Installed Building Products, Inc. Q4 FY2025 Earnings Call

Greetings, and welcome to Installed Building Products Fourth Quarter 2025 Financial Results Conference Call. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Darren Hicks, VP-Investor Relations. Thank you. Mr. Hicks, you may begin.

Good morning, and welcome to Installed Building Products Fourth Quarter 2025 Earnings Conference Call. Earlier today, we issued a press release on our financial results for the 2025 fourth quarter and fiscal year, 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. Jeff, I will now turn the call over to you.

Thanks, Darren, 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. We closed out 2025 with a strong fourth quarter, delivering record sales and profitability for the year. While our core residential end markets experienced headwinds, partly due to housing affordability, our commercial end markets performed extremely well as we focused on meeting the needs of our customers, profitability, and product diversification across end markets. We continue to generate strong operating cash flow, which we use to support our growth-oriented capital allocation strategy. While we expect homebuilding activity to remain challenging in the near term, the long-term outlook for our installed services remains positive, and we believe we are well positioned to continue investing in strategic acquisitions while returning cash to our shareholders. Capital allocation decisions are among the most important we make as a company, and we take pride in our disciplined approach. For 2025, our adjusted return on invested capital was 24%, in line with the returns achieved over the previous three years. Even with industry-specific headwinds expected to continue to affect our new residential Insulation segment in the near term, our overall business has proved to be resilient. All the credit goes to the hardworking 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 IBP, thank you for making 2025 a great year. As we continue to focus on profitable growth and maximizing returns for our shareholders, we remain committed to doing the right thing for our employees, customers, and communities. Looking at our full year 2025 performance, consolidated sales increased 1% and same-branch sales declined 1%. Same-branch commercial sales growth was more than offset by residential same-branch sales growth headwinds. Residential sales growth within our Installation segment was down 4% on a same-branch basis for 2025, as both single-family and multifamily same-branch sales decreased from the prior year. With respect to our single-family end market, the spring selling season is underway, but it's too early to draw any conclusions for the rest of the year. We expect that given readily available labor and material and relatively short construction cycle times, construction activity is primed to accelerate without any of the production-related hurdles that existed in prior years. In our multifamily end market, our contract backlog continues to grow, which is encouraging. Our commercial end market was a real bright spot in 2025, with sales in our Installation segment up 10% on a same-branch basis from the prior year period. Our heavy commercial end market continued to be the dominant driver of sales growth, which more than offset weakness in our light commercial end market. Based on the growth in our heavy commercial contract backlogs, we believe heavy commercial sales and profitability are poised to remain healthy in 2026. We completed 11 acquisitions, including bolt-ons during 2025, representing over $64 million of annual revenue. We remain disciplined in our approach to acquiring well-run businesses that make strategic sense, support attractive returns on invested capital and fit well culturally. Our core residential installation end market remains highly fragmented with considerable opportunity for consolidation. During the 2025 fourth quarter, we completed a total of four acquisitions, representing over $23 million of annual sales from a diverse product set in both residential and commercial end markets. Acquisitions included an insulation installer, a glass design and fabrication company, a drywall and framing company, and a shower doors, shelving, mirrors, and accessories company. In addition, in January and February, we acquired an installer of insulation across new residential and commercial end markets throughout Texas, Louisiana, Arkansas, and Oklahoma with annual sales of approximately $5 million; a provider of a wide range of value-added mechanical insulation services for diverse commercial and industrial applications serving key commercial and industrial hubs across Wisconsin, Iowa, Minnesota, Michigan, and Illinois with annual sales of approximately $13 million; and an installer of insulation primarily across new residential and light commercial markets throughout Kansas and Oklahoma with annual sales of approximately $3 million. Although deal timing is hard to predict, our current outlook for acquisition opportunities in 2026 is strong, and we expect to acquire at least $100 million of annual revenue this year. In terms of broader housing construction activity in the U.S., Census Bureau data for 2025 showed single-family starts decreased 7% from the prior year, while multifamily starts were up 18% for the same period. From a federal housing policy standpoint, we do not have any unique insight into the likelihood of changes in regulation coming to fruition or its potential impact or benefit. Our experienced leadership team has a history of operating through multiple housing cycles, and with our strong national market share and deep customer and supplier relationships, we are well positioned to continue to compete and win business. We remain focused on growing our operations profitably and allocating capital effectively to drive value for our shareholders. I'm proud of our team's continued success and commitment to doing an excellent job for our customers. Once again, to everyone at IBP, thank you. I remain encouraged by the fundamentals of our industry, our competitive positioning, and I'm optimistic about the prospects ahead for IBP and the broader insulation and complementary building product installation business. So, with this overview, I'd like to turn the call over to Michael to provide more detail on our fourth quarter and fiscal year 2025 financial results.

