Good afternoon, ladies and gentlemen, and welcome to the Beacon Fourth Quarter and Fiscal Year 2020 Earnings Call. My name is Gabriel, and I will be your coordinator for today. This call will contain forward-looking statements, including statements about its plans and objectives and future economic performance. Forward-looking statements are only predictions and are subject to a number of risks and uncertainties. Therefore, actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors including, but not limited to, those set forth in the Risk Factors section of the company's latest Form 10-K and Form 10-Q for the quarter ended June 30, 2020. These forward-looking statements fall within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 regarding future events and the future financial performance of the company, including the company's financial outlook. The forward-looking statements contained in this call are based on information as of today, November 19, 2020. And except as required by law, the company undertakes no obligation to update or revise any of these forward-looking statements. Finally, this call will contain references to certain non-GAAP measures. The reconciliation of these non-GAAP measures is set forth in today's press release. The company has posted a summary financial slide presentation on the Investors section of its website under Events and Presentations that will be referenced during management's review of the financial results. On today's call for Beacon will be Mr. Julian Francis, President and CEO; and Mr. Frank Lonegro, Executive Vice President and CFO. I would now like to turn the call over to Mr. Julian Francis, President and CEO. Please proceed.

Thank you, Gabriel. Good evening, and welcome to our fourth quarter 2020 earnings call. As Gabriel said, on the call with me today is Frank Lonegro, our Chief Financial Officer. Our prepared remarks will correspond with the slide deck, which is posted to the Investor Relations section of Beacon's website, and I'll begin on Page 4 of our slide materials. 2020 was not the year we expected, but Beacon exits the year a significantly stronger company. Our 7,500 employees worked incredibly hard to provide strong service levels to customers while keeping those customers, themselves and their colleagues safe during an unprecedented environment: the pandemic, wildfires, hurricanes and social unrest. I could not be prouder of the business results we delivered given the circumstances. As a company, we have successfully transitioned to new leadership and embraced a new strategy. We have implemented four key strategic initiatives generating meaningful contributions to our results. I see the mindset and processes behind these initiatives becoming quickly ingrained in the company's leadership at all levels. Capped off by a record fourth quarter, full year adjusted EBITDA margin exceeded 2019 despite COVID, and our 2020 operating cash flow was the second highest in company history. We've used the cash to pay down our ABL and materially improve our balance sheet. We are delivering the type of results you should expect from Beacon, and we will continue to improve and grow. There are several important takeaways from the quarter that I want to emphasize. First is that we have a resilient business mix. After state government restrictions negatively impacted March and April, we quickly recovered and delivered five consecutive months of stable year-to-year daily sales rates. This is an important characteristic of our underlying markets, driven by the less cyclical repair and replacement cycle and our balanced exposure to both residential and commercial construction. Second, price execution is a critical focus for my leadership team. Fourth quarter gross margins improved more than 100 basis points both sequentially and year-over-year. We have been intensely focused on making positive strides to improve our gross margin the past year after a couple of years in a challenging environment. We are pleased to report traction on price increases we implemented during the quarter. While some of this Q4 gross margin benefit reflects favorable timing, we expect our price initiatives to be accretive to margins going forward. First, our operating expense discipline continues. As Frank will discuss later, we are extremely pleased to report a sequentially flat adjusted OpEx to sales percentage, better than we had previously guided despite higher incentive compensation. We continue to do an excellent job of managing head count while posting the second consecutive quarter with significant year-over-year employee productivity. Fourth, we delivered a strong cash flow year. Fiscal 2020 operating cash flow at $479 million demonstrates solid operating performance in a difficult environment. We reduced net debt leverage to 4.7x as we continue to move towards our leverage goal of about 3x. Fifth, our strategic initiatives meaningfully contributed to results. I'll touch on each of the four initiatives in more detail in a minute, but I wanted to quickly highlight the success of our digital platform and underperforming branch initiatives. Our industry-leading digital platform achieved the aggressive exit run rate goal of 10% of sales that I set for fiscal 2020. We continue to emphasize our e-commerce platform as a key differentiator for Beacon and will invest to maintain our leadership position. As for our lowest-quintile branches, they produced more than $20 million of operating margin improvement for the fiscal year. While it's difficult to separate branch-specific performance relative to the impact of our swift reaction to COVID, it is clear we are well on our way to delivering the targeted $30 million to $60 million of margin benefit. Moving to Page 5 of our slide materials, I want to highlight a couple of items related to our fourth quarter results. In August, we provided you with a