Good afternoon, ladies and gentlemen, and welcome to the Beacon Transition Period and Calendar Year 2021 Earnings Conference Call. My name is Tania, and I will be your coordinator for today. At this time, all participants are in listen-only mode. We will be conducting a question-and-answer session towards the end of this conference. At that time, I will give instructions on how to ask a question. If at any time during the call you require assistance, please press star followed by zero, and a coordinator will be happy to assist you. As a reminder, this conference call is being recorded for replay purposes. This call will contain forward-looking statements, including statements about the company's plans and objectives and future economic performance. Forward-looking statements can be identified by the fact that they do not relate strictly to historic or current facts and often use words such as anticipate, estimate, expect, believe, will likely result, outlook, project, and other words and expressions of similar meaning. 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 2021 Form 10-K and subsequent filings with the U.S. Securities and Exchange Commission. These forward-looking statements fall within the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 regarding future events and 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, February 3, 2022, 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. These reconciliations of non-GAAP measures to the most comparable measures calculated and presented in accordance with GAAP are set forth in today's press release and the appendix to the presentation accompanying this call. Both the press release and the presentation are available on our website, www.becn.com. I would now like to turn the call over to Mr. Binit Sanghvi, Head of Investor Relations. Please proceed, Mr. Sanghvi. Thank you, Tania. Good afternoon and welcome to our transition period and calendar year 2021 earnings call. With me on the call today are Julian Francis, President and CEO, and Frank Lonegro, Chief Financial Officer. Our prepared remarks will correspond with the slide deck posted to the investor relations section of Beacon's website. After management's prepared remarks, there will be a question and answer session. I will now turn the call over to Julian. Thanks, Binit, and good afternoon, everyone. Before I provide my comments on the quarter, I just wanna remind everyone that we've changed our fiscal year-end to coincide with the calendar year-end. As a result, we're reporting our calendar Q4 today, which is referred to in our earnings release and other materials as our transition period. Now let's begin on slide four. I'm very pleased to report that we finished the year in record fashion. The team delivered calendar Q4 records for sales, net income, and adjusted EBITDA. I also want to highlight that we achieved double-digit EBITDA margins for the calendar year 2021, a significant milestone for the company. For the quarter, sales were up 11% year-over-year against a strong 2020 comparison in which we had high single, high shingle demand driven by housing investment and storm volumes. We exceeded the expectations we set out in November of net sales growth in the high single digits, largely due to the later onset of winter weather, which allowed for an extended roofing season, particularly in the Northeast. The fundamental drivers of residential demand remain strong. Despite continuing supply chain issues, commercial activity continues to show an improving trend as evidenced by our strong year-end backlog. We also continue to experience inflationary pressure across most product categories. Our focus continues to be on great execution at the branch level and staying ahead of the cost curve while ensuring we have product available when and where our customers need it. As a result, gross margins in the quarter expanded year-over-year by more than 90 basis points to 26.3%. We expect cost pressure to continue, but are confident that we can execute to capture additional pricing to offset the headwinds. Impressively, we increased adjusted EBITDA by 21% in the calendar fourth quarter and yielded nearly a 10% margin. We continue to focus on our portfolio, and our renewed financial flexibility provided the capacity to add tuck-in M&A as another lever to our growth ambition. We successfully closed on two acquisitions recently, expanding our presence in key markets. As we announced on our prior earnings call, on November 1, we acquired Midway Wholesale, a premier distributor of roofing products and a broad offering of complementary building materials. With annual sales of approximately $130 million and 10 locations across the Midwest, we expanded our presence in growing markets in Kansas, Missouri, and Nebraska. Additionally, on January first, we acquired Crabtree Siding and Supply, a distributor with sales of approximately $1 million. We welcome the Midway and Crabtree teams to Beacon and look forward to leveraging their reputation for quality, service, and reliability to further enhance our combined market positions. During the quarter, we also announced that we divested our solar products business, further focusing our resources on delivering high-caliber services to our core roofing customers. Overall, the solar business was dilutive to our margins, and we determined that the buyer was better positioned for long-term growth in the category. Now, I'd also like to take time to highlight critical non-financial initiatives that demonstrate how we continue to build the organization. Putting people first is a core value, and we believe in attracting, developing, and retaining a workforce that is representative of the communities in which we work and live. Last year, we created a cross-functional diversity, equity, and inclusion council comprised of employee volunteers who provide expertise and advice on DE&I strategies. The council has made significant progress, laying the groundwork in its aim to foster a culture where all voices can be heard. In recent months, we have conducted focus groups with leaders in underrepresented groups and rolled out training and education on diversity, equity, and inclusion to all our employees. In addition, we widened our hiring lens by partnering with INROADS, a nonprofit organization that creates pathways to careers for ethnically