Installed Building Products Inc.
05/07/2026 | Press release | Distributed by Public on 05/07/2026 13:51
Quarterly Report for Quarter Ending 3/31/2026 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations
This Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our condensed consolidated financial statements and related notes in "Item 1. Financial Statements" of this Quarterly Report on Form 10-Q, as well as our 2025 Form 10-K.
OVERVIEW
We are one of the nation's largest insulation installers for the residential new construction market and are also a diversified installer of complementary building products throughout the United States, including waterproofing, fire-stopping and fireproofing, garage doors, rain gutters, window blinds, shower doors, closet shelving, mirrors and other products. We offer our portfolio of services for new and existing single-family and multi-family residential and commercial building projects in all 48 continental states and the District of Columbia from our national network of over 250 branch locations. During the three months ended March 31, 2026, 92% of our net revenue came from the service-based installation of these products across all of our end markets which forms our Installation operating segment and single reportable segment. In addition, we have regional distribution operations that serve the Midwest, Mountain West, Northeast and Mid-Atlantic regions of the United States, and we operate multiple cellulose insulation manufacturing facilities. We believe our business is well positioned to continue to profitably grow over the long-term due to our strong balance sheet, liquidity and our continuing acquisition strategy.
A large portion of our net revenue comes from the U.S. residential new construction market, which depends upon a number of economic factors, including demographic trends, interest rates, inflation, consumer confidence, employment rates, housing inventory levels and affordability, foreclosure rates, the health of the economy and availability of mortgage financing.
2026 First Quarter Highlights
Net revenue decreased 3.5%, or $24.3 million to $660.5 million, while gross profit decreased 5.1% to $212.3 million during the three months ended March 31, 2026 compared to the same period in 2025. The decrease in net revenue was primarily due to a 9.9% decline in Installation segment volume. The decrease in gross profit was primarily driven by higher labor costs, vehicle insurance, depreciation and other indirect costs from shifts in end market and product mix. Certain net revenue and industry metrics we use to monitor our operations are discussed in the "Key Measures of Performance" section below, and further details regarding results of our various end markets are discussed further in the "Net Revenue, Cost of Sales and Gross Profit" section below.
During the three months ended March 31, 2026, we amended and extended our asset-based lending credit agreement which included increasing the commitment on our revolving line of credit to $375.0 million. Additionally, we issued $500.0 million in aggregate principal amount of 5.625% senior unsecured notes due 2034. We used the net proceeds to redeem the outstanding principal and accrued interest on our 5.75% senior unsecured notes previously due 2028, pay fees and expenses relating to the offering and to increase cash reserves for general corporate use, including payments for future acquisitions. As a result of these transactions, we will have no significant debt maturity prior to 2031. For further information about our debt transactions, see Part I, Item 1. Financial Statements, Note 7, Long-Term Debt.
As of March 31, 2026, we had $474.3 million of cash and cash equivalents and had not drawn on our revolving line of credit. This strong liquidity position allowed us to return capital to shareholders by increasing our regular quarterly dividend 5% over the first quarter of 2025 to $0.39 per share, or $10.5 million in the aggregate. We also increased our annual variable dividend from $1.70 a share paid in the first quarter of 2025 to $1.80 a share, or a 6% increase, during the three months ended March 31, 2026. Additionally, we repurchased $25.4 million of our outstanding common stock during the three months ended March 31, 2026 for a total capital return to shareholders of $84.6 million.
Key Measures of Performance
We utilize certain net revenue and industry metrics to monitor our operations. Key metrics include total sales growth and same branch growth metrics for our consolidated results, our Installation reportable segment and our Other category consisting of our Distribution and Manufacturing operating segments. We also monitor sales growth for our Installation segment by end market and track volume growth and price/mix growth. Furthermore, we now present additional volume and price/mix growth metrics that include the heavy commercial subset of the commercial end market due to the greater impact of that end market on our revenue and results of operations.
We believe the revenue growth measures are important indicators of how our business is performing, however, we may rely on different metrics in the future. We also utilize gross profit percentage as shown in the following section to monitor our most significant variable costs and to evaluate labor efficiency and success at passing increasing costs of materials to customers.