framework outlining our expectations for the fourth quarter. Our sales outlook called for a low single-digit revenue decline year-over-year with increasingly difficult comparisons as the quarter progressed and limited incremental price contribution. For margins, we provided expectations for a slight sequential improvement in gross margins and a modest increase in adjusted OpEx to sales with temporary costs returning. Fourth quarter sales modestly exceeded our expectations as August and September month sales were both slightly stronger than anticipated. Both margin lines outperformed our public outlook with gross margins up 140 basis points sequentially and adjusted operating costs as a percent of sales flat with the third quarter. Actual EBITDA margins finished at 9.5%, up substantially both sequentially and year-on-year. There were several moving parts within our Q4 gross margin performance, and Frank will speak to those in more detail. At the completion of our prepared comments, I will address our future margin expectations. Next, I'll provide an update on our key initiatives. Please turn to Page 6 of the slide deck. These four initiatives have become significant drivers of our sales and margins. These initiatives create multiple paths to add value for customers and differentiate us from our competitors, rate the quality and consistency of our customer service, increase communications and interactions with customers and provide clear focus areas for our employees. The successful implementation and execution of these initiatives generate top line, gross margin, OpEx and cash flow benefits. Our strong performance following the initial COVID lockdowns in late March and April illustrates the benefits of our strategic direction, and now I'd like to provide more detail on each. Let me begin with our focus on organic growth. Our sales team, branch leadership and marketing organizations are in lockstep driving sales growth. We have placed the customer in the center of our business and are resourcing our inside and outside sales teams to support contractors who want to save time, be more efficient and grow their businesses. We are helping our sales representatives by providing training, developing productivity tools and supporting them with expanded lines of private label and branded products as well as collaborative e-commerce platform and call center personnel. We believe the number and quality of calls we have with customers have a direct correlation to our sales performance. We have an established set of goals for our sales team for the number of interactions daily. As we move towards this optimal level, we believe the increased activity will drive sales growth for both new and existing customers. Next is our industry-leading digital platform. As I said, I'm pleased to report that Beacon's digital platform exceeded 10% of company sales during September. As you may remember, this was an aggressive goal that I set shortly after joining the company a year ago. We have the first-mover advantage, significant breadth of digital solutions in our offer, a sales and marketing organization committed to enhancing the platform and increasing buy-in from vendors and customers who recognize us as the industry leader. Customers have been particularly enthusiastic about the benefits of online ordering and estimating tools during the pandemic. Our customer surveys continue to reveal contractors' high marks for the platform's user-friendly order processing, tracking and payment features. Additionally, digital works in conjunction with other strategic objectives at Beacon and is particularly effective at driving growth in our private label offering. As an example, online order templates for contractors give us the ability to migrate customers to our TRI-BUILT line of private label products. This has provided a significant boost for TRI-BUILT sales, which increased 50% year-over-year in 2020 and has a positive impact on our gross margins. Next, moving to our on-time and complete outlook. Our OTC strategy is another significant differentiator relative to our competitors. We believe this provides four key benefits to our business. First, it enables us to improve our service platform, shorten delivery cycles and enhance product availability, which contributes to our top line growth. Second, by optimizing our network and delivery routing, we see expense reductions tied to fleet and employee productivity. Third, we can optimize our inventory position across multiple locations, driving a permanent reduction in working capital. And fourth, it significantly enhances our talent development pipeline, giving us the opportunity to develop early career talent in significant roles. Importantly, we operate OTCs in 58 markets, each having marketplace P&Ls, the majority operating centralized dispatch, a key element in optimizing delivery performance for our customers. In total, these markets contain 260 branches, representing more than half of our exterior locations. We opened our first new hub location earlier this year in Denver, which follows three legacy hubs in operation as well as two specialty siding hubs. Lastly, I want to highlight our branch operating performance. Earlier this year, we introduced a new program focused on raising the operating performance and profitability of our lowest-quintile branches. We have publicly disclosed a $30 million to $60 million bottom line improvement goal for this initiative. As I mentioned earlier, I'm pleased to report that our initial group delivered more than $20 million of operating income improvement during fiscal 2020. This is a tremendous accomplishment given significant market challenges tied to COVID and with these locations having only a couple of quarters of operations with action plans fully implemented. I'll now pass the call over to Frank, who will discuss fourth quarter results in more detail.

