TopBuild Corp. (BLD) Earnings Call Transcript & Summary

Well, good morning, everybody, and welcome to TopBuild's 2022 Investor Day. I'm Tabitha Zane, Vice President of Investor Relations, and I joined TopBuild about 6.5 years ago in October 2015, about 3 months after we spun off from Masco. Prior to joining TopBuild, I was with a publicly traded REIT for 13 years. And I'm really glad to be here, and I think I know most of you here in this room. And again, thank you for joining us in person. To everybody on the webcast, thank you for listening. We have a great half day planned for you. We hope you leave here with a good sense of our vision, depth of experience of our management team, a deeper understanding of our 2 business segments, Installation and Specialty Distribution, and a clear vision of our growth strategy. We're very excited about what the future holds and believe that the many competitive advantages we offer will enable us to outperform in any environment. This year, we decided instead of giving out a gift, we would instead make a donation in your honor to 2 groups, we believe, are making a difference in the communities that we serve. The first is Habitat for Humanity. TopBuild has partnered with this organization for many years, contributing time, material and financial resources to help Habitat achieve its vision where everyone has a decent place to live. The second group is the Posse Foundation. It's an organization focused on identifying and nurturing talented high school students. Posse believes that the leaders of the 21st century should reflect our rich demographic mix, and their goal is to cultivate the leaders of tomorrow. Before we move on to the formal presentation, which is available on our website, I must point out the obligatory safe harbor statement on Slide 4. This presentation is being webcast, and a replay will be available. Moving to today's agenda. Robert Buck, our President and CEO, will provide you with an overview of TopBuild and our strategy, including a discussion of our company's culture and focus on operational excellence. We will then move on to the individual presentations. First up is Jennifer Shoffner, our Chief Human Resources Officer. We all know that talent is a key focus for most companies, and Jennifer will outline why we believe we are the employer of choice in our industry. Jennifer will be followed by Robin Stennet, Vice President of Innovation and Marketing, and Sri Pullareddy, our Chief Information Officer. Robin will talk about how we think outside the box and bring innovative programs and services throughout our organization. And Sri will then talk about our connected technology platform, which we believe is a key competitive advantage. We will then move to our first Q&A session followed by a short break. Next up will be Steve Raia and Jeff Krestancic, who will discuss our installation operations, then followed by Jeff Franklin and Joey Viselli, who will cover specialty distribution. We'll move back to TopBuild, and Rob Kuhns, our CFO, will discuss M&A and our financial outlook. We will then host a second Q&A session. And during lunch, which will be in the room where breakfast was, you'll have an opportunity to sit down and talk with all of our business leaders. I also encourage you to visit our product showcase in the back of this room during the break and during lunch. We've brought 9 examples of the different types of insulation that DI distributes and in many cases, fabricate. And Rip Hubbard, our Supply Chain Senior Vice President, has created our famous wall of insulation, which I know brought many of you here today, and it has samples from just about every type of insulation available. So we'll start the day with a brief video, then Robert Buck, President and CEO of TopBuild, will take the stage. [Presentation]

