Installed Building Products Inc (IBP) Q1 2021 Earnings Call Transcript

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Installed Building Products Inc (IBP 2.49%)
Q1 2021 Earnings Call
May 7, 2021, 10:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Greetings. Welcome to Installed Building Products' Fiscal 2021 First Quarter Financial Results Conference Call. [Operator Instructions] At this time, I'll turn the conference over to Jason Niswonger, Senior Vice President, Finance and Investor Relations. Jason, you may now begin.

Jason R. Niswonger -- Senior Vice President, Finance and Investor Relations

Good morning, and welcome to Installed Building Products' first quarter 2021 Conference Call. Earlier today, we issued a press release on our financial results for the first quarter, which can be found in the Investor Relations section on our website. On today's call, management's prepared remarks and answers to your questions may contain forward-looking statements within the meaning of the federal securities law. These forward-looking statements include statements with respect to the housing market and the commercial market, industry conditions and trends, our financial and business model, payment of a quarterly cash dividend, labor trends, our efforts to manage material inflation, supply chain constraints, our ability to increase selling prices, the demand for our services and product offerings, the impact of the COVID-19 crisis on our business and end-markets, expansion of our national footprint products and end-market, our expectations for our end-markets including our large commercial business and multifamily business, our ability to strengthen our market position, our ability to pursue and integrate value-enhancing acquisitions and the expected amount of acquired revenue, our diversification efforts, our growth rates and ability to improve sales and profitability, the impact of the COVID-19 crisis on our financial results, and expectations for demand for our services and our earnings in 2021.

Forward-looking statements may generally be identified by the use of words such as anticipate believe expect, intends, plan and will or in each case they're 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 statement made by management during this call is not a guarantee of future performance and actual results may differ materially from those expressed in or suggested by the forward-looking statements, as a result of various factors, including, without limitation, the duration, effect and severity of the COVID -19 crisis.

The adverse impact of the COVID 19 crisis on our business and financial results, the economy and the markets we serve, general economic and industry conditions, the material price 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 the Company's annual report on Form 10-K for the year ended December 31, 2020 as the same may be updated from time-to-time in subsequent filings with the Securities and Exchange Commission.

Any forward-looking statement made by management on this call speaks only as of the date hereof. New risks and uncertainties come up from time to time and it is impossible for the Company to predict these events or their effect. The Company has no obligation and does not intend to update any forward-looking statement after the date hereof, except as required by federal securities laws.

In addition, management uses certain non-GAAP performance measures on this call, such as adjusted EBITDA, adjusted EBITDA margin, adjusted net income and adjusted net income per diluted share, adjusted gross profit, adjusted gross profit margin and adjusted selling and administrative expense. You can find a reconciliation of such measures to their nearest GAAP equivalent in the Company's earnings release and additional reconciliation for adjusted EBITDA for earlier fiscal years in our Investor Presentation, which are available on our website.

This morning's conference call is hosted by Jeff Edwards, our Chairman and Chief Executive Officer; and Michael Miller, our Chief Financial Officer. I will now turn the call over to Jeff.

Jeffrey W. Edwards -- President, Chief Executive Officer and Chairman

Thanks, Jason. Good morning to everyone joining us on today's call. As usual, I will start the call with some highlights on the quarter and then turn the call over to Michael Miller, IBP's CFO, who will discuss our results and capital position in more detail before we take your questions. 2021 is off to a robust start in IBP produced record first quarter results including record sales, net income and EBITDA. I'm especially pleased with our first quarter performance, as we were able to overcome meaningful operating challenges that impacted IBP like many of the trade serving the housing and commercial construction markets. I believe our success results from the resiliency of our business model, the benefits of our product end-market, geographic diversification strategies and the continued hard work of our team members nationwide.

I want to start my prepared remarks by saying thank you to all of our employees throughout our branch operations in at our headquarters in Columbus. I am humbled by the continued dedication resiliency and motivation our team demonstrates day-after-day, which is especially true over the past 12 months. The strength of our team members is a direct result of the entrepreneurial and empowering culture we have created. Overall, labor trends remain strong and as -- of all the challenges we faced during the first quarter, labor was not one of them. To everyone at IBP, thank you for your commitment, your hard work and a tough job always done well.

So looking at our record first quarter results in more detail. Several unique macro level dynamics occurred during the quarter. We successfully overcame significant supply chain constraints during the quarter and experienced lost production days, as a result of the February winter storms. We believe these issues are largely transitory in nature and our business model continues to benefit from growth in our core single-family and multi-family markets, our national scale and our strategy is focused on product, end market and geographic diversification.

Total U.S. residential completions growth was strong in the first quarter of 2021, increasing by 11.4% year-over-year, led by a 14.1% increase in single-family completions. Single-family housing demand continues to benefit from low mortgage rates and favorable demographics that have driven an increase in demand for entry-level housing. We believe these trends will continue supporting further growth, as the industry approaches stabilization in the years to come. While this activity helped drive our same branch volume growth by 10%, there was a clear shift of sales to higher volume production builders and entry level homes compared to last year consistent with the fourth quarter of 2020.

This shift within the single-family end market yield a lower average insulation selling price than what is typical for a move up or custom home. As expected, this dynamic negatively impacted our Q1 price mix result. Given consumer demand for entry level homes, we believe this end market shift driving relatively higher volume at relatively lower average selling prices may continue over the near term, but we anticipate that our selling price increases will offset the price mix headwind as the year progresses.

Beyond the mix shift, there has been evident throughout the industry, rising demand-driven backlogs and weather disruptions during the first quarter of 2021 were impactful on our same branch sales growth rate while the increasing lag between the housing starts and completions has previously been noted within the industry, the February 2021 winter storms, most notably in Texas and Colorado caused additional production delays.

