Greetings, and welcome to the Installed Building Products Fiscal 2022 third quarter financial results conference call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, 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, anticipation, 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 statement 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 in 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 remained 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 year and a half has prepared us for future challenges. We are closely watching our markets for changes in residential activity as the home building 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 US 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 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.
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 branch sales growth of 35%. 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 continued 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 reflects 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 non-cash 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 points 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%-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%-27% for the full year ending December 31st, 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 nine months ended September 30th, 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 nine months of the year. At September 30th, 2022, we had $311 million in working capital, excluding cash and cash equivalents and investments. Capital expenditures and total incurred finance leases for the nine months ended September 30th, 2022, were $37 million combined, which was 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. We have no significant debt maturities until 2028. At September 30th, 2022, we had a net debt to adjusted trailing twelve-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 nine 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 nine 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 30th, 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 31st, 2022 to stockholders of record on December 15th, 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.
Thank you. We will now conduct a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in a question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Once again, that's star one at this time. One moment while we poll for our first question. Our first question comes from Stephen Kim with Evercore. Please proceed.
Yeah. Thanks very much, guys. Appreciate all the color. I think last quarter, if we look at our notes, we see that you talked about anticipating that there will be another price increase from the manufacturers, which, you know, of course, on the fiberglass side, which of course actually turned out to be true. Was curious if you could talk about how you're seeing that pricing flowing through or are you getting any pushback from customers that manifested itself in 3Q sales? Are there certain areas of the market where maybe you're getting greater pushback than others?
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.
Mm-hmm.
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. Certainly I understand that we have a December price increase, you know, coming as well. 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.
Mm-hmm.
They continue to value the quality of our service and install and the products that we're installing. You know, 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.
Yeah, that makes sense. Just a housekeeping item. Installation revenues and other revenues. Could we get that number for 4Q 2021? 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'd be great.
I just wanted to follow up on the AMD Distribution business you acquired, I mean, almost a year ago. At that time, you know, you talked about wanting to be mindful of, you know, potential channel conflict, but you also wanted a platform that was big enough to scale quickly. 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. I mean, we knew those. I mean, when we say we wanted to buy one that was a platform big enough to scale, I mean, this will take time, clearly, and I believe we probably said that. You know, primarily they're doing business in the western, you know, more western states. Believe it or not, a lot of the business that AMD does, we don't have a channel conflict with. They're fairly penetrated in kind of the ag business to, you know, to a degree in some of the smaller markets where we don't do a whole lot of work.
You know, really for us, it was a matter of trying to improve, in essence the buying of some of the supplies and things that we would typically not be able to buy direct, and we just continue to try to develop that, you know, really every day. Like everything else with supply chain issues and COVID, it just takes longer than you'd like today. I think ultimately it still was the right decision and we'll get it there in that regard too. They're doing a little bit of laminating of material for us and some other things that make sense too.
So-
Right. That's the metal building insulation. Is that what you mean?
Yeah. We also install a lot of basement blanket in certain markets that has facing on it. We're, you know, looking into that idea too. Rather than buy everything from a third party, you know, laminator, 'cause not all the fiberglass manufacturers actually laminate their own product. You know, I think that's an opportunity for us too.
To answer your question about the other segment in the fourth quarter of last year, it was roughly $12 million of revenue.
That was the other segment? Okay.
In the fourth quarter of 2021. Keep in mind, the distribution acquisitions, both AMD and Central Aluminum, really didn't contribute very much revenue to the fourth quarter last year.
Gotcha. Perfect. Thanks very much, guys.
Sure.
Our next question comes from Mike Rehaut with JP Morgan. Please proceed.
Hi, guys. Good morning. Doug Wardlaw on for Mike.
Morning.
The first question is, how should we think about decremental margins that made a down market, say, 10%? Would that lead to any timing changes? How should we kinda think about that moving forward?
Well, anyone that assumes that we would have a decline in revenue in that kind of an environment. 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, you know, we do have a lot of advanced knowledge, if you will, both from macro metrics that, you know, we receive from the U.S. Census Bureau as well as from our customers in terms of whether or not there's gonna be any slowdown. That gives us tremendous opportunity to readjust our highly variable costs to meet our expectations of future demand.
