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DATE

Wednesday, Nov. 5, 2025, at 10 a.m. ET

CALL PARTICIPANTS

  • Chairman, Chief Executive Officer, and President — Jeffrey W. Edwards
  • Chief Financial Officer — Michael Thomas Miller
  • Chief Operating Officer — Jason M. Martin

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RISKS

  • Management stated, "we are expecting residential housing starts will be flat compared to 2025," though the specific time period was not clarified, because of persistent affordability challenges, potentially impacting growth in the segment.
  • Michael Thomas Miller said, "We do think that Q4 2025 will create pressures. Multifamily completions are not expected to inflect positively in Q4 2025, so there will definitely be headwinds. However, we have confidence based on the trends we've seen and our experience over the past two quarters that our team will perform better than the overall market opportunity. Still, there will be headwinds coming into Q4 2025 and Q1 2026 on the new residential construction side. We feel very good about what the heavy commercial business is doing, as it is really helping to offset some of those residential construction headwinds, confirming continued demand headwinds in this category.
  • Management noted, "there have been in certain select markets some project delays," and indicated that these may be elongated if multifamily starts accelerate, primarily due to labor constraints in prior trades.
  • "Pricing pressure," was acknowledged in light commercial and entry-level single-family segments, with management stating, "we would expect it to continue, until the market inflects positively."

TAKEAWAYS

  • Consolidated Net Revenue -- $778 million in consolidated net revenue for Q3 2025, up 2% from last year and setting a new company record.
  • Same-Branch New Single-Family Installation Sales -- Decreased 2% in Q3 2025, indicating soft demand in the largest end market.
  • Same-Branch Commercial Installation Sales -- Increased 12% in Q3 2025, led by "heavy commercial" outperforming "light commercial."
  • Heavy Commercial Same-Branch Sales -- Grew over 30% year-over-year in Q3 2025, providing a significant margin benefit.
  • Same-Branch Multifamily Installation Sales -- Decreased 7% in Q3 2025, though contract backlogs are growing year-over-year in key branches.
  • Price Mix vs. Volume -- Company-wide price mix rose 1.5% in Q3 2025, but this was offset by a 4.8% decrease in job volume (excluding heavy commercial and "other") in Q3 2025.
  • Adjusted Gross Margin -- Adjusted gross margin increased to 34% from 33.8% year-over-year in Q3 2025, with mix shifts cited as key drivers.
  • Adjusted EBITDA -- Reached a record $140 million, with an adjusted EBITDA margin of 18% in Q3 2025.
  • Adjusted Net Income -- Adjusted net income for the third quarter of 2025 was $86 million, or $3.18 per diluted share.
  • Operating Cash Flow -- Grew 16% to $307 million in cash flow from operating activities for 9M 2025, largely due to improved working capital management.
  • Net Debt to Trailing 12-Month Adjusted EBITDA -- 1.09 times at quarter-end, remaining well below the self-imposed 2 times target.
  • Capital Returned to Shareholders -- $213 million year-to-date (9M 2025) through dividends ($78 million) and share repurchases ($135 million).
  • Q3 Share Repurchases -- 200,000 shares for $51 million, with $365 million still authorized for buybacks as of Q3 2025.
  • Dividend Increase -- The fourth-quarter 2025 cash dividend of $0.37 per share reflects a 6% increase from the prior year.
  • Operating Expenditures -- CapEx and finance leases totaled $20 million, about 3% of revenue, elevated by vehicle purchases ahead of forecasted price hikes in Q3 2025.
  • Acquisitions Completed -- Nearly $60 million in annual sales acquired year-to-date through 9M 2025, spanning cellulose insulation manufacturing, glass, and regional installation firms.
  • Third-Quarter Interest Expense -- Net interest expense was $7 million, down from $8 million a year earlier, as lower interest income from investments was offset by lower cash interest expense on outstanding debt.
  • Q4 Margin Guidance -- Management expects no incremental adjusted gross margin benefit from heavy commercial in Q4 2025. Management anticipates staying within a 32%-34% adjusted gross margin range for the full year 2025.
  • Regional Single-Family/Multifamily Sales -- Midwest and Northeast (30% of residential sales) grew by low single digits in Q3 2025. South (45%) was flat in Q3 2025. West (20%) declined slightly.
  • Multifamily Segment Outlook -- Management indicated that a rebound in multifamily installation is more likely in the second half of 2026 due to construction cycle timing.

SUMMARY

Installed Building Products (IBP +3.45%) management emphasized that flat residential housing starts expected for 2026 versus 2025, along with continued entry-level market softness, represent ongoing challenges, even as market share gains and operational discipline partially offset these pressures.

  • Capital deployment remained a core priority, with substantial buybacks, consistent dividend growth, and a continued focus on disciplined acquisitions.
  • Company leaders highlighted increased backlogs and geographic expansion via recent acquisitions, suggesting confidence in driving growth in underpenetrated regions and products.
  • Heavy commercial strength is expected to offset some residential headwinds, with management stating, "heavy commercial sales and profitability are poised to remain healthy beyond 2025."
  • Adjusted selling and administrative expenses declined as a percentage of sales to 18.2% in Q3 2025, driven by cost controls despite inflationary pressures in insurance and other non-discretionary expenses.
  • Recent distribution efforts provided a 50-basis-point benefit to gross margin year-to-date through Q3 2025, underlining incremental efficiency progress in internal logistics and supply chain operations.
  • Management reiterated a $10 million amortization expense forecast for Q4 2025. Management also expects an effective tax rate of 25%-27% for the full year 2025.

INDUSTRY GLOSSARY

  • Heavy Commercial: Large-scale construction projects typically involving steel and concrete, distinct from light commercial’s focus on framed construction, and a major revenue driver in this period.
  • Same-Branch Sales: Year-over-year sales comparison for company locations operating during both the current and prior reporting periods.
  • Price Mix: A composite metric reflecting changes in average unit pricing and product/customer/geographic mix—not solely price increases.
  • Complementary Products: Non-insulation building materials including garage doors, glass, closet shelving, and other installed products referenced as an area of double-digit sales growth.