diverse students across the country. Our progress on DE&I has begun with meaningful intent, and we've seen our efforts advance throughout the company, but we recognize we have much more to do. We also believe that putting people first means recognizing the efforts of our employees who have demonstrated tremendous resilience since the beginning of the pandemic. As part of our annual safety stand-down, this quarter we celebrated and rewarded the exceptional contributions of all our frontline employees during 2021. It is only through their tireless efforts that we are able to help our customers build more. The performance improvements we have delivered in the past 12 months gives us great confidence in our future plans. We look forward to sharing our longer-term strategic plan that we have called Ambition 2025 with the investment community later this month. Now please turn to page five of the slide deck. As always, I'll provide a brief update on our four strategic initiatives. Our organic growth initiative continues to focus on enhancing the customer experience and the effectiveness of our sales organization. Over the past year, we continued to invest in sales training programs, marketing support, and value-added tools that help our salespeople grow our business. These initiatives are paying off. For example, sales of our private label are up nearly 30% in the quarter versus the prior year. Our line of high-quality building products sold under the TRI-BUILT label deliver professional results at a competitive price. TRI-BUILT is becoming a recognized and trusted name by professional contractors across our residential, commercial, and complementary end markets. Our focus on our national accounts is also generating results. In calendar year 2021, sales to our largest customers increased by 25%. We continue to build an experienced team with a proven track record focused on developing long-term, trusted relationships to be the supplier of choice. These examples provide an idea of the significant opportunities we have available to further partner with existing customers, build the business with new customers, and grow organically as we accelerate these types of investments in the near term. Next, our digital capability continues to be a clear competitive differentiator for Beacon. We provide the most complete digital offering and continue to expand our capabilities to make it easier for our customers to do business with us. We achieved digital sales of nearly 16% in our residential line of business in the calendar Q4, and we have nearly 50% more active users of our online platform compared to this time last year. I'd remind you that this sales channel is both revenue and margin accretive. Our OTC strategy is an operating model in which branches are networked in larger MSAs, and OTC provides four key benefits. First is improved customer service levels in our OTCs. We have greater flexibility to deliver from the branch with the best combination of product and service to support the customer's needs. The second benefit is a lower cost to serve. By leveraging resources and logistics across a network of branches, we are able to reduce delivery time and mileage, improve labor efficiency, and reduce fleet costs and emissions. The third benefit is optimizing inventory levels, and we continue to believe there is potential to cut our inventory investments by around $50 million-$100 million while maintaining service levels. Fourth, critical to our ambition is that we accelerate our talent development. Our OTC initiative creates opportunities for the people at Beacon to build fulfilling careers and for us to unleash local talent, enhancing our ability to execute on our plans. We are very pleased with the recent launch of our Houston hub, designed for efficiency and capacity, improving our position in one of the largest markets in the country. We also anticipate opening one of the largest exterior products distribution centers on the West Coast with our Los Angeles hub expected to be operational in the first half of this year. Finally, operating performance. Our focus on the bottom quintile branches is producing meaningful results. We generated $18 million year-on-year EBITDA improvement in calendar year 2021, bringing the two-year total to over $70 million. In summary, our strategic initiatives have delivered measurable results in 2021, and we remain focused on accelerating our growth and profitability. These strategies will continue to be foundational as we launch our Ambition 2025. Now, I'll pass the call over to Frank to provide deeper focus on our Q4 continuing results. Thanks, Julian, and good evening, everyone. Two housekeeping items before we get started. As you know, we divested our Solar products business on December first. Given its relatively small size, it is included in the results of continuing operations. Therefore, our reported results for calendar Q4 include two months of contribution from Solar within our complementary line of business. Also, it is important to note that the comparable results from the prior year quarter includes three months of Solar's results. Similarly, we closed on the Midway acquisition on November first, and our reported results this quarter include two months of Midway's results. While these two items in the aggregate are not material to our bottom line results or the year-over-year comparison, we thought it would be helpful to level set on these items prior to discussing the quarterly results. Turning to slide seven, we achieved nearly $1.8 billion in total net sales in the calendar Q4, up more than 11% year-over-year, driven primarily by higher average selling prices for our products. In the aggregate, price contributed approximately 15%-16% to revenue growth, partially offset by lower volumes of around 4%-5%, largely attributable to the continued supply constraints in the current period, combined with a strong prior year comparable. Residential roofing sales were up approximately 9% on shingle price execution throughout the year, including the recent September increase. Shingle volumes were down about 10% year-over-year, in line with ARMA and slightly better than our expectations. As you know, the strong prior year shingle comparable benefited from the COVID snapback and stronger storm demand in 2020. We estimate that about a third of the shingle