The following table shows key measures of performance we utilize to evaluate our results:
| Three months ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Period-over-period Growth | |||||||||||
| Consolidated Sales Growth | (3.5)% | (1.2)% | |||||||||
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Consolidated Same Branch Sales Growth (1)
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(5.9)% | (4.2)% | |||||||||
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Installation Segment Sales Growth
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Sales Growth (2)
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(5.8)% | (1.3)% | |||||||||
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Residential Sales Growth (3)
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(10.3)% | (1.7)% | |||||||||
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Single-Family Sales Growth (4)
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(10.1)% | (1.0)% | |||||||||
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Multi-Family Sales Growth (5)
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(11.0)% | (4.2)% | |||||||||
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Commercial Sales Growth (6)
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13.6% | (2.3)% | |||||||||
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Installation Segment Same Branch Sales Growth (1)
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Same Branch Sales Growth (2)
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(7.0)% | (3.7)% | |||||||||
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Volume, Price/Mix Growth Including Heavy Commercial(7):
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Volume Growth (8)(11)
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(9.9)% | (6.0)% | |||||||||
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Price/Mix Growth (9)(11)
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2.9% | 2.3% | |||||||||
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Volume, Price/Mix Growth Excluding Heavy Commercial(7):
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Volume Growth (8)(11)
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(10.0)% | (5.6)% | |||||||||
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Price/Mix Growth (9)(11)
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(0.1)% | 1.5% | |||||||||
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Residential Same Branch Sales Growth (3)
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(11.2)% | (4.6)% | |||||||||
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Single-Family Same Branch Sales Growth (4)
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(11.3)% | (4.5)% | |||||||||
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Multi-Family Same Branch Sales Growth (5)
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(11.2)% | (5.0)% | |||||||||
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Commercial Same Branch Sales Growth (6)
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10.7% | (2.8)% | |||||||||
| Other Sales Growth (Net of Eliminations) | |||||||||||
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Sales Growth (10)(11)
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34.8% | 1.6% | |||||||||
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Same Branch Sales Growth (1)(10)(11)
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13.6% | (12.7)% | |||||||||
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U.S. Housing Market Growth (12)
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| Total Completions Growth | (13.6)% | 1.3% | |||||||||
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Single-Family Completions Growth
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(12.3)% | 4.6% | |||||||||
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Multi-Family Completions Growth
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(16.7)% | (4.2)% | |||||||||
| (1) |
Same-branch basis represents period-over-period change in sales for branch locations owned greater than 12 months as of each financial statement date.
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| (2) |
Calculated based on period-over-period change in sales of all end markets for our Installation segment.
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| (3) |
Calculated based on period-over-period change in sales in the residential new construction end market for our Installation segment.
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| (4) |
Calculated based on period-over-period change in sales in the single-family subset of the residential new construction end market for our Installation segment.
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| (5) |
Calculated based on period-over-period change in sales in the multi-family subset of the residential new construction end market for our Installation segment.
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| (6) |
Calculated based on period-over-period change in sales in the total commercial end market for our Installation segment. Our commercial end market consists of heavy and light commercial projects.
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| (7) |
The heavy commercial end market, a subset of our total commercial end market, comprises projects that are much larger than our average installation job. As such, per-job revenue is much larger than the average job in all other end markets.
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| (8) |
Calculated as period-over-period change in the number of completed same-branch jobs within our Installation segment for all markets.
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| (9) |
Defined as change in the mix of products sold and related pricing changes and calculated as the change in period-over-period average selling price per same-branch jobs within our Installation segment for all markets we serve, multiplied by total current year jobs. The mix of end customer and product would have an impact on the year-over-year price per job.
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| (10) |
Calculated based on period-over-period gross sales change, excluding intercompany transactions, in our Other category which consists of our Manufacturing and Distribution operating segments.
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| (11) |
We revised this calculation to exclude certain intercompany sales. Percentages in all periods presented conform to this revised method.
