Greetings. Welcome to TopBuild's First Quarter 2024 Earnings Release. I will now turn the conference over to your host, P.I. Aquino. You may begin.

Good morning, and thanks for joining us. On our call today are Robert Buck, President and Chief Executive Officer; and Rob Kuhns, Chief Financial Officer. We posted our earnings release, senior management's formal remarks and a presentation that summarizes our comments on our website at topbuild.com. Many of our remarks today 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 any forward-looking statements because of new information, future events or otherwise. Please note that some of the financial measures to be discussed during 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 presentation, both of which are available on our website. I'll now turn the call over to President and CEO, Robert Buck.

Good morning, and thank you for joining our call today. Our first quarter performance got the year off to a solid start for TopBuild and was in line with our expectations, as results continue to demonstrate the strength of our business model and our team's ongoing drive to improve. As you saw in our release this morning, we are also raising our outlook and guidance for the remainder of 2024, which Rob will cover in his remarks. Let me start with a couple of comments around our recent announcements. Most of you saw our press release of 2 weeks ago terminating the SPI transaction. Since last July, we worked through the HSR review process to help the DOJ better understand the entire business and transaction details. The DOJ focused on a small sub-segment of metal building insulation, laminated fiberglass, and defined the business and distribution of the product very narrowly. Laminated fiberglass is one of several options that contractors have when insulating a metal building. This view from the DOJ led us to explore the possibility of renegotiating the transaction to buy SPI excluding the MBI business. While doing so would have likely allowed us to receive regulatory approval, we were unable to agree on price with the sellers and ultimately decided that pursuing the transaction further was not in our shareholders’ best interest. As good stewards of your capital, we will continue to be very disciplined in our approach to acquisitions and capital allocation. Next, we announced today that our Board authorized a new share repurchase program of up to $1 billion. This is in addition to the prior authorization, which has approximately $154 million remaining. This brings our total availability for share repurchase to $1.15 billion. This authorization shows the strength of our balance sheet and our management team and Board’s confidence in our business and strategic direction. Turning now to our first quarter, we're pleased with our start to the year. Total company sales grew 1.1% to $1.28 billion and adjusted EBITDA rose 6.5% to $253.8 million. Good price realization in the quarter, coupled with productivity initiatives, drove adjusted EBITDA margin expansion of 100 basis points to 19.8%. On a same branch basis in the first quarter, our single-family installation business improved sequentially each month. In fact, March was the first time in more than a year that single-family improved on a year-over-year basis, which is very encouraging. As you have heard from the public builders’ sentiment and order volumes being reported, we expect a healthy single-family environment for the remainder of 2024. Our Installation results also benefited from continued strength in multi-family in the quarter, which grew more than 20% versus a tough comp from last year. As we noted last quarter, starts and bidding activity for multi-family have slowed, but we have a healthy backlog of work that we anticipate will continue throughout the balance of 2024. Across the commercial and industrial landscape, we are seeing solid progress in the business and our bidding activity and win rate continues to improve. Our proprietary lead app tool is driving organic growth in this part of the business. We see many major projects being bid and coming online. We have several heavy commercial and mechanical insulation projects that we are being worked on across multiple verticals. We have added slides 9, 10 and 11 to our earnings deck so you can visualize these verticals as well as our highly fragmented $18.25 billion total addressable market. These slides will also help you understand our customer base, product breadth and service reach. As you can see, we have a lot of white space across our core insulation business for both organic and M&A growth. Turning to M&A, acquisitions will continue to be our number one capital allocation priority as they generate great returns for increased shareholder value. Identifying, evaluating, and integrating acquisitions is a core competency of ours, and we have an excellent track record of results in this area. We continue to have a robust pipeline of acquisition prospects. In fact, yesterday we announced an agreement to acquire Insulation Works, a $28 million Arkansas-based installation business with national expertise in agricultural buildings. We are excited to have another great addition to the TopBuild family of companies and expect to close this transaction later this month. To date in 2024, we've announced 5 transactions totaling approximately $68 million in annual revenue. Let me make a couple of industry comments before turning to our operations. On the material supply side, fiberglass continues to be on allocation. We anticipate Knauf's new facility in Texas will come online successfully in Q3; however, there is quite a bit of maintenance and downtime planned at several other fiberglass facilities which will likely offset any new production capacity this year. We are feeling the impact of the tight supply situation in our distribution business, mainly our Specialty Distribution volumes, which Rob will touch on in his comments. On the other hand, we