Thank you, and good morning. On the call today are Robert Buck, President and Chief Executive Officer; and Rob Kuhns, Chief Financial Officer. 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 be found on our website. I will now turn the call over to Robert Buck.

Good morning, and thank you for joining us today. As you can see from today’s press release, we had an outstanding fourth quarter and a record 2022. Our diversified business model and seasoned management team once again delivered strong top-line and bottom-line growth. Our team successfully balanced expected cost increases with selling price adjustments and did an excellent job managing both material and labor constraints by efficiently moving resources across our network to meet the needs of our customers and grow our business. While Rob will discuss our financial results in detail, I’d like to give a brief overview of our operating results. Compared to fourth quarter 2021, revenue increased 18.9%, our adjusted gross margin expanded 160 basis points, and our adjusted EBITDA margin increased 170 basis points. Both business segments reported double-digit revenue growth and EBITDA margin expansion. Installation had an outstanding fourth quarter with volume growth of 12.4% and price increasing 8.2%. We are working through the single and multifamily backlog and believe we are getting more than our fair share of this work. Specialty Distribution’s volume declined in the fourth quarter in part due to the lumpiness of large-scale mechanical insulation projects, which we discussed on previous calls. Specialty Distribution’s pricing was strong in the quarter, growing 11.5%. In addition to reporting a record quarter and year of financial growth and profitability, our team realized several other significant accomplishments in 2022. Specifically, we reported our best year ever with regards to our safety and personal injury rate, successfully integrated Distribution International into our specialty distribution segment and now expect to achieve the high end of our forecasted $35 million to $40 million of synergies, continue to improve labor and sales productivity and drive overall operational improvements as part of our overall strategy to grow our business. Our technology tools have enhanced our installers’ efficiency and improved the sales process, and our back-office technology initiatives have resulted in appreciable cost savings. We completed five strategic residential acquisitions that are expected to generate over $17 million of net annual revenue, returned capital to our shareholders, acquiring 1.4 million shares for approximately $250 million, enhanced our disclosures related to ESG, including publishing Scope 1 emissions data and added human capital management statistics including more detailed workforce demographic data, and enhanced safety performance information. We provided you with a better understanding of our long-term growth strategy and the depth and experience of our leadership team at our Investor Day last spring. All in all, a very productive and profitable year for TopBuild. We enter 2023 financially strong and well-prepared to outperform in any environment. While we cannot predict the direction of the economy, our unique business model differentiates us from our peers and provides multiple avenues for growth. We also have several key competitive advantages that position us well for the future. First and foremost is our experienced and cycle-tested leadership team. They understand what it takes to execute our business plan successfully, and they’re 100% focused on growing our company, driving improvements, and creating value for our shareholders. A second key advantage is having all of our branches roll up to a single sophisticated ERP system. This allows us to track activity in every branch daily, enabling us to proactively address business changes through real-time data-driven decisions. A third is the command we have of our business, coupled with our strong track record of successfully navigating an inflationary environment along with material and labor constraints. We expect fiberglass capacity to remain tight for most of this year and not unexpectedly, the December industry cost increase has had good traction. Our builder customers recognize the supply and labor constraints our industry is operating under and the value of the quality and service we provide. A fourth competitive advantage is our core competency around identifying, evaluating, and integrating acquisitions, which continue to drive shareholder value. While we have market-leading scale, we see lots of white space for growth in all three of the end markets we serve: residential building insulation, commercial building insulation, and mechanical insulation. Combined, they represent a $16 billion total addressable market, where we currently have just over 20% market share. In our residential end market, following the pandemic, we saw demand soar, and builders were forced to limit sales