Installed Building Prods Q3 2026 Earnings Call Transcript

Installed Building Prods (NYSE:IBP) reported third-quarter financial results on Thursday. The transcript from the company’s third-quarter earnings call has been provided below.

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Summary

Installed Building Prods reported record third-quarter revenue of $808 million, a 4% increase driven by commercial, multifamily, and recent acquisitions, despite softness in single-family demand.

The company’s commercial installations saw double-digit growth for the sixth consecutive quarter, while multifamily sales grew by 8% and the “other” segment grew 19% due to acquisitions.

Installed Building Prods completed four acquisitions in the quarter, adding approximately $22 million in annual revenue, with expectations of at least $100 million in acquired annual revenue for the full year.

The third-quarter adjusted gross profit margin was 32%, impacted by higher input costs like aluminum and fuel, although insulation product margins remained stable year over year.

The company raised $250 million in additional debt to support acquisition strategies, maintaining pro forma leverage below their two times target, and continued to prioritize acquisitions and shareholder returns.

Management remains optimistic about the company’s prospects despite industry-specific headwinds, highlighting robust acquisition pipelines and strategic diversification across markets and products.

Full Transcript

OPERATOR

Greetings, welcome to the Installed Building Prods third quarter 2026 financial results conference call. At this time, all participants are on a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star-0 on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Ryan Ricketts, Vice President of Investor Relations. Thank you, Ryan. You may begin.

Ryan Ricketts (Vice President of Investor Relations)

Good morning and welcome to Installed Building Prods third quarter 2026 earnings conference call. Earlier today we issued a press release on our financial results for the 2026 third 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 federal securities laws. These forward-looking statements are based on management’s current beliefs and expectations and are subject to factors that could cause actual results to differ materially from those described today. Please refer to our SEC filings for cautionary statements and risk factors. We undertake no duty or obligation to update any forward-looking statement as a result of new information or future events, except as required by federal securities laws.

In addition, management refers to certain non-GAAP and adjusted financial measures on this call. You can find a reconciliation of such non-GAAP measures to the nearest GAAP equivalent in the company’s earnings release and investor presentation, both of which are available in the Investor Relations section of our website. This morning’s conference call is hosted by Jeff Edwards, our Chairman and Chief Executive Officer; Michael Miller, our Chief Financial Officer; and we are also joined by Jason Niswonger, our Chief Administrative and Sustainability Officer; and Brad Wheeler, our Chief Operating Officer.

Jeff, I will now turn the call over to you.

Jeffrey Edwards (President)

Thanks, Ryan, and good morning to everyone joining us today. As usual, I will start the call with some highlights and then turn the call over to Michael, who will discuss our financial results in more detail before we take your questions. Third quarter revenue reached a record $808 million, up 4%, driven by our commercial, multifamily, other segment, and recent acquisitions. That result came in a residential market where single-family demand remains soft, and it is direct evidence that the diversification strategy we have built is working as designed. Our residential installation business continued to outperform broader housing market trends, demonstrating the strength of our operating teams, the benefits of our diversified platform, and the multiple avenues available to support growth across varying market conditions.

Overall, we believe these results demonstrate the value Installed Building Prods provides customers across the markets we serve and products we install. Throughout the quarter, lower consumer confidence along with affordability concerns and rising mortgage rates have made new home sales more challenging. Even with industry-specific headwinds expected to continue to affect our new residential installation segment in the near term, our overall business remains resilient.

All the credit goes to the hard-working men and women across our more than 250 branches throughout the United States and those who support them. From our office in Columbus, Ohio to everyone at Installed Building Prods, thank you for your hard work and dedication. Looking at our 2026 third quarter performance, consolidated sales increased 4% and same-branch sales were slightly positive. Our commercial end market continued to show strength, delivering double-digit installation sales growth for the sixth consecutive quarter, with heavy commercial sales growth exceeding 13% during the quarter. With respect to our new single-family end market, activity remains challenged as a result of affordability concerns and lower consumer confidence, with some geographic markets feeling more upbeat than others.

In our multifamily end market, sales grew 8% during the quarter and our contract backlog continues to grow. Our other segment revenue grew 19% net of eliminations, partly due to acquisitions, and is up 33% year to date. We continue to effectively manage both material and labor to meet the needs of our customers and remain flexible to adjust to the varying demand across regions. During the 2026 third quarter we completed four acquisitions representing approximately $22 million in annual revenue. Our pipeline supports our expectation of at least $100 million of acquired annual revenue for the full year. Acquisitions during the quarter included an installer of shower doors, closet shelving, mirrors, and other accessories across residential markets, serving customers throughout Minnesota and surrounding states, with annual sales of approximately $7 million; an installer of door, bath, and fencing hardware, primarily in new residential markets throughout South Carolina and Georgia, with annual sales of approximately $7 million; an installer of fireplaces, primarily in new residential markets throughout Maryland, Virginia, West Virginia, and North Carolina, with annual sales of approximately $4 million; and finally, an installer of insulation, fireplaces, and gutters, primarily in new residential markets throughout Oklahoma, with annual sales of approximately $4 million.

I’m proud of our team’s continued success and commitment to doing an excellent job for our customers. Once again, to everyone at Installed Building Prods, thank you. I remain encouraged by the fundamentals of our industry, our competitive positioning, and I’m optimistic about the prospects ahead for Installed Building Prods and the broader installation, complementary building product installation business. With this overview, I’d like to turn the call over to Michael to provide more detail on our 2026 third quarter financial results.

