Installed Building Products, Inc. (IBP)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our condensed consolidated financial statements and related notes in “Item 1. Financial Statements” of this Quarterly Report on Form 10-Q, as well as our 2025 Form 10-K.

OVERVIEW

We are one of the nation’s largest insulation installers for the residential new construction market and are also a diversified installer of complementary building products throughout the United States, including waterproofing, fire-stopping and fireproofing, garage doors, rain gutters, window blinds, shower doors, closet shelving, mirrors and other products. We offer our portfolio of services for new and existing single-family and multi-family residential and commercial building projects in all 48 continental states and the District of Columbia from our national network of over 250 branch locations. During the three months ended June 30, 2026, 91% of our net revenue came from the service-based installation of these products across all of our end markets which forms our Installation operating segment and single reportable segment. In addition, we have regional distribution operations that serve the Midwest, Mountain West, Northeast and Mid-Atlantic regions of the United States, and we operate multiple cellulose insulation manufacturing facilities. We believe our business is well positioned to continue to profitably grow over the long-term due to our strong balance sheet, liquidity and our continuing acquisition strategy.

A large portion of our net revenue comes from the U.S. residential new construction market, which depends upon a number of economic factors, including demographic trends, interest rates, inflation, consumer confidence, employment rates, housing inventory levels and affordability, foreclosure rates, the health of the economy and availability of mortgage financing.

2026 Second Quarter Highlights

Net revenue increased 2.3%, or $17.5 million to $777.8 million, while gross profit decreased 0.4% to $258.9 million during the three months ended June 30, 2026 compared to the same period in 2025. The increase in net revenue was primarily due to a 14.1% increase in commercial end market sales growth and the contribution of our recent acquisitions, partially offset by a decline in Installation job volume in our single-family residential end market. The decrease in gross profit was primarily driven by vehicle-related costs including fuel, insurance and depreciation expense. Gross profit percentage was also impacted by higher sales in our Other category which has a lower gross margin than our Installation segment. Certain net revenue and industry metrics we use to monitor our operations are discussed in the "Key Measures of Performance" section below, and further details regarding results of our various end markets are discussed further in the "Net Revenue, Cost of Sales and Gross Profit" section below.

As of June 30, 2026, we had $394.5 million of cash and cash equivalents and had not drawn on our revolving line of credit. This strong liquidity position allowed us to return capital to shareholders by increasing our regular quarterly dividend 5% over the second quarter of 2025 to $0.39 per share, or $10.4 million in the aggregate. Additionally, we repurchased $76.2 million of our outstanding common stock during the three months ended June 30, 2026 for a total capital return to shareholders of $86.6 million.

Key Measures of Performance

We utilize certain net revenue and industry metrics to monitor our operations. Key metrics include total sales growth and same branch growth metrics for our consolidated results, our Installation reportable segment and our Other category consisting of our Distribution and Manufacturing operating segments. We also monitor sales growth for our Installation segment by end market and track volume growth and price/mix growth. Furthermore, we now present additional volume and price/mix growth metrics that include the heavy commercial subset of the commercial end market due to the greater impact of that end market on our revenue and results of operations.

We believe the revenue growth measures are important indicators of how our business is performing, however, we may rely on different metrics in the future. We also utilize gross profit percentage as shown in the following section to monitor our most significant variable costs and to evaluate labor efficiency and success at passing increasing costs of materials to customers.

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Table of Contents

The following table shows key measures of performance we utilize to evaluate our results:

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Table of Contents

Net Revenue, Cost of Sales and Gross Profit

The components of gross profit were as follows (in millions):

Net revenue increased during the three months ended June 30, 2026 over the same period in 2025 primarily due to sales growth from our commercial end market and contributions from our recent acquisitions. Our commercial end market sales grew 10.4% on a same branch basis for the three months ended June 30, 2026 over the same period in 2025. Same branch sales from our single-family end market declined 7.2% while same branch sales from our multi-family end market decreased 1.4%, outpacing the 2.8% decline in national multi-family completions. These markets combined for a residential same branch sales decline of 6.1% for the three months ended March 31, 2026 over the same period in 2025. Lastly, sales within our Distribution and Manufacturing businesses increased 50.4% during the three months ended June 30, 2026 which aligns with our strategy to enhance our procurement efforts through vertical integration in select product and end markets.

