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Information on Segments
 3 Months Ended
Mar. 31, 2023
Segment Reporting [Abstract]  
Information on Segments INFORMATION ON SEGMENTS
Our segment structure includes three operating segments consisting of Installation, Distribution and Manufacturing. Our Installation operating segment represents the majority of our net revenue and gross profit and forms our one reportable segment. This operating segment represents the service-based installation of insulation and complementary building products in the residential new construction, repair and remodel and commercial construction end markets from our national network of branch locations. These branch locations have similar economic and operating characteristics including the nature of products and services offered, operating procedures and risks, customer bases, employee incentives, material procurement and shared corporate resources and therefore combine to form one operating segment.
The Other category reported below reflects the operations of our two remaining operating segments, Distribution and Manufacturing, which do not meet the quantitative thresholds for separate reporting. Our Distribution operating segment includes our businesses that sell insulation, gutters and accessories primarily to installers of these products who operate in multiple end markets. Our Manufacturing operating segment consists of our cellulose insulation manufacturing operation. In
addition to sales of cellulose insulation, revenues from this operating segment consist of sales of asphalt and industrial fibers to distributors and installers of these products.
The Installation reportable segment includes substantially all of our net revenue from services while net revenue included in the Other category includes substantially all of our net revenue from sales of products. The intercompany sales from the Other category to the Installation reportable segment include a profit margin while our Installation segment records these transactions at cost.
The key metrics used to assess the performance of our operating segments are revenue and segment gross profit as these are the metrics used by our Chief Executive Officer, who is also our Chief Operating Decision Maker ("CODM"), to review results, assess performance and allocate resources. We define segment gross profit as revenue less cost of sales, excluding depreciation and amortization. We do not report total assets, depreciation and amortization expenses included in reported cost of sales, operating expenses or other expense, net by segment because our CODM does not use this information to assess segment performance or allocate resources. The following tables represent our segment information for the three months ended March 31, 2023 and 2022 (in thousands):
Three months ended March 31, 2023
InstallationOtherEliminationsConsolidated
Revenue$622,742 $38,722 $(2,155)$659,309 
Cost of sales (1)
410,384 28,459 (1,766)437,077 
Segment gross profit$212,358 $10,263 $(389)$222,232 
Segment gross profit percentage34.1 %26.5 %18.1 %33.7 %
Three months ended March 31, 2022
InstallationOtherEliminationsConsolidated
Revenue$561,631 $26,650 $(789)$587,492 
Cost of sales (1)
385,692 19,373 (609)404,456 
Segment gross profit$175,939 $7,277 $(180)$183,036 
Segment gross profit percentage31.3 %27.3 %22.8 %31.2 %
(1)Cost of sales included in segment gross profit is exclusive of depreciation and amortization for the three months ended March 31, 2023 and 2022.
The reconciliation between consolidated segment gross profit for each period as shown in the tables above to consolidated income before income taxes is as follows:
Three months ended March 31,
20232022
Segment gross profit - consolidated$222,232 $183,036 
Depreciation and amortization (1)
11,810 10,633 
Gross profit, as reported210,422 172,403 
Operating expenses133,546 115,433 
Operating income 76,876 56,970 
Other expense, net9,517 10,745 
Income before income taxes$67,359 $46,225 
(1)Depreciation and amortization is excluded from segment gross profit for the three months ended March 31, 2023 and 2022.