Greetings, and welcome to TopBuild Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note, this conference is being recorded. I would now turn the conference over to your host, Ms. Tabitha Zane, Vice President, Investor Relations.

Thank you, and good morning. On the call today are Robert Buck, President and Chief Executive Officer; John Peterson, Chief Financial Officer; and Rob Kuhns, Vice President and Controller. We have posted senior management’s formal remarks and a PowerPoint presentation that summarizes our comments on our website at topbuild.com. Many of our remarks will include forward-looking statements which are subject to known and unknown risks and uncertainties, including those set forth in this morning’s press release, as well as in the Company’s filings with the SEC. The Company assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events. Please note that some of the financial measures to be discussed on this call will be on a non-GAAP basis. The non-GAAP measures are not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP. We have provided a reconciliation of these financial measures to the most comparable GAAP measures in a table included in today’s press release, and in our fourth quarter presentation, which can also be found on our website. I will now turn the call over to Robert Buck.

Good morning, everyone, and thanks for joining us today. We were pleased to end the year with a strong fourth quarter, reporting solid topline growth, and a 17.1% adjusted EBITDA margin. For full-year 2021, we again demonstrated the strength of our diversified business model and our seasoned management team, and delivered on our objective to achieve profitable growth. Revenue increased 28.3%, and adjusted operating and EBITDA margins expanded 160 and 130 basis points, respectively. Full year 2021 was also very productive. Highlights include reporting our best year ever with regards to our safety and personal injury rate, managing both material and labor constraints while moving resources across our network to meet the needs of our customers, successfully managing material cost increases with appropriate selling price adjustments, putting over $1 billion of capital to work through the acquisition of 11 companies, including Distribution International, or DI, establishing TopBuild as the leading distributor of mechanical insulation, entering the industrial insulation end-market and broadening our insulation capabilities and services, more than doubling our specialty distribution network, including expansion into Canada, and maintaining our focus on driving operational efficiencies throughout the organization. We’ve also evolved as a company compared to where we were when we went public in 2015. To give you some context, six years ago, approximately 84% of our revenue was derived from residential housing. Today, on a pro forma basis, it’s about 63%, with commercial now representing 29%, and industrial 8%. We’ve also expanded our Specialty Distribution business, which, again on a pro forma basis, accounts for 42% of our revenue versus 35% in 2015. Perhaps most important, we’ve successfully demonstrated our ability to outperform in any environment, as evidenced by our exceptionally strong adjusted operating and EBITDA margin expansion every single year. While we’ve seen important changes as a company, what has remained constant over these same six years is our unwavering focus on our core business, insulation. We’ve doubled our revenue over this timeframe, and increased the percentage of sales from insulation and insulation-related accessories by 400 basis points to 80%. We are the market leader in all three insulation end-markets we serve, giving us unparalleled size, scale, and leverage. Turning to operations, I’ll start with Specialty Distribution, and specifically DI, which had a very strong fourth quarter, beating the high end of the sales and adjusted EBITDA guidance we gave on our third quarter call. DI’s adjusted EBITDA margin for the fourth quarter was close to 11%, a substantial improvement from DI’s full year 2020 pro forma adjusted EBITDA margin of 8.2%. DI has been an outstanding acquisition for TopBuild, providing us with a leadership position in the $5 billion mechanical insulation market. With the DI acquisition, we have expanded our core business, joined forces with a very talented, experienced, and knowledgeable team, welcomed over 13,000 new insulation customers, gained a recurring revenue stream driven by an MRO business and industry-leading fabrication capabilities, entered the Canadian market with a strong leadership team in place in that country, further enhanced our partnership with the manufacturers of fiberglass insulation, and expanded our M&A prospect pipeline to include industrial, commercial, and of course, residential. Looking ahead, we expect solid performance this year for mechanical insulation in both the commercial and industrial end-markets, including new projects and maintenance and repair work. As far as the integration, while still in the early stages, it is going really well. In fact, in some areas, we’re even ahead of schedule. Making this success possible are the strengths of our talented operating teams working closely together, forged by a similar culture focused on safety, integrity, and operational efficiency. We are highly confident we will achieve the $35 million to $40 million of run-rate synergies in the first 24 months of ownership, as we outlined when we announced this transaction last September. Service Partners also had an outstanding year, with strong margin expansion as our team successfully balanced material cost increases and other inflation factors with customer pricing. Volume growth in the quarter was challenged by material constraints in both fiberglass and spray foam. Spray foam, which represents about 18% of our legacy insulation sales, continues to face supply