volume decline in the quarter was related to lower wind and hailstorm activity as compared to the prior year. The fundamental drivers of the residential market remain strong, with approximately 80% of demand coming from reroofing activity, which is largely nondiscretionary. An important indicator of the strength in the residential market is the comparison to the Q4 of 2019. Residential shingle volumes were 12% higher in the reported quarter versus the calendar Q4 of 2019. Non-residential roofing sales were up approximately 13% in a challenging supply chain environment. Our team did a great job of providing as much product as possible, given those challenges and staying ahead of inflation. We continue to see longer project cycle times, which added to our strong pipeline, a positive indicator of future demand. Complementary sales increased approximately 16% in the calendar Q4 as we achieved higher prices across nearly all products, including siding and lumber. As you may recall, our complementary line of business has roughly 80% exposure to the residential market and allows us to be the supplier of choice to the exterior-focused customer. Turning to slide eight, we'll review gross margin. Gross margin improved 26.3%, up nearly 95 basis points year-over-year. The execution of the price increases early in the year contributed to the improvement. In the aggregate, price cost was positive by approximately 110 basis points in the calendar Q4 on a year-over-year basis. Sequentially, product costs increased as the inventory timing benefits largely rolled off by the end of the quarter. Mix in the quarter was negative and slightly more unfavorable than we initially expected, given relatively higher sales growth in our non-residential and complementary line of business, combined with higher direct sales to customers. Adjusted OpEx was $306 million, a $30 million increase compared to the year-ago quarter, mainly due to inflation in wages, rent, and fuel costs. Selling expenses such as travel and entertainment were also higher as we cycle the impact of certain COVID-related cost actions taken in the prior year. We also made the conscious decision to undertake less winterization this year, given the favorable fall selling season and our desire to be adequately staffed in a labor-constrained environment to handle the demand we expect in the upcoming construction season. Our headcount was up a little more than 2% year-over-year, excluding our recent Midway acquisition, and we continue to focus on labor productivity. As a result of these factors, combined with higher sales, our adjusted OpEx to sales ratio was in line with the prior period. Turning to slide nine, we will review our financial flexibility. Operating cash flow, adjusted for items related to the sale of our Interior Products business, was a positive $60 million in the quarter. This compares favorably to our typical calendar Q4, which has negative operating cash flow. In recent quarters, this restored financial flexibility has enabled us to open new greenfields, such as the Houston OTC hub, reengage in tuck-in M&A transactions like Midway and Crabtree, and rebuild our inventory to ensure we can effectively meet demand. Net inventory is $200 million higher year-over-year, reflective of several factors: product cost inflation, rebuilding inventory levels from post-COVID lows, carrying certain elements of inventory longer than expected. Material availability to support our strong backlog and buying inventory ahead of price increases. 2021 was a truly transformational year for Beacon for many reasons, not the least of which was the divestiture of the interiors business and more recently, the solar products business. In addition to focusing the company on our core exteriors customers, the proceeds, along with balance sheet cash and free cash flow, allowed us to reduce gross debt by more than $1 billion year-over-year. Net debt leverage stood at 2.1x trailing twelve-month adjusted EBITDA at quarter end compared to 4.8x a year ago. In addition, we de-risked our debt maturities through a comprehensive refinancing earlier in the year, which essentially eliminated near-term refinancing risk. We have no meaningful debt maturities until 2026, and our liquidity position of approximately $1.5 billion at quarter end provides significant ability to invest in our future. This renewed balance sheet strength has given us the opportunity to thoroughly review our existing capital allocation framework. We look forward to laying out our new capital allocation strategy in more detail at the upcoming Investor Day. With that, I'll turn the call back to Julian for his closing remarks. Thanks, Frank. Before we turn the call over to Q&A, I want to briefly wrap up our 2021 and turn your attention to 2022. Please reference page 11 of the slide materials. 2021 was transformational, and we begin 2022 with great optimism. The underlying pace of demand remains positive in residential, even as our new home building customers continue to manage through constraints such as labor and material shortages. Regarding non-residential demand, the macro environment continues to remain supported. The rising demand trend we saw begin in late 2020 is expected to continue in line with the Architectural Billings Index. Although we believe supply chain disruptions will continue to impact lead times and project cycle times, overall sentiment remains positive, and our strong backlog is indicative of future demand. In our Q1 ending in March, we expect total sales growth to be in the high single-digits range year-on-year after strong performance in January. This guidance also reflects our recent acquisitions and the divestiture of our solar business. Gross margin will reflect our expectations for positive price cost contribution. You may recall that we are lapping price inflation as well as the related timing benefits from price increases in the prior year quarter. Nevertheless, we expect solid price execution to result in a year-to-year gross margin percent increase of approximately 40-60 basis points. For the full year 2022, we will continue to execute our strategy and focus on controllable areas of our business. These include ensuring product availability, remaining ahead of inflationary pressures, as well as furthering our productivity gains and cost management. We expect full year 