UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2022

OR

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

For the Transition Period From _________ To ________

Commission File Number: 001-36307

Installed Building Products, Inc.

(Exact name of registrant as specified in its charter)

Delaware	45-3707650
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
495 South High Street, Suite 50
Columbus, Ohio	43215
(Address of principal executive offices)	(Zip Code)

(614) 221-3399

(Registrant's telephone number, including area code)

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

Title of each class		Trading Symbol(s)	Name of each exchange on which registered
Common Stock,	$0.01 par value per share	IBP	The New York Stock Exchange

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

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

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

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

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

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

On April 28, 2022, the registrant had 29,295,555 shares of common stock, par value $0.01 per share, outstanding.

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION	1
Item 1. Financial Statements	1
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3. Quantitative and Qualitative Disclosures About Market Risk	34
Item 4. Controls and Procedures	35
PART II – OTHER INFORMATION	36
Item 1. Legal Proceedings	36
Item 1A. Risk Factors	36
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	36
Item 3. Defaults Upon Senior Securities	36
Item 4. Mine Safety Disclosures	36
Item 5. Other Information	36
Item 6. Exhibits	37
SIGNATURES	38

i

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

INSTALLED BUILDING PRODUCTS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands, except share and per share amounts)

	March 31,		December 31,
	2022		2021
ASSETS
Current assets
Cash and cash equivalents	$	217,434	$	333,485
Investments	49,980		—
Accounts receivable (less allowance for credit losses of $8,590 and $8,717 at March 31, 2022 and December 31, 2021, respectively)	345,586		312,767
Inventories	160,023		143,039
Prepaid expenses and other current assets	69,205		70,025
Total current assets	842,228		859,316
Property and equipment, net	107,817		105,933
Operating lease right-of-use assets	69,033		69,871
Goodwill	325,347		322,517
Customer relationships, net	173,868		178,264
Other intangibles, net	84,092		86,157
Other non-current assets	50,364		31,144
Total assets	$	1,652,749	$	1,653,202
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt	$	30,668	$	30,839
Current maturities of operating lease obligations	23,505		23,224
Current maturities of finance lease obligations	1,801		1,747
Accounts payable	150,643		132,705
Accrued compensation	56,639		50,964
Other current liabilities	64,272		68,090
Total current liabilities	327,528		307,569
Long-term debt	829,638		832,193
Operating lease obligations	45,091		46,075
Finance lease obligations	3,254		3,297
Deferred income taxes	11,242		4,819
Other long-term liabilities	45,765		42,409
Total liabilities	1,262,518		1,236,362
Commitments and contingencies (Note 16)
Stockholders’ equity
Preferred Stock; $0.01 par value: 5,000,000 authorized and 0 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively	—		—
Common stock; $0.01 par value: 100,000,000 authorized, 33,351,843 and 33,271,659 issued and 29,275,592 and 29,706,401 shares outstanding at March 31, 2022 and December 31, 2021, respectively	334		333
Additional paid in capital	218,642		211,430
Retained earnings	350,475		352,543
Treasury stock; at cost: 4,076,251 and 3,565,258 shares at March 31, 2022 and December 31, 2021, respectively	(197,104)		(147,239)
Accumulated other comprehensive income (loss)	17,884		(227)
Total stockholders’ equity	390,231		416,840
Total liabilities and stockholders’ equity	$	1,652,749	$	1,653,202

1

See accompanying notes to consolidated financial statements

INSTALLED BUILDING PRODUCTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (UNAUDITED)

(in thousands, except share and per share amounts)