Michael T. Miller (Chief Financial Officer)

Thank you, Jeff, and good morning everyone. Consolidated net revenue for the third quarter was up 4% to a record $808 million compared to $778 million for the same period last year. Same-branch sales for the installation segment increased 0.3% for the third quarter, as a 5% decline in new single-family same-branch sales was offset by a 10% increase in commercial same-branch sales and an 8% increase in multifamily same-branch sales. Price/mix increased 0.4% during the third quarter, or 2% including heavy commercial.

Volume during the 2026 third quarter decreased by 2%, primarily due to lower new single-family volume. Third quarter adjusted gross profit margin was 32%. Roughly 180 basis points of the year-over-year decline is attributed to specific input costs—aluminum at 100 basis points, fuel at 40, and freight at 20—with a further 20 basis points from the faster growth of our other segment. Gross margins were also negatively impacted by a mix shift to complementary products, which have a lower gross margin profile than insulation. Importantly, insulation product margin was essentially flat year over year, illustrating that the core business is performing.

For the first nine months of this year, adjusted gross margin was 32.4% and installation gross margin was 35.7% compared to 36.5% in the prior year. The decline in installation gross margin was attributable to the higher cost of aluminum and fuel, which were a negative impact of 50 basis points and 40 basis points, respectively. Adjusted selling and administrative expenses increased 4% compared to the 2025 third quarter. As a percent of third quarter sales, adjusted selling and administrative expense was 18.2%, consistent with the prior year. Adjusted EBITDA for the 2026 third quarter was $128 million, reflecting an adjusted EBITDA margin of 15.9%, and adjusted net income was $73 million, or $2.76 per diluted share.

Although we do not provide comprehensive financial guidance, based on recent acquisitions we expect fourth quarter and full year 2026 amortization expense of approximately $10 million and $42 million, respectively. We would expect these estimates to change with any acquisitions we complete in future periods. Also, we continue to expect an effective tax rate of 25% to 27% for the full year ending December 31, 2026. Our third quarter net interest expense was $10 million compared to $7 million for the 2025 third quarter. We would expect fourth quarter net interest expense of approximately $15 million. At September 30, 2026, we had $396 million in working capital excluding cash and cash equivalents. Capital expenditures and total incurred finance leases for the three months ended September 30, 2026 were approximately $16 million combined, which was approximately 2% of revenue.

We ended the third quarter with $416 million in cash on the balance sheet, and we will continue to prioritize acquisitions with long-term strategic benefits and attractive returns on invested capital. We expect positive free cash flow will continue to support shareholder returns and stock buybacks based on prevailing market conditions. After quarter end, we completed a $250 million add-on to our existing Term Loan B on identical terms, increasing the total to approximately $740 million, with all rating agencies reaffirming their ratings. We raised this capital proactively from a position of strength at 1.3 times leverage to ensure we can perform on our acquisition strategy. Pro forma leverage remains comfortably below our two times target, and we have no near-term maturities.

At September 30, 2026, the company had approximately $398 million available under its stock repurchase program, which expires March 1, 2027. Installed Building Prods’ board of directors approved the fourth quarter dividend of $0.39 per share, which is payable on December 31, 2026 to stockholders of record on December 15, 2026. The fourth quarter dividend represents a more than 5% increase over the prior year period. We are committed to continuing to grow the company while returning excess capital to shareholders through our dividend policy and opportunistic share repurchases.

With this overview, I will now turn the call back to Jeff for closing remarks.

Jeffrey Edwards (President)

Thanks, Michael. I’d like to conclude our prepared remarks by once again thanking Installed Building Prods employees for their hard work and commitment to our company. Our success over the years is made possible because of you. Operator, let’s open up the call for questions.

OPERATOR

Thank you. We will now be conducting a question-and-answer session. We ask that you please limit yourself to one question and one follow-up. If you would like to ask a question, please press star-1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star-2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

One moment, please, while we poll for questions. Our first question is from Phil Ng with Jefferies. Please proceed with your question.

Phil Ng (Analyst at Jefferies)

Hey guys, you know, tough environment for sure. Managing through that reasonably well, particularly I appreciate the color, Michael, in terms of the install margins holding up pretty well in this backdrop. But I guess, you know, as we kind of look out to ’27 and beyond, you know, there’s a view that single-family starts could be down. Can your install business take price to kind of offset inflation? Are you in a position where you could maintain that longer-term gross margin framework in that 32% to 34% range in a softer potential environment as we look out to 2027?

Michael T. Miller (Chief Financial Officer)

Yeah. Phil, thanks for the question. Obviously, a lot depends upon how the single-family market develops in 27. Our current expectation is that both single-family and multifamily starts are down sort of mid-single digits in the year. I think, you know, we know that when single-family starts are down sort of mid-single digit, getting price realization is tough for sure. However, we’ve continued to do extremely well in terms of gaining market share and performing very well on the multifamily side, which I think this quarter’s results reflect that in a very strong positive way.