2022 sales to be up mid- to high-single digits versus calendar year 2021. We expect higher sales and continued cost discipline to more than offset gross margin decline as inventory profits roll off and will result in adjusted EBITDA in the range of $685 million-$725 million. We're excited about 2022 and are off to a good start. As we look forward, our team is energized and ready to execute on our longer-term strategic plan called Ambition 2025. I'm pleased to hear that many of you will join us at our Investor Day on February twenty-third and twenty-fourth in Houston, where you will hear details about our growth strategy, market execution, capital allocation plan, plans, and have the opportunity to see our newly opened Houston hub. I'm confident that you will come away with an understanding of how we intend to achieve our full potential. With that, operator, we're now ready to open the line for questions. The first question is from the line of Kathryn Thompson with Thompson Research Group. Your line is open. Hi. Thank you for taking my question today. A lot of topics I'd like to ask, I think you'll most likely cover at the Investor Day. One I wanted to touch on today, in regards to inventory, so the near term and looking at the bigger picture, just a clarification of how much of inventory is price versus volume. Then, just strategically from this is really most post-COVID world and shifting from a just-in-time to, as I've had some contractors share with me, just in case there's an increasing value placed on companies that carry inventory. Obviously a distribution model. How has this shift in thinking impacted how Beacon focuses on inventory management and hence cash flows going forward? Thank you. Well, Kathryn, I'll take the first part. I'll let Frank answer some of the details on the difference between price and volume in our current inventory. Look, I think we've all been challenged with the current inventory situation and the supply chain challenges, and they've been meaningful. Certainly we've taken advantage We are managing them probably a little bit higher than we would normally through this period of time both deliberately and probably on a base in some cases. Project cycle delays, as Frank mentioned in his prepared remarks, are causing us to hold some inventory as we assemble all of the pieces together. I think your question really emphasizes the value of distribution. We are the ones that aggregate the demand and from the marketplace and from various suppliers and are able to deliver that and do just that. I think that distribution at this point in time is really proving its value. Look, I think you know we're gonna see what happens down the road. We're gonna manage our inventories to best enable us to capture as much of the share of the market as we can in a reasonable fashion. If that means long term, we're gonna carry slightly higher balances, that'll be determined as much by the marketplace. Certainly we think that this period of time has emphasized the value of distribution in building the aggregator of demand and for the suppliers as well. Yeah. Hey, Kathryn. Conscious decision obviously to invest in inventory for all the reasons, you know, that you're implying in your question. A couple of numbers that might be helpful. Rough order of magnitude overall, the build is about half price, half volume. It's a little bit different depending on the product that you're asking about. Shingles may be on your mind. That's about 50/50 between price and volume. Some of the other bigger categories, on the single-ply side, so the commercial piece, that's probably the element that we'd like to get more of if we could. That volume's down a bit. On the installation piece of commercial, that volume's up a little bit more than the 50% that I mentioned on the shingle side. Maybe siding would be another good category to mention. That's about two-thirds on the pricing side and about a third on the volume side. Hopefully that gives you a bit of a walk around the inventory situation. That does. Thank you very much. Thank you, Ms. Thompson. The next question is from the line of Mike Dahl with RBC Capital Markets. Your line is open. Hi. Thanks for taking my questions. Just as a follow-up to kind of price mix, I wanna ask you about the full year guide. You know, you've given some of the moving pieces around sales and margin. Within the sales guide for both the upcoming quarter and the year, can you help us think about what's contemplated price versus volume? Mike, the current anticipated price increases we see are contemplated in our guide. If there are no other price increases announced, we're not covering additional ones there. We are covering the ones that we know about as of today and have implemented. Yeah. High level, Mike, on the current quarter, so Q1 2022, volume will be down. I'm talking broad strokes here, company average, not any specific product category, in the low single digit range, which puts price obviously up in a low double digit range, which gets you to the high singles guide on the sales side. For the full year, the mid- to high- guide that Julian you know gave is really a combination of price and volume. It is positive volume and obviously a positive price. It's about two-thirds price, one-third volume. Again, I'm giving you rough broad strokes here at a company level, not any specific product category. Okay. Thanks. Second question, I know you talked about kind of recalibrating on the bottom quintile, and that's supposed to be kind of this ongoing structural thing that you guys implement each year or is just part of your system now. Any early thoughts on what the runway is as you look out to this year from the new batch of underperforming branches? Thanks for the question, Mike. Certainly, you know, it's just by the law of mathematics, you end up with the bottom quintile having to improve just to get to the company average, and, you know, that's the theory behind this. This is something that we will share some targets on at our Investor Day. We've got a well-thought-out plan, and we think we've demonstrated that there's significant opportunity. Ultimately, we think significant opportunity remains, and we'll be more transparent on that in a few weeks' time. Got it. Okay. Thanks, Julian. Thank you, Mr. Dahl. The next question is from the line of Ketan Mamtora with BMO