Thank you, Jeff, and good morning, everyone. Consolidated net revenue for the fourth quarter was roughly flat at $748 million compared to $750 million for the same period last year. Same-branch sales for the Installation segment were down 2% for the fourth quarter as a 23% increase in commercial same-branch sales almost fully offset a 9% decline in new residential same-branch sales. Although the components behind our price/mix and volume disclosures have several moving parts that are difficult to forecast and quantify, we reported a 1.7% increase in price/mix during the fourth quarter. This result was offset by a 9.3% decrease in job volumes relative to the fourth quarter last year. It is important to note that our heavy commercial end market and the other Distribution and Manufacturing segment results are not included in the price/mix and volume disclosures. Our heavy commercial same-branch sales growth was incredibly strong at 38% during the 2025 fourth quarter. Including the heavy commercial installation sales, price/mix increased 6%, while job volume decreased 9% during the 2025 fourth quarter. With respect to profit margins in the fourth quarter, our business achieved a record adjusted gross margin of 35%, an increase from 33.6% in the prior year period. The year-over-year increase in margin during the quarter was in part related to a shift in our Installation segment customer mix and successful management of direct operating costs in a demand environment that varied from challenging to healthy across end markets. Adjusted selling and administrative expenses were relatively stable compared to the 2024 fourth quarter. As a percent of fourth quarter sales, adjusted selling and administrative expense was 18.3%, compared to 18.1% in the prior year period. Adjusted EBITDA for the 2025 fourth quarter increased to a record $142 million, reflecting a record adjusted EBITDA margin of 19%, and adjusted net income increased to $88 million or $3.24 per diluted share. Although we do not provide comprehensive financial guidance, based on recent acquisitions, we expect first quarter and full year 2026 amortization expense of approximately $10 million and $38 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. For the 12 months ended December 31, 2025, we generated $371 million in cash flow from operations. The 9% year-over-year increase in operating cash flow was primarily associated with an increase in net income and improvements in working capital management. Our fourth quarter net interest expense was $8 million compared to $9 million for the 2024 fourth quarter due to higher interest income from investments combined with lower cash interest expense on outstanding debt. At December 31, 2025, we had a net debt to trailing 12-month adjusted EBITDA leverage ratio of 1.1x compared to 1.09x at December 31, 2024, which remains well below our stated target of 2x. At December 31, 2025, we had $377 million in working capital, excluding cash and cash equivalents. Capital expenditures and total incurred finance leases for the three months ended December 31, 2025, were approximately $17 million combined, which was approximately 2% of revenue. In January 2026, we closed a private offering of $500 million in aggregate principal amount of 5.625% senior unsecured notes due 2034. A portion of the proceeds were used to fully repay our $300 million notes due 2028. We also amended our existing $250 million asset-based lending revolving credit facility to, among other things, increase the commitments thereunder to $375 million and extend the maturity date to January 2031. Following the completion of these transactions, we have nearly $900 million in available liquidity and very modest financial leverage. Based on higher debt and cash balances, we estimate that first quarter interest expense will be approximately $11 million. With an even stronger liquidity position as a financial foundation, 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. During the 2025 fourth quarter, we repurchased 150,000 shares of common stock at a total cost of $38 million and 850,000 shares at a total cost of $173 million during the 12 months ended December 31, 2025. The Board of Directors authorized a new $500 million stock buyback program. The new authorization replaces the previous program and is in effect through March 1, 2027. IBP's Board of Directors approved the first quarter dividend of $0.39 per share, which is payable on March 31, 2026, to stockholders of record on March 13, 2026. The first quarter dividend represents a more than 5% increase over the prior year period. Also, as a part of our established dividend policy, today we announced that our Board has declared a $1.80 per share annual variable dividend, which is nearly a 6% increase over the variable dividend we paid last year. The 2026 variable dividend amount was based on the cash flow generated by our operations with consideration for planned cash obligations, acquisitions, and other factors as determined by the Board. The variable dividend will be paid concurrent with the regular quarterly dividend on March 31, 2026, to stockholders of record on March 13, 2026. 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.

