ibp-20220930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

For the quarterly period ended September 30, 2022


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

For the Transition Period From _________ To ________

Commission File Number: 001-36307

Installed Building Products, Inc.

(Exact name of registrant as specified in its charter)


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

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

(614) 221-3399

(Registrant's telephone number, including area code)

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock,

$0.01 par value per share

IBP

The New York Stock Exchange

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

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

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

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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

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

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

Table of Contents

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			29
Item 3. Quantitative and Qualitative Disclosures About Market Risk			39
Item 4. Controls and Procedures			40
PART II – OTHER INFORMATION			41
Item 1. Legal Proceedings			41
Item 1A. Risk Factors			41
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			41
Item 3. Defaults Upon Senior Securities			41
Item 4. Mine Safety Disclosures			41
Item 5. Other Information			41
Item 6. Exhibits			42
SIGNATURES			43

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

INSTALLED BUILDING PRODUCTS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands, except share and per share amounts)


	September 30,		December 31,
	2022		2021
ASSETS
Current assets
Cash and cash equivalents	$	203,402	$	333,485
Investments	24,996		—
Accounts receivable (less allowance for credit losses of $9,083 and $8,717 at September 30, 2022 and December 31, 2021, respectively)	415,657		312,767
Inventories	182,176		143,039
Prepaid expenses and other current assets	71,790		70,025
Total current assets	898,021		859,316
Property and equipment, net	115,479		105,933
Operating lease right-of-use assets	72,226		69,871
Goodwill	356,612		322,517
Customer relationships, net	184,225		178,264
Other intangibles, net	91,613		86,157
Other non-current assets	45,675		31,144
Total assets	$	1,763,851	$	1,653,202
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt	$	30,494	$	30,839
Current maturities of operating lease obligations	25,414		23,224
Current maturities of finance lease obligations	2,275		1,747
Accounts payable	156,117		132,705
Accrued compensation	61,453		50,964
Other current liabilities	82,809		68,090
Total current liabilities	358,562		307,569
Long-term debt	827,906		832,193
Operating lease obligations	46,640		46,075
Finance lease obligations	5,469		3,297
Deferred income taxes	19,901		4,819
Other long-term liabilities	47,859		42,409
Total liabilities	1,306,337		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 September 30, 2022 and December 31, 2021, respectively	—		—
Common stock; $0.01 par value: 100,000,000 authorized, 33,429,557 and 33,271,659 issued and 28,604,098 and 29,706,401 shares outstanding at September 30, 2022 and December 31, 2021, respectively	334		333
Additional paid in capital	225,377		211,430
Retained earnings	453,286		352,543
Treasury stock; at cost: 4,825,459 and 3,565,258 shares at September 30, 2022 and December 31, 2021, respectively	(263,896)		(147,239)
Accumulated other comprehensive income (loss)	42,413		(227)
Total stockholders’ equity	457,514		416,840
Total liabilities and stockholders’ equity	$	1,763,851	$	1,653,202

See accompanying notes to consolidated financial statements

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INSTALLED BUILDING PRODUCTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (UNAUDITED)

(in thousands, except share and per share amounts)


	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021
Net revenue	$	719,114	$	509,763	$	1,983,355	$	1,434,927
Cost of sales	497,837		353,879		1,372,966		1,001,730
Gross profit	221,277		155,884		610,389		433,197
Operating expenses
Selling	31,651		24,188		86,214		67,677
Administrative	84,345		68,056		247,519		199,607
Amortization	11,370		9,224		33,728		26,798
Operating income	93,911		54,416		242,928		139,115
Other expense, net
Interest expense, net	10,668		7,687		31,669		22,781
Other expense (income)	185		(483)		698		(494)
Income before income taxes	83,058		47,212		210,561		116,828
Income tax provision	22,080		12,320		55,857		27,432
Net income	$	60,978	$	34,892	$	154,704	$	89,396
Other comprehensive income, net of tax:
Net change on cash flow hedges, net of tax provision of $(5,105) and $(454) for the three months ended September 30, 2022 and 2021, respectively, and $(15,138) and $(2,638) for the nine months ended September 30, 2022 and 2021, respectively	14,379		1,292		42,640		7,762
Comprehensive income	$	75,357	$	36,184	$	197,344	$	97,158
Earnings Per Share:
Basic	$	2.14	$	1.19	$	5.36	$	3.05
Diluted	$	2.13	$	1.18	$	5.33	$	3.02
Weighted average shares outstanding:
Basic	28,478,954		29,404,257		28,851,389		29,355,538
Diluted	28,595,707		29,620,748		29,020,509		29,615,162

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

See accompanying notes to consolidated financial statements

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INSTALLED BUILDING PRODUCTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2021 AND SEPTEMBER 30, 2022

(in thousands, except share amounts)


