minimum lease payments	9,147						74,339
Less: Current obligation under leases	Less: Current obligation under leases	(2,275)						(25,414)		Less: Current obligation under leases	(2,588)						(26,000)
Long-term lease obligations	Long-term lease obligations	$	5,469					$	46,640	Long-term lease obligations	$	6,559					$	48,339

NOTE 9 - FAIR VALUE MEASUREMENTS

Assets and Liabilities Measured at Fair Value on a Recurring Basis

In many cases, a valuation technique used to measure fair value includes inputs from multiple levels of the fair value hierarchy. The lowest level of significant input determines the placement of the entire fair value measurement in the hierarchy. During the periods presented, there were no transfers between fair value hierarchical levels.

Assets Measured at Fair Value on a Nonrecurring Basis

Certain assets, specifically other intangible and long-lived assets, are measured at fair value on a nonrecurring basis in periods subsequent to initial recognition. Assets measured at fair value on a nonrecurring basis as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 are categorized based on the lowest level of significant input to the valuation. The assets are measured at fair value when our impairment assessment indicates a carrying value for each of the assets in excess of the asset’s estimated fair value. Undiscounted cash flows, a Level 3 input, are utilized in determining estimated fair values. During each of the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ we did not record any impairments on these assets required to be measured at fair value on a nonrecurring basis.

~~Table of Contents~~

~~INSTALLED BUILDING PRODUCTS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

Estimated Fair Value of Financial Instruments

Accounts receivable, accounts payable and accrued liabilities as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 approximate fair value due to the short-term maturities of these financial instruments. The carrying amounts of certain long-term debt, including the Term Loan and ABL Revolver as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, approximate fair value due to the variable rate nature of the agreements. The carrying amounts of our operating lease right-of-use assets and the obligations associated with our operating and finance leases as well as our vehicle and equipment notes approximate fair value as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022. All debt classifications represent Level 2 fair value measurements.

Derivative financial instruments are measured at fair value based on observable market information and appropriate valuation methods.

Contingent consideration liabilities arise from future earnout payments to the sellers associated with certain acquisitions and are based on predetermined calculations of certain future results. These future payments are estimated by considering various factors, including business risk and projections. The contingent consideration liabilities are measured at fair value by discounting estimated future payments, calculated based on a weighted average of various future forecast scenarios, to their net present value. The future payments were primarily calculated using the Black Scholes Call Option method, a probabilistic framework used to estimate expected future cash flows. This valuation method was chosen for our acquisition

Table of Central Aluminum due to the model's ability to value a nonlinear percentage of the acquisition's future earnings. For more information on this acquisition, see Note 17, Business Combinations. The earnout for this acquisition is not capped so we are unable to provide a range of potential outcomes. Inputs that had a significant effect on this earnout valuation during the nine months ended September 30, 2022 include a remaining term of 0.6 years, expected volatility of 25.0%, and risk free interest rate of 1.9%. Expected volatility is based on the historical volatility of market participants for the length of time corresponding to the expected term of the consideration. The risk-free interest rate is based on the U.S. treasury yield curve on the acquisition date for the expected term of the consideration.Contents

~~The fair values of financial assets and liabilities that are recorded at fair~~INSTALLED BUILDING PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Fair value in the Condensed Consolidated Balance Sheets and not described above were as follows (in thousands):


		As of September 30, 2022								As of December 31, 2021									As of March 31, 2023								As of December 31, 2022
		Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3			Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Financial assets:	Financial assets:																	Financial assets:
Cash equivalents	Cash equivalents	$	173,252	$	173,252	$	—	$	—	$	258,055	$	258,055	$	—	$	—	Cash equivalents	$	197,910	$	197,910	$	—	$	—	$	191,881	$	191,881	$	—	$	—
Derivative financial instruments	Derivative financial instruments	42,413		—		42,413		—		14,830		—		14,830		—		Derivative financial instruments	30,020		—		30,020		—		38,671		—		38,671		—
Total financial assets	Total financial assets	$	215,665	$	173,252	$	42,413	$	—	$	272,885	$	258,055	$	14,830	$	—	Total financial assets	$	227,930	$	197,910	$	30,020	$	—	$	230,552	$	191,881	$	38,671	$	—
Financial liabilities:	Financial liabilities:																	Financial liabilities:
Contingent consideration	Contingent consideration	$	18,237	$	—	$	—	$	18,237	$	11,170	$	—	$	—	$	11,170	Contingent consideration	$	968	$	—	$	—	$	968	$	1,858	$	—	$	—	$	1,858
Derivative financial instruments	Derivative financial instruments	—		—		—		—		1,937		—		1,937		—		Derivative financial instruments	1,014		—		1,014		—		—		—		—		—
Total financial liabilities	Total financial liabilities	$	18,237	$	—	$	—	$	18,237	$	13,107	$	—	$	1,937	$	11,170	Total financial liabilities	$	1,982	$	—	$	1,014	$	968	$	1,858	$	—	$	—	$	1,858

See Note 5, ~~Investments and~~ Cash and Cash Equivalents, for more information on cash equivalents included in the table above. Also see Note 11, Derivatives and Hedging Activities, for more information on derivative financial instruments.

The change in fair value of the contingent consideration (a Level 3 input) was as follows (in thousands):


Contingent consideration liability - January 1, ~~2022~~2023	$	~~11,170~~1,858
~~Preliminary purchase price~~	~~16,410~~
~~Fair value adjustments~~	~~(946)~~
Accretion in value	~~578~~110
~~Amounts cancelled~~	~~(984)~~
~~Settlement Adjustments~~	~~(505)~~
Amounts paid to sellers	~~(7,486)~~(1,000)
Contingent consideration liability - ~~September 30, 2022~~March 31, 2023	$	~~18,237~~968

The accretion in value of contingent consideration liabilities is included within administrative expenses on the Condensed Consolidated Statements of Operations and Comprehensive Income.

~~Table of Contents~~

~~INSTALLED BUILDING PRODUCTS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

The carrying value and associated fair value of financial assets and liabilities that are not recorded at fair value in the Condensed Consolidated Balance Sheets and not described above include our ~~investments and~~ Senior Notes. To estimate the fair value of our ~~investments and~~ Senior Notes, we utilized third-party quotes which are derived all or in part from model prices, external sources or market prices. The ~~investments and~~ Senior Notes represent a Level 2 fair value measurement and are as follows (in thousands):

As of September 30, 2022 As of December 31, 2021
Carrying Value Fair Value Carrying Value Fair Value
Investments $ 24,996 $ 24,998 $ — $ —
Senior Notes(1)
300,000 268,638 300,000 311,028


	As of March 31, 2023				As of December 31, 2022
	Carrying Value		Fair Value		Carrying Value		Fair Value

Senior Notes(1)	$	300,000	$	278,709	$	300,000	$	270,993

(1)Excludes the impact of unamortized debt issuance costs.

See Note 5, ~~Investments and~~ Cash and Cash Equivalents, for more information on investments included in the table above. Also see Note 7, Long-Term Debt, for more information on our Senior Notes.

NOTE 10 - INFORMATION ON SEGMENTS

During the first quarter of 2022, our Chief Executive Officer, who is also our Chief Operating Decision Maker ("CODM"), changed the manner in which he reviews financial information for purposes of assessing business performance, managing the business and allocating resources. In conjunction with this change, we realigned ourOur segment structure ~~resulting in our Company having~~includes three operating segments consisting of Installation, Distribution and Manufacturing.

Our Installation operating segment represents the majority of our net revenue and gross profit and forms our one reportable segment. This operating segment represents the service-based installation of insulation and complementary building products in the residential new construction, repair and remodel and commercial construction end markets from our national network of branch locations. These branch locations have similar economic and operating characteristics including the nature of products and services offered, operating procedures and risks, customer bases, employee incentives, material procurement and shared corporate resources ~~which led us to conclude that they~~and therefore combine to form one operating segment.

The Other category reported below reflects the operations of our two remaining operating segments, Distribution and Manufacturing, which do not meet the quantitative thresholds for separate reporting. Our Distribution operating segment includes our ~~recently acquired distribution~~ businesses that sell insulation, gutters and accessories primarily to installers of these products who operate in multiple end markets. Our Manufacturing operating segment consists of our cellulose insulation manufacturing ~~operation which was previously combined with our Installation operating segment.~~operation. In

Table of Contents

INSTALLED BUILDING PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

addition to sales of cellulose insulation, revenues from this operating segment consist of sales of asphalt and industrial fibers to distributors and installers of these products.

The key metrics used to assess the performance of our operating segments are revenue and segment gross profit as these are the metrics used by our CODM to review results, assess performance and allocate resources. We define segment gross profit as revenue less cost of sales, excluding depreciation and amortization. We do not report total assets or related depreciation and amortization expenses by segment because our CODM does not use this information to assess segment performance or allocate resources.

The Installation reportable segment includes substantially all of our net revenue from services while net revenue included in the Other category includes substantially all of our net revenue from sales of products. The intercompany sales from the Other category to the Installation reportable segment include a profit margin while our Installation segment records these transactions at cost.

~~Table~~The key metrics used to assess the performance of ~~Contents~~

~~INSTALLED BUILDING PRODUCTS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

our operating segments are revenue and segment gross profit as these are the metrics used by our Chief Executive Officer, who is also our Chief Operating Decision Maker ("CODM"), to review results, assess performance and allocate resources. We define segment gross profit as revenue less cost of sales, excluding depreciation and amortization. We do not report total assets, depreciation and amortization expenses included in reported cost of sales, operating expenses or other expense, net by segment because our CODM does not use this information to assess segment performance or allocate resources. The following ~~table represents~~tables represent our segment information for the three months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ (in thousands):

Three months ended September 30, 2022 Three months ended September 30, 2021
Installation Other Eliminations Consolidated Installation Other Eliminations Consolidated
Revenue $ 672,916 $ 47,748 $ (1,550) $ 719,114 $ 504,161 $ 6,305 $ (703) $ 509,763
Cost of sales (exclusive of depreciation and amortization shown separately below) 450,017 37,659 (1,116) 486,560 339,308 4,837 (539) 343,606
Segment gross profit 222,899 10,089 (434) 232,554 164,853 1,468 (164) 166,157
Depreciation and amortization 11,277 10,273
Gross profit, as reported 221,277 155,884
Selling 31,651 24,188
Administrative 84,345 68,056
Amortization 11,370 9,224
Operating income 93,911 54,416
Interest expense, net 10,668 7,687
Other expense (income) 185 (483)
Income before income taxes $ 83,058 $ 47,212


	Three months ended March 31, 2023
	Installation			Other			Eliminations			Consolidated
Revenue	$	622,742		$	38,722		$	(2,155)		$	659,309
Cost of sales (1)	410,384			28,459			(1,766)			437,077
Segment gross profit	$	212,358		$	10,263		$	(389)		$	222,232
Segment gross profit percentage	34.1		%	26.5		%	18.1		%	33.7		%

Three months ended September 30, 2022 Three months ended September 30, 2021
Installation Other Eliminations Consolidated Installation Other Eliminations Consolidated
Segment gross profit percentage 33.1 % 21.1 % 28.0 % 32.3 % 32.7 % 23.3 % 23.3 % 32.6 %


	Three months ended March 31, 2022
	Installation			Other			Eliminations			Consolidated
Revenue	$	561,631		$	26,650		$	(789)		$	587,492
Cost of sales (1)	385,692			19,373			(609)			404,456
Segment gross profit	$	175,939		$	7,277		$	(180)		$	183,036
Segment gross profit percentage	31.3		%	27.3		%	22.8		%	31.2		%

(1)Cost of sales included in segment gross profit is exclusive of depreciation and amortization for the three months ended March 31, 2023 and 2022.

The ~~following table represents our~~reconciliation between consolidated segment ~~information~~gross profit for each period as shown in the tables above to consolidated income before income taxes is as follows:


	Three months ended March 31,
	2023		2022
Segment gross profit - consolidated	$	222,232	$	183,036
Depreciation and amortization (1)	11,810		10,633
Gross profit, as reported	210,422		172,403
Operating expenses	133,546		115,433
Operating income	76,876		56,970
Other expense, net	9,517		10,745
Income before income taxes	$	67,359	$	46,225

(1)Depreciation and amortization is excluded from segment gross profit for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 and ~~2021 (in thousands):~~

Nine months ended September 30, 2022 Nine months ended September 30, 2021
Installation Other Eliminations Consolidated Installation Other Eliminations Consolidated
Revenue $ 1,872,544 $ 114,690 $ (3,879) $ 1,983,355 $ 1,419,302 $ 17,182 $ (1,557) $ 1,434,927
Cost of sales (exclusive of depreciation and amortization shown separately below) 1,255,521 87,425 (3,015) 1,339,931 959,384 12,980 (1,207) 971,157
Segment gross profit 617,023 27,265 (864) 643,424 459,918 4,202 (350) 463,770
Depreciation and amortization 33,035 30,573
Gross profit, as reported 610,389 433,197
Selling 86,214 67,677
Administrative 247,519 199,607
Amortization 33,728 26,798
Operating income 242,928 139,115
Interest expense, net 31,669 22,781
Other expense (income) 698 (494)
Income before income taxes $ 210,561 $ 116,828

Nine months ended September 30, 2022 Nine months ended September 30, 2021
Installation Other Eliminations Consolidated Installation Other Eliminations Consolidated
Segment gross profit percentage 33.0 % 23.8 % 22.3 % 32.4 % 32.4 % 24.5 % 22.5 % 32.3 %

~~The prior period disclosures in the above table have been recast to conform to the current period segment presentation.~~2022.

1714

Table of Contents

INSTALLED BUILDING PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 11 - DERIVATIVES AND HEDGING ACTIVITIES

Cash Flow Hedges of Interest Rate Risk

Our purpose for using interest rate derivatives is to add stability to interest expense and to manage our exposure to interest rate movements. During the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, we used interest rate swaps to hedge the variable cash flows associated with existing variable-rate debt. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. We do not use derivatives for trading or speculative purposes and we currently do not have any derivatives that are not designated as hedges. As of ~~September 30, 2022,~~March 31, 2023, we have not posted any collateral related to these agreements.

