Installed Building Products, Inc. Q3 FY2022 Earnings Call

Greetings, and welcome to the Installed Building Products Fiscal 2022 Third Quarter Financial Results Conference Call. This conference is being recorded. It is now my pleasure to introduce your host, Darren Hicks, Managing Director of Investor Relations. Thank you. You may begin.

Good morning, and welcome to Installed Building Products Third Quarter 2022 Conference Call. Earlier today, we issued a press release on the financial results for the 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 the federal securities laws. These forward-looking statements include statements about future expectations, anticipations, 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 price and supply environment, the timing of increases in our selling prices, and the factors discussed in the Risk Factors section of the 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 quarters in our investor presentation, which are available on our website. This morning's conference call is hosted by Jeff Edwards, our Chairman and Chief Executive Officer; and Michael Miller, our Chief Financial Officer; and we are 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. I am pleased to report IBP achieved another quarter of record net revenue, net income, and adjusted EBITDA, which was led by a favorable volume and pricing environment across our residential end markets and the hard work of our team members. Beyond the record results, our role in creating a sustainable future through installing products that promote energy efficiency is an important component of how we define success. During the third quarter, we published our second annual ESG report outlining the progress we have made along our ESG journey over the past year. Since our inception, we have worked hard to promote the culture of doing what's right, and we believe we can continue to make a positive impact in the lives of our employees and the communities in which we operate. The dedication of our team members remains extremely important as we navigate an increasingly complex economic, social, and business environment. To everyone at IBP, thank you for your commitment, your hard work, and a tough job always done well. Looking at our record third quarter results, we experienced another quarter of excellent residential sales growth. For the quarter, within our installation segment, we experienced a 35% increase in residential same-branch sales from the prior year period, which was driven by a 35% increase in single-family same-branch sales and a 33% increase in multifamily same-branch revenue. By comparison, total U.S. residential completions increased by 6.5% during the third quarter. While completions growth did improve both sequentially and year-over-year, we believe U.S. housing completions continue to be affected by labor, material availability, and extended residential construction cycle times. During the third quarter, price mix increased 27% 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 stabilized product mix compared to the prior year have contributed to the largest quarterly increase in price mix we've achieved since becoming a public company. We continue to make prudent adjustments to align our pricing with the value we offer our customers in ongoing inflationary trends. Additionally, the supply chain for many of the building products and materials we install remain constrained during the third quarter. We anticipate that supply chain tightness will continue to persist, but our experience managing through this environment over the last 1.5 years has prepared us for future challenges. We are closely watching our markets for changes in residential activity as the homebuilding industry navigates a rising mortgage rate environment. We continue to believe IBP is better positioned than at any other time in our history to manage the business throughout the U.S. housing cycle. In addition, we believe the elevated number of houses currently under construction according to the U.S. Census Bureau should remain supportive of our residential business throughout 2022 and into 2023. Within our commercial business, same-branch sales increased 3% in the 2022 third quarter, with bidding activity remaining stable and project bid acceptance steady relative to the 2022 second quarter, and we remain focused on improving our operational efficiency. Looking into our acquisition strategy, we continue to prioritize profitable growth through acquiring well-run companies that install insulation and complementary building products. During the 2022 third quarter, we acquired an Orlando, Florida-based installer of spray foam and fiberglass insulation to residential, multifamily, and commercial customers with annual revenue of approximately $2.4 million. Our acquisition pipeline remains robust and includes opportunities across multiple geographies, products, and end markets. To date, in 2022, IBP has acquired over $73 million of annual revenue. 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. As we look to the remainder of 2022 and beyond, we remain encouraged by our market opportunity and our relative position as a leader in the insulation and building products installation industry. In order to make the most of the opportunities ahead of us, we anticipate that effective management of our supply chain will continue to be a priority. Our team will continue to work with our suppliers and customers to help ease industry-wide supply chain challenges. With access to labor, a strong position with our customers and suppliers, and a healthy backlog, we believe 2022 is shaping up to be another successful year, focusing on our strengths, executing our growth strategy, and creating value at IBP. So with this overview, I'd like to turn the call over to Michael to provide more detail on our third quarter financial results.