So I think that on the multifamily side we will be able to offset some of that weakness. We’ll feel it. And as everybody knows, the comps are just very, very difficult coming in. I mean, a little bit weaker. Obviously this is the first quarter in, I don’t know, six or seven quarters that multifamily inflected positively and our backlogs are growing there. Not by much, but they’re definitely growing there. So to answer your question, yes, I think that we can stay within that 32 to 34 full-year range, but we’re clearly going to be at the low end of the range. We’re not going to go at 34. And, you know, and certainly, as I think everyone on the call realizes, our fourth quarter gross margin last year was a record gross margin that we recorded as a public company. And we clearly don’t expect that to be the case in the fourth quarter of this year because some of the headwinds that we noted in our prepared remarks will continue.

I mean, clearly fuel and freight are going to continue to be headwinds on the aluminum side. You know, if there is one thing we’re disappointed about in this quarter it is that we didn’t get on top of the gutter margins as quickly as we should have. We are very deliberately and actively working with our customers to get that margin back up. And we do not think it will be the same kind of headwind that it was in the third quarter and the fourth quarter.

We do not think we’ll recover 100% of the margin. But it definitely won’t be as much of a headwind. I would say on the positive side, the team, while they didn’t do a great job on the gutters, they did an amazing job on spray foam. And as we had talked about last quarter, you know, there was a very hard, significant 20% plus price increase in spray foam and they maintained margin throughout the whole quarter. So we were very pleased with the result there.

Phil Ng (Analyst at Jefferies)

Okay, helpful, Michael. I think a weaker single-family backdrop is well appreciated, but with rates going higher, have you seen an air pocket in your commercial business? Particularly like commercial. And then on the multifamily side, I mean, you said you’re expecting multifamily starts to be down mid-single digits. But on the flip side, I mean, your business turned positive and contractor backlogs remain good. Is that a backdrop where, one, given your share gains in multifamily, you can grow in multifamily next year?

And just any color in terms of what you’re seeing on the commercial side of things?

Michael T. Miller (Chief Financial Officer)

Yeah, I mean, you’re absolutely right. On the light commercial side, it’s definitely getting tougher because of the rate environment. I would say on the heavy commercial side, we continue — that literally knocked the cover off the ball, quite frankly. At the end of the quarter, their backlogs were up mid-teens from what was already high record levels. So while the comps there, again, as everybody knows, are extremely difficult, particularly in the fourth quarter, the team there has continued to perform very well and we feel good about, you know, the progress that they’re continuing to make on that side.

On the multifamily side, the rate environment has definitely taken a little bit of the wind out of the sails for multifamily developers. I mean, what you’re seeing is a lot of equity is trapped in existing multifamily projects that are actually doing better from a rent growth and occupancy perspective. But the developers can’t get the equity out because cap rates have gone up and the value of the buildings has gone down. So that’s definitely taking wind out of the multifamily sails right now.

And while we have a lot of confidence about our ability to outperform relative to the market, we just think it’s a tough market, quite frankly. So, you know, they will continue to — you know, again, we have confidence around our ability to gain share and perform well. I mean, when we look at the quarter on, you know, the multifamily revenue that we generated in the quarter, I mean, it was across pretty much all regions that we had a pretty solid, you know, multifamily number.

I would, just bouncing back to the heavy commercial, just kind of remind people that the fourth quarter revenue for both total revenue and same branch revenue, 38.5% in the fourth quarter — that is the toughest comp we’re going to face as a company since we’ve been reporting the heavy commercial business separately. So just as a level set relative to where we expect that business to do in the fourth quarter and through 27,

Phil Ng (Analyst at Jefferies)

Can you still grow on that tough comp in fourth quarter with heavy commercial, given the backlog you’re seeing? Your view?

Jeffrey Edwards (President)

Yeah. I mean, obviously we don’t provide guidance, but the portion of the business that we are most excited about clearly is the heavy commercial business and the opportunities that are there.

Phil Ng (Analyst at Jefferies)

Okay, really helpful color. Appreciate it, guys. Thank you.

OPERATOR

Our next question is from Michael Rehaut with Melius. Please proceed with your question.

Michael Rehaut (Analyst at Melius Research)

Hey, thanks. It’s Mike Rehaut from Melius Research. Appreciate you taking my questions. First on the M&A update and, you know, the four companies acquired, you know, during the third quarter, you know, all in the complementary side. And I’m just wondering, you know, in terms of what you’re seeing out there from an M&A landscape, if it’s also a little bit more oriented towards complementary and if so, what might that mean for gross margins over the next two to three years if that shift continues?

Michael T. Miller (Chief Financial Officer)

Yeah, this is Mike. I’ll start and then Jeff can kind of follow it up. But I would say the pipeline is very robust. We feel great about the deals that are there. And it’s a mixture of things including regular way insulation installers. I would say that your average single-market insulation installer has not delivered the kind of performance that we have delivered. And as a consequence, they’re not super excited about selling their business in, for them, what is a pretty tough environment.

I mean, keep in mind, you know, one of the things that we think is most attractive about Installed Building Prods is not only our broad geographic dispersion and our, you know, the geography that we have and our overweight towards the top half of the country, which continues to do better than the bottom half of the country, but it’s the diversification of the business and the strength of the multifamily and the strength of the commercial. A traditional insulation installer that we’re buying doesn’t have that kind of diversification to offset what are pretty tough conditions in the single-family side.

