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Martin Luffy

Martin Luffy. “ The Digital Journey ” 4 September 2014. Insert picture. Mluffy@installed.net. IBP Background and History. 1. The Business Technology Path Pitfalls and Obstacles Along the Way Role of the Senior Management Team. August 2014. Background Information.

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Martin Luffy

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  1. Martin Luffy “The Digital Journey” 4 September 2014 Insert picture Mluffy@installed.net

  2. IBP Background and History • 1. The Business • Technology Path • Pitfalls and Obstacles Along the Way • Role of the Senior Management Team August 2014

  3. Background Information • Specialty sub-contracting sector of the highly cyclical construction industry • Mainly installing insulation products and installation for new housing • Low-skilled work – commodity products • Started in 1995 with 1 location • Growth thru acquisition • Many small jobs – average ~ $2,000/job • Completed IPO in 1Q 2014

  4. Investor Presentation - August 2014 Evolution into an Industry Leader The second largest1 new residential insulation installer in the US with over 100 locations serving 47 states Service area covers more than 55% of total permits issued vs. 24% in 2005 with a #1 or #2 position in greater than half of the markets served2 Note: Shaded states are where we have a physical presence. Some dots represent multiple locations 1 Based on internal estimates 2 Based on permits issued in those markets

  5. Investor Presentation - August 2014 Products & End Markets Siding Focused insulation installation offering, coupled with complementary products for end markets having significant cyclical upside Fireplaces Net Revenue by End Market – LTM 6/14 Net Revenue by Product – LTM 6/14 Door Locksets & Hardware Insulation Garage Doors Rain Gutters Closets & Shelving Shower Doors & Mirrors

  6. Investor Presentation - August 2014 Benefits of a Unique Value Chain Structure Scale provides a direct link between manufacturers and builders through a streamlined value chain Building Products Manufacturer Insulation Manufacturer Distributor Purchasing Logistics Installation Typical Value Chain Insulation Value Chain Wholesaler or Retailer Contractor Finished Home Finished Home

  7. Strengths of Our Business 1 Local market leadership with national scale Proven ability to gain market share 2 Multiple Ways to Drive Growth and Profitability 3 Proven acquisition track record 4 Highly experienced and incentivized management team 5 Clear Strategy for Value Enhancing Acquisitions 6 Investor Presentation - August 2014

  8. 1. Local Market Leadership with National Scale Leading market positions serviced through local trade names • Maintains local trade names and existing management, strengthening the relationship between the Company and its customers • Business is primarily won or lost at the local level Local IBP trade names is served by 11 different IBP branches across 15 markets Investor Presentation - August 2014

  9. 2. Proven Ability to Gain Market Share Continued US Housing Improvement IBP Market Share Growth Total US housing starts forecasted to increase at a 14% CAGR from 2013 to 2015E IBP has increased its net revenue divided by total U.S. housing completions by 250% since 2005 • Approximately 75% of net revenue derived from single family new construction • Strong competitive and geographic positions • 2015 starts forecast reduced from 1,300 (CAGR) • Result of acquiring local installation operations, gaining market share organically, and cross-selling complementary services • 1H14 single family sales growth of 24.0% compared to 11.8% in single family completions Net Revenues / Total U.S. Housing Completions Starts (000s) Average Historical Starts = ~1.6mm1 1 Total housing starts averaged from 1968 to 2006 Source: US Census Bureau, Blue Chip consensus housing starts forecast Source: US Census Bureau, Company filings Investor Presentation - August 2014

  10. 3. Multiple Ways to Drive Growth and Profitability Asset lite model can accommodate growth without material capital needs • Total Housing Starts forecasted to increase at 14% CAGR from 2013 to 2015E1 Capitalize on New Home Construction Market Recovery • Same branch single-family sales grew by 20% y-o-y in 2Q 2014 • US single-family housing completions grew 12% in 2Q 2014 Continue to Strengthen Market Share Position • Attractive opportunities in fragmented market of independent contractors Pursue Value Enhancing Strategic Acquisitions • Demonstrated scale economies in indirect operating costs and SG&A, with Gross Margin improving 250 bps during 2Q 2014 as compared to 2Q 2013 Extract Additional Value from Operating Leverage and National Scale 1 Per Blue Chip consensus housing starts forecast Investor Presentation - August 2014

  11. 4. Demonstrated Track Record of Successful Acquisitions 90+ successfully integrated acquisitions • Key components of the acquisition strategy include: • Ability to realize synergies within scalable infrastructure • Targeting profitable markets • Acquiring operations with strong reputation and customer base • Maintaining local trade name and existing management team • Corporate support allows more focus on customer service • Senior management team has been directing the Company’s acquisition strategy for 10+ years Investor Presentation - August 2014

