Installed Building Products Inc (IBP) 2017 Q1 法說會逐字稿

Greetings, and welcome to the Installed Building Products Fiscal First Quarter 2017 Earnings Conference Call. (Operator Instructions) As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Mr. Jason Niswonger, Senior Vice President of Finance and Investor Relations for Installed Building Products. Thank you. You may begin.

Good morning, and welcome to Installed Building Products' First Quarter 2017 Earnings Conference Call. Earlier today, we issued a press release on our financial results for the first quarter, which can be found in the Investor Relations section on 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 our financial model and seasonality, the demand for our services, expansion of our national footprint, our ability to capitalize on the new home construction recovery, our ability to strengthen our market position, our ability to pursue and integrate value-enhancing acquisitions, the impact of Alpha on our revenue and profitability, expansion of our commercial business, our ability to improve sales and profitability and expectations for demand for our services for the remainder of 2017. Forward-looking statements may generally be identified by the use of words such as anticipate, believe, expect, intends, plan and will, or in each case, their negative or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts.

By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Any forward-looking statement made by management during this call is not a guarantee of future performance, and actual results may differ materially from those expressed in or suggested by the forward-looking statements as a result of various factors, including, without limitation, the factors discussed in the Risk Factors section of the company's annual report on Form 10-K for the year ended December 31, 2016, as the same may be updated from time to time in subsequent filings with the Securities and Exchange Commission.

Any forward-looking statement made by management on this call speaks only as of the date hereof. New risks and uncertainties come up from time to time, and it is impossible for the company to predict these events or their effect. The company has no obligation and does not intend to update any forward-looking statements after the date hereof, 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 and adjusted net income per diluted share. You can find a reconciliation of such measures to their nearest GAAP equivalent in the company's earnings release, which is 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. I will now turn the call over to Jeff.

Thanks, Jason, and good morning to everyone joining us on today's call. I'm happy to have the opportunity to talk to all of you about our first quarter results. As usual, I will start today's call with some highlights and then turn the call over to Michael Miller, IBP's CFO, who will discuss our results in more detail before we take your questions.

This year is off to an excellent start, driven by strong first quarter operating and financial results. The first quarter is typically our seasonally lowest quarter for revenues and profitability, and as you may remember, last year's first quarter benefited from a significant catch-up in completions, which favorably influenced IBP's revenue mix and profitability. This year is also off to a strong start though for different reasons, leading us to believe that 2017 is shaping up to be an excellent year and yet have more of a normal seasonal pattern.

As a reminder, the insulation installation process of a single-family home typically requires 3 separate trips to the construction site. The first phase is primarily associated with preparing and air sealing the house as well as installing insulation in locations that become difficult to access later after other trades perform their roughing work prior to insulation install. This stage is more labor-intensive with typically lower margins. We do a higher mix of this type of work during the first quarter.

The second phase typically involves installing fiberglass batts in the wall cavities, and the final phase primarily consists of blow-in loose-fill insulation in the attic. These later 2 phases are typically higher-margin jobs and represent a greater mix of the work we complete during the second half of the year.

Last year's first quarter benefited from a higher amount of phase 2 and 3 insulation installation services as there was a catch-up in the lag between starts and completions that built during the second half of 2015, which isn't generally what we see during our first quarter. This year is following a more normal seasonal pattern and we believe will be more similar to 2015 than 2016.

As a result, profitability during the 2017 first quarter is not directly comparable to the prior year period from a gross margin and same-branch incremental adjusted EBITDA margin perspective, yet I'm very pleased with the strong gross margin and adjusted EBITDA margin we have experienced in a seasonally low quarter.

So with this as a backdrop, let's talk more about the first quarter's operating and financial results. First quarter total revenues increased 33% to $256 million, driven by same-branch growth, the contribution of our recent acquisitions and a strengthening housing market. The higher revenues we experienced in the first quarter, combined with controlled spending, helped improve our first quarter profitability with a 36% increase in adjusted EBITDA and a 35% increase in adjusted net income per diluted share. We continue to produce strong operating cash flows. And during the 3-month period ended March 31, 2017, we generated $16 million of cash from operating activities.