chain challenges, and prices have significantly increased over the last 12 to 18 months. We are hopeful this situation will ease in the back half of the year. Speaking of material, we did see additional loose fill capacity come online late last year from Knauf, and anticipate additional capacity coming online from Johns Manville by the end of next month. While in total, this will add only about 3% to capacity, our outstanding partnerships with these two suppliers ensures we will secure our fair share of these new lines. That being said, fiberglass supply remains tight. Switching to the TruTeam installation business, we saw healthy demand throughout 2021 for residential new construction, as well as a very strong pricing environment. We are also pleased that TruTeam’s commercial business saw positive same-branch revenue growth for the full year, despite continued project delays due to COVID job site safety protocols and industrywide material constraints. Rob will cover more details for each segment in his prepared remarks. I do want to take a minute to talk about TopBuild’s safety performance. As I mentioned earlier, we reported our best year ever with regards to our safety injury rate. Our incident rate has steadily declined since 2017, and we believe this downward trend is an important indicator of the adoption of our safety culture and the effectiveness of our safety programs. With over 16,000 job sites visited each day, safety is not just a choice. It’s ingrained in our culture and our code of ethics. Our over 410 locations strive to maintain a zero-incident safety culture, and a portion of management’s compensation is tied to this metric. I am really proud of our team for their passionate and personal leadership of a safety lifestyle and integrating safety within the hearts and minds of everyone at TopBuild. On the capital allocation front, we completed 11 acquisitions in 2021, including four in the fourth quarter: DI, Tonks Insulation, Shepherds Insulation, and Insulating Products. Earlier this month, we added Billings Insulation, a residential insulation installer serving the Montana and Northern Wyoming markets. We remain focused on acquiring high quality residential and commercial installation and specialty distribution companies. All three of our end-markets are highly fragmented and present great opportunities to put the strong free cash flow that our business generates to work. However, while we expect to remain active on the M&A front in all three end-markets, the successful integration of DI is our number one priority. In 2021, we also repurchased just over 183,000 shares of our common stock for approximately $35.6 million. We have a $200 million share repurchase program in place, reflecting the confidence of both management and our board in the long-term potential of TopBuild, our strong future free cash flow position, and our firm commitment to optimizing the efficiency of our capital structure. Next, I’d like to briefly discuss our ESG initiatives and where we are in our ESG journey. First and foremost, our business is inherently ESG-friendly. The insulation products we install and distribute provide energy efficiency and improved environmental conditions to thousands of residential, commercial, and industrial locations every single day. Last year, we established a formal ESG sustainability program directly overseen by our Board of Directors. The program is managed by an ESG committee comprised of the Company’s executive officers, including me, and a newly appointed ESG leader who reports to our General Counsel. In this year’s 10-K, we have expanded our disclosures regarding our workforce demographics, our diversity and inclusion initiatives, and our OSHA recordable incident and lost time rates. Our plan is to publish our 2022 Sustainability Report in the second quarter. We are committed to the quality of our reporting, inclusive of our acquisitions, and will be keeping our stakeholders informed and providing additional information on an ongoing basis. As we look at 2022, we are optimistic that it will be another good year for TopBuild. The acquisition of DI has further enhanced our growth opportunities within our core business, insulation. We believe residential new construction will remain strong, despite the likelihood of interest rate hikes. Our builder customers continue to be optimistic and are still restricting sales due to outsized demand. Housing inventory is extremely tight, and labor and material constraints continue to elongate the build cycle. Our backlog is very strong and is growing as the delta between starts and completions continues to widen. Turning to our outlook for our commercial business, as the threat of COVID wanes, which statistics indicate is occurring, commercial construction should get back on track. We have a solid backlog in this end-market, and bidding activity remains strong. And, as I mentioned earlier, we expect solid demand for mechanical insulation in both the commercial and industrial end-markets, including new projects and maintenance and repair work. Operationally, we remain focused on continuing to implement initiatives that drive operational efficiency and improve labor and sales productivity. Strategic acquisitions will remain our number one capital allocation priority and will continue to be an important aspect of our projected growth. And finally, we believe energy codes will continue to strengthen, providing growth opportunities for all areas of TopBuild’s business. Before turning the call over to John, I want to note that this is his last earnings call as CFO of TopBuild, as he is retiring at the end of March. John has played a key role in our growth and success, and has built an outstanding track record of creating strategic value for our stakeholders. I consider him a colleague and a friend, and really appreciate his partnership over the years. Thank you, John.