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| (12) | U.S. Census Bureau data, as revised. | ||||
Net Revenue, Cost of Sales and Gross Profit
The components of gross profit were as follows (in millions):
| Three months ended March 31, | |||||||||||||||||
| 2026 | Change | 2025 | |||||||||||||||
| Net revenue | $ | 660.5 | (3.5) | % | $ | 684.8 | |||||||||||
| Cost of sales | 448.2 | (2.8) | % | 461.1 | |||||||||||||
| Gross profit | $ | 212.3 | (5.1) | % | $ | 223.7 | |||||||||||
| Gross profit percentage | 32.1 | % | 32.7 | % | |||||||||||||
Net revenue decreased during the three months ended March 31, 2026 over the same period in 2025 primarily due to the decline in residential job volume. Same branch sales from our single-family end market declined 11.3% while same branch sales from our multi-family end market decreased 11.2%, outpacing the 16.7% decline in national multi-family completions. These markets combined for a residential same branch sales decline of 11.2% for the three months ended March 31, 2026 over the same period in 2025. The net revenue decline was partially offset by our commercial end market increasing 10.7% on a same branch basis for the three months ended March 31, 2026 over the same period in 2025. Lastly, sales within our Distribution and Manufacturing businesses increased 34.8% during the three months ended March 31, 2026 which aligns with our strategy to enhance our procurement efforts through vertical integration in select product and end markets.
During the three months ended March 31, 2026, gross profit as a percentage of net revenue decreased as compared to the same period in 2025, primarily due to higher labor costs and other indirect costs from shifts in product and end market mix, increased vehicle costs, including depreciation expense and auto insurance, and increased freight and shipping costs from higher Manufacturing and Distribution activity. The decline in gross profit percentage was partially offset by lower material costs from changes in end market and supplier mix. We will continue to work with our suppliers to lessen the impact on our margins and with our customers to offset further cost increases through selling price adjustments.
Operating Expenses
Operating expenses were as follows (in millions):
| Three months ended March 31, | |||||||||||||||||
| 2026 | Change | 2025 | |||||||||||||||
| Selling | $ | 34.0 | (4.0) | % | $ | 35.4 | |||||||||||
| Percentage of total net revenue | 5.1 | % | 5.2 | % | |||||||||||||
| Administrative | $ | 110.2 | 1.7 | % | $ | 108.4 | |||||||||||
| Percentage of total net revenue | 16.7 | % | 15.8 | % | |||||||||||||
| Amortization | $ | 10.5 | 4.0 | % | $ | 10.1 | |||||||||||
| Percentage of total net revenue | 1.6 | % | 1.5 | % | |||||||||||||
Selling
The decrease in selling expenses on both a dollar and percentage of net revenue basis for the three months ended March 31, 2026 compared to 2025 was primarily driven by a decrease in selling compensation on lower revenues.
Administrative
The dollar increase in administrative expenses for the three months ended March 31, 2026 compared to 2025 was primarily due to an increase in medical benefits and liability insurance costs. In addition, facility costs increased due to inflationary pressures and acquisitions. Administrative expenses increased as a percentage of net revenue for the three months ended March 31, 2026 compared to 2025 primarily due to inflationary pressures on insurance costs, partially offset by organizational optimization cost savings and lower transaction fees.
Amortization
Amortization expense for the three months ended March 31, 2026 compared to 2025 increased primarily due to the acquisition of more finite-lived intangible assets.
Other Expense, Net
Other expense, net was as follows (in millions):
| Three months ended March 31, | |||||||||||||||||
| 2026 | Change | 2025 | |||||||||||||||
| Interest expense, net | $ | 10.3 | 24.1 | % | $ | 8.3 | |||||||||||
| Other expense | 0.2 | - | % | 0.2 | |||||||||||||
| Total other expense, net | $ | 10.5 | $ | 8.5 | |||||||||||||
Interest expense, net increased during the three months ended March 31, 2026 compared to the same period in 2025 primarily due to higher debt levels and write-offs of debt issuance costs resulting from our January 2026 transactions related to the Senior Notes (as defined below), partially offset by increased interest income on money market accounts. See Part I, Item 1. Financial Statements, Note 7, Long-Term Debt, for more information on the January 2026 debt transactions.
