Q1 2022 Installed Building Products Inc Earnings Call
Greetings and welcome to installed building products fiscal 2022 first quarter financial results Conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during todays conference. Please press star zero on your.
Telephone keypad as a reminder, this conference is being recorded I would now like to turn this conference over to your host Mr. Darren Hicks director of Investor Relations. Thank you. Sir you may begin your presentation.
Good morning, and welcome to installed building products first quarter 2022 conference call earlier today, we issued a press release on our financial results for the first quarter, which can be found in the Investor Relations section of our website.
On today's call management's prepared remarks and answers to your questions may contain forward looking statements within the meaning of the federal Securities laws. These forward looking statements include statements about future expectations anticipation beliefs estimates forecasts plans and prospects.
These forward looking statements are based on management's current expectations and involve risks and uncertainties any forward looking statements made by management. During this call is not a guarantee of future performance and actual results may differ materially as a result of various factors including.
Without limitation, the adverse impact of the COVID-19 crisis general economic and industry conditions inflation and interest rates the material pricing and supply environment.
Timing of increases in our selling prices and factors discussed in the risk factors section of our company's annual report on.
Form 10-K as may be updated from time to time in our SEC filings any forward looking statement speaks only as of the date hereof.
The company undertakes no duty or obligation to update any forward looking statements as a result of new information or future events, except as required by federal Securities Laws. In addition management uses certain non-GAAP performance measures on this call such as adjusted EBITDA adjusted EBITDA margin adjusted net income.
Adjusted net income per diluted share adjusted gross profit adjusted gross profit margin and adjusted selling and administrative expense you can find a reconciliation of such measures to their nearest GAAP equivalent in the company's earnings release and additional reconciliation for adjusted EBITDA for earlier fiscal years in our Investor presentation.
Which are available on our website. This mornings conference call is hosted by Jeff Edwards, Our Chairman and Chief Executive Officer, and Michael Miller, Our Chief Financial Officer, and joined by Jason Niswonger, Our chief administrative and sustainability Officer, I will now turn the call over to Jeff.
Thanks, Darren and good morning to everyone joining us on today's call.
As usual I will start the call with some highlights and then turn the call over to Michael who will discuss our financial results and capital position in more detail before we take your questions.
IBP produced another record quarter, driven by strong demand within our core residential housing markets in the benefits of record quarterly price mix growth.
Record first quarter sales and profitability are encouraging as we overcame continued inflationary and supply chain challenges as well as the lingering impacts of the COVID-19 pandemic, primarily within our commercial market.
Our financial and operating results reflect the resiliency of our business model the benefits of our product end market and geographic diversification strategies and the hard work of our team members nationwide.
The dedication of our team members is especially important in the current environment as homebuilders navigate ongoing supply chain constraints and struggled to keep up with significant demand for new homes ibp's value proposition resonates with our customers because of our focus on providing an exceptional level of service by completing jobs correctly and on schedule.
Joe.
As a result as a result, our local branches have done an excellent job aligning our selling prices with the value we offer our customers, which has supported profitability and strong incremental margins to everyone. At IBP. Thank you for your commitment your hard work and a tough job always done well.
Before I go further into our highlights I would like to note that this quarter, we have realigned our operating segments to reflect changes in our business. We now have two reporting segments installation and other which includes our distribution and manufacturing operations Michael will touch more on this later in the call.
So looking at our first quarter results in more detail, we experienced another quarter of strong residential growth, while the COVID-19 pandemic continue to impact activity within our commercial operations for the quarter within our installation segment, we experienced a 28, 3% increase in residential same branch sales from the prior year peer.
<unk>, which was driven by a 29, 4% increase in installation single family same branch sales growth and a 23% 21% increase in installation multifamily same branch revenue by comparison total U S residential completions decreased by five 5% during the first quarter.
Which we believe was influenced by extended residential construction cycle times.
During the first quarter price mix increased 14, 6% over the prior year period, consistent with the inflationary trends in the construction industry and the increasing demand for our services, our pricing efforts and stabilize mix compared to the prior year have contributed to the strongest quarterly increase we've achieved since becoming a public company.
We continue to make prudent adjustments to align our pricing with the value we offer customers an inflationary trends as.