Although, our operations are geographically diverse, we note the Texas accounts for approximately 12% of our business. We estimate lost production associated with the winter storms reduced first quarter revenue by $3 million to $3.5 million and impacted gross profit and adjusted EBITDA by $1 million to $1.5 million. Strong multi-family sales helped support total sales during the quarter, for the 2021 first quarter our multi-family revenue increased nearly 19% compared to prior-year quarter and on a same branch basis was up nearly 7%.

We continue to perform well in the multi-family end market, as a result of our enhanced sales strategy as we are growing the end market in locations that had previously been over-indexed to single-family construction. The COVID-19 pandemic combined with material supply chain issues had a significant impact on sales within our commercial markets. Our commercial construction end-market increased 2.3% for the quarter, as a result of recent acquisitions, while same branch sales within this end market declined 14.5%.

The primary driver of this decline is the large commercial portion of the end market, which declined 13% on a same branch basis. However, bidding activity has continued to be strong in this end market and we are starting to see project bid acceptance in a recovery in this end-market, which strengthens our expectations for second half of 2021 improvement in revenue. We continue to believe the large commercial construction market represents a significant growth opportunity for IBP and despite the near-term challenges within this market we remain focused on expanding our exposure within compelling commercial markets across the U.S.

Turning to our acquisition strategy, we continue to prioritize profitable growth through our proven strategy of acquiring well-run installers of insulation and complementary building products. During the 2021 first quarter, we acquired a Washington-based provider of insulation installation services to residential customers throughout Washington, Oregon and Idaho with annual revenue over $34 million.

Since the first quarter ended, we have completed two additional acquisitions, a Southern California-based commercial installation fireproofing and ceiling system installer and in Colorado Springs based installer of fiberglass in spray foam insulation to residential and multi-family customers. The three acquisitions we have completed to-date 2021 represents approximately $65 million of annual revenues. We feel confident, that we will exceed the targeted $100 million of acquired revenue for 2021.

While the February winter storms impacted our sales during the quarter, we are encouraged by the housing trends for 2021, as a generational shift in demand among millennials is increasing the demand for entry level housing and the supply of existing homes remains tight supporting the demand for move-up and custom homes.

Finally, I'd like to address the material supply environment. During the first quarter, we experienced unprecedented material supply shortages for a variety of products used across our installation services. At the start of the year, the installation supply chain was already tight, and the February winter storms temporarily worsened the environment. Facilities at two of our main fiberglass Insulation suppliers went temporarily offline forcing us to buy installation through distributors as well as local retailers to meet customer demand. In addition, materials needed for spray foam applications were in short supply after the storms, as chemicals processing facilities went offline.

While our ability to source fiberglass in spray foam had the most significant impact on our financial performance during the quarter, it is important to note that we saw constraints across many of the materials and supplies we used for our installation services. As a result, we estimate the supply chain disruption impacted first quarter gross profit and adjusted EBITDA by at least $2 million and affected our ability to complete spray foam installation work with certain customers in some instances turning away work due to a lack of spray foam materials. Supply chain efficiencies have steadily improved during April and into May. Relative to the first quarter of 2021, but we expect the supply chain to be tight over the remainder of the year for many of the materials and products used throughout our installation work.

In addition, manufacturers including large fiberglass suppliers announced additional price increases that went into effect in April, and more recently, an additional fiberglass price increase for June. In the current demand environment we are performing well and realizing selling price increases with our customers in reaction to materials inflation. And as the demand for housing continues to rise, we anticipate our favorable pricing environment to continue.

With our availability of labor, our strong position with our customers and suppliers and strong demand dynamics within the housing industry, we believe, we are well positioned to navigate inflationary environment in 2021. It is also important to note that installation represents a small portion of the total cost to build a home, which we believe provides us greater flexibility to increase prices to maintain margins.

Strong demand increasing material availability in a robust pricing environment has led to accelerating momentum in our business. We ended the first quarter with the highest monthly sales in our history in March, as sales for the month increased 16% year-over-year on a days adjusted basis. Positive momentum has continued in the second quarter is off to a strong start. Adjusted for the branches closed due to COVID, restrictions in April of 2020, April 2021 sales growth is approximately 24% compared to the prior year. As mentioned in previous calls, we also anticipate trends within our large commercial business will improve later this year, as economies reopen and the impact of the COVID-19 pandemic subside.

As I stated, our bidding activity on large commercial construction projects has been strong and backlog has increased over $90 million at the end of first quarter. We expect 2021 will be another strong year of sales and earnings growth for IBP, and I look forward to sharing our continued success with investors as the year progresses.

With this overview, I would now like to turn the call over to Michael to provide more details on our first quarter results.

Michael T. Miller -- Executive Vice President, Chief Financial Officer and Director

Thank you, Jeff, and good morning everyone. Net sales for the first quarter increased to a first quarter record of $437.1 million compared to $397.3 million at the same period last year. The 10% year-over-year improvement in sales was mainly driven by higher volume of customer jobs completed during the quarter, growth in other complementary products and the contribution from our recent acquisitions. On a same branch basis, net revenue improved 2.2% from the prior year quarter, multi-family sales increased 18.8%, contributing to a 9.6% increase in total residential sales during the first quarter. Elongating building cycles, as a result of increased builder demand is driving the difference in the quarterly comparison of residential sales to industry reported completions.

From a volume perspective, our sales growth has outpaced the rate of total residential completions over the last six months. Same branch sales at our large commercial operations decreased 13.1%, as we continue to experience quarterly volatility as a result of the pandemic. Additionally, during the quarter the February winter storms impacted production on large commercial job sites in Texas and Colorado.

As we have highlighted on previous calls, and Jeff mentioned in his prepared remarks, the bidding activity continues to increase sequentially and our backlog has increased over $90 million, as bids are being awarded and large commercial projects are progressing, further supporting our expectations for improvement in revenue in the second half of 2021.