In addition, in April, we successfully refinanced our senior secured debt with new credit facilities that provide IBP with significant capital and financial flexibility to achieve our established growth strategies.

During the 2017 first quarter, we saw strong growth across all of our end markets. Single-family same-branch sales increased 4.4% while total single-family sales increased 14.4% compared to the increase in total U.S. single-family completions of 10.9%. Within the multifamily market, our locations benefited from robust demand, and during the 2017 first quarter, same-branch multifamily sales increased nearly 44% while total multifamily sales increased 115%.

IBP's total residential same-branch sales increased 8% for the 2017 first quarter compared to total completions growth of 10.7%. Over the past 12 months, our total new residential same-branch sales have increased 11.4% compared to total U.S. completions growth of 7.7%.

We expect residential end markets to improve towards stabilization of approximately 1.5 million total housing starts over the next several years, and our business continues to benefit from the recovering housing industry. According to the U.S. Census Bureau's historical data and the April 2017 Blue Chip consensus forecast for housing starts, total U.S. housing starts are forecasted to increase at a 9% compound annual growth rate from 2016 to 2018.

During the 2017 first quarter, total U.S. housing permits increased 10.5%. This was primarily due to a 13.2% increase in single-family permits while multifamily permits increased 5.6%. We expect residential end markets to benefit from various factors, including improving employment, rising household formations and historically low mortgage interest rates.

Acquisitions continue to enhance our financial performance. In the first quarter, we acquired Atlanta-based Custom Glass Atlanta, Inc. and Atlanta Commercial Glazing, Inc., with combined annual revenues of $11 million and Arctic Express, an insulation installer located in Corpus Christi, Texas, with $1.6 million in trailing 12-month sales.

We also closed the acquisition of Trilok Industries, Inc., Alpha Insulation and Waterproofing, Inc. and Alpha Insulation and Waterproofing Company, a provider of waterproofing, insulation, fireproofing and fire stopping services to commercial contractors with 9 locations throughout the southern U.S. and 2016 revenues of $106 million.

I'm encouraged by the first quarter's contribution from the Alpha Insulation and Waterproofing acquisition, which we successfully closed and began integrating into our operations in January. Alpha has exceeded our initial expectations, helping to drive a significant increase in acquired revenues while improving the company's adjusted EBITDA contribution margin from acquired businesses to 14.4% in the quarter compared to 11.2% for the same period last year.

Alpha's backlog at the end of the first quarter was $87 million, a 4% increase since the start of the year. With the addition of Alpha, IBP has developed a strong commercial platform that is well positioned for sustained growth.

For the 2017 first quarter, commercial revenue represented 18% of total revenue compared to 11% for the same period last year. We are focused on leveraging Alpha's commercial experience throughout IBP's nationwide branch network and expect commercial revenues will become a greater percentage of IBP's total revenue.

Additionally, we have completed 2 more recent acquisitions. In April, we acquired Minneapolis-based Horizon Electric Company with annualized revenue of $1.2 million. And in May, we acquired Sanford, Florida-based Legacy & Glass, LLC, with annualized revenues of $5.4 million. Year-to-date, these 5 acquisitions represent a total of $125 million of acquired revenues.

We continue to deliver on our acquisition strategy and remain confident in our ability to identify candidates, successfully integrate newly acquired companies and immediately achieve operating synergies through our scale and national buying power. Our pipeline of potential residential and commercial deals over the next 12 months is robust, and we anticipate the remainder of the year will be strong.

I want to emphasize again what a strong quarter IBP had in light of the difficult comparison to the first quarter of 2016. With nearly 5% growth in the number of completed jobs on a same-branch basis and a 4% gain in price mix, the existing branch locations performed exceptionally well, and the addition of key acquisitions impressively improved our end-market diversification and profitability.