Thanks, Michael. I'd like to conclude our prepared remarks by once again thanking IBP 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.

The first question comes from Philip Ng with Jefferies.

Congrats on a really strong quarter in a not easy environment. Your gross margin and EBITDA margin expanded nicely this year. So, pretty impressive. But in this current backdrop, when we look out to 2026, what's your confidence in protecting margins? Your largest competitor just reported results; they're calling out perhaps low single-digit price deflation in '26 and some price cost headwinds. So, how should we think about it as it relates to IBP?

Phil, this is Michael. I appreciate your kind words. We are truly proud of what our team has achieved, not only in the fourth quarter but throughout the entire year. Regarding margins, especially gross margins, I will reiterate that we do not provide guidance, as is my practice. However, as we assess our business and the strong performance of the commercial sector, we are optimistic that this trend will persist. The Manufacturing and Distribution segment is also doing well, and we expect that to continue. In looking at our core residential installation business, we categorize it into two main areas. The first includes regional private, move-up, custom, and semi-custom builders, where we have observed consistent demand throughout most of 2025 and into 2026. That said, we are aware that the year has begun slowly due to weather-related challenges nationwide. The area experiencing weakness is the entry-level production builder segment. At this stage, it’s premature to determine if there will be a shift in the spring selling season. Some positive news is derived from recent statistics from the Census Bureau, which indicate that single-family starts, when seasonally adjusted on an annual basis, were about 6% higher in the fourth quarter than in the third quarter. This is encouraging. Reports from other companies in our industry have noted that production builders reduced their building activity in the fourth quarter to align their existing inventory with demand. We believe that if the market remains relatively flat and there isn't an upturn in the entry-level sector, there may be some rebuilding of inventories. Currently, entry-level builders are constructing spec homes, and we expect to see some recovery in starts that could be beneficial. Nevertheless, from a broader perspective, the affordability issue in the entry-level market persists, and it remains uncertain whether this year will bring any significant positive change and the extent of that change. Public builders have indicated that they foresee a weak first quarter and initial half of the year, with a potential positive turn in the latter half. We acknowledge that these expectations are based on easier comparisons from last year, which could influence results. Overall, we consider these developments to be somewhat constructive. I apologize if I provided too much detail in response to your question.

No, that's great color, Michael. And then your commercial business has been a bright spot, right? It's growing nicely. It's a business you've improved and enhanced profitability. Is that an area where you guys can get behind a little more so from an investment standpoint, whether it's M&A or organic? Just kind of help us think through the opportunity set there, your ability to kind of continue to drive momentum? And do you plan to put a little more capital there to support the growth?

Phil, this is Jeff. I would say, for sure, as we always are, we'll be opportunistic as the situation offers or demands. There is room for both organic growth and M&A growth. We haven't pursued it that hard yet because, quite frankly, we've been growing the base business enough where that hasn't been tightening the screws. So, at this point, we feel very, very good about the business, and we do feel good about growth prospects going forward.