Thanks, Julian, and good evening, everyone. Before getting into the details of the quarter, I thought it would be helpful to provide some perspective over the last seven months since joining Beacon. In mid-April, we were in the depths of COVID and the future was uncertain at best. Julian, the Board, the executive committee and the division presidents were already fully engaged in cost reduction, cash preservation and trade working capital management. It's a pleasure to work with a team that can think clearly in a crisis, execute the necessary actions rapidly and leverage those actions as sales improve. There is no doubt in my mind that our experience in navigating the COVID environment has accelerated our performance and increased our potential. To that point, our second half operating expense performance demonstrates our ability to deliver efficiencies regardless of whether sales are declining or improving. Turning to Page 8, we'll review our quarterly sales performance. During our past two earnings calls, we provided details on the disparate impact of COVID on our business. While there continue to be geographic performance gaps to COVID, the economic impacts from COVID are also evident in our product and end market categories. Residential roofing delivered 6% sales growth during the fourth quarter, evidence of a rapid recovery following the initial COVID lockdowns. Housing market indicators for both new construction and repair and remodel activity remain quite positive as the consumer continues to concentrate discretionary spending on their homes. Our contractors remain busy, and we see the potential for an extended roofing season. But as always, this will be dictated as much by weather as by underlying demand. We are well positioned to capitalize on this favorable residential backdrop, and our shingle purchases in the quarter were slightly above the year-over-year growth from the ARMA data you've seen. Commercial roofing sales declined 12% in the quarter with decline similar to what we experienced in Q3. Continued uncertainty in the office and retail sectors have created select deferrals and reroofing, while new commercial construction has also experienced a slowdown. Certain categories, including schools, which traditionally complete free roofing projects during the summer months, were pulled forward due to COVID-related building closures. We have recently seen some leading indicators improve, and bidding has also stabilized, but visibility remains limited going into the slower winter period. Complementary products were down 1.5% year-over-year but improved significantly on a sequential basis. As a reminder, the complementary category is split relatively equally between exteriors and interiors and between residential and commercial. Not surprisingly, in Q4, complementary sales in residential markets outperformed complementary sales in commercial markets. Turning to Slide 9, we'll review gross margin. We were delighted with our gross margin performance in Q4. Fourth quarter gross margin of 25.5% improved 140 basis points sequentially and 120 basis points year-over-year. Getting into the details, there were a number of items that favorably impacted gross margin performance in the quarter. On a year-over-year basis, price/cost was positive by approximately 75 basis points, driven by three primary factors: one, our continued successful implementation of recent price increases; two, a timing benefit related to our pricing increases relative to the corresponding increase in our cost of goods sold; and three, stronger residential sales incentives based on increased shipments for our customers. We also benefited from favorable product mix in the quarter as we experienced stronger sales from our higher-margin residential roofing category. Going forward, we should continue to experience favorable mix as residential roofing is expected to see continued outperformance. We also expect to benefit from the recently announced price increases. Given our high level of execution in implementing these increases across the network, the timing benefit we experienced in the fourth quarter is likely to be smaller in the first quarter. And we do not expect any meaningful timing benefits beyond fiscal Q1. Finally, our vendor incentives in Q1 should reflect seasonally lower quarterly sales activity. Julian will provide further detail regarding our gross margin outlook in his wrap-up comments. As I mentioned in my opening comments, we are proud of our Q4 operating cost performance and appreciate the tremendous efforts of the entire Beacon team in managing costs tightly. Adjusted OpEx was $346 million, unchanged from last year. Strong labor and fleet productivity efforts were largely offset by higher incentive compensation as we finished fiscal 2020 with significantly stronger bottom line results than we had anticipated in the prior quarter. As a percentage of sales, expenses were largely unchanged, both sequentially and year-over-year at 17% of sales. During our Q3 call, I highlighted three buckets of cost savings enacted during COVID: temporary, continuing temporary and permanent savings. On a sequential basis, fourth quarter operating costs reflect the return of the temporary cost actions we took during Q3. A portion of the continuing temporary costs also returned. That said, travel and entertainment expenditures remain below historic levels and will provide year-over-year cost benefits in the first half of fiscal 2021. In our third quarter release, we also introduced a new measure, sales per hour worked. We believe this metric provides useful insights into our efficiency efforts. And with labor being the most significant cost for any distributor, driving efficiency in this area remains a central focus. Following an incredible third quarter performance, we are very pleased that we produced a 15% year-over-year improvement with 7% fewer employees in the fourth quarter. We will continue to leverage this important efficiency metric going forward, but it is only one measure of what we're trying to accomplish more broadly with our operating expenses. We are focused on improving the efficiency and effectiveness of our sales personnel, driving asset utilization gains in our truck fleet, and we are working hard to offset inflation with productivity in each of our operating divisions, functional departments and corporate teams. The effect of COVID has certainly created greater urgency in Beacon and has helped us accelerate the pace of continuous improvement evident in our results. Turning to Slide 10, we'll review our cash flow and balance sheet. We finished 2020 with a very strong Q4 cash flow, bringing the full year operating cash flow to $479 million, illustrating the benefits of favorable earnings and strong trade working capital management. Quarterly cash flow was again driven by strong operating results from sequentially improving sales, strong gross margin performance and continued cost discipline. And while we had previously anticipated working capital will be relatively neutral in Q4, we ended the period with a positive contribution from trade working capital, primarily due to higher AP at the end of the quarter. AR was slightly higher sequentially, given higher sales in the fourth quarter. And inventory levels were better by 7% year-over-year, stable sequentially as we continue to leverage the aggressive actions we undertook in Q3. Importantly, our strong second half cash generation produced significant debt reduction. During Q4, we reduced total debt by $600 million, and Beacon now has repaid the entire $725 million March ABL drawdown. As a reminder, we drew down the ABL as a proactive measure, given the economic uncertainty from COVID. Currently, we have approximately $250 million outstanding on our ABL and would expect to pay that off during the first half of fiscal 2021. Our management team continues to view debt reduction and balance sheet strength as high priorities. To that end, we are pleased to report that our net leverage declined to 4.7x trailing 12-month EBITDA, reaching the lowest leverage level since the Allied transaction. We are making good progress in operating performance, cash generation and debt reduction, and are continuing to target net leverage of approximately 3x EBITDA. With that, I'll turn the call back to Julian for his closing remarks.

