Jason Niswonger - Head, IR Jeff Edwards - Chairman and CEO Mike Miller - CFO.

Rob Hansen - Deutsche Bank David Goldberg - UBS Judy Merrick - SunTrust.

Greeting, welcome to the Installed Building Products Fourth Quarter and Full Year 2014 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Jason Niswonger. Thank you Mr. Niswonger, you may now begin..

Good morning. We would like to thank you for joining us today for Installed Building Products fourth quarter and full year 2014 earnings conference call.

Earlier today we issued a press release on our financial results for the quarter and full year 2014, which can be found in the Investor Relations section on our website at www.installedbuildingproducts.com.

On today's call, management's prepared remarks and answers to your questions contain forward-looking statements within the meaning of the federal securities laws. These forward-looking statements include statements concerning demand for our services, expansion of our business, improvements in the U.S.

housing market and our end market, our ability to strengthen our market position, our ability to pursue value enhancing acquisitions and expectations regarding our sales and growth in 2015.

Forward-looking statements may generally be identified by the use of words such as, anticipate, believe, estimate, expect, forecast, intend, plan, and will or in each case they're 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. As a result, actual events may differ materially from those expressed and/or suggested by the forward-looking statements.

Any forward-looking statement made by management on this call speaks only as of the date hereof.

A full discussion of the company's operations and financial conditions, including factors that may affect our business and future prospects is contained in documents it is filed with the SEC, and will be contained in subsequent periodic filings made with the SEC.

New risks and uncertainties come up 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.

In addition, management uses certain non-GAAP performance measures on this call. You can find a reconciliation of such measures to their nearest GAAP equivalent in the company's earnings release, which is available on our website.

This morning's conference call is hosted by Jeff Edwards, our Chairman and Chief Executive Officer; and Michael Miller, the Company's Chief Financial Officer. Now I will turn the call over to Jeff..

Thanks, Jason. And thank you everyone for joining us today to review our results for the fourth quarter and full year 2014. I would like to begin with the summary of our operating highlights, followed by an update on our markets.

I will then ask Mike Miller to follow with some additional details on our quarterly and full year 2014 results and capital position, and finally, after our prepared remarks, we will open up the call for questions. 2014 was an exceptional year progress for IBP.

The positive momentum in our business continued through the fourth quarter resulting in solid growth in our net revenue and profitability for the full year.

This improvement reflects the hard work of our local branch operations, the successful expansion of our installation operation, and the benefits we are achieving from our well-established and efficient platform. For the full year 2014, we increased our net sales 20% compared to last year to $518 million.

We also effectively managed our cost to deliver adjusted EBITDA of $44 million, an increase of 74% compared to a year ago. During 2014 we also continued to consolidate the highly fragmented installation industry.

Our collective acquisition activity in 2014 strengthened our presence in several key markets with the addition of three established installation installers with extensive customer relationships and combined trailing 12-months revenue of approximately $30 million.

During the fourth quarter, we acquired Installed Building Solutions, a highly complimentary installer of installation which enhanced our market opportunity in Minnesota and Wisconsin.

With trailing 12-months revenues of approximately $17.4 million as of September 2014, this established regional operator's aligned with our growth strategy has already begun to contribute to our profitability. We are very excited to again welcome our 2014 acquisitions to the IBP team.

I have commented in previous quarters on our robust acquisition pipeline. Our team has been working diligently to complete deals and cultivate new opportunities. I'm encouraged by the current visibility on our potential deals and we believe 2015 will display in more impactful way our ability to further execute on our acquisition strategy.

In the fourth quarter of 2014, we continue to realize the benefit of growth in U.S. residential new construction, improve pricing and operating leverage to produce another quarter of strong revenue and profit growth.

We increased our net revenue 22% to $145.3 million and produced adjusted EBITDA of $15.2 million, an increase of 65% compared to the prior year quarter. We improved our adjusted net income to $6.2 million or $0.20 per diluted share compared to a year ago. Our same branch sales grew approximately 16% during the fourth quarter.

In our primary single-family end market, same branch sales improved approximately 18% compared to an increase in U.S. single-family housing completions of approximately 7% in the fourth quarter.

Our ability to drive same branch sales growth in excess of the pace of the national housing recovery, speaks to our customer loyalty and leading market positions in some of the strongest U.S. housing markets.