As of ~~September 30,~~March 31, 2023 and December 31, 2022, we had the following interest rate swap derivatives outstanding:


Effective Date	Notional Amount		Fixed Rate		Maturity Date
	(in millions)
July 30, 2021	$	200.0	0.51	%	December 31, 2025
December 31, 2021	100.0		1.37	%	December 31, 2025
December 31, 2021	100.0		1.37	%	December 31, 2025
December 31, 2025	300.0		3.09	%	December 14, 2028
December 31, 2025	100.0		2.98	%	December 14, 2028

As of ~~December~~March 31, ~~2021, we had the following interest rate swap derivatives outstanding:~~

Effective Date Notional Amount Fixed Rate Maturity Date
(in millions)
July 30, 2021 $ 200.0 0.51 % April 15, 2030
December 31, 2021 100.0 1.37 % December 15, 2028
December 31, 2021 100.0 1.37 % December 15, 2028

~~On July 8, 2022, we amended the maturity date of each of~~2023, our three active interest rate swaps to December 31, 2025 with the other terms remaining unchanged. Collectively, the swaps had unrealized gains of $51.2 million at the amendment date of July 8, 2022. These unrealized gains will be amortized as a decrease to interest expense, net through the original maturity dates of April 15, 2030 and December 15, 2028. For the three and nine months ended September 30, 2022, we amortized $1.6 million of these unrealized gains as a decrease to interest expense, net. In conjunction with the amendments, we received cash of $25.5 million from swap counterparties, which is presented in cash flows from operating activities in the Condensed Consolidated Statements of Cash Flows during the nine months ended September 30, 2022.

The amended swaps include off-market terms at inception and contained a $25.7 million other-than-insignificant financing element which will amortize to interest expense, net through the new December 31, 2025 maturity date of the amended swaps. For the three and nine months ended September 30, 2022, we amortized $1.7 million of the financing element as an increase to interest expense, net. Future net cash settlements are recognized through cash flows from investing activities in the Condensed Consolidated Statements of Cash Flows due to the other-than-insignificant financing element.

~~Also in July 2022, we entered into two new forward interest rate swaps. As of September 30, 2022, these~~ two forward interest rate swaps, combined with our three ~~amended~~active swaps, serve to hedge $400.0 million of the variable cash flows on our variable rate Term Loan through maturity. The assets and liabilities associated with these interest rate swaps are included in other current assets, other non-current assets and other ~~current~~long-term liabilities on the Consolidated Balance Sheets at their fair value amounts as described in Note 9, Fair Value Measurements.

In July 2022, we amended the maturity date of each of our three active interest rate swaps to December 31, 2025 with the other terms remaining unchanged. The remaining unrealized gains will be amortized as a decrease to interest expense, net through the original maturity dates of April 15, 2030 and December 15, 2028. For the three months ended March 31, 2023, we amortized $1.7 million of the remaining unrealized gains as a decrease to interest expense, net.

The amended swaps included off-market terms at inception. This other-than-insignificant financing element will be amortized as an increase to interest expense, net through the December 31, 2025 maturity date of the amended swaps. For the three months ended March 31, 2023, we amortized $1.8 million of the financing element as an increase to interest expense, net. Future net cash settlements are recognized through cash flows from investing activities in the Condensed Consolidated Statements of Cash Flows due to the other-than-insignificant financing element.

In August 2020, we terminated two then-existing interest rate swaps and one then-existing forward interest rate swap. ~~For~~During the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022 we amortized ~~$1.1~~$1.0 million and ~~$2.8~~$0.8 million, respectively, of the ~~$17.8 million~~remaining unrealized loss ~~existing at the time of termination~~ as an increase to interest expense, net. ~~For the three and nine months ended September 30, 2021, we amortized $0.8 million and $2.4 million of the unrealized loss to interest expense, net.~~

~~Table of Contents~~

~~INSTALLED BUILDING PRODUCTS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

The changes in the fair value of derivatives designated, and that qualify, as cash flow hedges are recorded in other comprehensive income, net of tax on the Condensed Consolidated Statements of Operations and Comprehensive Income and in accumulated other comprehensive income ~~(loss)~~ on the Condensed Consolidated Balance Sheets and subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. We had no such changes during the ~~nine~~three months ended ~~September 30, 2021 or~~March 31, 2023 and 2022.

Amounts reported in accumulated other comprehensive income ~~(loss)~~ related to derivatives will be reclassified to interest expense, net as interest payments are made on our variable-rate debt, and as our terminated and amended swaps are amortized. Over the next twelve months, we estimate that an additional ~~$9.0~~$10.4 million will be reclassified as a decrease to interest expense, net.

Table of Contents

INSTALLED BUILDING PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The following table summarizes amounts recorded to interest expense, net included in the Condensed Consolidated Statements of Operations and Comprehensive Income related to our interest rate swaps (in thousands):


		Three months ended September 30,				Nine months ended September 30,					Three months ended March 31,
		2022		2021		2022		2021			2023		2022
(Benefit) expense associated with swap net settlements	(Benefit) expense associated with swap net settlements	$	(1,303)	$	147	$	(344)	$	147	(Benefit) expense associated with swap net settlements	$	(3,593)	$	795
Expense associated with amortization of terminated swaps		1,127		812		2,796		2,412
Expense associated with amortization of amended/terminated swaps										Expense associated with amortization of amended/terminated swaps	1,104		790

LIBOR iswas used as a reference rate for our interest rate swap agreements we use to hedge our interest rate exposure. The Intercontinental Exchange Benchmark Administration, the administrator of LIBOR, announced in March 2021 its intention to extend the publication of certain LIBOR settings, including the setting we use as a reference rate, to June 2023. In January 2020, the ~~FASB~~Financial Accounting Standards Board (the "FASB") issued ASU 2020-04, Reference Rate Reform: Facilitation of the Effects of Reference Rate Reform on Financial Reporting (Topic 848) and in January 2021, the FASB subsequently issued ASU 2021-01, Reference Rate Reform - Scope, which clarified the scope and application of the original guidance. The purpose of this guidance is to provide relief for impacted areas as it relates to impending reference rate reform. We elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. See Note 19, Subsequent Events, for information on a change regarding the reference rate for our interest rate swaps.

NOTE 12 - STOCKHOLDERS’ EQUITY

Accumulated other comprehensive income ~~(loss)~~

The change in accumulated other comprehensive income ~~(loss)~~ related to our interest rate derivatives, net of taxes, was as follows (in thousands):

Three months ended September 30, Nine months ended September 30,
2022 2021 2022 2021
Accumulated gain/(loss) at beginning of period $ 28,034 $ (2,293) $ (227) $ (8,763)
Unrealized gains in fair value 13,547 691 40,577 5,960
Reclassifications of realized net losses to earnings 832 601 2,063 1,802
Accumulated gain/(loss) at end of period 42,413 (1,001) 42,413 (1,001)


	Three months ended March 31,
	2023		2022
Accumulated gain (loss) at beginning of period	$	40,560	$	(227)
Unrealized (losses) gains in fair value	(7,126)		17,527
Reclassifications of realized net losses to earnings	817		584
Accumulated gain at end of period	$	34,251	$	17,884

The reclassifications of realized net losses to earnings in the above table are recorded within interest expense, net.

Share repurchases

During the three months ended ~~September 30,~~March 31, 2023 we did not repurchase any common stock. During the three months ended March 31, 2022 we repurchased approximately ~~142~~511 thousand shares of our common stock with an aggregate price of approximately ~~$12.5~~$49.9 million, or ~~$88.27~~$97.57 average price per share. During the nine months ended September 30, 2022 we repurchased approximately 1.2 million shares of our common stock with an aggregate price of approximately $112.2 million, or $92.98 average price per share. We did not repurchase any shares during the nine months ended September 30, 2021. On February 24, 2022, we announced that our board of directors authorized an extension of our previous stock repurchase program through March 1, 2023 and concurrently authorized an increase in the total amount of our

~~Table of Contents~~

~~INSTALLED BUILDING PRODUCTS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

outstanding common stock we can purchase up to $200.0 million. On August 4, 2022, we announced that our board of directors authorized a new stock repurchase program which replaces our previous program. The new stock repurchase program allows for the repurchase of up to $200.0 million of our outstanding common stock through August 10, 2023. As of September 30, 2022, we had $187.5 million remaining on our new stock repurchase program. The effect of these treasury shares in reducing the number of common shares outstanding is reflected in our earnings per share calculation.

On February 22, 2023, we announced that our board of directors authorized a new stock repurchase program that allows for the repurchase of up to $200.0 million of our outstanding common stock. The new program replaces the previous program and is in effect through March 1, 2024.

Table of Contents

INSTALLED BUILDING PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Dividends

During the ~~nine~~three months ended ~~September 30,~~March 31, 2023, we declared and paid the following cash dividends (amount declared and amount paid in thousands):


Declaration Date	Record Date	Payment Date	Dividend Per Share		Amount Declared		Amount Paid

2/22/2023	3/15/2023	3/31/2023	$	0.90	$	25,537	$	25,270
2/22/2023	3/15/2023	3/31/2023	0.33		9,364		9,266

During the three months ended March 31, 2022, we declared and paid the following cash dividends (amount declared and amount paid in thousands):

Declaration Date Record Date Payment Date Dividend Per Share Amount Declared Amount Paid
2/24/2022 3/15/2022 3/31/2022 $ 0.90 $ 26,585 $ 26,242
2/24/2022 3/15/2022 3/31/2022 0.315 9,305 9,184
5/5/2022 6/15/2022 6/30/2022 0.315 9,054 8,982
8/4/2022 9/15/2022 9/30/2022 0.315 9,018 8,945

~~During the nine months ended September 30, 2021, we declared and paid the following cash dividends (amount declared and amount paid in thousands):~~

Declaration Date Record Date Payment Date Dividend Per Share Amount Declared Amount Paid
2/23/2021 3/15/2021 3/31/2021 $ 0.30 $ 8,907 $ 8,786
5/5/2021 6/15/2021 6/30/2021 0.30 8,910 8,821
8/5/2021 9/15/2021 9/30/2021 0.30 8,912 8,821


Declaration Date	Record Date	Payment Date	Dividend Per Share		Amount Declared		Amount Paid

2/24/2022	3/15/2022	3/31/2022	$	0.90	$	26,585	$	26,242
2/24/2022	3/15/2022	3/31/2022	0.315		9,305		9,184

The amount of dividends declared may vary from the amount of dividends paid in a period due to the vesting of restricted stock awards and performance share awards, which accrue dividend equivalent rights that are paid when the award vests. ~~During the nine months ended September 30, 2022, we also paid $0.5 million in accrued dividends not included in the table above related to the vesting of these awards.~~ The payment of future dividends will be at the discretion of our board of directors and will depend on our future earnings, capital requirements, financial condition, future prospects, results of operations, contractual restrictions, legal requirements, and other factors deemed relevant by our board of directors.

NOTE 13 - EMPLOYEE BENEFITS

Healthcare

We participate in multiple healthcare plans, the largest of which is partially self-funded with an insurance company paying benefits in excess of stop loss limits per individual/family. Our healthcare benefit expense (net of employee contributions) was ~~$6.9~~$7.4 million and ~~$6.5~~$8.9 million for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, respectively and $23.0 million and $20.6 million for the nine months ended September 30, 2022 and 2021.~~respectively. An accrual for estimated healthcare claims incurred but not reported (“IBNR”) is included within accrued compensation on the Condensed Consolidated Balance Sheets and was ~~$3.6~~$4.3 million and ~~$3.3~~$3.8 million as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

Workers’ Compensation

Workers’ compensation expense totaled ~~$5.9~~$5.8 million and ~~$4.8~~$5.7 million for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, respectively and $14.5 million and $11.9 million for the nine months ended September 30, 2022 and 2021.~~respectively. Workers’ compensation known claims and IBNR reserves included on the Condensed Consolidated Balance Sheets were as follows (in thousands):

~~Table of Contents~~

~~INSTALLED BUILDING PRODUCTS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Included in other current liabilities	Included in other current liabilities	$	7,373	$	8,048	Included in other current liabilities	$	8,782	$	9,946
Included in other long-term liabilities	Included in other long-term liabilities	15,644		13,397		Included in other long-term liabilities	16,550		13,730
		$	23,017	$	21,445		$	25,332	$	23,676

We also had an insurance receivable for claims that exceeded the stop loss limit under our self-insured policies as well as claims under our fully insured policies included on the Condensed Consolidated Balance Sheets. This receivable offsets an equal liability included within the reserve amounts noted above and was as follows (in thousands):

September 30, 2022 December 31, 2021
Included in other non-current assets $ 2,302 $ 2,137


	March 31, 2023		December 31, 2022
Included in other non-current assets	$	2,743	$	2,318

Retirement Plans

We participate in multiple 401(k) plans, whereby we provide a matching contribution of wages deferred by employees and can also make discretionary contributions to each plan. Certain plans allow for discretionary employer contributions only. These

Table of Contents

INSTALLED BUILDING PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

plans cover substantially all our eligible employees. We recognized 401(k) plan expenses of ~~$0.6~~$0.9 million and ~~$0.5~~$0.8 million during the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, respectively and $2.2 million and $1.9 million during the nine months ended September 30, 2022 and 2021.~~respectively. These expenses are included in administrative expenses on the accompanying Condensed Consolidated Statements of Operations and Comprehensive Income.

Multiemployer Pension Plans

We participate in various multiemployer pension plans under collective bargaining agreements in Washington, Oregon, California and Illinois with other companies in the construction industry. These plans cover our union-represented employees and contributions to these plans are expensed as incurred. These plans generally provide for retirement, death and/or termination benefits for eligible employees within the applicable collective bargaining units, based on specific eligibility/participation requirements, vesting periods and benefit formulas. We do not participate in any multiemployer pension plans that are considered to be individually significant.

Share-Based Compensation

Common Stock Awards

We periodically grant shares of our common stock to non-employee members of our board of directors and our employees. ~~We granted approximately one thousand shares of our common stock during~~During the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and six thousand and four thousand~~we did not grant any such shares ~~during the nine months ended September 30, 2022 and 2021, respectively,~~ under ~~our~~ our 2014 Omnibus Incentive Plan to non-employee members of our board of ~~directors.~~

In addition, we granted approximately seven thousand shares of our common stock to employees during the three months ended September 30, 2021 and 63 thousand and 46 thousand shares to employees during the nine months ended September 30, 2022 and 2021, respectively.directors or employees.