Capital Markets. Your line is open. Thank you, and good afternoon. Just coming back to the balance sheet flexibility, obviously net leverage is down quite nicely. As you look ahead, can you talk about, you know, kind of, you know, sort of the priorities, and managing kind of M&A? Absent M&A, you know, how would you think about capital allocation? Sure, Ketan. As Julian mentioned, and I mentioned in the prepared remarks, that will be a key element of the conversation that we'll have with everyone in about three weeks at the Investor Day. We've mentioned a number of times in the last quarters that everything is on the table in terms of, you know, consideration as we lay out the capital allocation, capital structure frameworks going forward. Rather than tip our hand now, it's probably worth asking that same question in about 20 days. Sounds good. Is the M&A pipeline pretty robust at this point, Frank? It is. We obviously had a couple of good acquisitions late last year. I'd say, you know, the first couple of weeks of January is always a little bit of a reset period, but things have kicked back into gear pretty quickly here and, you know, we're actively in conversation with a number of companies as we always are. The environment doesn't seem to have slowed down at all. As a matter of fact, you know, Julian and I are actively engaged with a number of folks and, you know, we'll see how many cross the finish line. You know, we certainly like what we see out in the market in terms of the geographies that we're looking at and the product suite that we're looking at. You know, hopefully we'll be the acquirer of choice and look forward to integrating those companies with us throughout the year. Sounds good. Thank you. Thank you, Mr. Mamtora. The next question is from the line of Truman Patterson with Wolfe Research. Your line is open. Hey, good afternoon, everyone. Thanks for taking my question. So just wanna touch on, you know, residential volumes have been down the past couple quarters, but pricing has stuck extremely well. I'm hoping you can give us some thoughts on the price hike here early in the year, you know, whether you expect it to stick and then, you know, just some color moving through 2022, you know, assuming that volumes stay, you know, below last year's levels. Just trying to understand your confidence in, you know, keeping pricing elevated. Thanks for the question, Truman. You know, I said in my prepared remarks that we remain confident that we can implement price increases to offset inflation. I do think that we will continue to see inflation throughout the year. I don't think that given the overall dynamic, we will see the same type of year we saw last year with multiple price increases in, you know, very short 60-day periods, across multiple product categories. I think the supply chain is easing, but is still relatively tight. You gotta remember, I think as, you know, you look out at 2022, demand's gonna be across most of our categories. We think demand's gonna be one of the highest we've seen in the last, you know, 10+ years, except for maybe last year. You end up with it's going to be a very good demand environment. I think supply chain challenges are still out there. I think that certainly all manufacturers across all product categories have room to improve their inventory positions. I think they're going to run so that they can continue to do it. Look, I think that the underlying demand is good. We had a relatively slow storm year last year on the grand scheme of things. I think we would assume that will return to about average, which is probably a little bit of a tailwind in our assumptions here going forward. I think we'll see a good environment overall for managing the pricing environment. I think that with the demand levels we see, like I said, we ultimately remain confident that we can offset inflation. Perfect. Thank you. Thank you, Mr. Patterson. The next question is from the line of Deepa Raghavan with Wells Fargo. Your line is open. Hi, good afternoon, everyone. Thanks for taking my question. My first question is on your current quarter. January is growing double digits, but you're guiding to high single digits, so you're obviously expecting a moderation. You also had a price increase levied in January. Just curious, why are you assuming a moderation? Hey, Deepa, it's Frank. So remember last year there were some really interesting dynamics in the quarter. January was a pretty good month last year. February was difficult on weather. You might remember the kinda deep freeze that reached all the way down into Texas. Our sense is that January and February will be strong this year relative to last year. March had what I'll say is some snapback demand from the February difficulties. So I think the March month in and of itself will be a tough comp for us. When you blend all that together, you get to that high single range that we mentioned. Okay, that's fair. Your gross margin expansion for the same upcoming quarter, 20-60 basis points, is this mostly pricing driven or are there any other benefits in there? I'm curious, what would that mean to your EBITDA expansion? Yeah, we didn't give EBITDA guidance, but clearly your question sort of hints at that. I'd say the gross margin is a combination of, you know, the carryover price increases from last year. Obviously, those begin to roll off as we go through the year. The January price increase, as Julian just referenced and spoke about in answer to the prior question. We are now getting those higher into the mix as inventory profits have rolled off from the prior price increases. We're always going to be working on private label, the digital and things like that which have, you know, a margin accretive benefit there. You know, from an OpEx perspective, if you just kind of walk down the P&L, I wouldn't anticipate huge changes on a year-over-year basis on an OpEx to sales basis. Obviously you can do the math on the EBITDA, which obviously would be a nice lift from last year without dimensionalizing it. All right. That's helpful. Thanks very much. Good luck. I'll pass it on. Thank you. Thank you. The next question is from the line of Keith Hughes with Truist. Your line is now open. Thank you. Question's on non-residential. You've had several quarters here with some positive results. The segment has a history of kind