Okay. But Jeff, why haven't you put more thought or capital there? I mean, the base business has been a little squishier and this seems like a nice bright spot, and there's a lot of runway for heavy commercial, I think, for most companies that we cover.

I think it's really been probably the last two at most three quarters where we felt like it was really, really in a position where we didn't need to kind of continue to work the base business. But I think at this point, I'd say we're ready to try to grow that business. Well more than just organically because we've had a heck of a lot of growth really from an organic perspective.

Yes. And I think to Jeff's point, the key is that that growth has been phenomenal, and it's not just been growth. It's been very profitable growth. And we wanted to make sure the team was ready to do additional acquisitions. The last thing we would want to do is kind of mess up their day, if you will, through the integration process of an acquisition and have them take their eye off the ball of the existing business. So, to Jeff's point, the past couple of quarters, we feel really confident that they've gotten to that point.

This is Aatish speaking on behalf of Stephen. I would like to discuss the merger and acquisition landscape. Has there been any shift in strategy regarding the types of companies that could be targeted? Specifically, considering interest from your largest competitor, has the commercial roofing market been a focus for you?

Yes. This is Jeff again. As we've stated, I think, in previous calls, yes, we're definitely interested in the commercial roofing segment. And as you probably noted, we've done a few mechanical and industrial installation installations, and that's another area that we're interested in. But again, I think we're on record previously as saying that we were interested in that business. So, I don't think it's a change in strategy. What I would say is that we've begun to really perform on those strategies a bit. But fundamentally, our core residential insulation installation business still presents tremendous opportunity for us, and we continue to pursue that area significantly just because we still have so much wide-open space as a company to acquire in that core business for us. So, it really is, if you will, a three-legged stool in terms of our strategy there.

That's helpful. And then, in the prepared remarks, you mentioned kind of a shift in customer mix in the Installation segment. Can you just detail that a little bit?

Yes. And just to clarify, that wasn't just insulation, it was the Installation business, so the kind of the residential installation business. And because we're continuing to see better sales rates with the semi-custom, custom builder and weaker sales rates with the production builder entry-level builder, that has a natural tendency, if you will, to improve and help gross margin. For example, during the quarter, our Midwest Census Bureau region revenue was up mid-single digits, right? So, and that market for us is generally speaking a higher gross margin market because of the higher amount of private semi-custom and custom homes that are built in that market. So, we definitely benefited in the quarter from our geographic mix as well as our customer mix from a gross margin and a profitability perspective. And I need to emphasize something that's very important is that our teams in the other regions of the country did an excellent job of maintaining profitability across the board with our customers and really highlighting and selling well to our customers the importance and quality of our installed services. And hats off to everyone in the field for doing such a great job.

Let me add my congrats on a great quarter, guys. Well done. My first question is, talking about the growth that you've seen in the complementary products. That's something that you've really focused on recently. Can you talk about where we are in that process? And as you think about 2026 and the comps that you're going to face there, are there any implications we should be thinking about as that relates to the path for margins or for the growth that you're going to see coming through?

Yes, we have continued to see strong growth in the complementary products. I should mention that a significant portion of those figures relates to the heavy commercial business, which does influence the overall numbers. However, when we analyze the data excluding the heavy commercial segment, the sales growth and margin improvement in the complementary products within the installed segment are still on the rise. We anticipate ongoing good growth in complementary products. As we have frequently mentioned, the challenges in the single-family market have driven increased interest in complementary products at our branches. Since compensation is closely tied to profitability, our sales team and branch managers are focusing more on complementary product opportunities when insulation sales are softer, especially with production builders. At the entry-level with production builders, we have seen strong adoption of complementary products due to these initiatives.