Thanks, Frank. I'll be providing a brief wrap-up to fiscal 2020 before turning to 2021 outlook on Page 12 of the slide materials. Fiscal 2020 represented a transition year for Beacon with new leadership and the implementation of a new strategic direction. The pivot in strategy signals Beacon's move from a predominantly growth by acquisition company to one with renewed focus on organic sales growth and industry-leading operational execution. As part of this shift, our leadership team has established four major strategic goals to guide us going forward. Fiscal 2020 also presented Beacon with our greatest challenge since the financial crisis more than a decade ago. The COVID pandemic caused demand to crater. Our company's response to this unprecedented environment has been incredible. The third quarter highlighted our ability to control costs and improve productivity. In the fourth quarter, we demonstrated strong pricing execution, resulting in a significant increase in gross margins. Internally, we are focused on building our company's culture around continuous improvement and operational excellence, and we hope this strength is increasingly clear to the investment community. We made significant progress during 2020, but as I've said since joining Beacon, we want this company and its employees to realize their full potential. We continue to pursue a path to do both. Now let me provide some details that will help you frame Q1 and the 2021 fiscal year. Our October sales improved approximately 6.5% year-over-year providing the combination of strong residential volumes and higher pricing, partially offset by weaker commercial sales. We have continued to see heightened demand within residential end markets, particularly residential roofing and insulation and are confident this strength will continue in fiscal 2021. In our first quarter, we are expecting overall net sales to increase low to mid-single digits, largely dependent on the number of available roofing days before winter weather impacts our customers. For gross margin, we expect the first quarter year-over-year improvement tied to solid pricing execution and favorable mix benefits versus the prior year. We anticipate a portion of the favorable Q4 timing benefits to continue into Q1, but it will have a smaller impact than the prior quarter. The combination of these factors is expected to result in first quarter margins of approximately 25%. We will continue to actively manage operating costs while improving employee and fleet productivity. During these past seven to eight months, we have gained valuable insights into our capacity for variablizing certain expenses, which should be most evident as we winterize during December, January and February. For the 2021 fiscal year, COVID creates uncertainty, particularly for nonresidential end markets. While we have seen some signals that nonresidential bidding activity may be emerging, it remains appropriate to keep a cautious outlook and manage our business accordingly. With this relative lack of visibility, we are focused on what we control, executing on our strategic initiatives, driving sales growth above market, instilling pricing discipline and driving productivity gains throughout the organization. Each of these represents key elements we put in motion during 2020 and expect further gains within the new year. As a result, we currently expect to deliver sales growth at the upper end of a low single-digit range, combined with gross margin expansion yielding adjusted EBITDA in the range of $500 million to $525 million. We're excited about 2021 and are off to a good start. And Gabriel, with that, we're ready to open the line for questions.