are seeing momentum with spray foam given the code adoption tailwinds I will discuss later. Recently all 4 of the fiberglass suppliers have announced material cost increases effective in June or July. We expect to successfully work through any cost inflation that may take place, as we have consistently demonstrated. Moving to our operations, as I noted on our last call, we expanded our Special Ops team in 2023. This is a small team of highly seasoned operators whose mission is to focus on our branches whose metrics fall into our bottom quartile. By leveraging this team’s knowledge and experience, we're able to identify opportunities to drive improved performance. This quarter we saw the benefit of this Special Ops work in one of our larger distribution and fabrication locations on the East Coast. Through work that started in 2023, this business was relocated to a better geography to service our customers. The facility was right sized to drive improvements operationally, including productivity and overhead. Better inventory management helped reduce transfers and improve service levels. Strategic decisions were made and actioned regarding sales productivity and talent. The mix of business was reviewed, and actions taken around new verticals for the business. What is the outcome? This Special Ops focus has improved profitability in this business from a low single digits to now mid-teens profit performance. The work on our bottom quartile is ongoing, as we drive to improve our business and our Special Ops Team continues to focus on the opportunities across our network. Next, for those of you who might be less familiar, I'd like to spend a couple minutes on our mechanical insulation business and the opportunity going forward. When you consider an industrial facility, they are full of pipes, ductwork, and mechanical systems. These environments may have systems that need to be maintained at a certain temperature or systems that require sound control via an acoustic barrier. They may also need protective insulation barriers to keep employees safe. We have the capability to supply any mechanical insulation solution required across many diverse industries. This is accomplished through a variety of products including custom fit jacketing and pipe covers made from insulating materials like fiberglass, foam glass or aerogel just to name a few. Our distribution business provides these materials and custom fabricates coverings to contractors and mechanical installers. The standards for these industries are very prescriptive, often regulated with specific replacement schedules. We're currently working on several large industrial LNG facilities in the U.S. and Canada. Mechanical insulation plays a key role for LNG facilities. Many are being built along the Gulf Coast and you're dealing with a high humidity environment and using cryogenic temperatures to compress natural gas. Let me give you an example of a multi-year LNG mega project in Louisiana where we are a primary distributor of mechanical insulation. The facility will sit on more than 600 acres and take 3-4 years to complete. The facility will contain massive storage tanks, energy turbines and multiple segments of pipeline totaling over 20 miles throughout. Some pipes will be more than 3 feet in diameter. Our initial scope included supplying products and fabrication services for modules being constructed off-site. Our national footprint allowed us to supply these pre-built modules from multiple Distribution International facilities across multiple states. This represented over $12 million in revenue in 2023. As the project has progressed, our scope has expanded to include more hot and cold insulation applications, fire protection and sound remediation insulation for on-site construction, which will deliver an additional $20 million in revenue. This is a great example of our scope on a multi-phase project that enables us to leverage our product breadth and expertise, fabrication capabilities, project management focus and national footprint. As we mentioned in the past, these projects may be lumpy over time in regard to revenue, but they play to TopBuild's Specialty Distribution strengths. In addition, the replacement cycles for these projects vary from 18 to 24 months for certain equipment to a plant-wide refurbishment every 5 years, so we will see recurring revenue from this project and others. Let me transition to discussing the future of our overall business. We have several dynamics across the industry that will allow our differentiated business model to continue driving profitable growth. Whether it be the large mega projects that should come online in the next few years and the recurring revenue that will follow or our expanded commercial reach across North America. At a macro level, the United States continues to face a housing shortage, the result of the last decade of underbuilding. So fundamentally, we expect housing demand to be strong for the foreseeable future. We also see tailwinds for TopBuild and the industry coming from energy code adoptions and recent HUD announcements. Given our expertise in all things insulation-related, we expect these energy code changes to help fuel additional demand for years to come. All these dynamics along with our relentless drive to improve and focus on talent fuels our confidence that TopBuild will outperform in any changing business environment. Finally, I'll close my remarks today by thanking and congratulating our entire TopBuild team. TopBuild has been recognized as a Great Place to Work for the second consecutive year. This recognition demonstrates that we're building a workplace that supports development, provides career opportunities, ensures fair treatment and values each employee. On behalf of our entire leadership team, thank you to our employees. Your passion, drive, and commitment to success have played a significant role in earning this certification once again. Let me now turn the call over to Rob.