Employees – Performance-Based Stock Awards

During the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, we issued approximately 4161 thousand shares of our common stock to certain officers, which vest in two equal installments on each of April 20, ~~2023~~2024 and April 20, ~~2024.~~2025. In addition, during the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, we established, and our board of directors approved, performance-based targets in connection with common stock awards to be issued to certain officers in ~~2023~~2024 contingent upon achievement of these targets.

In addition, there are long-term performance-based restricted stock awards to be issued to certain employees annually through 2024 contingent upon achievement of certain performance targets. These awards are accounted for as liability-based awards since they represent a predominantly-fixed monetary amount that will be settled with a variable number of common shares in the first quarter of 2025 and as such are included in other long-term liabilities on the Condensed Consolidated Balance Sheets. During the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ we granted approximately 398 thousand and ~~five~~39 thousand shares of our common stock, ~~respectively, which both~~respectively. The shares granted in 2023 will vest in 2025, and the shares granted in 2022 vested in the second quarter of 2022.

~~Table of Contents~~

~~INSTALLED BUILDING PRODUCTS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

Employees – Performance-Based Restricted Stock Units

During 2021, we established, and our board of directors approved, performance-based restricted stock units in connection with common stock awards which were issued to certain employees in 2022 based upon achievement of a performance target. In addition, during the nine months ended September 30, 2022, we established, and our board of directors approved, performance-based restricted stock units in connection with common stock awards to be issued to certain employees in 2023 based upon achievement of a performance target. These units will be accounted for as equity-based awards that will be settled with a fixed number of common shares.

Table of Contents

INSTALLED BUILDING PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Share-Based Compensation Summary

Amounts and changes for each category of equity-based award were as follows:


		Common Stock Awards			Performance-Based Stock Awards			Performance-Based Restricted Stock Units				Common Stock Awards			Performance-Based Stock Awards			Performance-Based Restricted Stock Units
		Awards	Weighted Average Grant Date Fair Value Per Share		Awards	Weighted Average Grant Date Fair Value Per Share		Units	Weighted Average Grant Date Fair Value Per Share			Awards	Weighted Average Grant Date Fair Value Per Share		Awards	Weighted Average Grant Date Fair Value Per Share		Units	Weighted Average Grant Date Fair Value Per Share
Nonvested awards/units at December 31, 2021		199,353	$	68.99	143,401	$	81.30	8,252	$	126.89
Nonvested awards/units at December 31, 2022											Nonvested awards/units at December 31, 2022	157,117	$	77.31	126,053	$	103.37	15,711	$	80.55
Granted	Granted	109,189	89.32		54,585	102.98		16,618	80.55		Granted	7,690	109.76		69,281	109.09		—	—
Vested	Vested	(147,095)	74.77		(71,933)	59.07		(8,061)	126.89		Vested	(569)	82.14		—	—		—	—
Forfeited/Cancelled	Forfeited/Cancelled	(1,057)	81.61		—	—		(404)	102.46		Forfeited/Cancelled	(398)	86.72		—	—		(289)	80.55
Nonvested awards/units at September 30, 2022		160,390	$	74.44	126,053	$	103.37	16,405	$	80.55
Nonvested awards/units at March 31, 2023											Nonvested awards/units at March 31, 2023	163,840	$	78.79	195,334	$	105.40	15,422	$	80.55

The following table summarizes the share-based compensation expense recognized under our 2014 Omnibus Incentive Plan (in thousands):


		Three months ended September 30,				Nine months ended September 30,					Three months ended March 31,
		2022		2021		2022		2021			2023		2022
Common Stock Awards	Common Stock Awards	$	1,420	$	1,426	$	4,718	$	3,843	Common Stock Awards	$	1,393	$	1,531
Non-Employee Common Stock Awards	Non-Employee Common Stock Awards	147		126		396		339		Non-Employee Common Stock Awards	148		124
Performance-Based Stock Awards	Performance-Based Stock Awards	1,237		1,128		3,863		3,462		Performance-Based Stock Awards	1,563		1,315
Liability Performance-Based Stock Awards	Liability Performance-Based Stock Awards	84		598		418		1,983		Liability Performance-Based Stock Awards	26		206
Performance-Based Restricted Stock Units	Performance-Based Restricted Stock Units	324		257		895		601		Performance-Based Restricted Stock Units	306		242
		$	3,212	$	3,535	$	10,290	$	10,228		$	3,436	$	3,418

We recorded the following stock compensation expense by income statement category (in thousands):


		Three months ended September 30,				Nine months ended September 30,					Three months ended March 31,
		2022		2021		2022		2021			2023		2022
Cost of sales	Cost of sales	$	165	$	161	$	484	$	287	Cost of sales	$	165	$	149
Selling	Selling	126		56		329		145		Selling	136		62
Administrative	Administrative	2,921		3,318		9,477		9,796		Administrative	3,135		3,207
		$	3,212	$	3,535	$	10,290	$	10,228		$	3,436	$	3,418

Administrative stock compensation expense includes all stock compensation earned by our administrative personnel, while cost of sales and selling stock compensation represents all stock compensation earned by our installation and sales employees, respectively.

2219

Table of Contents

INSTALLED BUILDING PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Unrecognized share-based compensation expense related to unvested awards was as follows (in thousands):


		As of September 30, 2022				As of March 31, 2023
		Unrecognized Compensation Expense on Unvested Awards		Weighted Average Remaining Vesting Period		Unrecognized Compensation Expense on Unvested Awards		Weighted Average Remaining Vesting Period
Common Stock Awards	Common Stock Awards	$	7,939	1.8	Common Stock Awards	$	5,561	1.7
Performance-Based Stock Awards	Performance-Based Stock Awards	6,591		1.7	Performance-Based Stock Awards	11,112		2.1
Performance-Based Restricted Stock Units	Performance-Based Restricted Stock Units	681		0.5	Performance-Based Restricted Stock Units	41		0.1
Total unrecognized compensation expense related to unvested awards	Total unrecognized compensation expense related to unvested awards	$	15,211		Total unrecognized compensation expense related to unvested awards	$	16,714

Total unrecognized compensation expense is subject to future adjustments for forfeitures. This expense is expected to be recognized over the remaining weighted-average period shown above on a straight-line basis except for the Performance-Based Stock Awards which uses the graded-vesting method. Shares forfeited are returned as treasury shares and available for future issuances.

During the ~~nine~~three months ended ~~September 30, 2022 and 2021,~~March 31, 2023, our employees surrendered approximately ~~53 thousand and 43 thousand~~200 shares of our common stock ~~respectively,~~ to satisfy tax withholding obligations arising in connection with the vesting of common stock awards issued under our 2014 Omnibus Incentive Plan. We recognized windfall tax benefits of $0.3 million and $3.0 million for the nine months ended September 30, 2022 and 2021, respectively, within the income tax provision in the Condensed Consolidated Statements of Operations and Comprehensive Income.

As of ~~September 30, 2022,~~March 31, 2023, approximately ~~1.7~~1.6 million of the 3.0 million shares of common stock authorized for issuance were available for issuance under the 2014 Omnibus Incentive Plan.

NOTE 14 - INCOME TAXES

Our provision for income taxes as a percentage of pretax earnings is based on a current estimate of the annual effective income tax rate adjusted to reflect the impact of discrete items.

During both the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022, our effective tax rate was ~~26.6% and 26.5%, respectively. During the three and nine months ended September 30, 2021, our effective tax rate was 26.1% and 23.5%, respectively.~~26.8%. The rates for each of the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ were ~~favorably~~unfavorably impacted by ~~recognition of a windfall~~certain expenses not being deductible for income tax ~~benefit from equity vesting.~~reporting purposes.

NOTE 15 - RELATED PARTY TRANSACTIONS

We sell installation services to other companies related to us through common or affiliated ownership and/or board of directors and/or management relationships. We also purchase services and materials and pay rent to companies with common or affiliated ownership.

We lease our headquarters and certain other facilities from related parties. See Note 8, Leases, for future minimum lease payments to be paid to these related parties.

The amount of sales to common or related parties as well as the purchases from and rent expense paid to common or related parties were as follows (in thousands):


		Three months ended September 30,				Nine months ended September 30,					Three months ended March 31,
		2022		2021		2022		2021			2023		2022
Sales	Sales	$	6,178	$	260	$	7,539	$	1,081	Sales	$	4,015	$	560
Purchases	Purchases	596		486		1,460		1,218		Purchases	666		407
Rent	Rent	336		370		974		983		Rent	352		314

We had a related party balance of approximately ~~$3.4~~$2.3 million and ~~$0.9~~$3.3 million included in accounts receivable on our Condensed Consolidated Balance Sheets as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively. These balances

~~Table of Contents~~

~~INSTALLED BUILDING PRODUCTS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

primarily represent trade accounts receivable arising during the normal course of business with various related parties. M/I Homes, Inc., a customer whose Chairman, Chief Executive Officer and President rejoined our board of directors in July of 2022, accounted for ~~$2.7~~$1.5 million and $2.5 million of the related party accounts receivable balance as of ~~September 30, 2022.~~March 31, 2023 and December 31, 2022,

Table of Contents

INSTALLED BUILDING PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

respectively. Additionally, M/I Homes, Inc. accounted for ~~$5.7 million~~a significant portion of our related party sales during the three ~~and nine~~ months ended ~~September 30, 2022.~~March 31, 2023.

NOTE 16 - COMMITMENTS AND CONTINGENCIES

Accrued General Liability and Auto Insurance

Accrued general liability and auto insurance reserves included on the Condensed Consolidated Balance Sheets were as follows (in thousands):


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Included in other current liabilities	Included in other current liabilities	$	5,925	$	5,889	Included in other current liabilities	$	7,162	$	7,479
Included in other long-term liabilities	Included in other long-term liabilities	20,691		16,050		Included in other long-term liabilities	16,621		17,528
		$	26,616	$	21,939		$	23,783	$	25,007

We also had insurance receivables and indemnification assets included on the Condensed Consolidated Balance Sheets that, in aggregate, offset equal liabilities included within the reserve amounts noted above. The amounts were as follows (in thousands):


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Insurance receivables and indemnification assets for claims under fully insured policies	Insurance receivables and indemnification assets for claims under fully insured policies	$	3,849	$	3,578	Insurance receivables and indemnification assets for claims under fully insured policies	$	2,643	$	4,933
Insurance receivables for claims that exceeded the stop loss limit	Insurance receivables for claims that exceeded the stop loss limit	492		278		Insurance receivables for claims that exceeded the stop loss limit	75		380
Total insurance receivables and indemnification assets included in other non-current assets	Total insurance receivables and indemnification assets included in other non-current assets	$	4,341	$	3,856	Total insurance receivables and indemnification assets included in other non-current assets	$	2,718	$	5,313

Leases

See Note 8, Leases, for further information regarding our lease commitments.

Other Commitments and Contingencies

From time to time, various claims and litigation are asserted or commenced against us principally arising from contractual matters and personnel and employment disputes. In determining loss contingencies, management considers the likelihood of loss as well as the ability to reasonably estimate the amount of such loss or liability. An estimated loss is recorded when it is considered probable that such a liability has been incurred and when the amount of loss can be reasonably estimated. As litigation is subject to inherent uncertainties, we cannot be certain that we will prevail in these matters. However, we do not believe that the ultimate outcome of any pending matters will have a material adverse effect on our consolidated financial position, results of operations or cash flows.

During the three months ended March 31, 2023, we entered into an supply agreement with variable pricing with one of our suppliers to purchase a portion of the material we utilize in our business. This agreement is effective March 31, 2023 through March 31, 2026 with a purchase obligation of 12.0 million pounds for 2023, 14.4 million pounds for 2024 and 17.3 million pounds for 2025.

NOTE 17 - BUSINESS COMBINATIONS

As part of our ongoing strategy to expand geographically and increase market share in certain markets, as well as diversify our products and end markets, we completed ~~five and seven~~two business combinations during the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 and ~~2021, respectively.~~one business combination during the three months ended March 31, 2022.

The largest of ~~these~~our 2023 acquisitions ~~were Pisgah~~was Anchor Insulation ~~and Fireplaces of NC, LLC ("Pisgah")~~Co., Inc. (Anchor) in March 2022, Central Aluminum Supply Corporation and Central Aluminum Supply of North Jersey, LLC ("Central Aluminum") in April 2022, Statewide Insulation, Inc. dba Tri County Insulation and Acoustical Contractor ("Tri-County") in May 2022, I.W. International Insulation, Inc., dba Intermountain West Insulation (“IWI”) in March 2021, Alert Insulation ("Alert") and Alpine Construction Services ("Alpine") in April 2021, General Ceiling & Partitions, Inc. ("GCP") in June 2021, and Five Star Building Products, LLC and Five Star Building Products of Southern Utah, LLC (collectively "Five Star") in September 2021.2023. Below is a summary of each significant acquisition by year, including revenue and net income ~~(loss)~~ since date of acquisition shown for the year of acquisition. Net income ~~(loss)~~ includes amortization ~~taxes~~ and ~~interest allocations~~taxes when appropriate.