	Common Stock			Additional Paid In Capital		Retained Earnings		Treasury Stock			Accumulated Other Comprehensive Loss		Stockholders’ Equity
	Shares	Amount						Shares	Amount
BALANCE - July 1, 2021	33,264,517	$	333	$	205,597	$	306,107	(3,562,942)	$	(147,204)	$	(2,293)	$	362,540
Net income						34,892							34,892
Issuance of common stock awards to employees	7,142	—											—
Surrender of common stock awards								(1,562)	(24)				(24)
Share-based compensation expense				2,812									2,812
Share-based compensation issued to directors				126									126
Dividend declared ($0.30 per share)						(8,912)							(8,912)
Other comprehensive income, net of tax											1,292		1,292
BALANCE - September 30, 2021	33,271,659	$	333	$	208,535	$	332,087	(3,564,504)	$	(147,228)	$	(1,001)	$	392,726

	Common Stock			Additional Paid In Capital		Retained Earnings		Treasury Stock			Accumulated Other Comprehensive Income		Stockholders’ Equity
	Shares	Amount						Shares	Amount
BALANCE - July 1, 2022	33,428,587	$	334	$	222,270	$	401,326	(4,682,973)	$	(251,363)	$	28,034	$	400,601
Net income						60,978							60,978


Surrender of common stock awards								(554)	(5)				(5)
Share-based compensation expense				2,967									2,967
Share-based compensation issued to directors	970			140									140

Dividends declared ($0.32 per share)						(9,018)							(9,018)
Common stock repurchase								(141,932)	(12,528)				(12,528)
Other comprehensive income, net of tax											14,379		14,379
BALANCE - September 30, 2022	33,429,557	$	334	$	225,377	$	453,286	(4,825,459)	$	(263,896)	$	42,413	$	457,514

See accompanying notes to consolidated financial statements

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INSTALLED BUILDING PRODUCTS, INC.

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

(in thousands, except share amounts)


	Common Stock			Additional Paid In Capital		Retained Earnings		Treasury Stock			Accumulated Other Comprehensive Loss		Stockholders’ Equity
	Shares	Amount						Shares	Amount
BALANCE - January 1, 2021	33,141,879	$	331	$	199,847	$	269,420	(3,518,607)	$	(141,653)	$	(8,763)	$	319,182
Net income						89,396							89,396

Issuance of common stock awards to employees	125,550	2		(2)									—
Surrender of common stock awards								(45,897)	(5,575)				(5,575)
Share-based compensation expense				8,351									8,351
Share-based compensation issued to directors	4,230			339									339
Dividends declared ($0.90 per share)						(26,729)							(26,729)
Other comprehensive income, net of tax											7,762		7,762
BALANCE - September 30, 2021	33,271,659	$	333	$	208,535	$	332,087	(3,564,504)	$	(147,228)	$	(1,001)	$	392,726

	Common Stock			Additional Paid In Capital		Retained Earnings		Treasury Stock			Accumulated Other Comprehensive Income (Loss)		Stockholders’ Equity
	Shares	Amount						Shares	Amount
BALANCE - January 1, 2022	33,271,659	$	333	$	211,430	$	352,543	(3,565,258)	$	(147,239)	$	(227)	$	416,840
Net income						154,704							154,704

Issuance of common stock awards to employees	112,389	1		(1)									—
Surrender of common stock awards								(53,599)	(4,464)				(4,464)
Share-based compensation expense				9,559									9,559
Share-based compensation issued to directors	6,305			389									389
Issuance of awards previously classified as liability awards	39,204			4,000									4,000
Dividends declared ($1.85 per share)						(53,961)							(53,961)
Common stock repurchase								(1,206,602)	(112,193)				(112,193)
Other comprehensive income, net of tax											42,640		42,640
BALANCE - September 30, 2022	33,429,557	$	334	$	225,377	$	453,286	(4,825,459)	$	(263,896)	$	42,413	$	457,514

See accompanying notes to consolidated financial statements

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INSTALLED BUILDING PRODUCTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)


	Nine months ended September 30,
	2022		2021
Cash flows from operating activities
Net income	$	154,704	$	89,396
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization of property and equipment	35,153		32,498
Amortization of operating lease right-of-use assets	19,832		16,464
Amortization of intangibles	33,728		26,798
Amortization of deferred financing costs and debt discount	1,436		993
Provision for credit losses	2,754		1,135
Gain on sale of property and equipment	(1,048)		(1,405)
Noncash stock compensation	10,290		10,228

Other, net	1,509		2,414
Changes in assets and liabilities, excluding effects of acquisitions
Accounts receivable	(98,528)		(23,224)
Inventories	(23,071)		(37,122)
Proceeds from termination of interest rate swap agreements	25,462		—
Other assets	4,773		(8,116)
Accounts payable	20,290		14,120
Income taxes receivable/payable	12,354		(107)
Other liabilities	(971)		(7,594)
Net cash provided by operating activities	198,667		116,478
Cash flows from investing activities
Purchases of investments	(344,388)		—
Maturities of short term investments	320,000		—