I want to thank our teams for their hard work in delivering another quarter of profitable growth for TopBuild. As we mentioned on the February call, the first quarter of last year was our highest sales growth quarter due to the carryover of a strong single-family backlog. We also had a slow start to this January due to weather across the country. Our teams came back and delivered strong results in February and March and our first quarter saw sales grow 1.1% to $1.28 billion, in line with our expectations. Across both segments we did a great job covering the fiberglass cost increases that hit during the quarter. These fiberglass price increases were partially offset by the carryover impact of lower material prices on spray foam from last year. Breaking our first quarter sales down by segment: Our Installation segment net sales grew 4.1% to $798.7 million, of which 2.6% was the net contribution from acquisitions and disposals, pricing contributed 1.2% and volume was up slightly by 0.3%. Installation's multi-family sales remained strong due to the strength of our backlog and single-family sales continued to improve each month of the quarter. The current trend on single-family starts should be a tailwind to our business as we move through the remainder of the year. Net sales for Specialty Distribution declined 2.3% to $545.8 million for the first quarter. Volume declined 4.2%, partially offset by higher pricing of 1.5% and acquisitions of 0.4%. The volume decline was driven by lower residential insulation sales because of business mix and tighter material supply of fiberglass. Total company gross margin of 30.3% expanded by 100 basis points versus last year due to improved productivity and higher pricing in both segments. As I mentioned earlier our teams continued to do a great job effectively managing the price-cost relationship. In addition, our ongoing focus on driving operational improvements, as Robert detailed earlier, continues to drive margin benefits. Adjusted EBITDA of $253.8 million, was up 6.5%, and adjusted EBITDA margin expanded 100 basis points to 19.8% compared to the first quarter of 2023. Installation adjusted EBITDA margin was 22.0%, an improvement of 60 basis points year over year. Specialty Distribution's adjusted EBITDA margin of 16.9% was 110 basis points better than the first quarter of 2023. Other Income and Expense totaled $7.5 million in the quarter, which was down from $16.1 million last year. Interest income from higher cash balances was the primary driver. Adjusted earnings per diluted share grew 10.3% to $4.81 in the first quarter. Turning to our balance sheet and cash flow. We finished the quarter with total liquidity of $1.4 billion, which includes cash of $968.8 million and availability under our revolver of $436.2 million. Net debt at the end of the quarter was $453.7 million, and our leverage ratio was 0.42x the last 12 months adjusted EBITDA. Working capital as a percent of sales was 14% in the quarter, an improvement of 160 basis points from last year at this time, primarily driven by inventory reductions. Free cash flow for the last 12 months was $790.1 million, which compares to $502.6 million last year, an increase of 57.2%. Our uniquely advantaged business model continues to generate strong cash flows. Acquisitions remain our top priority for reinvesting our cash flow as our disciplined M&A process has a proven track record of driving significant shareholder value. As Robert discussed earlier, our Board recently approved a new share repurchase authorization of up to $1 billion, bringing the total availability for buybacks to $1.15 billion. As we have done in the past, we will continue to balance returning capital to shareholders with our M&A pipeline. Turning now to our 2024 guidance. We are raising our sales expectation by $40 million to a range of $5.4 to $5.6 billion. We continue to expect total sales for residential and commercial to grow by mid-single digits. We are also raising our Adjusted EBITDA guidance by $25 million to $1.065 to $1.155 billion. These increases to sales and adjusted EBITDA are driven by better than anticipated Q1 profitability and recent acquisitions. Looking to the remainder of the year, I want to remind you that last year’s second and third quarter EBITDA included $10 million and $15 million respectively of unusual profit related to our multifamily business. I'll close today by reiterating our continued confidence in our outlook as well as the strength of the long-term fundamentals in our business. We believe that our teams will continue to execute at a high level and TopBuild will continue to outperform in any environment.

We continue to be confident about 2024 and expect both segments to deliver another year of consistent execution and strong results. Our multiple avenues for growth stretch across a very fragmented $18.25 billion total addressable market. I hope the information and slides that we provided today are helpful in better understanding our insulation end markets and our opportunities. We have a proven, differentiated business model and a disciplined capital allocation strategy. Looking forward, we see great opportunity for profitable growth, both organically and through M&A. Operator, we are now ready for questions.

Our first question comes from Stephen Kim with Evercore ISI.