It is important to note that sales from our large commercial construction business are not including the volume and price mix metrics we disclosed. Profitability remained strong, but as Jeff mentioned, profitability was impacted by material supply shortages and large production time during the quarter. As a result, adjusted gross profit margin was 28.7% for the 2021 first quarter.

We estimate lost production due to the winter storms impacted first quarter gross profit by $1 million to $1.5 million, and we believe, the material supply shortages had an additional impact of that least $2 million during the quarter. Adjusting for these impacts gross profit margin for the quarter would have been consistent with the prior year reflecting typical seasonal trends.

Administrative expenses, as a percent of first quarter sales were 14.9%, a 20 basis point improvement from the prior year period. Adjusted SG&A as a percent of first quarter sales improved 80 basis points from the prior year period. The improvements in SG&A are primarily due to higher sales leveraging expenses compared to the prior year quarter. The increase in administrative expenses in the first quarter compared to the fourth quarter was due primarily to administrative expenses at the newly acquired companies.

On a GAAP basis, our first quarter net income increased 8.1% from the prior year quarter to $17.3 million or $0.58 per diluted share. Our adjusted net income improved 15.3% to $26.8 million or $0.90 per diluted share compared to $23.2 million or $0.78 per diluted share in the prior year quarter. The lost production in February combined with the material supplies shortages impacted earnings per share by approximately $0.08 to $0.09 per diluted share.

During the first quarter of 2021, our acquisition activity increased our reported amortization expense to $8.4 million compared to $6.7 million for the same period last year. This non-cash adjustment impacts net income, which is why we continue to believe that adjusted EBITDA is the most useful measure of profitability.

Based on the acquisitions completed year-to-date, we expect second quarter 2021 amortization expense of approximately $8.6 million and full year 2021 expense of approximately $34.2 million. This figure will change with any subsequent acquisitions we close in future periods. For the 2021 first quarter our effective tax rate was approximately 26.2%, and we continue to expect a full year effective tax rate of 25% to 27% for 2021.

Adjusted EBITDA for the first quarter of 2021 improved to a first quarter record of $54.5 million representing an increase of 10.8% from $49.2 million in the prior year. Adjusted EBITDA, as a percent of net revenue was 12.5% for the first quarter compared to 12.4% for the same period last year. Same branch incremental adjusted EBITDA margin was 10.5% for the first quarter.

Similar to the impact on gross profit, we estimate that lost production due to the winter storms combined with the material supply shortages during the quarter impacted adjusted EBITDA by approximately $3 million to $3.5 million. Without these impacts on profitability, we estimate adjusted EBITDA margin would have been 13% and same branch incremental adjusted EBITDA contribution margin would have been over 30% in the quarter.

Now let's look at our liquidity, balance sheet and capital requirements in more detail. Our business model continues to generate strong operating cash flows. For the three months ended March 31, 2021, we generated $37.6 million in cash flow from operations compared to $35.9 million in the prior year period an increase of 4.8%.

Our asset-light business model does not require a significant amount of capital expenditures, and our primary capital requirement is to fund working capital needs. At March 31, 2021, we had $157.5 million in working capital, which excludes $207.3 million of cash and cash equivalents. Capital expenditures as of March 31, 2021 were $10.8 million, while total incurred finance leases were $0.3 million. Capital expenditures and finance capital leases as a percent of revenue were 2.5% at March 31, 2021 compared to 2.6% at March 31, 2020.

At March 31, 2021, we had total cash and short term investments of $207.3 million compared to $231.4 million at December 31, 2020. Total debt at March 31, 2021 was $568.9 million, compared to $565.3 million at December 31, 2020, and $569.8 million at March 31, 2020.

Considering cash and short term investments at March 31, 2021, our net total debt was approximately $361.6 million compared to $333.8 million at December 31, 2020, and $356.1 million at March 31, 2020. At March 31, 2021, we had a net debt to adjusted trailing 12-month EBITDA leverage ratio of 1.4 times. Well within our stated expectation of maintaining a leverage ratio of less than 2 times. We continue to prioritize profitable growth to our proven strategy of acquiring well-run installers of insulation and complementary building products. Through the first quarter we invested over $41.9 million in acquisitions compared to operating cash flow of nearly $37.6 million.

In addition, we initiated a cash dividend in the 2021 first quarter, and this week IBP's Board of Directors approved our second quarter dividend of $0.30 per share, which is payable on June 30, 2021 to stockholders of record on June 15, 2021. The company did not repurchase any shares of its common stock during the first quarter compared to $15.8 million during the same period last year, and we have $100 million of availability under our current share repurchase program.

We continue to believe, we have considerable financial flexibility, as we have nothing drawn our $200 million revolving line of credit, a strong cash position, staggered debt maturities and limited financial covenants. In addition, with no significant debt maturities until 2025 and strong liquidity we have considerable financial resources to invest in our long-term growth opportunities. With that I will now turn the call back to Jeff, for closing remarks.

Jeffrey W. Edwards -- President, Chief Executive Officer and Chairman

Thanks Michael. I'd like to conclude our prepared remarks by once again thanking IBP employees for their hard work, dedication and commitment to our company during this very challenging period. Our success over the years and more recently wouldn't be possible if it wasn't for you. Operator, let's open up the call for questions.

Questions and Answers:

Operator

[Operator Instructions] And our first question is from Ken Zener with KeyBanc. Please proceed with your question.

Kenneth Zener -- KeyBanc Capital Markets -- Analyst

Good morning, everybody.

Jeffrey W. Edwards -- President, Chief Executive Officer and Chairman

Good morning, Ken.

Kenneth Zener -- KeyBanc Capital Markets -- Analyst

I'll go toward, Jeff. You talked about this a lot, obviously the stocks interpreting I think you guys did a good job of laying out obviously the gross margin headwinds in terms of the demand. And the -- I assume unique need to buy from distributors. If you could actually clarify if that's your only time it happened. I think the big picture here is this. Is this is going to be a deja vu of 2018. When pricing in the industry went out due to manufacturing capacity falling.