Thank you, Jeff, and good morning, everyone. Net sales for the third quarter increased to a quarterly record of $719 million compared to $510 million for the same period last year. The 41% year-over-year improvement in sales during the quarter was mainly driven by an increase in price mix, a higher volume of customer jobs completed, and the revenue contribution from recent acquisitions. From a segment standpoint, installation revenue increased 34% to $673 million, driven by strong growth across IBP's residential new construction market. Other revenue, which includes IBP's manufacturing and distribution operations, increased from $5.6 million to $46.2 million, driven by strong operating results and the recent acquisitions of AMD Distribution and Central Aluminum. On a pro forma basis, the other revenue segment increased 18% in the third quarter of 2022 compared to the 2021 third quarter. On a same branch basis, installation revenue improved 28% from the prior year quarter, driven by single-family same-brand sales growth of 35% and multifamily same branch sales increased 33%. Our 2022 third quarter residential same-branch sales growth was 35% above the prior year quarter. While we experienced strong overall installation sales growth, the lingering effects of the COVID-19 pandemic continue to moderate growth in our commercial end market. Installation same-branch commercial sales increased 2.8% in the 2022 third quarter. Adjusted gross profit margin improved 10 basis points year-over-year to 30.8% in the third quarter as we realigned our selling prices to reflect the quality of service we provide, inflationary pressure, and material supply shortages. It's important to highlight that our operating segments have different gross profit profiles. During the 2022 third quarter, our installation operating segment's gross profit margin was 33.1% compared to the other operating segment gross margin of 21.1%. We believe it's relevant to note the segment impact on our reported gross profit margin since our other operating segment includes our more recent acquisitions in the distribution business. The distribution businesses did not have an impact on the prior year third quarter as they had not been acquired at that time. The other segment impact reduced the 2022 third quarter consolidated gross margin by about 80 basis points. Adjusted selling and administrative expense as a percent of third quarter sales improved approximately 180 basis points from the prior year period to 15.7%. The year-over-year improvements in selling and administrative expense relative to sales during the third quarter reflect our ability to leverage administrative costs during periods of strong volume growth and higher operating expense leverage at the distribution businesses. On a GAAP basis, our third quarter net income increased 75% from the prior year quarter to $61 million or $2.13 per diluted share. Our adjusted net income improved 63% to $72 million or $2.51 per diluted share. During the third quarter of 2022, the acquisition of new businesses increased our recorded amortization expense to $11 million compared to $9 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 on recent acquisitions, we expect fourth quarter 2022 amortization expense of approximately $11.1 million and full year 2023 expense of approximately $41.4 million. We would expect these estimates to change with any acquisitions we close in future periods. Adjusted EBITDA for the third quarter of 2022 improved 54% to $120 million. Adjusted EBITDA as a percent of net revenue was 16.7% for the 2022 third quarter, a 140 basis improvement from the same period last year. Same branch incremental adjusted EBITDA margin was 24.7% for the third quarter, near the high end of our targeted full-year long-term range of 20% to 25% compared to 13.2% for the same period last year. For the 2022 third quarter, our effective tax rate was approximately 26.6%, and we continue to expect an 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 9 months ended September 30, 2022, we generated $199 million in cash flow from operations compared to $116 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 net working capital requirements from our 38% increase in net revenue during the first 9 months of the year. At September 30, 2022, we had $311 million in working capital, excluding cash and cash equivalents and investments. Capital expenditures and total incurred finance leases for the 9 months ended September 30, 2022, were $37 million combined, which is 1.9% of revenue compared to 2.1% for the same period last year. Through interest rate swap agreements, we fixed the interest rate on $400 million of our existing variable rate debt until December 2028, limiting our interest rate exposure. Also, we have no significant debt maturities until 2028. At September 30, 2022, we had a net debt to adjusted trailing 12-month EBITDA leverage ratio of 1.6x compared to 1.9x at December 31, 2021, which is well below our stated target of 2x. With our strong liquidity position and modest leverage, we continue to execute on our acquisition strategy and return capital to shareholders. During the first 9 months of 2022, we have returned $166 million to shareholders through dividends and share repurchases. IBP repurchased 1.2 million shares of its common stock at a total cost of $112 million during the first 9 months of 2022, which includes nearly 142,000 shares repurchased during the 2022 third quarter at a total cost of $13 million, including commissions. At September 30, 2022, we had $188 million of availability remaining under our stock repurchase program. Today, we announced that IBP's Board of Directors approved the fourth quarter dividend of $0.315 per share, which is payable on December 31, 2022, to stockholders of record on December 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, 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.