Your first question will come from the line of Michael Rehaut of JPMorgan.

Congrats on the results. I wanted to first delve a little bit into the guidance for first quarter and the upcoming fiscal year, more focused on how you're thinking about gross margins. Obviously, you gave guidance of roughly 25%, down from 25.5% in the fourth quarter of 2020. It would seem, if I'm trying to make proper assumptions about the full year guidance, that perhaps you're looking for gross margins more in the high 24% range. I was hoping to get that bridge — how to bridge the gap between Q4 and Q1 and also between Q1 and the overall fiscal year, if it's primarily due to some timing benefits reverting or positive mix reverting. I'm trying to get the different drivers and buckets in terms of what's driving those changes.

Sure, Michael. It's Frank. Thanks for the question. You're thinking about it in the way that we're thinking about it. Your math makes sense to me. When I look at the Q1 guidance relative to Q4 performance, there are a couple of moving parts. Continuing pricing execution will be important for us in the first quarter, which will be helpful from a year-over-year perspective. There is a temporary benefit that we mentioned that will impact Q1, maybe slightly smaller than it was in Q4, but we'll certainly have some benefit there in Q1, and then continued mix. The residential markets continue to be strong for us, and that carries with it some margin lift associated with that. When we think about the full year, the year is about one to one-and-a-half months in, so we're trying to figure out how long the residential strength continues, whether commercial comes back, what COVID does and what the weather looks like. So there's a lot that goes into handicapping gross margin for the full year. Clearly, we're off to a good start and look forward to updating you as the year goes on. Getting through the next few months of winter, I think, will give us a lot better insight into what the full year looks like, but your numbers make sense from our perspective at this point in time.