Full Conference Call Transcript

Jeffrey W. Edwards: Thanks, Darren, and good morning to everyone joining us today. As usual, I will start the call with some highlights and then turn the call over to Michael, who will discuss our financial results in more detail before we take your questions. With another quarter of record sales and profitability, 2025 has been another very encouraging year for IBP. Our national network of branches continues to execute at a high level, delivering reliable installation services to large, medium, and small homebuilders and commercial developers.

While local market dynamics can vary greatly across the country, our results highlight the benefit of IBP's scale, product, and end-market diversity, and the trust we place in our branches to make the right operating decisions for their respective markets. Although the ten-year US treasury rate has come down since our second quarter call in August, homeownership remains incredibly expensive for most people, which we believe will remain the biggest challenge for our customers selling new homes in the near term. Still, we are confident in the long-term fundamentals of the US housing construction industry. We remain focused on growing earnings and cash flow while diligently deploying capital to shareholders.

Through the nine months ended 09/30/2025, we paid nearly $78 million in cash dividends and repurchased approximately $135 million of our common stock, returning nearly $213 million of capital back to our shareholders. In October, we published our 2025 ESG report, highlighting IBP's continued efforts to support environmental sustainability, employee well-being, and community engagement in pursuit of a more sustainable and equitable future. Since our inaugural ESG report, published in 2021, we have made steady progress in reducing our carbon footprint. We believe our efforts today are laying the foundation for a stronger, more sustainable future for our employees and people representing all communities. Looking at our third-quarter sales performance, consolidated sales increased 2%, and same-branch sales were roughly flat.

In our largest end market, same-branch new single-family installation sales were down 2%. While adjusting to the pace of residential housing and commercial building construction in local markets, our branches did a tremendous job growing complementary product sales by a double-digit percentage relative to the same period last year. Third-quarter installation sales in our multifamily end market were down 7% on a same-branch basis. But looking ahead, several markets are stabilizing and showing improvement. As of September, contract backlogs at key branches have grown year over year, and we have secured jobs in geographic markets in which we previously had little or no presence.

Third-quarter commercial sales in our installation segment increased 12% on a same-branch basis from the prior year period. Our heavy commercial end market continued to be the dominant driver of sales growth in this end market, which more than offset weakness in our light commercial end market. Based on the growth in our heavy commercial contract backlogs, we believe heavy commercial sales and profitability are poised to remain healthy beyond 2025. During the nine months ended 09/30/2025, cash flow from operating activities increased 16% to $307 million, which primarily reflected improvements in working capital management. Year to date, we have acquired nearly $60 million in annual sales.

We remain disciplined in our approach to find well-run businesses that would make strategic sense, support attractive returns on invested capital, and fit well culturally. Our core residential installation end market remains highly fragmented, with considerable opportunity for consolidation. During the 2025 third quarter, we acquired a North Carolina manufacturer of cellulose-based insulation for homes, hydromulch for erosion control, and composite materials used in industrial applications with an annual revenue of $20 million.

In addition, in October and November, we acquired a business with a value-added wholesale glass design and fabrication division and a retail sales and installation operation, primarily serving residential customers throughout the Southeastern United States, with annual sales of approximately $12 million throughout Wisconsin, with annual sales of approximately $4 million, and an installer of insulation in single-family, multifamily, and commercial structures across South Dakota, North Dakota, Wyoming, and Nebraska, with annual sales of approximately $3 million. Single-family starts year to date through August 2025 have decreased by 5% from the prior year, while multifamily starts are up 15% for the same period.

Looking into 2026, as is typically the case, the new residential construction outlook will be influenced by consumer confidence and buyer activity during the spring home selling season. However, with persistent challenges from housing affordability, we are expecting residential housing starts will be flat compared to 2025, a level that is above the five-year average from 2017 to 2021. For individuals and families with housing affordability concerns or shifting lifestyle preferences, constructed multifamily housing helps meet the needs of growing markets. Over the long term, we continue to believe that the volume growth in our business is supported by a fundamental undersupply of residential housing for the purpose of improved energy efficiency across the US.

We believe IBP continues to operate from a position of strength as we remain flexible in navigating any potential near-term challenges. Our national scale, strong customer relationships, experienced leadership team, and sales across product categories and end markets create a solid platform for IBP to serve our customers and meet their operational efficiency goals. Although broader macroeconomic uncertainty influences prevailing market conditions in our industry, and in many others, we remain focused on profitability and effective capital allocation to drive earnings growth and value for our shareholders. I'm proud of our team's continued success and commitment to doing an excellent job for our customers. To everyone at IBP, thank you.

I remain encouraged by the fundamentals of our industry, our competitive positioning, and I'm optimistic about the prospects ahead for IBP and the broader insulation complementary building product installation business. So with this overview, I'd like to turn the call over to Michael to provide more detail on our third-quarter financial results.

Michael Thomas Miller: Thank you, Jeff, and good morning, everyone. Consolidated net revenue for the third quarter increased 2% to a record of $778 million compared to $761 million for the same period last year. Same-brand sales for the Installation segment were flat for the third quarter as a 12% increase in Commercial same-brand sales more than offset a 3% decline in residential same-brand sales. Although the components behind our price mix and volume disclosure have several moving parts that are difficult to forecast and quantify, we reported a 1.5% increase in price mix during the third quarter. This result was offset by a 4.8% decrease in job volumes relative to the third quarter last year.

It is important to note that our heavy commercial end market and the other segment results are not included in the price mix volume disclosures. Our heavy commercial same-branch sales growth exceeded 30% during the 2025 third quarter, including the heavy commercial installation sales. Price mix increased 4.4% while job volume decreased 4.5% during the 2025 third quarter. With respect to profit margins in the third quarter, our business achieved an adjusted gross margin of 34%, an increase from 33.8% in the prior year period. The year-over-year increase in margin during the quarter was in part related to a shift in customer, product, and geographic mix. Adjusted selling and administrative expenses were stable relative to the 2024 third quarter.