2421

Table of Contents

INSTALLED BUILDING PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 (in thousands):


									Three months ended March 31, 2023
2023 Acquisitions	Date	Acquisition Type	Cash Paid		Seller Obligations		Total Purchase Price		Revenue		Net Income
Anchor	3/12/2023	Share	$	35,928	$	1,000	$	36,928	$	2,193	$	51
Other	2/13/2023	Asset	2,090		131		2,221		444		15






			$	38,018	$	1,131	$	39,149	$	2,637	$	66

For the three months ended March 31, 2022 (in thousands):
Three months ended September 30, 2022 Nine months ended September 30, 2022
2022 Acquisitions Date Acquisition Type Cash Paid Seller
Obligations Total Purchase Price Revenue Net Income (Loss) Revenue Net Income (Loss)
Pisgah 03/01/2022 Share $ 8,050 $ 1,878 $ 9,928 $ 2,847 $ 285 $ 6,665 $ 638
Central Aluminum 4/11/2022 Share 55,150 22,927 78,077 13,404 (1,048) 26,128 (805)
Tri-County 5/23/2022 Asset 9,600 473 10,073 3,548 (40) 5,034 (179)
Other Various Asset 3,309 256 3,565 550 (41) 550 (41)
$ 76,109 $ 25,534 $ 101,643 $ 20,349 $ (844) $ 38,377 $ (387)

~~For the three and nine months ended September 30, 2021 (in thousands)~~
Three months ended September 30, 2021 Nine months ended September 30, 2021
2021 Acquisitions Date Acquisition Type Cash Paid Seller
Obligations Total Purchase Price Revenue Net Income (Loss) Revenue Net Income (Loss)
IWI 03/01/2021 Share $ 42,098 $ 5,959 $ 48,057 $ 10,556 $ 590 $ 24,315 $ 2,068
Alert 4/13/2021 Asset 5,850 2,980 8,830 4,764 2 8,890 147
Alpine 4/19/2021 Asset 7,945 2,208 10,153 3,045 263 4,996 216
GCP 6/7/2021 Asset 9,700 1,427 11,127 2,624 (152) 3,270 (118)
Five Star 9/13/2021 Share 26,308 5,466 31,774 1,243 25 1,243 25
Other Various Asset 4,240 947 5,187 956 (29) 1,252 (43)
$ 96,141 $ 18,987 $ 115,128 $ 23,188 $ 699 $ 43,966 $ 2,295


									Three months ended March 31, 2022
2022 Acquisitions	Date	Acquisition Type	Cash Paid		Seller Obligations		Total Purchase Price		Revenue		Net Income
Other	03/01/2022	Share	$	8,050	$	1,878	$	9,928	$	915	$	97

Acquisition-related costs recorded within administrative expenses on the Condensed Consolidated Statements of Operations and Comprehensive Income amounted to ~~$(0.1)~~$0.6 million and ~~$(0.3)~~$0.7 million for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, respectively, and $1.3 million and $1.6 million for the nine months ended September 30, 2022 and 2021,~~ respectively. The goodwill recognized in conjunction with these business combinations represents the excess cost of the acquired entity over the net amount assigned to assets acquired and liabilities assumed. We expect to deduct approximately ~~$34.3~~$13.0 million of goodwill for tax purposes as a result of ~~2022~~2023 acquisitions.

~~Table of Contents~~

~~INSTALLED BUILDING PRODUCTS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

Purchase Price Allocations

The estimated fair values of the assets acquired and liabilities assumed for the acquisitions, as well as total purchase prices and cash paid, approximated the following (in thousands):

Nine months ended September 30, 2022
Pisgah Central Aluminum Tri-County Other Total
Estimated fair values:
Cash $ 87 $ 243 $ — $ — $ 330
Accounts receivable 772 3,502 2,823 — 7,097
Inventories 684 14,344 839 199 16,066
Other current assets 21 16 2 — 39
Property and equipment 1,049 2,590 927 513 5,079
Operating lease right-of-use asset — 844 66 — 910
Intangibles 4,634 34,900 3,488 1,378 44,400
Goodwill 2,743 27,595 2,123 1,523 33,984
Other non-current assets 7 — 12 37 56
Accounts payable and other current liabilities (69) (5,388) (185) (85) (5,727)
Other long-term liabilities — (569) (22) — (591)
Fair value of assets acquired and purchase price 9,928 78,077 10,073 3,565 101,643
Less seller obligations 1,878 22,927 473 256 25,534
Cash paid $ 8,050 $ 55,150 $ 9,600 $ 3,309 $ 76,109


		Nine months ended September 30, 2021																Three months ended March 31, 2023		Three months ended March 31, 2022
			IWI		Alert		Alpine		GCP		Five Star		Other		Total			Anchor		Other		Total		Other
Estimated fair values:	Estimated fair values:																Estimated fair values:
Cash	Cash		$	168	$	—	$	—	$	—	$	1,472	$	—	$	1,640	Cash	$	10	$	—	$	10	$	87
Accounts receivable	Accounts receivable		5,122		4,710		—		3,067		4,583		482		17,964		Accounts receivable	3,661		—		3,661		772
Inventories	Inventories		1,157		765		359		—		1,399		138		3,818		Inventories	1,527		64		1,591		684
Other current assets	Other current assets		3,014		738		—		—		330		—		4,082		Other current assets	1,732		—		1,732		21
Property and equipment	Property and equipment		796		693		726		206		1,161		544		4,126		Property and equipment	2,428		381		2,809		1,049
Operating lease right-of-use asset																	Operating lease right-of-use asset	—		28		28		—
Intangibles	Intangibles		25,200		2,770		5,543		5,670		17,400		2,787		59,370		Intangibles	16,420		1,120		17,540		4,634
Goodwill	Goodwill		23,282		940		3,582		2,695		6,626		1,253		38,378		Goodwill	12,870		670		13,540		2,743
Other non-current assets	Other non-current assets		264		132		—		—				6		402		Other non-current assets	184		13		197		7
Accounts payable and other current liabilities	Accounts payable and other current liabilities		(8,416)		(1,184)		(57)		(493)		(1,170)		(20)		(11,340)		Accounts payable and other current liabilities	(1,904)		(46)		(1,950)		(69)

Other long-term liabilities	Other long-term liabilities		(2,530)		(734)		—		(18)		(27)		(3)		(3,312)		Other long-term liabilities	—		(9)		(9)		—
Fair value of assets acquired and purchase price	Fair value of assets acquired and purchase price		48,057		8,830		10,153		11,127		31,774		5,187		115,128		Fair value of assets acquired and purchase price	36,928		2,221		39,149		9,928
Less seller obligations	Less seller obligations		5,959		2,980		2,208		1,427		5,466		947		18,987		Less seller obligations	1,000		131		1,131		1,878
Cash paid	Cash paid		$	42,098	$	5,850	$	7,945	$	9,700	$	26,308	$	4,240	$	96,141	Cash paid	$	35,928	$	2,090	$	38,018	$	8,050

Contingent consideration, isnon-compete agreements and/or amounts based on working capital calculations are included as “seller obligations” in the above table or within “fair value of assets acquired” if subsequently paid during the period presented. ~~These contingent~~Contingent consideration payments consist primarily of earnouts based on performance that are recorded at fair value at the time of ~~acquisition, and/or non-compete agreements and amounts based on working capital calculations.~~acquisition. When these payments are expected to be made over one year from the acquisition date, the contingent ~~consideration is discounted to net present value of future payments based on a weighted average of various future forecast scenarios.~~

2622

Table of Contents

INSTALLED BUILDING PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

consideration is discounted to net present value of future payments based on a weighted average of various future forecast scenarios.

Further adjustments to the allocation for each acquisition still under its measurement period are expected as third-party or internal valuations are finalized, certain tax aspects of the transaction are completed ~~contingent consideration is settled~~ and customary post-closing reviews are concluded during the measurement period attributable to each individual business combination. As a result, ~~insignificant~~ adjustments to the fair value of assets acquired, and in some cases total purchase price, have been made to certain business combinations since the date of acquisition and future adjustments may be made through the end of each measurement period. Any acquisition acquired after ~~September 30, 2021~~March 31, 2022 is deemed to be within the measurement period and its purchase price considered preliminary. Goodwill and intangibles per the above table may not agree to the total gross increases of these assets as shown in Note 6, Goodwill and Intangibles, during each of the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ due to adjustments to goodwill for the allocation of certain acquisitions still under measurement as well as other immaterial intangible assets added during the ordinary course of business. All ~~of the goodwill for Central Aluminum was assigned to our Distribution operating segment. All other~~ acquisitions during the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ had their respective goodwill assigned to our Installation operating segment.

Estimates of acquired intangible assets related to the acquisitions are as follows (in thousands):


		For the nine months ended September 30,							For the three months ended March 31,
		2022			2021				2023			2022
Acquired intangibles assets	Acquired intangibles assets	Estimated Fair Value		Weighted Average Estimated Useful Life (yrs.)	Estimated Fair Value		Weighted Average Estimated Useful Life (yrs.)	Acquired intangibles assets	Estimated Fair Value		Weighted Average Estimated Useful Life (yrs.)	Estimated Fair Value		Weighted Average Estimated Useful Life (yrs.)
Customer relationships	Customer relationships	$	29,606	12	$	43,115	12	Customer relationships	$	10,969	12	$	3,125	12
Trademarks and tradenames	Trademarks and tradenames	13,228		15	10,147		15	Trademarks and tradenames	5,466		15	1,136		15
Non-competition agreements	Non-competition agreements	1,566		5	4,530		5	Non-competition agreements	285		5	374		5
Backlog	Backlog	—		0	1,578		1.5	Backlog	820		1	—		0

Pro Forma Information

The unaudited pro forma information for the combined results of the Company has been prepared as if the 2023 acquisitions had taken place on January 1, 2022 and the 2022 acquisitions had taken place on January 1, ~~2021 and the 2021 acquisitions had taken place on January 1, 2020.~~2021. The unaudited pro forma information is not necessarily indicative of the results that we would have achieved had the transactions actually taken place on January 1, ~~2021~~2022 and ~~2020,~~2021, respectively, and the unaudited pro forma information does not purport to be indicative of future financial operating results (in thousands, except per share data):


		Unaudited pro forma for the three months ended September 30,				Unaudited pro forma for the nine months ended September 30,				Unaudited pro forma for the three months ended March 31,
		2022		2021		2022		2021				2023		2022
Net revenue	Net revenue	$	720,502	$	564,387	$	2,007,475	$	1,603,585		Net revenue	$	667,915	$	623,603
Net income	Net income	60,983		38,803		154,732		100,564			Net income	49,590		34,974
Basic net income per share	Basic net income per share	2.14		1.32		5.36		3.43			Basic net income per share	1.77		1.19
Diluted net income per share	Diluted net income per share	2.13		1.31		5.33		3.40			Diluted net income per share	1.75		1.18

Unaudited pro forma net income reflects additional intangible asset amortization expense of approximately ~~$13 thousand~~$0.4 million and ~~$2.9~~$1.9 million for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, respectively, and $1.0 million and $10.1 million for the nine months ended September 30, 2022 and 2021,~~ respectively, as well as additional income tax expense of approximately ~~$2 thousand~~$0.1 million and ~~$1.3~~$0.4 million for the three months ended ~~September 30,~~March 31, 2023 and 2022, and 2021, respectively, and $9 thousand and $3.7 million for the nine months ended September 30, 2022 and 2021, respectively. Also there was an additional interest expense of $1.1 million and $3.2 million for the three and nine months ended September 30, 2021, respectively, that would have been recorded had the 2023 acquisitions taken place on January 1, 2022 and the 2022 acquisitions taken place on January 1, ~~2021 and the 2021 acquisitions taken place on January 1, 2020.~~2021.

2723

Table of Contents

INSTALLED BUILDING PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 18 - INCOME PER COMMON SHARE

Basic net income per common share is calculated by dividing net income by the weighted average shares outstanding during the period, without consideration for common stock equivalents.

Diluted net income per common share is calculated by adjusting weighted average shares outstanding for the dilutive effect of common stock equivalents outstanding for the period, determined using the treasury stock method. Potential common stock is included in the diluted income per common share calculation when dilutive. The dilutive effect of outstanding restricted stock awards after application of the treasury stock method was approximately ~~117~~203 thousand and ~~169~~278 thousand shares for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022, ~~respectively and 216 thousand and 260 thousand shares for the three and nine months ended September 30, 2021,~~ respectively. Approximately 4 ~~thousand and 2~~ thousand shares of potential common stock were not included in the calculation of diluted net income per common share for the ~~nine~~three months ended ~~September 30, 2022 and 2021,~~March 31, 2023 because the effect would have been anti-dilutive. There were no shares that would have been considered anti-dilutive for the three months ended three months ended March 31, 2022.

NOTE 19 - SUBSEQUENT EVENTS

We announced on ~~November 3rd, 2022~~May 4th, 2023 that our board of directors declared a quarterly dividend, payable on ~~December 31, 2022~~June 30, 2023 to stockholders of record on ~~December~~June 15, ~~2022,~~2023, at a rate of ~~31.5~~33.0 cents per share.

In April 2023, we notified the lenders on our $500.0 million, seven-year term loan facility due December 2028 (the "Term Loan") under our credit agreement (the "Term Loan Agreement") that we have elected to trigger a benchmark replacement from LIBOR to the Secured Overnight Financing Rate ("Term SOFR"). This trigger includes a credit spread adjustment of 0.11%, 0.26% and 0.43% for interest periods of one month, three months and six months, respectively, and it is subject to the same floor as currently set forth in the Term Loan Agreement. The new Term SOFR rate was effective on April 28, 2023. Also in April 2023, we transitioned our interest rate swap derivatives to Term SOFR to avoid a mismatch of rates.

2824

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our consolidated financial statements and related notes in “Item 1. Financial Statements” of this Form 10-Q, as well as our ~~2021~~2022 Form 10-K.

OVERVIEW

We are one of the nation’s largest insulation installers for the residential new construction market and are also a diversified installer of complementary building products throughout the United States, including waterproofing, fire-stopping and fireproofing, garage doors, rain gutters, window blinds, shower doors, closet shelving, mirrors and other ~~products throughout the United States.~~products. We offer our portfolio of services for new and existing single-family and multi-family residential and commercial building projects in all 48 continental states and the District of Columbia from our national network of over ~~220~~240 branch locations. 94% of our net revenue comes from the service-based installation of these products across all of our end markets and forms our Installation operating segment and single reportable segment. ~~Additionally,~~In addition, two regional distribution operations serve the Midwest, Mountain West, Northeast and Mid-Atlantic regions of the United States, and we manufacture and distribute certain building products and materials to installers and distributors involved with various types of construction projects and these two operations form our Manufacturing operating segment and our Distribution operating segment, respectively.operate a cellulose manufacturing facility. We believe our business is well positioned to continue to profitably grow over the long-term due to our strong balance sheet, liquidity and our continuing acquisition strategy. ~~See “Key Factors Affecting Our Operating Results, COVID-19 Impacts” below for a discussion of short-term impacts to our business.~~

A large portion of our net revenue comes from the U.S. residential new construction market, which depends upon a number of economic factors, including demographic trends, interest rates, inflation, consumer confidence, employment rates, housing inventory levels, foreclosure rates, the health of the economy and availability of mortgage financing. The strategic acquisitions of multiple companies over the last several years contributed meaningfully to our ~~41.1%~~12.2% increase in net revenue during the three months ended ~~September 30, 2022~~March 31, 2023 compared to ~~2021.~~2022.