as they raced to obtain permits to start new homes while facing significant supply and labor constraints. Of course, with demand far exceeding supply, made worse by years of underbuilding and material Labor shortages, new and existing home prices rose significantly. This created affordability issues for many consumers today, which has been further impacted by rising mortgage rates. So where are we today? There is still a strong backlog of single and multifamily homes that need to be insulated. This backlog provides us the visibility on the single-family market through the first half of the year and into late 2023, early 2024 for the multifamily market. While there is still uncertainty around the second half of the year, we are encouraged by the recent optimism from several builder customers. However, if housing starts continue to slow or remain at current levels, given our strong track record of execution, we still have opportunities to grow both organically and through acquisitions. Moving to our commercial building insulation end market, we see multiple avenues for growth, including heavy and light installation and product distribution. As we’ve noted on past calls, most of our residential installation branches also perform light commercial work. With the help of our proprietary lead generation application, which we highlighted at our May Investor Day, we are aggressively pursuing these projects and prospects hard in all our markets with solid resulting growth. As a reminder, light commercial follows residential expansion as new home communities require businesses to support them, including retail, restaurants, and health care facilities. For heavy commercial installation, we’re looking at a solid backlog and strong bidding activity. We have roughly 20 branches focused on this business, and the projects in which we work range from distribution centers, warehouses, and hospitals to airports, arenas, and hotels, providing significant diversity in end market exposure. While we’re the biggest player in the commercial building insulation space, we estimate we have approximately 11% share of this $5.5 billion end market. So there’s clearly significant incremental room for growth. Organically, our expansion will be driven through existing and new relationships with general contractors, from market intelligence into new project leads gained from our proprietary technology tools, and from the hard work of our local teams bidding and winning more projects. Moving to the distribution of mechanical insulation in the commercial and industrial end markets. Once again, we have a long runway for growth. While we’re the biggest player in this space in both U.S. and Canada, we estimate our share of this $5 billion end market is only 10%. Half of our mechanical insulation revenue is derived from maintenance and repair work and the other half for new projects, including both the types of heavy commercial projects I discussed earlier and major industrial projects such as liquid natural gas facilities, food and beverage plants, chemical refineries, and manufacturing plants. We believe we’ll see another year of solid growth in our mechanical insulation business both organically and through targeted acquisitions. Regarding capital allocation, our strategy remains intact. Our priority after internal investments in technology, innovation, and equipment remains focused on acquiring high-quality residential and commercial installation contractors and specialty distribution companies. Our team has an experienced and proven ability to realize meaningful synergies from these transactions, driving significantly the greatest returns for our shareholders. We have substantial liquidity and expect to continue to generate strong free cash flow, enabling us to target the right deals that meet our specific criteria. Since 2018, we have acquired and successfully integrated 24 companies that are contributing over $1.6 billion of annual revenue. This includes SRI Holdings, a $62 million residential installation company we acquired in January. This well-managed, high-quality company brings with it a strong customer base in markets in the Southeast and Midwest, and its focus on its employees and safety fits well with TopBuild’s culture. Looking ahead, our pipeline of prospects is strong. We remain focused on our core of insulation and are targeting companies that will enhance our scale, expand our customer base, and generate strong returns for our shareholders. As I’ve mentioned, we have multiple avenues for growth, and you can expect us to remain active on the acquisition front. In addition, we’ll continue to evaluate returning cash to shareholders through share repurchases. Our share repurchase program reflects management’s and our directors’ confidence in the long-term potential of TopBuild, our strong cash flow position, and our firm commitment to optimizing the efficiency of our capital structure. Rob will now discuss our financial results and 2023 outlook.