We also benefit from our national scale, long standing supplier relationships, and a broad customer base that includes production and custom home builders, multifamily and commercial contractors, and home owners. Looking at the broader market opportunity, we believe there is significant runway for improvement in U.S. residential construction. U.S.

housing completions remain 32% below the trailing 25-year average and single-family housing completions are actually 40% below the trailing 25-year average, which supports our outlook for meaningful upside in years to come.

We expect residential end markets to benefit from various factors including improving employment, rising household formations, and historically low mortgage interest rates along with recent easing of landing standards announced by the FHFA which could further stimulate housing demand.

In conclusion, as a company we are encouraged by our accomplishments during 2014. We believe we have the right strategy in place to continue to solidify our position as a leading installation installer as the housing market improves. We have a strong balance sheet and a proven acquisition model to further capitalize on attractive growth opportunity.

I will now turn the call over to Michael to provide more details on our fourth quarter and full year results..

Thank you Jeff and good morning everyone. We continue to make considerable progress in growing our revenue and improving our profitability. For the full year, our net sales increased 19.9% to $518 million, compared to $431.9 million in the prior year, which was mainly driven by higher volume price mix and acquisitions that we competed during 2014.

For the fourth quarter, our revenue increased 21.7% to $145.3 million. Our same branch sales improved 16.2% which was attributable to an increase in volume and all of our end markets and some additional benefits from our higher average price per job due primarily to a more favorable mix.

Our same branch single-family sales growth of 17.9% exceeded the 6.8% increase in single-family U.S. housing completions during the fourth quarter, which reflects our strong market performance by our local branches and our well-positioned geographic footprint.

Our adjusted gross margin before depreciation expense and certain one-time items extended to 30.5%, representing an increase of 230 basis points from 28.2% in the prior year quarter.

This improvement was primarily due to labor productivity improvements, operating efficiency and more favorable customer and product price mix, which was partially offset by some material price inflation.

As highlighted in the adjusted EBITDA table on our press release, an unusual adverse development in our workers compensation expense impacted our gross margin by 120 basis points in the fourth quarter of 2014, which we excluded from our adjusted gross margin.

We believe adjusted gross margin excluding depreciation more accurately reflects the progress we are making in our core operation. On a GAAP basis, we increased our gross margin to 27% or 80 basis points higher than the 26.2% margin in the prior year quarter.

For the fourth quarter, selling and administrative expenses as a percent of net revenue improved 170 basis points to 20% from 21.7% in the prior year quarter, as higher sales more than offset additional costs associated with being a publicly traded company and an increase in personal cost to support our growth.

We expect SG&A expense as a percent of net revenue to continue to improve over time, as we further scale our operations and benefit from higher sales. For the full year, we improved our adjusted EBITDA to $44 million representing an increase of 73.6% from $25.4 million in the prior year.

We achieved gross margin expansion and operating leverage in each quarter during the year. In the fourth quarter we reported adjusted EBITDA of $15.2 million representing a 65.3% increase from $9.2 million in the prior year quarter.

As a percent of net revenue, our adjusted EBITDA improved to 10.5% in the fourth quarter, representing a 280 basis point increase from 7.7% in the prior year quarter. We are pleased with the successful steps we have taken to enhance our operating efficiency and significantly extend our adjusted EBITDA margin.

For the full year, adjusted net income from continuing operations was $16.2 million or $0.54 per diluted share compared to $7.5 million or $0.34 per diluted share on a prior year.

On a GAAP basis for the full year we recorded a net loss of $6 million or $0.20 per diluted share, compared to a net loss of $200,000 or $0.01 per diluted share in the prior year. Adjustments to our full year 2014 net income were largely related to our initial public offering and subsequent equity follow-on offering completed during the year.

For the fourth quarter, our adjusted net income from continuing operations improved to $6.2 million or $0.20 per share, compared to $3.3 million or $0.15 per share in the prior year quarter.

On a GAAP basis, our fourth quarter net income was $5.1 million or $0.16 per diluted share, compared to net income of $800,000 or $0.03 per diluted share in the prior year quarter. Now moving onto our balance sheet and cash flow. In 2014, we generated $19.6 million in cash flow from operation, an increase of $15.4 million from the prior year period.

We used this cash flow to fund acquisitions, reinvest in our business and strengthen our balance sheet. In 2014, our depreciation and amortization expenses totaled $15 million, which approximated 2.9% of net revenue.