~~2022 Third~~2023 First Quarter Highlights

Net revenue increased ~~41.1%~~12.2%, or ~~$209.4~~$71.8 million to ~~$719.1~~$659.3 million, while gross profit increased ~~41.9%~~22.1% to ~~$221.3~~$210.4 million during the three months ended ~~September 30, 2022~~March 31, 2023 compared to ~~2021.~~2022. The increase in net revenue and gross profit was primarily driven by selling price ~~increases, higher volume of customer jobs completed,~~and product mix improvements and the contribution of our recent acquisitions. We continue to make pricing adjustments to offset the current macroeconomic inflationary trends as evidenced by the ~~27.1%~~16.5% increase in our price/mix ~~metric. Sales volume increased by 7.5% on a same branch basis.~~metric for our Installation segment. Gross profit margin grew ~~primarily~~faster than revenue as we continued to prioritize profitability over sales volume. Specifically, gross profit outpaced sales growth due to higher selling prices and resulting leverage gained on labor and other costs of sales, ~~partially offset by higher~~including lower material costs ~~caused by~~as recent supply chain constraints and higher fuel costs. Inflationary pressures continue to contribute to higher material costs, particularly for spray foam and several complementary installed products, as some products continue to be difficult to source near volume and pricing levels secured in prior periods.began showing signs of easing. Certain net revenue and industry metrics we use to monitor our operations are discussed in the "Key Measures of Performance" section below, and further details regarding results of our various end markets are discussed further in the "Net Revenue, Cost of Sales and Gross Profit" section below.

As of ~~September 30, 2022,~~March 31, 2023, we had ~~$203.4~~$218.7 million of cash and cash equivalents, ~~$25.0 million of short-term investments,~~ and we have not drawn on our revolving line of ~~credit, which we amended and extended during the three months ended March 31, 2022, increasing the commitment to $250.0 million from $200.0 million.~~credit. This strong liquidity position allowed us to return capital to shareholders ~~through purchasing $12.5~~by paying a variable annual dividend of $0.90 per share, or $25.3 million ofin the aggregate, as well as increasing our ~~Company's stock and declaring a~~regular quarterly dividend ~~of $0.315~~5% to $0.33 per share, or $9.0 million in the aggregate, during the three months ended ~~September 30, 2022. Additionally, we received $25.5~~March 31, 2023. During the quarter, our board of directors also authorized a new stock repurchase program which replaces our previous stock repurchase program that allows for the repurchase of up to $200.0 million ~~from amending the maturity dates on~~of our ~~three interest rate swaps during the three months ended September 30, 2022.~~outstanding common stock.

Key Measures of Performance

We utilize certain net revenue and industry metrics to monitor our operations. At the beginning of 2022, we realigned our operating segments to reflect recent changes in our business as described in Part I, Item 1, "Note 10 - Information on Segments." In conjunction with this realignment, we modified the keyKey metrics ~~we use to monitor company and segment performance. Specifically, we now present~~include total sales growth and same branch growth metrics for our consolidated results, our Installation reportable segment and our Other category consisting of our Distribution and Manufacturing operating segments. ~~In addition,~~We also monitor sales growth for our Installation segment by end market and track volume growth and price/mix growth.

We believe the revenue growth measures are important indicators of how our business is performing, however, we may rely on different metrics ~~are now only presented for~~in the ~~Installation reportable segment~~future. We also utilize gross profit percentage as shown in the following section to ~~align with how we~~ monitor our ~~operations. While these changes do not significantly alter the prior period metrics previously~~most significant variable costs and to evaluate labor efficiency and success at passing increasing costs of materials to customers.

2925

~~disclosed, prior period Manufacturing operating segment growth metrics were reclassified from our Installation segment metrics to the Other category metrics.~~

The following table shows key measures of performance we utilize to evaluate our results:


		Three months ended September 30,				Nine months ended September 30,					Three months ended March 31,
		2022		2021		2022		2021			2023		2022
Period-over-period Growth	Period-over-period Growth									Period-over-period Growth
Consolidated Sales Growth	Consolidated Sales Growth	41.1	%	21.2	%	38.2	%	18.4	%	Consolidated Sales Growth	12.2	%	34.4	%
Consolidated Same Branch Sales Growth (1)	Consolidated Same Branch Sales Growth (1)	28.5	%	11.2	%	26.2	%	8.9	%	Consolidated Same Branch Sales Growth (1)	7.1	%	22.5	%

Installation ~~(2)~~	Installation ~~(2)~~									Installation ~~(2)~~
Sales Growth ~~(3)~~(2)	Sales Growth ~~(3)~~(2)	33.5	%	21.3	%	31.9	%	18.2	%	Sales Growth ~~(3)~~(2)	10.9	%	30.0	%
Same Branch Sales Growth ~~(3)~~(2)	Same Branch Sales Growth ~~(3)~~(2)	28.4	%	11.2	%	26.2	%	8.6	%	Same Branch Sales Growth ~~(3)~~(2)	7.0	%	22.2	%

Single-Family Sales Growth ~~(4)~~(3)	Single-Family Sales Growth ~~(4)~~(3)	39.2	%	24.1	%	38.2	%	20.1	%	Single-Family Sales Growth ~~(4)~~(3)	1.6	%	37.4	%
Single-Family Same Branch Sales Growth ~~(4)~~(3)	Single-Family Same Branch Sales Growth ~~(4)~~(3)	35.3	%	16.0	%	32.8	%	12.8	%	Single-Family Same Branch Sales Growth ~~(4)~~(3)	(2.6)	%	29.4	%

Multi-Family Sales Growth ~~(5)~~(4)	Multi-Family Sales Growth ~~(5)~~(4)	33.9	%	18.2	%	29.7	%	17.0	%	Multi-Family Sales Growth ~~(5)~~(4)	38.1	%	24.6	%
Multi-Family Same Branch Sales Growth ~~(5)~~(4)	Multi-Family Same Branch Sales Growth ~~(5)~~(4)	32.9	%	10.9	%	28.9	%	7.0	%	Multi-Family Same Branch Sales Growth ~~(5)~~(4)	37.9	%	23.1	%

Residential Sales Growth ~~(6)~~(5)	Residential Sales Growth ~~(6)~~(5)	38.4	%	23.2	%	36.8	%	19.6	%	Residential Sales Growth ~~(6)~~(5)	7.4	%	35.2	%
Residential Same Branch Sales Growth ~~(6)~~(5)	Residential Same Branch Sales Growth ~~(6)~~(5)	34.9	%	15.1	%	32.1	%	11.8	%	Residential Same Branch Sales Growth ~~(6)~~(5)	3.8	%	28.3	%

Commercial Sales Growth ~~(7)~~(6)	Commercial Sales Growth ~~(7)~~(6)	16.0	%	17.5	%	14.4	%	12.1	%	Commercial Sales Growth ~~(7)~~(6)	27.0	%	13.0	%
Commercial Same Branch Sales Growth ~~(7)~~(6)	Commercial Same Branch Sales Growth ~~(7)~~(6)	2.8	%	(0.2)	%	4.4	%	(5.0)	%	Commercial Same Branch Sales Growth ~~(7)~~(6)	22.4	%	5.9	%

Other ~~(2)~~	Other ~~(2)~~									Other ~~(2)~~
Sales Growth ~~(8)~~(7)	Sales Growth ~~(8)~~(7)	657.3	%	23.0	%	567.5	%	44.0	%	Sales Growth ~~(8)~~(7)	45.3	%	407.3	%
Same Branch Sales Growth ~~(8)~~(7)	Same Branch Sales Growth ~~(8)~~(7)	44.3	%	23.0	%	43.8	%	44.0	%	Same Branch Sales Growth ~~(8)~~(7)	12.9	%	50.8	%

Same Branch Sales Growth - Installation ~~(9)~~(8)	Same Branch Sales Growth - Installation ~~(9)~~(8)									Same Branch Sales Growth - Installation ~~(9)~~(8)
Volume Growth (1)(10)		7.5	%	4.7	%	7.9	%	10.4	%
Price/Mix Growth (1)(11)		27.1	%	7.4	%	22.2	%	(0.3)	%
Volume Growth (1)(9)										Volume Growth (1)(9)	(9.3)	%	9.7	%
Price/Mix Growth (1)(10)										Price/Mix Growth (1)(10)	16.5	%	14.6	%

U.S. Housing Market (12)
U.S. Housing Market (11)										U.S. Housing Market (11)
Total Completions Growth	Total Completions Growth	6.5	%	(2.1)	%	2.3	%	5.9	%	Total Completions Growth	11.7	%	(3.4)	%
Single-Family Completions Growth	Single-Family Completions Growth	8.1	%	1.5	%	5.4	%	6.9	%	Single-Family Completions Growth	1.4	%	1.5	%
Multi-Family Completions Growth	Multi-Family Completions Growth	5.6	%	(9.6)	%	(5.3)	%	4.3	%	Multi-Family Completions Growth	50.8	%	(18.7)	%


(1)			Same-branch basis represents period-over-period growth for branch locations owned greater than 12 months as of each financial statement date.
(2)			~~Prior period disclosures have been recast to conform to the current period segment presentation.~~
~~(3)~~			Calculated based on period-over-period growth of all end markets for our Installation segment.
~~(4)~~(3)			Calculated based on period-over-period growth in the single-family subset of the residential new construction end market for our Installation segment.
~~(5)~~(4)			Calculated based on period-over-period growth in the multi-family subset of the residential new construction end market for our Installation segment.
~~(6)~~(5)			Calculated based on period-over-period growth in the residential new construction end market for our Installation segment.
~~(7)~~(6)			Calculated based on period-over-period growth in the total commercial end market for our Installation segment. Our commercial end market consists of heavy and light commercial projects.
~~(8)~~(7)			Calculated based on period-over-period growth in our Other category which consists of our Manufacturing and Distribution operating segments. Our distribution businesses were acquired in December, 2021 and April, 2022.
~~(9)~~(8)			The heavy commercial end market, a subset of our total commercial end market, comprises projects that are much larger than our average installation job. This end market is excluded from the volume growth and price/mix growth calculations as to not skew the growth rates given its much larger per-job revenue compared to the average jobs in our remaining end markets.
~~(10)~~(9)			Calculated as period-over-period change in the number of completed same-branch jobs within our Installation segment for all markets we serve except the heavy commercial end market.
~~(11)~~(10)			Defined as change in the mix of products sold and related pricing changes and calculated as the change in period-over-period average selling price per same-branch jobs within our Installation segment for all markets we serve except the heavy commercial market, multiplied by total current year jobs. The mix of end customer and product would have an impact on the year-over-year price per job.
~~(12)~~(11)			U.S. Census Bureau data, as revised.

We believe the revenue growth measures are important indicators of how our business is performing, however, we may rely on different metrics in the future. We also utilize gross profit percentage as shown in the following section to monitor our most significant variable costs and to evaluate labor efficiency and success at passing increasing costs of materials to customers.

3026

Net Revenue, Cost of Sales and Gross Profit

The components of gross profit were as follows (in thousands):


		Three months ended September 30,								Nine months ended September 30,									Three months ended March 31,
		2022			Change		2021			2022			Change		2021				2023			Change		2022
Net revenue	Net revenue	$	719,114		41.1	%	$	509,763		$	1,983,355		38.2	%	$	1,434,927		Net revenue	$	659,309		12.2	%	$	587,492
Cost of sales	Cost of sales	497,837			40.7	%	353,879			1,372,966			37.1	%	1,001,730			Cost of sales	448,887			8.1	%	415,089
Gross profit	Gross profit	$	221,277		41.9	%	$	155,884		$	610,389		40.9	%	$	433,197		Gross profit	$	210,422		22.1	%	$	172,403
Gross profit percentage	Gross profit percentage	30.8		%			30.6		%	30.8		%			30.2		%	Gross profit percentage	31.9		%			29.3		%

~~In addition to acquisitions, net~~Net revenue increased during the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 primarily due to increased selling prices and product mix improvements, acquisitions and organic growth from our existing branches as ~~evidenced by the volume and price/mix metrics~~ shown in the Key Measures of Performance section above. ~~During the three and nine months ended September 30, 2022, we experienced growth in all of our end markets and we achieved 28.5% and 26.2% year-over-year same branch sales growth, respectively.~~ Installation revenue increased ~~33.5% and 31.9%~~10.9% for the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, respectively, driven by continued strong growth in the new residential ~~new construction, repair and remodel, and~~multifamily market which grew 38.1% as well as growth in the commercial ~~markets.~~market which increased 27.0% over the prior year period. Our largest end market, the single-family subset of the residential new construction market, grew revenue ~~39.2% and 38.2%, respectively,~~1.6% over the same ~~periods~~period ended September 30, 2021. The vast majority of the growth in this end market was organic, attributable to price gains and more favorable customer and product mix with the remainder attributable to growth in the number of completed jobs. In our commercial end market, continued challenges associated with the COVID-19 pandemic had an impact, as evidenced by modest increases of 2.8% and 4.4% in same branch sales within this end market during the three and nine months ended September 30, 2022, respectively. See “Key Factors Affecting Our Operating Results, COVID-19 Impacts” below for further information.March 31, 2022. The remaining overall growth in net revenue for ~~both~~ the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 is attributable to the ~~recent acquisitions~~acquisition of ~~AMD Distribution and~~ Central Aluminum which, combined with AMD Distribution, form our Distribution operating segment. This operating segment, combined with our Manufacturing operating segment, ~~grew from $6.3 million to $47.7 million~~experienced 12.9% organic growth, or 45.3% including the Central Aluminum acquisition, for the three months ended ~~September 30, 2022 and from $17.2 million to $114.7 million for the nine months ended September 30, 2022.~~March 31, 2023.

As a percentage of net revenue, gross profit improved during the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 compared to the corresponding prior year ~~periods~~period primarily on the strength of ~~sales~~price/mix growth ~~across all end markets as well as strong price/mix growth. However, ongoing industry wide supply chain issues continue~~and resulting leverage gained on labor and other costs of sales. We continued to focus on profitability over volume gains, and this had a noticeable impact our operating efficiency, driving our material costs higher. In order to meet customer demand during the quarter, we purchased materials from distributors and home centers at a premium to what we typically would purchase directly from manufacturers. During the three and nine months ended September 30, 2022, we estimate these purchases increased materials expense by approximately $1.2 million and $3.6 million, respectively, therefore reducingon gross profit ~~by approximately 20 basis points for both periods.~~this quarter. While inflation and material supply chain issues that affected our business and industry in recent years are likely to persist ~~throughout~~through 2023, we have seen inflation moderate since the ~~remainder~~end of 2022 and ~~into 2023, we~~signs that the supply chain is improving. We will continue to work with our suppliers to lessen the impact on our margins and with our customers to offset further cost increases through selling price adjustments.