As expected the supply chain for many of the building products and materials, we install remained constrained during the first quarter.
We anticipate that supply chain challenges will continue for the foreseeable future, but our asset light business model should enable us to remain flexible and generate strong cash flow.
Our branches benefit from our national scale material buying advantage and strategic plans aimed at diversifying and expanding our products and markets and geographic presence.
While mortgage rates have increased since the beginning of the year favorable demographics and tight supply have continued to support housing construction. In addition, with the record number of permitted units that have yet to be started new housing construction is expected to remain supportive of our business throughout 2022.
Within our heavy commercial business same branch sales were roughly flat in the 2022 first quarter with bidding activity remaining stable and project bid acceptance steady relative to the 2021 first quarter. We estimate our large commercial backlog was $177 7 million at March 31 2000.
'twenty two the heavy commercial construction market continues to represent a significant long term growth opportunity for IBP and we remain focused on improving our operational efficiency, while expanding our exposure within compelling commercial markets nationwide.
Looking at our acquisition strategy in more detail, we continue to prioritize profitable growth through acquiring well run companies that install installation and complementary building products.
During the first 2022 first quarter and April we acquired a North Carolina based installer of spray foam insulation fiberglass insulation and fire places in the Asheville, North Carolina market with annual revenue of approximately $8 $5 million in a new Jersey based distributor of Qatar supplies and accessories to.
The U S northeast and mid Atlantic markets with annual revenue of approximately $45 million.
Since the first quarter ended we're excited to become an early investor in energy Dot AI and a part of the innovative AI driven platform they are developing.
Their platform provides actionable insight into our company's energy usage and carbon emissions using artificial intelligence in fact, we'd like the platform. So much we decided to partner with energy Dot AI to implement their solution at IV at IBP as we worked to reduce our greenhouse gas emissions.
Our acquisition pipeline remains robust and includes opportunities across multiple geographies products and end markets. As a result, we believe 2022 will be another strong year of acquisition growth and we expect to acquire at least $100 million of revenue in 2022.
As we look to 2022 and beyond we remain excited by the direction in which we are headed and the compelling outlook across our residential and commercial end markets. We anticipate that effective management of our supply chain will continue to be a priority throughout this year, our purchasing logistics and warehousing teams will continue to work with our suppliers and customers.
To help ease these industry wide supply chain challenges.
With access to labor, our strong position with our customers and suppliers and the healthy backlog. We believe 2022 is shaping up to be another year of profitable growth and value creation for IBP. So with this overview I would like to turn the call over to Michael to provide more detail on our first quarter results.
Thank you, Jeff and good morning, everyone. We are now providing additional information on our revenue and gross profit by segment within our quarterly earnings releases and filings with the SEC. This.
This includes reporting revenue for our installation segment by residential new construction repair and remodel and commercial end markets. We have also disclosed a separate other revenue category, which includes net revenue from our manufacturing and distribution operations going forward. We will continue to provide this revenue and gross profit information.
So with this introduction, let's look at our record 2022 first quarter financial results in more detail.
Net sales for the first quarter increased to a quarterly record of 587 5 billion.
<unk> two $437 $1 million for the same period last year.
At 34, 4% year over year improvement in sales during the quarter was mainly driven by an increase in price mix.
Volume of customer jobs completed and the revenue contribution from recent acquisitions from a segment standpoint installation revenue increased 30% to $561 $6 million driven by strong growth across ibp's residential new construction market and improvements in our commercial end market.
Other revenue, which include Ibp's manufacturing and distribution operations.
Creased, 407% to $26 $7 million driven by strong operating results in the December 2021 acquisition of AMG distribution.
This was the first full quarter of results for AMD on a pro forma basis. Other revenue increased 24, 2% in the first quarter of 2022 compared to the 2021 quarter.
On a same branch basis installation net revenue improved to 22, 2% from the prior year quarter driven by single family same branch sales growth of 29, 4% multifamily same branch sales increased 23, 1% our residential first quarter same branch sales growth 28.
3% significantly outpaced the total U S housing completions decline of five 5% during the quarter as.
As Jeff mentioned, we believe this is in part a result of increases to residential construction cycle times, which remained extended during the first quarter relative to the prior year period.