Income Tax Provision
Income tax provision and effective tax rates were as follows (in millions):
| Three months ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Income tax provision | $ | 12.3 | $ | 15.9 | |||||||
| Effective tax rate | 26.1 | % | 25.9 | % | |||||||
The effective tax rates for the three months ended March 31, 2026 and 2025 were based on an estimated annual effective tax rate for federal, state and local tax expense.
Other Comprehensive Income (Loss), Net of Tax
Other comprehensive income (loss), net of tax was as follows (in millions):
| Three months ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Net change on cash flow hedges, net of taxes | $ | 0.3 | $ | (5.3) | |||||||
During the three months ended March 31, 2026 and 2025, we recorded an unrealized gain of $1.6 million and an unrealized loss of $6.1 million, respectively, net of taxes, on our cash flow hedges due to the changes in the market's expectations for future long-term interest rates.
During the three months ended March 31, 2026 and 2025, we amortized $1.7 million of our remaining unrealized gains and a net impact of $(1.1) million of our remaining unrealized gains, losses and off-market terms, respectively, on our amended and terminated cash flow hedges to interest expense, not including the offsetting tax effects of $(0.4) million and $0.3 million for the three months ended March 31, 2026 and 2025, respectively.
KEY FACTORS AFFECTING OUR OPERATING RESULTS
Inflation, Housing Affordability and Mortgage Interest Rates
Inflation has affected the economy as a whole since 2022, but began moderating in 2023 as the Federal Reserve took actions to stabilize inflation by raising the federal funds rate multiple times through July 2023. These rate hikes indirectly affected the 30-year fixed rate mortgage average in the United States, resulting in mortgage rates peaking above 7% in recent years. These rate-driven pressures have curtailed housing demand as mortgage financing affordability has been reduced. Inflation rates in 2026 have remained above the 2% stated target, and the Iranian conflict in the Middle East has significantly raised oil prices which could push inflation higher and cause the Federal Reserve to continue to pause rate cuts or institute new rate hikes. While a more accommodating Federal Reserve monetary policy does not directly determine mortgage rates, any easing of the federal funds rate would likely contribute to a downward trend in mortgage rates. We expect to continue to be impacted by the current elevated rates in 2026 but anticipate pressures to lessen over time if mortgage rates are further reduced.
In addition, housing affordability is impacted by international trade as certain housing inputs such as lumber are more reliant on imports than domestic production. While we purchase the large majority of the products we install and sell domestically, our business could be impacted if overall home affordability is further reduced by higher material prices due to increased tariffs.
Trends in the Construction Industry
Elevated home prices, high mortgage rates, recent economic uncertainty and rising new home inventory were the primary contributors to the decline in demand of new homes in the first quarter of 2026. Activity slowed in the residential homebuilding market as non-seasonally adjusted single-family starts, our largest end market, decreased 5.5% according to the U.S. Census during the three months ended March 31, 2026 compared to the same period in 2025. Employment remains stable and continues to support demand for residential new construction activity despite the affordability concerns and recent economic uncertainty. As a result, while we expect cyclicality to continue in the housing industry, we believe the long-term opportunities in our residential and commercial end markets are favorable. Our largest customers are publicly traded homebuilders, and these builders have been able to increase affordability by offering mortgage rate buydowns as incentives to their customers. Regarding the repair and remodel markets, many existing homeowners are locked into low interest mortgages and an aging housing stock exists in many areas of the United States, bolstering demand in this end market.
Cost and Availability of Materials
We typically purchase the materials we use in our business directly from manufacturers. The largest fiberglass manufacturers have cut production capacity during past business cycles which has caused periods of industry-wide supply allocations. While we are not currently experiencing material supply shortages, we could incur such shortages in the remainder of 2026 and beyond if these manufacturers reduce production this year. We also experience price increases from our suppliers from time to time, and we may have more difficulty raising selling prices to offset any material price increases in 2026 if housing demand slows. We could be subject to increased material pricing on some of the complementary building products we install and sell due to tariffs imposed on goods imported from certain foreign nations. The extent of these increases will depend on a variety of factors including the magnitude of each tariff, the extent our vendors pass on the tariffs they incur, and the number of countries subject to tariffs in the future. Additionally, we may be subject to increased shipping and freight costs on inventory if the recent spike in oil prices continues and those costs are passed onto us from our suppliers. Increased market pricing, regardless of the catalyst, has and could continue to impact our results of operations in 2026, to the extent that price increases cannot be passed on to our customers. We will continue to work with our customers to adjust selling prices to offset higher costs as they occur.