Thanks, Robert, and thank you to the entire TopBuild team for making these past almost seven years successful, memorable, and fun. I’ll miss all of you. Robert, special thanks to you for your leadership, partnership, and friendship over the past 12 years. I’ve enjoyed every moment of it. As most of you know, Rob Kuhns, who has served as our Vice President and Controller for almost four years, will be assuming the CFO role at the end of next month. Rob has made significant contributions to our strategy, growth, and success, and has built a very strong team. His in-depth experience, understanding of our operations, and leadership skills make for this to be a very smooth passing of the baton. I look forward to watching all the success he and the rest of the TopBuild team will have in the future. I also want to thank all of you on the call, most of whom I’ve met. Your support of TopBuild over these years has been greatly appreciated. Rob will now discuss the company’s fourth quarter results.

Thank you, John, and good morning, everyone. As Robert noted, we finished 2021 with a strong fourth quarter, and entered 2022 well-positioned to capitalize on the anticipated growth in the three end-markets we serve. We’ll begin with a review of our 2021 results, then provide our outlook for 2022. First, a couple of housekeeping items. As Robert mentioned, DI’s results are being reported, along with Service Partners, as part of our Specialty Distribution segment. In addition, due to the significant amortization from the purchase accounting associated with DI, we are now providing adjusted EBITDA results for both of our reporting segments. Starting with our fourth quarter results, net sales increased 47.4% to $1.1 billion. The 11 acquisitions we completed in 2021 increased sales by 34.9%, with DI contributing $188.3 million, ahead of our expectations. On a same-branch basis, sales increased 12.5%, driven by higher selling prices, partially offset by slightly lower volume due to the continued industrywide supply chain shortages and labor constraints, along with a more difficult year-over-year comp for Service Partners. Sales for the full year 2021 increased 28.3% to $3.5 billion. On a same-branch basis, sales increased 12.7%, driven by higher selling prices and higher sales volume. Adjusted gross margin improved 60 basis points in the fourth quarter to 28.1%, and improved 90 basis points for the full year to 28.4%. On a same-branch basis, adjusted gross margin improved 190 basis points, and 150 basis points for the fourth quarter and full year, respectively. Adjusted gross margin improvement for both the fourth quarter and the full year was driven primarily by higher selling prices, strong cost controls, and productivity initiatives, partially offset by material inflation. Adjusted operating profit in the quarter grew 45% to $150.7 million, while adjusted operating margin declined 20 basis points to 14.2%. As we have previously discussed, DI is currently operating at lower margins than our legacy TopBuild business. In addition, due to the purchase accounting from the DI transaction, we incurred an additional $8 million of amortization expense in the quarter. On a same-branch basis, removing the impact of DI and all other M&A, our adjusted operating margin improved 230 basis points in the fourth quarter. On a full year basis, adjusted operating profit improved 43.4% to $515.2 million, while adjusted operating margin improved 160 basis points to 14.8%. On a same-branch basis, our operating margin improved 260 basis points. Fourth quarter adjusted EBITDA was $182.1 million, compared to $121.5 million last year, a 49.9% increase. Our fourth quarter adjusted EBITDA margin was 17.1%, a 30-basis point improvement. On a same-branch basis, EBITDA margin was 19%, a 220-basis point improvement. Our fourth quarter incremental adjusted EBITDA margin was 17.7%, which consisted of incremental same-branch EBITDA margin of 36%, and EBITDA from M&A of 11.1%. DI’s fourth quarter EBITDA was $20.4 million, or 10.8% of sales, ahead of our expectations. For full year 2021, adjusted EBITDA grew 38.7% to $605.9 million, and adjusted EBITDA margin improved 130 basis points to 17.4%. On a same-branch basis, adjusted EBITDA margin improved 200 basis points. Our full year incremental adjusted EBITDA margin was 22%, which consisted of incremental same-branch EBITDA margin of 34.1%, and EBITDA from M&A of 12.2%. Both adjusted operating profit and adjusted EBITDA improvements were driven by the previously mentioned factors impacting gross margin, as well as lower legal fees and lower share-based compensation expense. Interest expense in 2021 was $29.1 million, versus $32.5 million in 2020. The decrease was primarily due to lower LIBOR rates on our term loan, and the first quarter refinancing of our $400 million, 5.625% Senior Notes due in 2026 that were replaced with $400 million, 3.625% Senior Notes due in 2029. This lower interest expense was partially offset by additional interest expense from our private offering in October of $500 million, 4.125% Senior Notes due in 2032. Our effective tax rate for the full year increased from 23.5% to 25.2%, driven by a decrease in the tax benefit related to share-based compensation, and an increase in non-deductible items. Adjusted net income for the fourth quarter was $103.3 million, or $3.12 per diluted share, an