Good morning, and welcome to Installed Building Products Fourth Quarter 2023 Earnings Conference Call. Earlier today, we issued a press release on our financial results for the third quarter, which can be found in the Investor Relations section of our website. On today’s call, management’s prepared remarks and answers to your questions may contain forward-looking statements within the meaning of the federal securities laws. These forward-looking statements are based on management’s current expectations and beliefs. These statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from those described today. Please refer to the cautionary statements and risk factors in our SEC filings, including our annual report on Form 10-K. We undertake no duty or obligation to update any forward-looking statements as a result of new information of future events, except as required by federal securities laws. In addition, management refers to certain non-GAAP or adjusted financial measures on this call. You can find a reconciliation of such measures to their nearest GAAP equivalent in the company’s earnings release and additional reconciliation for EBITDA and adjusted EBITDA for earlier fiscal periods in our investor presentation, which are available on the Investor Relations section of our website. This morning’s conference call is hosted by Jeff Edwards, our Chairman and Chief Executive Officer; and Michael Miller, our Chief Financial Officer; and joined by Jason Niswonger, our Chief Administrative and Sustainability Officer. I will now turn the call over to Jeff.

Thanks, Darren, and good morning to everyone joining us on today’s call. As usual, I will start the call with some highlights and then turn the call over to Michael, who will discuss our financial results and capital position in more detail before we take your questions. IBP improved both sales and profitability in the fourth quarter, helping IBP achieve another year of record financial results including record revenue, net income and adjusted EBITDA. I'm proud of IBP's performance in 2023, as installation sales growth in our multifamily and commercial end markets more than offset softer single-family sales growth throughout the year. Our installation teams worked efficiently to optimize the value we provide to our customers which with each completed job, driving record annual net profit and adjusted EBITDA margins in 2023. The talent and commitment of our employees combined with the strength of our business model enabled the company to once again reach new heights in 2023. Throughout 2023, our acquisitions contributed positively to our financial results. We invested approximately $60 million in acquisitions while returning nearly $70 million to shareholders through dividends and share repurchases. I'm pleased to report that for the 2024 first quarter, our Board of Directors has approved an increase to our regular quarterly cash dividend by 6% and declared an annual variable dividend of $1.60 per share, representing a $0.70 per share increase over last year's variable dividend. On February 12, 2024, we celebrated the 10th anniversary of our public offering by ringing the closing bell at the New York Stock Exchange, since our IPO in 2014, net revenue, net income and adjusted EBITDA have grown at compound annual growth rates of 21%, 37% and 31%, respectively. During this period, we completed almost 90 acquisitions, expanding our footprint across the United States in diversifying our revenue to additional end markets and product categories. As a result, IBP has transformed from a regional installer of insulation to one of the largest installer of building products in the country. The success of our growth strategies combined with our disciplined approach to capital allocation has created significant value for our shareholders. The credit for our accomplishments goes to the hard-working men and women across our roughly 250 branches throughout the United States and those who support them from our office in Columbus, Ohio. To everyone at IBP, thank you. As we continue to focus on profitable growth, we remain committed to doing the right thing for our employees, customers, communities and shareholders. During 2023, we acquired eight companies with combined annual revenue of approximately $75 million, further expanding our product offering and geographic presence. We expect to acquire at least $100 million of annual revenue each year. However, acquisition timing is unpredictable and certain acquisitions may change from their intended closing dates with any given calendar year. During the 2023 fourth quarter, we completed two acquisitions, including a North Dakota-based installer of fiberglass and spray foam insulation in multifamily, residential and commercial customers, with annual revenue of approximately $2 million and a Florida-based installer of diverse mix of building products to new residential construction projects in the Orlando market with annual revenue of approximately $16.5 million. Overall, the residential housing market continues to be resilient as relatively low existing home inventory levels have led to a higher percentage of new construction home sales relative to historical averages. Additionally, an elevated volume of multi-family units under construction continue to be supported by our installation business. We believe, we are well-positioned for another year of strong operational and financial performance in 2024, as we continue to focus on profitability and effective capital allocation to drive growth. Longer term, we believe that housing demand will continue to grow and the insulation installation industry has favorable opportunities ahead, including demand driven by the Inflation Reduction Act of 2022 in the bipartisan infrastructure law, which are intended to improve energy efficiency in residential homes. IBP's strong customer relationships, experienced leadership team, national scale and diverse product categories across multiple end markets will help the company navigate future changes in the US housing market. I'm proud of our continued success and excited by the prospects ahead for IBP in the broader insulation and other product installation business. So with this overview, I'd like to turn the call over to Michael to provide more detail on our fourth quarter financial results.