	Three months ended March 31,
	2022		2021
Net revenue	$	587,492	$	437,066
Cost of sales	415,089		311,639
Gross profit	172,403		125,427
Operating expenses
Selling	25,192		20,858
Administrative	79,144		65,077
Amortization	11,097		8,396
Operating income	56,970		31,096
Other expense, net
Interest expense, net	10,600		7,574
Other expense	145		81
Income before income taxes	46,225		23,441
Income tax provision	12,403		6,150
Net income	$	33,822	$	17,291
Other comprehensive income, net of tax:
Net change on cash flow hedges, net of tax provision of $6,430 and $3,428 for the three months ended March 31, 2022 and 2021, respectively	18,111		10,157
Comprehensive income	$	51,933	$	27,448
Earnings Per Share:
Basic	$	1.15	$	0.59
Diluted	$	1.14	$	0.58
Weighted average shares outstanding:
Basic	29,302,396		29,286,044
Diluted	29,580,731		29,613,484
Cash dividends declared per share	$	1.22	$	0.30

2

See accompanying notes to consolidated financial statements

INSTALLED BUILDING PRODUCTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED) FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND MARCH 31, 2022

(in thousands, except share amounts)

	Common Stock			Additional Paid In Capital		Retained Earnings		Treasury Stock			Accumulated  Other Comprehensive Income (Loss)		Stockholders’ Equity
	Shares	Amount						Shares	Amount
BALANCE - January 1, 2021	33,141,879	$	331	$	199,847	$	269,420	(3,518,607)	$	(141,653)	$	(8,763)	$	319,182
Net income						17,291							17,291
Issuance of common stock awards to employees	66,203	—											—
Surrender of common stock awards								(274)	—				—
Share-based compensation expense				2,713									2,713
Share-based compensation issued to directors				102									102
Dividend declared ($0.30 per share)						(8,907)							(8,907)
Other comprehensive income, net of tax											10,157		10,157
BALANCE - March 31, 2021	33,208,082	$	331	$	202,662	$	277,804	(3,518,881)	$	(141,653)	$	1,394	$	340,538
	Common Stock			Additional Paid In Capital		Retained Earnings		Treasury Stock			Accumulated Other Comprehensive Income (Loss)		Stockholders’ Equity
	Shares	Amount						Shares	Amount
BALANCE - January 1, 2022	33,271,659	$	333	$	211,430	$	352,543	(3,565,258)	$	(147,239)	$	(227)	$	416,840
Net income						33,822							33,822
Issuance of common stock awards to employees	40,980	1		(1)									—
Surrender of common stock awards								(50)	—				—
Share-based compensation expense				3,089									3,089
Share-based compensation issued to directors				124									124
Issuance of awards previously classified as liability awards	39,204			4,000									4,000
Dividends Declared ($1.22 per Share)						(35,890)							(35,890)
Common stock repurchase								(510,943)	(49,865)				(49,865)
Other comprehensive income, net of tax											18,111		18,111
BALANCE - March 31, 2022	33,351,843	$	334	$	218,642	$	350,475	(4,076,251)	$	(197,104)	$	17,884	$	390,231