increase of 45.1% compared to prior year. Fourth quarter 2021 non-GAAP adjustments totaled $32.3 million, and were primarily tied to the DI acquisition. This included $16 million from the one-time impact of purchase accounting inventory step-up, $12 million from transaction costs, and $4 million from integration-related costs. Adjusted net income for full year 2021 was $359.7 million, or $10.85 per diluted share, an increase of 49% compared to prior year. Full year 2021 non-GAAP adjustments totaled $52.7 million, primarily related to acquisition-related expenses, the purchase accounting inventory step-up, refinancing costs and the related extinguishment of debt associated with the redemption of our 5.625% Senior Notes. CapEx for the full year 2021 was $55.5 million, approximately 1.6% of revenue. Working capital as a percent of trailing twelve-month sales was 13.3%, 400 basis points higher than prior year, primarily as a result of the DI acquisition. We are evaluating working capital improvements at DI, and expect to see working capital as a percentage of revenue settle in at a range of 11% to 13%. We ended the year with net leverage of 2.02 times trailing twelve months pro forma adjusted EBITDA. Our net leverage is already down significantly from the pro forma 2.5 times we announced at the time of the DI acquisition. Total liquidity at year-end was $569.8 million, inclusive of the $430.1 million available on our $500 million revolver, and cash of $139.8 million. Operating cashflow was $403.0 million for 2021. Now let’s turn to our segment results. Starting with Installation, sales increased 23.3% in the fourth quarter to $627.1 million. Same-branch sales increased 12.2%, driven by an 11% increase in price, and a 1.2% increase in volume. Residential and commercial markets continued to see strong demand, but volume growth was hampered by ongoing material shortages and labor constraints. For the full year, Installation same-branch revenue grew 11%, driven by higher selling prices of 6.5%, and volume growth of 4.5%. For Installation, fourth quarter adjusted EBITDA grew 29% to $121.8 million, and adjusted EBITDA margin was 19.4%, an 80-basis point improvement compared to a year ago. For the full year, adjusted EBITDA was $444.9 million, and adjusted EBITDA margin also improved 80 basis points to 18.7%. Both the fourth quarter and full year EBITDA growth were driven by higher sales volume, higher selling prices, fixed cost controls, and productivity initiatives, partially offset by material cost increases. Moving to Specialty Distribution, fourth quarter sales were up 93.1% to $485.8 million. Same-branch revenue was up 15.6%, driven by higher selling prices of 22.4%, partially offset by a 6.8% decline in volume. As a reminder, on a same-branch basis, the fourth quarter was a tough comp for our Service Partners business, as our 2020 fourth quarter volume growth was 13.3%. For the full year, Specialty Distribution same-branch revenue grew 17%, driven by pricing increases of 13.7%, and volume growth of 3.3%. Fourth quarter adjusted EBITDA for Specialty Distribution more than doubled from fourth quarter 2020 to $73.1 million, and adjusted EBITDA margin improved 70 basis points to 15%. For the full year, adjusted EBITDA increased 62% to $205.6 million, and adjusted EBITDA margin expanded 230 basis points to 16%. Both the fourth quarter and full year EBITDA growth were driven by higher selling prices, fixed cost controls, productivity initiatives, and the acquisition of DI, partially offset by material cost increases. Moving to our 2022 annual guidance, there are a number of tailwinds impacting the industries we serve. They include strong wage growth, strong consumer demand, healthy backlogs in our three end-markets, and historically low housing inventory. We’re also cognizant that rising interest rates and inflation could lead to affordability issues that might dampen demand, but we have not seen any impact to date. In addition, our guidance does not anticipate that the current material and labor supply constraints will be resolved quickly, and we are estimating only a slight improvement starting in the back half of 2022. We are projecting total sales to be between $4.5 billion and $4.65 billion, and adjusted EBITDA to be between $770 million and $820 million. This includes revenue from announced acquisitions, but does not include any additional acquisitions we may make this year. We’ve also provided our long-range modeling assumptions for a number of metrics. We are now projecting $107 million of revenue for every 50,000 new homes insulated, and non-residential sales growth to average between 5% and 7.5% annually. The range for same-branch incremental EBITDA is 22% to 27%, and 11% to 16% for acquisitions. The range for our normalized tax rate is 25% to 27%. The range for working capital is now 11% to 13% of trailing twelve-month sales, slightly higher than previous guidance, primarily as a result of the acquisition of DI. And finally, we project CapEx at 1.5% to 2% of sales. Before turning the call back over to Robert, I too would like to thank John for his many contributions to TopBuild, and for his guidance and leadership over these past three plus years as part of the Company’s ongoing succession planning. I look forward to working with all of you and appreciate your continuing support of TopBuild. Robert?