of being up and down. Is there anything that's changed in how you run the business to get a little bit more consistent results? Do you think as you go through 2022, could we see the volume there inflect higher given some of your commentary earlier about some commercial activity really starting to stir? Thanks for the question, Keith. It's very insightful. Yes. The answer is we do think that we're running the business a little bit differently. We do think of our business as having two core businesses, the residential focus and the commercial business, and they're not the same. We do think about them as different businesses and run them as such. Look, I think the supply chain challenges on commercial have been manifest across so many different categories. It's difficult to put your finger on it. It's gone from insulation to fasteners back to insulation. I mean, it's been all over the place, and compiling the jobs has been a real challenge. Then getting labor to get it on the jobs and the timing of the projects. It's really been, like, to Kathryn's earlier question, the value of distribution in this time for the contractor and for the manufacturers is high as we compile all those jobs and hold them until we can get job packets out the door. That's really important. I think that we will see some easing as we go through the year of supply chain challenges on some product categories. Look, I think we're very conscious of some products that are shipped transcontinentally. Disruptions in that supply chain, while it's been easing a little bit more recently, you know, containers, the cost of containers, the inflation that drives, the ability to get them, there's still a tremendous amount of uncertainty. What I do think is positive overall is that I don't think that there is a sudden belief that commercial construction is just gonna go away. I mean, I think there was a lot of talk early in the pandemic that, you know, would anyone ever go back to offices? What would happen to retail? There seems to be a lot of construction going on out there, and I think it's in categories that are very beneficial for us. There's a lot of investment going on in warehouse space. There's a lot of investment going on in sort of the data centers. And those are generally low rise, large spaces with large roofs. Overall, I think we feel very good about the position. We're thinking about the commercial business differently. We think the underlying demand trend is extremely positive for the longer term outlook. I remain extremely cautious about short term predictions because the supply chain is just a challenge right now. Okay. Thank you. Thank you, Mr. Hughes. The next question is from the line of Michael Rehaut with JP Morgan. Your line is open. Thanks. Good afternoon, everyone. Thanks for taking my question. I wanted to just drill down a little bit on the 2022 EBITDA guidance or guidance in general. You know, from a couple different angles. I apologize if you had covered this earlier in the call if I missed it. You know, if I'm doing the math right and you know, you're saying sales are up, you expect up mid- to high-single digits. If you assume a 7% sales growth kind of in the middle of that and take the midpoint of your EBITDA guidance, I'm getting to a margin of 9.6%, which I believe is down 50 basis points year-over-year. I was just curious on, you know, if I have that math roughly correct and what's driving that, you know, EBITDA margin contraction. Yeah. Hey, Michael. So the math, I'll give you directional accuracy. Obviously it's not too hard to put those numbers together. Remember something that we have talked quite a bit about in the last three or so quarters is this concept of inventory profits. It's obviously gonna hit the gross margin line as the replacement cost for the inventory as we go throughout 2022 is going to be significantly higher than the inventory cost associated with those same products. In 2021. The pricing environment continues to be robust. We're only really handicapping in the guide the January increases that have already been announced. We don't have any other ones built into that, so obviously that can change the dynamic if we get inventory profits in 2022 that begin to build and rival those in 2021, and that dynamic in your math would change. But based on what we see right now, there is that kind of 50 to 100 basis points of headwind that we have. It's probably more toward the northern end of that as we rerun the math for the full calendar 2021 that we have to overcome in 2022. We've got obviously the pricing mechanism in January. We've got the private label and the digital and other things. It's really the product cost for the full year at a much higher level in 2022 than we had in 2021. Okay. No, that's helpful, Frank. I guess just kind of also thinking about it from another angle, just wanted to make sure that included in your guidance, obviously you have the divestiture and the acquisitions so far. I know you're gonna go into it later at the Investor Day, but would that also include planned improvement from the bottom quintile of branches? Let's go back to the first part of your second question. Obviously we'll have a full year of Midway's results and Crabtree's results in that guide. In terms of the launching point 2021, one of the housekeeping items I said in my prepared remarks was that solar is part of the continuing operations. That is part of the 2021 comparable. Realize that the growth rates are better over that organic basis, but obviously we have solar in 2021, which sets the comparable higher. the bottom quintile? I mean, that's. Again, productivity is a big part of what we do. We continue to believe that, you know, the bottom quintile branches have huge opportunity, and that's not just on the OpEx line. You know, we expect good sales growth out of those branches. We expect gross margin accretion there. There's still, as I mentioned on prior calls, literally hundreds of basis points of difference between the underperforming branches and the performing branches, when you look at the gross margin line as well as on the OpEx line. Both of those are in play anytime we look at an underperforming branch, as is just the general sales, you know, rates that we're seeing there. In 2021, we saw higher growth rates in the underperforming branches on the sales line, and obviously