Our first question comes from Stephen Kim with Evercore.

I appreciate the information provided. Last quarter, you mentioned that you expected another price increase from the manufacturers on the fiberglass side, which turned out to be accurate. Could you discuss how this pricing is affecting your sales? Are you experiencing any pushback from customers in the third quarter? Are there specific areas in the market where you're seeing more resistance?

Stephen, this is Michael. I would say that there was not an impact in Q3 from the announced price increase because it hasn't taken effect yet. And it's probably still too early to assess or determine exactly how much the market is going to take relative to that price increase because it always takes time to see how it ends up being accepted by the marketplace.

I guess I was referring to just pricing in general because there have been price increases. So certainly, I understand that we have a December price increase coming as well. But in terms of just price pushback, in general, given all the inflation that we have seen, put through over the last couple of years, that's kind of what I was referring to, did you see any of that sort of manifesting itself in 3Q?

Our customers continue to be primarily focused on working through the backlog of homes that exist right now and they continue to value the quality of our service and install the products that we're installing. So we continue to stay focused on working with our customers to make sure that that backlog is managed as effectively as possible and that they can get their homes finished, closed, and sold as quickly as possible.

Yes, that makes sense. Just a housekeeping item, installation revenues and other revenues, could we get that number for 4Q '21? I think we have most of the other numbers we need, but not for that period. If that's a number you can give us, that would be great. And then also, I just wanted to follow up on the AMD distribution business you acquired almost a year ago. At that time, you talked about wanting to be mindful of potential channel conflict, but you also wanted a platform that was big enough to scale quickly. I was curious if you could give us a sense for how has that scaled? And how have you been able to manage the potential channel conflict?

This is Jeff. We anticipated that the acquisition would require time to scale effectively. Primarily, the business operates in western states, and surprisingly, AMD's involvement in the agricultural sector does not create a channel conflict as they have a presence in some smaller markets where we are less active. Our aim has been to enhance our purchasing capabilities for supplies that we usually cannot obtain directly. We are consistently working on this, but, as with many supply chain issues exacerbated by COVID, progress has been slower than expected. However, I believe it was the right choice, and we will continue to make advancements in this area. They are also providing us with some laminating materials and additional products that align well with our needs.

Is that the metal building insulation, is that what you mean?

Yes, we install a significant amount of basement blanket with painting in certain markets. We are also exploring that idea. Instead of sourcing everything from a third-party laminator, especially since not all fiberglass manufacturers laminate their own products, I believe there's an opportunity for us in that area as well.

And then to answer your question about the other segment in the fourth quarter of last year, it was roughly $12 million. It was roughly $12 million of revenue.

That was the other segment?

In the fourth quarter of '21. But keep in mind, the distribution acquisitions, both AMD and Central Aluminum, really didn't contribute very much revenue to the fourth quarter last year.

Our next question comes from Mike Rehaut with JPMorgan.

Doug Wardlaw on for Mike. First question is, how should we think about decremental margins in mid-down market, say, 10%? And would that lead to any timing changes? How should we kind of think about that moving forward?