So essentially, do you guys -- it took you a year to get to price cost neutrality in 2018 basically? And there was some commercial investment headwinds as well, but I think that's really what investors are struggling with. So can you walk us through, why on the pricing side is not going to take you a year to get through? And if Michael, I know this is going to be difficult for you, but do you guys expect to be neutral on this pricing leverage by the second half of this year, including the mix from home builders? A lot in there, but I think it's important for you to clarify why it's not 2018.

Jeffrey W. Edwards -- President, Chief Executive Officer and Chairman

Okay, Ken. Thanks it's a good question. So we feel like we're in entirely different place in terms of the environment to go ahead if realized price increases even at the pace at which they're coming. And so from that perspective I think it's -- we're in altogether a different universe. So we feel very, very good about that there is no question that the overall industry from a supply perspective has been and continues to be well and pretty tight.

As a result of COVID and some of it's curtailment in others within IBP and we, we even talked about this before, but as a result of COVID there was a lot of curtailments going on with the various manufacturers. And when the downturn in housing kind of demand didn't materialize in a lot of instances they ran down inventory to a point that manufacturers where they lost what they would refer to mostly as mixing stock or the ability to fill all SKUs on an order.

So what we and others suffered from, and it depends. I mean, it depends on which manufacturer you're talking about one of the four. All of them as an essence had their time and that they're all of from a difficulty perspective. So -- but what happens is, if you've got a mixed order they have sometimes trouble filling every SKU on new order in -- despite directions to fill it with kind of whatever they have, sometimes that doesn't work.

And so when you expect those -- that have been delayed tomorrow and they don't show up, it is basically causes you to run in some instances either to distribution or even in some cases to home centers, as a result. It is difficult I think to go to a builder and say on Thursday that you are charging more than you were charging on Wednesday, because you had to go buy product on -- varies much spot basis from Home Depot that's different scenario and not something that I think you can have the cadence with the price increases that come with announced price increases in some lead time.

So we feel very good about being able to stay on top of price increases and maintain maybe potentially improve margins going forward. It's just harder when there -- when some of the manufacturers and really all of them at times are struggling to be able to fulfill orders in a timely way.

Michael T. Miller -- Executive Vice President, Chief Financial Officer and Director

Yeah. Ken, this is Michael and thanks for the question, and I appreciate you handicapping my answer there. But I think there is two opoints to your question that it's really important to highlight. One, is that this really is a mix issue and not a price issue. And fortunately, as we -- and as we expected and as we've talked about in the fourth quarter call, we're incrementally seeing improvement in this mix price mix headwind.

April inflected very constructively. In the month we had very encouraged by what we saw in April, and what we're continuing to see. So that's again extremely encouraging. The other thing that I would note about getting and realizing price increases. In addition to what Jeff just said is that historically the fiberglass manufacturers have provided us a pretty decent lead time from when they announced a price increase and when it becomes effective.

And they do that so that we have time to get those prices into builders' deals with us. Because as Jeff just said, it's not a situation where you can go to a builder today and tell them that you're going to charge them a higher price tomorrow because he is probably already sold that house. So you have to work it through the production side. And as you probably haven't noticed this, but the manufacturers have started giving us a little bit more time between announcement and then effective to take into consideration the extended lag times that are building.

Now, we would say it's not sufficient because the lag times have gotten very very extended as we've all talked a lot about, but that's very constructive. And to Jeff's point and I'll reiterate it, this environment is extremely strong, and we feel good about our ability over the course of the year to be able to really get on top of it and have price mix in the back half of the year, not be a headwind, as we've been talking about now for a couple of quarters.

So, that's from our perspective is pretty constructive and we feel very good about the environment. The one thing that I would say though about some of the other products, particularly spray foam and the other products that we install, we don't get the same kind of lag time from announcement to effective date on those prices. So it's a little bit more challenging in those products, but we feel very good about the demand environment and working with our customers to make sure that we're a fairly for the install service that we're providing.

Kenneth Zener -- KeyBanc Capital Markets -- Analyst

Understood. And that was a long first question. Now let me rephrase it for my second question. If it took you four quarters in '18 basically to get the price cost neutrality, and I realize there is some big builder mix impacting you. Is that your expectation for this year or do you feel what you learned in '18 realizing it's very different can be realized sooner than the 12 months that it took in 2018? Thank you.

Jeffrey W. Edwards -- President, Chief Executive Officer and Chairman

Yeah, thanks again. We absolutely, and we've said this several -- say this even more times I think on this call, but we feel very confident about the current demand environment, and our ability to get on top of any price inflation that we see. And as we've talked about in the fourth quarter call, we definitely feel good about the price mix headwinds as we go into the second half of the year. And as I mentioned just a moment ago, we feel good about the trends we were seeing in April.

Michael T. Miller -- Executive Vice President, Chief Financial Officer and Director

Well, I mean, I'd just go further and say sooner around announced price increases, but I'd have to handicap it on the supply basis going forward for the potentially necessary spot price from distribution or home. We hope during the past, we don't know that for sure. And my comments were specifically addressed mostly toward obviously fiberglass. But the fact of matter is, I think all but one of the foam suppliers are enforce measure and the supplies around foam have been extremely tight and then kind of hindered in that regard too, and it's going be a little while before that gets figured out too from a supply perspective.

Operator

Thank you. Our next question is coming from the line of Stephen Kim with Evercore ISI. Please proceed with your question.

Stephen Kim -- Evercore ISI -- Analyst

Thanks very much guys. Yeah, and one of the talk a little bit about the increased cycle times that the builders are seeing. I was wondering how much of an impact do you think the increased cycle times have weighed on your price mix realization in the quarter? And how much of an increase in cycle times are we talking about on the part of the builders from what you can tell?