Now, that being said, we have deals that we expect to close in the near term that are regular way insulation installers, but some that are other products. We feel really good about our ability to continue to execute and perform on the acquisition strategy.

Jeffrey Edwards (President)

This is Jeff. I agree with Michael. In terms of just kind of the way the chips came in, per se, the mix is normal. But the other thing that happens is when the market’s a little tougher like this, some of our leads come from the field and come from the branch managers. And to the extent that they’re trying to get into other products to bolster sales volume in their locations, there’s sometimes a tendency to kind of surface more of the other product deals.

And it’s an intentional move on our part. Yeah, it actually is the best time for us to really build out more of the complementary product strategy, which, as you all know, is something we’ve been working on for a long time.

Michael Rehaut (Analyst at Melius Research)

No, absolutely appreciate that. And I guess just following up on the comments in the prior question around, you know, what you’re hoping to do with recovering some of the aluminum headwinds that you saw in the gutters business in 3Q into 4Q. I just want to try and make sure that I’m appreciating the dynamics there in terms of a — I would assume you’d be able to only recover, let’s say, a portion of that, you know, maybe the 50% type of range of that hundred bps, if that’s broadly speaking, the right way to think about that.

And conversely, if there’s any other incremental headwinds that you might see sequentially — specifically, I’m talking about, I’m thinking about fuel or freight — but if there’s any others, you know, just trying to think about the sequential progression here. You know, aluminum maybe being less of a headwind, but if there are any other incremental headwinds relative to 3Q into 4Q, that would be helpful.

Michael T. Miller (Chief Financial Officer)

Yeah, I mean, I think again, obviously we don’t give guidance, but we’re working very hard to offset that 100 basis points headwind within gutter sales. I mean, you know, the one positive is that aluminum prices on average in the month of October were down about 6.5%. Now, that’s still up 15% from last year. But that will help us offset some of the headwind that we experienced in the third quarter. I mean, is it going to be 50 basis points, 100 basis points?

Again, we don’t provide guidance, but, you know, the team’s working very hard to make it be as little of an impact as possible. But there will still be some. I mean, we just have to be honest about that. And we will continue to have, unless something changes very dramatically here, like tomorrow, we’re going to continue to have the headwinds associated with fuel and freight. And then, I mean it’s a good thing, but it’s a bad thing for gross margin, is the continued strong growth of the Other segment.

The one thing that I will comment around the Other segment is the overall growth rate there will come down in the fourth quarter because something that is driving that growth rate as high as it is is the fact that in the fourth quarter of last year we did two acquisitions that were in the Other segment. So we would expect that Other segment revenue growth is going to be more similar to what the Other segment same-branch sales growth was in the third quarter, which is, you know, mid-single digits.

Michael Rehaut (Analyst at Melius Research)

Great, thank you.

OPERATOR

Our next question is from Sam Reed with Wells Fargo. Please proceed with your question.

Sam Reed (Analyst at Wells Fargo)

Awesome. Thanks so much, guys. Wanted to touch on competitive dynamics in install more broadly. Obviously there is a competitor that is under new ownership and it’s now, let’s call it four or so months into that ownership. So any senses to changes in competitive behavior and dynamics that we should be mindful of?

Michael T. Miller (Chief Financial Officer)

Yeah, this is Michael. I’ll start that and then let Brad sort of follow up. But I, you know, our general sense — you know, and obviously it’s different market to market and I think as everyone can appreciate that — particularly the production builders, the public builders, you know, are definitely under considerable margin pressure themselves and, you know, it’s necessitated significant dialogue and conversation with all of their trades. And I would say during that process we’ve been very disciplined and, you know, I think our competitor, our largest competitor, has been very disciplined as well.

Brad Wheeler (Chief Operating Officer)

This is Brad, I would agree. I mean our largest competitors, they’ve always been a good competitor and they still are. Nothing’s really changed. We haven’t noticed anything in the field contrary to that.

Sam Reed (Analyst at Wells Fargo)

Really helpful.

Jeffrey Edwards (President)

Yeah, it was pretty much across the board. I mean, I think as we indicated or certainly have talked to investors about, you know, the spray foam product is a semi-custom, custom home product for the most part. And that customer set is the most willing to accept price increases. And I would say unlike with gutters and aluminum, we had a lot of advanced knowledge about the price increase coming and it was very well telegraphed to certainly our customers and to our employees so that people were ready for it.

And as a consequence, particularly because with the custom home, the bid-to-install time can be quite long just given the nature of the length of those projects. So I think the team did a better job than we expected them to do, quite honestly, in forward-pricing price increases, the material price increases, to maintain the margin. And quite frankly it also helps that there is pretty good discipline within the spray foam contractor base to maintain margin.

I don’t know, Brad, if you want to add to that, but—

Brad Wheeler (Chief Operating Officer)

You covered it.

OPERATOR

As a reminder, we ask you to please limit yourself to one question and one follow-up. Our next question is from Stephen Kim with Evercore ISI. Please proceed with your question.

Stephen Kim (Analyst at Evercore ISI)

Hi, this is a tee shot for Steve, sort of touch on the commercial side. Specific heavy commercial. Can you give us an idea of which verticals specifically are supporting growth, which are a little bit more consistent in terms of that growth contribution versus ones that may be a little bit more lumpy or volatile?