Great. Secondly, I'd like your thoughts from a guidance perspective on the top line. You noted first quarter sales up low to mid-single digits and the full year being up towards the upper end of low single digits, which to me sounds like about 4%. I guess that would imply the rest of the year being at the middle or slightly less, depending on how the math works out. What are the assumptions behind that? Are you thinking continued strength in residential roofing, maybe nonres continuing to be weak, as you've indicated for the first quarter? Also, you mentioned that shingle purchases slightly exceeded ARMA shipments; how does that flow through the numbers and was there any inventory rebuild and how might that impact the first half of the year?

Got you. If I miss any embedded questions, Julian will help me out, but let me address what I think was the top of the set. For Q1 revenue, we gave a fairly wide range: low single digits to mid-single digits. A lot of that depends on how weather plays out in the second half of November and into December. There's always a month-to-month decline as we go through fiscal Q1. What's really good to see is that so far, throughout the first six weeks of the quarter, we look like we're in good shape. October came in at 6.5% up. If that continues, we will be more towards the mid-single digits rather than the low single digits. If we have weather in the next six weeks, then I'd take the under. We'll know a lot more over the next couple of weeks as we get through Thanksgiving and the end of November. For the full year, when we say the upper end of low single digits, we're talking within that range, not above that. Your point around nonres is the qualifier: how deep is nonres going to impact us in 2021. Right now, to Julian's point, we do feel like there's some bottoming there. With the COVID vaccine, it's possible we could see some second half help on the commercial side, but it's too early to call that. Regarding ARMA, what we were explaining is ARMA is talking about manufacturer selling and not buying, relative to where we both were a year ago. We purchased about 26% year-over-year in shingle buys, while ARMA indicated manufacturer shipments of about 25%. So we were just a little ahead of that from a purchasing perspective year-over-year.

Yes. As we're thinking about sales, consider where we are today: a strong fourth quarter. Industry shipments in the fourth quarter were actually slightly above maximum production capacity. So it is difficult to beat from a top line perspective just in terms of number of shipments. Then the drag, as Frank indicated, is uncertainty about commercial. We do think it has been bottoming, but as we look year-over-year, we remain cautious on that outlook.

Michael, last point: regarding inventory levels, we essentially sold everything we bought in the quarter, so we didn't build any shingle inventory in the quarter.

Next question will come from the line of Mike Dahl of RBC.

I wanted to follow up on inventory dynamics. If you purchased above at 26% but your sellout was 6%, help us understand the lack of build. Is there any difference when you're talking about inventory with respect to residential shingle inventory — was it flat, or was residential up and nonres down? And second, as you think about the first part of the year, how are you planning your inventory position for the first half?

Good questions, Mike. Remember that ARMA is talking about manufacturer selling year-over-year, not our buying. A lot depends on what the benchmarks were a year ago. We did have strong asphalt shingle sales, about 8% growth in asphalt shingle sales. Inventory was flat sequentially quarter-over-quarter. Year-over-year, inventory was down about $100 million, down about 7% overall. Commercial inventory on a sequential basis was down about 10%. So we did see a reduction there that was important given commercial demand was down in the second half of the year.

Our next question will come from the line of David MacGregor of Longbow.

You called out the price increase and said you were particularly pleased with execution on the price increase. I wondered if there was something different about the way you secured the price increase this time that may have made a difference?

Dave, thanks for the question. Yes, we focused on this price increase. Over the last several years, we've seen price increases driven by asphalt inflation into a declining market environment. This time, pricing increases went into a good market. We executed very well. We set targets for each of our divisions, got buy-in across the organization on implementation, put tracking in place to ensure we were doing the right things and had daily updates on execution to follow up on the opportunities presenting themselves.

Next question will come from the line of Kevin Hocevar of Northcoast.

I wanted to come back to the gross margin outlook for fiscal Q1. Q4 was 25.5%, guiding to around 25% in Q1 — a decline of roughly 50 basis points sequentially. Normal seasonality often leaves Q1 and Q4 similar. It seems price/cost was a big driver, and I might have thought having a full quarter's benefit could be a tailwind sequentially. Is the expectation that some timing benefits go away and more than offset a full quarter of price/cost? Just looking to understand the moving pieces.