Okay. That's great color. And then, you mentioned that you've recently done some more deals in the mechanical space. Can you talk about your interest there, where you are in that process? How we should think about what that could mean for the future of the business? And then maybe with that, any comments on your efforts to build out distribution as well and just where we are there?

Yes, Susan, this is Jeff. We certainly consider the mechanical and industrial sector as a significant opportunity for us. This market is highly fragmented, and the potential businesses we've looked at tend to be somewhat larger than those we typically encounter in our usual acquisitions, with favorable margins for the company. We are eager to find a bigger business to help build out a platform, and we are optimistic about future possibilities in this area. Regarding our distribution efforts, we are pleased with the progress made over the last two quarters. I would estimate that we are currently servicing about 60% to 70% of our branches from around 5 to 6 locations, with plans to expand further. Overall, everything has gone as we anticipated, and it has positively impacted our margins.

Yes, certainly our gross margin.

You mentioned some positive mix impacts on gross margin from the better growth in custom and semi-custom products, as well as some regional factors like the Midwest. Did the strong growth in heavy commercial also contribute to the gross margin expansion?

Yes, absolutely. I think in the third quarter call, we sort of called out that we didn't expect that much of a tailwind from the support or improvement within the heavy commercial business. But I guess we were sandbagging a little bit there, quite frankly, because the heavy commercial business did continue its relative outperformance, and we would estimate that the heavy commercial business added about 40 basis points or so to the gross margin improvement.

Okay. Got it. Great. That's helpful. And then, just digging into the heavy commercial strength, I mean, was it pretty broad-based? Are there certain verticals like maybe data center that were kind of outsized contributors? Or just kind of what you're seeing there maybe by an end market vertical perspective in heavy?

Yes. And so, Brad Wheeler, our Chief Operating Officer, is here, and I'm going to have him add some color to this as well. But it's not data center related. I mean, it's across the board with the big exception of high-rise multifamily. It's a lot of educational, it's health care, it's recreation, transportation. While we do some data center work, we don't chase it like other companies do.

This is Brad. Yes, we've maintained our core. The educational sector and some offices are back, which has been beneficial. Manufacturing has also increased, which is positive. We're focused on our core strengths and leveraging the data centers we have in our platform.

I wanted to first kind of go back big picture a little bit with the gross margins. We've had many quarters now where you've really executed very strongly and kind of at or above that 32% to 34% range that you've talked about. There's also been, as you've highlighted, good improvement in commercial. You're benefiting from the mix on the semi-custom and the geographic. And I'm just wondering, with all those factors kind of benefiting the margin, if you've kind of given any thought to perhaps thinking about gross margins over the next couple of years, maybe above that 32% to 34%, particularly given the strength in the fourth quarter.

Yes, that's a great question, and I'm glad you asked it. We expect that gross margins will continue to be in the 32% to 34% range on a full-year basis. As we mentioned earlier, the only area where we don’t have good visibility is the entry-level market for production builders. We believe that when this market improves, we are well positioned to benefit, but it may put pressure on gross margins because that work typically yields lower margins. However, it should enhance operational expense leverage and improve EBITDA margins. Currently, we are focusing on maximizing profitability in areas of the business that are steady or growing and preparing ourselves for a strong position when that market improvement occurs. We are confident in our team's ability to respond to increased demand. As Jeff noted in his remarks, it is still early in the spring selling season to determine if we will see improvement this year, but there is potential with production builders rebuilding their inventory in the first half.

I appreciate your thoughts. I was wondering if you could discuss your price and cost situation for the fourth quarter. I noticed that a competitor mentioned potential price and cost challenges for 2026 earlier today. I’m interested in your perspective on how you expect this situation to evolve for you in 2026 and whether it could also be a challenge compared to your current results.