As the spring selling season continues to provide strong indicators to our volume of work in future quarters, I'm very pleased with our strong start to the year and expect 2017 will be another record year as we are positioned to achieve over $1 billion in revenues. IBP has a fantastic team of experienced, dedicated and motivated associates, and I'd like to thank all of them for their hard work.

Finally, on behalf of everyone at IBP, I'd like to also thank our suppliers as well as our homebuilding multifamily and commercial customers. We appreciate your support, and we are dedicated to providing each of our customers with superior, committed and excellent installation services.

Thank you. Michael, I'd like to now turn the call over to you to provide more details on our first quarter results.

Thank you, Jeff, and good morning, everyone. We continue to make considerable progress growing revenue and improving profitability. For the first quarter, our revenue increased 33.4% to $255.7 million. Our same-branch sales improved 8.7% due to an increase in volume across all of our end markets and favorable improvements in price and mix.

Our same-branch single-family sales growth was 4.4%, and our total new residential construction same-branch sales increased 8%. Additionally, we continue to experience strong organic growth in the commercial and repair and remodel markets, which increased to combined 11.9% on a same-branch basis.

As noted in previous quarters, we believe it is helpful to look at certain metrics over more than just a single quarter. Over the last 12 months, our total same-branch sales growth was 11.9% comprised of 11.4% from our new residential end market and 14.2% from commercial and repair and remodel, all on a same-branch basis.

First quarter 2017 gross margin was 28.2% compared to 28.5% in the prior year quarter as a result of a return to a more normal seasonal mix of installation services and an increase in fuel costs. For a perspective on the normal seasonally low first quarter margins, during the first quarter of 2015, gross margin was 26.3% compared to full year 2015 gross margin of 28.4%.

For the 2017 first quarter, selling and administrative expenses, as a percent of net revenue, declined to 20.8% as compared to 21.7% for the 2016 period. As a percentage of revenues, administrative expenses were 15.4% in the first quarter compared to 15.8% for the same period last year. We improved our operating leverage even though we continue to incur increased public company compliance costs primarily associated with the transition to a large accelerated filer. We expect general and administrative expenses as a percent of net revenue to continue to improve over time as we further scale our operations and benefit from higher sales.

As we have stated in previous earnings calls, it is important to note that as our acquisition strategy continues and as the volume of total acquired business operations become larger, we will incur additional noncash amortization expenses. In the first quarter, we recorded $6.4 million of amortization expense, a 159% increase over the prior year period. This noncash adjustment impacts net income, which is why we believe adjusted EBITDA is the most useful measure of profitability.

Based on our acquisitions completed to date, we expect second quarter 2017 amortization expense of approximately $6.5 million and full year amortization expense of approximately $25.8 million. These figures will change with each subsequent acquisition.

For the first quarter of 2017, adjusted EBITDA improved to $26.3 million, representing an increase of 36.4% from $19.3 million in the prior year. As a percent of net revenue, our adjusted EBITDA improved to 10.3% in the first quarter, representing an increase of 20 basis points from 10.1% in the prior year quarter. We are pleased with the successful steps we have taken to enhance our operating efficiency and increase our adjusted EBITDA margin.

IBP's same-branch incremental adjusted EBITDA margin for the 2017 first quarter was impacted by the return to a more seasonally normal first quarter compared to the prior year period. As a result, the same-branch incremental adjusted EBITDA margin was 1.2% for the first quarter. On a trailing 12-month basis, same-branch incremental EBITDA margin was 16.9%. It is helpful to note that same-branch EBITDA includes all of the incremental costs of the transition to a large accelerated filer and higher corporate costs to support our growth.

The adjusted EBITDA margin contribution from acquired revenues was 14.4% compared to 11.2% for the same period last year, reflecting the contribution of Alpha's higher-margin commercial revenues. As 2017 follows a more historical seasonal pattern, we expect incremental adjusted EBITDA margins, especially on same-branch revenues, to increase throughout the year. Long term, we continue to believe our financial model can produce full year incremental adjusted EBITDA margins of 20% to 25%.