Net capital expenditures of $5.5 million represented 1.1% of net revenue and new capital lease obligations of $14.6 million or 2.8% of net revenue. At the end of the fourth quarter, we had total cash of $10.8 million and nothing drawn on our $75 million revolver.

With our strong capital position and asset like business model, we have significant financial flexibility to continue investing in our business and capitalizing on the attractive growth opportunities in front of us. I will now turn the call back to Jeff for closing remarks..

Thanks, Michael. Looking forward to 2015, we’re extremely optimistic on our prospects for growth and we’re making progress to improve our business across all of our key markets to enhance shareholder value. Our proven operating platform, dedicated management team, and strong balance sheet position us well for the future.

With positive indicators across all of our end markets most notably residential construction, we would expect to deliver another strong year in 2015.

With significant fragmentation of our industry provides us with further upside from acquisitions to continue to expand our presence in attractive geographic markets, and we continue to push ourselves in delivering on our acquisition strategy. We look forward to updating you on our progress in the next quarter.

Operator, we will now open the call to questions..

[Operator Instructions] Our first question is from the line of Nishu Sood with Deutsche Bank. Please go ahead with your question..

Thanks this is Rob Hansen, on for Nishu. The first question I had, you guys are pretty positive for 2015, a lot of the builders have come out with some very positive commentary in January and February and I realize that it's going to hit you on a lagged basis.

But I guess that - question is, what have you guys kind of seen trends early in the year and has there been any weather impact and if there has been if you could just be specific in terms of whether small or large, I think last year you gave a number that was somewhere like 1% of sales for the full year.

So wouldn't it up being a small impact so yeah just wanted to get your thoughts around those things?.

Rob, this is Mike Miller, thanks for the question. Yeah absolutely in first quarter of last year when most people dealt a significant impact in weather, we as a company benefited from the broad geographic footprint that we have.

And we would expect that we’ll continue to have that benefit in the first quarter of 2015, as it relates to kind of any weather sort of impact. So we feel good about where we are and the trends that we’re continuing to see in the business. You are absolutely right about the builder's commentary and we're very encouraged by that.

And it does have an impact on our sales in the second and third quarters of the year as those houses get started and ready to install. So yeah, we are very encouraged by the positive momentum there seems to be in the market and for this spring selling season..

Okay. And one of those things I wanted to ask about was, you mentioned that acquisitions would be more impactful I think in 2015. So should we take this to mean that you could end up exceeding kind of what you did for this year? I think you talked about the goals, longer term like $30 million to $40 million of revenue per year.

And is there a reason that we could see more this year as opposed to last year?.

Rob this is Jeff Edwards. Yeah, I would just say that we've been, I mean it's been a full quote press really on behalf - numbers of IBP's team. And at this point honestly we’re probably as busy as we've ever been really working prospects in other new deals that we have with some prospect. So we feel very strong about it.

We have a lot of work ahead of us obviously to get deals close and to continue to do what we've been doing for so many years, but we feel really very strong about it right now..

And these are going to continue to be kind of smaller, the smaller acquisitions while nothing in the – nothing larger?.

I have mentioned in past calls in past conversations that on average, our average deal size is maybe larger than it’s been historically, I don't know that I would change that in anyway.

I think historically we've said that, our average acquisition was around $4 million in revenue in that - lately we've been seeing a number of deals that kind of trend and average maybe closer to $8 million to $10 million on average and I don't think that’s changed, although that's a fairly significant departure if you think about a $4 million average to an $8 million to $10 million average..

Rob this is Michael Miller again, and we strongly believe that given the point where we are in the housing recovery, it makes a lot of sense for us as a company to acquire more revenues today than it was say two to three years from now.

So, we have full quarter cost on here internally to get good deals done in the right locations under the right economics, maintaining discipline about it but recognizing that it really is a great opportunity for us to continue to increase revenue and also to improve the operating leverage within the business..

Got it. And then the last question I had is just on leverage, I think around one-time or little less, what is your kind of outlook for that for leverage this year.

And would you be willing to kind of increase that for these acquisitions that you’re talking about?.

That's a great question and we absolutely would be.

We feel that we have a lot of flexibility within the capital structure of the company in terms of leverage and as I was just saying from a timing perspective, we believe its very prudent for us to invest in doing acquisitions today at this point in the cycle, so that we can enjoy the benefit of those entities as we - or those acquired companies as we believe this market continues to recover.

