Installed Building Products' Q3 2025: Contradictions Emerge on Multifamily Market Performance, Tariff Impacts, and Labor Dynamics

Date of Call: November 5, 2025

Financials Results

• Revenue: $778M, up 2% YOY (vs $761M prior year)
• EPS: $3.18 per diluted share (adjusted net income $86M)
• Gross Margin: 34%, compared to 33.8% in the prior year

Guidance:

• Q4 2025 amortization expense expected to be approximately $10M (subject to acquisitions).
• Full-year 2025 effective tax rate expected to be 25%–27%.
• Fourth quarter dividend approved at $0.37 per share payable Dec 31, 2025.
• Expect residential housing starts in 2026 to be flat vs 2025 (above 2017–2021 five‑year average).
• Anticipate near‑term headwinds in single‑family entry‑level; heavy commercial backlog expected to remain healthy.

Business Commentary:

* Revenue Growth and Market Diversification: - Installed Building Products reported consolidated sales increased by 2% in Q3 2025, with same-branch sales being roughly flat. - The growth was driven by strong performance in commercial and complementary product sales, offsetting declines in single-family housing installations.

• Commercial Segment Performance:
• Commercial sales in the installation segment increased 12% on a same-branch basis from the prior year period.

• This was primarily due to the growth in heavy commercial end market sales, which exceeded 30%, outpacing weakness in the light commercial segment.

• Multifamily Market Dynamics:

• Multifamily installation sales were down 7% on a same-branch basis, but key branches experienced increased backlogs year-over-year.

• The decline in multifamily sales was due to project delays in certain markets, although the company's strategy of gaining market share and growing complementary product sales remained strong.

• Gross Margin and Cost Management:

• The company achieved an adjusted gross margin of 34%, an increase from 33.8% in the prior year period.
• Improvements were attributed to a shift in customer, product, and geographic mix, despite challenges from lower-margin complementary products and insurance costs.

Sentiment Analysis:

Overall Tone: Positive

• Management highlighted "another quarter of record sales and profitability," consolidated net revenue of $778M (up 2% YOY), record adjusted EBITDA of $140M, and said they are "confident in the long-term fundamentals" and "optimistic about the prospects ahead for IBP."

Q&A:

• Question from Aatish Shah (Evercore ISI): How do you see backlogs for multifamily and commercial? Do you still see a multifamily rebound in 1Q? On the commercial side, are you seeing any delays?
  Response: Multifamily faces near‑term headwinds with benefits likely in 2026 (weighted to back half) as trades complete work; heavy commercial is growing strongly (>30%) and should remain healthy while light commercial remains weak.

• Question from Stephen Kim (Evercore ISI): You previously suggested multifamily might rebound in 1Q; did anything change to push that back into back half of next year?
  Response: No material change — management is being cautious because project timing depends on preceding trades and selective market delays could elongate cycle times, pushing benefit later into 2026.

• Question from Stephen Kim (Evercore ISI): Would any elongation be more on the labor side or product availability?
  Response: Labor — specifically earlier trades like framers/foundations could experience labor constraints, not material sourcing issues for IBP.

• Question from Stephen Kim (Evercore ISI): Can you call out geographic strengths or weaknesses driving mix?
  Response: Top half of the country (Midwest/Northeast) outperformed (Midwest/Northeast ~30% of new residential sales, up low single digits), South (~45%) was flat, West (~20%) down low single digits; regional mix aided margins.

• Question from Michael Rehaut (JPMorgan): Given peers' down low‑double‑digit end markets, how did your markets perform and did you outperform?
  Response: Company benefited from stronger regional exposure and customer mix and management says branches outperformed the market opportunity this quarter and into Q4, though headwinds remain in entry‑level single‑family.

• Question from Michael Rehaut (JPMorgan): How much of the 1.5% price/mix was price vs mix and how sustainable is the ~34% gross margin?
  Response: Price/mix was largely mix (outperformance with regional/local/custom builders); heavy commercial provided ~100bps gross‑margin tailwind, complementary/distribution mix created ~60bps headwind — expect to remain in the 32%–34% adjusted gross margin range for the year, though heavy commercial benefit may not repeat in Q4.