Yes. I mean, certainly, at the entry-level part of the business, there's definitely price/cost pressure. The team is doing an excellent job of trying to manage through that. But there's definitely going to be pressure there until that entry-level aspect of the market inflects positively. But our team, again, I think they’re doing a really good job of trying to manage that, but there's clearly pressure there for sure. And clearly, in the first quarter, we're going to have pressure from the weather. We estimated that in January and February that the weather impact was about $20 million to revenue in the first quarter. Now we're working to make that up, and we will work to make that up, but we're not going to be able to make that up in the month of March. It's just not going to happen. So, it's definitely making that up is going to fall into the second quarter. So yes, we're going to face pricing pressure with our customers. But I think as a company, we know that we've done an excellent job, and we believe our results reflect our ability to effectively manage that price/cost pressure.

So, is it fair to say then, Mike, that you're expecting the pressure to continue, but maybe not to increase compared to what you're already experiencing in your fourth quarter results?

Yes. I think that's reasonable. Although the first quarter is always our weakest quarter, right? And the headwind that we have because of the weather impact, obviously, is going to be tough. But if we think of it, and we like to think of it on a full-year basis as opposed to a quarterly basis, we feel good about what the team has been able to do. And if we have a flat to slightly down single-family market, excluding any acquisitions that we do, given the strength that we're seeing in the commercial business and the Manufacturing and Distribution business, we feel pretty good about the year in general. So, obviously, it's late February. It's hard to call a year at this point, but there's definitely reason to be pretty encouraged.

I want to take that last question and kind of flip it around and ask, in the fourth quarter, did you actually experience some effective price/cost benefits? I know there's a lot moving around in terms of mix and different types of mix, but it seemed like there was some opportunity for buyers such as yourselves to get some lower pricing on resi fiberglass in the fourth quarter and your reported pricing, again, understanding there's a lot of mix, but it was up. I'm just wondering if that - if there was something like that that actually also contributed to the gross margins because the heavy commercial disclosure was helpful, but margins being up 100 basis points year-on-year, even taking that aside is pretty impressive.

Yes. I mean, it is predominantly mix-related and the team's ability to manage the cost structure as effectively as possible in the current environment. So, I think there's been a lot of discussion around fiberglass pricing, the fiberglass manufacturers. In our opinion, and I'll have Jeff or Brad talk a little bit more about this, I think they've done a good job of managing capacity relative to the demand environment, and I think they've done an excellent job of maintaining price. And I think it's clear to us that what they're focused on is maintaining price in the current environment so that when there's an upward inflection, they can keep that price as opposed to lowering price now and making it more difficult to get price back when there is an upward inflection. But I don't know if you guys want to add anything to that.

I think everything you said is accurate, and I wouldn't add anything.

Okay. Got it. Appreciate that. Second question, just on the commercial side and heavy commercial, it's interesting the comments on maybe doing some more inorganically now. Just on the organic side, I mean, with this type of strength in same-branch sales and the backlog that you're seeing, when we think about organic OpEx or capacity expansions, how are you thinking about that in 2026? Do you really need to start to do more to support the growth that you're seeing in that segment?

Yes, that's a really good question given the growth rates that we're seeing. I mean, we clearly benefit from the highly variable cost structure. But I'll ask Brad to give some more commentary on our ability to bring up capacity to support the demand.

Sure, this is Brad again. We have expanded our geographic reach as part of our organic growth strategy, aiming to secure jobs in markets where we previously had little presence. This helps us build a backlog. Once we establish a team and installers in a new area, we can open an office there. This is the foundation of our current strategy. Additionally, we are exploring other markets across the country that we believe would be suitable for organic growth, along with potential acquisitions.

But our ability to flex both in the heavy commercial business, the light commercial business, all of the install businesses, our ability to flex up or down is very significant. I mean, obviously, we wouldn't disclose individual branch results, but there are some branches in Texas and Florida that have had pretty significant sales declines over the course of the year and particularly in the fourth quarter, but they have maintained their margins, right? And that speaks dramatically to the heavy variable cost structure of the business, and importantly, the manager's ability to manage effectively. One of the things that we believe, structurally, we benefit from is the highly variable compensation within the organization, and particularly within the branch managers, that provides a powerful incentive for them to manage the cost structure, whether that's managing it up or down based upon the volumes that they're seeing.