Yes. Appreciate all the color as always. A couple of questions here. I guess, first, regarding the M&A pipeline, which continues to be, I think, you said your number one priority. Obviously, thanks for the color here on the metal building insulation hiccup with SPI. But as we look across the landscape, I was wondering if you could give us kind of a breakdown of how you see the pipeline looking across the three segments that you laid out? And specifically within the mechanical industrial, could you help us understand what the landscape looks like? I assume that the metal building insulation is not something which you expect to be an impediment going forward. But if you could just clarify that for us, that would be helpful.

Stephen, this is Robert. Yes, starting with the residential sector, the pipeline looks very healthy, both in terms of installations and opportunities in distribution. This includes various insulation products such as fiberglass and spray foam, which contribute to the fragmentation and potential for growth. On the mechanical side, we do not see the metal building insulation as a barrier; it primarily removes one competitor from the market, specifically SPI. Historically, there are a few larger players in the mechanical segment that we monitor, but beyond that, the market is quite fragmented with numerous regional companies in the U.S. and Canada. These regional firms often focus on specific industries like oil and gas, food and beverage, or pharmaceuticals, which adds to the fragmentation and creates significant M&A opportunities for us. Overall, we have a strong pipeline, and it remains our top priority for capital allocation. You can expect us to remain active in this space.

Okay, great. That's helpful, thank you. Secondly, regarding the code changes announced by HUD, which will take effect for new residential construction in about 18 months and transition to the 2021 code, could you provide some insights on this? Specifically, should we expect that the 2021 code will result in a 20% to 30% increase in insulation costs per home? How do you see this impacting TopBuild's revenue? Additionally, we understand that the 2024 code might differ significantly and potentially require less material. Can you help us analyze that? Finally, how likely do you think it is that Fannie and Freddie will also adopt these changes?

Sure, let's discuss the code changes. You're right that the HUD announcement is definitely a positive factor. However, the impact depends on a few variables. For instance, if a builder is currently using a code from 2009 or earlier, we could see an increase of around 30% in the amount of fiberglass used. If they are closer to a 2015 code, the increase might be in the 15% range. We view this as a beneficial trend with several options for how to comply with the new codes, which may impact the revenue questions you raised. Overall, we see these as advantageous for the future, extending over multiple years. The year 2024 stands out because it will involve a more integrated approach, offering various ways to meet the code requirements. We're optimistic about how this will play out, especially since insulation remains one of the most effective and comprehensive methods for builders to comply. Regarding adoption rates, it appears that energy codes have gained momentum. Although the Inflation Reduction Act's 45L adds complexity, it also encourages a systems-based approach. We anticipate an increase in adoption, particularly noticeable over the past 12 to 18 months, which has been a strong positive for the industry.

Our next question comes from the line of Susan Maklari with Goldman Sachs.

My first question is just perhaps going back to the capital allocation. Given your comments on the mechanical side of things, does it imply that maybe you would consider pursuing some of those smaller niche players rather than going after the handful of larger ones? And I guess, with that too, how are you thinking about buybacks just given the increase in the authorization that you also announced this morning?

Susan, it's Robert. I'll take the first part of that question, Rob will take the second part. So yes, on the landscape of the mechanical acquisition side, we're looking across both. I mean, so obviously, we have some relationships with some of the larger players and conversations that we've had. But then absolutely, we participate across all those verticals. And so the local or more regional players and they play in one or two verticals, we're absolutely interested in that. We've had some success in that approach in the past. DI had some success in that approach in the past as well. So we're open to the gamut on M&A relative to mechanical and we think it's all open ground for us. So I think that's why we're excited about it. That's why we keep talking about the fragmentation, but also the robust pipeline as well.

Yes, Susan, I just want to add regarding the buyback. We are clearly excited to announce this today, as it reflects the confidence our Board has in our strategy and the strength of our balance sheet at this time. As Robert mentioned, M&A will continue to be our highest priority. However, considering the cash we have available, we will balance our pipeline with returning capital to shareholders as we have in the past. We are genuinely enthusiastic about this and will manage it as we have previously.

Okay. All right. And then maybe thinking a bit about price and price cost. You mentioned the announcements, the price increases that have come out from the suppliers. Just any thoughts on how that can roll through the business and your ability to continue to offset those incremental increases?

Yes, this is Robert. I feel confident about our situation. We've previously discussed how we manage our ERP system and our connection with each local branch. Our teams in the field have shown a strong track record in this regard. As for the impact, we'll observe how single-family starts develop. We expect a positive second half of the year, which should keep materials in demand and likely support price traction and increases. There will be more updates, but I am definitely confident in our capacity to manage this effectively.