While we experienced growth the lingering effects of the COVID-19 pandemic continued impacting our commercial end market installation same branch commercial sales increased five 9% in the 2002 first quarter, while our heavy commercial same branch sales were roughly flat in the quarter relative to the same period last year.
Adjusted gross profit margin improved 70 basis points year over year to 29, 4% in the first quarter as we realigned our selling prices to reflect the quality of service, we provide inflationary pressure in materials supplier shortages, we estimate that supply chain disruptions in the first quarter of 2000.
Wanting to have an impact of approximately $1 4 million and gross profit during the quarter the impact from the supply disruptions reduced adjusted gross profit margin by approximately 20 basis points.
Administrative expenses as a percent of our first quarter sales with.
We're at 13, 5%, a 140 basis point improvement from the prior year period.
Adjusted SG&A as a percent of first quarter sales improved approximately 100 day 180 basis points from the prior year period.
Year over year improvements in SG&A expense relative to sales during the first quarter reflects our ability to leverage administrative cost during strong volume and price mix growth periods.
On a GAAP basis, our first quarter net income increased 95, 6% from the prior year quarter to $33 8 million or $1 14 per diluted share. Our adjusted net income improved 77% to $45 7 million or $1 54 per diluted share.
We estimate the material supply shortages impacted first quarter earnings per share by approximately <unk> <unk> per diluted share.
During the first quarter of 2022, the acquisition of new businesses drove an increase in our recorded amortization expense to $11 1 million compared to $8 4 million for the same period last year.
This noncash adjustment impacts net income, which is why we continue to believe that adjusted EBITDA is the most useful measure of profitability based.
Based on recent acquisitions, we expect second quarter 2022 amortization expense of approximately $10 6 million and full year 2022 expense of approximately $42 $4 million. We would expect these estimates to change with any acquisitions, we closed in future periods.
Adjusted EBITDA for the first quarter of 2022 improved 54, 5% to $84 2 million adjusted.
Adjusted EBITDA as a percent of net revenue was 14, 3% for the 2020 to first quarter.
180 basis point improvement from 12, 5% for the same period last year.
Same branch incremental adjusted EBITDA margin was 22, 9% for the first quarter compared to 10, 5% for the same period last year.
Similar to the impact on gross profit, we estimate that material supply shortages during the quarter impacted adjusted EBITDA by approximately $1 4 million.
Reducing our adjusted EBITDA margin by approximately 20 basis points.
For the 2022 first quarter, our effective tax rate was approximately 26, 7% and we continue to expect that effective tax rate of 25% to 27% for the full year ending December 31 2022.
Now, let's look at our liquidity balance sheet and capital requirements in more detail.
Our business model continues to generate strong operating cash flow for the three months ended March 31, 2022, we generated $48 $2 million in cash flow from operations compared to $37 6 million in the prior year period.
The year over year increase in operating cash flow was primarily associated with higher net income.
Which offset increased working capital requirements aimed at reducing material shortages in an inflationary environment.
At March 31.
2022, we had $247 3 million and working capital, excluding cash and cash equivalents and investments capital expenditures and total incurred finance leases for the three months ended March 31, 2022 were $10 9 million combined which is one 9% of revenue at March 31 2000.
22, compared to two 5% for the same period last year.
On February 17, 2022, we increased our asset based lending credit facility $250 million.
Which now matures in February 17th 2027, there is currently nothing drawn on the amended ABL facility through.
Through the use of interest rate swaps, we are eliminating our interest rate exposure with no significant debt maturities until 2028 with.
With $267 4 million in cash and cash equivalents and borrowing capacity under our ABL facility, we have in excess of $500 million in liquidity to invest in our long term growth opportunities at March 31, 2022, we had a net debt to adjusted trailing 12 month EBITDA leverage ratio.
Of one nine times, which remains below our stated leverage ratio expectation of less than two times.
As such we continue to perform on our acquisition strategy and return capital to shareholders.
During the first quarter, we returned $85 $3 million to shareholders through dividends and share repurchases today, we announced that Ibp's board of directors approved our second quarter dividend <unk> 31, and a half cents per share which is payable on June 30.
2022 to stockholders of record on June 15, 2022, we are committed to continuing to grow the company, while returning excess capital to shareholders through our dividend and share repurchase programs.