Jeffrey Edwards (President)

Sure. I mean, the big drivers of growth in the backlog, which is then comparable for what the reported results are, but recreational and entertainment has been strong. Industrial and manufacturing has been very strong. Actually retail has been solid for us. It’s not a big portion of the overall revenue, but it has been growing significantly from a backlog perspective. And then lodging and hotel has been pretty solid. The areas of weakness, maybe not surprising, multifamily, a little bit of education and a little bit of transportation. Part of the transportation weakness though is that those projects tend to be pretty high dollar value. So when some of them roll off, it takes a while to build back up the backlog in those. But, I mean, as we look at it overall, as I mentioned, a mid-teens increase in their backlog is phenomenal. The only thing disappointing about it is that they’re only like 10%, 11% of revenue.

Stephen Kim (Analyst at Evercore ISI)

Great, that’s super helpful. And then I just wanted to come back to the multifamily conversation. A lot of detail there and kind of the challenges that you’re expecting. But I guess in terms of the kind of the outperformance versus the market, can you kind of touch on how the CQ team is kind of contributing to that? And, you know, any context there would be helpful.

Jeffrey Edwards (President)

Yeah, I mean, CQ is helping drive that for sure. Although the teams, the non-CQ teams, if you will, actually did a really nice job on the multifamily side in the quarter as well. What’s really starting to happen is the success of CQ in the South census region is starting to expand into the other regions, particularly the West and the Mid-Atlantic. And we’re starting to see the fruits of that effort and that work. And we believe we have tremendous potential, particularly in those two regions, to increase our market share. We estimate that in the South census region where CQ is dominant, that we have over 50% market share in multifamily, which is phenomenal, but our market share in those other markets is considerably lower— or the other census regions. So there’s a lot of runway there. It’s a runway in a market that is admittedly very challenged, as I think pretty much everyone on this call would know, is that in the third quarter, multifamily starts, which had been growing, were down almost 10% in the third quarter.

So that I think is indicative of the rate increases and, you know, the headwinds that multifamily developers and owners are seeing. And there definitely appears to be a near-term pullback in multifamily development, which I think everybody understands the dynamics around rates and that.

Stephen Kim (Analyst at Evercore ISI)

Great. Thanks a lot.

OPERATOR

Our next question is from Susan McClary with Goldman Sachs. Please proceed with your question.

Susan McClary (Analyst at Goldman Sachs)

Thank you. Good morning, everyone.

Jeffrey Edwards (President)

Hey, Susan. Good morning.

Susan McClary (Analyst at Goldman Sachs)

My first question is, in your prepared remarks, you mentioned that there were some markets that had outperformed other markets. Can you talk a bit about what you’re seeing geographically and did that have any implications in terms of this quarter’s results or how we should think about the end of the year or even early 27?

Jeffrey Edwards (President)

Yeah, I mean, I’ll call out some states that we had a lot of headwinds in. And I’m only talking about the big states for us, not some of the smaller states, but Colorado, Indiana, Texas, Virginia, Washington were a little challenged. We were very pleased that California and Florida stabilized in the quarter, which was nice to see, particularly Florida stabilizing. You know, North Carolina was pretty good for us. We had some incredible performances in some of our states, like Georgia, Minnesota, our hometown, Ohio, South Carolina, Wisconsin.

Some of those states were actually up double digits, believe it or not. So, yeah, we felt like it was balanced. But when we look at state-by-state performance, two things that really stood out for us was the performance in California and Florida. And that felt like they hit bottom, which is good.

Susan McClary (Analyst at Goldman Sachs)

Yeah. Okay, that’s encouraging to hear. And then switching to the volume versus price mix, it’s been nice to see how price mix has been flat, excluding heavy commercial, even with the volume pressures that are coming in. Right. Your volumes have been down, call it low to mid single digits. Can you talk about the ability to sustain that going forward and how we should think about the different moves coming through as perhaps single-family starts further moderate?

Jeffrey Edwards (President)

Yeah, thanks for the question, Sue. I do think that price mix is going to continue to get more challenged as we progress through the fourth quarter and going into 27 based upon our expectations, you know, for the market. So, you know, one of the things that we mentioned, you know, last quarter and for several quarters, you know, one of the things that we do is we track when the public builders report their numbers and their homebuilding revenue was down in the third quarter 7% or so.

And our revenue with them was down about 7%. So we track pretty closely with them. Based upon their current guidance consensus for the fourth quarter, it would imply that our fourth quarter revenue with them is going to be down roughly 6%. So we think that’s going to be tough both from a volume and a price mix perspective. I would say in the quarter that the private builders were basically flat in Q3. This has been a trend now for multiple quarters that the private builders continue to outperform with us anyway relative to the public builders. You know, it’s, I think everybody appreciates this on the call, that the toughest part of the single-family market right now is the entry level, which the public builders have very, very high market share in. So it is going to continue to be a challenge.

But fortunately we do have the benefits and the diversification with the commercial business and our ability to continue to take share on the multifamily side. And we were talking about, and I get it, focusing on starts because that’s a much more forward-looking metric versus the backward-looking metric. But I think we really need to highlight the company’s performance relative to completions in the quarter. You know, with single-family completions down 12% and multifamily completions down 27%, our performance relative to that in the quarter highlights the strength of our team and of our business model.

And while it’s not a perfect correlation on a quarterly basis, it is a good indication of the performance that we had in what was and what continues to be a very tough environment.