Our next question comes from the line of Ken Zener with Seaport Research Partners.

So it's an interesting combination here where pricing is positive. You talked about on the distribution side, supply actually impacting your volume, if I understood your language correctly. Is that correct?

That's correct.

Could you provide some context? I understand that there are over 1.4 million starts and that conditions are quite tight, which is supporting prices despite what had been a slowdown in activity, but that seems to be picking up again. However, I haven’t heard about allocation issues like people going to Home Depot. Can you explain why the supply is so tight and why we haven’t observed more significant price changes if that’s the case? I’m trying to understand this, especially regarding the potential pricing tensions we might face in the second half of the year.

Yes, Ken. So I'll take the first part of material and Rob will handle the price, detailed piece of it. Yes, so material definitely is still tight. I mean, I have to even say that we've had to buy some material through third party, if you will, given the tightness. As we mentioned back in February, some of that is planned maintenance, but there's also been some downtime in the industry as well, unplanned downtime in the industry that caused material to be tight. I think what we've seen is, given some of the code adoption, you're seeing some momentum with other products. We mentioned in our prepared remarks around spray foam. So I think you see that relieving some of it relative to the installation side of the business. And then we talked about fiberglass; there were also some commercial products that were very tight in the first quarter as well. I mean you're around mineral wool and some of the manufacturer's issues with that product as well, but that's definitely improving. So we think material stays tight, but we think we'll be in a good position here given some of the other products. Rob will talk about the price piece.

Yes. So around price, Ken, I mean, the way to think about the first quarter, a couple of things impacting that and probing making it a little less. And if you just look at fiberglass in a vacuum. One is the timing of the fiberglass increase, I'd say, was more of a mid-quarter implementation. So we should see that improve as we go into the second quarter. And then the other thing you have is the carryover impact of some price decreases we saw last year, primarily around spray foam. And that's going to continue on in through the second quarter offsetting some of the price increase we see on fiberglass.

Okay. Can we discuss the mechanical sector? While the deal didn't go through, it's a significant area for potential acquisitions given your mid-teens market share. Is there anything about these mechanical acquisitions that might change the incremental margins for specialty distribution? Or should we still expect the breakdown to be approximately 75% material and 25% value add? Will the incremental margins for that business continue to stay in the low to mid-teen range as you previously described?

Yes. Based on our observations, we anticipate that most distributors in this sector will have EBITDA margins in the mid-teens or more likely in the low 10% to 11% range, possibly reaching the low teens. However, similar to our experience with DI and the synergies we can achieve, we expect to elevate that to the mid-teens over time, particularly after the first year as we take advantage of the fixed cost base. We aim for incremental margins between 22% and 27%. In the long term, we foresee distribution trends leaning towards the lower end of that spectrum, while installations are expected to trend towards the higher end.

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

I just wanted to circle back for a moment. I don't mean to beat a dead horse here, but obviously, a lot of focus around the mechanical vertical. And I was wondering if you could give a little more color around what the metal building insulation represented as a percent of sales of SPI? What it also represents as a percent of the $5.75 billion mechanical vertical that you posted on the slides. And I noticed that you didn't change the overall TAM of that vertical relative to your prior presentation. So I'm just kind of wondering around this subsector if you still see it as a viable part of the industry. And again, just trying to get a size of SPI in the broader sector and if it changes your view around this subcategory is still being an area as part of your acquisition strategy within the broader space.

Yes, Michael, this is Rob. I'll begin with that. Currently, MBI makes up about 6% of our revenue. It's crucial to clarify that it falls into the middle market segment of the commercial building envelope, not the mechanical area. When insulating a metal building, there are several options available; laminated fiberglass is one of them, which we provide, and it's also what SPI offered. For SPI, this segment accounted for around 15% of their overall revenue. Thus, it remains a relatively small segment for both companies. It's a small niche within the commercial building envelope. For insulating a commercial building, options include laminated fiberglass, spray foam, or insulated metal panels. Our broader perspective on the market considers this, but the DOJ has focused specifically on laminated fiberglass, which represents a minor portion of the overall market. Regarding our M&A strategy moving forward, this situation doesn't concern us. We are already a significant player in this small niche, and we don't have a large presence in the rest of the commercial building or mechanical markets, where we will continue to explore M&A opportunities.