Thank you, Rob. Before opening the call up for questions, I wanted to note that we have moved our Investor Day from March 15 to May 26, with the same New York City location. Most of you should have received a new save-the-date email a few weeks ago. This change was due solely to the widespread of Omicron and our concern for the health and safety of our team and our Investor Day attendees. 2022 should be another year of profitable growth for TopBuild. Our backlog is strong and demand is healthy. Our entire team is focused on the successful execution of our plan, providing energy efficient solutions for our customers, driving operational efficiencies throughout our company, integrating DI on our operating platform, successfully managing input costs and pricing, and identifying accretive acquisitions that support our core business, insulation. In closing, I want to thank our entire TopBuild team, TruTeam, Service Partners, DI, Branch Support, and Field Support Center teams, for their dedication and hard work. We had a great year in 2021, and our success is due to your outstanding efforts and constant drive to improve. Operator, we are now ready for questions.

Thank you. Our first question is from Trey Grooms with Stephens. Please go ahead.

Hey, good morning. First off, congrats on a strong finish to the year. And, John, congrats and wish you the best on your next chapter.

Great. Trey, I appreciate that. Thank you.

Okay. So, I guess, first question is, looking at the guide for this year and understanding that there is a growing backlog due to the constraints you talked about, you mentioned that you have the expectation for supply to remain tight, but that there's — with this assumption of low to mid-single digit volume, it sounds like you're expecting maybe some easing here with some of these constraints in the back half. I guess, number one, thoughts around what's going to kind of help create this easing situation. Number two, I guess trying to get at the cadence there as well, and could it be more kind of back-half loaded with the volume, given the comment around the easing and these constraints?

Hey Trey, this is Rob. Yes, so looking at next year, we see strong demand across all three end markets. To your point, we're expecting low to mid-single digit volume growth. And that's really being driven by the continuing constraints. Certainly, without the constraints, our volume growth would be significantly higher than that. So, we are optimistic that it'll sort itself out a little bit more towards the backend, but we're not expecting a step function change in availability in the back half.