Okay. Good morning, everyone. Welcome. Glad that you're here. Glad to see folks back face-to-face, which talking to several of you before, I think you're glad to be back face-to-face as well. Welcome to those on the webcast also. Look, we have a super exciting story to tell about TopBuild today, about the business that we built and about the future of the business as well. I'm Robert Buck, President and CEO of TopBuild. I'm really fortunate to have a job that I love and that I'm passionate about. But guess what? I also get to be your master of ceremonies today, which I'm really excited about because they don't let me do this very often. So -- but we're excited to be here for multiple reasons. One, to talk about the business and talk about where we see it going. But the other thing is to really share our confidence of why TopBuild will outperform in any environment. And that's the common theme that you'll hear us talk about today throughout the business, what we've built, but most importantly, how we continue to hone that model and improve that model for the future. So a few common themes that you'll hear throughout everyone's presentations today and some key messages. So first, what's happened with the company since 2017? How has the company evolved since 2017? A little about my history. I joined this company in 2010. And really, if I think about my time here 12 years in the business, I think about how we've developed this model, how we continue to evolve this model during that time and really what we developed in the first 7 years and what's happened with this model since 2017. Prior to that, I was with our previous parent company, Masco, for 13 years and in the building products industry my entire career actually. My background is heavily grounded in operations. And you'll hear a little bit of a chuckle from the crowd today, especially our leadership team, but I have a strong background in IT as well. So -- but all joking aside, I think that background in IT gives me a unique perspective on how to leverage technology and how to make technology a differentiator for our business. And I think we've done that and you'll hear that today. So since '17, what have we done with the business? We doubled the size of the business in revenue. We continue to expand our presence, geographic presence, not only in the U.S. but in Canada now. And we further differentiated and diversified this business. So we'll talk about our end-segment diversification and how not only have we diversified the business, but we've continued to build and solidify our industry leadership position in all 3 end markets that we service. You're going to hear today from our engaged, energized and really tested leadership team. And I think you're going to sense an energy. But you're going to hear common term of engagement, engagement of our team and engagement of our workforce, which I think is a really differentiator for us, especially in these times. We're going to talk about how we foster this culture, a culture that's founded in entrepreneurship, local empowerment, and are really a drive and a spirit in continuous improvement and operational excellence in all that we do. And it's more than just a culture and a spirit. It's really a cadence of how we run our business every day. Talk about our unrivaled scale, not just from a supply chain perspective, but also across our footprint, our proven track record of strong execution and really a unique and flexible business model that we'll talk about in detail that absolutely prepares TopBuild to outperform in any environment. A capital-light business model that generates a lot of free cash flow. I'll talk about our M&A track record. Rob Kuhns will go deeper talking about how we've deployed capital in our business, and most importantly, the returns that we've gotten from that. And then the growth of the business and the growth of the business in our core insulation, that's a key message for TopBuild. Our core business is insulation. Everything we do is really grounded in that core of insulation. So how we grow the business, how we run the business from the people side. You'll hear that from Jennifer Shoffner from the talent perspective to how our operators bring it to life every day and operationalize it in over 410 local businesses every day, to things that we do to continue to grow the business. In technology and innovation, you're going to hear from Robin Stennet and Sri Pullareddy. But it's more than just technology and innovation for their sake. It's a practical approach to technology and innovation. A little bit of the snapshot of the company. If you think about today and maybe also thinking back to 2017, last time we stood in front of you for Investor Day. Headquarter, Daytona Beach; $6.2 billion market cap. If you're standing here or part of this Investor Day in 2017, was a little less than $2.5 billion. So we generated nearly $4 billion in market cap since '17. Nearly 13,000 employees, Jennifer will talk you through the demographics of that. Over 410 branches or what we call local businesses. From a segmentation perspective of the business, today, 58% Installation, our TruTeam business; 42% our Specialty Distribution business. If you're here in 2017, that was 67% Installation, 33% Distribution. Our core is Insulation. You can see from the product mix, 81% of the business, insulation or insulation-related accessories. And then the end market diversification that we've driven in the business that really sets us up for great success in the future, 63% residential, 28% commercial and 9% industrial. Really diversifying the business organically and through the acquisition of Distribution International. If you saw that segmentation back in 2017, 80% residential back at that time, 20% commercial. So a great job of executing the strategy of diversifying our business model and establishing ourselves as the leader in Installation and Specialty Distribution now. So a little bit about the evolution of the company. If we were here in '17, we talked about, "Hey, pre-2005, highly acquisitive. 2006 through 2010, it was a time of rationalization, the Great Recession." But then we were standing here in '17 talking about, look, from 2011 to '16, we really honed this operating model that we have, really started to establish the discipline in the business and really starting to create this unique operating model that we had, diversifying the business, diversifying the business in the core of insulation, starting to build our commercial model, continuing to build on residential repair remodel and really leveraging our unrivaled national scale. Standing here in '17, we were talking about, "Hey, we're continuing to hone that model driven by continuous improvement." We were building that strong track record of execution and results. And we promised we would continue to deliver that, which we've done. But then we also talked about, hey, how we're going to deploy capital, how we're going to execute on our strategy of capital allocation. And we've done that with a very focused and targeted approach. And we'll talk about those results as well with our experienced M&A team and the competency we built in the area of M&A. To today, what have we accomplished? What have been our achievements in that core business of insulation, doubling our revenue, expanded our EBITDA margin 700 basis points since we stood in front of you in 2017, diversified the end market exposure, minimized the cyclicality, that tremendous diversification we built in commercial and industrial now that prepares us for the future and to outperform in any environment, continue to grow in our core of insulation, being so laser-focused in that core, successfully completed 28 acquisitions in the past 6 years, and we'll talk about those results, continuing to build this culture centered around the people side of our business, entered the Canadian market with a leadership position and established our ESG program, which is inherent to our model and driven by our Board and our executive leadership team. So you've seen the proven track record. What we're excited to share with you today is how this track record is going to continue for the future. I think we've done a nice job of expanding our total addressable market. Back in '17, we were talking residential and commercial, about a $9.5 billion opportunity for total addressable market back at that time. Today, over $16 billion total addressable market. Significant opportunities to grow, we believe, in residential, commercial and industrial, across all 3 end markets, which, again, we are the leader today. Probably my favorite chart or my favorite slide of the day talking about our experience and our expertise of strong execution and how we deliver that on a consistent basis. So talk about the revenue, how we've doubled the revenue at the same time diversifying the business in a growing residential environment. I think that's impressive. Free cash flow, continue to generate free cash flow at an impressive rate given the capital-light model that you'll hear Rob talk more about. That expanded adjusted EBITDA margins, 700 basis points, really driven by 4 things. Our focus on operational excellence, this cadence of driving improvements in the business every day, driving improvements in the business every day. And by the way, we're not out of opportunity. We still see a lot of opportunity to drive those improvements every day. This discipline around driving productivity, driving pricing, driving efficiency in the business. That's helped absolutely expand that margin performance. Supply chain optimization, backwards and forwards in the supply chain out into our field operations across our footprint, U.S. and Canada, also working with our supplier partners. And then leveraging. Leveraging our back office, but also leveraging our fixed cost model as well. These things and a very focused approach have absolutely allowed us to expand that EBITDA margin 700 basis points. And then the total shareholder return, you can see to the right. Our total shareholder return compared to our peer group as well as compared to the S&P 500. I think you would say a great track record for TopBuild in driving shareholder value. So I'll leave you with one thing here. There's still plenty of opportunity in this model, and this leadership team absolutely believes that, lives that every day. But if I'm with you, the question is Robert and team, how do you ensure that this success continues? And I think it is about the foundation of what we've built in the company here. And again, it's more than just about a culture and some values on the slide, it's about the cadence of how we run the business every day. Starting with safety. I'll go detail into safety, but I think safety is a core of our business, cornerstone of our business, putting our people first. And that proved itself really well during COVID, how we took care of our team, and the benefits that we saw from that and our team and their families saw from that as well. Integrity. How we run the business with a high level of integrity, respect and accountability. And that accountability is about results, driving results, driving profitable growth, executing well every day. Focus. Customer-focus, that's external customer focus, but for us, it's also internal customer focus. We're a very aligned team. As a matter of fact, we call our group in Daytona Beach the branch support center. That's an aligned team that's there to support our branches. And that spirit lives in the cadence of how we run our business. But it's also about this focus of relationships, relationships to our customers, relationships to our supplier partners, relationships to our investors, but also relationships internally with our workforce and how we engage our workforce, we think, at a whole different level compared to others. Innovation. Continuously driving improvement, fostering new ideas, being open to new ideas in the business. Unity. United as one team, you're going to hear that today, one team and how although we're a dispersed business, over 410 local businesses, 13,000 employees, how we are very aligned and operate as one team and pull together as one team, valuing diversity. Community. Making a difference in our local communities that we service, both from a charitable perspective, but also from a perspective of how we drive great solutions, energy efficiency solutions that benefit our local communities and our customers and end consumers as well. And then empowerment. Again, another theme you're going to hear, local empowerment. We're all about empowering individuals to do their best, but empowering our team to do their best as well. So this is the foundation of the company that we've built, but it's also the foundation of what we continue to improve every day in how we run the business. And we think this is key to our success, the past, present and absolute results we'll drive in the future. So safety, talk about my favorite slide, this is my proudest slide. So if you think about what happens in TopBuild world on a daily basis, on an average morning by 6:30 local time, we dispatch out about 6,000 trucks, 8,000 installers, 1,300 salespeople, 500 delivery drivers. And on an average day like today, we'll visit over 16,000 job sites in the U.S. and Canada. So our culture of influencing people to do the right thing whenever no one's watching relative to quality, relative to productivity, relative to integrity, relative to safety, that's our culture. And that's a secret part of who we are and the culture that we foster. And safety is the cornerstone. You can see we have industry-leading safety. If you look at the right of the chart here in our incident rate, personal injury rate. But you know what? We're not satisfied. We're always striving for 0, keeping our teams safe every day so they go home to their family safe every evening. For us, it's about a personal message around safety. That's why we think we connect with our employees at a whole different level. It's about a lifestyle of safety at home and working for TopBuild. That's why we are industry-leading. That's why we're best-in-class in safety. And it's about a real personal engagement of our workforce that drives the safety but also drives for how they feel working for TopBuild every day. So talk about our unparalleled unrivaled footprint across the U.S. and Canada, over 410 locations. First, starting with our TruTeam installation locations. The ability to service over 99% of the housing starts in the U.S. Also facilitated by our Service Partners distribution business on the residential and commercial side helps facilitate that servicing of the residential housing market as well as the repair/remodel market. But then also this footprint allows us to really capitalize on the commercial opportunity across the country as well, both heavy commercial, which you'll hear Jeff Krestancic talk about heavy commercial versus light commercial a little later this morning, but then our residential branches can capitalize on that light commercial opportunity as well. And then with our Distribution International acquisition. Over 100 locations, leadership position in the mechanical insulation space, both in the U.S. and Canada, so an entry into Canada here; the only national distributor of mechanical insulation. So we have unrivaled scale, footprint, buying power. We're able to service builders, contractors of any size, geographical location. And then we bring a value-add that others don't bring. If I think about it from a labor perspective, if I think about it from a services and expertise perspective, but then I think about it from a fabrication perspective. You'll hear us talk about our differentiation relative to fabrication on the mechanical side of the business. The other thing about the footprint, so much white space for future growth opportunities, both through M&A, organic growth and a greenfield strategy as well. Talk about the total addressable market that we've expanded to $16 billion. So let me break that down in our leadership position in all 3 end markets. So on the residential side, $5.5 billion market opportunity. Today, we enjoy a 40%-plus share in this space. That's broken about 30%-plus on the TruTeam side of the business and 10%-plus share on the Service Partners side of the business, distribution. Our labor network and our ability to service contractors, customers of all sizes really provides our ability to continue to grow in this space. Our commercial building insulation, again, 11% share of a $5.5 billion opportunity. This is an area that we've done a great job of growing organically over time with our bundled product solutions and our ability to service light and heavy commercial. And then now with the DI acquisition, another $5 billion market opportunity where we are the leader. Commercial and industrial mechanical insulation. A little better than a 10% share there, providing that custom fabrication, a really unique piece of the business, a recurring revenue stream in the maintenance, repair and operations side of the business. And again, a leadership position in the U.S. and Canada. So great opportunity to grow organically and also through targeted acquisitions across all 3 end markets and a lot of addressable market here in the $16 billion worth of opportunity. The other part of this is all of these markets, very, very highly fragmented. So there's a lot of white space here relative to acquisitions, a lot of white space relative where to grow across the footprint and across the 3 end segments. So reality check, right? A lot of question today about the health of the U.S. housing industry. I think this chart tells you a few things. Number one, it doesn't tell you is this is a very different environment than 2008. So let's not be confused about today's environment versus 2008. 2008 where people were highly leveraged in their homes, and the industry had grossly overbuilt back in 2008. That's not today's environment. If you look at the chart, 50-year history of housing starts, 1.42 million. The last 10 years, we've significantly underbuilt at an average of 1.17 million per year. Household formations between 2018 and 2028, expected to be 12.2 million. So strong household formation. On top of this, another 250,000 to 300,000 homes we destroy in the U.S. on an annual basis. So we would say from a demand perspective, there's a built-up demand of, just doing the math here, well over 2 million -- sorry, 2 million homes that we've underbuilt. And I'm sure you read the same things that we have. There's estimates out there that say that number's somewhere between 4 million and 5 million homes that we've underbuilt in the U.S., and there's pent-up demand for. And then you've got the rise in interest rates, and look reality, right? The rise in interest rates are probably pricing some people out of the market today, but they're still historically below the average interest rates over the last 50 years, and you got an environment of rising wages as well, helping consumers with the increasing housing cost. So we look at the reality, we remain optimistic. We think there's the fundamentals on the macro side to continue to provide steady growth in the years that we're looking at ahead. And I think as we think about this, our ability to outperform in any environment. If there is a blip, if things do change quickly, we know how to adapt. We have the playbook for that, and we will outperform. So you should take away from this, we have a good reality check, but you all should understand our optimism in this and also the model that we've built. We've diversified the model in preparation for how things could change from a cycle perspective. So TopBuild is very, very well positioned today and for the future. We talk about the unique business model. So I do want to hit on some key points here. Operational excellence. Again, it's the cadence of how we run the business. It's not just a bullet point. It's not just something we say. Most importantly, we've shown it in our results over and over again. We're constantly driving improvements in this business. Talk about the diversification, minimizing cyclicality in the business, how important that is for today and for the future. But this M&A core competency, not just targeting the right companies, not just integrating the right companies, but generating great, great returns from M&A perspective and from a capital perspective, capital deployment perspective. How does it differentiate us? The strong local presence and reputation fostered by the strong local relationships externally with our customers, supplier partners, but also with our workforce. And look, I mean, one thing that if you take between the housing environment, the main discussions were materials and labor. How we engage our labor force is second to none. Our proven ability to leverage our footprint, best practices and assets. You're going to hear us talk about technology. We think this is a differentiator for us. How we can leverage, how with just a drop and a drag of a mouse, we can move crews, equipment, labor from Tampa to Orlando in a matter of minutes. How we can look -- one of our best installers in Dallas, Texas, Clay Parker, how we can look at Clay and see his productivity. I can tell you what Clay installed in the last hour. How many square foot he installed, what's his productivity, what's the margin on that? I mean, these are powerful, powerful tools if you think about our dispersed model and how we utilize that every day to drive improvements in the business. So the technology focus, but also our expertise, expertise in the products, expertise in building science as the environment changes. Our operators have talked about our flexible model, how we adapt to the needs of our customer. I've talked about the diversification we've driven, 39% commercial and industrial. Product breadth and knowledge, we are the leaders. We are the experts across all insulation materials and then this culture, but more than a culture of cadence and why we are the employer of choice. And why you'll hear us talk about and you'll hear Jennifer really hit on the details, we are winning the war on talent, and we're winning the war for labor. So if you said, Robert, boil the strategy down to 3 key areas. It would be these 3 key areas for TopBuild. Attract and retain top talent, putting the best people around us every day so that we perform. Best team on the field wins every day, and fostering that environment that I talked about. Succession planning, how we do that, how we bring talent and bench strength along in the organization all the way down to our programs, our manager and training program, which we have a great example to talk about today, which, by the way, this is a differentiator. Nobody else in the industry has what we're doing from a talent perspective. Improve and innovate in a practical manner. This drive to improve mindset, the tools that we put in place. You'll hear us talk about some -- you'll hear us talk about our new lead generation system. Nobody else has this tool and how we'll capitalize on that, providing benefits, by the way, to TopBuild, but all of our partners, customers, supplier partners and our shareholders. And then driving profitable growth. That's a theme in our company all the way down to the local salesperson. We're about driving profitable growth. Profitable growth, and whenever we talk about our model here in a few minutes, you'll see that's right in the center of our model. So this continued focus on operational excellence, leveraging the scale and building on this M&A competency to drive profitable growth and expand our market presence. M&A track record, 28 acquisitions over the past 6 years. Most importantly, the bottom right, consistently exceeding internal rate of return. So not just targeting the right companies, quality companies, integrating those companies onto our ERP system, but driving results, getting those synergies that we expected. We've got a great track record of that. We've got more opportunities across all 3 end markets on the acquisition side. We have a dedicated team, dedicated process, dedicated approach, discipline. You'll hear Rob talk about our discipline in this area. And I would challenge, I think you'd find it hard -- there's very few companies that have our track record on the successful M&A strategy like we've proven at TopBuild over the past 6 years. So I talked about the framework and the model that we've built. It's really around these 4 areas: people first culture. Hiring, developing the best people and empowering them to do their best work; operational excellence, driving it for our customers, but driving it with this continuous improvement mindset and really driving results, industry-leading results through this focus on operational excellence every day. Proven business model for value creation. I think you can see our track record for execution and results, clear strategy for leveraging this model that we developed but continuing to improve this model consistently. Driving execution. We value simplification. And when we think about processes, decision-making, we're all about simplification to deliver those strong results. And then our environmental focus, our focus on sustainability. I'll talk about our ESG program, how proud we are of it. But inherently, how this environmental focus lives in our business every day and how we bring it to life for our customers, for our employees, equally important for the environment where we operate every day. So our ESG focus, obviously, on the environmental side, I'll talk more detail about that, but what we bring to life with the products, what we bring to life in our operations every day. Our social focus, putting our employees first, their well-being, fostering this environment of equity, diversification and inclusion. Our principles around integrity and accountability and driving results from that, results that motivate folks. And then governance, I think you've seen a very strong governance makeup from TopBuild since our spin from Masco in 2015. So a strong commitment from executive leadership but also our Board as well. But from an environmental perspective, this is where we get excited about ESG because it's inherent to our business every day, what we bring to life, the products that we install and the products that we distribute, how it drives energy efficiency, significant energy efficiency in all the residential, commercial and industrial structures. Those 16,000 job sites we visit every day, we're driving energy efficiency in every one of those job sites every day with the work that we do. You can see typical residential fiberglass and look at the benefit to the environment for residential fiberglass. And by the way, mechanical insulation is only better than that. Our products drive thermal efficiency, reduce emissions, lower energy usage and cost and reduce that carbon intensity for heating and cooling, residential, commercial and industrial. Over 16,000 job sites a day we're making that difference. 81% of our revenues related to products that are driving and improving energy efficiency. So I think if you take that framework, you take our focus on ESG, what we do inherently every day positive for the environment. We are confident in our ability to outperform and our ability to make a positive impact for the environment. So I'll stop where I finish, and that is excited to be here, excited for you to hear from this energized, engaged leadership team. I think you're going to -- you can see that from a diversity perspective, we leave that from the top down. You can see the amount of experience, years of tenure, the experience that this team brings to this. I think what you also sense is this word, engagement. I want to go back to how this team is engaged in the business, engaged with our workforce, passionate about the business. And I think that's what you're here to see, the passion of this leadership team. And I think you'll absolutely walk away with undeniable passion around this business from the leadership team. We have the best operators in the business that you hear from today, how do we operationalize this culture and execute upon it on a daily basis. And then you're going to hear some unique perspectives today. I think about Sri Pullareddy, our CIO. He's not just a technical expert. He's a business person. Sri has probably visited more of our operations across the country in Canada than anybody in this room. He's seen as a business leader. I think about Rip Hubbard, that you probably met or will meet as part of the product showcase. In these times where supply chain challenges are demanding, Rip has a great relationship with all of our 200 operators-plus on the TruTeam side and all of our operators on the Specialty Distribution side working together every day as one team for the best TopBuild answer. This is about engagement, how we build relationships throughout the business. You'll absolutely see that today, and I think you'll see the engagement and energy of this team. So with that, I'm going to turn it over to Jennifer Shoffner, our CHRO. And Jennifer, I think, will do a great job of how we're winning the war on talent. Thank you, everyone.