Thanks, Robert, and good morning, everyone. As Robert noted, our operational teams throughout the U.S. and Canada delivered another stellar performance, producing record results for both the fourth quarter and the full year. This is a direct result of our continued focus on driving top-line growth and bottom-line profitability, coupled with an emphasis on operational excellence at every level of the organization. Our track record points to the success of our operating model. Over the past four years, we have more than doubled our revenue, more than tripled our adjusted EBITDA, and expanded our adjusted EBITDA margins by 690 basis points. Moving to the financials. I’ll start with an overview of the fourth quarter results, update you on our balance sheet, and provide our full-year guidance for 2023. Fourth quarter net sales increased 18.9% to $1.3 billion, and 14.2% on a same branch basis. Breaking that down, our installation segment’s fourth-quarter net sales were $761.3 million, an increase of 21.4% driven by strong volume growth and higher selling prices. Specialty Distribution’s net sales were $563.1 million, an increase of 15.9%, primarily driven by price and M&A. Specialty Distribution’s volume declined in the fourth quarter as project-related volumes for mechanical insulation were lower than prior year. As I’ve noted on previous calls, volumes on the mechanical insulation side can be a little choppy due to the project nature of the business. For the full year, total sales increased 43.7% to $5 billion and 18.8% on a same branch basis. Installation’s revenue grew 24.9%, primarily driven by increased prices and volume. Specialty Distribution’s full-year revenue increased 77%, primarily driven by contributions from M&A and improved pricing. Our adjusted gross margin for both the fourth quarter and the full year was 29.7%, which equates to a 160 basis point expansion in the fourth quarter and 130 basis points for the full year. This was driven by operational efficiencies, fixed cost leverage, and our continued success in managing inflation. Fourth quarter adjusted EBITDA increased 30.4% to $237.4 million, and our adjusted EBITDA margin was 18.8%, a 170 basis point improvement compared to 2021. Full-year adjusted EBITDA increased 55.2% to $940.6 million, and our adjusted EBITDA margin was 18.8%, a 140 basis point improvement. On a same branch basis, our EBITDA margins improved by 210 basis points for the full year of 2022. Our fourth-quarter and full-year same-branch incremental EBITDA margins were both 30.8%. Fourth-quarter adjusted EBITDA margin for our installation segment was 20.8% and 16.7% for our Specialty Distribution segment, an improvement of 140 basis points and 170 basis points, respectively. For the full year, adjusted EBITDA margin for installation expanded by 190 basis points to 20.6%. Specialty Distribution’s full-year adjusted EBITDA margin expanded 90 basis points to 16.9%. Interest expense increased from $10.9 million to $16.8 million in the fourth quarter and from $29.1 million to $56.7 million for the full year, primarily as a result of additional borrowings from our acquisition of DI in the fourth quarter of 2021 and higher variable interest rates. Our current debt is approximately 60% fixed and 40% variable with no upcoming maturities until 2026. In the fourth quarter, adjustments to net income were $1.4 million and $7.8 million for the full year, primarily related to acquisition integration-related costs. Fourth-quarter adjusted earnings per diluted share were $4.40, a 41% increase from prior year. Full-year adjusted earnings per diluted share were $17.11, a 57.7% increase. Moving to our balance sheet and cash flows. Our 2022 operating cash flow was $495.8 million compared to $403 million in the prior year. This was driven by our 71.6% increase in net income, partially offset by growth in working capital. The increase in working capital was driven by continued price inflation, higher fourth-quarter sales volumes, and normal Q4 seasonality. This is an area where we see opportunities for improvement, and we are targeting a long-term range of 12% to 14% of sales. CapEx in 2022 was $76.4 million, approximately 1.5% of revenue and consistent with our long-term guidance. Regarding capital allocation. For the full year, we spent approximately $15 million on acquisitions and approximately $250 million on share repurchases. Over the long term, we will continue to prioritize a healthy balance sheet, internal investments, synergistic acquisitions, and opportunistic share repurchases. In terms of acquisitions, we have opportunities for growth in all three end markets we serve as well as a healthy pipeline of acquisition targets. There were no significant changes to our debt structure, and our outstanding short-term and long-term debt balances remained at just under $1.5 billion. We ended the fourth quarter with net debt leverage of 1.31x trailing 12-month adjusted EBITDA. This is down from 1.49x at the end of the third quarter and down from our pro forma leverage of 2.2x after we acquired DI in October of 2021. Total liquidity on December 31, 2022, was $672.4 million, including cash of $240.1 million and an accessible revolver of $432.3 million. Moving to annual guidance. The backlog of single-family units under construction should continue to support our residential sales into the second quarter of 2023, while the backlog of multifamily units is stronger and should support our residential sales for the full year. At this time, given this current backlog and the recent trend on housing starts, we are expecting our residential sales to decline mid- to upper single digits in 2023 as we expect single-family activity to be slower in the back half of the year. However, we believe the long-term fundamentals of the housing industry are solid, and we were very pleased to hear some of the recent optimism expressed by a number of the public builders. Moreover, we are confident our leadership team, technology tools, and flexible cost structure will ensure that TopBuild will continue to outperform in any environment. Our expectation for our commercial and industrial end markets which is now 35% of our total revenues is more optimistic. We have a strong backlog and bidding activity, and new projects are very active. As a result, we are expecting sales in these end markets to expand by low to mid-single digits. Putting all that together, we are projecting total 2023 sales to be between $4.7 billion and $4.9 billion and adjusted EBITDA to be in the range of $820 million to $910 million. I’ll now turn the call over to Robert for closing remarks.