And are the manufacturers giving you that similar amount of extension, because you talked about the manufacturers given you a little bit longer lead time because your customers are having longer lead times and stuff, which you're honoring. And so, just help us understand the whole food chain there in terms of the cycle times, and the impact on price mix in the quarter?

Michael T. Miller -- Executive Vice President, Chief Financial Officer and Director

That's good question, thanks. This is Michael. What I would say relative to the amount of time that we get from announcement to effective. I'm not going to specifically address IVP, but more of the industry in general. So I think that the manufacturers as we said, they have extended the announced to effective date a little bit. Is it sufficient for the overall industry? I think, that they should give more to the extent that they can and because of the cycle times have been considerably extended.

I mean there used to be a sense that from start to install for the primary services that we install was anywhere between 60 to 90 days. We believe that that's extended at least 30 days or more, quite frankly. And with the storms we think that impacted the affected regions even more so.

So that's with us, and we think it's going to stay with us for a while, when you look at the disconnect between starts and completions. Although, we did make some progress on the completion side in the first quarter, but we still have a long way to go. And we just think that's going to be a fact of life for certainly the next -- certainly all of this year, and we think going into next year, which provides a great demand backdrop for us.

So again, we feel good about the overall market. Obviously, we would always want more time to work through price increases from an announcement to an effective date, but we feel really good about what our team is doing. And I would say, even if going a little bit back to the first question what we've learned in 2018 and 2019 in working with our builders.

In terms of the impact of this extended cycle time and what that did to price mix in the quarter. I mean, I'll be honest with you, that's really hard to quantify and specify. Because you're kind of looking at what would somebody have been had the cycle times not been extended, but it's very clear. I think this is obvious to everyone on this call that at least right now at this point in the cycle, the public builders are taking considerable market share from the regional and local builders.

I mean when you just look at overall completions even overall home installs relative to what the public builders are reporting, and it's clear that they're taking market share, and we're working very closely with them to help them deliver those homes. And we're seeing great sales growth, well above the rest of our other customers growth with those customers, the production builders.

Stephen Kim -- Evercore ISI -- Analyst

Yeah, that's actually a great segue, because that was exactly what I was going to ask you. Next, whether you were seeing that market? So you've clearly said that yes, you are seeing that market share growth in the big builders. Now, have you also seen there, these larger builders experiencing the same kind of increase in cycle times or how -- are the cycle time increase -- is the cycle time increased for larger builders may be not as dramatic as the cycle time increase for the smaller peers?

Michael T. Miller -- Executive Vice President, Chief Financial Officer and Director

Yes, that's a great question, because you're absolutely right. The big production builders. Particularly, I'll call out they are important, because I think, they've probably done the best job of managing the cycle times, because they didn't stop during COVID last year. So the production builders --- this kind of environment, absolutely benefits the way that they build because they are building somebody homes and they're doing it at such a high cadence and they're continuously employing all of their subcontractors.

So this kind environment absolutely favors them. And I'll just make this up for illustrative purposes, but if you say the cycle time at regional and local guys has increased 30%, maybe it's only 10% at the production builders. So there is no doubt that they are definitely doing better from a cycle time extension than some of the other guys.

Now, as our expectation based upon our customer relationships and the feedback that we're getting that that's going to normalize over time, but it is going to take time. And certainly the severe shortages that you're seeing in building products materials, all building products materials right now doesn't help. But yes, we would see that maybe normalized, but it may not be until '22 quite frankly that, that starts to normalize,,, relative to the production builders versus the regional local builders.

Operator

Thank you. Our next question is coming from the line of Susan Maklari with Goldman Sachs. Please proceed with your questions.

Susan Maklari -- Goldman Sachs -- Analyst

Good morning, everybody.

Michael T. Miller -- Executive Vice President, Chief Financial Officer and Director

Good morning.

Jeffrey W. Edwards -- President, Chief Executive Officer and Chairman

Good morning.

Susan Maklari -- Goldman Sachs -- Analyst

My first question is, can you talk a little bit about what you're seeing in terms of some of the regional trends that are coming through? Obviously, we've talked a lot about Texas and the weather down there, but can you talk to any other thoughts you have as we get into the second quarter on how other regions are coming together?

Jeffrey W. Edwards -- President, Chief Executive Officer and Chairman

Yes. Susan. Thanks for that question. And it's really, the answer is almost identical to what we talked about in the fourth quarter. And that we've been pleasantly surprised at the strength we're seeing in the top half of the country. I think, people have a tenancy to focus on the bottom half of the country and the smile and the strength is there, but we've been very impressed with what we're seeing particularly out of the top half of the country.

And I would say that's East Coast and West Coast, quite frankly, and obviously the center of the country. And that's in our mind adjusting for COVID. Because the branches that we're really -- the only branch -- more branches were impacted in terms of state mandated shutdowns in April and some into May roll on the top half of the country. There was really no stated in the bottom half of the country that was shut down.

So, even adjusting for that, we're feeling very good about what we're seeing from a demand environment in the top half the country.

Jason R. Niswonger -- Senior Vice President, Finance and Investor Relations

That still saves their smile.

Susan Maklari -- Goldman Sachs -- Analyst

Okay.

Michael T. Miller -- Executive Vice President, Chief Financial Officer and Director

Yes, smile is still great.

Susan Maklari -- Goldman Sachs -- Analyst

Okay, good. And then my next question is, talking a little bit about some of the ancillary products that you've also been growing and expanding with. Can you talk to any issue that you've seen on that side or how that piece of the business has been trending? And your thoughts, as we look to the back half there?

Jeffrey W. Edwards -- President, Chief Executive Officer and Chairman

Yeah, the story there is consistent with what it was in the fourth quarter, and really all of last year. The other product sales grew at almost twice the rate in the quarter that Insulation sales grew. And we did see gross margin improvement, as we're continuing to see gross margin improvement in those products. So it's an important part of our strategy. We think that long-term, and we know this from our branches that have great product diversity, that it did adds to local market share, it adds to the stickiness with our customer relationships. So we're really proud of the efforts that our team has made in pushing the other products, and most importantly improving the margin in the other products.