So, it seems even more noticeable this quarter given your gross margin. The production builder versus your other category has been affecting the mix, and you’ve mentioned margins related to customer mix, which I believe is similar. Can you provide any insights on the growth rates you are experiencing or the different rate of change within your production category compared to your other regional category? The magnitude looks promising. I think you mentioned the regional category is stable or increasing, if I heard you right. Any comments would be appreciated.

If we examine the full year, our business with private regional builders remained stable. In contrast, our dealings with public production builders, which include publicly available data, saw their homebuilding revenue decrease by about 6%, and our revenue from them mirrored that decline. However, this decline was balanced out by our steady to positive growth with private builders. We believe we are effectively maintaining our market share with public production builders while also focusing on sustaining prices and profitability. Our team is dedicated to supporting them during transitions and is actively identifying opportunities within our geographic focus and customer base, ensuring we maximize the benefits available. Correct.

I've a question about multifamily. I've seen the government data, too, it shows a profound rebound in multifamily. Are we actually seeing that kind of boots on the ground? Is it that good? Or is it more just a bottoming going on?

Yes, that's a great question, and I'm glad you raised it because we wanted to address it. We believe that, at a macro level, based on recent information from the Census Bureau, multifamily cycle times have essentially returned to pre-COVID levels, prior to any supply side disruptions. This normalization is primarily due to a significant increase in multifamily starts, which were up about 18% for the year, while units under construction saw a decline of 13%. We think the multifamily market is approaching an equilibrium, although there will still be some challenges ahead. In the first half of this year, our team has performed exceptionally well in the multifamily sector, particularly in CQ, surpassing the available market opportunities. We are very confident in their ongoing capabilities, as evidenced by the growth in their backlogs and their success in boosting complementary product penetration in multifamily projects. Looking at the starts for 2025 moving into 2026, and considering the longer cycle times for multifamily compared to single-family, we are optimistic about the multifamily outlook for the full year 2026, especially given the favorable comparisons that the industry will face. Additionally, regarding cycle times in the single-family sector, they are currently at their most efficient levels ever. Many of the larger production builders have noted improvements in their cycle times. Reflecting on our overall business, the only segment where we lack confidence is in single-family production builders, as their cycle times are very tight at the entry level. If there is an increase in demand, we will see a swift impact on our installation timelines, allowing us to adjust quickly, unlike multifamily, where the time from bid to installation can take 12 to 18 months. Therefore, any change in the entry-level production builder segment could be significant when it occurs, although we are uncertain about the timing of such changes.

I was just hoping you can talk about IBP single-family branch sales growth relative to the national market in the fourth quarter and just how and why that might have changed from sort of how IBP performed versus the market in 2Q and 3Q?

We continue to perform ahead of the market opportunity, and we benefit from our strong presence in the Midwest and Northeast. Our single-family revenue and market share are highest in the Midwest, which has been relatively strong compared to the rest of the country. We're confident in our regional mix. We are well-positioned with production and entry-level builders for when the market begins to shift. In the meantime, we're focusing on our private, semi-custom, and custom builders, leveraging our regional diversification advantages.

Great. That's helpful color. And then just really quickly on the commercial performance. I believe you characterized the backlog as healthy. But I was just curious if there's any more finer points you can put on sort of what you're seeing in the backlog in that early part of 2026 here and how much visibility that really gives you?

It's very healthy. We feel very good about the business. It's working incredibly well. To be honest, the team deserves a tremendous amount of the credit, and the leadership that Brad has brought to that team has been phenomenal.

Yes, absolutely.

Thank you for your questions, and I look forward to our next quarterly call. Thank you.

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