You know, we have talked about decrementals being similar to our incrementals of sort of 20%-25%, but we believe we can very effectively manage that knowing that we have, you know, a decent amount of time and that we have really very little, quote-unquote, "true fixed costs" 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. Thanks. Lastly, can you give some insight on some trends you're seeing in single family and multifamily respectively, and where do you think that's going, moving into 2023?
Well, I think there's two parts to answer that question. Because clearly we're seeing a deceleration in, you know, single family orders, single family permits, and single family starts. However, the single family backlog continues to be at highly elevated rates. Once a builder starts a house, they finish the house, right? We're continuing to see a lot of demand for our services and installed solutions on the single family side. On the multifamily side, which has been really, our team has done an incredible job of gaining market share and really improving our presence on the multifamily side. I think as everyone well knows, the backlog in multifamily is really quite unprecedented. I mean, if you look at just the units in backlog right now, it's half single family, roughly half single family, half multifamily.
I mean, the multifamily backlog, you know, so based on historical averages, one can argue is multi-year. We're continuing to see very good demand trends on the multifamily side. You know, and very good demand trends on the single family side. You know, we can't ignore the fact that, you know, what's happening on the completion starts and orders front.
Yeah. I'd add still though that labor, even though we've been able to manage through it, labor remains tight. Although supply chain disruptions, and issues are getting better, it's still-
It's still not easy and it's still problematic in terms of continuing to cause an elongated build cycle and therefore, you know, we're remaining busy.
Right. Thank you.
Sure.
Our next question comes from Susan Maklari with Goldman Sachs. Please proceed.
Thank you. Good morning, everyone.
Hi, Sue. How are you?
Good, thanks. My first question is, you know, 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?
Yeah, we would say that it's definitely gotten better. There's no doubt about that. You know, spray foam, which is a fairly important product for us, is finally loosening up in terms of the availability of both open cell and closed cell, so that's very encouraging. I would say the other products outside of fiberglass, you know, we're seeing decent availability, partially because we've adjusted to the extended lead times in terms of getting those products. As I think you know, most people on this call probably realize that fiberglass is still under allocation. We would say it's getting better and not getting worse, that's for sure.
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. I would say we feel better now than we have in probably the past 18-24 months about the availability of material.
I'd say longer than that.
Okay.
Because it's certainly not pre-COVID ease and flow, but it's certainly better, as Michael said.
Yep.
Yeah. Okay. 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, you know, coming through the business, how are you thinking about the broad trajectory? I know you're not gonna give guidance, but just sort of the broad trajectory there and the ability to kind of sustain those level 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. You know, 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. You know, 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 tend to be similar to the overall company average.
Okay. Thank you for the color, and good luck.
Thank you.
Our next question comes from Adam Baumgarten with Zelman. Please proceed.
Hey, good morning, everyone. Just a question on industry fiberglass capacity as we look out to next year. I mean, do you have a sense for, given all the planned maintenance across the manufacturers, what percentage of total industry capacity may be down at some point next year?
Excuse me. We would say roughly mid-single digits.
Okay. Got it. That's helpful. 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?
Yeah. You know, we experienced. It was a challenging quarter for us in the heavy commercial business, and we did see organic declines in that business, but we saw very good strength in the light commercial business. We're continuing to focus less on volume in the heavy commercial business and more on profitability. You know, we're gonna continue to focus on that through the rest of the year and into next year. Yeah.
Got it. Thank you.
Yep.
Our next question comes from Jeff Stevenson with Loop Capital. Please proceed.
Hi. Thanks for taking my questions today, and congrats on a nice quarter.
Thanks.
Thank you.
I'm just wondering how we should think about organic volume growth on the installation side as we move into the fourth quarter. 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 two quarters?
Well, I mean, we don't provide guidance. We've always talked about volume being sort of a mid-single digit number. You know, the volume number obviously moves with completions. There's not always a one-for-one correlation, but it trends very closely to completions over time. We would expect that trend to continue going into 2023 and 2024. To the first part of your question, yes, the backlogs are very elevated, and we believe that is constructive for a positive completions environment through 2023.
Got it. No, that's helpful. The M&A pipeline sounds active right now, and I know you plan to be active on the acquisition front throughout the cycle. 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. Yeah, you know, 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 kinda get what he feels is his life's work, you know, justly paid for, or whatever he can get doesn't provide for what he's expecting kind of in, you know, ultimately in retirement, it's just, it doesn't line up. They end up pretty much kind of continuing to run the business. Will it be a little less, you know, frothy? Probably.