3

See accompanying notes to consolidated financial statements

INSTALLED BUILDING PRODUCTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

	Three months ended March 31,
	2022		2021
Cash flows from operating activities
Net income	$	33,822	$	17,291
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization of property and equipment	11,329		10,663
Amortization of operating lease right-of-use assets	6,371		5,050
Amortization of intangibles	11,097		8,396
Amortization of deferred financing costs and debt discount	484		331
Provision for credit losses	653		127
Gain on sale of property and equipment	(92)		(252)
Noncash stock compensation	3,418		3,196
Amortization of terminated interest rate swap	790		798
Changes in assets and liabilities, excluding effects of acquisitions
Accounts receivable	(32,700)		1,056
Inventories	(16,300)		(7,644)
Other assets	169		(1,794)
Accounts payable	16,486		524
Income taxes receivable/payable	11,433		4,633
Other liabilities	1,265		(4,757)
Net cash provided by operating activities	48,225		37,618
Cash flows from investing activities
Purchases of investments	(49,957)		—
Purchases of property and equipment	(10,362)		(10,846)
Acquisitions of businesses, net of cash acquired of $0 and $168 in 2022 and 2021, respectively	(8,050)		(41,930)
Proceeds from sale of property and equipment	265		389
Other	(614)		(5)
Net cash used in investing activities	(68,718)		(52,392)
Cash flows from financing activities
Payments on Term Loan	(1,250)		—
Proceeds from vehicle and equipment notes payable	4,752		7,808
Debt issuance costs	(627)		—
Principal payments on long-term debt	(6,618)		(6,481)
Principal payments on finance lease obligations	(521)		(530)
Dividends paid	(35,426)		(8,786)
Acquisition-related obligations	(6,003)		(1,414)
Repurchase of common stock	(49,865)		—
Net cash used in financing activities	(95,558)		(9,403)
Net change in cash and cash equivalents	(116,051)		(24,177)
Cash and cash equivalents at beginning of period	333,485		231,520
Cash and cash equivalents at end of period	$	217,434	$	207,343
Supplemental disclosures of cash flow information
Net cash paid during the period for:
Interest	$	14,293	$	10,839
Income taxes, net of refunds	1,088		1,474
Supplemental disclosure of noncash activities
Right-of-use assets obtained in exchange for operating lease obligations	5,514		5,679
Property and equipment obtained in exchange for finance lease obligations	544		268
Seller obligations in connection with acquisition of businesses	1,878		5,959
Unpaid purchases of property and equipment included in accounts payable	1,884		1,043

4

See accompanying notes to consolidated financial statements

INSTALLED BUILDING PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1 - ORGANIZATION

Installed Building Products (“IBP”), a Delaware corporation formed on October 28, 2011, and its wholly-owned subsidiaries (collectively referred to as the “Company,” and “we,” “us” and “our”) primarily install insulation, waterproofing, fire-stopping, fireproofing, garage doors, rain gutters, window blinds, shower doors, closet shelving and mirrors and other products for residential and commercial builders located in the continental United States. The Company operates in more than 210 locations and its corporate office is located in Columbus, Ohio.

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

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

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

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Principles of Consolidation

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

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

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

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

5

INSTALLED BUILDING PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Reclassifications

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

Recently Issued Accounting Pronouncements Not Yet Adopted

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

Standard	Description	Effective Date	Effect on the financial statements or other significant matters
ASU 2021-08, Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers	This pronouncement amends Topic 805 to require an acquirer to account for revenue contracts in a business combination in accordance with Topic 606 as if the acquirer had originated the contracts.	Annual periods beginning after December 15, 2022, including interim periods therein. Early adoption is permitted.	We are currently assessing the impact of adoption on our consolidated financial statements.

NOTE 3 - REVENUE RECOGNITION

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

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

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

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

6

INSTALLED BUILDING PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

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

	Three months ended March 31,
	2022				2021
Installation:
Residential new construction	$	442,404	75	%	$	327,244	75	%
Repair and remodel	32,641		6	%	28,289		6	%
Commercial	86,586		15	%	76,645		18	%
Net revenue, Installation	$	561,631	96	%	$	432,178	99	%
Other (1)	25,861		4	%	4,888		1	%
Net revenue, as reported	$	587,492	100	%	$	437,066	100	%

	Three months ended March 31,
	2022				2021
Installation:
Insulation	$	364,943	63	%	$	278,568	63	%
Waterproofing	29,022		5	%	29,949		7	%
Shower doors, shelving and mirrors	36,340		6	%	31,433		7	%
Garage doors	35,979		6	%	24,439		6	%
Rain gutters	23,546		4	%	19,003		4	%
Fireproofing/firestopping	15,922		3	%	12,435		3	%
Window blinds	13,058		2	%	11,534		3	%
Other building products	42,821		7	%	24,817		6	%
Net revenue, Installation	$	561,631	96	%	$	432,178	99	%
Other (1)	25,861		4	%	4,888		1	%
Net revenue, as reported	$	587,492	100	%	$	437,066	100	%