Thank you, Jeff, and good morning everyone. Consolidated net revenue for the fourth quarter increased 5% to $721 million compared to $687 million for the same period last year. The increase in sales during the quarter was driven by higher multifamily and commercial sales, which was partially offset by softer single-family sales within our Installation segment. As we evaluate our performance on a year-over-year basis, the exceptional growth our company experienced in 2022 set difficult comparisons this past year. Also, rising interest rates and the decrease in single-family housing units under construction were headwinds to our revenue opportunity in 2023. According to the US Census Bureau, in the fourth quarter of 2023, the housing units under construction, the sales pipeline for our installation services showed single-family units were down 12% year over year, while our single-family same-branch sales were down 7%. And the multi-family end market, industry units under construction were up 8%, while our multifamily same-branch sales were up approximately 30%. We are pleased with our performance relative to the market opportunity. Our focus on efficiency and job optimization led us to achieve a record fourth quarter profitability, as measured by adjusted gross profit margin, adjusted net income margin and adjusted EBITDA margin. As the inflationary environment began to normalize in 2023, our ability to compete based on service and provide value to our customers, helped to support a 240 basis point improvement in adjusted gross profit margin at 34.1% in the fourth quarter relative to the same period last year. Adjusted selling and administrative expense, as a percent of fourth quarter sales was up 160 basis points to 18.3%, due primarily to higher insurance and variable compensation related to higher gross profit and EBITDA performance from the prior year period. Despite a higher adjusted selling and administrative expense ratio in the fourth quarter, adjusted net income margin improved to 10.7% from 10.1% in the prior-year period. Adjusted EBITDA for the 2023 fourth quarter increased 11% to a fourth quarter record of $128 million and adjusted EBITDA margin reached a fourth quarter record of 17.8% compared to 16.8% for the same period last year. We continue to target full year long-term same-branch incremental adjusted EBITDA margins in the range of 20% to 25%. For the 2023 full year, total same-branch incremental adjusted EBITDA margins were substantially above our target range. Although we do not provide comprehensive financial guidance based on recent acquisitions, we expect first quarter 2024 amortization expense of approximately $10.5 million and full year 2024 expense of approximately $40.9 million. We would expect these estimates to change with any acquisitions we close in future periods. Also we continue to expect an effective tax rate of 25% to 27% for the full year ending December 31, 2024. Now let's look at our liquidity position balance sheet and capital requirements in more detail. For the 12 months ended December 31, 2023, we generated $340 million in cash flow from operations, an all-time annual record compared to $278 million in the prior year period. The year-over-year increase in operating cash flow was primarily associated with higher net income and effective management of working capital. During the fourth quarter, interest rates increased year over year. But through interest rate swap agreements we have fixed the interest rate on $400 million of our existing variable-rate debt until December 2028, limiting our interest rate exposure. We have no significant debt maturities until 2028. Our fourth quarter net interest expense decreased to $7.8 million from $9.9 million in the prior-year period due to the term loan repricing in August 2023 and the higher rate of interest we earned on cash and cash equivalents invested throughout the quarter. At December 31, 2023, we had a net debt to adjusted annual EBITDA leverage ratio of one time compared to 1.5 times at December 31, 2022, which is well-below our stated target of two times. At December 31, 2023, we had $337 million in working capital, excluding cash and cash equivalents. Capital expenditures and total incurred finance leases for the year ended December 31, 2023 were approximately $65 million combined, which was approximately 2% of revenue roughly in line with the same period last year. With our strong liquidity position, asset-light business model and modest financial leverage, we continue to focus on expanding through acquisition and returning capital to shareholders. Our goal of acquiring $100 million of annual revenue each year is unchanged. IBP's Board of Directors approved the first quarter dividend of $0.35 per share, which is payable on March 31, 2024 to stockholders of record on March 15, 2024. The first quarter dividend represents a 6% increase over the prior year period. Also as a part of our established dividend policy, today we announced that our Board has declared a $1.60 per share annual variable dividend of $0.70 per share increase over the variable dividend we paid last year. The 2024 variable dividend amount was based on the cash flow generated by our operations with consideration for planned cash obligations acquisitions and other factors as determined by the Board. The variable dividend will be paid concurrent with the regular quarterly dividend on March 31, 2024 to stockholders of record on March 15, 2024. We are committed to continuing to grow the company while returning excess capital to shareholders through our dividend policy and opportunistic share repurchases. The Board of Directors authorized a new stock buyback program, which expands our repurchase capability to $300 million of our outstanding common stock, up from $200 million in the previous program. The new authorization replaces the previous program and is in effect through March 1, 2025. With this overview, I will now turn the call back to Jeff for closing remarks.