As a percent of third-quarter sales, adjusted selling and administrative expenses decreased to 18.2% compared to 18.5% in the prior year period. Adjusted EBITDA for the 2025 third quarter increased to a record $140 million, reflecting an adjusted EBITDA margin of 18%, and adjusted net income increased to $86 million or $3.18 per diluted share. Although we do not provide comprehensive financial guidance, based on recent acquisitions, we expect fourth-quarter 2025 amortization expense of approximately $10 million. We would expect these estimates to change with any acquisitions we complete in future periods. Also, we continue to expect an effective tax rate of 25% to 27% for the full year ending 12/31/2025.

Now let's look at our liquidity position, balance sheet, and capital expenditures in more detail. For the nine months ended 09/30/2025, we generated $307 million in cash flow from operations. The 16% year-over-year increase in operating cash flow was primarily associated with improvements in working capital management. Our third-quarter net interest expense was $7 million compared to $8 million for the 2024 third quarter as lower interest income from investments was offset by lower cash interest expense on outstanding debt. At 09/30/2025, we had a net debt to trailing twelve-month adjusted EBITDA leverage ratio of 1.09 times, compared to one time at 09/30/2024. This remains well below our stated target of two times.

At 09/30/2025, we had $330 million in working capital, excluding cash and cash equivalents. Capital expenditures and total incurred finance leases for the three months ended 09/30/2025 were approximately $20 million combined, which was approximately 3% of revenue. This is higher than usual as we accelerated vehicle purchases in advance of expected price increases. With our strong liquidity position and modest financial leverage, we continue to prioritize allocating capital to achieve the best returns while distributing excess cash to shareholders. During the 2025 third quarter, IBP repurchased 200,000 shares of its common stock at a total cost of $51 million and 700,000 shares at a total cost of $135 million during the nine months ended 09/30/2025.

At 09/30/2025, the company had approximately $365 million available under its stock repurchase program. As previously announced, IBP's Board of Directors approved the fourth-quarter dividend of $0.37 per share, which is payable on 12/31/2025, to shareholders of record on 12/15/2025. The fourth-quarter dividend represents a 6% increase over the prior year period. With this overview, I will now turn the call back to Jeff for closing remarks.

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

Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press 1 on your telephone keypad. You may press 2 to remove yourself from the queue. For participants using computer equipment, it may be necessary to pick up your handset before pressing the star key. First question comes from Stephen Kim with Evercore ISI. Please go ahead.

Stephen Kim: Hi. This is Atish on for Steve. Thanks for taking the question. I just want to touch on how you see backlogs for multifamily and commercial and do you still see multifamily rebound in 1Q? And then on the commercial side, are you seeing any delays there? Any color there would be helpful. Thanks.

Michael Thomas Miller: So this is Michael on the multifamily side. As we talked about, really in the first quarter and the second quarter, we expected through the rest of this year continued headwinds, which I think we saw in the third quarter, although our team has done a phenomenal job of outperforming relative to the market. We believe they will continue to do that. As Jeff mentioned in his prepared remarks, we're seeing, in certain markets, building of backlogs in those markets, as well as gaining share in new markets for ourselves. So for us, the multifamily story continues to be intact in terms of us strategically gaining market share, not just in insulation, but in the complementary products as well.

And, you know, as we pretty much everyone on this call would know that multifamily starts have performed pretty well this year. Because of the lag time from, you know, start to install, the multifamily side, it's probably gonna be more weighted towards the back half of '26 than the front half of '26. So, really, a lot depends on, you know, the trades that come before us to, you know, get their aspects of the trades done. But we are seeing continuing to see good bidding activity and are surprised actually some markets like Florida, which is, I think everybody knows, is probably the weakest residential market right now, is seeing some actually decent multifamily development.

So we feel good about that in those markets. On the commercial side, as we talked both last quarter and the first quarter, really the story there is the heavy commercial business, which has performed exceedingly well and has offset the continued weakness in the light commercial business. Although the light commercial business is starting to be less negative, in part because it is, the comps are getting easier because it's been down for such an extended period of time. You know, we don't have nearly as much visibility into the light commercial business as we do the heavy commercial business. We feel very good that the heavy commercial business is gonna continue to deliver strong top-line and bottom-line results.

But it's not clear yet when the light commercial business is going to inflect positively. And it'll really be dependent upon the inflection in the single-family market.

Stephen Kim: Hey, Mike. It's Steve Kim. Just to follow-up. I think last quarter, you had suggested that we might see the multifamily business rebound, as early as one I think you had said at that time that maybe you were seeing the comps sort of accelerate or something. And so just wondering, did anything change to sort of push that back? You should now sort of say maybe back half of the year. So just not to nitpick too much, but just wanna make sure we don't miss something that you're trying to communicate about what you're seeing about with respect to your backlog timing.

Michael Thomas Miller: No. It's just being cautious and also as you know, we are influenced significantly in terms of our ability to do install work based upon the trades that come before us. So it's really the ability of the trades to come that come before us to get their work done so we can get there. And while we're not seeing across the board project delays, there have been in certain select markets some project delays.

You know, one of the issues potentially could become for the trades that come before us is we're all expecting because of the starts numbers and what's happened from completions perspective and the significant decline in multifamily completions is that if there is a significant inflection which the starts numbers would indicate, you can start to have elongated, cycle times on the multifamily side. So you know, we're just trying to factor some of that potential into our thought process as it relates to 2026.

Stephen Kim: Got it. Do you guys anticipate that if there were to be any elongation in cycle times like you just described, that would be more on the labor side? Or would they more on the product availability side? I assume labor.

Michael Thomas Miller: Yes. It is. Definitely labor. And I'm not talk you know, just to be clear, I'm not talking about our ability to source the labor. Or our ability to source material. But I definitely think that some of those the earlier trades, like you know, the framers and foundation guys might experience a bit of an issue from a labor perspective.

Stephen Kim: Gotcha. Last one for me is you talked about margins benefiting from mix, I think you said product geographic and customer. Can you talk a little bit about the geographic? Was there a noticeable, relative strength or weakness, if across any geographies worth calling out?