With this overview I will now turn the call back to Jeff for closing remarks. Thanks.
Thanks, Michael I'd like to conclude our prepared remarks by once again thanking IBP employees for their hard work dedication and commitment to our company. Our success over the years is made possible because of all of you.
Operator, let's open up the call for questions.
At this time, we'll be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the queue for participants using speaker equipment. It may be necessary for you to pick up here.
Handset before pressing the star keys.
Limit yourself to one question and one follow up one moment Molly poll for questions.
First question comes from the line of Ken Zenner with Keybanc. You May proceed with your question.
Okay.
Good morning, everybody.
Good morning.
I appreciate the.
Increased disclosure could you go into the thinking there was that something that.
Had been contemplated last year was it really that you are seeing such different trends.
Could you just expand that thinking because obviously I think more clarity.
It's helpful.
Hi, Ken this is Michael it really.
It has to do with the December .
Acquisition of AMD distribution.
So we decided that it made sense to break that out as a separate segment.
Okay and.
Given the strong price that we're seeing.
King.
Yes.
And they are generally more tepid volume can you describe how in the past.
What are you using the exact places, but all the price we're seeing across so many industries.
And I understand it's related to cycle times.
In many People's minds, but can you talk about how that's kind of a reset in your view in terms of more normalized.
Process as you see it unfolding given year.
Time.
In this industry not so much the distribution side, but on the install side.
Yes, Ken this is Michael again, so we had we.
Thank very solid volume growth of nearly 10% in the quarter. When you look at that relative to completions growth. Obviously, we considerably outperformed the number of units that were reported is completed by the census Bureau, we think debt consistent I think with what Youre.
Hearing from a lot of companies the inflationary.
Scenario environment is continuing we don't necessarily expect a normalization.
The inflationary environment to happen.
Certainly this year.
But.
We're hopeful and encouraged that the rate of growth and inflation.
<unk> start to come down but clearly.
Fiberglass continues to be on allocation.
<unk> foam is very tight.
And we're continuing to see.
Mismatch, if you will between demand.
And supply as it goes through not just the products that we install but the entire building products.
When you look at right.
Yeah.
Go ahead.
I was just going to say I mean, the authorized but not started unit numbers are at a historic high.
And we're continuing to see very very solid backlogs.
One of the things that I think it's a little bit lost in the discussion about permits and units and orders is that everyone looks at it in unit terms, which makes sense in a typical normalized environment, where there is little to no inflation.
But in the current environment that we're seeing a lot of inflation I think you have to sort of dollar value adjust the backlogs and if you look at just what the public builders reported in the first quarter their units were up 5%.
Which is great, which is solid but the dollar value of their backlog was up 26%. So I think youre seeing that certainly at the combination of inflation if you will.
But it's also I think a combination of the type of product that they are building as well. So when we look at that and we think of the demand environment. That's out there. We believe it's extremely solid and just as a.
Reminder, that dollar value of the backlog is more relevant to us from a pricing perspective than the unit value of the backlog.
I appreciate that if I can just make a comment your operating leverage went to 19.
Different ways to do it but it improved last year, you kind of talked about exposure to lower volume mix would you say that your exposure to.
Large production builders and it's still part of that tailwind that you're seeing in the volume consistent with the industry roughly 30% increase in inventory unit. Thank you.
Yes, yes.
Thank you to everybody.
Yep.
Our next question comes from the line of Trey Grooms with Stephens You May proceed with your question.
Hey, good morning, everyone.
That's right.
So just wanted to touch real quickly on I mean, clearly the lead times are still an issue material availability.
But with what's the outlook here.
You know where it stands with kind of this lag between completions and starts in <unk>.
Start to maybe taken a little bit of a pause I mean as you look out for the rest of the year are you expecting any change at all in the material availability, especially around.
Fiberglass.
Phone.
But also if you could kind of talk to how things are looking across your other product lines there.
So on the fiber glass and film side. This is Jeff.
Things are certainly a little better than they were for instance, this time last year or even a couple of quarters ago is it free flow supply and get everything you want every day that you want it no absolutely not.