• Question from Susan Maklari (Goldman Sachs): How are you preserving core insulation margin and leveraging ancillary products to protect margins?
  Response: Field teams sell an installed solution valued by builders; incentive compensation ties branch pay to profitability, driving cross‑sell of complementary products and margin improvement despite entry‑level softness.

• Question from Susan Maklari (Goldman Sachs): Progress on SG&A reductions and what's offsetting inflationary pressures?
  Response: Good progress controlling controllable G&A, but savings are being partially offset by uncontrollable items (notably insurance); team aims to offset inflationary pressures via cost control.

• Question from Philip Ng (Jefferies): Was there a strategic pivot to lean into custom/regional builders this year?
  Response: The field teams proactively shifted focus toward regional/local/custom builders to offset entry‑level weakness, yielding outperformance in those segments.

• Question from Philip Ng (Jefferies): Are declines still to come given peers' outlooks or could this be the trough?
  Response: Expect Q4 pressures — public builders' closings/guides imply high‑single‑digit declines that will affect IBP's exposure to that revenue pool, but management expects to outperform the market and heavy commercial will offset some residential weakness.

• Question from Michael Dahl (RBC): Were you referring to delivery/closings when citing high single‑digit declines and how are private/custom customers faring?
  Response: Reference was to public builders' closings (not starts); custom/semi‑custom/regional builders are generally flat overall, market‑by‑market variability exists.

• Question from Michael Dahl (RBC): How should we think about Q4 gross‑margin compares given the moving pieces?
  Response: Expect continued headwind from faster growth in lower‑margin complementary and other segment businesses and no incremental heavy commercial tailwind in Q4; prior Q4 last year adjusted gross margin was 33.6%, and full‑year guidance remains 32%–34%.

• Question from Jeffrey Stevenson (Loop Capital): Which complementary products are outperforming and is strength concentrated in better single‑family markets like the Midwest?
  Response: Growth in complementary products is broad and aided materially by heavy commercial activity; residential complementary sales also grew and contributed to margin improvement, not one single product dominating.

• Question from Keith Hughes (Truist): On commercial revenue (~$135M), what's the heavy vs light split and how do you define them?
  Response: Install side: heavy commercial ~11% of revenue, light commercial ~7.5%; heavy = steel/concrete structures, light = framed construction.

• Question from Keith Hughes (Truist): Why not accelerate acquisitions in heavy commercial — what's pacing M&A there?
  Response: Management sees larger near‑term opportunity via organic expansion by following developers/GCs into new metros; acquisition pipeline exists but selective and organic growth may lead.

• Question from Collin Verron (Deutsche Bank): How is price/cost tracking in residential vs commercial insulation?
  Response: Pricing pressure concentrated regionally at entry‑level single‑family; custom/semi‑custom/top half markets have less pricing pressure and higher ASPs, with teams working to preserve pricing via service and efficiency.

• Question from Collin Verron (Deutsche Bank): What's driving strong growth in the distribution & manufacturing segment and its trajectory?
  Response: Internal distribution efforts are scaling; intercompany sales growth contributed roughly a 50bps benefit to gross margin year‑to‑date and the program is gaining broad branch acceptance.

• Question from Adam Baumgarten (Vertical Research): Update on multifamily whitespace/geographic expansion and benefits?
  Response: Progress converting pipeline into backlog in new multifamily markets (not yet revenue); company is methodically gaining share with a differentiated GC offering.

• Question from Reuben Garner (The Benchmark Company): Current M&A environment and appetite for adjacencies?
  Response: Deal flow for typical add‑ons remains available but lumpy; pipeline of regular add‑ons is active and company is also seriously exploring adjacent verticals (e.g., commercial roofing).

• Question from Ken Zener (Seaport Research): How large is the dollar spread between public builders (~30%) and private/custom (70%), and does mix imply persistent outperformance vs census data into next year?
  Response: Average job price for regional/local builders is multiple times entry‑level due to larger homes/basements; mix aided outperformance and will help near term, and the company is positioned to benefit when entry‑level inflects, though timing is uncertain.