we saw nice accretion from both the gross margin and the OpEx line as well. Great. Thanks so much. Thank you, Mr. Rehaut. The next question is from the line of Philip Ng with Jefferies. Your line is open. Hey, guys. Can you provide any color on the volume expectations by segment for your full year guidance? You know, I'm particularly curious about resi just given your tough comps and just weaker storm carrier demand. On the flip side, commercial, you know, I think underlying demand, as you kinda pointed out, it's been pretty robust, but some of these supply chain challenges have weighed on volumes. I'm just curious, does that start off kinda negative or flattish then build through the year as some of those bottlenecks ease? Any color would be really helpful here. Yeah, no, good and fair question. We're gonna have a couple of unique dynamics by line of business next year. I'm talking full year. On the resi side, you know, we're probably in that volume piece of the low single digits overall. It's gonna be a first half, second half dynamic, because if you go back to the COVID period, the second half of 2020 and the first half of 2021 were really strong volume quarters, and we've tried to call that out over that period of time. That obviously flips a little bit as we get into the second half of 2021. The comparables, not that they're easy, but on a relative basis, they're easier than the first half of 2021. I think you'll see some progress throughout the year from maybe starting out negative and ending up positive. On the non-resi side, you know, it's probably a higher growth rate, I think mid-single digits% probably on the volume side on the non-res piece. Again, there's going to be first half, second half dynamics. Remember that there wasn't any real supply chain challenges in the first half of last year, whereas there were supply chain challenges in the second half of last year, so it's gonna be a little bit of a different dynamic there. Complementary again is a you know is a large set of disparate businesses. Solar's in the prior year, so I'd probably give that a flattish type of an outlook on complementary. Okay. If I heard you correctly, you're expecting low single-digit volume growth in resi for the full year? I mean, I think most people are expecting- Correct. a more muted backdrop. Okay. Is that driven by anything in particular? I guess you mentioned storms maybe being normal, driving that new construction. It'd be helpful to kinda unpack that, resi growth. Yeah. I mean, I think it's all of the things that you mentioned. Obviously Midway, the acquisition is helpful. Crabtree is helpful. You know, we have an expectation that storms will revert to the 10-year average, which will provide some help for us as well. The housing is there. You know, so the cycle of new housing 20 years ago is still in the lift period of time. There's a fair number of factors in there, and we're hopeful that the supply chain won't present us any challenges as we fulfill the demand that we believe is out there. The other point, and this goes Both Michael's and Keith's questions as well. We mentioned a couple of times in our remarks about the backlog. The backlog, which is about two-thirds non-res and about one-third residential and complementary, is literally the highest that we have in our history as far as we can tell. It was a 14% quarter-over-quarter, so a little unusual given the time of year, but it was up on a quarter-over-quarter basis, and it's literally tripled in the year-over-year period. We have really good insight into, you know, what the next six to 12 months look like when we look at those backlogs, and we realize what's. Got it. Frank, sorry, nitpick. Is there any way to parse out that resi volume piece organically without the acquisition? How we should think about it? Well, we mentioned. Yeah, we mentioned that Midway's about $130 million in annual revenues. We've got a couple of months in 2021 that's in the comparable given what we said about. There's a little bit of a split, though, if you remember some of the press releases that we put out. The resi piece of Midway is kind of a third-ish of that business, and complementary's about two-thirds of it. Okay. All right. Great. Thank you. Thank you, Mr. Ng. Again, to ask a question, please press star followed by one on your touch tone telephone. The next question is from the line of David Manthey with Baird. Your line is open. Thank you. I was wondering if I hit the numbers incorrectly. Here we are. A question on what you were talking before about the 50 to 100 basis point gross profit margin inventory benefit in 2021. Now you're guiding the Q1 slightly higher year-over-year, and it sounds like you continue to chase price higher. I mean, obviously, you raised price again here. Would it stand to reason that you probably won't give all of that back in the coming calendar year, or do you think it'll still unwind by the time we get to the end of 2022? Dave, thanks for the question. Look, I said in my prepared remarks, we remain confident that we can more than offset inflation with actions. We're very focused on pricing execution. We think we've done that very well over the last 18 months or so as we've seen rapid inflation. Obviously, you know, we're keen to take advantage of inventory profits, and we certainly don't wanna let that go. We continue to look at the opportunities to do that. You know, the pricing dynamic over the last, I'd say, 12-18 months has been pretty unique with just about every product category seeing rapid back-to-back increases. Executing on that requires a tremendous amount of work. You're pricing so many SKUs. I think our execution on that has been really strong. We will continue to execute at that high level. We think there's continued opportunities to enhance our overall pricing dynamic as well. We think that there's, as Frank said in his remarks as well, that, you know, when you think about TRI-BUILT, when we think about the digital, when we think about underperforming branches, when we think about the pricing dynamic overall as well as our execution, we think there's a lot of ways that we can have a really good influence on both gross margin and EBITDA margins going forward. Okay. All right. Then, Frank, just some technical questions here. CapEx that you're thinking right now, unless that reveals too much