And <unk>, maybe a little more so than even fiberglass in that regard. Although you just never know everybody is running the plants et cetera straight out in when there's an issue or downtime or even a planned rebuild that kind of throws being back back into the mix again.
Some of the other products or even maybe more difficult certainly in terms of lead time.
Probably.
Essentially even.
Their heart, a little harder to manage in terms of price increases too because there's not the same degree many cases kind of forward notification that you get inside the fiberglass industry. So that makes it a little more interesting to butt.
In general.
It's still not easy by any means but we're getting an adequate supply to obviously grow the sales the way we have been able to service our customers.
Okay.
Got it and then.
That's helpful. Jeff Thank you.
And then and then lastly.
On your commercial side of the business can you it sounds like you've got some decent backlogs, there and things like that but can you talk about maybe a little bit more of the outlook there as we kind of progress through the year.
Just the demand levels backlogs.
Conversations youre, having with with your customers on that front.
What their suggested outlook might be from where we stand today.
Yes, we continue to feel good about the both the light and the heavy commercial business the light commercial business, which has a tendency to track very closely to residential.
Construction, new residential construction, we're seeing.
Accelerated growth in that segment, if you will or that that business that end market for us, which we would have expected given the strength that we're seeing on the residential side on the heavy commercial side backlogs are continuing to build we feel good about the bidding there and we believe as we get into the.
The back half of the year, we will see more meaningful growth in heavy commercial business.
Okay. Thanks for that and last one for me.
We kind of have a decent view into.
Pricing.
On the on the fiberglass side, what's going on with things like that.
But for the other parts of your business. The other products, obviously, a lot smaller for you guys, but.
What's going on there as far as from a pricing standpoint, I know everything's up but.
Directionally, if you could maybe give us some sense of magnitude and then and then or is there more to come on on pricing across your other products.
I would say that the other products are up at least as much as the smaller ones are up at least as much as some with what you guys would normally consider kind of our core product lines around installation.
And.
I think it'd be naive if I didn't say in fact I read an article right now is handed to me by one of our board members yesterday.
Some of the some of the prognostications about how long this inflationary environment is going to last.
There is probably pretty lengthy right.
A little bit, but all I can pick up a little bit when Ken asked his question even too.
Was it wasn't very long ago, and we would still say this but I've got to be careful in saying that where we would see a rising price environment was a good thing right.
We will now by any other name its inflation rate in.
<unk> got to be careful on the one hand, but there.
Clearly you've got the Ukraine situation, you've got interest rates and everything else, but we feel constructive about our business and about the homebuilding industry and.
It is a rising price environment, and we got to do our job and do the right job for the customers and get paid what we need to get paid in order to.
<unk> provides a service we provide and cover the cost that were the cost increases we're taking.
In all product lines.
Alright, well, thanks for the color, Jeff and congrats on the progress in the quarter. Thank you.
Sure.
Our next question comes from the line of Mike Dahl with RBC capital markets. You May proceed with your question.
Good morning, Thanks for taking my questions.
I wanted to follow up on kind of the new the new segmentation.
Your standard kind of got triggered by.
The December acquisition that you made the central aluminum acquisition in April and this is kind of part of your new strategy.
Expanding your reach and building the distribution business. So as you've formulated your plans could you just give us an update on how youre thinking about how big and how broad.
You want to go.
Down the road and distribution, maybe some product categories that are that are targets and maybe.
Is that to also talk about the current M&A environment and if you're lucky.
Okay.
Sure so.
This is Jeff.
Entrants, especially into the.
The installation distribution business has been something thats been contemplated for a very long period of time.
There are not a tremendous number of insulation distributors as you probably know in most cases they line up around manufacturers and they are the a horse for particular region, a particular area or in some cases, even on a national basis. So it was not.
Kind of a field, where we got many many many all the time opportunities being presented to us. So it took us some time to find.
The write in land.
With the right partner, which we think we did with A&D, but again, it's been on our list of things to try to get done for a long time, I mean over time should be advantageous.
Not just because you are adding the distribution business, but more because it has the ability to aid.
And help us out on the install side of things and AMD. In addition to doing just pure kind of distribution is also does a degree of laminating, a fiberglass, which is a product that we use quite a bit in certain regions. So over time, we'll probably.
Start to satisfy some of our own needs in that regard.