Thanks Michael. I'd like to conclude our prepared remarks by once again thanking IBP employees for their hard work, dedication and commitment to our company. Our success over the years is made possible because of all of you. Operator, let's open up the call for questions.

Thank you. Our first question comes from Susan Maklari with Goldman Sachs. Please go ahead with your question.

Good morning, everyone, and congrats on a great quarter.

Good morning. Thanks, Sue.

My first question is if we think about 2023, you saw some really nice price mix that came into the business despite all the headwinds that you had in there. As you think about the outlook for 2024, how you're thinking about the setup there? Can you talk just generally to the different moving pieces and any thoughts on price specifically as the manufacturers perhaps look to offset some ongoing inflation?

So this is Michael. Yeah. Our view really hasn't changed very much as it relates to price mix going into 2024. If you take out the high inflationary period that we experienced in 2022. And really that was partially in 2021, 2022 and still catching up a little bit coming into 2023. We really have consistently run price mix and sort of a mid to low single-digit pace. And that's consistent with our expectation of sort of a fairly benign inflationary environment across the products that we install. So there's nothing that we see right now that would change that. I mean, material particularly fiberglass continues to be tight. And we believe that as we progress through the year in the back half of the year, the material might loosen up a little bit. But that also depends a lot on what happens with the single-family market which we currently feel very constructive about.

Well, it'll loosen up as a relative. As you know it's we're still not without even as recently as the third and fourth quarter last year, at times having to you know kind of go fend for ourselves based on how tight the market is. So it's healthy in that regard.

The market feels very comfortable, although things are tight and there are unique challenges. However, considering the situation in the single-family market and the feedback from our suppliers, we are very encouraged.

Okay. All right. That's helpful color. And then on turning to the incremental margin was obviously really impressive on last year as well, as you think about the operating conditions and the setup over not just even 2024, but just looking further out, what would you need to see to give you confidence to raise that range or to change where you think the business can fundamentally operate? And how do you think about the different puts and takes to that?

Well, obviously, we performed well above our targeted incremental margins on this year. There was definitely some, I don't want to say unique, but factors that contributed to that. I mean, if you look on an annual basis, over the course of the past couple of years, I mean both 2022 and 2023 were very solid incremental margin on same-branch incremental margin years for us and we feel very good going into 2024. And obviously, we don't provide guidance, but we're feeling good that we will continue to have above the top end of the range incremental margins when we look back this time next year.

Okay. All right. Thank you and good luck with everything.

Great. Thank you.

Thank you. Our next question comes from the line of Stephen Kim with Evercore ISI. Please proceed with your question.