Oh, okay. All right, that's helpful. So, nothing monumental, just the slight improvement, hopefully in the back half. One last one here for the longer-term guide, the residential revenue for every 50,000 starts, $107 million, up from, I think the last update, and I may have missed something in between, but I thought at the end of 2020, it was $90 million per 50,000. So, if you can help us unpack that a little bit, how much has pricing put in place since then versus market share gains?

Yes, Trey, really the — this is Rob again. There's really two main drivers to that. It's M&A we've done over the past year, and then as well as price over the past year. So, those are the two big drivers of that.

Yes, okay. And I guess lastly, the $1 billion of capital you put to work, big year for M&A obviously. And you noted the prepared remarks that the DI integration is kind of at top of mind, but did still mention M&A as possibility. Just given how heavy the M&A was in ’21, should we be kind of thinking about maybe little bit of a dial-back on the M&A appetite just as you get that integration kind of work-through? Was that the messaging? Or just help us kind of think about your appetite there as we look through this year, given what we saw in the past.

Right. Trey, good morning. It’s Robert. So, yes, DI integration is absolutely our priority, but you've seen since we acquired DI, we've completed four additional acquisitions, three in the residential space, another one in the specialty distribution space. So, the pipeline is still really healthy. We're definitely focused on the quality of targets. So, I think you'll see activity from us this year really looking across all three end markets, but you’re also going to see us do a great job of this integration with DI, which I think you heard me say in my prepared remarks, we're off to a great start. That's a great acquisition for us, and we feel so confident with what we're doing there. So, it's going to be a good balance. It's going to be a great integration of DI, and we’ve got a really nice pipeline across all three end markets as well.

Right. Thank you, Robert and Rob, and I'll pass it on. Thanks again.

Thank you. Our next question is from Adam Baumgarten with Zelman & Associates. Please go ahead.

Hey, good morning. I guess maybe sticking with the volume guidance, just the low to mid-single digits. Any way you can break down further how you're thinking about residential versus commercial and industrial, or if they're all kind of in a similar boat?

Yes, Adam, this is Rob. So, over across the three markets we serve, we say it's not going to be drastically different, a point or two difference between the three. But we're expecting similar environments of strong demand, tight supply, which is obviously going to also lead to an inflationary environment next year as well.

Adam, this is Robert. Maybe just to add on to that, to what Rob said. The backlogs are really healthy. As we look across residential, the backlog there, given that extension that's happened in the cycle time, as well as our backlogs in commercial and industrial. So, really healthy backlogs across. And we would say also a really great start to the year here in 2022, also. So, really happy with what we've seen thus far early in the new calendar year.

Okay, got it. And then just a couple on distribution, the pricing delta between the Distribution business and TruTeam continues to widen. Maybe if you could kind of walk through some of the driving factors there, as well as if you expect that gap to narrow at some point. And then just on volume, should we expect negative volumes through the first half in that business, given the still tough comps you face?

Hey Adam, this is Rob again. So, as far as the pricing differential between Installation and Distribution, it's really driven primarily by the material content. So, on the install side, within the cost of sales, you have labor and material, and on distribution, it's purely material. So, you always are going to have a higher pricing dynamic on the distribution side of things.

Yes, just on the volumes for the first half in industrial, should we expect those to remain negative given the pretty similar tough comps that you have?

Yes. First quarter is going to be another tough comp for Service Partners for sure year-over-year. So, that's probably a likely trend.

Got it. Thanks, guys.

Thank you. Our next question is from Philip Ng with Jefferies. Please go ahead.

Hey, guys. Congrats on another strong quarter. John, appreciate working with you all these years. It's been super helpful. And Rob, looking forward to working more with you going forward.

Thank you, Phil. Much appreciated.

I guess, Rob, heading into Q1, a lot of companies we cover are still playing catch-up on price costs. You guys have obviously done a really good job on that front. Just want to get some color on how price — have you taken all the pricing actions you need to kind of maintain the type of incrementals you've been putting up for some time now starting the year?