Well, any one that assumes that we would have a decline in revenue in that kind of environment. But if we did see a decline in revenue, so much of it really depends on the timing of when we experience the decline. Keep in mind that we do have a lot of advanced knowledge, if you will, both from macro metrics that we received from the U.S. Census Bureau as well as from our customers in terms of whether or not there's going to be any slowdown. That gives us tremendous opportunity to readjust our highly variable costs to meet our expectations of future demand. So we have talked about decrementals being similar to our incremental of sort of 20% to 25%, but we believe we can very effectively manage that knowing that we have a decent amount of time and that we have really very little true fixed cost and the ability to adjust those variable costs again to meet the demand that we know is coming from a combination of our customers and some of the macro information that's available.

Great. And then lastly, can you give some insight on some trends you're seeing in single-family, multifamily, respectively? And where do you think that's going moving into 2023?

There are two aspects to consider in response to that question. We are observing a slowdown in single-family orders, permits, and starts. However, the backlog for single-family remains at very high levels. Once a builder begins construction on a house, they typically finish it. So, we continue to experience strong demand for our services and installed solutions in the single-family sector. On the multifamily side, our team has done an outstanding job of increasing market share and enhancing our presence. The current backlog in multifamily is quite remarkable; it consists of roughly equal parts single-family and multifamily units. Based on historical averages, the multifamily backlog could be considered multi-year. We are still seeing robust demand trends in both the multifamily and single-family markets, but we cannot overlook the challenges associated with order completions.

But I'd add still though that labor, even though we've been able to manage through it, labor remains tight. And although supply chain disruptions and issues are getting better, it's still not easy and still problematic in terms of continuing to cause an elongated build cycle, and therefore, we're remaining busy.

Our next question comes from Susan Maklari with Goldman Sachs.

My first question is, you mentioned in your prepared comments that the supply chain continues to remain constrained. Can you just give a bit more color on where you're seeing those pressures and any improvements or any moves that you've seen more recently there?

Yes. We would say that it's definitely gotten better. There's no doubt about that. Spray foam, which is a fairly important product for us, is finally lessening up in terms of the availability of both open cell and closed cells. So that's very encouraging. I would say the other products outside of fiberglass, we're seeing decent availability partially because we've adjusted to the extended lead times in terms of getting those products. And as I think most people on this call probably realize that fiberglass is still under allocation, but we would say it's getting better and not getting worse, that's for sure. But we're in kind of what we consider to be loose-fill season right now because it's the fall. So that creates a little bit of tightness for loose fill. But I would say we feel better now than we have in probably the past 18 to 24 months about the availability of material.

I say longer than that because it's certainly not pre-code and flow, but it's certainly better, as Mike said. Yes.

And then you also mentioned that the other segment reduced your gross margin by about 80 basis points in the quarter. As we think about what you're seeing with AMD and the price cost that is coming through the business, how are you thinking about the broad trajectory? I know you're not going to give guidance, but just sort of the broad trajectory there and the ability to kind of sustain those levels of profitability that you're seeing on the gross margin line?

Well, the reason we specifically called it out was just because the impact of the other segment was fully realized, if you will, in this quarter. And we believe it will have a similar impact on future quarters. We do feel good about that business. We think there's a lot of opportunity over time to recognize the benefits, which we've talked about. That business, while yes, it structurally has lower gross margins than the installation business. It does have very good OpEx leverage. So the EBITDA margin contribution from those businesses tends to be similar to the overall company average.

Our next question comes from Adam Baumgarten with Zelman.

I have a question about the fiberglass capacity in the industry as we look to next year. Do you have an estimate of what percentage of total industry capacity might be unavailable at some point next year due to the planned maintenance across manufacturers?

We would say roughly mid-single digits.

And then just maybe on commercial. I know you gave same-store sales growth of about 3%. Can you maybe break that out between heavy and light commercial?

Yes. We had a challenging quarter in the heavy commercial business, with organic declines in that sector, but we experienced strong performance in the light commercial business. Our focus is shifting away from volume in heavy commercial toward profitability, and we will maintain this focus for the remainder of the year and into next year.

Our next question comes from Jeff Stevenson with Loop Capital.

Congrats on a nice quarter.

Jeff, thank you.