Thank you very much, everyone. The results were strong. I wanted to ask a few questions regarding the long-term outlook. The commercial business performed well and experienced good growth this year. You mentioned a management change last quarter in that area. Could you provide an update on that? Specifically, how does this position the commercial aspect of your business for future growth? Looking ahead over the next couple of years, do you think what we observed in 2023 is indicative of future performance, or was it more of a one-time event? That's the insight I was seeking.

Sure. Stephen, this is Michael. Thanks for that question. And we are extremely proud of what was accomplished in the heavy commercial business, particularly the heavy commercial business not just the overall commercial business. And this year, it really was a year to sort of stabilize that business and start bringing it back up to acceptable margin levels. I would say that it's still not and at company margins, and we believe there's still room for improvement. But just to give you a sense of the benefit we received from the heavy commercial business in the year and in the quarter, they actually added roughly 100 basis points in gross margin improvement to the overall business. So that while news is that the bad news is they came from such a low point but we do not think that that's transitory and that's sustainable. So that benefit will remain, we believe as we continue to go through 2024. Now we will not, we do not expect that we'll see a strong sales growth and I think in the commercial business, particularly in heavy commercial business in 2024. But what we're really managing towards in that business is maximum – continuing to maximize profitability and getting the margins up to closer to company averages and we would much rather have that than sales.

This is Jeff. We made I mean just to be clear, we made a change in the leadership of that business line, not last year but the prior year. But these are long duration contracts and a lot of cases, at some of which we were suffering through kind of the hyperinflation in bid wouldn't that wouldn't allow us to improve kind of our pricing in that regard but it's also just a change in the mentality to Michael's point in terms of driving for profitability as opposed to sales, that the fact, that it's been fixed doesn't mean we'll crawl back in our show as a matter of fact go. And I think we could go back to growing the business.

Yeah I definitely see great opportunity in 2024. I mean you always kind of look across the business and what we call the end markets. I mean we believe that through 2024 the greatest opportunity for organic growth will be in single-family markets, right? But now I want to back that up a little bit and just say our multifamily backlogs continue to be very strong, extremely strong. What we would at a macro level expect the multifamily it starts to come down fairly significantly in our call it 12% to 13% from 2023. We have a lot of confidence around our ability to continue to take market share and continue to perform on the existing backlog that we have such that we continue to perform much better than the market opportunity on the multifamily side but single-family nearly as everyone's talking about there's just tremendous potential there this year.

Yeah. And so I think that that all makes sense. You know switching. So switching to the resi side of your business, multifamily, the backlogs being very strong I think you had previously said you expected that to sort of be a driver to your business all throughout 2024 pretty much. And can you talk about the margin profile there? I mean obviously the margins have been extremely strong. Your margins in the quarter and the year were strong and kind of above I believe what you had sort of said was your sort of a long-term outlook for gross margins of 30 to 32. You're running well above that. Was curious is, if we would – what you would attribute that to? Is that something where you still feel 30 to 32 is the right range or maybe given some things that you've seen, we could scoot that up a little bit. Just trying to get some color on your outlook for gross margins, whether it's changing maybe going up a little higher and whether multifamily is playing a role in what we're seeing right now?

That's a great question. We are definitely encouraged by the solid improvement in gross margins. However, as we anticipated, and as we've already experienced in January, the higher growth rates from the larger production builders, particularly the national ones, tend to put pressure on gross margins. Despite this, the contribution to EBITDA margins remains similar. Our team has done an outstanding job focusing on delivering customer value and service to enhance profitability across the company. Looking ahead, especially through 2024, we have worked diligently to improve multifamily margins, which had previously been a drag on overall margins. Our efforts have successfully turned that around. Additionally, while the growth rate for insulation products outpaced other products, the latter, which typically have lower margins, showed significantly better improvement in margins than insulation. This positively impacted our gross margins, and we believe this trend is sustainable. We are confident that gross margins will settle closer to 32 rather than 30.