Operating Expenses

Operating expenses were as follows (in thousands):


		Three months ended September 30,								Nine months ended September 30,									Three months ended March 31,
		2022			Change		2021			2022			Change		2021				2023			Change		2022
Selling	Selling	$	31,651		30.9	%	$	24,188		$	86,214		27.4	%	$	67,677		Selling	$	32,607		29.4	%	$	25,192
Percentage of total net revenue	Percentage of total net revenue	4.4		%			4.7		%	4.3		%			4.7		%	Percentage of total net revenue	4.9		%			4.3		%
Administrative	Administrative	$	84,345		23.9	%	$	68,056		$	247,519		24.0	%	$	199,607		Administrative	$	89,504		13.1	%	$	79,144
Percentage of total net revenue	Percentage of total net revenue	11.7		%			13.4		%	12.5		%			13.9		%	Percentage of total net revenue	13.6		%			13.5		%
Amortization	Amortization	$	11,370		23.3	%	$	9,224		$	33,728		25.9	%	$	26,798		Amortization	$	11,435		3.0	%	$	11,097
Percentage of total net revenue	Percentage of total net revenue	1.6		%			1.8		%	1.7		%			1.9		%	Percentage of total net revenue	1.7		%			1.9		%

Selling

The dollar increase in selling expenses for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 was primarily driven by an increase in selling wages and commissions to support our increased net revenue of ~~41.1%.~~12.2% and higher credit loss provisions due to increased sales. Selling expense as a percentage of sales ~~decreased~~increased for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 compared to ~~2021~~2022 primarily due to increased ~~leverage on selling wages~~commissions from ~~increased sales.~~

changes in product mix and more profitable completed jobs.

Administrative

The dollar increase in administrative expenses for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 was primarily due to an increase in wages ~~and benefits, insurance~~ and facility costs from acquisitions and to support organic growth. Administrative expenses ~~decreased~~slightly increased as a percentage of sales for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 compared to ~~2021~~2022 primarily due to ~~the leverage gained on administrative employee expenses~~inflationary pressures and ~~facility costs from~~ increased ~~sales.~~number of employees leading to higher wages and benefits.

Amortization

The increase in amortization expense for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 was attributable to the increase in finite-lived intangible assets recorded as a result of acquisitions.

Other Expense, Net

Other expense, net was as follows (in thousands):


		Three months ended September 30,						Nine months ended September 30,							Three months ended March 31,
		2022		Change		2021		2022		Change		2021			2023		Change		2022
Interest expense, net	Interest expense, net	$	10,668	38.8	%	$	7,687	$	31,669	39.0	%	$	22,781	Interest expense, net	$	9,670	(8.8)	%	$	10,600
Other expense (income)		185		138.3	%	(483)		698		241.3	%	(494)
Other (income) expense														Other (income) expense	(153)		(205.5)	%	145
Total other expense, net	Total other expense, net	$	10,853			$	7,204	$	32,367			$	22,287	Total other expense, net	$	9,517			$	10,745

The ~~increase~~decrease in interest expense, net during the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 compared to ~~2021~~2022 was primarily due to increased interest income due to higher yields on cash deposits offsetting the ~~increase in debt levels. See Note 7, Long-Term Debt, for more information.~~expense, partially offset by increased interest expense on variable rate debt.

Income Tax Provision

Income tax provision and effective tax rates were as follows (in thousands):


		Three months ended September 30,						Nine months ended September 30,							Three months ended March 31,
		2022			2021			2022			2021				2023			2022
Income tax provision	Income tax provision	$	22,080		$	12,320		$	55,857		$	27,432		Income tax provision	$	18,085		$	12,403
Effective tax rate	Effective tax rate	26.6		%	26.1		%	26.5		%	23.5		%	Effective tax rate	26.8		%	26.8		%

During both the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022, our effective tax rates were ~~26.6% and 26.5%, respectively.~~26.8%. The rates for both periods were ~~favorably~~unfavorably impacted by ~~recognition of a windfall~~certain expenses not deductible for income tax ~~benefit from equity vesting. Each rate for the three and nine months ended September 30, 2021 was also favorably impacted by recognition of a windfall tax benefit due to equity vesting.~~reporting purposes.

Other Comprehensive (Loss) Income, ~~(Loss),~~ Net of Tax

Other comprehensive (loss) income, ~~(loss),~~ net of tax was as follows (in thousands):

Three months ended September 30, Nine months ended September 30,
2022 2021 2022 2021
Net change on cash flow hedges, net of taxes $ 14,379 $ 1,292 $ 42,640 $ 7,762


	Three months ended March 31,
	2023		2022
Net change on cash flow hedges, net of taxes	$	(6,309)	$	18,111

During the three months ended September 30, 2022, we amended the maturity dates for our three existing interest rate swaps. These swaps had unrealized gains of $51.2 million at the amendment date of July 8, 2022. These unrealized gains will be amortized as a decrease to interest expense, net through the original maturity date of April 2030. See Note 11, Derivatives and Hedging Activities, for more information.

~~During the three and nine months ended September 30, 2022,~~March 31, 2023, we recorded unrealized ~~gains~~losses of ~~$13.5 million and $40.6~~$7.1 million, net of taxes, respectively, on our cash flow hedges due to the market's expectations for ~~higher~~lower long-term interest rates in the future relative to our three existing interest rate swaps and our two forward interest rate swaps. We also amortized $1.1 million ~~and $2.8 million~~ of our remaining unrealized gains and losses, net, on our terminated cash flow hedges to interest expense during ~~the~~ three ~~and nine~~ months ended ~~September 30, 2022, respectively,~~March 31, 2023, not including the offsetting tax effects of ~~$(0.3) million and $(0.7) million, respectively.~~

$0.3 million.

During the three months ended ~~September 30, 2021,~~March 31, 2022, we recorded an unrealized gain of ~~$0.7~~$17.5 million, net of tax, and amortized $0.8 million of our remaining unrealized loss on our terminated cash flow hedges, not including the offsetting tax effect of $(0.2) million. During the nine months ended September 30, 2021, we recorded an unrealized gain of $6.0 million, net of tax, and amortized $2.4 million of our remaining unrealized loss on our terminated cash flow hedges, not including the offsetting tax effect of $(0.6)$0.2 million.

KEY FACTORS AFFECTING OUR OPERATING RESULTS

Inflation and Interest Rates

The fast recovery in residential housing demand helped offset prolonged impacts of the COVID-19 pandemic already experienced. However, the strong demand for residential housing has caused inflationary pressure on ~~materials.~~materials used in our industry. Inflation has also affected the economy as a whole as consumer price inflation has reached 40-year highs, negatively impacting consumer sentiment and increasing market uncertainty. The Federal Reserve ~~aims~~took actions to moderate and stabilize inflation ~~as it has raised~~by raising the federal funds rate multiple times in 2022 and ~~has signaled~~2023 and signaling plans to continue raising ~~this~~the rate ~~throughout 2022 and into~~ in

2023. This caused the average mortgage rate in the United States to ~~almost double~~increase rapidly since the end of 2021. Rising interest rates began to curtail housing demand in the second ~~and third quarters~~half of 2022 and first quarter of 2023, reducing mortgage financing affordability. ~~While~~As a result, the single family homebuilding market began showing signs of weakening in late 2022 and early 2023 and housing starts and permits are forecasted to decline in 2023.

We expect to be impacted by these economic headwinds in 2023. However, we believe ~~the demand for our installation services remains high due to~~ the large residential construction backlog of both units under construction and units not started will partially offset these challenges. Additionally, there are housing shortages in some of the markets we serve and we expect the backlog in our growing multi-family business will help to offset any declines we may face in the residential homebuilding market. Also, many existing homeowners are ~~closely watching our residential~~locked into low interest mortgages, and an aging housing stock exists in many areas of the United States. We expect these factors, combined with incentives from the Inflation Reduction Act of 2022, to drive growth in the repair and remodel markets ~~for signs of a slowdown in demand that could result from these risks.~~we service.

Cost and Availability of Materials

We typically purchase the materials that we install directly from manufacturers, and the products we sell are either purchased from manufacturers or other suppliers or are manufactured by us. ~~Since the beginning of the COVID-19 pandemic, the~~The industry supply of ~~many of~~these materials experienced supply shortages in 2022 due to strong demand and effects from the ~~materials we install has been disrupted.~~COVID-19 pandemic. The higher demand for materials coupled with supply chain issues including raw material shortages, supplier labor shortages, bottlenecks and shipping constraints ~~has forced us to buy some materials at higher prices through distributors and local retailers to meet customer demand, therefore reducing gross profit. The pandemic has also resulted in~~showed signs of easing during the ~~need for some of our manufacturers to allocate materials across the industry which has affected the pricing and availability of those materials. We~~three months ended March 31, 2023. However, we expect the supply chain disruptions affecting ~~most~~some of the materials used throughout our installation work to continue throughout ~~2022 and into~~ 2023. We will continue to prioritize the effective management of our supply chain by our purchasing, logistics and warehousing teams.

In addition, we experience price increases from our suppliers from time to time, including multiple increases over the last few years caused by supply shortages and general economic inflationary pressures. ~~During the three and nine months ended September 30, 2022, we saw~~We have experienced unprecedented increased

pricing for ~~certain~~fiberglass and foam insulation materials ~~as well as many of~~over the ~~other products we install and~~last three years but expect manufacturers to ~~seek additional~~slow the pace of price

increases ~~during the year. The increase~~ in ~~demand, inflationary pressures, product shortages and other supply constraints caused these material price increases to be larger and more frequent than in a normal business cycle.~~2023. Increased market pricing, regardless of the catalyst, has and could continue to impact our results of operations throughout the remainder of ~~2022,~~2023, to the extent that price increases cannot be passed on to our customers. Our selling price increases were able to support most material cost increases in 2022 but we may have more difficulty raising prices in 2023 if housing demand slows. We will continue to work with our customers to adjust selling prices to offset higher costs as they occur. See “COVID-19 Impacts” below for a discussion of the short-term impacts of the current economic climate on the availability of the materials we install.

Cost of Labor

Our business is labor intensive and the majority of our employees work as installers on local construction sites. We expect to spend more to hire, train and retain installers to support our growing business in ~~2022,~~2023, as tight labor availability continues within the construction industry. We offer a comprehensive benefits package ~~which~~unlike many of our local competitors, ~~are not able to provide,~~ which will increase costs as we hire additional personnel. Our workers’ compensation costs may continue to rise as we increase our coverage for additional personnel. We obtained leverage on our labor costs in the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 compared to ~~2021~~2022 due to increased selling prices per ~~job, however,~~job. However, inflation and market competition could increase these costs in the near-term.

We have experienced strong employee retention, turnover and labor efficiency rates ~~in the three and nine months ended September 30, 2022.~~that exceed industry standards. We believe this is partially a result of various programs meant to benefit our employees, including our financial wellness plan, longevity stock compensation plan for employees and assistance from the Installed Building Products Foundation meant to benefit our employees, their families and their communities. While improved retention drives lower costs

to recruit and train new employees, resulting in greater installer productivity, these improvements are somewhat offset by the additional costs of these incentives.

COVID-19 Impacts

The COVID-19 pandemic has caused significant volatility, uncertainty and economic disruption. ~~While~~As the ~~COVID-19~~ pandemic ~~and related events will likely have a negative effect on our business during~~continues to move toward the ~~remainder of 2022,~~endemic stage, the full extent and scope of the impact on our business and industry, as well as national, regional and global markets and economies, depends on numerous evolving factors that we may not be able to accurately predict, including the duration and scope of the pandemic, additional government actions taken in response to the pandemic, the impact on construction activity and demand for homes (based on employment levels, consumer spending and consumer confidence). The fast recovery in residential housing demand helped offset prolonged impacts of the pandemic already

experienced. However, we have experienced supply constraints and material price increases ultimately stemming from the effects of the pandemic across most of the products we install or sell, which ~~we expect to~~could continue throughout ~~2022.~~2023.

In the commercial sector, we have experienced some impact to our commercial business from the pandemic, mainly in the form of project start delays and ~~inefficiencies due to social distancing requirements in some areas.~~other inefficiencies. In the future, certain large-scale infrastructure programs may be at risk if the need for such structures decline, project funding declines or as consumer behaviors change in the wake of COVID-19 disruptions to the economy and changes to our general ways of life. For example, reduced demand for office buildings and/or educational facilities, decreased airport traffic, or decreased usage of sports arenas or similar commercial structures could impact our commercial end market. WeAs discussed in the sections above, our commercial business experienced strong sales growth during the three months ended March 31, 2023, signaling a potential improvement in this market. However, we continue to evaluate the nature and extent of the COVID-19 pandemic’s impact on our financial condition, results of operations and cash ~~flows.~~

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security ("CARES Act") was signed into law. The CARES Act provides numerous tax provision and other stimulus measures. We benefited from the temporary suspensionflows of the employer portion of Social Security taxes by deferring $20.7 million of payments in 2020. 50% of the amount was paid on December 31, 2021 and the remaining 50% will be paid on December 31, 2022. It is important to note that this does not impact the timing of the expense, only the timing of the payment.commercial business.

LIQUIDITY AND CAPITAL RESOURCES

Our capital resources primarily consist of cash from operations and borrowings under our various debt agreements and capital equipment leases and loans. As of ~~September 30, 2022,~~March 31, 2023, we had cash and cash equivalents of ~~$203.4 million, short-term investments of $25.0~~$218.7 million as well as access to $250.0 million under our asset-based lending credit facility (as defined below), less ~~$52.4~~$5.8 million of outstanding letters of credit, resulting in total liquidity of ~~$426.0~~$462.9 million. This total liquidity was reduced by ~~$4.3~~$1.6 million within our cash and cash equivalents due to a deposit into a trust to serve as additional collateral for our workers' compensation and general liability ~~and auto~~ policies. This amount can be converted to a letter of credit at our discretion and would reduce the availability of our asset-based lending facility (as defined below). Liquidity may also be limited in the future by certain cash collateral limitations under our asset-based credit facility (as defined below), depending on the status of our borrowing base availability.