Thanks, Robert. Good morning. As Robert said, I'm Jennifer Shoffner. I'm the Chief HR Officer at TopBuild. And I'm excited to be here on what is my first Investor Day. As a quick introduction, I joined TopBuild about 2.5 years ago. I joined the company to build and lead talent function. So this is, as Robert said, a topic I'm particularly passionate about. I moved quickly into this role. Before joining TopBuild, I worked for about 23 years at a Masco company leading HR. So given TopBuild's history with Masco, I was certainly familiar with the business and familiar with some of its leaders. But now I'm happy to be part of this team and talk to you today more about talent. Some of the messages I'm going to talk about really relate back to something Robert said about being an employer of choice. And that means, obviously, as we're recruiting people, we want them to choose TopBuild, but we also want them to choose TopBuild every day, to choose being with us and staying with us. And so we have some unique things that we're doing to attract talent, retain talent and keep people engaged every day, and we'll talk about that. Also about our culture and fostering this culture around diversity and inclusion and this drive to improve mindset. Before I get more detail into some of those principles, just wanted to orient you to our workforce. You can see what our workforce is today versus what it was last time we shared this at Investor Day in 2017. And we're really proud of the direction each of these numbers has moved. Today, we have a little over 13,000 employees across the U.S. and Canada. 8,000 of those are installers. You'll hear us talk about -- and you'll hear me talk about it in just a few minutes some unique things we're doing to really take care of that group of employees because they're so important to our business. Across our business, 61% of all of our employees are people of color. And at our branch support center, our headquarters that Robert referenced in Daytona Beach, of all of our managers and above, 45% of those identify as female. So again, we're really excited and proud of the diversity that we're driving into our business. We're also really fortunate to have experienced employees. Even with the growth that we've experienced, the hiring that we've done, we've maintained a real successful tenure in our industry. Across our business, 5 years is the average tenure for our employees. And among our managers and above across the whole business, it's 8 years, a little over 8 years. So that experience really helps us in a number of ways. You heard Robert talk about things like safety, productivity, relationship building. Those are things that happen over time and get better with time. And so the greater tenure we have, we know the better we perform. Our talent strategy is pretty clear and concise. It really is about, again, being this employer of choice. As is much reported on, and you've probably had experiences with this yourself, the labor market is really tight. As you try to recruit and retain people, it's increasingly difficult. And so it's important for us to make sure that we really listen to our employees and understand what it is that's important to them and also follow the market, the labor market and see what drivers and trends are happening there. And so one of the things that we're doing, you can see several things mentioned here, I'll highlight a couple. One is really understanding what are the unique needs of our labor workforce is different. Different groups want and need different things. And so we really listen to what that is. One example of that recently over the last year or so has been around hybrid and remote work. I'm sure many of you are experiencing that as well when you listen to your employees and your own experiences. So that's something that since the pandemic, we've really been able to offer, where it fits in our business, remote and hybrid work for our employees. When we get people, again, we're really focused on retaining them. Some of the ways that we do that is really emphasizing the culture and the opportunities that we provide. Having our national scale and that national footprint that Robert mentioned really allows us to be able to move employees around to different -- across our businesses and at different locations. And we were able to really emphasize the power of that national scale and being able to provide comprehensive and complete benefits but also that small company feel. And that's a really unique part of our culture and something that employees really respond to and are inspired by just this idea of local empowerment. And you can be part of a larger company but have that feel of a smaller company and get rewarded for having that entrepreneurial spirit and engagement. And so that's something that's really important to what we continue to provide. We really stress this with our new hires and newly acquired employees and helping them integrate into our culture. I'll talk a little bit more about our direct labor. As I mentioned, that's more than 60% of our workforce. And for us, direct labor are our installers, our drivers and now with DI are fabricators. And this is a workforce that, again, has some unique needs, and we pride ourselves on understanding what those are and addressing those. One of the things that we do with our, again, national scale is work with partners who can provide us labor on a national scale as well. Some examples of us doing that, recently, we're working with a couple of groups right now who are placing veterans and refugees. These are organizations who have a labor supply that we can use. And so we're partnering with them to be able to diversify our talent pool. One of the things also that you heard Robert mention is safety. That's such an important part of our culture and how we care for our employees. And we train them when they first come on as to how to work safely, but we keep that training going. Last year, we provided 16 hours, on average, across our field for safety training for our employees. So making sure they understand and keep that top of mind as they work and go home each day. We're also moving to a more formal performance evaluation process for our direct labor. And you may think, "Well, doesn't everybody do that?" No, they don't. A lot of our competitors in the labor market don't take the time with their direct labor force to talk about performance, to talk about goals and opportunities in their careers. So that's unique for us and something that we are taking that time to do. And then we also are offering competitive benefits. I mentioned that already, but really a complete package for our employees. Many -- most of our direct labor, they enjoy the same benefits that our professional staff does. And that includes a matching 401(k), tuition dollars, even holiday pay. Again, these may sound like commonplace benefits, but they aren't, not for this job group. And where we compete locally or regionally for talent, these employees aren't used to having, in some cases, holiday pay or certainly matching 401(k) or education dollars. So this is something that at our scale, we can offer these complete benefits and really compete well in the marketplace. And it is a differentiator for us. Digging a little bit deeper into this direct labor group are our installers. I mentioned we have 8,000 of these. And you'll hear Jeff and Steve talk more about our installer group when they present. Our goal here is really to attract and retain this talent. And so one of the things that we've done, we've done some unique things with this group that I'll highlight. One is in 2020, we created a program that we call friends and family. And that is an employee referral program. And it is really, it's pretty simple. We pay employees to refer installers to us. And so when we hire an installer who stays with us, over the time that they stay with us, the employee who referred them gets paid for that referral. And it sounds pretty simple. It's been quite a win for us. Last year, which is the first full year we've had this program, we hired and retained 1,200 installers through this program. So it's been quite successful. We have obviously new installers who have a great job. We have employees who are getting paid for the referral, and then we're getting the benefit of that work as well. Most of our installers are compensated through piece rate or productivity pay, which means the more they install, the more they get paid. So we spend a lot of time helping them understand what their earning potential is, how to work efficiently and productively so that they earn more. That's a win for them, obviously, a win for us as well. We take care of our employees through safety, through compensation. This is another example of that. On average, our installers earn between $55,000 and $65,000 a year. And last year, 30% of those installers made more than $70,000. And again, this is a good example of taking care of our employees, making sure that they have a good life, that they're living a good life, working safely, but also have a good livelihood. Another example of just taking care of this group is -- and really our whole direct labor group is during COVID, we provided what we call COVID pay so that when we had an employee who was sick with COVID, they could take time off work and take care of themselves, keep the rest of our workforce safe and then come back to us and continue working. And as Robert said, that's just one of the many ways that we show our employees that we care about them and inspire them to continue to choose TopBuild each day. Another thing that we're doing for our installers is providing job opportunities, career opportunities where they want to advance. They can do that through traditional means of applying for jobs. We also have, as was already referenced by Robert, a Manager in Training program. And I want to talk about that just a little bit because it is customized. It was created by TopBuild and is such a unique program. The program was launched in 2005. It is really a program where our MIT participants come into the program and they learn this program, they learn our business from the ground up. They start out installing or loading and unloading trucks. They work throughout our branch operation, learning how to budget for the branch, learning the back-office functions, billing, scheduling, just the whole branch operation. And it's a 12- to 24-month program. We have anywhere from 15 to 20 people in this program at any one time. And we keep it to a small manageable number because we want it to be a high-touch experiential learning. And it really is a one-on-one. We have -- we don't have more than one of these at any branch so that they really get that one-on-one attention and mentorship. We have great retention through this program. We have a lot of great example, dozens of people now across our business who are in management positions who started out as MITs. You'll hear from one of those later this morning, Jeff Krestancic, is our VP of Operations for TruTeam, and he was one of our first MITs. You've heard me talk a little bit about diversity and inclusion or D&I already. And certainly, that's been something that we've been very focused on for the last few years. A lot of companies have talked about and been focused on D&I for the last few years. So why is that important for us? First, it gives us a greater range of talent. We've been able to access a deeper pool of talent by focusing on this effort. It's also helping build our culture. As Robert said, we have this drive to improve mindset, and D&I is one of those. How can we use that to really enhance our culture, and it fits well with our value of unity. We've been very focused on awareness and education and starting to build our D&I function from that space. And some examples of that, last year, we provided unconscious bias training to about 2,500 employees. And that was a great basis on which to start this effort. We're also requiring a diverse slate of candidates for all of our leadership positions, and that's moving the needle on our representation in our leadership group. We've also increased our diversity in some of the programs that feed talent into our organization, like the MIT program that I mentioned, it's quite diverse now as well as our internship program. And these are great ways to build that diversity into our leadership pipeline. Last year, we had an all-employee survey. And for the first time, we asked questions about diversity and inclusion. And 78% of participants of that survey answered positively when it came to talking about our company's commitment, real commitment to D&I and their feeling of belonging and inclusion. So we're happy with that baseline. But again, with that drive to improve mindset, we continue to set the bar on how we can build D&I into our culture. I mentioned our all-employee survey. You can see here some of the direct quotes from that survey from employees, and you get an idea of the sentiment of employees for why we are an employer of choice and why they choose TopBuild every day. It's important to us to listen -- to ask our employees for their feedback, and then listen to that and act on it. A couple of things that I've mentioned already here today came as a direct result of our survey. One is hybrid and remote work that I mentioned. Another is related to diversity and inclusion. We now have a D&I Council that helps, really, with kind of bottom-up programming around diversity and inclusion and creating conversations in that space, and that came from this employee survey as well. So some key takeaways here. We are doing some unique things, as I mentioned, unique to TopBuild. Our goal with talent is to create an experience for employees that's connected and that's engaging and most importantly, that fits our business. And Robert talked about the cadence to our business and really operationalizing the things that are important to us. And so we work with our business leaders, many of who you'll hear from later this morning, around our talent efforts and making sure that they really check 3 boxes. One is that they be practical. We value simplification, as you heard Robert say, and so they have to be practical in our business; that they be engaging and inclusive because that's part of the culture that we're really trying to enhance; and that they'd be flexible. We know that our business is going to change. We know that the labor market will change, and we need to be flexible to change with that. And so our commitment is to do those things. It's to be able to operationalize great ideas, make them fit for TopBuild and continue to help our company grow profitably. Thank you for your time. And next, I'll turn it over to Robin Stennet and Sri Pullareddy.