Understood. Thank you.
Yeah.
Our next question comes from Keith Hughes with Truist. Please proceed.
Yeah, thank you. You had, you know, tremendous price mix numbers in the quarter. Can you give any more details on mix, where mix was helping you and particularly going to a downturn, is mix gonna turn around to a negative if single-family falls off faster than other markets?
Keith, this is Michael. Really, the past couple of quarters, mix has not been a headwind, either through production builder work or through the other products. A lot of the price mix growth, not all of it, but a lot of the price mix growth is really price, you know, job price. In terms of what will happen with price mix if single family changes, it really depends upon the rate at which it does. You know, well, I guess I should back up and say the price mix growth that we've experienced this year, and particularly in the back half, the second quarter and the third quarter, you know, we're coming next year into very tough comps. We believe it'll be an environment that is not the inflationary environment we're in right now.
We would expect price mix to normalize next year as opposed to being at these extremely elevated rates or levels, and we think that makes sense. The mix turning negative in the price mix calculation, again, really just depends upon the timing. I think if it does happen, it would probably happen more towards the back half of next year versus the front half of next year.
Okay. Thank you.
Sure.
Our next question comes from Phil Ng with Jefferies. Please proceed.
Hey, good morning. This is actually, Collin Verron on for Phil . I was just wondering if you could quantify the size of those backlogs or maybe how far out you're 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.
On the multifamily side and commercial side, I mean, our backlogs extend through 2023. You know, we're continuing to see good bidding and good acceptance of bids in both the multifamily and commercial side of the business. On the single-family side of the business, honestly, it is really dependent upon the trades in front of us and how quickly they can get the houses ready for us to do the install work and the ability of the industry to complete the backlog that's there. I mean, if you look at it just at the macro information from the U.S. Census Bureau, you know, we continue to be very elevated from a cycle time perspective.
You know, we believe that the backlog in the single family at a macro level is supportive of, again, single family completion, single family construction, you know, through 2023. Clearly, you know, all the information that, you know, is out there on a macro level from the U.S. Census Bureau would point to weakening in the second half of 2023, absent a change in the current trajectory, if you will, of starts.
Okay. That's very helpful color. Thank you. Just a follow-up question. Commercial, it's been a little bit of a slower growth coming out of the pandemic. What are you seeing 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. It has a tendency to trend to single family, but it does trend behind single family, both going up and coming down. We're still feeling very good about the light commercial business. You know, the heavy commercial business, I mean, if you look at, again, 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 you know, where single-family is or has been on a starts and orders perspective.
Great. Thanks for the color. Good luck next quarter.
Thanks.
Our next question comes from Mike Dahl with RBC Capital. Please proceed.
Hey, this is actually Ryan Frank going for Mike Dahl. Thanks for taking my question. I wanted to come back to the pricing side, understand kind of the dynamics going on, but more just simply around the comps that you guys are gonna start lapping. I mean, how quick of a decel do you think this could be? Is it something that, you know, we could start being flat in 1Q next year, or is it have more legs to it? Thank you.
I'm sorry, would you ask that question again?
Really, I'm just trying to get a sense for, I mean, you guys are, you said it, the comps that you're coming up against in price starting 4Q and into next year are pretty significant. Assuming pricing kind of just stays where it is now, how quickly should it decel into like a low- to mid-single-digit range?
Well, it would. I mean, if you just look at sort of where we've been over the past couple of quarters, you know, we would expect that we're gonna have a more normalized price mix as we're going through 2023, right? That's a function of one sort of lapping the price mix that we've had over the trailing sort of four quarters, if you will, combined with what we believe will be a much more benign inflationary environment going forward.
Do you think, I mean, I could see a step function lower starting next quarter. I guess just kind of surprised to see a constant, you know, a sequential increase this quarter.
Well, you know, we continue to work very closely with our customers and our suppliers to make sure that, you know, price costs are aligned properly. You know, we do that all the time, and, you know, we'll continue to do that.
Okay, that's helpful. Just a follow-up on the M&A. I mean, we're only, you know, two months away from the end of the year, and I think you're still saying that you're gonna acquire an additional $25 million. Are there some bigger deals in the pipeline at this point?
Well, Dave, I'm not sure what you're assuming in terms of average revenue per, you know, per acquisition. I mean, we've been all over the board really in the last two to three years. I mean, yeah, the pipeline's pretty decent. I would say on average, yes, some of the deals that are out there, again, not materially, you know, any larger, but yeah, a little larger, so.