On a GAAP basis, our first quarter net income was $6.4 million or $0.20 per diluted share compared to net income of $5.8 million or $0.19 per diluted share in the prior year quarter. Our adjusted net income improved to $11.1 million or $0.35 per diluted share compared to $8.1 million or 26% -- $0.26 per diluted share in the prior year quarter.

For the first quarter of 2017, our effective tax rate was 37.3% compared to 34.8% in the prior year quarter. We typically experience a higher effective tax rate during the first half of the year due to tax valuations related to losses in certain business entities. For the full year, we expect an effective tax rate of 35% to 37%.

Now moving on to our balance sheet and cash flow. At March 31, 2017, we generated $15.7 million in cash flow from operations, which we continue to use to fund acquisitions and reinvest in our business. Capital expenditures at March 31, 2017, were $7.8 million while total incurred capital leases were $800,000. Capital expenditures and incurred capital leases as a percent of revenue declined 60 basis points to 3.4% in the 2017 first quarter compared to 2016 despite a 33.4% increase in revenues. We continue to expect gross capital expenditures and incurred capital leases to trend at approximately 3% to 4% of sales during this part of the housing recovery.

At the end of 2017 first quarter, we had total cash of $24.6 million compared to $14.5 million at December 31, 2016. On April 17, 2017, we announced the successful refinancing of our borrowings under the company's then-existing term loan and delayed draw term loan facilities and the closing of a new $300 million Term Loan B facility and $100 million ABL revolving credit facility.

On a pro forma basis, IBP has total indebtedness of approximately $369 million comprised of the new $300 million term loan, $56 million in equipment financing and $13 million in acquisition-related notes and noncompetes. With currently about $100 million in cash resulting in net total indebtedness of $269 million, IBP continues to have a conservative capital structure and considerable flexibility as we continue to deliver on our growth strategy.

As a result of our new credit agreements, we anticipate interest expense of $4.8 million in the second quarter and $14.1 million for the full year, including the write-off of unamortized loan costs relating to our previous facilities. These figures will change based upon subsequent finance fleet purchases and short-term cash flow financing under our ABL facility.

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

Thanks, Michael. Well, I think that pretty well sums up the numbers and drivers of what was a fantastic quarter. And as you can see, our growth-oriented business strategy continues to drive strong financial results. With the housing industry continuing to demonstrate improving trends, we're excited about our opportunities for 2017 and beyond.

Operator, now let's open up the call for questions.

(Operator Instructions) Our first question comes from the line of Nishu Sood with Deutsche Bank.

And I wanted to start out -- by the way, I thought it was great details about the seasonality. So no questions there. Mike, you mentioned gross margins in terms of the seasonal pattern. You used 2015 as an example, where I think there was a 200 basis point difference between 1Q and the full year. Does that mean that we should be thinking about that same 200 basis point gap for 2017?

Nishu, it's Michael. Good question. And you broke up a little bit there. I don't know if it's our connection or not. But in terms of our comment around both the first quarter '15 and full year '15 gross margin, it was really more to provide context for how gross margin improves during the course of the year. Now that's not us trying to provide guidance around a larger increase in gross margin as we go through the year. As I think we talked about in last quarter's call and a couple of quarters before that as well, we've continued to make very good progress on improving gross margin. And one of the things that I would highlight out of this quarter is we're continuing to get more selling and administrative expense leverage, which is something that we think is key as we trend towards that mid-teens EBITDA margin that we talked about as we approach stabilization. So we weren't trying to give guidance towards continued improvement necessarily as it relates to 2017's gross margin on a specific basis other than to make it clear that historically, the first quarter is our lowest gross margin quarter.

Got it. No, that's helpful. Sorry about the breakup there. But that is exactly what I was asking about, the 200 basis points that you mentioned. So understood, not providing anything specific. The incremental EBITDA margins on acquired businesses was very strong. I think it's the strongest year you may have on record. And you mentioned obviously Alpha, the commercial business having higher incrementals. But you also maintained the longer-term expectation for 20% to 25% incremental EBITDA margins. Wouldn't the Alpha mix, the commercial mix, especially as you start to grow that business potentially through acquisitions as well, wouldn't that tilt that number higher? So maybe that just means within the 20% to 25% range, we should be thinking at the higher end of that? Or yes -- so how should we think about that? Shouldn't commercial push that number up?