That if I could just follow up there, these non insulation products, the margin improvement, you think is sustainable. Can you give a little more color on or some examples of sort of what drove that and why it's sustainable?

I think there are several things, the inflationary environment becoming more benign, the availability of material becoming more normalized. And honestly, I mean we say it a lot, but it absolutely is true. It's the performance of the team. I mean, our field team has executed so effectively, in times that have been very difficult when we think about, what's happened over the past couple of years between COVID, the supply disruptions this year the challenges that single-family presented that we're all well aware of, I mean the team has just done an outstanding job and their focus on profitability, we believe is reflected clearly in the numbers.

Great. Thanks so much guys.

Thank you. Our next question comes from the line of Joe Ahlersmeyer with Deutsche Bank. Please proceed with your question.

Hey, good morning, everybody. Thanks for taking the question and congrats on the results. I'm trying to think through, where do expect the most strength in year-over-year sales growth within single-family for the year? Maybe if you could just talk about, what you've seen in starts in the fourth quarter and into January in the data, how you maybe expect that to come to your stage of construction right, the installation part. And then, also in the context of what the comps were last year. I think you've previously spoken to 2Q being the maybe the easiest comp. So maybe it might take into the second quarter, before we really see single-family start to expand year over year?

Yeah, this is Michael. I think that's right. Although what I would say is that, you know, as we just started the year obviously, but it is starting to play out exactly as we would have expected in the sense that we're seeing, because if you look at the products that we install on the residential side, generally speaking insulation is the first thing that we do, and then the other products some cut come after what we call after paint, right? So after that the house has been painted. So those are much later in the cycle. So, what we expect to see in on, yes, certainly through the rest of the first quarter and going into the second quarter, is that we'll see some better sales opportunity if you will on the single-family side in insulation where we'll see weakness. From a volumes perspective is going to be in the other products, until those later cycle installed products come in more towards the back half of the year. So, the year from the single-family perspective is starting to play out exactly, as we would have expected it to in terms of the improvement that we're seeing, with the big national builder sales relative to the regional and local guys. And then the installation revenue is starting to improve at a better rate relative to what we're seeing in the other products. As we do our planning for 2024, we always start sort of with the macro forecast for single-family and multi-family. And our expectation is that single-family starts are going to be in that $1 million to $1.1 million range and which would represent sort of mid single digit growth in single-family. We do believe that that growth is going to be weighted more heavily, much more heavily towards the big production builders, which is why we made the comment about the impact on gross margin and the answer to the previous questions. And then on the multifamily side, we think that starts are going to probably be down 12% maybe 15% down to roughly $400,000 or so. But again, as we said we feel very good about our backlog, what the team is doing there. And one of the things that our multifamily team is doing, is really expanding the cross-sell of the other products, not just insulation and that's really helping support our confidence around their ability to grow above market in that end market for us.

Yes a lot of good detail on there and a good callout for the 3Q guidance down in Florida maybe, if we could pivot to price in the early part of the year here. Do you what do we think that maybe the exit rate for 1Q is reaching that full realization of the price increase you're seeing better support for pricing from the labor tightness or from the material conditions tightness conditions? Thanks.

Yes, definitely, it's both as is always the case. It's always been I mean, you know when it's material when it's announced material price increases as everyone on this call. I can appreciate there has been in the market has taken a price increase. You know, generally speaking people are stronger around that because the labor inflation and labor tightness is a constant always there. But clearly, our ability to show up on time and perform is a function of our ability to attract retain and train labor.

I would say that all I'll just add to that. I mean, it takes a very low static market for there not always to be some degree of kind of price taking going on it. Just does based on like the contract based on number of customers based on type of product we're doing and everything else that is yielding the further we get away from it increase and in a healthy environment like this you know to because of the better the better conditions are for it to be kind of real normalized for us.

Makes sense. Thanks a lot.

Sure.

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

Good morning everybody.

Good morning, Ken.