Susan McClary (Analyst at Goldman Sachs)

Okay, thank you for all the color and good luck with the quarter.

OPERATOR

Our next question is from Adam Baumgarten with Vertical Research Partners. Please, please proceed with your question.

Adam Baumgarten (Analyst at Vertical Research Partners)

Hey guys. Good morning. Noticed that you guys didn’t buy back stock in the quarter and had recently raised some debt as you guys mentioned at the top of the call. I guess can you talk through your appetite for maybe some larger, chunkier acquisitions, perhaps in tangential parts of the business like mechanical insulation install?

Michael T. Miller (Chief Financial Officer)

Yeah, thanks for the question. And a couple of things there. You know, the primary weakness in the share price during the quarter was during a closed window and we are restricted from buying shares during closed windows. So the lack of purchases in the quarter isn’t really a reflection of us not wanting to buy shares because that still is definitely one of our capital priorities. But our number one capital priority has been and will continue to be the acquisition strategy and buying accretive acquisitions that continue to diversify the business.

I think we’ve demonstrated over the past several years, and I think this quarter is even a highlight to that, that having a well-diversified business has improved and helps maintain a strong financial condition even in a weaker environment. You know, we did the 250 million add-on, you know, recognizing that we have some larger things that are in the pipeline. Now because they’re in the pipeline doesn’t mean they’re going to close. But, you know, that capital is extremely flexible. Our leverage is still well below our two times stated net leverage. The rating agencies reconfirmed our ratings, including the investment grade rating on our senior secured debt. So, you know, for us it was very opportunistic.

It makes a lot of sense. The nice thing about the way that deal is structured, if we decide that we want to pay it off, we can pay it off without penalty. And, you know, it provides us tremendous amount of flexibility. But I will say, you know, right now we have over a billion dollars of liquidity given our cash position and the availability under our ABL facility. So we feel very good about where we are and we feel very disciplined about both the acquisition strategy and that being priority number one, certainly share repurchases and then the dividend.

Adam Baumgarten (Analyst at Vertical Research Partners)

Okay, got it, thanks. That’s helpful. And then just maybe switching gears to insulation prices, kind of what you’re seeing out there. It seems like based on one of your large suppliers that maybe prices softened a bit in the third quarter sequentially, maybe what your outlook is there and if maybe you can capture some kind of price-cost spread as price mix is still kind of flattish to up a little bit.

Michael T. Miller (Chief Financial Officer)

Yeah, let me start that and I’ll let Jeff sort of finish it up. But, I mean, I would say really across now coming into the fourth quarter, we expect there to continue to be stability in fiberglass pricing and stability in spray foam pricing at this point. So we don’t expect to see, you know, pricing moving one way or the other, you know, and even if there is pricing, it’s going to be, you know, very modest, you know, so nothing that I think kind of moves the needle for us or for the industry.

I don’t know if you want to add anything to that.

Jeffrey Edwards (President)

My opinion also. Yeah.

OPERATOR

Our next question is from Trey Grooms with Stephens Inc. Please proceed with your question.

Ethan (Analyst at Stephens Inc.)

Yeah. Hey guys, this is Ethan on for Trey. Thanks for taking the question. I wanted to start off with commercial sales. Organically, those were up double digits again this quarter and as you mentioned against a more difficult prior-year comp, and the growth here has obviously been pretty impressive. Backlog up mid-teens. And so, while the backlog doesn’t suggest this to be the case, I’m just curious that with the uptick in rates intra-quarter, if you’re seeing any signs of some moderation in appetite here based on what you’re hearing from your customers.

So any color on that would be great.

Jeffrey Edwards (President)

I’ll start that and Brad can add some color to that, but I would say no. And the fact that the backlog at the end of the quarter was up, you know, mid-teens suggests that there really hasn’t been any fall-off. And keep in mind that backlog is up mid-teens against record upon record quarterly revenue.

Brad Wheeler (Chief Operating Officer)

This is Brad. Our backlog is confirmed backlog as well, and our pipeline is as robust as it has ever been on the commercial side. So we have plenty of opportunity ahead of us.

Ethan (Analyst at Stephens Inc.)

Okay, great. Yeah, that’s encouraging. And then, building on the prior question on the fiberglass side of things, we know that there’s a lot of supply out there and these OEM increases appear to continue to be pushed. And it sounds like you guys, expecting mid-single-digit type declines in single-family and multifamily next year, that any increases would probably not be accepted by the market. But just curious your thoughts here and if maybe an increasing industry cost curve could potentially support some degree of pricing, all else equal, despite lower demand.

Jeffrey Edwards (President)

Yeah, we would expect that to be a pretty difficult thing to realize just given our expectation—I think everyone’s expectation—for a pretty muted environment next year. One thing that could offset that a little bit, quite honestly, is, and I think O.C. talked about this in their insulation segment, the mechanical industrial side of the insulation business is pretty much on allocation, and they are getting price appreciation there. While typically that’s not going to impact the residential side, I think it could cause a little bit of pressure from a pricing perspective.

But at this point, our belief is that we’ll have stability in both fiberglass and spray foam pricing certainly for the next couple of quarters, unless the on-the-ground macro condition for new residential construction changes. On the mechanical industrial side, it’s definitely a hard market. There’s a lot of activity there. As pretty much everyone on the call would know, we do have about $50 million of revenue in the mechanical industrial insulation space, and that part of the business is doing well.