We would expect over time that yes, commercial would help us get to the higher end of that 20% to 25% same-branch incremental EBITDA margin. But also keep in mind that the Alpha business was acquired in January of this year, and it won't become same-branch or organic until January of next year. So it will continue to influence the acquired incremental EBITDA margins or acquired EBITDA margins for the rest of this year. But then next year, it'll lap into the organic incremental margins. So we believe -- again on a full year basis and over time, particularly as we lap in, if you will, Alpha into the organic business and also as we continue to see good progress on the single-family side of the business, we're confident that we will fall in that 20% to 25% range.

Got it. One final one, if I could. The debt-to-EBITDA $269 million against, I think, $112 million trailing adjusted EBITDA, it’s here (inaudible) about 2.4x. Obviously, you're entering the strong cash flow period of the year. Where are you targeting that to be by the end of the year? And if you could clarify what you would be assuming in terms of acquisitions for where you would want that to be by the end of the year.

Yes, as you know, we don't provide guidance both on EBITDA and/or future acquisitions. What I would say though is that the numbers that you're using are not pro forma. And obviously, the Alpha acquisition, while it contributed EBITDA to the first quarter on a trailing basis, there would be 3 quarters in which their EBITDA wouldn't be in that number. So on a net basis, the leverage is obviously better on a pro forma basis. So as we think of leverage, just in aggregate, not necessarily at the target towards the end of the year, but at this point in the cycle and what we're seeing from a very strong cash flow perspective, being in that kind of 2x to 3x is very comfortable for us. And it gives us, with our strong cash flow and our pipeline of deals, gives us a lot of flexibility, keeping in mind that we do have currently approximately $100 million of cash on the balance sheet. So we have a lot of flexibility. The new capital structure, we believe, provides us even more flexibility than we had before. And we're very confident in our ability to properly use the cash that we have and the cash flow that we generate not only to invest in the organic side of the business but also with the acquisition opportunities that we see.

Our next question comes from the line of Bob Wetenhall with RBC Capital Markets.

So seasonality, and you're speaking some comments about return to a more normal rate of seasonality, and we're looking organic volume growth coming in around 5.5% in the first quarter. And by implication, just in terms of how we've seen the pace and cadence of EBITDA, does that mean organic growth is going to accelerate during the balance of the year in order to get to a more normalized seasonal pattern?

Well, again, we don't provide guidance, but I would point to a couple of things, and things that we were very pleased with in the quarter. And that was the organic growth that we saw in the quarter on the multifamily side, which was over 40% on repair and remodel, which was 17%. And on the commercial side, again, this is all organic so it doesn't include any of the Alpha revenues of about 9%. And what particularly encourages us for the remaining balance of the year is the data that you were all seeing relative to single-family permit growth, what the builders have reported in terms of new orders, the private surveys that we're seeing relative to the non-public builders in terms of their new order growth. It looks as if we're going to have one of the best spring selling seasons we've had in a long time, which that then is very, very encouraging for our single-family same-branch sales growth as well as we head into the balance of the year. So we feel as if the first quarter has set us up very well to benefit from what we believe is going to be a very solid recovery in the single-family side of the market.

Yes, it seems robust. Should we expect the market -- you're talking about the lag between starts and completions. So how should we think about market growth coming in ahead of your results for same-stores performance? In terms of the length of the lag right now, with what's going on?

Rob, it's actually a little early to tell yet in terms of how much that lag is going to be this year just given the increase in volume. Historically, when there's been kind of mid-teens growth in, say, permits so the permit growth was, on a single-family basis, was 13.5% in the first quarter. So when you have that kind of growth, there typically tends to be a greater lag that's created between permit and completion. We do believe that the industry has scaled up more, say, than in '15 when we created that big lag that created in the back half of the year. So we believe the industry is going to be able to address it a little bit better. But certainly, when you have the kind of growth in the single-family market that we're experiencing right now, lags are extended. So it's a little bit early to tell just what's going to happen in the back half of the second quarter and going into the third and fourth quarters. But we feel confident on more than just a quarter basis. Certainly for the full year, '17 is really setting up to be a good year for single-family.