All right. Good morning, everybody. How's everyone doing so far? Good? Good? Excellent. I'm thrilled to be here. I'm Robin Stennet. And I lead Innovation, Marketing and our Building Science business unit, TopBuild Home Services, which my partner, Jeff, will talk a little bit about later and how we work together with TruTeam. But I'm really thrilled to be here with Sri, our CIO, to talk with you about the importance, and I would even say the evolution, the journey really of innovation and technology at TopBuild and share a few examples with you of things that are in progress right now that we're really, really excited about. It's interesting because everything we're going to talk about really is anchored in several of the concepts that Robert already introduced and Jennifer started punctuating already, which are how every single one of us and every team is really focused on delivering operational excellence, supporting the field, creating opportunities for future profitable growth, and ultimately anchoring all of that in a culture, not just words on a slide or just our team thinking about innovation and technology, but really a culture of how we improve every day to keep the exciting trend of our results really going. So really excited to share with you some examples of that here in a moment. A little bit about me, I've been with TopBuild just about 3.5 years. And that's after 20 years in IoT, tech and telecom, where I spent a lot of time creating digital experiences for our customers, product apps as well as sales and service experiences for internal teams, spent a lot of time doing product plans and segment plans and market plans about growth, growth, growth. And so when I left that world and decided to move over into construction with TopBuild, a lot of my colleagues and friends in tech were like, "You're going from tech to construction, that seems not the right direction. It's how could you go from something so innovative to something that is so not innovative, right, in construction?" I have to say, I have found that not to be true. And one of the reasons I'm still here is we have an incredible expectation, opportunity and challenge for innovation, and it's pretty fun to bring innovation to more legacy environment. So I'm excited to share more with you, and I'll ask Sri to introduce himself.

Thanks, Robin. Good morning, everybody. My name is Sri Pullareddy, Chief Information Officer for TopBuild. Robert talked about my operations exposure. It has been a rewarding journey and experience for me, visiting branches, meeting our people, learning and sharing and taking it back to IT. And it's like making a difference. So a little bit about myself. I started my journey back in 1990, working on Schaeffler, making ball and roller bearings. For next 10 years, I took several manufacturing roles and moved on to work for Oracle, GE Industrial Systems, GE Medical Systems and learned ERP applications. That led me joining Masco Contractor Services back in like 2007. Over next 15 years, I had great opportunities, focusing on business simplification, digitization, M&A-related integrations and developing a connected ERP platform. You will hear a lot about that today. And a great opportunity working with Robin and her innovation team. Back to you.

Thanks. So we're going to tag team this a little bit today. And first of all, just to kind of talk a little bit about our journey and some key ideas that we want to share with you today that you'll see punctuated in some of the examples, we'll show you, and also a little bit about the journey. So much like Jennifer, I was not part of the TopBuild family during the last Investor Day. But at that time, we didn't have a focus, I would say, in terms of team practice on innovation. So what's happened to drive that since then, first is just the recognition that over the time that we have grown so dramatically both in terms of geography, the diversity of product, the diversity of end market, the diversity and expansion of the employee, the workforce, our customer base really need to be additionally aware of what's happening in the market. And that awareness could be in a variety of areas, absolutely in terms of process and how technology could be affecting the built world and the construction process itself, secular business and consumer trends, demographic shifts that are absolutely underway as well as things that are more advanced topics like increased advances in material science, robotics, autonomy, data analytics things like that and how those could either affect or enable parts of our business. So huge focus on awareness. Secondly, the other piece of that is how do you maintain awareness, but then at some point, awareness needs to translate to action of some kind. So we really developed the innovation practice, which is first my team, Sri's team, but really in partnership really with the rest of the business, which we'll talk about here. And how do we take that test-and-learn mindset and apply it to our environment. So how do we identify, pilot, measure and then keep kill the things that make sense to bring into the business. The third area is, and you might start to think, they're going to keep talking about this drive to prove, we totally are. And that's because it really is a real thing. It's true and it's an anchoring part of how we function. So innovation is not something that sort of we just bring into the business, we're actually being motivated, inspired, challenged by that improvement culture that already exists especially in the braches as they think about their local business as their own. So that helps us with thinking of technology and innovation as an agile, flexible component. And the fourth piece there is actually investing. So we're going to talk today about investments in our existing platforms, which are really critical to ensuring scale in our most important business processes, but also balancing that with new opportunities and ideas and being willing to curate investments in new things that we do think have high potential. So those are some of the key themes that I think you'll hear today throughout. And talking a little bit strategically, the word innovation, having worked in this space for a while, can definitely mean a lot of different things to different people. So let's make sure to define for you strategically how we think about and then ultimately how we facilitate innovation. So the first key strategic approach for you to think about how we think about innovation is how we see change? Change agents, whether that's process, product, technology is all about looking at things through a dual lens. Could it be a disruptor? Sure, it could. Could it ever be opportunistic? Probably so. It's all in how you look at things, 2 sides of the same coin really. So this dual lens approach is really part of how we evaluate every single opportunity, disruptor for how can we create value ultimately to the business, no matter how we see it in terms of change. The second piece is understanding how that potential opportunity or that disruptor actually relates to the business. Every single idea that's an innovation idea, we challenge it for its relevance to the day to day. Jennifer mentioned practicality. Robert mentioned practicality. Sometimes people ask me at conferences, whatever, what kind of innovation? I'd say, practical innovation. They're kind of like, doesn't that kind of hit kind of practical innovation that those things go together. Shouldn't innovation be pie in the sky, [indiscernible]. Having worked with a lot of moonshot-type companies, I think that there's a place for that. But in our business, we find that innovation that is both walking forward while always tethered to how our business model works. What is it that produces those results that Robert showed earlier. We want to say always be looking forward, but always stay focused on the relevance to the day-to-day and technology not for its own sake, innovation not for its own sake, but for the sake of solving a challenge or contributing to that operational efficiency for that future growth. So the third piece of how that really comes together is how do we act on those ideas. And strategically, our focus is leveraging the network that Robert introduced and everyone will ultimately talk about unmatched access to suppliers, manufacturers, anyone looking for a channel, our employee base, our skilled and professional folks out there that understand this business. So how do we look at operationalizing these new ideas through the richness of that network. So how we look at change, creating practical ideas for innovation and ultimately following that up with operational excellence is the structure strategically of how we think about innovation. So how does this actually get into play, though? Innovation in action, it really is a team effort. From a leadership perspective, yes, Sri and I work a lot together on creating actual action out of these innovation ideas. But again, we won't stop saying that we partner significantly with our friends in the field to make this real for the business. And it is sort of an effort of leveraging skills. So innovation team, what we do is we're out there looking for new ideas that have an opportunity, that are small right now, but could be big in the future. Sri's team is really focused on hardening and scaling systems that have critical business performance every day. So how do we do that? My team, we really focus on identifying, staying aware of those trends that I mentioned earlier. The second piece is leveraging that network that I mentioned. Let's talk a little bit about that. Our existing network of traditional resources, suppliers, manufacturers, so much constant conversation, engagement with Rip and his team on what is the new thing that they're working on or what is the new challenge that we see that those partners could have a solution to. But increasingly, we're growing our external network of nontraditional resources, too. This is things like incubator and accelerator programs for start-ups out there, either domestically or globally, universities, programs that are looking at energy solutions in new and different ways, venture cap firms, any groups that are out there who may have an interesting point of view or opportunity for something we are thinking about. Once we find those opportunities, it's all about the pilot. I definitely come from a test-and-learn background. And so that dynamic approach actually fits in really well with the speed of our business. We identify something. We try to test it. We see if it works, measure it and decide whether or not to implement it. And we may do that in product, in process or service, but we also and what we'll talk about today is doing that in digital and in technology. So once we do that on our side, what's then the IT team doing? Well, they're doing all the day-to-day very important stuff, which is stewarding the core business systems, making sure that connectivity logistics, the device portfolio, all of the things that have to do with doing business day in and day out are functional and scaled. They're always working on innovation inside that portfolio. So where should additional protectionary cyber come in, data, analytics, other additional pieces around the right premise to cloud transitions. Certainly, they're inheriting any successful pilots that might come out of innovation to try to scale those across the business. But they're also, and what Sri is going to talk about is, innovating in our core systems in big hit ways, like thinking about reimaging ERP, which may sound very basic and normal to a business in order to really mobilize all our resources across the company. So that's a bit how we do that. Sri's team focused on hardening and scaling. My team is focused on finding new things and measuring and testing those. So I'm really excited to give you 2 examples of pilots that are in progress right now on brand new technology ideas, one of which Robert mentioned, that are really focused on 2 different outcomes in the market: one is a little more interior focused, one is a little more externally focused on customers. But as you'll see, they both have at their core, how can technology improve our cost to serve and productivity and create new market opportunity outside the business. So the first one of those really excited about is the lead app, which Robert mentioned briefly in his comments. This is our industry-first technology for sales management and for lead management. And our challenge here is in a very active construction market where we have access to essentially any project really when you think about it across residential, commercial and industrial, how do we help our sales team to more quickly identify, bid, win those projects and start to mobilize the sales force in a way that only our footprint really can. So we built the lead app. And having worked in data for a long time, something that comes to TopBuild, I've been a bit surprised by the complexity of construction data and the notorious fragmentation of construction data across thousands of sources, many of which are still paper-based or municipality-based and not particularly digitized all the time. So rather than just take a off-the-shelf CRM and just kind of give it to the team, we said, why don't we try to solve the problem that they have, which is manually kind of waiting through all the data. And so we started first by building a cloud-based data hub, which ingests, organizes, structures and then serves up this complex data across lots of different sources in one single view for them. Then we apply some smart business rules, a low-code automation stack on top of that to serve it up in a very simple user interface that kind of masks the rigor of the technology behind. And that allows us to not only deliver to the salesperson for each business unit uniquely, like what they want to see in order to drive their funnel, but it also helps us to quickly and nimbly make adjustments when they have, I don't like where this field is. Well, I'd rather see this. We can make those changes really, really quickly and for low cost. So we're very excited about this in a few ways. It's fresh. I mean this has only been out for a couple of weeks. And the initial feedback, especially from the commercial team is that it's helping to simplify their access to these activities and these projects rather. So we absolutely expect to see improved sales productivity. We expect to see greater access to particularly those commercial, but really any other types of projects. And the ability to do something that really no other company can, which is mobilize our sales force across regions, across product types, across end markets in a way that whether you look at the opportunities from top down or bottoms up, you start to see a full-scale mobilization that really no one else can. So we're super excited about that. I'm excited, just reminding myself about what we're doing. So the second piece here, the second pilot that I want to share with you another technology pilot, slightly different here, which is our first-to-market e-sales and service platform called Customer Connect, in our specialty distribution channel. The challenge here is how do we take the customer experience that our customers are already expecting and enjoying, but augment that with digital, what can digital bring to that. And so we partnered again with industry-leading e-commerce platform. And again, didn't take something off the shelf, but really created something in partnership to customize to the needs of our specialty channel. We have allowed customers to access certain information they are used to thinking about from an e-com perspective, but not when it comes to, say, mechanical insulation distribution. So account information, billing information, product information as well as really in demand safety, technical data content that has been available but requires a lot of manual interaction, so having a service rep e-mail or a phone call. So what's really cool about this, too, is it's not just generalized information, it's specific to their price book, by site. It's specific to their account. It's specific to their transactions. And the initial feedback from existing customers has been really promising around, "Hey, I love that I still have the live service experience that I'm used to because it's such a key part of our specialty distribution flavor. But I also really appreciate that at night or on the weekend, I can actually jump on and do something and not have to wait for this call center to open." The second thing that's been very interesting is this is bringing in brand-new customers who are digital first. So we've seen a group of customers who found us online, ordered online, quoted online and continue to either primarily or exclusively order online, which means, hey, there's a lot of opportunity out there for digital-first customers, and we're really untapped in that opportunity with this. So very excited about this. We expect to see improved cost to serve from a servicing perspective while offering this added value to our customer base. So you might say, okay, the lead app, Customer Connect. When those things are successful, what happens? Well, we should put it over to IT to ask them to help scale and harden that across the business. So I'll turn it over to Sri.