And obviously, Mike, that's where the focus was really around that small niche of the MBI side. So no concern across the rest of the business, and there's really not much to pick off the table relative to MBI other than the decision we just made.

Right. So I guess just kind of following on that and I appreciate the additional color there. As you look at the landscape of potential targets across the commercial industrial space, the building envelope and the mechanical. In the past, you've kind of said that there were maybe half a dozen or less kind of larger potential acquisitions, medium to larger, and you kind of walked through the different relative sizes. With SPI off the table, to the extent that some of these other medium to larger-sized potential targets also have MBI, I'm just kind of curious if that kind of changes the calculus or the likelihood of some of those other larger players? Or was this kind of a one-off where the other kind of larger, medium to larger targets wouldn't necessarily have this niche issue that the DOJ kind of zeroed in on?

Yes. Great question, Mike. This is Robert. So you hit on it there. The other players really don't have the MBI niche piece of the business. That's why we keep saying it's really zero concern for us from an M&A strategy perspective. So it doesn't really exist in any of the other targets that we talked about in the past or any of the ones that we're focused on. So really not an issue.

Michael, this is Rob. It doesn’t include either one of those, so we don’t account for any acquisitions that we haven't yet finalized. The Arkansas acquisition we announced will contribute positively. Additionally, we haven't factored in any potential price increases at this moment; we have accounted for what we know from the Q1 price hike, but we have not included any possible additional increases later this year.

Our next question comes from the line of Rafe Jadrosich with Bank of America.

This is actually Shaun Calnan on for Rafe. So spray foam has come up a couple of times on this call. Can you talk about your current exposure to spray foam either in terms of volume or revenue? And then are you seeing the demand pick up for that as the price begins to narrow between that and some more of the traditional insulation products?

So I'll give you a couple of quick numbers and then Robert can expand on what's going on in the industry a little bit with spray foam right now. But from a unit basis in terms of the houses we insulate it's probably roughly 10% on a unit basis from a dollars perspective, though, it's going to be north of 20% because the cost on spray foams roughly 2x maybe a little more than that, closer to 2.5 in some places in terms of the cost per unit. But Robert can talk a little bit about some of the dynamics there with spray foam right now.

Yes. So you're definitely seeing momentum in the products shown. One is definitely a big tailwind coming from the codes that we've talked about. So you see even some of the production homebuilders are becoming very interested in that product to reach the 45L rebate piece and make sure they deliver upon that. So definitely momentum with the product, both smaller builders, custom builders, but then also even with production builders. And then last point I would just say is around commercial, we see more spray foam being used in commercial projects as well. So it's got some momentum really across the board.

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

I guess, my question is, do you have any chunkier deals in the pipeline, especially on the C&I side? And just given how strong your balance sheet is in free cash flow, perhaps, Rob, how are you thinking about pacing this buyback is, at least on my math, $1 billion buyback, not saying you would buy the whole thing this year. It would still get you to a balance sheet like 1x or less from a leverage standpoint. So one, color on chunkier deals? And two, how you're thinking about pacing this $1 billion buyback authorization program you stand?

This is Robert, I'll take the first part. So yes, I mean, definitely, the pipeline looks good from that perspective. Obviously, we're waiting to see if we got SPI across the finish line. And so now that we've moved forward from that made our decision to remain disciplined on the M&A front, then we'll be moving forward with some of our other opportunities that we have. So yes, so feel good about the pipeline really across all three end segments, including the C&I side as well.

Yes, Phil, this is Rob. In terms of buyback, like I said earlier, we're not going to be able to give any guidance exactly how that's going to play out. We're going to obviously see how the M&A pipeline flows, prioritize that. But as you point out, we're sitting in a very healthy balance sheet position today. So we'll see how many of these M&A deals we get to the finish line, and we'll certainly balance that with the buybacks moving forward. Like we've talked about in the past, we think net debt leverage somewhere in the 1 to 2 is probably the right type number, and we're obviously at 0.42 at the end of this quarter. We were anticipating using a significant portion of that cash on the SPI deal. So obviously, we're pivoting from that and, hence, the announcement of the $1 billion authorization.

But Rob, I guess, if there's no deal, the game plan wouldn't be to build excess cash, right? The plan would probably still stay within that leverage ratio or maybe closer to the low end? Or am I thinking about it right?

Yes, I think if we use most of that, we will likely end up towards the low end of our 1 to 2 range right now.