Michael T. Miller -- Executive Vice President, Chief Financial Officer and Director

I mean, there are some supply constraints and some lead time issues, as it relates to those products, but thus far they are not -- have not been, as acute as it has been for both fiberglass and for foam, quite frankly.

Jeffrey W. Edwards -- President, Chief Executive Officer and Chairman

Yeah, I would say with the one exception is, aluminum for gutters aluminum, aluminum prices as everyone here knows have gone up substantially. But that market is conditioned to vary pricing based on the cost of aluminum against our price issuance.

Michael T. Miller -- Executive Vice President, Chief Financial Officer and Director

Yeah.

Jeffrey W. Edwards -- President, Chief Executive Officer and Chairman

That's very important.

Operator

Thank you. Our next question is from the line of Michael Rehaut with J.P. Morgan. Please proceed with your question.

Elad Hillman -- J.P. Morgan -- Analyst

Hi, this is Elad Hillman on for Mike. Thanks for taking my questions. So first, for the full year, just based on all the commentary you gave, and what you're seeing from the production builder mix shift and the the price increases that you. I just wanted to get clarity if you anticipate being able to have gross margin expansion in 2021? And then also relative to EBITDA margin expansion.

Jeffrey W. Edwards -- President, Chief Executive Officer and Chairman

Well, thanks for the question. As you know we don't provide guidance. I think, we were pretty clear in the fourth quarter call that based on historical trends when we're in a rising price environment that's coupled with a strong demand environment historically, that has led to improving gross margins and as a consequence, improving EBITDA margins.

So we continue to feel that, that historical trend will continue, and feel very excited about what '21. And honestly, not just '21, I mean '22 and I mean, obviously, we don't have a crystal ball, but at least from where we sit today and talking with our customers all of the information that we see points to a very constructive environment, particularly for single-family housing for we think '21, '22 and even going into '23.

Michael T. Miller -- Executive Vice President, Chief Financial Officer and Director

And we feel I think, very confident for the year, and good about the year both in terms of volume and pricing and margin on a go-forward basis.

Elad Hillman -- J.P. Morgan -- Analyst

Great, thank you. And then secondly, I was wondering if you could provide more detail on the sales strength in March and April. What you saw in terms of sequential growth? And on the 16% year-on-year adjusted basis in March and the April 24%. Was this -- what was this on an organic basis? And what was the price mix impact in those months?

Michael T. Miller -- Executive Vice President, Chief Financial Officer and Director

Yeah, we don't separately disclose those numbers on our kind of a monthly basis, but what I would say is that the trends that we saw in March and April both on organic sales, volume and price mix were very, very encouraging.

Elad Hillman -- J.P. Morgan -- Analyst

Thank you.

Operator

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

Philip Ng -- Jefferies -- Analyst

Hey, guys.

Michael T. Miller -- Executive Vice President, Chief Financial Officer and Director

Hey, Phil.

Philip Ng -- Jefferies -- Analyst

Just given the -- good morning, everyone. The materials is dynamic. I'm just trying to gauge, has it started to improve enough that you're going to run pretty hard in 2Q or is this going to be a little more gradual in nature? And I think, Jeff, coming into the year I think you made the point that maybe IBP or just the industry broadly based on the labor you guys have you thought the industry had the bandwidth to grow volumes organically in the high-single to low double-digit range, is that a still a realistic target given some of the constraints you're seeing?

Jeffrey W. Edwards -- President, Chief Executive Officer and Chairman

Absolutely. I think it is better.

Philip Ng -- Jefferies -- Analyst

Okay.

Jeffrey W. Edwards -- President, Chief Executive Officer and Chairman

I think the issues that we would have frankly quite right now would be in -- maybe at least from a supply perspective, not from a labor perspective would have been to kind of hindered to those levels. And yeah, look, you can see from our performance. But and even -- based on even an earlier question, I mean we have one little comment about not even actually doing full work that was available to us. I mean, without a doubt, given the constraints within foam it's for sure hindered sales, even though they were still good on a year-over-year basis.

And it is not likely be get cleaned up the chemical side of that probably sometime I'm guessing in the third quarter maybe early third quarter, but the third quarter. With fiberglass, we'll see. I think there is an effort among all the manufacturers to get back to where they have the mixing stock that would make some of the delays in the lead time issues go away, but it's just not an easy thing to get on top of I think given the current demand environment.

Philip Ng -- Jefferies -- Analyst

Despite. Yeah, sorry. Go ahead, Mike.

Michael T. Miller -- Executive Vice President, Chief Financial Officer and Director

And I would say that we would expect that the spray foam manufacturers, suppliers will get on top of it, as Jeff said, in the third quarter, but probably early in the third quarter as opposed to later in the third quarter. And I would also say that may if anything we feel better about that number high-single low-double digits that it may even be higher quite frankly, given everything that we're seeing right now from a demand perspective.

So I know we tried to ground people pretty hard on that number, but or that percentage -- but what we're seeing right now is extremely encouraging. And we're very encouraged by the steps that everyone in the building products chain is taking to try and address the supply demand balance.

Philip Ng -- Jefferies -- Analyst

Okay, that's helpful. I mean, that's great you're able to play catch-up after a tougher 1Q environment. Not on you, but just the backdrop on the supply side and labor site. And then it'd be helpful kind of Michael if you can break out absolute pricing versus mix just because the mix piece is not a negative in my mind. Because I thought mix while the optics hurt you on a price mix revenue standpoint, I believe, cost to serve for your production builder is lower.