Thanks, Kevin. The price increase went into effect in mid-August. As we started selling through inventory, we received a full benefit before the corresponding increase in cost of goods flowed through, which created the timing benefit in Q4. We continue to see some of that benefit in Q1 as we work through pre-price-increase inventory, but it diminishes as the full inventory cost catches up. Typically fourth quarter to first quarter is somewhat flat, but the combination of timing and the drop-off in residential mix late in the quarter leads us to be sequentially down because the timing benefit primarily goes away.

Your next question will come from the line of Seldon Clarke of Deutsche Bank.

Could you help us think through the impact on working capital next year and maybe how we should think about free cash flow for 2021?

On free cash flow, an easier way is to think about conversion. If you assume conversion around 60% next year from EBITDA to free cash flow, you'd be in the right neighborhood. Interest cost is predictable based on current rates, we'll likely be a higher taxpayer next year, and CapEx will be a bit higher year-over-year since CapEx was artificially low this year due to curtailment. But conversion of about 60% EBITDA to free cash flow is a reasonable assumption.

Next question will come from the line of David Manthey of Baird.

Two questions. First, could you give us price realization year-over-year for residential, nonresidential and complementary? Second, on the gross margin, can you tell us approximately what the gross margin benefit from rebates was? Also, Frank, when you listed positive margin factors, you did not mention private label. Was that too small a factor?

On the private label piece, whenever private label sales increase, which they clearly did, we get some margin lift embedded within that. Digital is helpful and private label is helpful. We tried to highlight major moving parts unique to the quarter. Regarding vendor incentives, they are largely derivative of what we sell relative to what we buy in the quarter. In this quarter, because we had significant year-over-year sales, we had higher vendor incentives. There may have been some catch-up from Q3 based on the outlook at that time, but largely it was because we had significant sell-through of asphalt shingles in the quarter.

Your next question will come from the line of Kathryn Thompson of TRG.

On logistics, could you give the status of trucking constraints and how this has impacted your interiors business versus your exterior products? Also, clarify differences in transportation for getting products from suppliers and getting product to end customers.

Thanks, Kathryn. We are not experiencing many inbound freight challenges today, primarily on the exteriors side. It's more related to available supply from the manufacturers in terms of production capacity. Manufacturers cut production in April and May, and as the market rebounded, supply got tight. We are not having problems once inbound trucks arrive at our facilities in getting product out to customers. A few issues remain around getting inventory balances right across the country, which is related to supply rather than inbound freight per se.

Kathryn, we are very happy with our ability to service customer demand with fewer trucks and fewer truck miles for the fleet we own and lease. We delivered strong productivity operating fewer trucks and fewer miles while essentially providing the same delivery service.

Your next question will come from the line of Ryan Merkel of William Blair.

Two questions. First, I realize the commercial outlook is murky, but as things normalize, is there meaningful pent-up demand opportunity in your view? Second, how much is price adding to residential sales in October?

I'll address commercial. As we said, we do think the outlook is stabilizing. Market indicators such as the Architecture Billings Index have bounced back toward more normal levels. I think we will likely see commercial down for the next several quarters as some new construction got pushed out, so there may be an air pocket in the near term. Over a longer term, I expect a bounce back; this pandemic is unlikely to fundamentally alter long-term construction patterns. There may be delayed investment, so we expect some comeback but remain cautious in the near term.

On your October question around residential, sales were up double digits. A reasonable split for October would be roughly one-third price and two-thirds volume.

Your next question comes from the line of Keith Hughes of Truist.

You referred to realizing $20 million of savings from the low-performing branch initiative and had a $30 million to $60 million goal. Do you think you'll get the majority of the remainder in the next fiscal year?

Thanks, Keith. We achieved more than $20 million toward the $30 million to $60 million target. I don't think we'll get all of the remainder in the next fiscal year. We are bouncing back from the COVID situation, so there is a challenge. We plan to expand the group of branches under these initiatives to accelerate the improvements, and we expect continued progress, but I do not expect the full $60 million in the next fiscal year.