Thanks, Phil. Yes, this is Rob. So, going into Q1, we've got some more price increases coming. We had some cost increases from suppliers that hit December and the beginning of Q1. So, we're trying to get out in front of those, but based on our results last year, I think you see our team in the field just does an excellent job of managing that, and we anticipate doing that throughout 2022 as well.

Got it. Super. And then a question for you, bigger picture, Robert. Can you give us a sense how much backlog you have in your business today? And is there a good way to compare that to call it mid-2018 levels? The reason I'm asking, there's no denying that underlying demand for housing is actually very strong right now. But if we do go through an air pocket like 2018 with rates going up, which you frankly managed quite well and saw very limited slippage, but just curious, how are you set up this time now versus 2018?

So, if I think about commercial and industrial first: obviously there's good visibility to that business, given our contracts, given what we see in our bidding activities. Those backlogs have actually grown. As we sell, projects get slowed down somewhat given the spike in COVID and some of the supply chain constraints, so we've seen backlogs grow there. Residential is a little harder to quantify. There are a few things to point to. One is the delta between starts and completions. Major delta there as builders have continued to sell homes. If you see starts of plus 16% and a completions rate that's more like 3%, that continues to add to the backlog. We've seen more multifamily coming along as we look at our contracts and work we've secured on the multifamily side. So, I think all that points to a solid backlog, and we definitely see that contract-wise on the commercial and industrial side of the business as well. Also, we didn't really expect to see the usual seasonality as we left 2021 and went into 2022, and you've heard us say we had a great start to the year.

Okay, that's helpful. And Robert, I'm obviously less familiar with DI, but from what I understand, material availability there might not be as tight. Any color on how to think about your ability to grow in that business? I suspect it's probably a little less constrained than residential, but any color would be helpful.

A few things. If you think about the industrial side of the business, the impact of material in the supply chain was a little bit delayed. There are some materials that are tight there, but not as tight as on the residential side and some of the building insulation side of the business. DI, like TopBuild, has great relationships with the supplier base. They did a really nice job of building some inventory last year in their supply chain and their facilities as well. Great relationships. So, I think we've got some good growth paths there. You've heard us talk about some greenfield opportunities. DI did a really nice job managing their inventory and service levels, which drove some share gain in 2021. We have a good level of confidence in servicing and growing those customers in 2022.

Great color. Thanks a lot, Robert. Appreciate it.

Thank you. Our next question is from Michael Rehaut with JPMorgan. Please go ahead.

Great. Thanks. Good morning, everyone, and congrats to both John and Rob. First question, and I apologize if this is something you kind of addressed earlier, but I might have missed it. In terms of the sales guidance for 2022, I know you kind of said that it incorporates an end market upload and mid-single digit volume growth, but I was trying to get a sense, the other two major components, how you're thinking about price and acquisitions also in terms of contributing to that number.

Michael, so if you break down our sales growth year-over-year, our guide is about $1.1 billion above year-over-year. Obviously, M&A is going to be a significant portion of that year-over-year, with the DI acquisition happening in the fourth quarter. With the volume guide we've given, if you factor those two things in, we don't disclose what our price assumption is. We've got price baked in there, assuming an inflationary environment, but doing that math you could get in the ballpark to wherever we are.

And in the guidance here, there'd be no additional M&A that would be in that as well, Michael. But to Rob’s point, additional pricing that we think could be coming here in 2022 is included.

Okay. Well, maybe we could talk a little more offline then on that. I think secondly, just the margin path for DI, I think you said it's performing better than expected. Any sense on, I think over time, where you want that business to be from a comparable margin rate standpoint? Obviously amortization near term is going to make things a little less comparable, but any way to think about the DI margins over time?

Michael, that’s a great question. As we think about it, DI is a great acquisition, and the more we've gotten closer to the business, the more confident we are. You've heard us talk about our $35 million to $40 million run-rate synergies by the end of year two. We are highly confident in that. If I take that plus the good momentum that DI had and the continued operational improvements we expect, we absolutely expect that business to get to a mid-teens type of margin within the next couple of years. We have line of sight to that and are confident DI will be accretive and add to our specialty distribution platform.