Yes, I think that's a good question, Phil. The plant is expected to be operational around June or July, which will give us some time to achieve a steady pace, likely pushing us into the third quarter. In terms of materials, as we've discussed, there is still maintenance required in the industry, and we've experienced some unexpected downtime, which raises concerns. That's why we anticipate that material will remain tight for the rest of the year. Regarding single-family starts, based on the orders from builders, we expect strong performance in the latter half of the year, which gives us hope for better traction with materials. We'll also see how 2025 unfolds, as we expect full production by then, along with a clearer picture of the starts situation. Additionally, some aspects related to code will introduce potential material into the mix, which should align well for the latter part of the year, but we will need to manage the allocation effectively as well.

Sorry to sneak this one in, Robert. I mean you were talking about how co-changes would be a good tailwind for demand. Material is clearly tight, single-family should pick up in the back half. Are you hearing anything from your suppliers in terms of potentially adding more capacity that could potentially be a relief next year? I know Owens Corning is taking that are hard to look at any long-term plans on the capacity front. But any incremental uplift that you see perhaps next year outside of Knauf ramping up more fully. And perhaps from a maintenance standpoint, things being a little better spot.

Yes. I think maybe 2 things I'll say, Phil. I think, one, people are evaluating. That's for sure. But I think people are evaluating multiple insulating products whenever they're doing the evaluation, if that makes sense.

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

This is Sid Ramesh on for Trey Grooms. Could you maybe talk about the trends you saw in April and into May on the different end markets? Anything noticeable with maybe rates ticking a little higher? It sounds like single-family is improving. But any changes on the commercial or multifamily side?

Yes. I'd say, Sid, for us, no major changes. I mean, April came in about as we expected. And just like I think Robert mentioned in his opening comments, we saw March was the first month we saw a single family with year-over-year sales growth first time we've seen that in a year. April, we saw that again. So we are seeing some of the improvement from the improved starts on the single-family side, which is definitely a positive sign as we move forward here.

Got it. Regarding the mid-single-digit commercial growth number, how should we interpret R&R and any new assumptions included in that figure? We have been noticing some potential weakness in the new construction segment, so any insights would be appreciated.

Yes, as we've mentioned previously, the recurring revenue within our specialty distribution business, which is primarily commercial at 60%, accounts for about a quarter of that revenue. Robert's comments today regarding the LNG facility in Louisiana illustrate the scale of the projects we're discussing. This particular job will generate over $30 million in total revenue over a few years, and it will also bring in recurring revenue. There will be ongoing maintenance and repairs throughout the project's lifespan, along with a complete teardown and replacement approximately every five years. While we are closely monitoring the commercial industrial aspects, we haven't noticed any decline in our bid rates. Many major projects, such as LNG facilities and chip manufacturing, require significant insulation, which should benefit our business moving forward.

And our next question comes from the line of Jeffrey Stevenson with Loop Capital Markets.

Congrats on the nice quarter. The improved monthly sequential single-family installation volumes throughout the quarter was encouraging. But with rates expected to remain higher longer, are you expecting public builders to represent a greater concentration of your mid-single-digit residential demand expectations than you did in February since the regional and independent builders are more sensitive to future interest rate cuts?

Yes, I'll address the first part, and Rob may want to add. We have a diverse range of customers, including production builders, big builders, regional builders, and small custom builders. Production and regional builders are definitely optimistic. Even small custom builders feel positive, although they are paying closer attention to interest rates. We are confident about our collaborations with production homebuilders, especially regarding codes and efforts to leverage the 45L advantage. This encourages various insulation options in their homes, which significantly benefits production homebuilders. Overall, there are many positive developments among different builders, particularly for production builders, who are well positioned for the current environment.

Yes. And Jeff, definitely not any major shift from what we had in our initial guidance or anything that would adjust our guidance in any way as a result of what's going on right now with rates.

Yes, Jeff, Robert. Not really. When we review our backlogs and bidding, we focus on the various sectors. One that stands out is office buildings, and we started discussing this with our teams about two years ago to ensure we were monitoring our bidding activity closely. There is no significant concern regarding the sectors we’re examining, and it's important that we maintain a strong presence across all these areas.

We have reached the end of the question-and-answer session. I'll now turn the call back over to President and CEO, Robert Buck, for closing remarks.

Thank you for joining us today. We look forward to talking with you in August, when we'll be presenting our Q2 results. Thank you.

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