So Michael, you mentioned that your single-family starts are up, likely showing positive growth after Q2. I believe you expressed confidence that when reviewing this year's performance, the operating leverage will exceed the upper limit of your long-term range. Did I understand that correctly?

I didn't say above. I just said that it was going to be closer to 25 than 20.

Okay. Thanks for the clarification. So what gives you that confidence that you're not going to go into Home Depot that is it from really just what you're seeing from the public builders or the fact that we’re just going through the space and you know for is it the fact that commercial isn't this risk factor that it was in the past. That's a fairly bold statement for you guys.

I would say it's really all of the above. We feel good about what we're starting to see and it's just starting. So we think that we feel the full benefit of the single-family recovery in the back half of the year. But we were very pleased to see the strength in the national builder business into the in the start of this year, right? So we feel good about that. We feel good about backlogs in the multifamily business. We feel good about the progress we're making on the other product margins because as we've talked on several calls before they can weigh on margins and they impact price mix disclosures all that kind of stuff so that those.

What do you feel bad about?

To be honest with you there's no mistake we have been a lot of people occasionally. I mean so but it's already built in the numbers from last year right? So it won't be worse it will be better right. And it's nice it could be a trucking issue right? So you just never know right that things like that but I'll mention it will go up right now. No it's honestly can't. I mean when we look at the backdrop right now.

That's good.

That is good.

Looking back when you started the business I believe in 1977 Edwards installation I'm starting to think that the parallels are very similar in the sense that as Michael was saying and you guys agree with things are good, they're not that the idea of disinflation from the current levels. We're not seeing it in your material inputs. We're not seeing it in your labor. What can you share some of your broad thoughts about the economies strong and you're running so many different operations. Just give us some of that perspective that you might have, if you recall it, from what was a inflationary period when you started the business and how that might impact concerns you have separate from what Michael has addressed.

Okay. So, let's be clear. I was 14. Exactly, my cousin and I were discussing the call, and it might make people anxious, especially if they were curious about my age since I’m 61. I can recall those times well. Having grown up around the real estate business and working in it for nearly 40 years, I believe we can all agree that the current environment is fairly healthy. In fact, during a different call this morning, I noted that this is the first year in three or four that we aren't really concerned about any major issues at this time of year, whether it was rising interest rates, a pandemic, a potential recession, or supply chain problems.

You are managing your business effectively, and Michael, if you could provide some data on the drag we've experienced from commercial over the last couple of years, it would help. You mentioned a 100 basis points lift this year, and context around that would be appreciated. It’s interesting to note that you are in a unique position with regard to pricing and labor. We can observe the demand curve, which indicates you are in a special situation, but it also raises questions about people's expectations surrounding monetary policy, given how well things are going.

Yes, I think that's true. Clearly, none of us know what the Fed will do. The market has been very resilient regarding rates and builders' ability to buy down rates, especially the national builders who have a capital advantage over regional and local ones. We've been quite surprised, and Jeff articulated it well: if we reflect on the past three or four years at this time, we've always faced some significant challenge, but right now, we don't have that.

In the business and elsewhere, so that's not the discount from the geopolitical things that are going on now or in two wars. And we've got a messy political situation and an election coming up, right? But business-wise things feel as good as they have in once.

We feel really good about the things we can control.

Thank you. Our next question comes from the line of Mike Dahl with RBC Capital Markets. Please proceed with your question.

Hi. Thank you for taking my questions. In your comments, you mentioned improvements in margins, especially on the heavy side, which are expected to continue. I appreciate the information about the public builder mixer. However, I'm still unclear about the reason why your gross margins would decrease significantly in this environment and how you plan to return to the 30 to 32 range. Could you provide more details on the potential impact of the public builder dynamic? Even a slight shift in public mix doesn't seem like it would be enough to drive significant change. Are you suggesting that margins will remain above your expectations?