Cost of Labor
Our business is labor intensive and the majority of our employees work as installers on local construction sites. We anticipate a slower hiring pace in 2026, but still expect to spend more to hire, train and retain installers to support our business as tight labor availability continues within the construction industry. Our workers' compensation costs also continue to rise as we increase our coverage for additional personnel.
Our employee retention rates remained better than industry averages in the three months ended March 31, 2026. We believe this is a result of our strong culture and the various programs meant to benefit our employees, including our financial wellness plan, emotional well-being coaching, longevity stock compensation plan and comprehensive benefit packages we offer. We also provide assistance from the Installed Building Products Foundation meant to benefit our employees, their families and their communities. While improved retention drives lower costs to recruit and train new employees, resulting in greater installer productivity, these improvements are somewhat offset by the additional costs of these incentives.
LIQUIDITY AND CAPITAL RESOURCES
Our capital resources primarily consist of cash from operations and borrowings under our various debt agreements and capital equipment leases and loans. As of March 31, 2026, we had cash and cash equivalents of $474.3 million as well as access to $375.0 million under our asset-based lending credit facility (as defined below), less $3.9 million of outstanding letters of credit, resulting in total liquidity of $845.4 million. Liquidity may also be limited in the future by certain cash collateral limitations under our asset-based credit facility (as defined below), depending on the status of our borrowing base availability.
Short-Term Material Cash Requirements
Our primary capital requirements are to fund working capital needs, operating expenses, acquisitions and capital expenditures, to meet debt and leasing principal and interest obligations and to make required income tax payments. We may also use our resources to fund our optional stock repurchase program and pay quarterly and annual dividends. We expect to spend cash and
cash equivalents to acquire various companies with at least $100.0 million in aggregate net revenue each fiscal year. The amount of cash paid for an acquisition is dependent on various factors, including the size and determined value of the business being acquired.
We expect to meet our short-term liquidity requirements primarily through net cash flows from operations, our cash and cash equivalents on hand and borrowings from various lenders under equipment and loan agreements. Additional sources of funds, should we need them, include borrowing capacity under our asset-based lending credit facility (as defined below).
We believe that our cash flows from operations, combined with our current cash levels and available borrowing capacity, will be adequate to support our ongoing operations and to fund our business needs, commitments and contractual obligations for at least the next 12 months as evidenced by our net positive cash flows from operations for the three months ended March 31, 2026. We believe that we have access to additional funds, if needed, through the capital markets to obtain further debt financing under the current market conditions, but we cannot guarantee that such financing will be available on favorable terms, or at all. In the short-term, we expect the seasonal trends we typically experience to return, including higher sales in the spring, summer and fall than in the winter. This could affect the timing of cash collections and payments during the rest of 2026.
Long-Term Material Cash Requirements
Beyond the next twelve months, our principal demands for funds will be to fund working capital needs and operating expenses, to meet principal and interest obligations on our long-term debts and finance leases as they become due or mature, and to make required income tax payments. Additional funds may be spent on acquisitions, stock repurchases, capital improvements and dividend payments, at our discretion.
On a long-term basis, we may refinance existing debt or obtain further debt financing to the extent that our sources of capital are insufficient to meet our operating needs and/or growth strategy.
In "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our 2025 Form 10-K, we disclosed that we had $1.1 billion aggregate long-term material cash requirements as of December 31, 2025. Our long-term commitments have since changed materially due to the issuance of $500.0 million in aggregate principal amount of 5.625% senior unsecured notes due 2034 and using a portion of the proceeds to redeem in full the outstanding principal and interest on our $300.0 million senior unsecured notes due 2028. This transaction reduced the principal payments included in the 2028 known obligations by $300.0 million and increased the thereafter known obligations by $500.0 million. The increased principal and extended maturity of the 2034 Senior Notes (as defined below) will also increase the amount of interest we will be required to pay in 2026 and beyond. There were no other material changes to our cash requirements during the period covered by this Quarterly Report on Form 10-Q outside of the normal course of our business. For further information about our debt transactions, see Part I, Item 1. Financial Statements, Note 7, Long-Term Debt.