So I'm just wondering how we should think about organic volume growth on the installation side as we move into the fourth quarter. So the elevated housing backlog should support positive volumes through early next year. But are you expecting a deceleration in year-over-year volumes from the high single-digit rate you've reported the last 2 quarters?

We don't provide guidance, but we have mentioned that our volume typically range in the mid-single-digit area. The volume figures do fluctuate with completions, and while they don't always correlate directly, they do trend closely over time. We anticipate that this trend will persist into 2023 and 2024. Regarding your first question, yes, our backlogs are quite high, and we believe this is favorable for a positive completions environment throughout 2023.

And then the M&A pipeline sounds active right now, and I know you plan to be active on the acquisition front throughout the cycle. And I just wondered, do you believe there could be an increase in motivated sellers and kind of more attractive valuation levels as we move into 2023, given the uncertainty on the residential side?

This is Jeff. Yes, maybe some a little, but I mean, I would say having been in and around the business for, I guess, close to 30 years now. There's been a number of cycles and usually, I mean, unless there's an age or a health issue or something like that, if there's not circumstances under which a seller can kind of get what he feels is a life work just lean paid for or it doesn't from whatever you can get doesn't provide for what he's expecting kind of ultimately in retirement, it doesn't line up. So they end up pretty much kind of continuing to run the business. But will it be a little less frothy? Probably.

Our question comes from Keith Hughes with Truist.

On your tremendous price/mix numbers in the quarter. Can you give any more details on mix, where mix is helping you and particularly going to a downturn kind of turnaround to a negative single-family falls off faster than other markets?

Keith, this is Michael. In the last few quarters, the mix has not posed a challenge through either production builder work or our other products. Much of the price/mix growth, although not all, is primarily due to job pricing. Regarding the potential changes in price/mix if the single-family market shifts, it largely depends on how quickly that occurs. I want to emphasize that the price/mix growth we've seen this year, especially in the second and third quarters, will face very challenging comparisons next year. We anticipate that the environment will differ significantly from the current inflationary context. Therefore, we expect price/mix to return to more normalized levels next year, rather than remaining at these very high rates. The mix turning negative in the price/mix calculation will also hinge on the timing, and if that does occur, it is likely to happen more in the latter half of next year rather than the earlier half.

Our next question comes from Phil Ng with Jefferies.

This is actually Collin on for Phil. I was just wondering if you could quantify the size of those backlogs or maybe how far out your booking jobs in both residential and commercial that gives you confidence into early 2023? And then when you would expect to see the impact of any slowdown come through your volumes?

Our backlogs for multifamily and commercial projects are set through 2023, and we are experiencing strong bidding and acceptance in both areas. However, the single-family segment heavily relies on the trades and their speed in preparing homes for installation, as well as the industry's ability to address the existing backlog. According to macro data from the Census Bureau, our cycle times remain significantly elevated. We think the single-family backlog at a macro level supports completions and construction through 2023. However, data from the Census Bureau suggests a potential weakening in the second half of 2023 unless there’s a shift in the current starting trends.

And then just a follow-up question. Commercial has been a little bit of a slower growth coming out of the pandemic. What do you see in terms of the commercial outlook? And how do you think about the impact of a slower residential construction environment on your light commercial business?

Well, the light commercial business, as you know, is more closely tied to single-family than the heavy commercial side of the business. So it has a tendency to trend to single-family, but it does trend behind single-family, both going up and coming down. So we're still feeling very good about the light commercial business. The heavy commercial business, I mean, if you look at, again, and I'll point to the macro information that's available. I mean, I think the leading indicators, if you will, there would say that it's in a different kind of growth environment or growth expectation relative to where single-family is or has been on starts and orders perspective.

Our next question comes from Mike Dahl with RBC Capital.

This is Ryan Frank speaking on behalf of Mike Dahl. I wanted to revisit the pricing aspect. I understand the ongoing dynamics, but I'm particularly interested in the comparisons you will soon be facing. How quickly do you think this could change? Is it possible for us to see flat performance in the first quarter of next year, or is there more to this situation?

So I'm sorry, would you ask that question again?