Yes. Thanks, Robin. So we talked about innovation. Innovation brings real benefits. One of the thing is that we don't chase technology for the sake of doing it. Robert talked about innovation as our core values. So we -- it has to deliver business value. So GPS is one of the great examples here. GPS has been there for a long time here. It's new to our industry. It's new to TopBuild in addressing specific needs and driving specific capabilities. For example, driving operational excellence and tracking employee productivity. So with 8,000-plus installers going to job sites, either from our branches or from their homes directly to these job sites, the business ask is threefold: Number one, time and labor compliance; number two, track employee productivity; number three, cut down or eliminate back-office manual admin work in tracking these time sheets, entering the job statuses and so far. So the solution for us is we'll leverage that mobile technology and package all of these capabilities into a simple-to-use app for thousands of installers with little-to-no training. So what they have to do is this smartphone, whether it's Android based or iOS, open the app, clock-in, lunch punches, clock-out until the app what material they used, how much they used and how long they worked on the job. So the outcomes are very tangible and they are real. Like we were able to get that time and labor compliance. We're able to track employee productivity, which helps our managers to guide, coach and train people need and employees for assistance, right? And number three, we were able to cut down or eliminate this clumsy, manual time tracking and all of those things, which is going back to we're able to drive this operational and financial performance. So let me give another example here about -- we talked about connected ERP, this operations experience. Robert mentioned about on any given day, we are touching 16,000-plus jobs. We are servicing 16,000-plus jobs at any average day, right? So our primary focus is to drive great customer experience while making sure that we are making profit and ensuring safety of our employees. This needed a ERP -- connected ERP architecture that seamlessly brings people, processes and technology, all of them together. So we did 3 things. Number one, we extend the ERP architecture with a smart mix of cloud and on-prem applications. Number two, relentlessly focused on end user experience of these applications. They got to be simple. They got to be easy to use. Number three, we brought all of the businesses together on one platform. So with that, we never missed a beat in serving the 16,000-plus jobs a day. While driving the synergies and empowering local branches, in terms of their markets, products, prices, material, sharing of resources between the branches, that is that operational excellence that Robert talked about, right? And then with this connected ERP platform, we actually can tap into this wealth of information, data and analytics to drive operational and financial performance. So let me take a few minutes to talk about this operations platform -- a connected operations platform. You know ERP has been there since 1970s. It has evolved, matured, gone through many technology cycles. But it all depends upon how companies leverage ERP. For TopBuild, ERP is not another transactional system. It is a strategic investment for several reasons. First, the M&A integrations. Robert talked about M&A being a core strategic growth area. Over the years, we brought 28 acquisitions or companies on this platform. Some of them on day 1 because of a simplicity of a design and the connected nature of this platform. It's a win-win. TopBuild gets the synergies quickly, while the acquired companies, they get to leverage their capabilities in driving operational excellence at their branches, right? Additionally, having all of the companies on one platform, all of the business units on one platform gives us a simplified controls, enhance the security, synergies, everyday operational efficiencies, whether it is back office or pricing controls and material location, sharing of resource that I talked about, right? Lastly, our operating environment is constantly growing, continuously growing. We want to make sure that we enable this growth by reducing complexity and driving simplicity, right? So before I wrap up, I would say that this connected ERP, our operations platform is a key element in our toolkit and is a differentiator and is embedded in the strong results that TopBuild continues to deliver. With that, Robin, back to you.

Thank you. So amazingly, when Sri talks about this, and Sri and his team are super humble, but I mean I think the operators will agree that this platform goes way beyond what you think about in terms of basic ERP, right? I mean it is allowing a mobilization of material, labor, pricing across markets. And so that's a really great example of how we're investing in our core platforms with an entrepreneurial spirit and innovation approach. So we'll wrap up this section kind of recapping some of the key points we really want to make leave with you when it comes to innovation and technology. And it's that innovative spirit that even in core platforms that are sort of part of the day-to-day business we're able to bring, while maximizing that focus on operational efficiency and ultimately profitable growth. But we don't stop just with the core systems, right? We want to see what's new, different and needs to be adapted and improved in our business. So we are seeking those opportunistic pilots that give us the opportunity to evaluate and scale new technology that could one day be as important, right, as our connected ERP. But all the time maintaining that practical tether not to reduce our innovative approach, but really to ensure that it delivers on the same types of results expectations that our partners and operations have around growth, revenue and cost serve. Third is how do we find those opportunities, making sure that we have our fingers on the pulse of a lot of different networks, our traditional relationships, suppliers as well as manufacturers as well as those nontraditional networks. And maintaining that dual focus, making sure that we don't see disruptors as threatening but more so as ways that we could potentially look at opportunities. And then finally, that drive to improved mindset that we continue to talk about across the team. I think Sri and I both are very privileged to lead some of these awesome examples of innovation, but it's not really our team doing innovation, it's the spirit and the focus of entrepreneurship at this company that kind of fuels what we are able to do and helps us to really deliver on that every single day. So really, thanks for the time to talk a bit about something we love to talk about. And I think at this time, I'm going to invite Jennifer and Robert back up for some Q&A on the first chunk.

For those of you on the webcast, if you look at the bottom left of your screen, you'll see an icon that you can click, if you want to submit any questions from the web. We'd be glad to take those. So we are going to pivot. This was going to be a fireside chat. It's a little bit warm up here. So it's going to be a panel discussion pivoting, okay? The other thing I want to mention that I forgot to, relative to ESG, we did publish our fourth annual ESG report earlier this week. So I'm sure if any ESG questions come up, I did want to mention. Hopefully, you've seen that. We published it Monday, Tuesday of this week. So a great job, Jennifer, Sri, Robin, talking through our journey with talent and diversity and inclusion as well as technology and innovation. Whenever we're talking to investors in the outside world, especially in this environment, Jennifer, you talked about relative to wage inflation, what we're seeing across our workforce, whether it be the direct labor side or also the professional side from a wage inflation perspective is a question we get constantly that how are we managing wage inflation. So maybe if you could address that, how are we managing that at TopBuild? And how do we manage that on a daily basis?

Yes. I think it goes back to the point I made earlier, which is really understanding the different needs of different labor groups, as you said. And so we certainly are seeing that in pockets in certain markets across the U.S. For our direct labor, as I mentioned, most of our direct labor is paid productivity. So we really focus on how to help them be most productive, most efficient. So that helps them with their earning potential. In our professional group, we're seeing some wage inflation as well, but we're also focused on some of the benefits and things that are important to them and drive value for them in terms of engagement, like I mentioned, flexibility, hybrid remote work. Those are things that frankly don't cost us anything, but really are a value to our employees. So we try to look at that sort of total package and take a surgical approach when it comes to the wage increases.

Okay. Great. If you do have questions in the group, just raise your hand. We have a couple of mics with folks that are roam round and take your questions, so first one.

It's Mike Rehaut, JPMorgan. Really appreciate it. A question on the lead app and the Customer Connect. Just kind of curious about -- I believe you said that the lead app was just kind of in the initial stages of being rolled out. If you could kind of describe a little bit more about what that might mean for the company over time? And also on the Customer Connect side, as well, you said that you're gaining some new customers through this that prefer digital, just kind of also curious about the time line of maybe rolling this out across the country and what it could mean ultimately for TopBuild?

Sure. So just to repeat the question around the lead app product that Robin spoke to as well as our Customer Connect, benefits we expect to see from the lead app, and then also is bringing us new customers. And then on the Customer Connect side, how we expect to roll that out and the benefits we expect to see that. So Robin?

Yes. So I think as I started to share, we're looking at these things as pilots. They're both very new. And so when it comes to a pilot, we will evaluate based on the success, how long or short it goes. So it's not necessarily a defined tenure of every single project. But I think the initial benefits that we expect to see, let's take the lead app first, absolutely sales productivity in terms of level of effort, time to get to bid, to get to win as well as the ability to really see, you can imagine over time, being able to look at market analytics in real time in terms of the volume of projects that are out there across the end markets. We have been really the go-to distribution channel, and I mean that in the macro sense of install and distribution sort of channel to the market, suppliers, manufacturers, a lot of interest in helping to identify how to get products across the business in a way that uses our scale, which the lead app will be able to do in terms of helping to look at sales force across the market in a more real-time way. So I think when it comes to potential benefits over time, it's certainly helping to improve commercial share, things like that. And when it comes to growing commercial and diversification there, just through better access and ability to really leverage those projects. On the Customer Connect side, I mean, I think that, look, digitization of channel is not a new thing, but it is not mason in our industry, especially with the complex products that are being sold in our specialty distribution pipeline. So I think we've been really pleasantly surprised by the digital intention of some of those customers there. And so we're going to exercise that through and figure out the right way to kind of grow it over time.

With lead generation, so you have products, so think about commercial, we have products to that the architects will specify across the country and maybe a specific contractor like a large Turner Construction or someone like that. So those products are specified. The fact that we have that footprint that we can supply and service and install those products consistently across the country. It's not just a benefit for Turner Construction, it's also a benefit for the manufacturers who are having that product spec and they want someone that can service that product across the country consistently as well. So we think that's a real benefit as we're getting all these lead generations coming in from these multiple sources that Robin spoke to. Phil?

Phil Ng from Jefferies. Very inspiring, especially on the innovation and technology side. On ERPs, inherently for me, as an analyst, it's always problematic if it's a big integration, but you guys have done it very seamlessly. Can you walk us through that implementation of an ERP system for a large or big deal like USI or DI, how long does that take to ramp up the process versus, let's say, a smaller transaction, the process and the ability to kind of really ramp that up and get the productivity and synergies?

Yes. So the question is around our ERP integration process, which we're very diligent about for sure, and a large acquisition like a USI versus a small -- smaller acquisition, maybe on the installation side. So Sri, maybe you want to speak to our process, maybe an important part of that, our PMO organization and how we really manage that discipline?

No, absolutely. I think Robert talked about we have a dedicated team of M&A and the integrations team. So again, it all depends upon the size of these acquisitions. As you mentioned, some of the small ones, we probably do on day 1. And then it's a midsize and the USI and the DI. It takes time for us, this PMO team and the acquisitions team going there and doing that business discovery, business gap analysis, all of those. And then if there are any gaps or capabilities that we need to develop, and that's where it takes time. And then we look at the complexity of these, the number of people, number of branches, and they come in waves and roles and things like that. Like a training and then the cutover and the post, all of those things. For example, I give -- the U.S. had some unique capabilities, we had to develop them. So to your question, right, hey, there is no one straight answer. Some of them take 30 days, some of them take like 6 months of rollouts.

I think if you take a USI type of scale of an acquisition, we acquired USI May of 2018. All their operating units were on our ERP system by early November of the same year. So we have a very, to Sri's point, dedicated team, a proven approach as to how we go about the training piece, how we do the rollout piece of it, how it kind of goes from a wave perspective out into the field. So in a pretty large acquisition like that is a fairly quick, at a time where we're able to integrate them into our system and start to see the benefits from that as well. Okay. Any questions? One more in the back here.

Ryan Gilbert, BTIG. I found that conversation around using your network to identify potential disruptors to be very interesting. I'd love to hear some, if you can, specific examples around potential disruptors that you've identified? And then either the competitive threat or the competitive opportunity that the disruptors present?

Yes. So questions around disruptors. How we look at disruptors and maybe an example of one we either saw as a threat or an opportunity. So maybe, Robin, it'd be great for you to field the question. But when I think about the offsite construction, it's something that we've got questions about, something we looked at in detail, maybe talk about offsite construction, our view of that, how we looked at that.