Sources and Uses of Cash and Related Trends
Working Capital
We carefully manage our working capital and operating expenses. As of March 31, 2026 and December 31, 2025, our working capital including cash and cash equivalents was $820.3 million and $698.4 million, respectively. The increase in 2026 was primarily driven by the increase in cash due to the net borrowings of our 2034 Senior Notes (as defined below). The increase was partially offset by accounts receivable decreasing $17.7 million on lower job volume and other current assets decreasing $9.9 million, the majority of which was a result of the amortization of prepaid expenses including insurance. We continue to look for opportunities to reduce our working capital as a percentage of net revenue.
The following table summarizes our cash flow activity (in millions):
| Three months ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Net cash provided by operating activities | $ | 102.3 | $ | 92.1 | |||||||
| Net cash used in investing activities | (45.3) | (26.1) | |||||||||
| Net cash provided by (used in) financing activities | 95.4 | (94.9) | |||||||||
Cash Flows from Operating Activities
Our primary source of cash provided by operations is revenues generated from installing or selling building products and the resulting operating income generated by these revenues. Operating income is adjusted for certain non-cash items, and our cash flows from operations can be impacted by the timing of our cash collections on sales and collection of retainage amounts.
Our primary uses of cash from operating activities include payments for inventory, compensation costs, leases, income taxes and other general corporate expenditures included in net income.
Net cash provided by operating activities increased from 2025 to 2026 primarily due to higher non-cash adjustments, a decrease in other current assets and lower accounts receivable due to lower job volume partially offset by a decrease in accrued compensation and an increase in other non-current assets.
Cash Flows from Investing Activities
Sources of cash from investing activities consist primarily of proceeds from the sales of property and equipment and, periodically, maturities from short term investments. Cash used in investing activities consists primarily of purchases of property and equipment, payments for acquisitions and, periodically, purchases of short term investments.
Net cash used in investing activities increased from 2025 to 2026 primarily due to increased spending on acquisitions of businesses in 2026 compared to 2025, partially offset by fewer purchases of property and equipment during the three months ended March 31, 2026.
Cash Flows from Financing Activities
Our sources of cash from financing activities consist of proceeds from the issuances of vehicle and equipment notes payable and, periodically, other sources of debt financing. Cash used in financing activities consists primarily of debt repayments, acquisition-related obligations, dividends and stock repurchases.
Net cash provided by (used in) financing activities increased from 2025 to 2026 primarily due to the net proceeds on the 2034 Senior Notes (as defined below). These increases were partially offset by less proceeds from vehicle and equipment notes during the three months ended March 31, 2026. See Part I, Item 1. Financial Statements, Note 7, Long-Term Debt, for more information on the senior notes.
Debt
5.625% Senior Notes due 2034
In January 2026, we issued $500.0 million in aggregate principal amount of 5.625% senior unsecured notes (the "2034 Senior Notes"). The 2034 Senior Notes will mature on February 1, 2034 and interest will accrue at a rate of 5.625% per annum from the date of original issuance and be payable semi-annually in cash in arrears on February 1 and August 1 of each year, commencing on August 1, 2026. The net proceeds from the 2034 Senior Notes offering were approximately $492.4 million after deducting fees and offering expenses. We used approximately $308.2 million of the net proceeds to redeem the outstanding principal and accrued interest on our 5.75% senior unsecured notes due 2028 (the "2028 Senior Notes" and, together with the 2034 Senior Notes, the "Senior Notes"). The remaining net proceeds will be used for general corporate purposes.
The indenture covering the 2034 Senior Notes contains restrictive covenants that, among other things, limit the ability of the Company and certain of our subsidiaries (subject to certain exceptions) to: (i) pay dividends on, redeem or repurchase stock; (ii) prepay subordinated debt; (iii) apply net proceeds from certain asset sales; (iv) engage in transactions with affiliates; (v) merge, consolidate or sell substantially all of its assets; and (vi) pay dividends and make other distributions from subsidiaries.