Thanks, Rob. In closing, as we look to the rest of this year, we recognize we cannot control the macro environment. What we can control is how we manage within it, and we are well-prepared to operate and outperform if the more challenging environment develops. This is evidenced by our strong track record of executing on our plan, producing solid results, and creating value for our shareholders. We’re also excited about our multiple avenues for growth. As I mentioned earlier, we have a combined 20% share of the three end markets we serve, which together represent over $16 billion total addressable market. We are confident in our ability to successfully source and execute strategic acquisitions to further fortify our competitive advantages. As always, I thank our entire TopBuild team for their hard work, energy, and unyielding focus on delivering continued great customer service and strong bottom line results while operating safely every day. Operator, we are now ready for questions.

Our first question comes from Stephen Kim with Evercore ISI.

Yes. I appreciate all the color. Good quarter and exciting times. So I wanted to delve in, if I could, a little bit into your outlook that you’ve provided for fiscal ‘23. I guess the first thing on the top line, can you give us a sense for sort of when exactly you think sales are going to turn negative year-over-year? I mean, is it going to be in the second quarter or the third quarter? And then secondly, based on that, I would say your EBITDA decremental that’s implied by your guide seems to be as high as about 40% and that’s well above your target incremental of 22% to 27%. So I was just wondering why is that so high? What kind of outlook for headcount or price cost does this assume?

Okay. Stephen, this is Rob. Yes. On the top line, the way we’re looking at it right now. So from a residential side of things, we’re looking at the single-family backlog that’s out there. And our best estimate is that’s going to last us into the second quarter. From there on, we’re modeling single-family to kind of line up with what we’ve seen from a starts perspective here in the last six months or so. But obviously, there could be some potential upside to that if you listen to what the builders are saying now. So if starts and the spring selling season is strong here, there could be some potential upside to that. On the multifamily side of things, the backlog is even stronger. We’re expecting that to carry us throughout the full year. And then as you look at sales, it’s important to remember, that’s 65% of our sales on the residential side but on the 35% side, you got commercial and industrial. On this year’s, we’ve got the real opportunity to show the strength of our diversified end markets with that side of the business. And we’re expecting strong growth in that side of the business throughout the year. In fact, right now, we’re bidding some pretty large projects out in Q3 and Q4. So we’re feeling pretty good about that side of the business. From an EBITDA perspective, on the high end of our guidance, we’re right around the targeted decremental of around 27% to 28%. But to your point on the lower end in the midpoint, it is higher. We’re looking at potentially holding onto labor through the downturn because we’re thinking it’s going to be an air pocket Q3, Q4 because ultimately, we’re very positive on the long-term fundamentals for residential housing. If you look at it, just how we’ve seen demand snap back since mortgage rates got down close to 6%. We want to be prepared for when that demand does come back, whether that’d be in Q3, Q4, or Q1 of next year.

