Columbus company turns home insulation into a multi-billion dollar business

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In business, insulation is about as sexy as overalls.

Yet one Columbus company has quietly built a multi-billion dollar business on a foundation of foam and fiberglass insulation.

From humble beginnings as Edwards Insulation in 1977, the company is now called Building products installed has more than 200 branches and more than 10,000 employees from coast to coast. With annual sales expected to approach $3 billion this year, the Brewery District company has been quietly one of the most successful businesses in central Ohio.

Now the company, commonly referred to as IBP, is about to face one of its biggest tests as a publicly traded company: can it sustain growth and profitability in a hammered housing market? by mortgage rates while battling the worst inflationary pressures it has ever faced?

Chairman and CEO Jeff Edwards is confident the answer is yes.

“We continue to believe that IBP is better positioned than at any other time in our history to manage the business through the U.S. real estate cycle,” he told analysts last week.

Installed building products installers Charles Irvin, left, talks with Trevor Stefanski, at the company's operations in Tampa, Florida.

A quiet start

No fancy technological breakthroughs, no Internet disruptions: the building products installed are decidedly old school. Even the name is utilitarian.

Owned by the Edwards family, which also owns the Edwards Companies development company, Edwards Insulation remained relatively small for its first two decades, providing insulation services in the Columbus area.

When Jeff Edwards became active in the business in 1994, he recognized there might be potential in the niche sector.

“It was a small business, but fundamentally a good small business,” said Edwards, who had seen other companies, particularly a division of Masco now called TopBuild, grow insulation services into huge businesses.

“Jeff got involved,” recalls Randy Hall, an IBP executive who was vice president of Edwards Insulation at the time. “He’s a visionary. He looked at what was happening in the domestic market and said there was no reason it shouldn’t be bigger. That’s where it all started.”

Every home, every building needs insulation, but it can be what Edwards calls a “harmful product” – essential, but a small piece of the building puzzle that can be a bit of a headache . He thought builders would respond if they had a contractor to go to to supply and install the product, especially if they could use the same company in different markets.

After:A blanket for your home: Choose the right insulation to save money

Edwards had no interest in reinventing the industry. Instead, his strategy was to buy successful insulation companies in different cities and let them do their job while Installed Building Products did “all the things they didn’t want to do”, like insurance, human resources, accounting and payroll.

In 1994, IBP made its first acquisition, a company called Freedom Construction in Columbus. IBP followed this by acquiring another company in each of the following years.

In 1999, IBP had the system down. That year he bought seven companies, start a shopping spree which has not yet ceased. Over the next two decades, she would acquire more than 100 companies, some with multiple branches. This year alone, it has acquired half a dozen companies and expects more before the end of the year.

“What makes IBP unique is that they haven’t gone down the road of buying failed businesses to fix them,” Hall said. “They want successful businesses.”

One of the companies acquired was OJ Insulation in Southern California in 2006.

“Jeff Edwards called me out of the blue,” said Scott Jenkins, co-founder of OJ Insulation. “I didn’t like selling. We were having our best year ever… (But) once I started talking to him, I realized it was fine with us. I had some lucky I sold to a big company.”

Jenkins remained with IBP and is now Regional President overseeing West Coast operations.

“The No. 1 thing that helped, in my case, was cash flow,” Jenkins said. “Once you’ve been acquired by a big company, you don’t have to worry about that anymore.”

Almost all of the companies acquired by IBP install insulation in new homes and apartments as a core business, although some also install other products, including garage doors and gutters. While some branches work in commercial buildings, housing remains the anchor.

Installer Aaron McCombs, left, works with manager Billy Hernandez, center, and installer Trevor Stefanski, right, at the Installed Building Products facility in Tampa, Florida.

In almost all cases, the companies acquired by IBP keep their name, and often that of their managers.

“The goodwill exists with the companies already there,” Edwards said. “We like to keep management; they have accumulated loyalty.”

Steady growth

This strategy has allowed IBP to become one of the most trusted companies in Central Ohio. Since its IPO in 2014, the company has increased revenue, revenue and earnings per share every year.

In 2013, the year before its IPO, IBP had annual revenue of $432 million and operating profit of $6.6 million, or 2 cents per share. Last year, it posted nearly $2 billion in revenue and $119 million in revenue, or $4 per share.

This year, for the first nine months alone, the company had sales of $1.98 billion and revenue of $155 million.

IBP’s success has been fueled by a robust housing market. But now, for the first time in years, that market looks unstable.

Industry Challenges

Mortgage rates of 7% dampened the boom in the housing market. Housing starts in the United States fell 8% in September and shows no signs of onset.

Edwards, however, thinks the company’s apartment and condo work could offset the decline in single-family work.

“Obviously we are seeing a deceleration in single family orders, single family permits and single family housing starts. However, the single family backlog continues to be at very high rates,” he told analysts. . “And the backlog in multifamily is truly unprecedented.”

A slower pace could actually benefit IBP by allowing the company’s weakened supply chain to catch up, he said.

“Everyone assumes it’s the start of a recession for housing, but the backlog is huge,” Edwards said. “I welcome a slowdown in demand.”

Jenkins agrees.

“We’re still going to have growth,” he said. “I’ve been in the business for 45 years. This cycle is a bit different because it’s more about interest rates. We’ve overheated so much that it will allow us to meet demand.”

IBP must also continue to battle skyrocketing material costs. IBP said its commodity prices rose 27% in the third quarter from the same period a year ago, the biggest increase since the company went public in 2014.

What awaits us

While Edwards expects insulation installation to continue to be the company’s core business, IBP has cautiously moved into another area.

The company’s recent acquisitions of AMD Distribution and Central Aluminum have given it a foothold in manufacturing and distribution.

IBP also expanded into commercial construction, but without growth on the residential side of the business.

Additionally, Edwards sees potential in adding other products to its menu, including window treatments and mirrors, as well as opportunities in certain parts of the country – particularly the Southwest and Eastern region. ‘Arkansas/Missouri – where the company lacks a presence.

“There are still a lot of consolidation opportunities in the industry,” Hall said. “At the same time, we have diversified our product line. We buy companies with the intention of buying the insulation business, but we find that there is another thing they are successful in – enclosures. bathroom, shelving. Next thing you know, we buy shelving and mirror companies. …

“It gives us the opportunity to be at the forefront of multiple product lines. Manufacturers find that attractive.”

Employee efforts

In recent years, the company has focused primarily on employee retention and well-being, a constant challenge in a labor-intensive industry.

Edwards said an average IBP installer makes $60,000 a year and the company’s turnover is far below that of others in the industry.

The company launched additional benefits to attract and retain workers, such as longevity bonuses, wellness programs, volunteer opportunities and a stock purchase program.

“We’re always looking for opportunities to improve and grow,” Edwards said, adding, “We know this isn’t a sexy business.”

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@JimWeiker

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