Okay. All right. Thanks. Just one last quick one on DI, again trying to triangulate a little bit on the sales contribution for 2022. It came in at about $750 million annualized sales. Is that — but you are also looking at another year with some growth and price perhaps on top of that. Any way to dimensionalize the contribution of DI in 2022 sales would be helpful if possible.

Michael, I think your number for DI is probably a little low if you annualized the two and a half months. That two and a half month period was very strong. Their annual sales next year are likely north of $800 million. It was a strong fourth quarter and we’re expecting that momentum to continue into next year.

Okay. Thanks a lot.

Thank you. Our next question is from Keith Hughes with Truist Securities. Please go ahead.

Thank you. As you look at the year and you've given us your guidance for organic contribution margin, would that be one of these years that was lower at the beginning and then improves as the year goes longer, or is it going to be more straight line?

Hey Keith, this is Rob. The way to think about it is we'll show consistent improvement on the core business throughout the year. If you break that EBITDA down, on the M&A piece we should be right in the middle of our guided range of 11% to 16%, probably slightly lower than the midpoint. From a same-branch perspective, we expect our incremental EBITDA to be more towards the high end of our guided range next year.

But ratably through the year to get to that high-end number, is that kind of how you're looking out?

We’re not breaking out the seasonality of it right now, but I would expect those incrementals to be consistent throughout the year. M&A is obviously going to be heavier in the first three quarters than the back half, given the DI timing.

Right. Okay. Thank you.

Thank you. Our next question is from Stephen Kim with Evercore ISI. Please go ahead.

Thanks very much, guys. Congratulations, and yes, we'll miss you, John. I really do appreciate all the help over the years. Most of my questions have been asked already, but I wanted to delve into the question of the shortages and the limited availability. You said it was both across spray foam and fiberglass. Is there a way to think of quantifying what that headwind from strictly availability was, and are your customers willing to wait longer to get product or are you seeing that you're just losing those sales altogether? Is there a practical limit to which these delays can extend on your customers' part? Just give us a little bit of insight into what's going on actually at the branch.

Hi Stephen. First, these delays and shortages have elongated the cycle in trades before us. If we were getting on the job site in 90 days, that elongated by probably 30 to 60 days more in 2021, and we even saw it get a little worse in Q4. It's really other trades that are stalling relative to when we're getting on the job site. From our perspective, fiberglass has remained tight. We know we're getting our fair share of the allocation. Even with new lines coming online, we got more than our fair share relative to that new capacity. Spray foam has probably been the bigger issue; constraints of input materials came from overseas supply and the impacts of weather events like the deep freeze. Between the two, spray foam has likely been the more limiting factor, but fiberglass remains tight. Relative to losing sales, on the residential side we're confident in our growth in both businesses. There could be some trade-offs on the distribution side between some customers, but overall we've kept our share and picked up some in areas. We do a good job moving material around and servicing customers due to our visibility and separate allocation between install and distribution.

That makes sense. Thinking a little longer term, with the rise in interest rates and mortgage rates, are you anticipating more of a move to affordably priced homes, and does that have any longer-term impact on interest in spray foam versus fiberglass? Are you hearing anything from the residential side about switching to fiberglass to keep the overall price tag down relative to spray foam?

Yes. You will see more entry-level homes from production builders as they think about interest rates and affordability. They are modifying the product they bring to market. Spray foam prices have increased significantly over the past 12 to 18 months. Custom builders and others remain on spray foam given its benefits, but some smaller builders are moving back to fiberglass. Overall, dollars on spray foam remain healthy due to inflation; we haven't seen a meaningful move in units, but some builders have chosen fiberglass over foam in certain instances.

Makes sense. Okay, great. Thanks very much, guys.

Thank you. Ladies and gentlemen, we have reached the end of the question-and-answer session, and I would like to turn the call back to Mr. Robert Buck for closing remarks.

Yes. Thank you everyone for joining us today. We look forward to talking with you in May, when we report our Q1 results.

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