Yes. Stephen, this is Robert. So I think you’ve seen, right, we’ve really done a great job of working the productivity of our business. And so we have a great command and control of our business in the field with our operators. And so we’re always watching the productivity of our crews. If we have to make adjustments, we will. We’ve shown that in the past and always come back strong if there is any type of slowdown or whatever. So we’re pretty comfortable with that. But we’re going to, as Rob said, we think this is short-lived. And so we’ll watch our labor closely and keep that productive labor that we’ve done a great job of building up.

Okay. Great. That’s helpful. I guess my second question relates to the distribution side. You talked about the lumpiness that we saw. It sounds like you got some good projects that you’re bidding on now. I guess, in general, though, would you regard the lumpiness we saw in 4Q as a result of previous strength? Was it sort of a result of some business being pulled into the third quarter? Or is it rather more like some opportunities that you think got pushed out into 1Q or 2023? And then also, you mentioned this positive commentary that the public builders have been talking about, and that’s certainly true. We’ve been hearing that from private builders as well. I was just curious, have you in your conversations seen any difference in the commentary between large and smaller builders? And have you seen any difference in their behavior as they may get ready to potentially ramp up starts later this year?

Yes, Stephen, this is Robert. Regarding the industrial and commercial side, we’ve noticed that some opportunities have been delayed. As we discuss 2023 and review our backlog and bidding projects, we feel confident about the expected growth this year, particularly in the latter half as new projects begin to surface. Concerning the builders' feedback, we’ve heard the same positive remarks from both public builders, who have expressed optimism in December and January, and from local regional builders as well. If there has been any change, it's that builders recognize the value of the labor and services we offer, especially regarding the availability of certain materials. They truly appreciate this value. This is reflected in the positive response to the price increases announced in December and January. Builders are eager to ensure they are well-prepared, and we are aligned with them for that.

Our next question comes from the line of Joe Ahlersmeyer with Deutsche Bank.

Yes. Thanks very much. Good morning, everybody. So you grew install volumes ahead of completions throughout the entire year, and the gap was particularly notable. It looks like even on a stack basis, your price mix had started to erode a little bit for the first time really since we had this pricing cycle. Certainly, a strong revenue finish to the year, but that composition trended, I think, a little bit differently from your peer who reported yesterday, who also at the time reiterated that value over volume mindset. Could you maybe just speak to that composition in your fourth-quarter growth? And if this is maybe the early signs of differing strategies there around price rationality as we go into the next year?

Yes. No, we feel really good about our fourth-quarter volumes. What we’ve seen and what we’ve heard from the builders is that trades in front of us, things have improved. So we think we’ve gotten to a lot more work. Obviously, we’re also happy with the price side of the equation. We manage that very well, and you can see that reflected in our margins for the quarter with the expansion we did there.

Yes. I think, Joe, if you look backwards at our price performance, you can see that we delivered price a lot earlier as things were moving along here. So if you go backwards at price, you’ll see that we were very strong on price a lot earlier in 2022. So—and then the volume has just come along with it and the margin expansion to that point. So, and as we talked about getting more than our fair share, so there’s nothing but positive in what’s happened on the price side and the margin side; we just executed. The team in the field did a great job of executing earlier on that price and continues to deliver price.

Yes. Yes, that makes a lot of sense. And looking at the margins slightly differently in the outlook, at the high end, you’re looking at flattish EBITDA margins even as you probably will deleverage on SG&A and then also have some mix mixing down on the industrial side. So it seems like your gross margin into next year is even flat to slightly up. Is that accurate?

Yes. Obviously, we don’t guide on gross margins going out, but we feel good with the guidance we got out there. Like I said, on the residential side, we obviously see the air pocket coming, but we feel good about the long term, and we’ll be prepared to adjust if it’s worse than we’re thinking. But like I said, with recent commentary, we think there’s potentially upside to that. And then like I said, on the commercial and industrial side, we’re excited about the backlog and bidding activity that we got going on that side of the business. I really think 2023 could be a year where you see our diversified end markets really helping support TopBuild’s results.

Our next question comes from the line of Phil Ng with Jefferies.