  12. 5. Highly Experienced and Incentivized Management Team Strong operational focus and proven understanding of the industry • Field management structure is comprised of deeply experienced managers at all levels • Team has effectively managed through several housing cycles, established a proven acquisition strategy, and gained market share • Senior management aligned with investors due to meaningful equity ownership in IBP • Sales Staff • 10+ years with IBP • Regional Presidents • 10+ years with IBP • +20 years in the industry (each) • Branch Managers • 10+ years with IBP • Sr. Management Team • 10+ years with IBP • 20+ years in the industry Experienced Investor Presentation - August 2014

  13. 6. Clear Strategy for Value Enhancing Acquisitions Fragmented industry allows for geographic expansion through sizable acquisitions and strengthening of existing branches via smaller tuck-ins • Extensive pool of potential acquisition targets with 1,000+ independent insulation contractors across the US • Additional large-market entry opportunities (IBP currently covers 35 of the top 50 MSA’s1) • Significant acquisition potential in attractive secondary markets Proven Model for Acquisitions Key Areas of Opportunity IBP branches 1 MSA, or Metropolitan Statistical Area, is an area that generally consists of at least one urbanized area of 50,000 or more inhabitants, plus adjacent territory that has a high degree of social and economic integration with the core area as measured by commuting ties Investor Presentation - August 2014

  14. TECHNOLOGY What started as a environment where each branch had their own system quickly turned into chaos at month-end close. Opportunity #1 - Eliminating the long-term ramifications of allowing our acquired locations to operate on separate technology platforms while providing them with the operational flexibility to continue to run their business based on local market conditions. Investor Presentation - August 2014

  15. TECHNOLOGY Requiring data to support the enterprise and the 100+ locations Opportunity 2: Building a coalition of sponsors/decision makers to agree on the definitions, timing and amount of data Investor Presentation - August 2014

  16. Relative Cost to Fix an Error

  17. TECHNOLOGY We ended up building an industry specific web-based system for our core branch operations and decided to utilize packaged software for other administrative functions such as Payroll, e-mail, HR and finance. Investor Presentation - August 2014

  18. TECHNOLOGY We called the system “jobCORE” – In addition to supporting our branches operationally, it provides a fully integrated reporting and dashboard environment for key business metrics Opportunity #3 – Defining key metrics and timing of updates for the dashboard Investor Presentation - August 2014

  19. TECHNOLOGY And we proceeded to implement jobCORE in our 100+ locations Opportunity #4: Managing the change and not disrupting on-going operations while moving the branches to the new system Investor Presentation - August 2014

  20. TECHNOLOGY By aggressively addressing the Investor Presentation - August 2014

  21. TECHNOLOGY We built a small team of professionals who travel to the branches to support the implementations and data conversions Investor Presentation - August 2014

  22. TECHNOLOGY What started as a few servers housed in a closet over 10 years ago has evolved into a large enterprise scale operation for our centrally managed IT environment. Opportunity #5 – Balancing the correct level of investment in people, process and technology to support the business without breaking the bank Investor Presentation - August 2014

  23. TECHNOLOGY – Where are We Going? Upgrading our technology to provide a reliable and scalable platform for the business as it grows Supporting the overall general controls environment and SOX compliance disaster recovery, user access controls, segregation of duties across the business) Maintaining a balanced investment approach that will be sustainable in the next downturn Investor Presentation - August 2014

  24. TECHNOLOGY – Where are We Going? Providing a broader group of business users with better data access and appropriate reporting tools Enterprise Data Warehouse ad-hoc reporting Investor Presentation - August 2014

  25. TECHNOLOGY – Where are We Going? Other technologies in pilot or expected to be utilized in the coming years: Mongo DB for mail archival – what is the need? Mobile applications – requirements and usage? GPS for vehicles – is there a real payoff? Tablets – mixed reviews from the business BYOD – is it secure? Systems support for SOX processes – required?

  26. ABC’s for the “Modern” CIO • Technology “WILL” change, always • Modern technology today will become “Classical” tomorrow • MODERN CIO’s will be able to identify the technologies that will be EFFECTIVE for “THEIR ORGANIZATION” and will push for change in the status quo to EFFICIENTLY implement them into the daily routine of the “BUSINESS”

  27. Some parting thoughts . . . CIO’s job is to Drive . . . • Take could do’s and determine the should do’s • Say no, manage the shoot, ready, aim approach • Make every $ of spending count • Tell the truth – Cost, budgets, etc. and here is what we are not doing • Do what you say you will do – Keep your promises • Emerge as a leader to the enterprise. • Fail to plan and you are planning to fail • Build relationships with everyone in the business • Force interaction with the C-suite, find reasons to talk to them that are of interest to them • Do not blindly follow the fad’s

  28. Bottom line. . . We all have or will have career/transformational moments. We need to make them, sometime by saying no to building stuff without support from a sponsor and a defined and measured business objective.

  29. And if all else fails . . .

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