What about -- what are you seeing in the marketplace with price realization? And do you expect any other pricing actions during the year?

I assume, Bob, you mean relative to the insulation manufacturers or on our side?

Yes, sir.

Bob, hi, it's Jeff Edwards, that is. Jeff Hire is also in the room. But as you probably know, there was a announced price increase out in the market currently from the fiberglass manufacturers. Demand is good. The market's better. So really in every case as we have a rising tide, I mean, our ability and our confidence that the industry, in fact, improves in that regard gets better. So...

And we think their ability to realize price obviously goes up at a time when single-family demand which, as you know, is a large portion of their incremental demand. As that single-family demand increases, it gives them greater ability to realize price increases. And as we stated consistently, we're supportive of a rising price environment in the market because over time, we've demonstrated our ability to appropriately and fairly realize the benefits associated with that with our customers.

Got it. That's helpful. And one last question. Working capital as a percentage of sales was higher. And is this a by-product of the integration of the larger branches with Alpha? Or is it something else just in the timing of cash flows?

Yes, that's a great question, Bob, and I'm glad you asked it. So really, it's more of a timing from an accounting perspective. So we acquired Alpha in January of this year. So their full balance sheet, if you will, was in the March numbers but only a quarter's worth of their revenue. So the -- we have all of the working capital on our balance sheet but only a quarter of the revenue associated with them. So it distorts a little bit that calculation this quarter. We would expect that over time that as they become more organic rather than acquired, that ratio would fall more in lines with historical patterns.

Our next question comes from line of Scott Rednor with Zelman & Associates.

Michael, I have a question on the incremental margin just for the core business. I appreciate the mix aspect relative to last year. Have you seen that bounce back already here in May? And I noticed that you didn't refer to the 20% to 25% for the year. Would it be wrong to think that you guys couldn't get back there on an annual basis?

Yes, in our prepared remarks, Scott, we did talk about our belief that on a full year basis, the incremental margin of 20% to 25%, we still feel confident about. I mean, obviously, given where we are in the first quarter, it makes it a little bit more difficult this year to get there. And also keep in mind, as we pointed out in the prepared remarks, the organic business, there's the incremental costs associated with things like supporting our growth, converting to a large accelerated filer, which we're still increasing higher levels of accounting and legal fees associated with that. So there's a lot of that organic or legacy business, a lot of incremental cost that it bears just the way that we calculate those numbers. So we definitely feel good over time, particularly when you look at it on an LTM basis or a full year basis that, that 20% to 25% is the right number. And as the mix of business, as we believe, is going to happen through the course of this year, as we continue to get good hopefully single-family volume growth that obviously helps the organic business from an incremental margin perspective.

And then just maybe shifting to Alpha. I think you disclosed that it's been -- it ran last year around the 20% EBITDA margin for the full year. Clearly, we only have 1 quarter to work with, but coupling that with Jeff's commentary in the release that it's tracking ahead of expectations, how should we think about the margin profile if we think about it annually? Is that a right target or should you leverage that 20% margin?

Yes, we think of it more of a high -- as a high teens margin business, and we feel good that it's tracking along under that basis. Jeff's specific comment was really talking about the growth that they saw, if you will, organically in the first quarter. Obviously, that doesn't show up in our numbers. But we feel very good that both the integration of that business has been going very well and that the growth that they're seeing in the business is looking very, very attractive. So we feel very good about our ability to integrate that business and also to be able to use and leverage the skill sets that they've developed and the team that they have to organically grow that business through some of our existing branches.