Your next question will come from the line of Philip Ng of Jefferies.

Congrats on the very strong quarter. The shingle manufacturers had a February price increase announcement. Do you have increases yourself, and do you see that as an opportunity to drive further margin expansion? Also, across other businesses like commercial or interior/exterior, do you see opportunities to replicate pricing and gross margin success in 2021?

Thanks, Philip. A couple of manufacturers have announced a February price increase. Sitting here in mid-November, it's a little early to predict how that will play out. If the increase goes into place and the market is conducive, we expect to execute well. February is not the strongest demand month, so we'll take a wait-and-see approach. Across other product lines, we have seen price increase announcements, and execution is early. The residential market remains reasonably strong, and price increases into a strong market have a higher chance of success. Our leadership is focused on execution, and if manufacturers increase prices, we intend to push those through to recover costs and capture fair value. On commercial, the outlook is more murky, so opportunities will be selective.

Your next question will come from the line of Truman Patterson of Wells Fargo.

On adjusted OpEx as a percent of sales, it was essentially flat year-over-year on similar revenues. You mentioned the lower-quintile branch initiative produced $20 million in EBITDA improvement. Where were the real offsets that kept OpEx flat, and how should we think about this as COVID-related cost actions return in 2021?

Truman, a lot of moving parts. We were happy with labor and fleet productivity: fewer people, lower overtime, better sales per hour, lower fuel and lower T&E costs. The primary offset was higher incentive compensation. A few months ago, incentive comp wasn't a focus given COVID, but as results improved, incentive comp increased year-over-year and sequentially. Looking at 2021, particularly Q1, I would estimate OpEx should be lower year-over-year both in dollars and as a percent of sales. We'll continue labor and fleet productivity gains, deploy lessons learned from COVID as we winterize, and maintain lower travel and entertainment. On a quarter-over-quarter basis, incentive comp will reset to targets and you'll see more variable costs due to seasonality.

Your next question comes from the line of Trey Grooms of Stephens.

You referenced supply constraints several times. Could you provide more color on that? Do you expect supply to put a governor on sales as new residential starts ramp, or should that normalize as demand becomes seasonally slower?

Thanks, Trey. In the fourth quarter we sold everything we bought, and Q1 started strong with sales up 6.5% in October. As winter impacts sales, manufacturers and distribution should be able to replenish. Today manufacturers and distribution are at very low inventory levels, so replenishment is needed. Given expected spring demand strength between February and April, we could see continued supply challenges early in the year if that demand materializes. We expect some replenishment over the next couple months during the seasonal slowdown, and then the key will be how the spring selling season unfolds.

Your next question will come from the line of Garik Shmois from Loop Capital.

Congratulations. Is there any carryover storm demand impacting your guidance and how should we think about geographic mix in fiscal 2021 given the sharp declines in spring in some Northern and West Coast markets due to COVID?

Thanks, Garik. The storms that hit Louisiana in Q4 created demand in those markets. Hurricane-related demand tends to drag out, so we expect some continuation in the current quarter, given those are southern markets less impacted by winter. Availability of supply to those regions is a factor because heavy building materials do not travel far cost effectively. As we planned, we base our outlook on an average storm year. Our fiscal year storms were about average, and the hurricanes toward the end of our fiscal year might make the calendar year slightly stronger than normal, but overall we planned assuming a normal strong storm year.

And that concludes the questions. I would now like to turn the call back over to Mr. Francis for his closing comments.

Thank you, Gabriel, and thanks to everyone for joining our call. I especially thank our customers who endured a very challenging environment and faced uncertainty with courage, and our supplier partners who faced whipsawing demand and did their utmost to ensure our partnership navigated the past few months successfully. To our employees, I'm incredibly grateful for your commitment to help our company thrive. We hope all of you on the call and all our employees, customers and suppliers are staying safe and healthy. Thanks very much. Good night.