We ~~experienced~~faced unprecedented increases in pricing for certain insulation materials in 2021 and 2022. While pricing for some of these materials continued to increase in the first ~~three quarters~~quarter of ~~2022 and expect manufacturers~~2023, pricing for other products began to ~~seek additional price increases in the remainder of 2022 and into 2023.~~moderate. Increased market pricing on ~~the~~ materials ~~we purchase~~ has ~~and could continue to~~a negative impact ~~our results of operations in 2022~~on liquidity due to the higher prices we must pay for materials. ~~See Part I, Item 1A, Risk Factors on the 2021 Form 10-K, for information on the potential and currently known impacts on our business and liquidity from the COVID-19 pandemic.~~

Short-Term Material Cash Requirements

Our primary capital requirements are to fund working capital needs, operating expenses, acquisitions and capital expenditures, to meet principal and interest obligations and to make required income tax payments. We may also use our resources to fund our optional stock repurchase program and pay quarterly and annual dividends. In addition, we expect to spend cash and cash equivalents to acquire various companies with at least $100.0 million in aggregate net revenue ~~acquired~~ each fiscal year. The amount of cash paid for an acquisition is dependent on various factors, including the size and determined value of the business being acquired.

We expect to meet our short-term liquidity requirements primarily through net cash flows from operations, our cash and cash equivalents on hand and borrowings from banks under the Master Loan and Security Agreement, the Master Equipment

Agreement and the Master Loan Agreements. Additional sources of funds, should we need them, include borrowing capacity under our asset-based lending credit facility (as defined below).

We believe that our cash flows from operations, combined with our current cash levels and available borrowing capacity, will be adequate to support our ongoing operations and to fund our business needs, commitments and contractual obligations for at least the next 12 months as evidenced by our net positive cash flows from operations for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021.~~2022. We believe that we have access to additional funds, if needed, through the capital markets to obtain further debt financing under the current market conditions, but we cannot guarantee that such financing will be available on favorable terms, or at all. In the short-term, we expect the seasonal trends we typically experience to vary from historical patterns, with the ~~last quarter of 2022 and~~ first half of 2023 experiencing stronger volumes than the second half of 2023 due to the large industry backlog of projects either in process or authorized but not started. This could affect the timing of cash collections and payments during ~~the fourth quarter of 2022 and~~ each quarter of 2023.

Long-Term Material Cash Requirements

Beyond the next twelve months, our principal demands for funds will be to fund working capital needs and operating expenses, to meet principal and interest obligations on our long-term debts and finance leases as they become due or mature, and to make required income tax payments. Additional funds may be spent on acquisitions, capital improvements and dividend payments, at our discretion.

On a long-term basis, our sources of capital could be insufficient to meet our needs and growth strategy. We may refinance existing debt or obtain further debt financing in the future to the extent that our sources of capital are insufficient.

In "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in the ~~2021~~2022 Form 10-K, we disclosed that we had ~~$1.1~~$1.0 billion aggregate long-term material cash requirements as of December 31, ~~2021.~~2022. During the three months ended March 31, 2023, we signed a long-term purchase commitment with variable pricing to purchase 43.7 million pounds of material over the next three years. See Note 16, Commitments and Contingencies, for more information on this commitment. There have been no other material changes to our cash requirements during the period covered by this 10-Q outside of the normal course of our business.

Sources and Uses of Cash and Related Trends

Working Capital

We carefully manage our working capital and operating expenses. As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, our working capital, including cash and cash equivalents, ~~and investments,~~ was ~~$539.5~~$546.3 million and ~~$551.7~~$556.4 million. ~~Accounts receivable increased $102.9~~This decrease was primarily due to the decrease in cash of $10.9 million resulting from the payment of our annual and first quarter dividends and increased ~~net revenue, and inventories increased~~acquisition activity. Inventories decreased by ~~$39.1~~$6.5 million as a result of reduced warehoused materials due to ~~material price inflation, increased selling activity~~easing supply chain shortages and ~~acquisitions.~~lower sales volume growth. These ~~increases were partially offset by an increase~~factors also led to a decrease of ~~$23.4~~$14.4 million in accounts payable ~~primarily due to material price inflation~~which partially offsets the reduction in inventories and ~~increased sales volume. We continue to look for opportunities to reduce our working capital as a percentage of net revenue.~~cash.

The following table summarizes our cash flow activity (in thousands):


		Nine months ended September 30,					Three months ended March 31,
		2022		2021			2023		2022
Net cash provided by operating activities	Net cash provided by operating activities	$	198,667	$	116,478	Net cash provided by operating activities	$	73,833	$	48,225
Net cash used in investing activities	Net cash used in investing activities	(139,935)		(121,609)		Net cash used in investing activities	(47,614)		(68,718)
Net cash used in financing activities	Net cash used in financing activities	(188,815)		(34,954)		Net cash used in financing activities	(37,156)		(95,558)

Cash Flows from Operating Activities

Our primary source of cash provided by operations is revenues generated from installing or selling building products and the resulting operating income generated by these revenues. Operating income is adjusted for certain non-cash items, and our cash flows from operations can be impacted by the timing of our cash collections on sales and collection of retainage amounts. The COVID-19 pandemic has not had a material impact on our cash collections to date.

Our primary uses of cash from operating activities include payments for installation materials, compensation costs, leases, income taxes and other general corporate expenditures included in net income.

Net cash provided by operating activities increased from ~~2021~~2022 to ~~2022~~2023 primarily due to the increases in net income, ~~a $25.5 million cash receipt for amending our interest rate swaps~~changes in certain working capital requirements, income tax expense payment timing and various noncash adjustments, partially offset by ~~certain increases in working capital requirements aimed at reducing material shortages in a supply constrained environment.~~the reduction of our accounts payable and other liabilities balances.

Cash Flows from Investing Activities

Sources of cash from investing activities consist primarily of proceeds from the sales of property and equipment and, periodically, maturities from short term investments. Cash used in investing activities consists primarily of purchases of property and equipment, payments for acquisitions and, periodically, purchases of short term investments.

Net cash used by investing activities ~~increased~~decreased from ~~2021~~2022 to ~~2022~~2023 primarily due to the purchase of short-term investments during the ~~nine~~three months ended ~~September 30,~~March 31, 2022, partially offset by the ~~maturities of some of these purchased short-term investments and less spent~~increase in spending on acquisitions ~~so far~~and property and equipment in ~~2022. See Note 5, Investments and Cash and Cash Equivalents, for more information on our investments.~~2023.

Cash Flows from Financing Activities

Our sources of cash from financing activities ~~consists~~consist of proceeds from the issuances of vehicle and equipment notes payable and, periodically, other sources of debt financing. Cash used in financing activities consists primarily of debt repayments, acquisition-related obligations, dividends and stock repurchases.

Net cash used by financing activities ~~increased~~decreased from ~~2021~~2022 to ~~2022~~2023 primarily due to the repurchase of common stock under our previous stock repurchase plan and higher acquisition-related obligations during the ~~nine~~three months ended ~~September 30,~~March 31, 2022. Our net cash used by financing activities was also ~~increased~~offset during the ~~nine~~three months ended ~~September 30, 2022 due to the payment of our first annual dividend of $0.90 per share which was in addition to regular quarterly dividend payments.~~March 31, 2023 by proceeds from vehicle and equipment notes. See Note 12, Stockholders' Equity, for more information on the repurchase of common ~~stock and the payment of dividends.~~stock.

Debt

5.75% Senior Notes due 2028

In September 2019, we issued $300.0 million in aggregate principal amount of 5.75% senior unsecured notes (the “Senior Notes”). The Senior Notes will mature on February 1, 2028 and interest is payable semi-annually in cash in arrears on February 1 and August 1, commencing on February 1, 2020. The net proceeds from the Senior Notes offering were $295.0 million after debt issuance costs.

The indenture covering the Senior Notes contains restrictive covenants that, among other things, limit the ability of the Company and certain of our subsidiaries (subject to certain exceptions) to: (i) incur additional debt and issue preferred stock; (ii) pay dividends on, redeem or repurchase stock in an aggregate amount exceeding 2.0% of market capitalization per fiscal year, or in an aggregate amount exceeding certain applicable restricted payment baskets; (iii) prepay subordinated debt; (iv) create liens; (v) make specified types of investments; (vi) apply net proceeds from certain asset sales; (vii) engage in transactions with affiliates; (viii) merge, consolidate or sell substantially all of our assets; and (ix) pay dividends and make other distributions from subsidiaries.

Credit Facilities

In December 2021, we amended and restated our $500 million, seven-year term loan facility due December 2028 (the “Term Loan”) under our credit agreement (the “Term Loan Agreement”), dated as of December 14, 2021 with Royal Bank of Canada as the administrative agent and collateral agent thereunder. The amended Term Loan amortizes in quarterly principal payments of $1.25 million starting on March 31, 2022, with any remaining unpaid balances due on the maturity date of December 14, 2028. The Term Loan bears interest at either the base rate (which approximates the prime rate) or the Eurodollar rate, plus a margin of (A) 1.25% in the case of base rate loans or (B) 2.25% in the case of Eurodollar rate loans. See Note 19, Subsequent Events, for information on a change regarding the reference rate for our Term Loan. Proceeds from the Term Loan were used to refinance and repay in full all amounts outstanding under our previous term loan agreement. We intend to use the remaining funds to pay for certain fees and expenses associated with the closing of the Term Loan and for general corporate purposes, including acquisitions and other growth initiatives. As of ~~September 30, 2022,~~March 31, 2023, we had ~~$490.2~~$488.2 million, net of unamortized debt issuance costs, due on our Term Loan.

Subject to certain exceptions, the Term Loan will be subject to mandatory prepayments of (i) 100% of the net cash proceeds from issuances or incurrence of debt by the Company or any of its restricted subsidiaries (other than with respect to certain permitted indebtedness (excluding any refinancing indebtedness); (ii) 100% (with step-downs to 50% and 0% based on achievement of specified net leverage ratios) of the net cash proceeds from certain sales or dispositions of assets by the Company or any of its restricted subsidiaries in excess of a certain amount and subject to reinvestment provision and certain other exception; and (iii) 50% (with step-downs to 25% and 0% based upon achievement of specified net leverage ratios) of excess cash flow of the Company and its restricted subsidiaries in excess of $15.0 million, subject to certain exceptions and limitations.

In February 2022, we amended and extended the term of our asset-based lending credit agreement (the “ABL Credit Agreement”). The ABL Credit Agreement increased the commitment under the asset-based lending credit facility (the “ABL Revolver”) to $250.0 million from $200.0 million, and permits us to further increase the commitment amount up to $300.0 million. The amendment also extends the maturity date from September 26, 2024 to February 17, 2027. The ABL Revolver bears interest at either the base rate or the Secured Overnight Financing Rate ("Term SOFR"), at our election, plus a margin of 0.25% or 0.50% in the case of base rate loans or 1.25% or 1.50% for Term SOFR advances (in each case based on a measure of availability under the ABL Credit Agreement). The amendment also allows for modification of specified fees dependent upon achieving certain sustainability targets, in addition to making other modifications to the ABL Credit Agreement. In connection with the Term Loan Agreement, we entered into a Third Amendment (the “Third Amendment”) to the ABL/Term Loan Intercreditor Agreement with Bank of America, N.A., as ABL Agent for the lenders under the ABL Credit Agreement, and Royal Bank of Canada as collateral agent under the Term Loan Agreement. Including outstanding letters of credit, our remaining availability under the ABL Revolver as of ~~September 30, 2022~~March 31, 2023 was ~~$197.6~~$244.2 million.

All of the obligations under the Term Loan and ABL Revolver are guaranteed by all of the Company’s existing restricted subsidiaries and will be guaranteed by the Company’s future restricted subsidiaries. Additionally, all obligations under the Term Loan and ABL Revolver, and the guarantees of those obligations, are secured by substantially all of the assets of the Company and the guarantors, subject to certain exceptions and permitted liens, including a first-priority security interest in such assets that constitute ABL Priority Collateral, as defined in the ABL Credit Agreement, and a second- priority security interest in such assets that constitute Term Loan Priority Collateral, as defined in the Term Loan Agreement.

The ABL Revolver also provides incremental revolving credit facility commitments of up to $50.0 million. The terms and conditions of any incremental revolving credit facility commitments must be no more favorable than the terms of the ABL Revolver. The ABL Revolver also allows for the issuance of letters of credit of up to $100.0 million in aggregate and borrowing of swingline loans of up to $25.0 million in aggregate.

At ~~September 30, 2022,~~March 31, 2023, we were in compliance with all applicable covenants under the Term Loan Agreement, ABL Credit Agreement and the Senior Notes.

Derivative Instruments

As of ~~September 30, 2022,~~March 31, 2023, we had three active interest rate swaps and two forward interest rate swaps. On July 8, 2022, we amended the maturity dates of our three active interest rate swaps. Prior to the amendment, we held one interest rate swap with a $200.0 million notional, a fixed rate of 0.51% and a maturity date of April 15, 2030. We also had two interest rate swaps, each with a $100.0 million notional, a fixed rate of 1.37% and a maturity date of December 15, 2028. As amended, each of these three swaps have a maturity day of December 31, 2025 with the other terms unchanged. We also entered into two new forward interest rate derivatives in July 2022. One forward interest rate swap has an effective date of December 31, 2025, a beginning notional of $300.0 million and a fixed rate of 3.09%. The other new forward interest rate swap also has an effective date of December 31, 2025, a beginning notional of $100.0 million and a fixed rate of 2.98%. For further information about our interest rate swaps, see Note 11, Derivatives and Hedging Activities. The assets and liabilities associated with the interest rate swaps are included in other non-current assets and other current liabilities on the Consolidated Balance Sheets at their fair value amounts as described in Note 9, Fair Value Measurements.

LIBOR iswas used as a reference rate for our Term Loan and our interest rate swap agreements we use to hedge our interest rate exposure. ~~For more~~See Note 19, Subsequent Events, for information on a change regarding the ~~discontinuance of LIBOR, see Item 3. Quantitative and Qualitative Disclosures about Market Risk below.~~reference rate for our interest rate swaps.

Vehicle and Equipment Notes

We have financing loan agreements with various lenders to provide financing for the purpose of purchasing or leasing vehicles and equipment used in the normal course of business. Vehicles and equipment purchased or leased under each financing arrangement serve as collateral for the note applicable to such financing arrangement. Regular payments are due under each note for a period of typically 60 consecutive months after the incurrence of the obligation.