During the six months ended June 30, 2026, net revenue decreased 0.5% over the same period in 2025 primarily due to the decline in residential job volume.

During the three months ended June 30, 2026, gross profit as a percentage of net revenue decreased as compared to the same period in 2025, primarily due to higher labor costs and other indirect costs from shifts in product and end market mix, increased vehicle costs including fuel, depreciation expense and auto insurance, and increased freight and shipping costs from higher Manufacturing and Distribution activity.

Operating Expenses

Operating expenses were as follows (in millions):

Selling

The dollar increase in selling expenses for the three months ended June 30, 2026 compared to 2025 was primarily driven by an increase in selling compensation and increased credit loss expense on higher revenues. Selling expenses for the six months ended June 30, 2026 decreased compared to 2025 primarily due to a decline in commissions on lower revenues. Selling expense as a percentage of sales remained flat during the three and six months ended June 30, 2026 compared to 2025.

Administrative

The dollar increase in administrative expenses for the three and six months ended June 30, 2026 compared to 2025 was primarily

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Management’s discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of our consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. Certain accounting policies involve judgments and uncertainties to such an extent that there is a reasonable likelihood that materially different amounts could have been reported using different assumptions or under different conditions. We evaluate our estimates and assumptions on a regular basis. We base our estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of our assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates and assumptions used in preparation of our consolidated financial statements. We believe the following critical accounting estimates require judgment and estimation in the preparation of our consolidated financial statements and to be fundamental to our results of operations. See Note 2, Significant Accounting Policies included in Item 8 of the Form 10-K for a summary of all of our significant accounting policies and their effect on our financial statements.

Revenue recognition

The majority of our revenues are recognized when we complete our contracts with customers to install building products and the control of the promised good or service is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. For contracts that are not complete at the reporting date, we recognize revenue over time utilizing a cost-to-cost input method as we believe this represents the best measure of when goods and services are transferred to the customer. When this method is used, we estimate the costs to complete individual contracts and record as revenue that portion of the total contract price that is considered complete based on the relationship of costs incurred to date to total anticipated costs. Under the cost-to-cost method, the use of estimated costs to complete each contract is a significant variable in the process of determining recognized revenue and can change throughout the duration of a contract due to contract modifications and other factors impacting job completion. Our cost estimation process is based on the knowledge, significant experience and judgment of project management, finance professionals and operational management to assess a variety of factors to determine revenues on uncompleted contracts. Such factors include historical performance, costs of materials and labor, change orders and the nature of the work to be performed. We generally review and reassess our estimates for each uncompleted contract at least quarterly to reflect the latest reliable information available. Changes in these estimates could favorably or unfavorably impact revenues and their related profits.

Goodwill Impairment

We performed an annual quantitative goodwill impairment test as of October 1, 2025 on our Distribution operating segment which we have determined is also a reporting unit. The estimate of the reporting unit’s fair value was determined by placing a 50% weighting on a discounted cash flow model and a 50% weighting on market-related model using current industry information that involve significant unobservable inputs (Level 3 inputs). Based on the results of this evaluation, we concluded

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that there were no impairments of goodwill, as the estimated fair value exceeded its carrying value by 18.4%. This is a decrease from the estimated fair value exceeding the carrying value by 32.1% on October 1, 2024. The primary reasons due to this decline was the additional carrying value resulting from a 2024 distribution acquisition and lower forecasted revenue and EBITDA in future periods due to near-term softening demand.

A 100 basis point change in either the discount rate or residual growth rate, or both, utilized in our discounted cash flow model using our weighted system would not have resulted in an impairment for our Distribution operating segment, nor would any change in the weighting of each method. The estimates and assumptions used in the test are subject to uncertainty due to the professional judgments required. We performed a qualitative evaluation for our Installation and Manufacturing operating segments and determined that it was more likely than not that the fair value of these operating segments exceeded their carrying values.