Sure. So I think, first of all, just thinking about disruptors as a critical part of what we're doing, but as I mentioned in the prepared remarks, we're always looking at all the sides of that. So offsite is a great example, gotten a lot of conversations. It's that all the conferences, that's being talked about. It's hit Silicon Valley. That -- we get to ask that question a lot. This isn't Europe, the density of housing. There are some things about our particular market that make, say, for example, offsite construction, not particularly successful model at this point. There have been some -- certainly some college tries of recent years to try to expand that, and it's just they haven't worked out here. Very capital intensive, very difficult to drive the entire build process around something like that, that is so capital intensive. So I think that's a good example of a very talked about destructor that we don't see a particular threat around, but we keep an eye on. I'd say in general, we are always looking at -- we get the question a lot around materials. You see a ton of materials in the back. I mean the great thing is -- if there's a new material that comes out, I mean, we're in a perfect position to sell it, to install it, to distribute it because we're able to support all of those. So we do receive countless inquiries about new opportunities and kind of stay focused on them all the time.

Okay. Great. I think we have one question coming from the web.

We actually did. This is about the building science group. How big is the group? And what exactly are they performing nationally?

So that's our TopBuild Home Services group, Robin?

Yes. Sure. So TopBuild Home Services is a group of building science, focused individuals who do plan or view evaluation testing for residential, like commercial and some other builders. About 100 people or so scattered throughout the key markets in the United States, very heavily tied to the TruTeam footprint. So Jeff will talk a little bit about how we partner. The focus there is around helping our customers to ensure that they deliver upon their code requirements at minimum, wherever they are in the country as well as to really expand those energy efficiencies and savings that happen in the home for the consumer who's the end user. There is an increased expectation among especially millennial buyers and then others around energy efficiency, around temperature and cost savings and control emissions reduction. So this team really helps to identify those targets, help the builder deliver them through insulation and other means and then test and review those.

Okay. So one other question that I think got a lot of attention, especially in the past couple of years, especially during the pandemic, we talk about our dispersed model. We talk about technology and digital. And so one question is, how do we think about any risk from a security perspective. It gets a lot of attention. It gets a lot of attention from our Board as well and how do we manage that. So Sri, maybe you want to talk about cybersecurity and our business continuity as well?

No, absolutely. I think business continuity with 410-plus branches, 13,000 employees. And again, making sure that every day, we dispatch the 16,000 jobs is so critical for us. So in some ways, a pandemic actually expedited what we have been doing in this space. As you all know, cyber landscape, a threat landscape continues to evolve rapidly, is just changing every single day. So for us, it is about investing in people, process, technologies and building those multi-defense, layer of defense, whether it is data centers, desktops, browsers, patching strategy and so on and so forth and also working with our partners. So at the end of the day, we acknowledge the fact that there is no end state. We just have to keep up, and we have to invest, train people and awareness of that. And then most importantly, work with our partners in the game. This is just more about being proactive, not being reactive. So it did help. And we learned a lot of lessons during this pandemic as well.

Okay. So Robin, Sri and Jennifer, they'll be available at lunch with the table if you have more Q&A for them, feel free to sit with them at lunch and ask questions or during the break. So I think right now, we're going to take a break. I invite you to visit the product showcase. You have Rip Hubbard, they'll talk about the wall of insulation, then [ Dave Fischer ], who is with our Distribution International business, one of the leading mindsets in the mechanical insulation space, they can answer any of the products that we have from a mechanical insulation side as well. So we'll take 15 minutes, and when we come back, we'll jump into the next part of the agenda, which is our TruTeam installation segment. Thank you. [Break]

So we're going to get started again in just a couple of minutes, if you all want to take your seat.

Okay. We'll get ready to get started back here with our next -- as I mentioned, our next agenda is getting into our TruTeam installation business. But first, we have a great video just to give you a brief introduction to the business and highlight some of the strengths and the track record for our TruTeam installation segment. [Presentation]

Okay. So to give an overview of our TruTeam installation business, I first want to introduce Jeff Krestancic, our Vice President of Operations for TruTeam.

Thank you, Rob. Okay. Good morning, everyone. My name is Jeff Krestancic, and I am the Vice President of Operations here at TruTeam. I've been in my role since July of last year. I'm now going in my 17th year of service here with the organization. Prior to becoming Vice President of Operations, I served in a capacity of regional director overseeing the Colorado and Central regions. Back in 2017, Steve and Robert had approached me about relocating from Florida to Colorado. That was a point in time in the organization's history, where we're very active from an M&A perspective. So a big part of my role at the time was to oversee the successful integration of those acquisition companies. Prior to that, I got my operations start back in Southwest Florida, first as a branch manager, running our Fort Myers location. And then after a couple of years, I had a chance to take on some additional responsibilities as a district manager, overseeing 7 of our locations in South Florida, representing about $77 million or so of annual revenue. Prior to that, I spent a little bit of time with Sridhar and the ERP project team. So I had a front row seat to the company's journey through our ERP integration and really a great understanding of our technology platform and how we mine our data and do some of those things. So that was a great experience. And then going all the way back to the beginning, as Jennifer Shoffner had mentioned earlier, I started in 2005 in our MIT program, manager and training program. I was the first MIT in Northern California. Did that for, I don't know, about 16 months or so. And again, I think the way that it was described earlier is really an outstanding way. It was a great way for me to learn the business from the ground up. Absolutely a hands-on experience as well. I did everything from installation to working in the warehouse to scheduling our customers, selling jobs to our customers, just really the day-to-day functions at a branch level. So it's an outstanding opportunity for me to really learn the business from the ground up, and it's built a nice foundation for where I am today. So that's a little bit about myself. As far as TruTeam key messages for today, since our last Investor Day in 2017, as you've seen already, the company has grown tremendously. That growth has come both from organic growth but also our acquisition expansion. Fostering a drive to improve culture. Really what that means to me is we're a company that doesn't stand still, right? So we look for opportunities to push the envelope and challenge each other day in and day out and always really looking for that competitive advantage. Expanding our market presence and continue to grow profitably. Again, that's not just residential, it's also on the commercial side of the business. So we want to continue to stay focused on those opportunities and pushing the business forward. And then again, we want to win every day. By leveraging our best-in-class model, we absolutely feel like we do have a best-in-class model. As we talk about our technology platform, really an outstanding way for us to make good fact-based and data-driven decisions. And then again, as we continue to drive for improvement, pushing everybody to be the best that we can be day in and day out. Okay. Since our last Investor Day in 2017, some key accomplishments for the business, not only we're bigger, but we're also better. The company has increased revenue 86% organically and through mergers and acquisitions. We've expanded our EBITDA margin 670 basis points, and the scope and the footprint of the business has also continued to expand. Number of branches that we have is up roughly 34%. And something that we're particularly proud of, as you've heard from some of the other comments here this morning, our M&A model. We've successfully integrated 17 installation companies which now contribute over $720 million in incremental annual revenue. And then lastly, on the commercial side of the business, market share in 2017 was in that 7% to 8% range. Today, our commercial share is in the 10% to 11%. Okay. For those of you that aren't familiar with the TruTeam story, a couple of key stats here relative to 2021. Annual sales approaching $2.4 billion, adjusted EBITDA of $445 million, EBITDA margin at 18.7%. The number of branches that we have throughout the United States, approximately 235 installation locations all in the U.S. And we now have over 10,000 employees, mostly consisting of our installers. So what TruTeam does? We install installation in both residential and commercial projects. And we really view ourselves as an insulation solution provider, okay? Basically, what that means is we do everything from procurement of the material to mobilization of our installers, our equipment. And essentially, we execute our scope of work through final inspection. We also have TopBuild Home Services. So TopBuild Home Service is complementary. Works directly with builders to design more energy efficient and comfortable homes. And in today's environment where there is an emphasis on energy efficiency and building science, they do a great job of bridging that gap and working with a lot of the same customers that we work with on the TruTeam side. And again, they also do an absolutely fantastic job with that being an 18-time ENERGY STAR award recipient. Okay. A little bit about our sales process and market presence. So really, the key takeaway here on this slide is that we serve builder customers of all sizes, whether it's a custom builder that builds approximately 10 units a year, a national builder that could build it in excess of 10,000 units annually or large-scale multifamily projects. We have a proven track record of being able to execute on all of those different project types and sizes. And the other thing that we feel is absolutely an advantage from our side, typical branch has their own independent sales team. And that sales team is responsible for really driving those relationships at a local level. At the end of the day, we feel like this business is very much a relationship business, and we've got a wonderful footprint to really capitalize on those local relationships. Okay. Shifting over to the commercial side of the business. We view that as a $5.5 billion market opportunity. Really, 2 different ways that we look at that. The first is light commercial. Light commercial typically follows residential. And again, as we've seen a real nice runway here over the last couple of years with the residential side of the business. That creates a tremendous opportunity for us on the light commercial side. Light commercial, from an application and install perspective, it follows suit with what we do on the residential side. So there isn't a tremendous amount of ramp-up or investment for us to be able to transition from the residential side of the business over to that light commercial opportunity. Second vertical for us is heavy commercial, bigger projects, more longer cycle projects, more complicated, a little more specialty from an install perspective. We have 22 dedicated heavy commercial locations. Those locations are mainly in large metropolitan areas. And again, as we look at what differentiates TruTeam here from others is we have a bundled solution that we're able to offer to our customers. Again, our core product here is insulation, but we also do several adjacent product offerings as well, such as fire stopping, fireproofing, fluid-applied air barrier. The benefit for our general contractor is, hey, it's one place to get multiple scopes of work, a little less from an administrative perspective. And again, whenever you look at mobilization familiarity and having that relationship, we certainly provide those things. And the benefit on the TruTeam side of the house is, hey, the more products that we have included in that contract, the better it is in terms of overall contract value. And one more point here as we talk about where our market share is, as I said, 10% to 11% share today in a $5.5 billion market opportunity. I think as we look forward, we think about the future, tremendous opportunity for us to continue to expand that market share. And do that not only from an organic standpoint, but also include that in our acquisition expansion strategy. Okay. Wrapping up here with TruTeam goals. The first one here is strive for 0 accidents every day. It's not a coincidence that we put safety as priority number one. The health and safety of our over 10,000 employees is absolutely mission-critical to what we do. It's a huge part of our culture. It's something that we talk about every day at our branches. It's integral message that we have really throughout the organization. Number two, grow residential and commercial market presence. Again, we want to continue pushing for that expansion on the market share side, both organically and through mergers and acquisitions. Number three, you've heard this theme a bit today as well, continue to implement productivity initiatives. Again, really something that we can do from a data perspective. We have the ability to look at this information in near real time, and really keep a very close eye on what our productivity does. As we've looked at some differentiators here in terms of our top-performing locations, top-performing locations usually have a common theme, and that theme is we have the most productive install labor at those locations. So again, that's a big part, making sure that we can take that and expand that to the remaining 235 locations. And 4 and 5 are really in the spirit of continuous improvement, and we do that from an engaged and inspiration standpoint. Really driving that messaging with the team and making sure that our local management teams absolutely feel empowered to make decisions and influence their businesses to the best of their ability. So again, those are the goals that we're after. With that said, I'll turn it over to our MC here for some panel discussion.

Got it. So before we get into the Q&A and the panel discussions, I want to just -- Jeff talked about engagement and that spirit. So I want to ask Steve Raia to come up and talk about -- introduce himself and talk about how he drives that and runs the business every day. Steve is the President of our TruTeam business. But he's a great partner for me. Steve is a great partner across our entire operations of TopBuild. So really value his input. He's been a major, major architect of what we've done on the operations side of our business. So I'm very excited for you to hear from Steve.