that you don't wanna talk about capital allocation and then your expected tax rate. I was also hoping you could disaggregate the $151 million depreciation and amortization separately. Yes is the answer. We can handle all that. CapEx, if you think about 2021, which I know wasn't the basis of your question, but in 2021, we were about 1% of sales, which is essentially what we guided for throughout the year. We are going to discuss CapEx at the Investor Day as part of the broader capital allocation perspective. I'd rather not tip my hand quite yet on that one. Tax rate, generally, you can always handicap us in the 25%-26% range. You know, the federal at 21%, and the state's usually gonna be 4%-5% as a federal benefit. If I look at 2022 on depreciation and amortization, you know, that $151 breaks down something in the kinda $65-ish range on depreciation and $85-ish range on amortization. That's helpful. Okay. Thank you very much. Thank you, Mr. Manthey. The next question is from the line of David MacGregor with Longbow Research. Your line is open. Hi. This is Joe Nolan on for David. I just had a quick follow-up on the non-res backlog. Can you just give any sense of how far those extend into 2022 at this point based on your current expectations for raw material availability? With recent price increases on the non-res side, are those taking a bit longer to see traction given how extended backlogs are at this point? I'll start with the second one. The answer to that is no. You know, generally, the increases are tied to shipments, not to orders placed. You know, we do look out. One of the challenges we are finding with that is that we do have to reprice quoted jobs. It's one of the big challenges with the supply chain right now. Quoting jobs that get delayed, you have to re-quote them, and that causes a lot of angst with both for us, our customers, the suppliers, the general contractors, and building owners. That's one of the dynamics that is really up in the air and difficult to manage right now. You know, ultimately, long backlogs and long lead times are less indicative of price increases. That's kind of where we are overall. I think that we feel pretty good about where we stand. The challenge is really managing the overall supply chain and getting to the jobs. The backlogs that we have, you know, we think these are all real orders that are out there, but jobs that are gonna ship at some point in the year, it's putting all these things together and is the real challenge. We've got lead times on some products that are still out 6-9 months. That's. It's just difficult to manage inventory in that type of environment. You know, we certainly think it's going to ease as we come through the years. The manufacturers get their production right as we start to work off these backlogs. In this industry with jobs shipping for installation in days, when you've got six months and longer lead times on certain materials, it's just incredibly difficult to manage. Joe, in terms of the overall backlog that I mentioned, not parsing it between resi and non-resi in this remark, the last few quarters, as we've looked at this, the trend has been about 50%-60% of that backlog was scheduled to ship within 90 days. The resi piece of that would naturally be on the shorter end, and the non-res would likely be on the longer end of that. Got it. That's very helpful. Thanks. Thank you, Mr. MacGregor. The last question is from Jeffrey Stevenson with Loop Capital. Your line is open. Hi. Thanks. This is Jeff on for Eric Bosshard. Thanks for taking my question today. I'm just wondering, have you seen any improvement in the residential roofing supply environment, and are you still on allocation from manufacturers? What's your current expectation on when we could return to a more normalized supply environment in residential? Thanks. Thanks, Jeff. Yeah, look, I mean, I think that actually in this sense, for one, summer is a good measure for us. I mean, summer shipments in the last quarter were below what we believe is total production. I think the manufacturers took the opportunity to do some of the maintenance that they're required to do on their plants to keep them running. I think that, you know, their plan would be to run full out. There are pockets of real tightness around the country, and there are pockets where supply has eased. Obviously, this time of year, it's really difficult to call a full year and how that's gonna shape out. I think, you know, we would expect to see probably a slight drop in overall shipments year-over-year, allowing the manufacturers probably to rebuild some of their inventory. I think that my guess is the distribution channel did what we did as best they could in the quarter and put as much inventory as they could into their warehouses in a quieter period of time. As it turned out, the Q4, calendar Q4 was actually very strong, so probably less than we thought on the residential side. I think that, you know, early in the year, it's gonna remain tight. I think the manufacturer is gonna catch up. I think they're gonna put a little bit of inventory in place. I think that as we get out of this period of time in winter and, you know, the storms that we've seen over the last few weeks, bad for short-term shipments and really good for long-term demand, it generally causes damage, winter damage. You know, I expect us to see a decent pickup. Overall, I think, like I said, I think the overall demand levels are gonna be strong. I think it gets a little bit easier as we go through the year. I don't expect a sudden wide open market to reappear at any time in the next several months at least. Very helpful. Thank you. Thank you, Mr. Stevenson. That concludes the questions. Now, I would like to turn the call back over to Mr. Julian for his closing remarks. Thanks, Tania. I appreciate everyone's attention to our call today. I do wanna reiterate the pride I have in the team's performance in 2021. It is an incredibly challenging environment still, as we've articulated a number of times on this call. For us to deliver the type of transformational year that we have and set the building blocks for our future ambition is something that I'm incredibly proud of, and we're really looking forward to talking to you all on at the end of the month at Investor Day. With that, thank you all for your attention. Good night.