Michael Thomas Miller: Yes. I mean, we definitely benefited from our historical overweight, if you will, to the top half of the country, which has done you know, fairly well relative to the bottom half of the country. I mean, clearly, the weakness that we're seeing in the single-family market or lack of inflection, I should say, the single-family market is really driven by the entry level. Right? We're seeing good, solid performance at the semi-custom regional and local builder level. Which as everybody knows, tend to be centered more from a, percentage of overall revenue. In the top half of the country.

So just to give you some kind of regional flavor, for us, and I'm using this based upon the census regions, not the way that we manage the business, but based on the census regions. So the Midwest and the Northeast represent roughly 30% of our new residential installation sales. So that's both single-family and multifamily. In the quarter, those region sales for single-family, multifamily were up low single digits. The South, which is our largest region, is about 45% of residential sales, and it was essentially flat. In the quarter. The West region, is roughly 20%, of our residential sales, was basically down very low single digits.

So clearly, there's different performance across, you know, the different regions, and we are definitely benefiting from the fact that we have such strong market share in the Midwest and the Northeast. That being said, and I don't wanna go into too much detail on necessarily on this question, but or the answer to this question, But our teams, even in the South and the West, have performed extremely well given the headwinds that they're facing. And the market conditions that are there.

So we're really we can't shout out enough how proud we are of the field team and the local management and their ability to know, continue to manage through what is you know, a pretty challenging market environment.

Stephen Kim: Great. Thanks so much, guys.

Michael Thomas Miller: Sure.

Operator: Next question, Michael Rehaut with JPMorgan. Please go ahead.

Michael Rehaut: Thanks. I appreciate you taking my questions. First, I just wanted to get a sense you know, you highlighted in terms of your end market demand kind of benefiting perhaps from price point and geographic exposure. I don't know if it's possible to try and triangulate. You know, you had a competitor yesterday talk about their end markets down low double digit.

You know, given your different mix, you know, based on customer, based on geography, I'm just trying to get a sense of you know, whether or not you feel like you know, that's down double digits is kinda the right framework for your set of exposures and, you know, if you're able to kinda triangulate you know, what your end markets what your markets did, or have been doing this year or during the third quarter even you know, if you feel like you've outperformed that mark.

Michael Thomas Miller: Well, as we said in the answer to the previous clearly, we benefited from the regions and our exposure to certain regions that have performed well relative to the overall market. I would say that we have been very successful with our customers particularly the regional and local semi-custom homebuilders in our mark markets to work with them to, you know, provide for us a, you know, very solid base from a revenue perspective. And we feel very good about our ability to continue to do that. I mean, no doubt there are headwinds and pressures, particularly as it relates to the entry-level market.

But our team is doing an excellent job of focusing on you know, the right customers in the right markets and know, working to make sure that we offset the challenges that the current market environment is providing.

Michael Rehaut: Okay. So in other words, you know, better markets, but you know, any type of sense of what your markets or you know, how they did during the quarter relative to what you were able to do?

Michael Thomas Miller: Yeah. I would say that you know, not in every single market, but if we and I think the results clearly we clearly reflect this. The team performed much better than the market opportunity that was in front of it. They did that last quarter. They did that this quarter. And, you know, so far going into the fourth quarter, we feel very good about their ability to continue to do that. I mean, that being said, I mean, obviously, we'll we will continue to see pressure particularly in the single-family entry-level market which is you know, heavily weighted towards the bottom half of the country or the smile as people refer to it.

But, you know, while we don't see the inflection yet in the single-family entry-level market, we're hopeful and encouraged that, you know, the spring selling season will be certainly more constructive next year than it was this year. And this is Jason. I would add to that. We've also seen very strong performance at our other complimentary products. So the sales growth is not just housing demand focus. It's the strength that we've had in growing those sales organically.

Michael Rehaut: Which is a really important point. Right? And we continue to improve the margin on those products. Now there's still less they're lower than insulation, considerably lower than insulation. As we've talked in previous quarters, when the sales rate of the complementary products is higher than the sales rate in insulation, it is a negative to gross margin. But we're making tremendous progress from both the sales perspective, as Jason pointed out, and a marketing perspective.

Michael Rehaut: Yep. No. No. No. I appreciate that. That point. It's actually kinda leads me into my second question around pricing, price mix, and gross margin. So you know, you're able to do another, you know, modestly positive price mix in the quarter. I think that's kind of you know, a positive surprise relative to perhaps some concerns around pricing, maybe reflects your own more stable demand backdrop, But I'd love to get a sense of you know, what insulation pricing did during the quarter? How much of the price mix was price versus mix?

And, you know, how does it kind of impact your outlook for now you have a couple quarters and several quarters actually in the last year, year and a half where you're more or less at that 34% range, you know, at the high end of that 32 to thirty four, and your ability to sustain that type of margin level.

Michael Thomas Miller: Yeah. So there's two parts to that question. On the price mix growth, a lot of it, excuse me, was mix. And the mix was really that our rate of sales growth with know, regional local custom builder was better than it was with the production builders. I mean, which is obvious based on their Q3 results. I mean, the reality is that given our solid share with the production builders, which tend to be very heavily weighted towards entry level, our sales with them trend with their sales, fairly closely.

So as a consequence, you know, the benefit that we saw from a price mix perspective in the residential side was really driven by the outperformance, if you will, on a relative basis with the regional local and custom builder. Which as everyone knows, has a much higher ASP than, you know, the entry level. And because of our regional difference, relative to our regional performance in the top half of the country, building codes and energy codes are much higher in that part of the country. It also tends to be a basement market, which that means that we're insulating the basement. We're insulating to a higher code. It also tends to be an on average, a larger home.

You have a much higher average job price in those markets than you do in bottom half of the country. As a consequence, all the things that we talked about from the regional benefit came into benefit price mix growth, as well.