So can you can remind us how that kind of shakes out with that negative mix dynamic? What kind of impact it has on EBITDA margins? Because I thought It was fairly neutral. So one, how did absolute pricing shake out? And then two, this mix dynamic on the production side production builder side, what type of impact does it have on EBITDA margins?

Michael T. Miller -- Executive Vice President, Chief Financial Officer and Director

Yeah. So, but I'm really glad you asked that question because let's be very clear pricing does not go down. This is completely a mix issue. And it definitely goes to the comments that we made around the production builders and their level of gaining share, and us continuing to gain share with them, which we think is important. And also the growth in other products that we talked about in the other question.

And at the consequence, so even though we had this heavy price mix pressure or I should say it's the mix pressure in the quarter, excellent volume growth. We still grew EBITDA margins even with the headwinds. But when you take the headwinds from the material and the storms we felt we saw a pretty constructive 60, 70 basis point increase in adjusted EBITDA margins.

And I think that's absolutely reflective of what you said that, that work well, yes, from a dollar perspective its the lower dollar value job. It absolutely helps, particularly on the G&A leverage because of the efficiency of doing work with those builders.

Philip Ng -- Jefferies -- Analyst

Thank you.

Operator

Our next question is from the, coming from the line of Mike Dahl with RBC. Please proceed with your questions.

Michael Dahl -- RBC Capital Markets -- Analyst

Thank you for taking my questions. First one, just a follow-up on that the mix point which is helpful color on top of the flow through on to EBITDA. But just taking from kind of a top line standpoint. You've discussed or acknowledged that the market share gains from the large publics are continuing, but you said you expect these mix headwind to abate as the year progresses.

I guess, how much of that is a function of just so the time you get fourth quarter, you're already lapping the bulk of this shift versus something you're seeing in your backlogs from some of the smaller builders. And as I'll just ask again on kind of the quantification side, if there is any way you can kind of quantify relative to the 1Q headwind? How the balance of the year should play out strictly from a mix standpoint?

Jeffrey W. Edwards -- President, Chief Executive Officer and Chairman

Yeah, we would think that the, the mix component of price mix will improve as we go through the back half of the year. But honestly our confidence around that improving price mix, as we go into the back half of the year is more a price-driven than mix-driven. Just because we know what's obviously happening from a price perspective.

Michael Dahl -- RBC Capital Markets -- Analyst

Got it, OK. And then on the margin side, I guess that some of those costs being fairly unique in terms of having to go through distribution and such. But when you're thinking about it's helpful color breaking out the incremental margin impact when you're thinking about kind of how the year shakes out, it sounds like some of those costs will continue. So from a reported standpoint it does sound like there is, first, there are likely to be at least the next two quarters some headwinds, the incrementals. Do you think net, net we're still in one-off and done a normal incremental margin range by the end of the year or do you think the middle of the year on a -- the way you guys will end up reporting adjusted EBITDA, it could be depressed relative to normal incrementals based on those costs?

Jeffrey W. Edwards -- President, Chief Executive Officer and Chairman

No. We're very confident that we're going to be in that 20% to 25% on a full year basis. And thank you for pointed out, because we did note in our prepared remarks that adjusting for these headwinds that we faced in the quarter, our first quarter incremental margins would have been 30%, which for us in the first quarter is very solid. So yeah, we feel very good about the rest of the year as it relates to them. But you're right, we cannot sit here today and tell you 60 days from now that we are not going to have to buy material from a different source than we normally do because of the kind of environment we're in. We believe, and we stated in the remarks and given our relationships and discussions with our suppliers, we believe things are getting better. But as we all know, stuff happens and it can put a disruption into the supply chain because all building products, not just insulation are so tight right now even the smallest little thing goes wrong and it really upset the applecart. It's just the reality of the situation. But it's difficult for us to deal with, and it's a challenge for our people in the field, they're doing an amazing job dealing with it, but we're doing it in an environment that is the demand environment is so incredibly strong.

It's -- this is something we have to deal with that's fine because we know we have plenty of demand runway in front of us.

Operator

Thank you. Our next question coming from the line of Keith Hughes with Truist. Please proceed with your question.

Keith Hughes -- Truist Securities -- Analyst

Thank you. Question on the commercial business, you were talking about some strong business in March and April and so that was company wide. But are you seeing that in commercial? Is there a pick-up coming from the weak numbers -- weak organic numbers of the first quarter?

Michael T. Miller -- Executive Vice President, Chief Financial Officer and Director

Yeah. On a relative basis it's getting better. But as we highlighted in our fourth quarter call last year we definitely expect on an organic basis the first half of this year to be tough. We are seeing, as Jeff pointed out, and we talked about in our prepared remarks we're definitely seeing things incrementally getting better. It is absolutely clear that GCs and project owners are accepting bids. We had talked about in the fourth quarter call that our bidding volume is very high.

We actually in the month of April had our -- had a record month for accepted bids, which is really encouraging to see. So, we think we continue to have good confidence around the back half of the year, as it relates to that business..But something, and we did mention in our prepared remarks, but something that's important to note is Texas and Colorado were really impacted by those storms.

And if you look at just Alpha, which is the largest component of our heavy commercial, large commercial business 40% of their revenue was in Texas and Colorado. So it had a pretty significant impact on their operations during the month and during t quarter. And unlike the residential business, where you can work weekends and make up a lot of work, you really can't do that on the commercial side. So, that definitely impacted our organic sales declined quite frankly in the quarter.

Keith Hughes -- Truist Securities -- Analyst

Okay, thank you.

Michael T. Miller -- Executive Vice President, Chief Financial Officer and Director

Sure.

Operator

Our next question is coming from the line of Noah Merkousko with Stephens. Please proceed with your question.

Noah Merkousko -- Stephens -- Analyst

Hi, good morning, and thanks for taking my questions.

Michael T. Miller -- Executive Vice President, Chief Financial Officer and Director

Sure.