Great. And then just lastly, some of the recent acquisitions, not including Alpha understandably, but seem to be a little bit outside of the core fiberglass insulation piece. And I believe you guys always refer to that as your best ROIC in terms of a deal. So just curious if you could maybe elaborate there. Is there any change in the strategy at all or maybe what's incremental about the additional bolt-ons that have occurred over the past few months?

Scott, it's Jeff. No, not changed really at all. I mean we, over the years, have done a lot of other product company acquisitions. We do, as you know, and you've heard us say a lot of times lead with or at least when we enter a new market, a lot of times, we'll lead with what is hopefully a fiberglass acquisition. The idea of coming back through in markets where we already have a presence and making a bolt-on acquisition that's another product type actually, we believe, makes perfect sense for us. I mean we ultimately have the ability to grow it organically. At the same time, we're busy chasing insulation. We're busy running at a great market opportunity in our core business. And this just gives us extra lift, and we're not as disruptive in the marketplace. We still get the cross-sale -- the ability to do cross-sales and pick up that with an acquisition. So to us, it makes, in a lot of instances, even more sense than -- in certain instances at least than growing it organically, and it just so happens that these transactions and deals presented themselves, and we took advantage of them.

And also from an ROIC basis, they tend to be pretty attractive as well because we will typically acquire them at, at least a full term multiple less than what we would a typical fiberglass deal. So we're very mindful of the ROIC that we're getting on all acquisitions.

Our next question comes from the line of Matt McCall with Seaport Global Securities.

So the phase 1 through 3 of the construction side of that, that was helpful, and I understand the impact on Q1. And I think Michael, you said that the expectation for the full year's still in that 20% to 25% range. Is there a quarter that sees kind of this pressure flip, and therefore, we see an extraordinarily high incremental for 1 quarter where that mix may have been different last year that it's going to be this year? Or is it a stabilization that gets us kind of back to that -- gets us back to that level of stabilization through the remaining quarters of the year?

Yes, historically, the third and fourth quarter would typically be our highest. And I just -- and it does change because of the mix of business. But historically, over a long period of time, the third and fourth quarter would typically have our highest incremental margins on an organic basis. That being said, clearly, the trend towards stabilization is very helpful, and volume growth in the single-family business is very helpful as well as we trend towards -- getting towards that 20% to 25% in incremental margins on a full year basis.

Okay, all right, so we're not going to see a big spike to kind of recover that 1% next quarter as the mix moves to a different structure versus last year?

No.

Matt, this is Jason. Just to clarify, and I think it's probably good to look back at the trends in '15 and '16 in this regard. If we look at last year, the incremental EBITDA on the same-branch basis was 19% to 20% in the back half of the year. However, in 2015, it was more so. I don't have exact figures in front of me, but I think it was more so around the 24%, 25%. Should the seasonality continue as we expect, we'd expect that sort of a trend.

Okay, that's helpful. So my other question. So the price mix around 4%. I guess there was a tough comp. You're up against a 12% comp, really strong price mix number in Q1 of last year. You also had this mix impact, which I assume had some impact on that number. Your comps get easier. The mix issue should be behind us. How should we look at the price mix going forward? Do we simply adjust for the easier comps? Do we have to add another kicker in because of this mix thing we're talking about? I'm just trying to figure out how to -- what the expectation should be for price mix for the rest of the year.

Well, I think one way to look at it is that on an LTM basis, the price mix benefit was about 5%. And if you look over time, our price mix benefit has been kind of in that 5-ish to 6-ish percent range on a full year 12-month basis. And we feel good that we're continuing to get a healthy price mix. And obviously, any acceleration in demand and/or realized price increases from the manufacturers benefits as well that price mix.

Our next question comes from the line of Keith Hughes with SunTrust Robinson Humphrey.

I also had a question on price mix. As you move for -- well, let me ask on the quarter. How much did the mix contribute to this? And I assume with multifamily doing so well in the quarter, that's a negative mix for you in terms of this calculation, correct?

Correct.

And so single-family numbers, I assume, would have been higher than this. So I think we're all sort of groping around the kind of the numbers at this point. Let me ask it this way. Is a mid-single-digit number a doable number in the near term for you?