Credit Facilities
Term Loan Facility
We have a term loan credit agreement with Royal Bank of Canada as the administrative agent and collateral agent thereunder (the "Term Loan Agreement"), dated as of December 14, 2021 (as amended by the First Amendment thereto dated April 28, 2023, by the Second Amendment thereto dated August 14, 2023, by the Third Amendment thereto dated March 28, 2024, and by the Fourth Amendment thereto dated November 26, 2024). The Third Amendment allowed for the issuance of a new term loan (the "Term Loan") in the amount of $500.0 million which will mature on March 28, 2031. Net proceeds of the Term Loan were used to refinance the remaining principal on our previous term loan, pay fees and increase working capital. The Term Loan bears interest, at our option, at a rate equal to either: the adjusted Term SOFR plus 1.75% per annum, or an alternative base rate plus 0.75%.
The Term Loan amortizes in quarterly principal payments of $1.25 million, with any remaining unpaid balances due on the maturity date of March 28, 2031. As of March 31, 2026, we had $487.0 million, net of unamortized debt issuance costs, due on our Term Loan.
Subject to certain exceptions, the Term Loan will be subject to mandatory prepayments of (i) 100% of the net cash proceeds from issuances or incurrence of debt by the Company or any of its restricted subsidiaries (other than with respect to certain permitted indebtedness (excluding any refinancing indebtedness); (ii) 100% (with step-downs to 50% and 0% based on achievement of specified net leverage ratios) of the net cash proceeds from certain sales or dispositions of assets by the Company or any of its restricted subsidiaries in excess of a certain amount and subject to reinvestment provision and certain other exception; and (iii) 50% (with step-downs to 25% and 0% based upon achievement of specified net leverage ratios) of excess cash flow of the Company and its restricted subsidiaries in excess of $15.0 million, subject to certain exceptions and limitations.
Asset-based Lending Credit Agreement
In January 2026, we amended and extended the term of our asset-based lending credit agreement (the "ABL Credit Agreement"). The ABL Credit Agreement transaction increased the commitment under the asset-based lending credit facility (the "ABL Revolver") from $250.0 million to $375.0 million and extended the maturity date to January 21, 2031. Terms include a springing maturity 91 days ahead of the maturity date of any material indebtedness.
The ABL Revolver now bears interest at either the Secured Overnight Financing Rates ("Term SOFR") or the base rate, at our election, plus a margin of 1.00% or 1.25% per annum in the case of Term SOFR advances or 0.00% or 0.25% per annum in the case of base rate loans (in each case based on a measure of availability under the ABL Credit Agreement). The ABL Credit Agreement contains a financial covenant requiring the satisfaction of a minimum of 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 Revolver also provides incremental revolving credit facility commitments of up to $105.0 million. 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 $50.0 million in aggregate. Including outstanding letters of credit, our remaining availability under the ABL Revolver as of March 31, 2026 was $371.1 million.
At March 31, 2026, we were in compliance with all applicable covenants under the Term Loan Agreement, ABL Credit Agreement and the 2034 Senior Notes.
Derivative Instruments
As of March 31, 2026, we had two active interest rate swaps with maturity dates of December 14, 2028. When combined, these interest rate swaps serve to hedge $400.0 million of the variable cash flows on our Term Loan through December 14, 2028. For further information about our interest rate swaps, see Part I, Item 1. Financial Statements, Note 11, Derivatives and Hedging Activities. The assets associated with the interest rate swaps are included in current assets and other non-current assets on the Consolidated Balance Sheets at their fair value amounts as described in Note 9, Fair Value Measurements.
Vehicle and Equipment Notes
We are party to a Master Loan and Security Agreement ("Master Loan and Security Agreement"), a Master Equipment Lease Agreement ("Master Equipment Agreement") and one or more Master Loan Agreements ("Master Loan Agreements" and together with the Master Loan and Security Agreement and Master Equipment Agreement, the "Master Loan and Equipment Agreements") with various lenders to provide financing for the purpose of purchasing or leasing vehicles and equipment used in
the normal course of business. Vehicles and equipment purchased or leased under each financing arrangement serve as collateral for the note applicable to such financing arrangement. Regular payments are due under each note for a period of typically 60 consecutive months after the incurrence of the obligation.