Michael Rehaut: And then on the gross margin part of your question, you know, the you know, there's a couple things that are really helping gross margin and then also some things that were headwinds to gross margin. So we've talked about this in previous quarters, but the even though the complementary products saw margin improvement of about a 100 basis points in the market, As I mentioned earlier, they still are at a lower gross margin than insulation. The higher rate of growth there than creates a headwind to gross margin. Also, our other segment, which includes distribution manufacturing business, naturally has lower gross margins and it also saw a decent growth in the quarter. Thus weighing on overall gross margins.

Combined, you know, that had about a 60 basis point headwind to gross margin. But that was more than offset with a 100 basis point gross margin benefit from the outsized performance from the heavy commercial business. So those two things were more than offset and helped us stay at that high range of 34% adjusted gross margin. I will say that the benefit that we received from the heavy commercial business in gross margin, that 100 basis points, this quarter.

We don't expect to see in the fourth quarter of this year not because they won't continue to perform well, because they had already raised their gross margin up by the fourth quarter of last year to sort of where they're where it is today. So we don't expect any incremental benefit coming from the heavy commercial business in the fourth quarter. But we still feel very confident that we will operate in that 32% to 34% adjusted gross margin range on a full-year basis.

Operator: Next question, Susan Maklari with Goldman Sachs. Please go ahead.

Susan Marie Maklari: Thank you. Good morning, everyone. Good morning, My first question is, following up on the gross margin comment, Michael. It seems like part of this is that you're doing a good job at being able to preserve the core margin that you're realizing on your installation of insulation even with the pressures that coming through across the different regions and types of builders. Can you talk about how those conversations are going? And how you're able to leverage the value add and perhaps the growth in the ancillary products that Jason mentioned in there to preserve that core margin.

Michael Thomas Miller: Yeah. Sue, just to be clear. It's the field team that's doing it. And they're doing an incredible job. I don't think anybody in this room feels that they can take responsibility for what a great job they're doing. But I think, you know, those conversations are definitely challenging right now given the softness particularly at the entry level. But you know, the reality is that we provide an installed solution. So we're not providing just labor. We're not providing just material. We're providing an installed solution. We're solving problems for builders. And they absolutely appreciate the value that we're providing. And, yeah, this has been a continuous story for us, quite frankly.

Terms of the team's ability to continue to do that. We as we've talked I think, on multiple occasions, about the benefits of a softer environment on the uptake of the complementary products. We're absolutely seeing that. The team is doing you know, what we would have expected them to do. Think that, we don't think we know that our incentive compensation systems are designed, quite frankly, to drive outperformance in a challenging market. Because so much of our branch managers' compensation is tied to the profitability of their location. In fact, mean, really, when you think about it, almost every employee within IBP has some portion of their compensation tied to profitability.

And we think that drives outperformance in a challenging environment.

Susan Marie Maklari: Yes. Okay. Thank you for that. And then turning to SG and A, it seems like you're also doing a nice job at controlling those costs in this kind of an environment. Can you talk about the progress that you're making on the that you had mentioned earlier this year? And anything else that's flowing through there that we should be aware of?

Michael Thomas Miller: Yeah. Thanks for that question, Sue. Definitely, we're making very good progress. We still have progress to make. I mean, to a large extent, the efforts that the whole team is making to the G and A that we can control. Is to a large extent being you know, offset unfortunately by some of things that aren't immediately under our control. You know, like insurance, and that's insurance at all levels. But the team is really working very hard to lower g and a expenses.

And our objective is that we will offset the natural inflation in some aspects of g and a and some of the headwinds that we're experiencing on the insurance side, of g and a you know, with the savings that we're continuing to experience on the g and a side. But it's really at this point, a, an opportunity for us to maintain the growth or to you know, use our belt tightening, if you will, to offset some of the costs that we are we don't directly or immediately control.

Susan Marie Maklari: Okay. Thanks for the color, good luck with the quarter.

Michael Thomas Miller: Thank you.

Operator: Next question, Jeffrey Stephenson with Loop Capital Markets. Please go ahead.

Jeffrey Stephenson: Hey, guys. Congrats on a really impressive quarter. I guess, Michael, that was really helpful color when you shared with us just now on your trends in the Southeast and the West, which was actually very stable, clearly outpacing the market handily. Was there big pivot this year in terms of your go-to-market strategy to kinda lean harder in some of these custom and regional builders. Or you've always been generally a little higher there just because, it does feel like, the team's really outperformed here.

Michael Thomas Miller: Yeah. I think that's a fair assessment, Phil, in the sense that know, our team looking forward obviously, working with their production builder, entry-level builders, saw the weakness. That the market was going to present and really saw that as an opportunity to work more closely with some of the other customers in that in those markets to offset what they saw as the headwinds coming. And, the team's done you know, a great job of performing relative to that. Now, you know, the reality is that there continues to be know, some states that are very weak. You know, we point we, talked about Florida last quarter, and Florida continues to be quite weak.

Although, as I mentioned earlier, we're seeing some encouraging signs on the multifamily side in Florida. You know? But it continues to be very weak. Texas is the state that people call out, which, you know, Texas is, you know, our second largest state. You know, it definitely has pockets of weakness, but know, we believe our team is doing a good job there of trying to offset some of that weakness by changing a little bit of the customer mix. And also cross-selling the other products. And quite frankly, you know, Texas is really one of the markets that's been very successful for us. On the multifamily side.

The CQ team, is our know, centralized multifamily operation that, you know, covers around 40 to 45% of our multifamily revenue. Has really, you know, outperformed in Texas and allowed us to gain, solid market share in that market but in a profitable way.

Jeffrey Stephenson: Okay. Super. And then, Michael, I think what you just said earlier, October trend, November sound pretty good, and you're still outperforming pretty handily. Wanted to hear you correctly. And I know you don't give guidance. Part of this question is just you know, most of your peers have seen and expect demand to really soften in the back half and perhaps these declines moderate going into next year, your trends have been very different from everyone else. So I'm just really curious. Know, is that decline to come, or this is potentially the trough, especially as we go into next year perhaps rates coming in, the consumer getting a little better, kinda back on the mend.

Just wanna appreciate, some of the nuances as it relates to your portfolio.