Total outstanding loan balances relating to our master loan and equipment agreements were ~~$69.4~~$74.1 million as of ~~September 30, 2022~~March 31, 2023 and ~~$69.2~~$73.0 million as of December 31, ~~2021,~~2022, respectively. Depreciation of assets held under these agreements is included within cost of sales on the Condensed Consolidated Statements of Operations and Comprehensive Income.

Letters of Credit and Bonds

We may use performance bonds to ensure completion of our work on certain larger customer contracts that can span multiple accounting periods. Performance bonds generally do not have stated expiration dates; rather, we are released from the bonds as the contractual performance is completed. In addition, we occasionally use letters of credit and cash to secure our performance under our general liability, workers’ compensation and auto insurance programs. Permit and license bonds are typically issued

for one year and are required by certain municipalities when we obtain licenses and permits to perform work in their jurisdictions.

The following table summarizes our outstanding bonds, letters of credit and cash-collateral (in thousands):


	As of ~~September 30, 2022~~March 31, 2023
Performance bonds	$	~~77,971~~104,126
Insurance letters of credit and cash collateral	~~58,514~~68,485
Permit and license bonds	~~9,420~~9,703
Total bonds and letters of credit	$	~~145,905~~182,314

We have ~~$4.3~~$58.9 million included in our insurance letters of credit in the above table that are unsecured and therefore do not reduce total liquidity. As of March 31, 2023, we have $1.6 million deposited into a trust ~~as of September 30, 2022~~ to serve as additional collateral for our workers’ compensation and general liability ~~and auto~~ policies. This collateral is included in the table above and can be converted to a letter of credit at our discretion and is therefore not considered to be restricted cash.

Critical Accounting Policies and Estimates

Management’s discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of our consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. Certain accounting policies involve judgments and uncertainties to such an extent that there is a reasonable likelihood that materially different amounts could have been reported using different assumptions or under different conditions. We evaluate our estimates and assumptions on a regular basis. We base our estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of our assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates and assumptions used in preparation of our consolidated financial statements. There have been no significant changes to our critical accounting policies and estimates during the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 from those disclosed in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our ~~2021~~2022 Form 10-K.

Recent Accounting Pronouncements

For a description of recently issued and/or adopted accounting pronouncements, see Note 2, Significant Accounting Policies, to our audited consolidated financial statements included in ~~the 2021~~our 2022 Form 10-K.

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws, including with respect to the housing market and the commercial market, our operations, economic and industry conditions, our financial and business model, payments of dividends, the impact of COVID-19 on our business and end markets, the demand for our services and product offerings, trends in the commercial business, 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, our efforts to navigate the material pricing environment, our ability to increase selling prices, our material and labor costs, supply chain and material constraints, the impact of COVID-19 on our financial results and expectations for demand for our services and our earnings in ~~2022.~~2023. Forward-looking statements may generally be identified by the use of words such as “anticipate,” “believe,” “estimate,” “project,” “predict,” “possible,” “forecast,” “may,” “could,” “would,” “should,” “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 ongoing COVID-19 ~~crisis~~pandemic on our business and financial results, our supply chain, the economy and the markets we serve; general economic and industry conditions; increases in mortgage interest rates and rising home prices; inflation and interest rates; the material price and supply environment; the timing of increases in our selling prices; the risk that the Company may reduce, suspend or eliminate dividend payments in the future; and the factors discussed in the “Risk Factors” section of our ~~2021 Annual Report on~~2022 Form 10-K, ~~and this Quarterly Report on Form 10-Q,~~ as the same may be updated from time to time in our subsequent filings with the SEC. In

addition, any future declaration of dividends will be subject to the final determination of our Board of Directors. Any forward-looking statement made by the Company in this report 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.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risks related to fluctuations in interest rates on our outstanding variable rate debt. As of ~~September 30, 2022,~~March 31, 2023, we had ~~$496.3~~$493.8 million outstanding on our Term Loan, gross of unamortized debt issuance costs, no outstanding borrowings on our ABL Revolver and no outstanding borrowings under finance leases subject to variable interest rates. As of ~~September 30, 2022,~~March 31, 2023, we had three active and two forward interest rate swaps which, when combined, serve to hedge $400.0 million of the variable cash flows on our Term Loan until its maturity unless extended. As a result, total variable rate debt of ~~$96.3~~$93.8 million was exposed to market risks as of ~~September 30, 2022.~~March 31, 2023. A hypothetical one percentage point increase (decrease) in interest rates on our variable rate debt would increase (decrease) our annual interest expense by approximately ~~$1.0~~$0.9 million. Our Senior Notes accrue interest at a fixed rate of 5.75%.

For variable rate debt, interest rate changes generally do not affect the fair value of the debt instrument, but do impact future earnings and cash flows, assuming other factors are held constant. We have not entered into and currently do not hold derivatives for trading or speculative purposes.

LIBOR iswas used as a reference rate for our Term Loan and our interest rate swap agreements we use to hedge our interest rate exposure. In 2017, the ~~FCA~~Financial Conduct Authority announced that it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021. The Intercontinental Exchange Benchmark Administration, the administrator of LIBOR, announced in March 2021 its intention to extend the publication of certain LIBOR settings, including the setting we use as a reference rate, to June 2023. It is unclear whether new methods of calculating LIBOR will be established after that date. Our Term Loan Agreement and 2021 interest rate swap agreements include a provision related to the potential discontinuance of LIBOR to be replaced with one or more Secured Overnight Financing Rate (SOFR) values or another alternate benchmark rate. However, if LIBOR ceases to exist after 2023, the interest rates under the alternative rate could be higher than LIBOR. In January 2020, the FASB issued ASU 2020-04, Reference Rate Reform: Facilitation of the Effects of Reference Rate Reform on Financial Reporting (Topic 848) and in January 2021, the FASB subsequently issued ASU 2021-01, Reference Rate Reform - Scope, which clarified the scope and application of the original guidance. The purpose of this guidance is to provide relief for impacted areas as it relates to impending reference rate reform. We elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. ~~We continue to evaluate~~See Note 19, Subsequent Events, for information on a change regarding the ~~impact of the guidance~~reference rate for our Term Loan and ~~may apply other elections as applicable as additional changes in the market occur.~~

interest rate swaps.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We have evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) as required by Exchange Act Rules 13a-15(e) and 15d-15(e). Based on that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of ~~September 30, 2022.~~March 31, 2023.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the three months ended ~~September 30, 2022~~March 31, 2023 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We have not experienced any material impact to our internal controls over financial reporting despite the fact that some of the employees at our corporate office are working remotely at times due to the COVID-19 pandemic.

4035

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

See Part I, Item 1. Financial Statements, Note 16, Commitments and Contingencies – Other Commitments and Contingencies, for information about existing legal proceedings.

Item 1A. Risk Factors

As of the date of this report, there have been no material changes from the risk factors disclosed in our ~~2021~~2022 Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table shows the stock repurchase activity, including shares surrendered by employees in connection with the vesting of restricted stock awards, for the three months ended ~~September 30, 2022:~~March 31, 2023:

Total Number
of Shares
Purchased Average
Price Paid
Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
Approximate Dollar Value of Shares that May Yet Be Purchased under the Plans or Programs (2)
July 1 - July 30, 2022 — $ — — $ —
August 1 - August 31, 2022 (1)
51 98.94 — —
September 1 - September 30, 2022 141,932 88.27 141,932 187.5 million
141,983 $ 88.27 141,932 $ 187.5 million


	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet Be Purchased under the Plans or Programs (2)
January 1 - January 31, 2023 (1)	89	$	87.76	—	$	—
February 1 - February 28, 2023	—	—		—	—
March 1 - March 31, 2023 (1)	94	114.03		—	200.0		million
	183	$	101.25	—	$	200.0	million

(1)Represents shares surrendered to the Company by employees to satisfy tax withholding obligations arising in connection with the vesting of ~~177~~566 shares of restricted stock awarded under our 2014 Omnibus Incentive Plan.

(2)On February ~~24, 2022 our board of directors authorized an extension of our previous stock repurchase program through March 1,~~22, 2023, ~~and concurrently authorized an increase in total amount of our outstanding common stock~~ we ~~can purchase under the extended program up to $200.0 million. On August 4, 2022~~announced that our board of directors authorized a new stock repurchase program that allows for the repurchase of up to $200.0 million of our outstanding common ~~stock through August 10, 2023. This~~stock. The new program ~~replaced~~replaces the previous ~~program.~~program and is in effect through March 1, 2024. We ~~repurchased $12.5 million and $112.2 million of~~did not repurchase any common stock under our stock repurchase programs during the three ~~and nine~~ months ended ~~September 30, 2022, respectively.~~March 31, 2023. For further information about our stock repurchase program, see Note 12, ~~Stockholder's~~Stockholders' Equity.

Item 3. Defaults Upon Senior Securities

There have been no material defaults in senior securities.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

~~None.~~ The Company’s employment agreement with Jeffrey Edwards, our Chief Executive Officer, President and Chairman, was amended and restated on May 3, 2023, to extend Mr. Edwards’ employment term to April 15, 2026, and after such date, provide for automatic five-year renewals, unless either party provides at least 90 days’ prior notice of non-renewal or unless the agreement is earlier terminated.

4136

Item 6. Exhibits

(a)(3) Exhibits

The following exhibits are being filed as part of this Quarterly Report on Form 10-Q:


Exhibit Number						Description

10.1*#						Amended and Restated Employment Agreement, dated as of May 3 , 2023, by and between Installed Building Products, Inc. and Jeffrey W. Edwards.

31.1*						CEO Certification pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*						CFO Certification pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*						CEO Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2*						CFO Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101**						The following financial statements from the Company's Quarterly Report on Form 10-Q for the period ended ~~September 30, 2022,~~March 31, 2023, formatted in inline XBRL, include: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations and Comprehensive Income, (iii) Condensed Consolidated Statements of Stockholders’ Equity, (iv) Condensed Consolidated Statements of Cash Flows and (v) the Notes to the Condensed Consolidated Financial Statements.

104**						Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101).

* Filed herewith.

** Submitted electronically with the report.

# Indicates management contract.

4237

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: ~~November 3, 2022~~May 4, 2023


INSTALLED BUILDING PRODUCTS, INC.

By:						/s/ Jeffrey W. Edwards
						Jeffrey W. Edwards
						President and Chief Executive Officer

By:						/s/ Michael T. Miller
						Michael T. Miller
						Executive Vice President and Chief Financial Officer


Remainder of 2022	$	11,113
2023	41,441
2024	37,520
2025	31,199
2026	27,241
Thereafter	127,324


Remainder of 2022	$	7,896
2023	29,159
2024	23,626
2025	17,547
2026	12,369
Thereafter	776,997


	Three months ended September 30, 2022								Three months ended September 30, 2021
	Installation		Other		Eliminations		Consolidated		Installation		Other		Eliminations		Consolidated
Revenue	$	672,916	$	47,748	$	(1,550)	$	719,114	$	504,161	$	6,305	$	(703)	$	509,763
Cost of sales (exclusive of depreciation and amortization shown separately below)	450,017		37,659		(1,116)		486,560		339,308		4,837		(539)		343,606
Segment gross profit	222,899		10,089		(434)		232,554		164,853		1,468		(164)		166,157
Depreciation and amortization							11,277								10,273
Gross profit, as reported							221,277								155,884
Selling							31,651								24,188
Administrative							84,345								68,056
Amortization							11,370								9,224
Operating income							93,911								54,416
Interest expense, net							10,668								7,687
Other expense (income)							185								(483)
Income before income taxes							$	83,058							$	47,212


	Nine months ended September 30, 2022								Nine months ended September 30, 2021
	Installation		Other		Eliminations		Consolidated		Installation		Other		Eliminations		Consolidated
Revenue	$	1,872,544	$	114,690	$	(3,879)	$	1,983,355	$	1,419,302	$	17,182	$	(1,557)	$	1,434,927
Cost of sales (exclusive of depreciation and amortization shown separately below)	1,255,521		87,425		(3,015)		1,339,931		959,384		12,980		(1,207)		971,157
Segment gross profit	617,023		27,265		(864)		643,424		459,918		4,202		(350)		463,770
Depreciation and amortization							33,035								30,573
Gross profit, as reported							610,389								433,197
Selling							86,214								67,677
Administrative							247,519								199,607
Amortization							33,728								26,798
Operating income							242,928								139,115
Interest expense, net							31,669								22,781
Other expense (income)							698								(494)
Income before income taxes							$	210,561							$	116,828


									Three months ended September 30, 2021				Nine months ended September 30, 2021
2021 Acquisitions	Date	Acquisition Type	Cash Paid		Seller Obligations		Total Purchase Price		Revenue		Net Income (Loss)		Revenue		Net Income (Loss)
IWI	03/01/2021	Share	$	42,098	$	5,959	$	48,057	$	10,556	$	590	$	24,315	$	2,068
Alert	4/13/2021	Asset	5,850		2,980		8,830		4,764		2		8,890		147
Alpine	4/19/2021	Asset	7,945		2,208		10,153		3,045		263		4,996		216
GCP	6/7/2021	Asset	9,700		1,427		11,127		2,624		(152)		3,270		(118)
Five Star	9/13/2021	Share	26,308		5,466		31,774		1,243		25		1,243		25
Other	Various	Asset	4,240		947		5,187		956		(29)		1,252		(43)
			$	96,141	$	18,987	$	115,128	$	23,188	$	699	$	43,966	$	2,295


	Nine months ended September 30, 2022
	Pisgah		Central Aluminum		Tri-County		Other		Total
Estimated fair values:
Cash	$	87	$	243	$	—	$	—	$	330
Accounts receivable	772		3,502		2,823		—		7,097
Inventories	684		14,344		839		199		16,066
Other current assets	21		16		2		—		39
Property and equipment	1,049		2,590		927		513		5,079
Operating lease right-of-use asset	—		844		66		—		910
Intangibles	4,634		34,900		3,488		1,378		44,400
Goodwill	2,743		27,595		2,123		1,523		33,984
Other non-current assets	7		—		12		37		56
Accounts payable and other current liabilities	(69)		(5,388)		(185)		(85)		(5,727)


Other long-term liabilities	—		(569)		(22)		—		(591)
Fair value of assets acquired and purchase price	9,928		78,077		10,073		3,565		101,643
Less seller obligations	1,878		22,927		473		256		25,534
Cash paid	$	8,050	$	55,150	$	9,600	$	3,309	$	76,109