Total outstanding loan balances relating to our Master Loan and Equipment Agreements were $90.2 million as of March 31, 2026 and $98.5 million as of December 31, 2025. Depreciation of assets held under these agreements is included within cost of sales on the Condensed Consolidated Statements of Operations and Comprehensive Income included herein.
Letters of Credit and Bonds
We may use performance bonds to ensure completion of our work on certain larger customer contracts that can span multiple accounting periods. Performance bonds are generally released as the contractual performance is completed. In addition, we occasionally use letters of credit and cash to secure our performance under our general liability, workers' compensation and auto insurance programs. Permit and license bonds are typically issued for one year and are required by certain states and municipalities when we obtain licenses and permits to perform work in their jurisdictions.
The following table summarizes our outstanding bonds, letters of credit and cash-collateral (in millions):
| As of March 31, 2026 | |||||
| Performance bonds | $ | 187.6 | |||
| Insurance letters of credit and cash collateral | 72.9 | ||||
| Permit and license bonds | 11.6 | ||||
| Total bonds and letters of credit | $ | 272.1 | |||
We have $65.3 million included in our insurance letters of credit in the above table that are unsecured and therefore do not reduce total liquidity.
Critical Accounting Policies and Estimates
Management's discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of our consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. Certain accounting policies involve judgments and uncertainties to such an extent that there is a reasonable likelihood that materially different amounts could have been reported using different assumptions or under different conditions. We evaluate our estimates and assumptions on a regular basis. We base our estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of our assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates and assumptions used in preparation of our consolidated financial statements. There have been no significant changes to our critical accounting policies and estimates during the three months ended March 31, 2026 from those disclosed in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of our 2025 Form 10-K.
Recent Accounting Pronouncements
For a description of recently issued and/or adopted accounting pronouncements, see Note 2, Significant Accounting Policies, to our audited consolidated financial statements included in our 2025 Form 10-K.
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws, including with respect to the housing market and the commercial market, our operations, economic and industry conditions, our financial and business model, payment of dividends, the demand for our services and product offerings, trends in the commercial business, expansion of our national footprint and diversification, our ability to grow and strengthen our market position, our ability to pursue and integrate value-enhancing acquisitions, our ability to improve sales and profitability, our efforts to navigate the material pricing environment, our ability to increase selling prices, our material and labor costs, supply chain and material constraints, impacts of inflation and interest rate trends, our hiring practices and expectations for demand for our services and our earnings in 2026. Forward-looking statements may generally be identified by the use of words such as "anticipate," "believe," "estimate," "project," "predict," "possible," "forecast," "may," "could," "would," "should," "expect," "intends," "plan," and "will" or, in each case, their negative, or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. By their nature, forward-looking statements involve risks and
uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Any forward-looking statements that we make herein and in any future reports and statements are not guarantees of future performance, and actual results may differ materially from those expressed in or suggested by such forward-looking statements as a result of various factors, including, without limitation the general economic and industry conditions; increases in mortgage interest rates and rising home prices; inflation and interest rates; the material price and supply environment; increased tariffs; uncertainty regarding the federal government's changes in fiscal, trade, monetary or regulatory policy; geopolitical conflicts, including the conflict in Iran; the timing of increases in our selling prices; the risk that the Company may reduce, suspend or eliminate dividend payments in the future; and the factors discussed in the "Risk Factors" section of our 2025 Form 10-K, as the same may be updated from time to time in our subsequent filings with the SEC. In addition, any future declaration of dividends will be subject to the final determination of our Board of Directors. Any forward-looking statement made by the Company in this report speaks only as of the date hereof. New risks and uncertainties arise from time to time and it is impossible for the Company to predict these events or how they may affect it. The Company has no obligation, and does not intend, to update any forward-looking statements after the date hereof, except as required by federal securities laws.
Installed Building Products Inc. published this content on May 07, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on May 07, 2026 at 19:51 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]