Ethan (Analyst at Stephens Inc.)

All right, got it. That’s very helpful. Thank you.

OPERATOR

Our next question is from Andrew Carter with Stifel. Please proceed with your question.

Andrew Carter (Analyst at Stifel)

Hey. Thank you. Good morning. I want to focus back on something you said earlier about the competition from the homebuilders or just what they’re looking to their suppliers. First thing, as I understand it, negotiations for your business on the install side go down to the house level. Has there been any change in terms of the national homebuilders trying to take more of an approach in terms of negotiating, whether it be RFPs or whatever, between you and QXO?

And then the second thing I would ask is, to build on the point, with all the labor challenges in the specialty, the mechanical trades that come right before you in the cycle, I’m guessing that makes your life harder to try to figure this out. Maybe the softer volume outlook you’ve set out there maybe assuages some of that, but I guess that would make your life harder. Does that show up in the margin? Can you manage to that and is there any recognition of that value?

Thank you.

Jeffrey Edwards (President)

Yeah, that’s a great question. I’ll start that and let Brad provide some more color. I would say that the bidding process and negotiating process really hasn’t changed much. One of the large homebuilders very aggressively went out to all of their trades to rebid everything. The results of that, I think, were pretty reasonable from our perspective. So I would say there’s not that much change. On the second part of your question, the scarcity of labor for the trades that come before us does extend cycle times, but given how soft the environment is right now, we’re not seeing any significant cycle time extensions. But it does help us because we have the install labor, and they are employees, and we become more important to the builder as somebody that can show up on time, get the job done right the first time and pass inspection. Now, does that mean we can get a 10% price increase?

No, but it means we don’t have to take a 10% price decrease because they know and value the fact that we have the consistency of the labor. Do you want to add?

Brad Wheeler (Chief Operating Officer)

Yeah, this is Brad. On the RFP question, first, it’s not just between us and QXO when builders and customers go out to bid; it’s all the independents as well—be clear on that. We’ve seen some, like Michael said, on some of the publics, but mainly one or two. You mentioned it: with the custom and smaller builder, it comes down to the price per house, and a lot of times that depends on the community that you’re in, the county, and the requirements for that area.

On the labor, when you really break it down, that’s what we do. We’re a labor company and also logistics, and we just happen to install products with it. So this isn’t really too much of a different story than what we’ve had in the past. A little tighter, but this is what we do.

Andrew Carter (Analyst at Stifel)

Second question, just in terms of where fuel prices are today. Well, I guess, number one, what is the kind of fuel price headwind in your ’26 margin, just assuming this week’s rates hold through the fourth quarter? And then if you took the current rates, what would be the annualized kind of impact versus ’25, just using the fuel rates? Thanks.

Michael T. Miller (Chief Financial Officer)

Yeah, it’s 40 to 60 basis points easily.

Andrew Carter (Analyst at Stifel)

Perfect. Thanks. I’ll pass it on.

Michael T. Miller (Chief Financial Officer)

And I should point out—and this is maybe too much of a nuance—but the impact of fuel is really primarily felt at the Installation segment because, which has been the way for decades and decades, the Installation segment does not do fuel surcharges with our customers. We’d love to be able to do that, but we don’t, and the industry doesn’t, I should say. But in the other segment, Distribution and Manufacturing, they do fuel surcharges. So there’s less impact to the margin on the other segment, the Distribution and Manufacturing business, but obviously the Installation segment is really the driver of the business.

OPERATOR

Thanks. Pass it on. Our next question is from Keith Hughes with Truist Securities. Please proceed with your question.

Keith Hughes (Analyst at Truist Securities)

Thank you. I just went back to the multifamily comments. It’s been tough to track that market. Some of the government data doesn’t seem to be tracking what’s better than it is on the field. Whatever this weed patch is, when do you think it’ll start showing up in terms of your install? And is there any comments from your customer of what their outlook is for next year on multifamily?

Jeffrey Edwards (President)

Yeah, I would say that the current rate environment has really muted expectations within the multifamily market. And I think that softness for the industry is definitely going to start showing up in the fourth quarter and certainly 1H27, unless there’s a meaningful change in the rate outlook or rate environment. One thing that we tried to make this point in answering an earlier question, but I think it is super relevant to understand or appreciate, is that although the multifamily market is probably performing better than people expected from a rent profile and an occupancy profile, the equity for so many developers is trapped in the value of those buildings because of the higher cap rates. And those projects just don’t sell because people don’t want to sell them at a loss.

So it definitely puts a damper, if you will, on expectations for future starts and growth in ’27 for sure.

Keith Hughes (Analyst at Truist Securities)

Thank you.

OPERATOR

Our next question is from Jeffrey Stevenson with Loop Capital. Please proceed with your question.

Jeffrey Stevenson (Analyst at Loop Capital)

Hi. Thanks for taking my questions today. I wanted to follow up on your comment, Mike, on the private builders outperforming in the third quarter. What have you been hearing from your regional and custom builder customers regarding 2027 expectations compared with their public counterpart? And do you think being under-indexed to the large production builders will continue to be a mix tailwind next year?