So yes, we would definitely be willing to put on more leverage for deals. And keep in mind, we're putting on the leverage we are acquiring EBITDA especially with that, plus we believe we’re going to continue to see growth in our own EBITDA so even as we add leverage it comes down fairly quickly as we continue to grow and we add those acquisitions..

Got it thanks guys..

Our next question comes from the line of Bob Wetenhall with RBC. Please proceed with your question..

Hi, this is actually [indiscernible] on for Bob. My first question just talking about some of the recent price increases from the installation manufacturers just now that we’re couple of months after those increases went effective. I am just wondering if you can address the success that you had in passing through those price increases to customers..

Sure. As you're probably aware, the manufacturers as they announced price increase to take effect in January, but the same effect basically happened in 2014 as well, where we saw material price inflation.

And I think it's highly reflective in our gross margin our ability over time to pass on material price increases and to offset those price increases either through things that we’re doing internally to improve operation efficiency and/or to pass price increase onto our customers.

And we believe that the most important part of what we do is provide service for the customers and it's not all about price, while price is important, the service component of our business is we believe very critical particularly in times of growing demand.

So we believe and we've demonstrated that over time, we have the ability to pass on any material price increases to our customers and continue to improve our gross margin.

I will say one other things that, the additional thing that's good about our industry, is that we have a lot of visibility in the price increases as to our customers because there is fairly long notification period in terms of when price increases going to go into effect.

So we have time to work with our customers, when these pricing increases occur and work it into their pricing as well as our pricing..

Thank you, that's helpful. And then just on the mix, could you discuss how in the quarter, how your mix of business between the local regional builders and the large public builders played out. And how would you expect that mix of trend this year, given your varying regional exposures..

Sure. That's a good question. We continue to see higher growth rate among our local and regional builders, growth rates higher than what we saw with the national builders. That being said, the growth rate in the fourth quarter among national builders was higher than it was in the third quarter. So there is still very good positive momentum there.

And we believe that, the next lag if you will of the housing recovery, really hopefully will be centered around growth within the local and regional builder. We’re seeing that in our business. Their growth rates are stronger towards the end of this year than they were in the beginning part of the year.

So we're hopeful that we will continue during - the course of the year. As we mentioned in previous calls, we get approximately 50% of our revenue from the U.S. Census Bureau region of the Midwest and the Northeast, which is more heavily waited towards those areas than overall permits come from.

So we as a company tend to have a higher percentage of regional on local builders as our customers than the national average. And we would continue to - we would expect that trend to continue..

Great. Thank you and good luck in the quarter..

Your next question comes from the line of David Goldberg with UBS. Please proceed with your question..

Thanks. Good morning everybody. Nice quarter. My first question, I actually wanted to ask Rob's question but about weather but I wanted to ask a little bit differently and in the Northeast at least for sure, it's been a pretty harsh winter and was pretty harsh February.

And I'm wondering if you look at the on-and-off part of the business, is buying people more likely to add installation or change their installation at their harsh winter versus, other when mild winters exchange.

In others words, with all this – we know we had in Boston and [indiscernible] had a tough winter, do you think that’s going to help first more demand for on our business?.

David, that is the kind of a funny question too because we hear that from some of our guys up in New England as they are digging themselves out of six rate [beating] [ph] snow but that is probably the silver lining I guess to a very harsh winter, is that there is a kind of pick up at both awareness and then ultimately in business, as it relates to that weather especially on existing home side.

And then I guess even to degree in terms of kind of making it more front of mine for home buyers in general. But as you know, the existing home business for our particular business is not a very, very large percentage of what but what we do. But again, it is a bit of silver lining at least in those geographies..

And the good news is that even though they're digging at six to eight meters now, there use to lot of snow and we've said on multiple calls from our perspective, its not a question of if we’re going to do the installation, its when we are going to do the installation.

So, when the roads get cleared and the house gets ready, we are there to do the installation and we really - in these kinds of situations where, we are seeing sort of difficult weather pattern if you will in all parts of the country, is really where our geographic footprint, having national geographic footprint really benefits the company part of it..

I understand that's helpful.

My follow up question was, it feels like some of the growth that we are starting to see in new home market is coming from some of the boom market and last like what you guys might have under exposure like Phoenix or Las Vegas and I'm wondering how you are thinking about those markets now, you know obviously with these severe decline we saw in the downtown unit very easy to build up too much infrastructure.