Michael Thomas Miller: Yeah. And thanks, Phil, for reiterating that we don't provide guidance And in my answer to your question, don't mean this to be guidance. It's just publicly available information that you know, I'll use to sort of triangulate a little bit. On our expectations for the fourth quarter. So I think as a lot of people on the call know, that, you know, roughly 55 to 60% of our total revenue is new single-family construction. Of that, you know, 55 to 60% roughly 27 to 30% of that revenue comes from the builders.

If you look at the guidance that those builders provided for the fourth quarter, and as I said in the answer to an earlier question, our sales to them kinda track their sales, basically. Their numbers, right, their publicly available numbers with suggests that their sales are going to be down on a combined basis roughly, you know, high single digits. And that high single digit decline would be roughly 400 to 500 basis points higher than the typical seasonal decline from the Q3 to Q4 because Q4 is seasonally a lower typically lower revenue month. Across the board within building products.

And, you know, we expect that extra four to 500 basis points revenue headwind that they're forecasting, you know, we will feel as well. In that, you know, portion of our business. So to more succinctly answer your question, we do think that the fourth quarter is gonna create pressures You know, multifamily completions, you know, we don't expect to inflect positively. In the fourth quarter, so there's definitely going to be headwinds. But you know, we have confidence, you know, based upon know, what the trends that we're seeing what we've experienced over the past two quarters.

That our team is going to perform you know, better than the overall market opportunity, but they're definitely going to be headwinds coming into the fourth quarter and the first quarter on the new residential construction side. We feel very good, though, and I'll reiterate this probably 10 times on the call today. We feel very good about what the, heavy commercial business is doing and is really helping to offset some of those, presidential construction headwinds.

Jeffrey Stephenson: Okay. Appreciate all the great color. Thank you so much, guys.

Michael Thomas Miller: Sure.

Operator: Next question, Mike Dahl with RBC Capital Markets. Keep going.

Mike Dahl: Thanks for taking my questions. Just wanna follow-up on that last point and make sure we're understanding. When you talk about the high single digit decline, you talking about their delivery guides or something else Because I think the starts commentary has been pointing to more significant declines in starts, understanding that you guys have some differences in lag timing. Right? I just wanna make sure we're understanding what your you're saying. And then could you could you give us a any insight into then on the private side are those customers of yours seeing a different trend than what you just started to feel, for the publics, or are they kinda starting to follow suit into your

Michael Thomas Miller: Yeah. So my comment around the Publix was more closings versus starts. Right? So and they're two different things as we all know. As it relates to the you know, kinda custom, semi-custom, and regional and local builders I would say that the commentary is generally flat. Where they're not seeing and, obviously, the you know, market by market. But I if I had to put it in a kind of broader context, it would be that the market is flat. It's not getting worse, but it's also not getting better.

Mike Dahl: Okay. Got it. That's helpful. And then I shifting gears back to the gross margin dynamic, appreciate the color on the heavy side and that you're now comping against the step up there. So when we think about the year on year impacts for four quarter, I think you articulated kind of some of the moving pieces around mix But when we think about that fourth quarter, can you just dial that in a little better in of, alright, we don't have the 100 basis point tailwind. We do have some of the headwinds, some other how do those headwinds in your mind, stack up compared to what you just articulated for the 3Q dynamics?

Michael Thomas Miller: Yeah. I mean, we would expect that we would continue I mean, it's it's interesting that we call out gross margin headwinds because the businesses are performing those businesses perform very well. Right? And they're improving margin, but just that they're at a lower gross margin, to start with just creates that sort of headwind. We would expect that trend to continue through the fourth quarter where the other products, the other segment, which is the distribution manufacturing business, you know, we continue to grow at a higher rate than the insulation business. So as a consequence, we believe that headwind will be there.

And then as I said, and you pointed out, we don't expect to see that much incremental gross margin benefit from the heavy commercial business, in the fourth quarter. And just as a reference point in the fourth quarter of last year, the adjusted gross margin was 33.6%. So, again, well within our 32 to 34 full-year range that we've talked about.

Mike Dahl: Yep. Okay. Thank you.

Michael Thomas Miller: Sure.

Operator: Next question, Jeffrey Stephenson with Loop Capital Markets. Please go ahead.

Jeffrey Stephenson: Hi, thanks for taking my question today and congrats on the strong results. Is great to see. Would you call out any products that are out outperforming as most of the strength in, you know, better single-family markets, you know, such as the Midwest.

Michael Thomas Miller: That's part of it, but, also, keep in mind, that within the complimentary bucket, if you will, is primarily the heavy commercial business primarily in the complimentary product bucket. So they're definitely helping you know, from a growth perspective, in those products. But we're definitely seeing it on the, you know, residential construction side of the business as well. Particularly on a margin improvement basis. So we feel good about you know, what the team has been able to do there. So and to answer your question specifically, mean, there's not I would say that you know, I wouldn't highlight any one particular of the complementary products. As being any better than the others.

It's really a uniform story in terms of their growth with the one exception that growth that Jason talked about is definitely being helped by the heavy commercial business.

Jeffrey Stephenson: Okay. No. Understood, Michael. And, you know, obviously, you know, a lot of discussion over the, you know, out you know, with the regional and local builders. Over the national, you know, public builders and you know, as you look at your backlog moving forward, could you know, would you expect, you know, those, mixed tailwinds to continue, especially given the softness at the you know, entry-level price point right now?

Michael Thomas Miller: Yes. We would expect that to, to be the case until the entry level influx. We're hoping that happens in the spring selling season.

Jeffrey Stephenson: Got it. Thank you.

Michael Thomas Miller: Sure.

Operator: Next question, Keith Hughes. Truist Security's key pillar.

Keith Hughes: Thank you. Just to level set, on the commercial 135,000,000 revenues in the quarter, what is the split right now between heavy and light?

Michael Thomas Miller: So on the install side, which is just a slightly different than on from the total I v p perspective, On the install side, heavy commercial is around 11% of revenue. And the light commercial is, like, seven and a half percent of revenue.