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

Contract Assets and Liabilities

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

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

	March 31, 2022		December 31, 2021
Contract assets	$	40,160	$	32,679
Contract liabilities	(14,756)		(14,153)

7

INSTALLED BUILDING PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Uncompleted contracts were as follows (in thousands):

	March 31, 2022		December 31, 2021
Costs incurred on uncompleted contracts	$	222,594	$	206,050
Estimated earnings	103,461		106,163
Total	326,055		312,213
Less: Billings to date	292,445		285,978
Net under billings	$	33,610	$	26,235

Net under billings were as follows (in thousands):

	March 31, 2022		December 31, 2021
Costs and estimated earnings in excess of billings on uncompleted contracts (contract assets)	$	40,160	$	32,679
Billings in excess of costs and estimated earnings on uncompleted contracts (contract liabilities)	(6,550)		(6,444)
Net under billings	$	33,610	$	26,235

The difference between contract assets and contract liabilities as of March 31, 2022 compared to December 31, 2021 is primarily the result of timing differences between our performance of obligations under contracts and customer payments. During the three months ended March 31, 2022, we recognized $10.4 million of revenue that was included in the contract liability balance at December 31, 2021. We did not recognize any impairment losses on our receivables and contract assets during the three months ended March 31, 2022 or 2021.

Remaining performance obligations represent the transaction price of contracts for which work has not been performed and excludes unexercised contract options and potential modifications. As of March 31, 2022, the aggregate amount of the transaction price allocated to remaining uncompleted contracts was $177.7 million. We expect to satisfy remaining performance obligations and recognize revenue on substantially all of these uncompleted contracts over the next 18 months.

Practical Expedients and Exemptions

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

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

NOTE 4 - CREDIT LOSSES

Our expected loss allowance methodology for accounts receivable is developed using historical losses, current economic conditions and future market forecasts. We also perform ongoing evaluations of our existing and potential customer’s creditworthiness.

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

Balance as of January 1, 2022	$	8,717
Current period provision	653
Recoveries collected and additions	89
Amounts written off	(869)
Balance as of March 31, 2022	$	8,590

NOTE 5 - INVESTMENTS AND CASH AND CASH EQUIVALENTS

Cash and cash equivalents include highly liquid instruments with insignificant interest rate risk and original or remaining maturities of three months or less at the time of purchase. These instruments amounted to approximately $201.1 million and

8

INSTALLED BUILDING PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

$258.1 million as of March 31, 2022 and December 31, 2021, respectively. See Note 9, Fair Value Measurements, for additional information.

All other investments are classified as held-to-maturity and consist of highly liquid instruments, including commercial paper. As of March 31, 2022, the amortized cost of these investments equaled the net carrying value, which was approximately 50.0 million. All held-to-maturity securities as of March 31, 2022 mature in one year or less. We held no such investments as of December 31, 2021. See Note 9, Fair Value Measurements, for additional information.

NOTE 6 - GOODWILL AND INTANGIBLES

We anticipate that the COVID-19 pandemic could continue to have an impact on the homebuilding industry in general, as it could result in further business interruptions (government-mandated or otherwise) and could affect, among other factors, inflation, interest rates, employment levels, consumer spending and consumer confidence, which could decrease demand for homes, adversely affecting our business. As such, we considered whether impairment indicators arose through the date of filing of this Quarterly Report on Form 10-Q for our goodwill, long-lived assets and other intangible assets and concluded that no such factors existed to cause us to test for goodwill impairment during the three months ended March 31, 2022. While we ultimately concluded that our goodwill, long-lived assets and other intangibles assets were not impaired as of March 31, 2022, we will continue to assess impairment indicators related to the impact of the COVID-19 pandemic on our business.

Goodwill

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

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

	Installation		Other		Consolidated
Goodwill (gross) - January 1, 2022, after change in reporting units	$	331,782	$	60,739	$	392,521
Business combinations	2,830		—		2,830
Goodwill (gross) - March 31, 2022	334,612		60,739		395,351
Accumulated impairment losses	(70,004)		—		(70,004)
Goodwill (net) - March 31, 2022	$	264,608	$	60,739	$	325,347

For additional information regarding changes to goodwill resulting from acquisitions, see Note 17, Business Combinations.