Congrats on another strong quarter. Encouraging to hear that you mentioned that trades ahead of you are loosening up. I’m just curious if spring selling season is strong, how quickly could you see that demand kind of ripple through your business? And then separately, certainly more optimism from your builder customers, but with rates kind of ticking back up, what’s driving that optimism? Is that something that we should be looking out with rates pushing back up here?

It’s Robert. So as we think about maybe taking the second question first. Yes, I think they saw unusually good traffic in like the December timeframe. Some saw historically strong traffic in January to start the spring selling season. I think what the builders have said, something that they are on the sidelines as rates stabilize a little bit, even tweak down, even—although there have been some recent changes there, some folks have definitely come off the sidelines for that. And I think that’s what’s driving their optimism as well. There’s no question we’ve been underbuilt for many years here. I think maybe there’s some receptiveness to the new rates and where things are going to end up there. What was your first question, sorry?

The ability to kind of react to a strong spring selling season with the trades loosening up? And how quickly could that ripple through your P&L?

Yes. So you’re right; trades in front of us have definitely loosened up. You see that as Rob talked about. As we look at—we’re getting on job sites; no doubt that we’re getting on job sites quicker, especially with the production homebuilders. So let’s say that spring selling season continues to be strong here in the month of March, I think we could see some of that work start to ripen and potentially end of the second quarter through the summer months and definitely into the fall, which, as you know, is a seasonally busy time. From our perspective, we’ll be ready for that. That’s why we keep talking about our labor, our labor productivity, and how we’re preparing for that. As you heard us talk a lot about before, we have great control and insight into our business. We’re monitoring branch by branch what’s going on in performance, what’s going on in bidding and stuff. So we’re always ready to kind of pull the lever that we need to at a local level any time.

Super. Robert, I guess, at the last conference call, you called out a watchout for 2023 would be potentially risk to your margins if the insulation manufacturers are seeing a lot of pricing power because it’s tight and maybe your builder customers asking for concessions. Your guide for 2023 EBITDA margins of 80 basis points compression is pretty benign. Can you give us some perspective on how you see yourself kind of managing price cost in a softening demand backdrop and your ability to kind of react on the cost side as well?

You got it. So it’s really about the value and the quality and the consistency of what we offer, Phil. I mean, that’s really what’s driving it. So maybe I’ll give you a few different data points there. As there has been some uptick in optimism, obviously builders want to make sure they’re partnering with somebody that’s going to have the material, going to have the labor, going to be there for them, especially if there’s a spike, so that definitely plays to our strength of what we provide. Labor is going to remain tight; there’s no question about that, even if there’s a little bit of an air pocket. The second thing is material. As you look at that mix of business, and even as you look at the multifamily being strong, the loose-fill material is going to continue to be tight. Part of the reason is that loose-fill material is heavily used in multifamily construction, if I think about mid-floors, some of those types of applications. The fact that this business continues to be strong in multifamily is not going to alleviate the material tightness. If you think about those dynamics that have transpired since, say go back to October, our value, our quality, and our service is definitely appreciated and noticed. That’s why you see us talking about traction in the different areas here.

Our next question comes from the line of Mike Rehaut with JPMorgan.

First, I just wanted to get a sense of price carryover in 2023. You started to see some deceleration. In the fourth quarter, I think average price was up 10% versus 14%, with a slowdown in both segments. How should we think about the first and second quarters assuming no additional pricing comes through the industry in ‘23?

Yes. So we’ve got—Michael, this is Rob. We’ve got our assumption for price obviously baked in. We don’t break out price versus volume. To your point, the carryover impact is certainly going to be stronger in the first half of the year. The thing to keep in mind, as you’ve seen, our price has come down throughout the year, but we’re also comping to quarters last year where we were getting price early on and benefiting from it as well. So you’ve got the comp that’s going on there. But as we look forward, we’re expecting certainly not the same type of year in a pricing environment is what we saw in 2022. So we’ve got that baked into our guidance as well.