Michael T. Miller (Chief Financial Officer)

Yeah, I mean, I would just say, just to clarify, we don’t really think of ourselves as under-indexed to the public builders. The reality is that they need our scale and volume, particularly in their high-volume subdivisions. It’s just that they’re weaker now given the market segment, the entry-level segment that they’re heavily indexed to. In terms of the expectations that we have from our private and regional builders, obviously it’s different market to market, but I think the mood there is better than it is with the publics because we continue to see better strength in the semi-custom, custom, and move-up market, which the private builders—that’s where they build basically. And us being over-indexed at the top half of the country, we’ve talked about this several times, definitely helps us for sure.

The Midwest has been great for us. The Northeast, Minnesota, which is our largest state by revenue, has just knocked the cover off the ball. I mean, they’re just doing extremely well, and so we feel very good about that.

Jeffrey Stevenson (Analyst at Loop Capital)

I appreciate that. And I was wondering if you could dive deeper into complementary products demand during the quarter. Are you seeing any products outperforming, and are you seeing stronger demand in better single-family markets like Minnesota you just mentioned?

Michael T. Miller (Chief Financial Officer)

Yeah, I mean, the complementary products had a better growth profile certainly than insulation did in the quarter. Bad news, good news is that gutter sales were up 16% in the quarter, which normally would be great, but in this quarter it wasn’t so great because of the margin pressure that they experienced due to the very significant increase in aluminum pricing. But as we said earlier, the team is working very deliberately to get the margin back up and to get price.

And I would say that there is a strong commitment to forego volume to get price. The reality is that gutter install work is some of the easiest to lose and some of the easiest to get back of all the things we install. So we’re definitely approaching the fourth quarter and ’27 with the mindset that margin is number one, volume is number two.

Jeffrey Stevenson (Analyst at Loop Capital)

Great, thank you.

OPERATOR

Our next question is from Mike Dahl with RBC Capital Markets. Please proceed with your question.

Mike Dahl (Analyst at RBC Capital Markets)

Hi, thanks for taking my questions. Just a couple follow-ups on the heavy commercial side. I know it’s really difficult to parse this out, but the disclosures you do make suggest that it obviously has a significant positive impact on overall price/mix—that’s just kind of the nature of it. But on a like-for-like basis, I was wondering if you could help us understand within the heavy commercial growth how much you think is kind of more volume-driven versus price/mix.

Michael T. Miller (Chief Financial Officer)

Quite a bit of it is price mix, and part of that is that we’re doing, on average, larger jobs than we historically have done. It was definitely an answer to the question about ’27 gross margins. You know, I would say when it comes to—and again, we don’t provide guidance, and that’s on a full-year basis—keeping in mind that the first quarter of every year is always our weakest margin quarter and our weakest sales quarter. In the fourth quarter of this year, again, we’re going against the most difficult gross margin comp we have ever had.

And given the gross margin performance, quite frankly, that we’ve had year to date and in this most recent quarter, you know, we’re definitely going to be challenged at the 32 to 34 for this year given some of the dynamics around—and it’s really around fuel, freight, and aluminum. You know, as we’ve talked, we’re working hard to offset that aluminum piece. We will not fully offset it in the fourth quarter, but we will make improvements. And the fuel—it’s just, until fuel prices, particularly diesel, stabilize and come back down, it’s going to be a headwind.

OPERATOR

Our next question is from Ruben Garner with Stonex. Please proceed with your question.

Ruben Garner (Analyst at Stonex)

Thank you. Good morning, guys. Just one for me. I was wondering if you could talk about product availability on the commercial side—whether it’s mechanical, industrial, heavy, light—just across the board. Has that kind of slowed the pace of growth a little bit? I know you’ve been growing and taking share, but has it kind of limited the speed at which you can grow and kind of what’s the outlook there from a pricing standpoint on the commercial side, if that kind of remains or gets tighter as growth continues.

Jeffrey Edwards (President)

Yeah, I’ll start that and let Brad answer it correctly. On the light commercial side, the products there are the same as they are on the residential side, so there is free availability, generally speaking, of material there. On the mechanical and industrial side and on the heavy commercial side, I would say that we are benefiting from the strength of our relationships with the manufacturers to support us, and that’s helping us to get sufficient material to meet our needs and requirements.

But there’s definitely—the manufacturers are getting price in those products, and, you know, the team, given the strength of those markets, is working hard to pass that on. I would also say that in the heavy commercial business, as I think everybody knows, it’s not as insulation-intensive as it is fireproofing, fire-stopping, waterproofing-intensive. And that material is pretty readily available.

Brad Wheeler (Chief Operating Officer)

Yeah, this is Brad. You pretty much nailed it. The only thing I would add on the commercial insulation side: some of the manufacturers have increased out there, and they are getting price on those, and the availability of that product has gotten a little tougher over the last month or two, let’s call it. But we’re working with our manufacturers to make sure we have product so that we can efficiently supply that to our customers.

Ruben Garner (Analyst at Stonex)

Great. Very helpful. Thanks, guys, and good luck.

Jeffrey Edwards (President)

Thank you.

OPERATOR

We have reached the end of the question and answer session. I would like to turn the floor back over to Jeff Edwards for closing comments.

Jeffrey Edwards (President)

I just want to thank you for your questions. I look forward to our next quarterly call.

OPERATOR

Thank you. This concludes today’s teleconference. You may disconnect your lines now. Thank you for your participation.

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