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

9

INSTALLED BUILDING PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Intangibles, net

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

	As of March 31,						As of December 31,
	2022						2021
	Gross Carrying Amount		Accumulated Amortization		Net Book Value		Gross Carrying Amount		Accumulated Amortization		Net Book Value
Amortized intangibles:
Customer relationships	$	295,239	$	121,371	$	173,868	$	292,113	$	113,849	$	178,264
Covenants not-to-compete	28,091		17,357		10,734		27,717		16,471		11,246
Trademarks and tradenames	104,142		34,248		69,894		103,007		32,623		70,384
Backlog	23,725		20,261		3,464		23,724		19,197		4,527
	$	451,197	$	193,237	$	257,960	$	446,561	$	182,140	$	264,421

The gross carrying amount of intangibles increased approximately $4.6 million during the three months ended March 31, 2022 primarily due to business combinations. For more information, see Note 17, Business Combinations. Remaining estimated aggregate annual amortization expense is as follows (amounts, in thousands, are for the fiscal year ended):

Remainder of 2022	$	31,315
2023	38,042
2024	34,122
2025	27,800
2026	23,842
Thereafter	102,839

NOTE 7 - LONG-TERM DEBT

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

	As of March 31,		As of December 31,
	2022		2021
Senior Notes due 2028, net of unamortized debt issuance costs of $3,484 and $3,633, respectively	$	296,516	$	296,367
Term loan, net of unamortized debt issuance costs of $6,495 and $6,735, respectively	492,255		493,265
Vehicle and equipment notes, maturing through March 2027; payable in various monthly installments, including interest rates ranging from 1.9% to 4.8%	67,363		69,228
Various notes payable, maturing through March 2025; payable in various monthly installments, including interest rates ranging from 1.0% to 5.0%	4,172		4,172
	860,306		863,032
Less: current maturities	(30,668)		(30,839)
Long-term debt, less current maturities	$	829,638	$	832,193

10

INSTALLED BUILDING PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

Remainder of 2022	$	23,783
2023	25,722
2024	20,012
2025	16,560
2026	9,017
Thereafter	775,191

Asset-Based Lending Credit Agreement Amendment

In February 2022, we amended and extended the term of our asset-based lending credit agreement (the “ABL Credit Agreement”). The ABL Credit Agreement increased the commitment under the asset-based lending credit facility (the “ABL Revolver”) to $250.0 million from $200.0 million, and permits us to further increase the commitment amount up to $300.0 million. The amendment also extends the maturity date from September 26, 2024 to February 17, 2027. The ABL Revolver bears interest at either the base rate or the Secured Overnight Financing Rate ("Term SOFR"), at our election, plus a margin of 0.25% or 0.50% in the case of base rate loans or 1.25% or 1.50% for Term SOFR advances (in each case based on a measure of availability under the ABL Credit Agreement). The amendment also allows for modification of specified fees dependent upon achieving certain sustainability targets, in addition to making other modifications to the ABL Credit Agreement. Including outstanding letters of credit, our remaining availability under the ABL Revolver as of March 31, 2022 was $205.7 million.