Keith Hughes: Okay. And what is the dividing line between light and commercial? Is that a is there a job size? Or is it a product? Or how do you define that?

Michael Thomas Miller: I mean, the simplest way is that light commercial is framed construction, and heavy commercial is steel and concrete.

Keith Hughes: Okay. And from a growth rate per when if we look longer term, I think you wanna do more in this What do you think has the bigger TAM that you could you could reach?

Michael Thomas Miller: Oh, heavy commercial without a doubt. I mean, our market share in heavy commercial is you know, in the markets that we're in, it's great. But or it's very soft. We have so much geography that's open to us. And you know, now that we have so much confidence in the team and the team is working so well, that, you know, we see a lot of opportunity there on an acquisition. Opportunity and then also potentially on a de novo basis, but that's gonna be very selective.

Keith Hughes: And what's stopping really accelerating the acquisition activity there? It seems like a great business for you. It just seems like we would see more deals or maybe that's to come. What's what's kind of your view of the pacing, I guess, is my question.

Jeffrey W. Edwards: This is Jeff. Key. So I would say, honestly, in unlike what we would say about our residential business, I think the potential for organic growth by us following customers and developers and general contractors we have relationships with actually, in this case, outweigh maybe even some of the commercial acquisition activity. Because I'd say that it isn't there. But I wouldn't be surprised if we don't, you know, end up moving more on the organic side than we do on the acquisition side in that part of the business. Not to downplay that there aren't opportunities. Just I think they may they may have a first organically.

Keith Hughes: Final thing. It lends itself to organic growth. What dynamic of it lends itself to organic growth more than, say, your residential installation is?

Jeffrey W. Edwards: I don't wanna call the customers necessarily stickier than they are on the residential side because we also make it a point of calling our cuss our residential because of the jobs that we do for them, the work that we do for them, the quality, etcetera, we provide as being sticky. But I do think maybe the universe of contractors that can perform the service that we perform on the commercial side, especially the bundling of that. But I think in addition to that, it's just we'll be able to follow developers and builders to other large metro areas that we're currently not in. With heavy commercial.

Keith Hughes: Yep. Okay. Great. Thank you very much.

Jeffrey W. Edwards: Gotcha. I see

Operator: Colin Darren with Deutsche Bank. Please go ahead.

Collin Andrew Verron: Good morning. Thank you for taking my questions. I just want to start on price cost level, I appreciate all the color around the moving pieces of mix. On gross margin. Any colors how price cost is tracking in more specifically within the residential insulation business and the commercial insulation business?

Michael Thomas Miller: Well, I mean, I think on the commercial side, you know, there's definitely a difference between the light commercial and the heavy commercial. We've talked about the light commercial business. Has been weak for multiple quarters at this point. So, obviously, that can lead to some pricing pressure. I would say on the on the single-family side, really where there's pricing pressure, and we would expect it to continue, until the market inflects positively is it's more regional in nature and more at the entry level that we've been talking about. I would say at the, you know, custom, semi-custom you know, our top half of the country, Well, obviously, it's a competitive environment.

The competitive challenges are not as significant they are in the parts of the market that are softer. I mean, it's logical supply and demand sort of response. But at the same time, you know, our team is doing an excellent job of, you know, working hard to maintain price and provide for the builder a high level of service that they will value and pay a fair price for. We are constantly working to be more efficient for our builder customers and to provide them as much value as possible. But, you know, there is a fair balance between, you know, what we get paid for and the installed solution that we provide.

Collin Andrew Verron: That's helpful color. And, I just want to touch on the distribution and manufacturing. Side. I know it's a small piece of your business, but the growth is really strong in the quarter and kinda contributed to growth from an out as an contributed to growth on an outside pace outsized pace relative to its size. So I guess, any color to sort of what's going on there and of the trajectory of that business as you look out a little bit further?

Michael Thomas Miller: Yeah. And keep in mind, some of the growth that you or a portion of the growth that, is in that other segment is coming from our internal distribution efforts, which we've talked a lot about. And it's that's really coming to fruition. And you can see the growth rate in that in our segment disclosure that just shows the significant growth of intercompany sales. And we estimate that, you know, year to date and in the quarter, that, the internal distribution efforts provided an almost 50 basis points benefit to, gross margin. Just executing on the plan that we talked about for years. Multiple yeah. Years. I was gonna say multiple quarters. Let's say multiple years. Yeah. Yeah.

So it's the benefits there are coming to fruition. We still have a lot a lot of work to do. But the team is working really well together. And we finally have gotten, I think, a wide acceptance among the branches to support the effort. Of internal distribution.

Collin Andrew Verron: Great. Thank you for the color.

Michael Thomas Miller: Sure.

Operator: Ken Zener, Seaport Research. Please go ahead.

Kenneth Robinson Zener: Good morning, everybody. Morning. Morning. It feels like we were looking at a horse, and then the light was turned on. You're more like a zebra. Relative to the regional and customer mix. So first question. Is that good or bad? Mix. It is what it is. So for customer mix, generally speaking, I think you talked about, you know, the public's about 30%. Can you talk to the dollar generally Michael? I know you've disclosed a lot today, so I don't wanna press you.

But what is generally, like, kind of the dollar spread between, like, that public, which I think people understandably characterized you guys as opposed to the 70% that's actually going to that private you know, more custom bucket since it's the majority. And then can you describe the demand dynamics of those builders' buyers? So you know, if it's custom, it's not gonna be as tied to affordability, entry. It's gonna be more non spec, etcetera.

Michael Thomas Miller: Yeah. That last part of your column comment or question there Ken, is definitely accurate. I would say that the average job price for the regional and local builder because of the type of product that they're building. And I'm not talking on a per square foot. Installed basis. I'm just talking about the average job price Right? So because of the type of product that they're building, because they're generally speaking gonna have a basement, which adds another level of work, for us to insulate. They those average job prices are multiple of what the average job price is for an entry-level home.