Noah Merkousko -- Stephens -- Analyst

So I wanted to talk about your efforts to increase complementary sales in some of your developing markets. You laid out that slide a few quarters go. I was hoping you could just help us understand what inning are we in this process? I think before you said roughly half of your markets, you consider developing what's the target there in terms of maybe a percentage of total markets you'd like that to reach?

Michael T. Miller -- Executive Vice President, Chief Financial Officer and Director

This is Michael, I mean, yes, you're absolutely right, that's sort of a percentage that we've given us sort of a guide that half of the branches. I mean, ideally you would want all of your residential branches to install all the products, but that's not realistic because on a local market level you might have some products that you really don't want to install just because they're -- it's just not at the price that we want to install those products at.

So our strategy over time is, this does not happen overnight. And we've talked about this before, it's a journey, it's a long journey is to really get a -- well I don't think we'll ever get to the same sort of 30% market share that we have an insulation. But if we can take a mid single-digit market share that we have in those other products and bring that up to 15% or so, so half of where we are in insulation right now that's a dramatic bump in the revenue opportunity and our overall installation market share.

Noah Merkousko -- Stephens -- Analyst

Got you. Thanks for that. And then just a quick clarification on the the April sales growth of 24% excluding branches closed last year. So those branches have reopened right? And how long were they closed last year?

Michael T. Miller -- Executive Vice President, Chief Financial Officer and Director

It's dependent upon the state because they were closed, based on the different state requirements. So some opened at the end of April beginning of May some went into the middle of May, but they're all open now. And what we disclosed that in the last year when it was going on, it represented about 10% of revenue. And so we had as Jeff had commented about 24% on a like-for-like basis, if you will, but total sales growth in the month of April was over 30%.

Operator

The next question is from the line of Justin Speer from Zelman & Associates. Please proceed with your question.

Justin Speer -- Zelman and Associates -- Analyst

Morning, guys. Thank you. Couple of questions. One, I really appreciate that the breakout of the disruptions from weather and the material shortage headwinds. But I'm just curious if those headwinds or just dollars that are pushed to the right or is that business that was ultimately served by competitors? Is there a way to tease that out? Just trying to get a sense for where you are versus the market, and kind of your mind with those discrete items?

Jeffrey W. Edwards -- President, Chief Executive Officer and Chairman

Yeah, that's actually a great question. And so the revenue component of it and the quote unquote missed EBITDA is definitely just pushed to the right, meaning that it's on a forward basis. We don't believe we've lost that, it's just that we weren't able to quote unquote get to that work. But what isn't pushed to the right quite honestly is, the costs associated with going to buying at a distribution and buying out of home centers, that's kind of lost EBITDA if you will. So we're doing excellent.

Michael T. Miller -- Executive Vice President, Chief Financial Officer and Director

Well we haven't spoken to this particularly, but it is impossible for us to quantify. But in many cases too, you're forced in this kind of environment to make do with the product that you have that might not be the exact product for the allocation that you're doing for instance, maybe due to our 19 backs and replace it with our 38 back but if didn't have, which is not as efficient from a labor perspective, nor is as economical, even if you did buy distribution.

But we can't quantify that or things that are being cut down or alternative ways to accomplish the same installation job in pass code. And so there is another benefit that we have spoke about, as material supply returns normal that should come back in, in that regard and understand. I mean, this is not a problem that is specific to IBP in terms of the supply issues. I mean, our phone rings in certain parts in really any part of the country because someone else is unable to perform that work either. Unfortunately, many cases in those particular markets we can't say, sure we'll do your work, but this is a common problem.

Jeffrey W. Edwards -- President, Chief Executive Officer and Chairman

Yeah, not to get too deep into the weeds. I mean to Jeff's point the manufacturers to increase capacity significantly limited the SKUs that they were producing. And as a consequence you're getting material, but it's not the material you really want to need and you have to make do with what you get.

Justin Speer -- Zelman and Associates -- Analyst

That's helpful. I, just a follow-up question. I just want to be clear, and I'm sorry if I missed this. But that the growth that you mentioned for March and April the 16% to 24% was that organic or does that include M&A? And I guess if it does or doesn't that'll be helpful. But maybe give us some handle then with the expected acquisition contribution to revenue based on the closed deals for the second quarter?

Michael T. Miller -- Executive Vice President, Chief Financial Officer and Director

Yeah, there is our absolute sort of revenue growth numbers, if you will. But what I would say is that organic growth was very strong in March and April. And the contribution from acquisitions really won't kick in heavily until really the third quarter just in terms of when we did those acquisitions. Year-to-date, we've acquired about $65 million or so in revenue. So that's roughly $15 million to $20 million, $15 million call it a quarter. But obviously, that's going to change, as we do more acquisitions.

Operator

Thank you. At this time, we've reached the end of our question-and-answer session. And I now I'll turn the floor over to Jeff Edwards for closing remarks.

Jeffrey W. Edwards -- President, Chief Executive Officer and Chairman

Thank you. Your questions, and I look forward to our next quarterly call. Thank you.

Operator

[Operator Closing Remarks]

Duration: 62 minutes

Call participants:

Jason R. Niswonger -- Senior Vice President, Finance and Investor Relations

Jeffrey W. Edwards -- President, Chief Executive Officer and Chairman

Michael T. Miller -- Executive Vice President, Chief Financial Officer and Director

Kenneth Zener -- KeyBanc Capital Markets -- Analyst

Stephen Kim -- Evercore ISI -- Analyst

Susan Maklari -- Goldman Sachs -- Analyst

Elad Hillman -- J.P. Morgan -- Analyst

Philip Ng -- Jefferies -- Analyst

Michael Dahl -- RBC Capital Markets -- Analyst

Keith Hughes -- Truist Securities -- Analyst

Noah Merkousko -- Stephens -- Analyst

Justin Speer -- Zelman and Associates -- Analyst

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