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

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

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

NOTE 8 - LEASES

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

11

INSTALLED BUILDING PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

		As of March 31,			As of December 31,
(in thousands)	Classification	2022			2021
Assets
Non-Current
Operating	Operating lease right-of-use assets	$	69,033		$	69,871
Finance	Property and equipment, net	5,218			5,266
Total lease assets		$	74,251		$	75,137
Liabilities
Current
Operating	Current maturities of operating lease obligations	$	23,505		$	23,224
Financing	Current maturities of finance lease obligations	1,801			1,747
Non-Current
Operating	Operating lease obligations	45,091			46,075
Financing	Finance lease obligations	3,254			3,297
Total lease liabilities		$	73,651		$	74,343
Weighted-average remaining lease term:
Operating leases		4.2 years			4.3 years
Finance leases		3.4 years			3.3 years
Weighted-average discount rate:
Operating leases		3.47		%	3.38		%
Finance leases		4.91		%	4.96		%

Lease Costs

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

		Three months ended March 31,
(in thousands)	Classification	2022		2021
Operating lease cost(1)	Administrative	$	7,759	$	6,350
Finance lease cost
Amortization of leased assets(2)	Cost of sales	716		792
Interest on finance lease obligations	Interest expense, net	61		55
Total lease costs		$	8,536	$	7,197

(1)Includes variable lease costs of $0.9 million and $0.7 million for the three months ended March 31, 2022 and 2021, respectively, and short-term lease costs of $0.3 million for both the three months ended March 31, 2022 and 2021, respectively.

(2)Includes variable lease costs of $0.2 million for each of the three months ended March 31, 2022 and 2021 .

Other Information

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

	Three months ended March 31,
	2022		2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	6,463	$	5,324
Operating cash flows for finance leases	61		55
Financing cash flows for finance leases	521		530

12

INSTALLED BUILDING PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Undiscounted Cash Flows

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

	Finance Leases		Operating Leases
			Related Party		Other		Total Operating
Remainder of 2022	$	1,548	$	1,080	$	18,498	$	19,578
2023	1,559		1,001		19,602		20,603
2024	1,152		743		12,234		12,977
2025	784		610		7,371		7,981
2026	453		—		5,454		5,454
Thereafter	15		—		7,596		7,596
Total minimum lease payments	5,511		$	3,434	$	70,755	74,189
Less: Amounts representing executory costs	(20)						—
Less: Amounts representing interest	(436)						(5,593)
Present value of future minimum lease payments	5,055						68,596
Less: Current obligation under leases	(1,801)						(23,505)
Long-term lease obligations	$	3,254					$	45,091

NOTE 9 - FAIR VALUE MEASUREMENTS

Assets and Liabilities Measured at Fair Value on a Recurring Basis

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

Assets Measured at Fair Value on a Nonrecurring Basis

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

Estimated Fair Value of Financial Instruments

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

Derivative financial instruments are measured at fair value based on observable market information and appropriate valuation methods. Contingent consideration liabilities arise from future earnout payments to the sellers associated with certain acquisitions and are based on predetermined calculations of certain future results. These future payments are estimated by considering various factors, including business risk and projections. The contingent consideration liabilities are measured at fair value by discounting estimated future payments, calculated based on a weighted average of various future forecast scenarios, to their net present value.

13

INSTALLED BUILDING PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The fair values of financial assets and liabilities that are recorded at fair value in the Condensed Consolidated Balance Sheets and not described above were as follows (in thousands):

	As of March 31, 2022								As of December 31, 2021
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Financial assets:
Cash equivalents	$	201,112	$	201,112	$	—	$	—	$	258,055	$	258,055	$	—	$	—
Derivative financial instruments	36,644		—		36,644		—		14,830		—		14,830		—
Total financial assets	$	237,756	$	201,112	$	36,644	$	—	$	272,885	$	258,055	$	14,830	$	—
Financial liabilities:
Contingent consideration	$	6,160	$	—	$	—	$	6,160	$	11,170	$	—	$	—	$	11,170
Derivative financial instruments	—		—		—		—		1,937		—		1,937		—
Total financial liabilities	$	6,160	$	—	$	—	$	6,160	$	13,107	$	—	$	1,937	$	11,170

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

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

Contingent consideration liability - January 1, 2022	$	11,170
Preliminary purchase price	910
Fair value adjustments	(46)
Accretion in value	116
Settlement adjustments	(505)
Amounts paid to sellers	(5,485)
Contingent consideration liability - March 31, 2022