Business combinations

We have recorded a significant amount of finite lived intangible assets associated with the acquisitions of businesses through our growth strategy. These intangible assets consist of customer relationships, backlog, non-competition agreements and business trademarks and trade names. Fair values and estimated useful lives are assigned to the identified intangible assets at the date of acquisition by financial professionals using either the income approach or the market approach along with certain industry information, professional experience and knowledge. In some instances, the process of assigning values and useful lives requires using judgment and other financial professionals may come to different conclusions. We review intangible assets whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. An impairment loss is recognized when estimated future cash flows expected to result from the use of an asset and its eventual disposition are less than its carrying amount. When impairment is identified, the carrying amount of the asset is reduced to its estimated fair value. Impairment losses would negatively affect earnings.

We also record contingent consideration liabilities that arise from future earnout payments to the sellers associated with certain acquisitions and are based on predetermined calculations of certain future results. These future payments can require a significant amount of estimation by considering various factors, including business risk and projections. We have used various estimate techniques and also consult with a third party valuation expert in certain instances. The contingent consideration liabilities are measured at fair value by discounting estimated future payments to their net present value.

Insurance risks

We carry insurance policies for a number of risks, including, but not limited to, workers’ compensation, general liability, vehicle liability, property and our obligation for employee-related health care benefits. Most of our insurance policies contain an element for which we assume a significant portion of the risk by having high deductibles or a large cap on claims. For a description of our different insurance programs, see Note 2, Significant Accounting Policies in Item 8, Financial Statements and Supplementary Data in this Form 10-K.

Our largest healthcare plan is partially self-funded with an insurance company paying benefits in excess of stop loss limits per individual/family. An accrual for estimated healthcare claims incurred but not reported (“IBNR”) is included within accrued compensation on the Consolidated Balance Sheets and was $4.9 million and $4.8 million as of December 31, 2025 and 2024, respectively.

We participate in multiple workers’ compensation plans covering a significant portion of our business. Under these plans, we use a high deductible program to cover losses above the deductible amount on a per claim basis. We accrue for the estimated losses occurring from both asserted and unasserted claims. Insurance claims and reserves include accruals of estimated settlements for known claims, as well as accruals of actuarial estimates of IBNR claims. In estimating these reserves, historical loss experience and judgments about the expected levels of costs per claim are considered. These claims are accounted for based on actuarial estimates of the undiscounted claims, including IBNR. We believe the use of actuarial methods to account for these liabilities provides a consistent and effective way to measure these highly judgmental accruals. As of December 31, 2025 and 2024, we estimated total short-term and long-term known and IBNR claims for workers' compensation to be $30.9 million and $27.7 million, respectively. As of December 31, 2025 and 2024, offsets of these liabilities were $4.8 million and $4.4 million, respectively, with insurance receivables and indemnification assets for claims under fully insured policies or claims that exceeded the stop loss limit.

We also participate in a high retention general liability insurance program and a high deductible auto insurance program. As of December 31, 2025 and 2024, general liability and auto insurance reserves included in other current and long-term liabilities were $43.3 million and $32.0 million, respectively. As of December 31, 2025 and 2024, offsets of these liabilities were $5.4

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million and $2.8 million, respectively, with insurance receivables and indemnification assets for claims under fully insured policies or claims that exceeded the stop loss limit.

Liabilities relating to claims associated with these risks are estimated by considering historical claims experience, including frequency, severity, demographic factors and other actuarial assumptions. In estimating our liability for such claims, we periodically analyze our historical trends, including loss development, and apply appropriate loss development factors to the incurred costs associated with the claims with the assistance of external actuarial consultants. While we do not expect the amounts ultimately paid to differ significantly from our estimates, our reserves and corresponding expenses could be affected if future claim experience differs significantly from historical trends and actuarial assumptions.

We have not made any material changes in our methodology used to establish our insurance reserves during the years ended December 31, 2025 and 2024, and none of the adjustments to our estimates have been material.

Recent Accounting Pronouncements

For a description of recently issued and/or adopted accounting pronouncements, see Note 2, Significant Accounting Policies, in Item 8, Financial Statements and Supplementary Data, of this Form 10-K.