It's not a dissimilar idea with the acquisition of the gutter business over time.
We've got some great supply partners on the Qatar side, so and we're working with them and.
And we will continue to our acquisition in New Jersey is really a small standalone business.
Quite frankly, it was kind.
Kind of opportunity that we were already purchasing from them from one of our most significant pieces of our debtor business.
At the two owners were trying to figure out what they were going to do kind of later in life. They are going to stick with us for quite some time.
Really like them as a management team and so it was an opportunity we thought we should jump off.
But I would say on your point of your question on the M&A pipeline there, we're not actively pursuing other distribution opportunities.
At this point, it's more sort of regular way deals that we're looking at.
Okay.
That's very helpful. Yes. Thank you my second question just to go back to the volume side.
For a minute.
So given the given the share gains year to date and what you're seeing.
The mix.
Mix of customers, how should we be thinking about.
Volume as we go through the year maybe either.
Yes.
Absolute terms or if you want to give kind of relative to the market.
And based on.
What we had discussed earlier in terms of just the unit volume growth with the big builders.
We have.
Fairly.
Fairly high share with them, which is understandable given our overall Nash.
Our national market share, so we feel very constructive around volume growth.
For this year and quite frankly going into next year, particularly when you look at the backlog and the Delta that has been created between starts and completions and the.
The authorized but not started as well being.
Record level. So we continue to remain very constructive around volume.
And also around price mix.
Thank you.
Sure.
Our next question comes from the line of Susan Macquarie with Goldman Sachs. You May proceed with your question.
Thank you good morning, everyone and congrats on a great quarter. Thank.
Thank you.
My first question is as you noted in your comments Michael Your SG&A came in exceptionally low and really reflected the ability to.
To get some leverage on the cost structure. This quarter. When you look out can you talk to the ability to sustain that level and how we should be thinking about the SG&A longer term as you continue to grow the business.
Well a lot of the increase in SG&A going forward is going to be a function of acquisitions, because obviously when we do acquisitions.
There are SG&A, but as we and I think as you. If you look back in past quarters, where we had excellent price mix volume growth.
Does help and lead to very good.
Leverage on on SG&A.
Quite frankly.
The efficiencies that we're gaining and being able to cover that.
Significant increases within the individual branches.
<unk> has continued to lead to strong SG&A leverage and based upon our previous comments about our constructive perspective on both volume and price mix we would.
<unk> continued to see or expect to continue to see improvements in the leverage.
Okay. That's helpful. And then my next question is obviously, when we think about the volume and the growth that you saw this quarter. In addition to the material side. It also speaks to the labor right and I know that you've got a lot over the last several years to attract and retain labor can you talk to how you are positioned to continue this.
Support the growth as you think about those builder backlogs and what is coming through for.
For the balance of this year and next year and just any new initiatives that we should be aware of as it relates to a lot of the employee base.
I don't.
Susan This is Jeff I.
I think we're in really pretty good shape.
Good a shape as you could ever expect under these conditions.
Like that.
Probably better at I guess, if you pick up a newspaper or anything today or.
That ounces <unk> old rate I, just said pick up a newspaper.
So ni.
And I am off but.
You know everybody is talking about labor and about wages. So we're not.
Isolated from that by any means but we feel really good about our position there I don't know that we necessarily have any.
Real new programs to talk about but all the programs we put in place in the past we continue to run.
And refined and it shows I think in our workforce.
Yeah, Okay. Thank you and good luck with everything.
Thank you.
Our next question comes from the line of Adam Baumgarten with Zelman you May proceed with your question.
Hey, good morning, everyone.
First I believe last quarter, you guys said you expected about a mid single digit growth.
<unk> growth for 2022, and completions any change to that to that outlook at this point.
Obviously this is Michael I mean, obviously with the decline that we saw in the first quarter as reported by the census Bureau.
Can it be more difficult to get to that number, but we definitely believe that there will be completions growth this year.
On a full year basis.
And.
Obviously, we're prepared.
To support that we do think though that the again this or the dollar value of what's in the backlog not as much. The units that are in the backlog is pretty important when youre looking at the opportunity set for us going forward.
Okay got it and then just on the topic of mixing.
Any meaningful impact in the quarter, whether it's positive or negative.