Yeah, I would say we still feel very confident about hitting the $100 million target this year. I will say this, that is, you know, acquisitions to some extent have, you know, a life of their own, if you will. Sometimes when you get towards the end of the year, a seller likes to wait until, you know, January to close just from a tax management perspective. We think we will get to that $100 million target. May it slip into January a little bit? That's potential. Based on our current pipeline, we feel pretty good about getting, you know, a couple of what we think are really solid deals done between now and the end of the year.
Got it. Thank you.
Mm-hmm.
Our next question comes from Ken Zener with KeyBanc . Please proceed.
Good morning, all.
Hey, Ken.
Morning.
Michael, I realize you wanna keep any comments very close to the chest. It's been 30 years, which is, you know, that's clearly some perspective you have. I'd suggest we've never had the macro inflation headwinds we've had now. Michael, could you talk to the dynamics as we forecast, that's our job, changes in price and changes in volume, focusing on the residential dynamics. Can you talk to how we should think about, you know, if you knew you were gonna have a 20% decline, two, three Qs, 'cause the builder starts are down 25% right now. It's just a matter of time, that completion lag cycle time to start normalizing. But can you talk about how the volume with, you know, your branches being largely variable cost, how that would flow through?
The price tailwind, which you guys might have been ahead, you might have been behind, but obviously, you know, prices, Jeff, I don't think you've ever seen prices go up when volume's down or in the Johns Manville furnace in 2017. Operating leverage on price, on the volume, if you have plenty of notification, which I think you guys are reading the news. That's my first question or maybe that was two. Thank you.
I think it might have been three.
Yeah, there's a lot to unpack there. I guess, you know, from a volume perspective, I would go back to our previous answer relative to volume, that we do track on the residential side. We track fairly closely to completions. That being said, it's been our experience, me 20 years, Jeff 30 years, that when we see overall housing declines in our markets, our branches do an excellent job of expanding their service area and expanding the products that they're installing and installing multiple products to our existing customer base. We have seen over time that our volumes can actually do better relative to what's happening in the completions market or in the housing market, the tougher things get.
You know, we've spoken many times to our experience during the Great Recession and how well we did during that time frame on an organic basis to really outperform considerably the market. We don't expect certainly anything like the Great Recession, but we have confidence that our team will be able to kinda outperform, if you will, any kind of volume declines that they're experiencing in their markets. It's impossible, quite frankly, to predict exactly the course of, you know, what's going on in the, you know, permit start side on the single-family side. The multifamily side, though, as we were saying earlier, is really a completely different story.
I mean, what's happening in terms of the backlog in multifamily, you know, combined with the continued reasonable strength in permits and starts, really is very supportive of the multifamily business and the additional market share that we've gained, with that. In terms of, you know, the inflationary environment and price mix, I think what's important to note is that, yes, it has been a highly inflationary environment, but we do not anticipate that there's going to be across the board for all the products that we install, significant price decreases, right? Our expectation is that on average, we're gonna see stabilization in, you know, that price cost, if you will, which would then lead to a more historical environment for us where we're having, you know, positive, price mix.
Obviously, going back to a previous question, you know, mix can become negative and can impact that. We would continue to expect a, you know, positive price mix environment, but just nothing close to the elevated levels we're experiencing right now.
Ken, you made the point to a degree, you know, the business is not to take anything away at all from any of our great managers, production managers, et cetera, but it does, to a degree, correct itself, you know, based on volume, both at the labor, you know, side of things and even on the material side in terms of just purchasing it. To your point, it's, there's a lot of variable costs there that we, you know, can get eliminated pretty quickly.
Yep.
You know, and I guess another point that you made, too, we were much more fiberglass-centered and centric in before, you know, back in 2004 and 2005, let's say, which is when our footprint was kind of at its peak then, which was kind of more, Great Lakes, you know, a little bit of Mid-Atlantic, I suppose, and Northeast. But I mean, the pricing power and the inflation that we were dealing with there in fiberglass was every bit as pronounced as it has been, you know, in the last 24-30 months here.
Yeah. I think something that's important to note, again, we're trying to make the distinction between single-family and multifamily. New single-family fiberglass insulation installation revenue is about 35% of our total revenue.
Thank you.
Sure.
Thank you. At this time, 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.