Right. Okay. I appreciate that. And I guess just similarly on the topic of price, if you could comment at all on the January price increase by the manufacturers and any sense of how that’s being realized in the industry at this point?

Mike, it’s Robert. So there’s good traction on the increase. I think it goes back to the value that I talked about earlier relative to labor; definitely, loose-fill material is still tight. The manufacturers obviously have communicated that. The builders recognize that as well. And we all know there’s no new supply coming on here in ‘24. So capacity is going to be constrained definitely on the loose-fill side. And again, we even talked about how that will impact us some by maintenance that’s going to happen in the industry as well as kind of that multifamily mix. We see the material remaining tight here in 2023.

Okay. Great. And just one last one again. I guess, just more conceptually, when you think about where your margins are, you’ve kind of moved to the decremental margin guidance long-term or decremental/incremental, but you’ve seen obviously a nice improvement over the last several years. Obviously, there’s a value that you provide, but the builders at the same time have been talking pretty consistently about, I guess, pushing back on the trades towards the extent that things loosen up a little bit. Have you started to have any of those conversations with your builder customers? And how should we think about current margins today, for example, in TruTeam being several hundred basis points higher than a few years ago?

Yes, Mike, Robert. I’ll start with this, and I’m sure Rob will add on anything as well. So if you think about it and what we’ve talked about before and others in the industry, I mean, right, our work is less than 2% of the total cost of the home. At the same time, it’s important to get a proper inspection after that before to make sure you don’t hold up other trades. Given that, I think given the labor component of our package, I believe the builders recognize that value. Also, codes are changing, making it tougher to ensure things are passing inspection. I think that’s recognized and our value will continue to be recognized. Again, I would say thinking ahead regarding margin trends that even if there is a small air pocket, which we think could be brief; nobody can forecast exactly the timing of that as well. Labor will remain tight. Given the maintenance in the industry, given that mix of multifamily, and given there could be some tailwinds from tax incentives for reinsulating homes, that’s going to tight material if you think about loose-fill typically as people blowing their insulation. So that’s going to continue to drive tightness in materials here in the industry in 2023. I think our guidance does a good job of reflecting how we think about that. If we think about it, it’s—anything that can happen there, we’re going to look at our labor very carefully.

Yes, Mike, and this is Rob. I think the only thing I’d add to that is some of that margin expansion is definitely from our operating team’s relentless focus on driving process improvements, how do we make this branch more efficient, how do we make that branch perform like this higher-performing branch? How do we make our installers more efficient? So a lot of the changes we've made in the business are going to stick.

Our next question comes from the line of Keith Hughes with Truist Securities.

Amongst the guidance, you had talked earlier in the call about expecting mid- to upper single-digit declines in residential. Just talk a little more? Is that a dollar number? And any kind of indication on price versus units then that would be helpful.

Yes. Keith, this is Rob. Yes, that is a dollar figure we’re talking about. The total residential sales down mid- to upper single digits. That’s going to be driven by what we’re seeing on the single-family start side. Right now, we’re expecting that to roll through Q3, Q4 and impact our single-family volumes there. As far as price volume, that’s really what’s going to drive the volume side of it from a price side. We don’t break out our guidance. We do expect this year for inflation to stabilize. It doesn’t mean we won’t get a price increase at some point this year, but we’re expecting it to be a more stable year than what we saw in 2022.

I guess just going back to the residential revenue guidance of mid- to high single-digit declines. It obviously includes some level of positive price. Could you maybe break out the assumptions on single-family versus multifamily? It sounds like maybe single-family could be down from a volume perspective, double digits? Is that fair in your assumption?

Yes. We don’t break out our guidance there. But if you look at the single-family starts data, over the past six months, it’s down 15% to 20% year-over-year. We are expecting some of that to start to roll through the completion side of things here in the second half of this year.