The other products were fairly neutral in the quarter from a mix perspective, we did see higher growth with our.
National builders, which as you know has a lower tends to be lower.
Rice, just because of the product that they're building. So we had some headwinds from the growth in our national builder business on the next side, but the other products again, we're fairly neutral.
Got it thanks a lot.
Yeah.
Our next question comes from the line of Stephen Kim with Evercore ISI. You May proceed with your question.
Thanks, guys, it's actually Trey morrish on for Steve.
Sure.
With the cycle with completions dropping in builder cycle times are extending and you guys put up a 9%.
Volume growth on the same branch and.
Talked about a little bit, but I wonder if you could give a little bit more specific on what you guys do or what were you able to.
Could garner this quarter to be able to actually see volume growth when the environment more broadly speaking it seems more challenge to get volume.
And if you can flatten out.
It's consistent with our historical trend of providing high quality service and really trying to have the best customers in every.
Market and when we say the best customers will remain in the customers that are winning market share in those markets and doing everything we can to.
Support them in their efforts to meet their timelines and get their houses completed.
It's back to the labor get too, where we're still we're positioned pretty well up on labor.
Maybe some others aren't so.
Got it thanks for that and then.
Looking at the share authorization and their purposes, you did in the quarter. This is definitely a good chunk of cash there and you highlighted in your release that you still have about $150 million left.
How should we think about.
Your willingness and particularly aggressiveness in using that to to.
To buy back shares.
This is Michael I mean, we have positioned the balance sheet very favorably our leverage we think is very prudent.
We have considerable cash and availability under our ABL facility.
I'd say that the way that we have looked at share repurchases is that they are always opportunistic so.
We're making those purchases in essence in the in the open market based upon.
Again, the opportunity that's in front of us I would say that in the first quarter.
As you know purchased approximately $50 million of shares at about $100 a share. Obviously, we thought it was very attractive then we feel better about the business now than we did in the first quarter. So.
I think we're pleased that we're positioned very well to be able to look at multiple ways to return.
Capital to shareholders.
Okay.
Alright, Thank you very much.
Sure.
Our next question comes from the line of Keith Hughes of tourists. You May proceed with your question.
Thank you a question about gross margin.
Gross margin in the quarter was actually slightly higher than we had a couple of years ago.
Our gross margin that we saw in 2020 years, that's something that could be repeatable. So that we make today about 2022.
Yes, yes.
Okay.
Is that just better price realization versus last year was or anything else.
Clause that year over year increase.
A lot of it is price realization as well as the volume growth both contribute meaningfully to improvements in gross margin.
As a consequence EBITDA margin.
Okay, Alright, and then one comment Jeff I also pick up a newspaper so youre not alone.
Yeah.
Thank you.
Yeah.
Our next question comes from the line of Mike <unk> with Jpmorgan. You May proceed with your question.
Hi, Good morning, Doug Wardlaw Hunter Mike.
Wondering if you guys could give a little bit of further color on COVID-19 impact on the commercial business I know you've referenced the backlog a few times now just wondering what the impact on <unk>.
Business, now and where you.
See that moving forward, especially as COVID-19 seems to be subsiding, a little bit.
We're definitely continuing to see lingering delays in the time to complete projects and start time of projects. So.
Projects that we thought when we bid them say last year or the year, even the year before last that we thought would have gotten started and we would have done the work.
Within six months is getting extended to 12 and 18 months.
But fortunately the backlog continues to be there we think there the backdrop for commercial were particularly heavy commercial work is extremely constructive.
And we feel encouraged about the ability of that business to start having some meaningful growth rates as we go into the latter half of 'twenty, two and the beginning of 'twenty three.
Got it and then just secondly, how are you thinking of the M&A pipeline over the next 12 to 24 months and has it changed at all and does the current rate environment make you any less accurate.
No I don't think that the current rate environment would make us less active the pipeline remains robust.
As I've said many times before you know most sellers in the businesses, where we're looking to buy.
Other smaller in general cause.
Contractors I mean, the sellers, there's a lifecycle to when they want to sell and it's not driven by.
Really much.
A macro thing, it's really their life and kind of where they are in their life snap to sellers like to sell in a down market no in general.
A lot of people say well don't you get a good deal of down market not generally.