We are significantly focused on the single-family sector, particularly with production builders, which is understandable considering our scale, our capability to service such customers, and the pricing structure. The pricing for these builders tends to be more competitive due to the efficiencies and costs involved in servicing them. While we see this as valuable work, it does affect gross margins. We anticipate that if there is mid-single-digit growth in the single-family market, a substantial portion—around 90%—will likely come from national builders. Our concentration in this area continually favors these builders, which means the gross margins from this work are tighter. Therefore, we expect this dynamic to impact our margins, but we view it positively and are ready to take on the challenge.

Okay. Yeah, I mean, look, no doubt the publics are growing. But I think if you look at the public builder commentary, you're only guiding to deliveries kind of mid-single digits to high single digits. So if the markets up mid single, doesn't necessarily seem like it's going to be there that big of a shift, but I hear you. In terms of the multifamily dynamics, if we look at permits, multifamily permits are down north of 20% on a rolling 12 month basis. And you're certainly starting to see that come through in the start. So when you talked about the down 12 to 15, I guess just to clarify is that your opportunity given you think you can take share against that? Is that you're specific market exposures may be down less than that, or is that truly a market view?

That's an outlook for the overall market, not just for us, but we believe that a lot of assumptions are being made, particularly regarding the possibility of the Fed reducing rates at some point this year. From our perspective, looking back from the third quarter to the fourth quarter, the challenges in multifamily housing were significant. However, as we sit here now, some of those challenges have lessened for multifamily. We anticipate a more positive environment for multifamily in 2024 compared to what we expected three to six months ago, given the previous challenges in the sector. So, we are not as pessimistic about multifamily as others may be.

Well, in part you mentioned it earlier. It's partly we take share, which is accurate in some ways. It's almost like if you refine the way we're saying that to say what we're really doing is we're entering either product lines or entering markets that were not. I mean this isn't us taking share necessarily in a market where it is just us beginning to offer the kind of CQ services and a lot of the other things we install and markets and on jobs we previously didn't do so, right?

Exactly.

Okay, great. Thank you.

Thank you. Our next question comes from the line of Mike Rehaut with JPMorgan. Please proceed with your question.

Hi guys. This is Doug Wardlaw on for Mike. Obviously you guys are very constructive about single-family as are your suppliers are very positive for the upcoming year. I'm just curious in terms of your acquisition strategy has, kind of, positivity and optimism in the market changed, how you're looking at your criteria for acquisitions and has it changed kind of what the pipeline has looked like thus far?

This is Jeff. So, I will say as always that the pipeline is robust. I would say that, whereas, we would have had more or less of internal at least likely either suspicion or prohibition on commercial acquisition. I think our attitude as we fixed what we've fixed over the last couple of years. I think we would alter our stance at this point and say that they know the market for commercial acquisition to us is now at this point kind of opened up. So I would say that that's really an additive components will continue for the most part let's say to play within the spaces that we have historically as you know we made the distribution acquisition a number of years ago. That's performed very well. So that's not the space again that we're by any means afraid of, and could continue to potentially look in that direction. Not long ago too, we acquired a business that as at least a component of their business was more on the industrial side of kind of the insulation install side of things. So as long as it kind of involves material purchase and a labor component that typically it's a product that we could install typically by direct that continues to be on kind of the watch list as.

Yeah, this is Michael. I wanted to clarify a couple of other questions. Just to be clear, when we think about the incremental margins on same-branch incremental margins for the full year 2024, we still believe they will be in the range of 20 to 25. However, given our confidence in everything we've discussed on the call so far, it's reasonable to assume we'll come in closer to 25 than to 20.

Thank you. Our next question comes from the line of Adam Baumgarten with Zelman & Associates. Please proceed with your question.

Hey guys, thanks for taking my question. Just maybe thinking about weather impact potentially January, just as we think about the first quarter. I know you guys don't guide explicitly, but some sort of what you're seeing there and if that's going to have any material impact.