Yes. So from that perspective, Adam, we’re always monitoring at a local level. If you think about how we work the network, we always move labor around. For example, if Tampa is slow and things are percolating in Orlando, we’re going to move labor to Orlando to satisfy the customers, which plays well for us in the future. We’re able to use our ERP system for that. We’re constantly monitoring that. If we think there’s a small air pocket there, we may not make changes. But if things were to show significant downturns, we can react quickly. That’s the beauty of the model and how we operate. We don’t sign long-term leases, we don’t have large facilities, and we optimize our footprint across the country.

Our next question comes from the line of Jeff Stevenson with Loop Capital Markets.

Congrats on the nice quarter. You’ve had another quarter of elevated gross margin expansion as you continue to benefit from strong volume and pricing gains. But moving forward, how should we think about the cadence of gross margins as we start to lap tougher pricing comps from last year’s increases?

Yes. This is Rob. We don’t guide quarterly on margins. But as you look at how things are going to roll, if you’re looking at our EBITDA margins throughout next year, I would expect margins in the first half of the year to be a little stronger. In addition, we think price is going to be stronger in the first half of the year. So I would think about the cadence of EBITDA margins through the year, I think about the first half being a little stronger than the second half.

Jeff, this is Robert. You hit on it right. Last year, we had purposely decided to focus on the successful integration of DI, which the team did a great job of accomplishing. You not only saw the integration of DI, you saw tremendous operating improvement in those margins in the DI business, and our Specialty Distribution business overall. We’re really happy with what happened with DI in 2022 and how that diversifies our business for the future. Yes, the pipeline is busy. You saw a nice acquisition we completed in January. We’re really active right now in the M&A activity given DI being done and what we’re actively working today. M&A has become a core competency for us. The great thing about our model is we have multiple avenues for growth across residential, commercial, and industrial, and we’re super excited about the M&A activity right now and what you’d expect to see from us here in the future.

Our next question comes from the line of Trey Grooms with Stephens Inc.

So the 35% that is commercial and industrial. You’re expecting low to mid-single-digit revenue growth there. So throughout, I guess, the year, it sounds like you’ve got pretty good visibility there. Can you parse out what you’re expecting between maybe the lighter side of commercial that follows residential versus that heavier industrial side as you kind of look through the visibility you have currently?

Yes, Trey, it’s Robert. From what we’ve seen, both sides are pretty strong. We talked at the call when we started on the light side of the business. All the residential branches can do that work, and they’re doing a really good job of executing upon that growth. That’s kind of the cadence of what’s happening there. Light commercial is benefiting from our new proprietary lead generation tool, and our branches are doing a nice job of bidding those with more leads, bidding more projects, and winning more projects. As we think about the mechanical side, we see strong growth and probably stronger in the back half of 2023. This diversified business will play really well this year.

Yes. The cycles for the mechanical insulation business, Trey, tend to be less steep than what we see on the residential side. Over the long term, the rises and dips will be less. But in the short term, you do see the quarter-over-quarter gaps sometimes.

And our next question comes from the line of Dan Oppenheim with Credit Suisse.

I appreciate the comments you’ve made there in the light commercial and what you’re doing from the—serving that from the residential branches. I guess wondering what you see in terms of potential for some offset there. Can that help on the margin side by keeping those in the residential branches sort of active even if the single-family is slow in terms of keeping those decrementals sort of down to the—having less impact there as we go through the air pocket here? Just curious about that.

Yes, Dan, this is Robert. You’ve got it exactly right. That’s why we built the diversified model and the multiple avenues for growth. Those residential branches can do that light commercial work. This gives them the chance to build that backlog. It helps for smoother volumes, keeps the labor busy. That’s good margin work also on the light commercial side. It’s part of the strength of this model that we built, the diversification that we’ve built, and then hearing us talk about two key themes here, right; multiple avenues for growth and why we believe we can outperform in any environment.

And we have reached the end of the question-and-answer session. I’ll now turn the call back over to Robert Buck for closing remarks.

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

And this concludes today’s conference, and you may disconnect your lines at this time. Thank you for your participation.