So how you are thinking about kind of when is the right point kind of being those markets, starts building structure and how you’re thinking about control from that perspective, not get over exposed again, - like when obviously volumes are way down but - growth accelerates, what does that mean?.

I think we are thinking about it now, really in everyday and yesterday included.

And so its obviously continues to drive our acquisition strategies and strategy out West as you know and especially in the Southwest were under representatives as you say, it's definitely on the list those markets as you say are improving and that's our job, you could make that happen.

As I said earlier we get 50% of our sales, approximately 50% of our sales from the Midwest from the Northeast and we won't get a better balance of our sales to being more reflective of where national permits and starts come from. So that, we are really focusing our acquisition strategy and expansion strategies on the Southeast and the West.

That being said though, our largest markets are still 3% to 4% of revenue.

So anyone market really is in material in any way to the company but to the extent we do find an acquisition that we feel good about and say Phoenix or Vegas, even as those markets become more important to us and become bigger, they’re still a relatively small percentage of our overall sales but that we won't see if there is Boomburst day in Vegas, it doesn’t have that dramatic of an impact on the overall company, again going back to the benefits of having sort of a national footprint..

If I could speak one more in, I was wondering competitive environment obviously biggest competitor in the business getting ready for its spin-off installation business, is anything changing the competitive landscape in comprising in terms of competitiveness or strategy that you are seeing advance of that trend?.

No..

We said many times Nesco is a great competitor and we share many markets with them and we believe that, this is a good market, it is good industry, it’s based upon quality service and we focus everyday on providing good quality service to our customers..

Great, Thank you guys very much. Nice quarter..

[Operator Instructions] The next question comes from the line of Keith Hughes of SunTrust. Please go ahead with your question..

Thank you. This is Judy Merrick for Keith Hughes.

In your comment, you mentioned that you saw higher average price, due to mix is there anymore that you can you tell us about the positives you saw whether with customer or product mix that was driving that?.

That's a great question. Really it is that as customer and product mix, as I mentioned earlier, we saw higher growth within the local and regional builders and those builders tend to have an higher average job price because they build on average higher or larger home.

So as a consequence the job crisis for us tends to be higher because we are pretty more installation in those jobs. So as that mix becomes - grows towards the regional and local builder, it naturally increases our average job price.

We also saw in the quarter very strong growth within our straight business and straight home jobs have attended - or do are at a much higher average job price than fiber glass jobs. So that has attended to raise our average job price as well.

And then also there has been greater adoption of energy codes and those lead to us in selling more installation, putting in more critical sealed packages within the home and therefore leads to a higher average stock price..

Okay. Some of the new standards you're seeing an impact..

Right, in certain markets..

Okay. And also last year earlier in the year you saw lags from starts to completion, some labor issues.

Is your outlook for 2015, have you seen any of those issues or how does that look for you?.

I think the comment that we had made earlier in the year was, there was an increase - we believe there was an increase in the lag between DARTs in completion that related not to labor on our sides because we’ve not had an issue rising up our labor but more on some of the other trades that had labor issues.

So we still feel - continue to feel good about our ability to size the business and we think the improvement in labor productivity that we saw in the fourth quarter was really very strong growth relative to market. We think it's indicative of our ability to meet the labor challenge if you will.

In terms of the lag, we believe and obviously we will see over time, but the lag has come back to a more typical phase through the third and fourth quarter.

It will and while we don't have the data yet to see it, it will be interesting to see how the mix of both the weather this first quarter combined with what looks to be solid increase in sales for the Home Builders, how that impacts the lags, and through the course of the year.

In times where there is a higher increase in sales, obviously that has a tendency to increase the lag because there's more houses trying to get built. And other trades can cause delay in getting the house completed. So I think that story will unfold for 2015.

But as we have said for us as a company, it's not a question of if we're going to do the installation, it's one we're going to do the installation and when the house is ready for us to do the installation, we believe that our strong customer relationship and the service that we provide to our customers will give us the opportunity to install..

Okay. Got it. Thanks..

Thank you. At this time, I will turn the floor back to management for closing comments..

I' just like to thank all of you for your questions, and I’m looking forward to our next quarterly update and conservation. And again, thank you for your time today..

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. We thank you for your participation..