I'm trying to understand the impact of the significant pricing comparisons you're facing starting in the fourth quarter and continuing into next year. Assuming prices remain stable, how quickly do you expect to see a decline into a low mid-single-digit range?

Given our performance in the past few quarters, we anticipate a return to a more typical price mix as we progress through 2023. This expectation is based on the fact that we are comparing against the price mix from the previous four quarters, combined with our belief in a much more stable inflationary environment ahead.

Do you think there might be a significant decrease starting next quarter? I'm a bit surprised to see a sequential increase this quarter.

Well, we continue to work very closely with our customers and our suppliers to make sure that price costs are aligned properly. And we do that all the time, and we'll continue to do that.

And then just a follow-up on the M&A. I mean, we're only 2 months away from the end of the year. And I think you're still saying that you're going to acquire an additional $25 million. Are there some bigger deals in the pipeline at this point?

I'm not sure what assumptions you're making regarding average revenue per acquisition. It has varied significantly over the past 2 to 3 years. The pipeline looks decent on average; while some deals may be slightly larger, they aren't significantly so. We remain confident about meeting our target for this year. However, acquisitions can sometimes take on a life of their own, and sellers might prefer to close in January for tax reasons. We believe we will reach that $100 million target, although it might slip into January. Overall, we're optimistic about finalizing a couple of solid deals before the year ends.

Our next question comes from Ken Zener with KeyBanc.

Michael, I understand you want to keep comments private. Jeff, you’ve got 30 years of experience, which gives you valuable perspective. We've never faced macro inflation headwinds like we are now. Michael, can you discuss the dynamics in our forecast regarding changes in price and volume, particularly in the residential segment? How should we approach a potential 20% decline in the second and third quarters due to a 25% drop in builder starts? It's just a matter of time before the lag in completions normalizes. Can you explain how volume might flow through, given that your branches operate on largely variable costs? Also, how do you view the price tailwind? You may have been ahead or behind on that, but typically prices don't rise when volume decreases, as seen with John’s management of all furnaces in '17. What’s your take on operating leverage concerning price and volume, especially if you have ample notification? That's my first question, or possibly two.

I believe it could even be three. There's a lot to discuss here. From a volume perspective, we closely monitor residential completions. Our experience over the past 20 to 30 years shows that when we encounter declines in housing markets, our branches excel at expanding their service areas and product installations for existing customers. Over time, our volumes have been able to outperform the completions and housing markets, especially during challenging times. We've often referenced our strong performance during the Great Recession, where we significantly exceeded market expectations on an organic basis. While we don't foresee a situation similar to the Great Recession, we are confident that our team will navigate any volume declines in their markets effectively. Predicting the trends in single-family permits and starts is quite difficult, but the multifamily sector tells a different story. The backlog in multifamily combined with steady permit and start activity is advantageous for this area of our business and contributes to our increased market share. Regarding the current inflationary environment, while we acknowledge the heightened levels of inflation, we do not expect widespread price reductions across all products. Instead, we foresee stabilization in price costs, which should return us to a more historical context with a positive price/mix. Mix can certainly become negative and affect this, but we remain optimistic about achieving a positive price/mix environment, albeit not at the elevated levels we are experiencing now.

Ken, you highlighted that the business doesn't take anything away from our excellent managers, including production managers. However, it adjusts based on volume, affecting both labor and material purchasing costs, which include many variable expenses that can be reduced quickly. You also mentioned that we were more concentrated in fiberglass around 2004 and 2005 when our footprint was at its peak, primarily in the Great Lakes and a bit in the Mid-Atlantic and Northeast. The pricing power and inflation we experienced then in fiberglass were just as significant as what we've seen in the last 24 to 30 months.

Yes. And I think something that's important to note is, again, we're trying to make the distinction between single-family and multifamily. But new single-family fiberglass insulation installation revenue is about 35% of our total revenue.

I would like to turn the call back over to management for closing comments.

Thank you for your questions, and I look forward to our call next quarter. Thanks again.

Thank you. This does conclude today's teleconference. You may disconnect your lines at this time, and thank you for your participation.