Purchases of property and equipment	(35,212)		(27,898)
Acquisitions of businesses, net of cash acquired of $330 and $1,640 in 2022 and 2021, respectively	(75,779)		(94,500)
Proceeds from sale of property and equipment	1,418		2,219

Other	(5,974)		(1,430)
Net cash used in investing activities	(139,935)		(121,609)
Cash flows from financing activities
Payments on Term Loan	(3,750)		—
Proceeds from vehicle and equipment notes payable	20,492		20,753
Debt issuance costs	(655)		—
Principal payments on long-term debt	(23,340)		(19,688)

Principal payments on finance lease obligations	(1,661)		(1,573)
Dividends paid	(53,821)		(26,428)
Acquisition-related obligations	(9,423)		(2,442)

Repurchase of common stock	(112,193)		—
Surrender of common stock awards by employees	(4,464)		(5,576)
Net cash used in financing activities	(188,815)		(34,954)
Net change in cash and cash equivalents	(130,083)		(40,085)
Cash and cash equivalents at beginning of period	333,485		231,520
Cash and cash equivalents at end of period	$	203,402	$	191,435
Supplemental disclosures of cash flow information
Net cash paid during the period for:
Interest	$	40,639	$	23,748
Income taxes, net of refunds	43,512		27,428
Supplemental disclosure of noncash activities
Right-of-use assets obtained in exchange for operating lease obligations	22,056		23,543
Release of indemnification of acquisition-related debt	980		2,036
Property and equipment obtained in exchange for finance lease obligations	4,411		1,918
Seller obligations in connection with acquisition of businesses	25,534		18,987
Unpaid purchases of property and equipment included in accounts payable	857		1,327

See accompanying notes to consolidated financial statements

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INSTALLED BUILDING PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1 - ORGANIZATION

Installed Building Products (“IBP”), a Delaware corporation formed on October 28, 2011, and its wholly-owned subsidiaries (collectively referred to as the “Company,” and “we,” “us” and “our”) primarily install insulation, waterproofing, fire-stopping, fireproofing, garage doors, rain gutters, window blinds, shower doors, closet shelving and mirrors and other products for residential and commercial builders located in the continental United States. The Company operates in more than 220 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 nine months of 2022. However, COVID-19 has caused disruptions in the building products supply chain, impacting our ability to purchase certain materials we install through typical channels and fueling producer price and consumer inflation. The extent to which COVID-19 will impact our future growth, operations, customers, suppliers, employees and financial results is uncertain. The future impact on our financial results will depend on numerous factors including government actions and the resulting impact on construction activity, the effect on our customers’ demand for our services, the effects on our supply chain for materials, and the ability of our customers to pay for our services.

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 and nine months ended September 30, 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 or nine months ended September 30, 2022.

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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.

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INSTALLED BUILDING PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

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


	Three months ended September 30,								Nine months ended September 30,
	2022				2021				2022				2021
Installation:
Residential new construction	$	532,299	74	%	$	385,401	76	%	$	1,480,214	75	%	$	1,082,379	75	%
Repair and remodel	39,139		6	%	31,276		6	%	109,745		5	%	89,810		7	%
Commercial	101,478		14	%	87,484		17	%	282,585		14	%	247,113		17	%
Net revenue, Installation	$	672,916	94	%	$	504,161	99	%	$	1,872,544	94	%	$	1,419,302	99	%

Other (1)	46,198		6	%	5,602		1	%	110,811		6	%	15,625		1	%
Net revenue, as reported	$	719,114	100	%	$	509,763	100	%	$	1,983,355	100	%	$	1,434,927	100	%


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

Other (1)	46,198		6	%	5,602		1	%	110,811		6	%	15,625		1	%
Net revenue, as reported	$	719,114	100	%	$	509,763	100	%	$	1,983,355	100	%	$	1,434,927	100	%

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

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):


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

Table of Contents

INSTALLED BUILDING PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Uncompleted contracts were as follows (in thousands):


	September 30, 2022		December 31, 2021
Costs incurred on uncompleted contracts	$	246,867	$	206,050
Estimated earnings	108,241		106,163
Total	355,108		312,213
Less: Billings to date	324,130		285,978
Net under billings	$	30,978	$	26,235

Net under billings were as follows (in thousands):


	September 30, 2022		December 31, 2021
Costs and estimated earnings in excess of billings on uncompleted contracts (contract assets)	$	37,956	$	32,679
Billings in excess of costs and estimated earnings on uncompleted contracts (contract liabilities)	(6,978)		(6,444)
Net under billings	$	30,978	$	26,235

The difference between contract assets and contract liabilities as of September 30, 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 and nine months ended September 30, 2022, we recognized $0.4 million and $13.6 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 and nine months ended September 30, 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 September 30, 2022, the aggregate amount of the transaction price allocated to remaining uncompleted contracts was $161.6 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 creditworthiness of our existing and potential customers.

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


Balance as of January 1, 2022	$	8,717
Current period provision	2,754
Recoveries collected and additions	181
Amounts written off	(2,569)
Balance as of September 30, 2022	$	9,083