Yeah. That's a great question. And I really appreciate you asking it. Because January was we did lose days in January for sure, the weather really across the country. California has obviously had an unprecedented amount of rain which is big operations for us here in February. We still feel good about the first quarter and our performance there, but we would expect to see the typical seasonal decline from fourth quarter to first quarter, in the first quarter and that's been typically sort of the mid-single digit sort of decline from Q4 to Q1. So that is definitely has been impacted by January, which was definitely weather impacted. At all of the things that we're talking about in terms of the strength of single-family the continued performance of multifamily and the commercial business, you know those all weaken in the first quarter. And as you all know that's typically our weakest quarter both from a sales and a profitability perspective. And we continue to expect that. And the real benefit from this shift in single-family just giving the timing between you now start to when we do our install work is really going to be a second quarter back half of the year opportunity for us. But that being said we were very encouraged to see what was going on with the national builders in January, despite the weather.

Okay got it. Thanks. And then just some heavy commercial, I think you talked about growth moderating in that in that business. Do you still expect growth in 2024 on an absolute basis?

Yeah.

Thank you. Our next question comes from the line of Keith Hughes Truist Securities. Please proceed with your question.

Thank you. Questions from really about product availability and could you just talk near term what you guys are saying and do you anticipate any potential shortfall particularly a single family kicks in a year later this year?

I mean, it's tight. This is Jeff. It's tight. It's not the way that was the last you know and then there was of those and it got a little better last year even two. But I think as we get through let's just put it that way, right? And we're not as you know Keith we're only maybe four months away or so from a little bit of supply getting added. There's always stuff that can happen. I mean, there was a brief issue with the plant here recently. I think they're backup and running and so tight. I mean, it's kind of in some ways healthy type. But so and really a lot of times it's a SKU that's not available that throws off like that would cause us to buy out a lot of distribution let's say, it would be below five times. It might be the way in which order got composed and we're missing one skew and we were that tied in or you know or afraid we got a freight issue or something else. But I think that we should be in a pretty good shape. And I think both in industry and ourselves.

Yeah and Jeff just makes a very important point here relative to the SKUs or the type of installation that's being required. This shift to more of a production builder business is very good for material availability, because they are very standard in terms of what gets installed. So it's a very regular way product. When we're doing a lot of custom work, and multifamily work, and some of the light commercial work that we're doing those tend to be less standardized products and they need to be cost more customized made and their availability is less. So the fact that we're going to have the highest efficiency products for the manufacturers as this happens we believe is good for material availability.

Mineral, as an example it's six months I know but you got to plan that way.

Yeah, right, right. Okay. That's all I have. Thank you very much.

Okay. Thanks.

Thank you. Our question comes from the line of Reuben Garner with The Benchmark Company. Please proceed with your question.

Thanks. Good morning everybody. I hate to beat a dead horse but kind of a follow-up on the gross margin outlook for this year. I guess that would imply some pretty material leverage on the SG&A front can you just kind of talk about the mechanics there? Where do you see that on the selling expenses line where you get more leverage just on admin expenses in general and it could be a couple of few hundred basis points to kind of offset the gross margin headwind? Or am I thinking about that the right way?

Yeah. Combination of selling expense primarily commissions. And I assume what you're asking about is the shift to the production builders away from that they're at a higher growth rate than the others correct?

Correct. Yeah.

So it's a combination of branch administrative costs that we leverage and primarily selling commissions that we leverage so SG&A.

Okay. And then last year and the Inflation Reduction Act, there was some talk about it but it didn't seem to really have a material impact. We've kind of heard recently that maybe that's starting to get some traction at the state and local level. Any updated thoughts there? Are you hearing builders looking to take advantage of that in a bigger way? Or maybe is that still kind of far out from having a major impact?

I mean, it's having an impact, but I would say not a major impact. It's still slow. I mean, getting the construction industry to change practices is not a quick thing. It takes a lot of time and a lot of effort. But I mean, we believe ultimately particularly as we look at the opportunity for insulation and energy efficiency benefits associated with insulation that long term the trend there is extremely constructive on for us and you know are the industry.

Fair enough. Thanks guys. Congrats on the strong close to the year. Good luck in 2024 and Jeff see you next week.

I'm waiting.

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