Contradiction Point 1

Multifamily Market Performance

It highlights differing perspectives on the performance and outlook for the multifamily market, which is an important segment for the company.

What is the current status of backlogs in the multifamily and commercial sectors, and are any delays or timing expectations anticipated? - Aatish Shah(Evercore ISI Institutional Equities, Research Division)

2025Q3: On the multifamily side, headwinds are expected until 2026. Backlogs are growing in certain markets, and we see gains in new markets. - Michael Miller(CFO)

How do you assess the production, regional, and local custom builder markets? - Stephen Kim(Evercore ISI)

2025Q1: Multifamily revenue was down 5% despite a unit under construction headwind of 20%. The CQ team's management resulted in a positive performance. Units under construction need to decrease further by 10% to stabilize. Despite current headwinds, multifamily sales are expected to outperform the market, supported by solid backlog. - Michael Miller(CFO)

Contradiction Point 2

Impact of Tariffs on Material Costs

It involves differing expectations about the financial impact of tariffs on material costs, which could impact the company's financial performance.

Can you clarify the price/mix impact on gross margin? - Michael Rehaut(JPMorgan Chase & Co, Research Division)

2025Q3: Markets remain current state with inflationary pressures in metal and fibreglass. Deceleration in pricing expected for 2026. The company has minor tariff exposure amounting to $2 million in the current quarter with additional $3 million impacts anticipated in the following quarters. - Michael Miller(CFO)

How do you view material prices this year and into 2026? - Alex Isaac(JPMorgan)

2025Q1: Tariffs could impact costs by $10-20 million. The market is moving closer to efficiency, with good supply now available. Spray foam suppliers source domestically, mitigating tariff impacts. - Michael Miller(CFO)

Contradiction Point 3

Labor Market Dynamics

It relates to the company's strategy and expectations regarding labor market conditions, which can have an impact on operational efficiency and costs.

Are you expecting any delays in cycle times, particularly in labor? - Aatish Shah(Evercore ISI Institutional Equities, Research Division)

2025Q3: Labor is the main issue, not material sourcing. There could be potential labor-related delays due to the 2026 multifamily starts lagging in completion. - Michael Miller(CFO)

How are you managing your labor force in the low-demand environment? - Aatish Shah(Evercore ISI)

2025Q1: Install labor fluctuates with job volumes, holding or adjusting as needed. Salesforce is typically stable unless significant headwinds arise. G&A labor is being optimized, with expectations of reductions. The strategy is to adjust labor in response to demand fluctuations. - Michael Miller(CFO)

Contradiction Point 4

Multifamily Market Outlook

It involves differing perspectives on the multifamily market outlook, which is crucial for strategic planning and investor expectations.

What is the outlook for multifamily and commercial backlogs, and potential delays? Are there timing expectations for multifamily backlogs? - Aatish Shah (Evercore ISI Institutional Equities, Research Division)

2025Q3: On the multifamily side, headwinds are expected until 2026. - Michael Miller(CFO)

What are your expectations for multifamily and single-family markets, and how does the company view them? - Keith Hughes (Truist Securities)

2024Q4: Our perspective is consistent: we expect to outperform the multifamily market due to price mix benefits. - Michael Miller(CFO)

Contradiction Point 5

Commercial Market Performance

It involves differing assessments of commercial market performance, particularly in heavy and light commercial segments, which are critical for business strategy and financial forecasting.

What are the current backlogs for multifamily and commercial, and are any delays expected? What are the timing expectations for multifamily backlogs? - Aatish Shah (Evercore ISI Institutional Equities, Research Division)

2025Q3: Heavy commercial is performing well, offsetting weakness in light commercial. - Michael Miller(CFO)

What are your expectations and the company's outlook for multifamily and single-family markets? - Keith Hughes (Truist Securities)

2024Q4: We are starting to see some stability in terms of heavy commercial work. Light commercial just continues to decline. - Michael Miller(CFO)