Kenneth Robinson Zener: Okay. And trying to pick my question here. Given that multiple difference is that something well, I guess, I'm gonna try to send it my second question. The census data besides the fact it's not getting published right now, is highly inaccurate. For the markets that the public builders are in. The smile, because most of the builders don't respond to the census. Do you feel that the census data is more accurate in those non SMILE states relative to kind of the starts and the activity that you've seen?

Michael Thomas Miller: Boy, I think we would have to go back and look at the information over an extended period of time to see if you know, the adjustments that they make to the information is greater in the smile than it is in the top half of the country. I yeah. I have no idea. We've never really looked at that. I mean, Yeah. It's never been as apparent. Yeah. We sort of take it at face value for what it is. Obviously, we don't run our business based upon what the census Bureau is reporting. So

Kenneth Robinson Zener: And then relative to that, given your and we very much appreciate your commentary relative to the census you know, boundary definition. Given that so much of your business is to the nonpublic, and that mix is geared more towards a higher total take it seems to me that's the biggest factor as we entered '25 for expectations for your business, in addition to your cost controls. Is there a reason that the base of your business is gonna be detrimental next year?

Because it seems if you have more of your mix in these more attractive markets where you know, there's better job growth, etcetera, that, you know, we could continue to see kind of the disconnect relative to you know, census data would next year. It's simply tied to your product mix and your regional mix. Is that a fair assessment? That the spread we see this year would persist into next year?

Michael Thomas Miller: I mean, obviously, but one, we don't provide guidance. Two, obviously, it depends upon what ends up happening to the market. What I would say, though, is that, you know, while the entry-level market right now, as we all know, is challenged, then it's a challenge challenging operating environment for their And, yes, our customer mix and regional mix is benefiting our or helping our outperformance. It's not the only reason we're outperforming. The team is doing the outperformance, but it is definitely helping in that situation.

I would say, though, and which one of the reasons why we're so excited about the business and continue to be, is that when the inflection comes in the entry-level market, we are completely set up to benefit from that inflection upward, and we think that will come at the same time when the regional locals are gonna continue to perform as well. Now does that mean it'll put pressure on our price mix disclosure? Absolutely. Because we'll be seeing an acceleration in that entry-level market. But at the same time, as we've talked about before, even though it's at a lower job price, considerably lower gross margin, the cost to serve is considerably lower as well.

And the EBITDA contribution margins on that business is solid. So you know, I don't think or I know we're not ready to call when that inflection happens. We're hoping that it's the spring selling season. But whenever it happens, we're ready to work with our customers to make sure that we can all capitalize on the opportunity that will present.

Kenneth Robinson Zener: Thank you very much, team.

Michael Thomas Miller: Bye.

Kenneth Robinson Zener: Thanks, Ken. Next question.

Operator: Adam Baumgarten with Vertical Research Partners. Please go ahead.

Adam Baumgarten: Just on the multifamily business, I know things started to slow, and I know you have a pretty unique business within that, guys talked about sort of the white space geographically you had and organic opportunities to expand there in a weak market. I guess any update there on how that's going, if you're starting to see some benefits from maybe a renewed effort to kind of go out of your core markets?

Michael Thomas Miller: That is a great question, and I appreciate you asking it because, yes, we are making very good progress on that front. It's not translated into revenue yet, but it's translated into backlog. And, you know, the team is doing a really good job of, as Jeff said in his prepared remarks, going into new markets and opening up those new markets for multifamily. And we really believe we have a differentiated model slash opportunity for the GCs, on the multifamily side. And we'll continue to strategically and methodically pursue you know, continued market share gains in multifamily.

I mean, honestly, for us, the multifamily story, as we've talked before, it's a lot about us catching up from a market share perspective to where we should be. Because we really lag behind in a lot of markets. Particularly markets in the smile. We lag behind from a multifamily perspective because we were so focused on the strong single-family opportunity.

Adam Baumgarten: K. Got it. Thanks a lot, guys.

Michael Thomas Miller: Sure.

Operator: Next question, Ruben Gardner with The Benchmark Company. Please go ahead.

Reuben Garner: Thanks. Good morning, guys in congrats on another strong quarter. My question and apologies if this has already been discussed. I had to hop on late, but just curious on the current m and a environment. I know you picked up a couple of kinda specialty product categories of late, but curious on what the environment is like for some of your smaller installation peers and then also the likelihood that we could see something larger or maybe even in a different vertical in the near or medium future?

Jeffrey W. Edwards: Great. This is Jeff, and I'm glad you asked that question. So I think the environment from a perspective is on both small guys, the ones that are kind of regular way as we used you know, would usually call them is not dissimilar that it's been really over the last I don't know, twenty plus years. Like we've said all along, their deals are kinda lumpy. We did make an effort to kinda do some add on kinda bolt on deals, which you've seen some of those flow through. But we're actually pretty excited about some of our kinda regular way in both in size and in terms of quantity kinda deals that we have in the pipeline currently.

In addition, we continue to look at kind of what we would call adjacent areas to the business Still interested. Pretty seriously in, you know, potentially commercial roofing and other areas where we would be installing products that have similar characteristics. To the, you know, the things we already install. But I guess also going back to Keith's question, I may have at least at least interpreted the question more narrowly than the way he asked it. Is also kind of a lead into what you asked also. And that is when I said that there maybe the avenue for acquisitions on the heavy commercial was kinda more organic or was gonna be constrained on the acquisition side.

I was interpreting at least, the question being asked specifically to the products that Alpha installs currently. And I think we feel pretty good about our ability to kinda chase the things that we do well as alpha organically. Now there are definitely other product lines that Alpha is not in, but I would categorize those more adjacencies that we could get into on the heavy commercial side in that particular area. We're very excited about what our prospects have.

Reuben Garner: In front of us. Great. Thanks, Jeff. Thanks, guys, and good luck to the rest of the year.

Jeffrey W. Edwards: Thank you. Thank you.

Operator: I would like to turn the floor over to Jeff for closing remarks.

Jeffrey W. Edwards: Thank you all for your questions. I look forward to our next quarterly call. Thank you.

Operator: This concludes today's teleconference. You may disconnect your lines at this time, and thank you for your participation.