Thank you, Rob. Well, good morning, everyone. And obviously, thank you for sharing a love that we share for our company. We love our company, and we work hard at it every day, and we enjoy it. So I'm glad to see everybody here. I guess I started in the insulation business right after I made my communion. I was 10 years old and I had to listen to my father at the dinner table every day. So that's where I started to learn. So in 1969, believe it or not, I used to hang insulation in the summer and in holidays, they're on high school. And then in 1973, I graduated high school, and I moved to New Jersey. My father had a little insulation company in New Jersey. We had 14 [indiscernible] of chicken coops in Lakewood, New Jersey and there I go, I moved from Long Island to there. So -- but when I grew that business over the years to about a $30 million business, and at that time, we just had New York and New Jersey. And then in '91, I lost my dad. And then in that business time that he passed, the consolidation of business of insulation companies started ramping up. And I grew it to 35 locations and 2 of those locations with distribution centers also. And after that, we kept the business from '91 to '99, those 35 locations, and I sold out to Masco in 1999. Worked for them for a few years -- 3 or 4 years, and it just wasn't going the same way that I feel about the business and how I love the business and how I love the people that work with me every day. Things would change and it was time for me to leave there. Met Robert about 12 years later -- 12 years ago today, say, around this time. And I met him and I said, "Rob, if you need any help or any questions and reach out to me, I'll give you the honest, the truth anytime you call me." And also, we used to meet about 3 or 4 times a year. And then 2015, he says, listen, we're going to spin this company off and would you like to come back. And I said I'd love to come back as long as I can run it the right way and the way I was taught and the way we treat people is a lot different than people have been treated here. So he says, "Come on back." And here we are today with the business. And we're so proud of this and passionate of this business and the people that work for us is beyond those 8,000 stores every day, there are life. So without them, we're nobody. So we communicate. My biggest thing is team play with everybody. Help the ones that want to be helped and the ones who don't want to be helped, probably won't work here. So we try to perform at the highest level every day and keep our people happy, and you know when people are happy, people are safer. People are more excited to come to work every day, people make more money. And we try to build that spirit in every position in the company from the installer, to our managers, to our regionals, and we make them gain the relationships to them and make sure that our manager and production manager knows every installers name, first name and children's name and wife's name and stuff like that because we do a lot of family things. We do family carnivals. We do family picnics with their wifes to show them that we're caring for them and caring about the people who work here, and we do pizza parties or safety meetings and stuff. So we try to keep engaged with our installers every day because don't forget, the more you could gain these relationships and with your people that work around you at every level, and the more we communicate them -- to them every day in every level is the more you could push them. And you can push them, they don't fear. They don't get fear because I'm going to get fired if I end this. But once you gain that relationship with them, you could have that one-on-one throughout, and you could push them and say that, and you're going to get the respect back as long as you give that respect, and we're big on that every day. So that's our business cycle, and we live by that every day, and we push it every day. So thank you. Thank you, everyone.

Okay. Thank you, Steve. So you can hear the passion, and you can see the energy and engagement that we push in the organization. And I would tell you, that's not easily replicated or duplicated. It really isn't. We think that's an absolutely critical piece and differentiator for our model, how we engage our labor force and our leadership. So I do want to jump into the panel discussion here on the install side of the business. And thinking about our TruTeam business and where we are today and being the industry leader from this perspective. So maybe with Steve and Jeff, I just want to talk about, maybe with you, Jeff, to kick off, what are the competitive advantages of TruTeam, whether you think about our customers, competitive advantages of our model that we've built and stuff. How do you think about that? How would you characterize that for the group?

I think probably the way that I would start there is we've got over 8,000 installers, okay? And as we look at the advanced work of our customers, if we look at different parts of the country where you've seen some spikes in demand here over the last couple of years, with the assistance of our technology platform, we have the ability to move people around the country, both people and resources from a material and equipment standpoint. And that's being very, very responsive to the needs of our customers. So we feel like that's a great differentiator for us. And again, as we talk about our emphasis on safety, we talk about our emphasis on product knowledge, building science, training, the folks that we're bringing forth on our install team to the customers are some of the best in the industry, right? And we've made a tremendous amount of effort and time, investment and making sure that those folks are providing the highest level of quality service and they're doing it safely for our customers.

Okay. Great. Just a reminder, if you have any questions, raise your hand and someone come to the mic, or if you're on the webcast, click the icon on the left, and you can submit those via the web as well. So thinking about the model, we're always thinking about how do we appeal to employees, given the labor situation that Jennifer spoke of, and we are a people business, right? I mean we do great fabrication, but we don't manufacture. We are a people business. But then also how we appeal to that very diverse customer base across the country. Maybe, Jeff, if you want to kick it off, I mean, how do you see that we appeal to both sides of this equation, which, by the way, are both super critical to our business.

Absolutely. I think on the employee side, I mean, as we talked earlier in the presentation about it being a difficult and tough labor market, at the end of the day the installers want to earn, right? And we provide them with opportunities to be able to earn, not only from the consistency of work that we provide but also some of the thoughts around driving labor productivity, improvement efficiencies, doing some things to make it a little easier, a little better for them to be able to go out and produce and generate the earnings that they want to make, right? And then on the customer side, I go back to the value that we bring with responding to peaks in demand, being able to do that quickly, being able to pivot across multiple different channels and lines of business, that's very appealing from a customer standpoint.

Yes. And I know, Steve, you talked about that level of engagement with the labor force, whether it be from the direct labor, the installer to the salespeople to the branch managers, the regional managers, and just -- you have an operating philosophy of your leadership being on the docks at 5:30 in the morning, you have an operating philosophy, how you want them to think about this as their own business. Maybe explain how you instill that and all these managers and leaders across the organization.

So obviously, the most important part of this business is being there in the morning with the installers. Obviously, number one, showing that you care that you're there with them at 5:30 or 6, whatever time they get there in the morning. Obviously, they've got to load some of their trucks and do certain things. So you -- as a manager, you would be on the dock with them, you would help them carry some bags and move some material around whatever it takes to show them that you care to get their trucks loaded and get out. Obviously, you care and ask questions, like how was your weekend, did your son just win the soccer game, communication, communication, it's the biggest thing in life, right? It's the biggest thing in your family. It's your biggest thing with anything that goes on. So we constantly make sure they have engaged with our team every day. And then obviously, when you do that, and you say, "Hey, Johnny, can you make sure that you finish that house today? This build is really pushing me to get it done, and you're going to get to it." No problem, boss, I'll get it done for you. So we're engaged like that with the team every day. But if you're not -- if you're the manager and you're going to sit behind a desk in the office somewhere and have the door shut and you have everybody else doing, that doesn't work here, it doesn't work for us. So -- and as a manager, as an owner, you would be out there with your peers and your installers to make sure that they're going to be able to do the right thing every day, and they're going to make enough money to come home and be happy about, so that's constant. And that's the whole day is right there in the morning. And then after that, obviously, you talk to your sales team the same way. And what are you going to be today? What jobs you're going to go measure, what work can you bring in? It goes on and on and on. And that's the daily part of our business. And for every location in America is that. So.

Great. Any questions from the web?

Yes, I have one on here. How do you envision growing your commercial business?

Yes, it's a great question, given the success we've had in commercial and the focus that we made and the investments that we've made. So maybe, Jeff, do you want to kick it off, and then I know Steve has a strong perspective on commercial as well.

Yes. I think on the growth side, as we talk about new tools and innovation coming into the business. We do have the lead app which gives us a single source visibility into what those opportunities look like. And being able to present those to our sales force across the country, and really look at when the lead is issued, where are we from a follow-up perspective and how are we going out and executing on those opportunities. We've got a lot more visibility than what we've had in the past. And that's really a great opportunity for us to run out there and grab some of that new business.

And maybe, Steve, you can talk about the investments from a...

Yes. So I mean, this is a big part of our growth is -- and we're out there right now hiring, believe in a lot of locations is a great estimate. It's a great commercial estimates because, I mean, you got to make sure that the best because we want to make sure there's no mistakes. So we're out there pushing and finding the best estimate is and to be part of like both, so sell it and then measure it. So like when they're -- when they take that job off, they're entitled to what gets done and know what gets done. So when we're on a job site and someone asked, does this clock get done? And yes, this is part of the estimate. This is part of -- if you have someone measure it in-house and then they go out to the job, then sometimes it's -- well, I didn't measure that part or I didn't measure it. So you hold them accountable for what they do. But we're investing in commercial. And we know commercial is probably a year lag, 1.5 year lag. So we're starting to gear up and stop building our business on that side.

Great. One thing is how the TruTeam business is well positioned to drive future growth organically and through M&A. So we've talked a lot about the talent piece and putting the best people around us in the business and proven to innovate. Maybe, Jeff, you talked about your ERP background. Just from a practical perspective, how is that technology helping drive the growth of the business on a daily basis in the field at ground zero, if you will?

Yes. I think the key is being able to have good fact-based information and have that at your fingertips. I mean again, having done a lot of different roles here within the TruTeam organization, I've run branches for a number of years. And being able to look at a dashboard and understand what my close ratio is, understand sales performance in terms of how many quotes are coming out of the system, we just really have a unique perspective to be able to see, hey, who's performing, where do we need to find some improvement. And we're using those metrics to really drive the business.

Great. And then just as we're thinking about -- you've heard this term a few times, one team. And so this one team approach out in the field, whether it be major customer opportunities or spike in demand, maybe Steve, just talk about that one team approach across the footprint or with our special ops team, that one team approach.

Yes. So we work together like branch by branch, and we share information. Meaning if some branches close in the same marketplace, this branch is making 20-some percent. This is making 15%, why is that? And we work together closely with branches to improve them constantly every day, but we share information back and forth because we work as a team. And we want to make sure that everybody does as well as the other person's doing. Because what -- if they do well, obviously, they make more money to take home for their family. So we make sure of that. We have a group of 5 gentlemen in America that are willing to and working and doing this right now for us to run around the country and we call it the special ops team. And what they do is work on the underperformance in the country. Meaning most of the problems and then when things are underperforming is, is probably like the manager isn't doing exactly the things that we want them to do every day and every morning. So his labor force is weak. And when your labor force is weak, you don't do as well because it's not important to get the right productivity out of the people that work for us, install for us every day. So we send this team around the country, and they spend 2 weeks there at a time and that just come in on a Monday night and leaving on a Thursday. They spend 2 weeks there and keep -- and train the manager the way they know and the way they were taught to be on the docks, helping the installers and working with them and showing them if they're making $15 an hour because they're just starting how they can make $40 or $50 an hour being on piece work. So constant improvement with the installers every day. It's a big part of our business.

If you're a bottom performing branch, we're not shy to make sure you know that you're bottom performing branch. You're going to get a lot of help. So I got a question back here.

Dan Oppenheim from Credit Suisse. Just a quick question in terms of the commercial side with the opportunities both with the light commercial and sort of heavier in terms of the different scale of projects, different customers. So tying that back to what you talked about why customers choose you in terms of that, where do you see greater opportunity in terms of the light versus heavy in those projects?

Yes. Let me start off and then Steve or Jeff can add. So if we think about that $5.5 billion opportunities, split pretty evenly between light and heavy commercial. Heavy commercial, 85% of the opportunity is with 200 miles of the top 25 metro areas in the U.S. So we have strategic locations across those. And by the way, those are dedicated heavy commercial branches because it is unique applications. On the light commercial side, to Jeff's point, that does follow residential. So you see that infrastructure being built, whether it be restaurants, hotels, strip malls, that type of thing. And all the residential branches that we have across the footprint, both from an install perspective and all the service partners branches can supply those products and we can install those products as well. So it's a great opportunity across both heavy commercial, a little more specialized from that perspective. So we're growing both sides of that business, dedicated teams around that and an investment in the resources that we're putting around that. Anything you guys would add?

The only thing I'd like to say we do a lot of tilt-wall business, and we're really professionals. We really are. I mean we're doing one in Vegas right now. But we do these tilt-wall businesses. And with 12 guys, a lot of lifts in a high build, we insulate the walls and then the ceilings. And we're in there in 2 weeks and the building on those jobs are $1 million. It's amazing. And we're running around the country doing that. We have the right crews that love doing it, that are doing well and they obviously making a lot of money. But we perform like no one can believe. And to the extent where the builder says, "How do you get it done in 1 month and you bill me in 1 month?" like because we're done. Some people get these jobs and they last 3, 4 months, and they get billed them 100 a year, 200 a year. We go in there and we knock them out in 2 weeks, a $1 million job on the tilt-wall business. It's really great.