I would point to the historical trends where that mid-single-digit number has consistently been there on an LTM and/or full year basis.

Okay. And then switching to Alpha and the commercial trends. Are you noticing any changes within the types of jobs they do? Any one subsegment doing better than others as the order book builds for the year?

No. I think it's the mix that we would have expected. In certain markets and really even on a national basis, there's both talk and probably reality of the office market coming back a little bit more strongly, and that would bring with it opportunity for them to, in certain applications, to things that when the office market's strong, you can't do. So there's probably more opportunity certainly, we think, in that regard, than there is in any downside in that regard.

Final question, this came out just right before the call started a settlement due in Owens Corning and TopBuild their year-long dispute here. Does that play any role or any impact on you one way or the other?

No.

Yes, it doesn't impact us at all.

(Operator Instructions) Our next question comes from the line of Trey Grooms with Stephens Inc.

I just want to go maybe a little bit higher level on the nonres side. With your exposure there through the recent acquisitions, what's the mix now of new nonres construction versus nonres R&R? How does that mix look now? And then also kind of how much -- I guess the question is how much does new nonres construction really drive your nonres business there? Is it a similar mix to -- on the res side?

So on the commercial side, right now, it's about 18% of total revenue, and that's up from 11% last year for the quarter. But is your question more specifically about the -- within the commercial end market, the difference between new and repair and remodel?

Yes, for your businesses that you've acquired. Because it is -- I mean, nonres is becoming a more important part of the business for you guys. Just trying to -- so as we're hearing headlines about new nonres construction and things like that, what I'm trying to gauge is that within your nonres business, what is the primary drivers? What's the mix of the business there between new nonres construction versus like a repair/remodel or retrofit kind of application where somebody's coming in and just trying to increase the efficiency of their building and so forth?

Yes. So -- okay. If you -- when looking at our commercial business and then breaking it down between new commercial and existing commercial, the existing commercial piece is very small. It's a very small percentage of the overall commercial revenues, which is when you think about the products that we're installing, particularly on the Alpha side of the business, they're typically not a retro application. There is some installation application that would be retro, but it's fairly small. So the driver -- to your question, the driver of the commercial business is new construction.

Got it, okay. That's helpful. And then Michael, you talked a little bit about the outlook for new res and starts and the lag and that sort of thing. But how are you looking at the other end markets that the R&R, for example, are more specifically nonres now? What's your outlook there? I mean, I would guess that it's probably pretty decent since you guys have been chipping away at the additional acquisitions there. But if you can give us any kind of thought about where you guys see us in the cycle there for nonres and what you're thinking about that end market.

We feel very, very good about the organic growth that we've seen in the R&R. Again, these are small -- relatively small percentage of our overall business. R&R is about 7%. But in the quarter, we saw a 17% organic growth in repair and remodel, which is higher than -- we were very pleased with that because I think most people would expect that R&R growth to be sort of in the mid-single digits. So to be at 17%, again, small percentage of our overall business, we felt very good with. And then on the organic side, on the commercial side, to get nearly 10% growth on that, again, that's not including acquisitions just on our existing commercial business, we feel very good that the trends there are very positive, particularly when -- and what gets us very excited about the rest of '17 is when we see what's going on in the single-family market as it relates to what I was talking about earlier, both permit growth, order growth, survey data that you're seeing from the public builders, the bank lending data that you're seeing both on a mortgage perspective and also particularly on the land development perspective. So we're very encouraged about what the single-family market is going to do through the rest of '17. It goes back though to an earlier question about what does the lag look like between permits and completions. And as we've seen like in '15, when there is this high acceleration in single-family, you do get somewhat of a lag. So the lag gets longer than historical averages. But long term and for the balance of '17, '18, we feel very good about where the single-family market is headed. And as you know, that is our bread and butter.

Mr. Edwards, there are no further questions at this time. I'll turn the floor back to you for final remarks.

Great. I'd like to thank all of you for your questions today, and I look forward to our next quarterly call. Thanks again.

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