Because most of the people we're talking to have been in this business for a while that Britain down up and down a few kind of good markets and bad markets in the housing industry and so.
Don't know that it's any different than it has really been in terms of our opportunities going forward from an acquisition perspective, we feel pretty good about the pipeline.
Really the returns around so associated with by the businesses, which doesn't.
Hugely impacted by the kind of cost of capital increases that we're talking about here.
Awesome. Thank you guys.
Our next question comes from the line of Dan Oppenheim with Credit Suisse. You May proceed with your question.
Thanks, very much for taking the question I guess wondering in terms of that you talked about the opportunistic share repurchase.
And the acquisition pipeline how has your thoughts as you sort of weigh the two opportunities.
Should we expect to see chairperson, continuing and still some acquisitions here.
I guess to start with that.
Yes, we have purposely positioned the company to have ample liquidity combined with low leverage so that we can.
<unk> actively and opportunistically pursue both acquisitions and share repurchases combined with the fact that the company generates considerable free cash flow. So we feel very good about our ability to.
Invest in acquisitions invest in the growth business and also Opportunistically do share repurchases.
Great. Thanks, and then I guess, the second one and with the the comment about the share repurchase you had said that you feel better about the business then during the first quarter and understanding that the backlogs in that strength continuing.
Is that aren't talking about feeling better now is that more on the what you're seeing on the commercial side or something on the residential side. That's just that's still continuing.
Continuing to be strong, what's leading you to feel even better than the first quarter.
It's really all of the above we feel better about the commercial business we're seeing.
Positive trends, there which is encouraging.
Buying with.
What we're seeing continuing to see on the price mix side as well as the backlog that we've been talking about that is out there. So.
All of those things.
<unk>.
We believe moving forward on a constructive in a constructive way.
Great. Thank you sure.
Yeah.
As a reminder, if you would like to ask a question. Please press star one on your telephone keypad.
Our next question comes from the line of Ryan Gilbert with <unk>. You May proceed with your question.
Okay.
Hi, Thanks, good morning, everyone.
First question for me.
<unk>.
I'm wondering if you saw any change are an increase in the sense of urgency from your homebuilder customers.
To get to get on.
Inventory up ahead of the spring selling season, especially in light of of higher mortgage rates and if thats. If you think that influenced your quarters results at all.
Yes, and yes.
I want to expand on that at all.
You know the I think it was.
Been well discussed by the publics that the public homebuilders that they want to get houses completed and they want to start.
Getting foundations for getting houses framed and they wanted to start delivering you know added accelerated paces at an accelerated basis as many houses as possible because they continue to believe as do we that there is still a very solid demand out there. Despite the increase in mortgage rates and that.
They are better served and we're better served by working hard to meet that demand obviously, the completions growth as reported by the census Bureau was fairly disappointing but.
But we believe that that just points to the strength of the underlying backlog and we're going to continue to work with our customers to help improve their cycle times as much as we can because we know how important that is to them.
Okay, Great that's really helpful.
And then I guess, just given the completion backlog.
We do see higher mortgage rates impact demand at some point.
Maybe in the second half of this year and that causes some deceleration or deterioration starts do you think you have enough.
Alright, well at least as you see it is there enough backlog to support.
Growth through the rest of 'twenty, two and then whatever we see if there. If there is some deterioration that ends up being a 2023 a share or do you think that could bleed into 'twenty two.
I mean, obviously it depends upon the deceleration, but we believe that there is plenty of work to do in 'twenty, two and into 'twenty three.
It's really unprecedented that dollar value the current backlog.
Well in the expansion of the time it takes to build a home.
Just a lot different.
Historically, we've all defined it to be and quite honestly a slowdown in starts would help.
Reduce that construction cycle time, and we don't expect it to be quote unquote normal anytime soon but anything we can do to reduce it even a couple of weeks. We believe is very constructive.
Okay, great. Thanks.
Sure.
Ladies and gentlemen, we have reached the end of today's question and answer session I would like to turn this call back over to Mr. Jeff Edwards for closing remarks.
Thank you for your questions and I look forward to our next quarterly call. Thank you.
This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation during the rest of your day.
Okay.
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Okay.
Sure.
Okay.
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