So Steve brings up a good point to your question, too. We really mix, the mix of this -- there's a lot of distribution centers going up in the U.S. today, right? So we target that. We target these tilt-wall jobs, and we have the teams that are ready to go out and do it and quite honestly, our experts are doing that as well. Keith, you had a question?

Yes. A question for Steve, you've been on this business -- a question for Steve. You've been in this business a long time, and we haven't seen this kind of inflation since you first got in this business. Can you compare the -- how much inflation we've seen in insulation and the timing of it versus '70s? And I guess more current day, if you could talk about in the field, how you deal with these constant very large price increases that are coming through?

Yes. So to repeat the question, it's about -- I think Keith is asking that Steve, specifically, compared to inflation, maybe we saw in the '70s, how does that compare to what we're seeing today and maybe our process and stuff for the field, I can take that part. Maybe you talk about the '70s.

Yes. So I mean -- why, you don't remember that? I mean I...

You got to [ play ] our strengths.

The '70s to me is no different, except the take per house a year is a lot more than it was then. The gas lines with or without trucks loading up in the morning and gone, standing on gas lines down the street, which is a nightmare. Getting material was in freight cars, we would get from -- railroad cars would come in, we have to go down and unload railroad cars. And so that part -- and as far as the inflation, I mean, I don't -- to me, it's almost -- it never changed the business. It really hasn't. The biggest part of it is the take for us every year gets bigger and bigger, which makes this business greater and greater. So I don't know if I answered your question enough, but...

Yes. From a process standpoint, Keith, I think you've heard us talk about it really is down to the system piece. So one, obviously, we're in constant contact and communication with the manufacturers. Once there's -- the industry announced the increases, this goes TruTeam and Service Partners and the process are putting in the DI. That communication starts immediately with our field and starts to meet with the customer base. But the real critical piece here is the system side, how we're able to put the increased cost into the system, set margin thresholds and really hold our teams accountable, all those, what, nearly 1,300 salespeople today to make sure we see that. And I think you've seen that in our results, a great job of the team in the field managing that inflation environment and offsetting that with the selling price perspective. So a lot of discipline, a lot of process around that.

Reuben Garner with The Benchmark Company. If I'm jumping the gun here, apologies. But any successes or stories you can give us so far of leveraging the DI acquisition, whether it's relationships or anything else that's come with it? And any thoughts or opportunities to get in on the installation and the mechanical front?

Yes. I'll tell you what, if you're okay, Reuben, Joey Viselli and Jeff Franklin are specifically going to get into that and where we see the great benefits of DI as part of the TopBuild family now. So if you hold that, I think you'll see multiple benefits that the team will talk about in just a second. I've got a couple here.

Mike Rehaut, JPMorgan. Just wanted to circle back to the leftmost column there, attract and retain talent. And I believe earlier, correct me if I'm wrong, the average years with the company for an installer is 5 years, I believe I think I remember seeing that stat. But in any case, I was wondering if you could kind of walk me through if that number has changed over time. And all the focus on retaining and attracting talent and happy employees and building those relationships obviously comes with the benefit to the employees, but also the company. And I'm curious if you've observed to the extent that you've been able to lengthen the average tenure of your installer, what that also means from a profit per employee or any type of productivity stats?

Yes. So let me start with the numbers, specifically and then Steve and Jeff will want to add on. So relative to tenure and relative to retention, that definitely has improved. I'll speak to a few specific things. One, just traditionally in the business, as you bring people in, you typically have to get them through that 180-day mark, right? So if you think about an installer coming into the business, it's not an easy job. It's not an easy job as well because if you think about the physical demand of the job, the fiberglass or other materials that can be -- skin irritation as an example. But they also have to kind of work through the cycle of the environment. So guess what, doing an attic in Florida in January is pretty different than doing that attic in July in Florida. So you got to get into that. Once you get in through that time and they get productive, then we see the retention rate go up dramatically. I'm going to call it about 180 days. Now if you said, okay, TopBuild, what's happened to your retention rate? We've absolutely seen it improve and we've seen it improve pretty significantly in the past 2 years. And I'll go back to the program that Jennifer talked about, Our friends and family program. I'll explain it just a little bit further. So we are encouraging and incenting. We absolutely are the employer of choice to get those 13,000 employees to go out and bring their friends and family into our company. And what we found, and it was by the design of the program, if Steve's my cousin, I bring him into my company and I know there's an incentive for me, I'm going to make sure, "Hey, Steve, how are you doing on the job? Steve, you get used to the physical aspect? How are you doing with your supervisor? Hey Steve, you understand how you're getting paid? You feel like you get along with your production manager? I'm going to stay close to him. I'm going to make sure -- and maybe if he's not doing so good, I'm going to talk to Jeff, who is in production and say, hey, Jeff, Steve struggled a little bit. Can you help him on this? Can you help him get even trained and the retention rate from that? Because they get that personal connection of their friend bringing them in or their family member bringing them in. So we've seen it improve over time. We've seen some nice improvement in the retention from our friends and family program. That's why we -- that's kind of a flag that we're waiving because that's been a great success for our company.

We never had like you take an install and you hire them, and all of a sudden, you say, "Hey, I'm going to be upstairs working, can you just start pushing in the walls?" That's the guy we lose. And this is why we did this program because when someone hires, brings in somebody, we have some people bringing in 10 and 15, 20 people where they're getting $1,000 for the first person that comes for the first year and then $1,500 on the second year and then $1,500 on the third year. So we're really building up the program to where they make -- they've shown what to do every day. They're making sure he's never leaving. And this is -- it's a big thing, and it's the greatest thing if you think about it, right? They're making sure that guy's installing and doing the right thing every day because he knows he has a pay day every year.

We've got time for one more. I think, Adam, you had a question. So Dave?

Adam, Zelman Associates. The ability to shift around your workforce, I think is pretty unique, I think, I believe, even versus your largest competitor. Can you talk about the benefits you see? Is it adding market share? Is it better margins? Maybe kind of how that's manifested itself in the financial impact.

Yes. So I'd like to tell stories, right? And this is my IT background, this is where Sri gets a little nervous, shifting in his chair. So yes, absolutely. And when everybody said this, and Jeff and Steve can absolutely expand upon this, but it is super easy for us to move around the footprint. If I'm in the region of Florida, and I've got an uptick in demand because of multifamily in Tampa, I need to move crews, material, labor, equipment, so dropping a drag over there as long as you have authority to do it. And so this one team approach, it allows us to give you an example, another geography, another region, large public, #3, public builder, heading towards their closings in the fall of last year. They have 190 homes that need to be done in 10 days. Competition can't do it. They come to us. We get those homes done in 7 days, by bringing crews from that region and crews from a couple of other states quickly to do that in that time. That's a differentiator for us that drives share gains for us. And you know what? It drives the relationship because they know they can rely on us in that type of environment, not just the material but the labor and the equipment and the resources to get it done. So great questions. Thank you for the questions on the install side of the business. And definitely Steve and Jeff will have tables at lunch, so we can sit down and take more questions. Just want to leave with the key takeaways here. I think Adam, you couldn't ask a better timed question. This unparalleled customer value proposition that we have. We've got the superior labor force, we've got the tools, we've got the leadership and the level of engagement to make that happen and leveraging our supply chain and the capabilities that come with being part of TopBuild. Technology, we think it's absolutely differentiated where nobody has what we have. Having 410 companies on that common platform, and everybody talk about, look, I can look and see the installer in Louisville, Kentucky, today and tell you what he's installed. We could look at the salesperson in Charlotte, North Carolina, taking many jobs they measure today, what material they measured, what's the margin on that job, when's that job going to be installed. The access we have the information to drive the business not only to bring discipline in an inflationary environment like this is unparalleled. Strong local relationships internally and externally, we have the tops-to-tops relationships, but we have those local relationships, which is where the game is won and lost in this business for sure. And then employer of choice. It is about the people we're providing a service in our business. So this employer of choice that we are absolutely winning that area and bringing folks in, but showing them a path in the company, path for them individually, but a path for their family as well. And it does make us employer of choice. So I think you leave with understanding the value and the differentiated model that we have here in TruTeam. Thanks, Steve and Jeff, for sharing everything. And we'll move on to the next agenda item here. But look forward to more questions on this part of the business as part of the lunch, and let you learn as well. Okay thank you. So the next agenda item we're going to move into is our specialty distribution platform, which is a combination of service partners and our distribution and international business as well. So we'll start off a video, which I think does a great job of giving you a little more detail on both businesses, but specifically some questions we've gotten on the DI business. We want to give you a really, really well-rounded understanding of this business and how it really fits into the core of insulation for TopBuild.

Diverse products, custom fabrication, North American reach and unmatched service are what make TopBuild specialty distribution segment, the leading supplier of energy-saving insulation products to the commercial, industrial and residential end markets. As the combination of Service Partners and Distribution International, TopBuild specialty distribution spans 175 branches, including 18 in Canada, offer strong synergy potential within 2 years and delivers a differentiated customer experience. Focused on commercial and residential contractors at Service Partners, we offer a broad range of in-demand insulation products, innovative service options like flexible job site delivery and specialized application training. The newest addition to the TopBuild family, Distribution International is the leading mechanical insulation provider in the U.S. and Canada. We serve general contractors, insulation and specialty installers and facility maintenance and repair companies across a variety of industrial and commercial end markets, including distribution and health care, marine, food and beverage, chemical, refining and manufacturing. While DI offers a selection of advanced products across a North American footprint, what really sets us apart from the competition is advanced custom fabrication. 27 locations offer customers a wide range of insulation materials, specifically produced for their unique projects. From precision cutting, to custom-fit components, fabrication ensures customers give the right fit for the right application faster and with less safety risk than on-site fabrication. And together, Service Partners and distribution International are now a leading fabricator and supplier of commercial metal building insulation. Technical expertise and geographic reach are key competitive advantages that help DI to attract and retain customers and our commitment to innovation helps keep DI at the forefront of the mechanical insulation distribution industry through unique programs like automatic order replenishment for maintenance and repair operations customers and our industry-first e-commerce solution, customer connect. Through strong combined sales and a consistent record of adjusted EBITDA growth, the Specialty Distribution segment is already creating value for TopBuild while helping customers get what they need, when and where they need it every day.

Okay. So I want to welcome 2 speakers to talk about our Specialty Distribution business, first being Jeff Franklin, Jeff is our President of Service Partners. Jeff has a wealth of industry experience across both installation and distribution and give Jeff a lot of credit. Jeff has really been the one that's really transformed our Service Partners business to the results that you've seen in the past couple of years. So Jeff will absolutely talk about that I'm really proud of the work that Jeff has done. And then also, Joey Viselli. Joey came along with the Distribution International acquisition. Great business leader, great business background in a lot of different segments and a lot of different areas of the Distribution International business. So I really look forward to let Joey explain that business and his wealth of understanding of it. So first, Jeff, I'll turn it over to you.

Okay. Thank you, Robert, and welcome, everyone. And it is our pleasure to really be here today. And I'll be honest with you. This isn't my most comfortable space, all right? I'd much rather be in a warehouse, I'd much rather be talking to a driver, or an insulation installer, one of those type of things. But like Robert said, I'm Jeff Franklin, I'm the President of Service Partners. Been the President since September 1, 2019. And when we look back, everybody has been talking about their careers, I'm not there with Steve yet, but I've been in the business for 40 years. So there's one thing I can guarantee you we know is insulation. I guarantee you that. So -- and I've had experience, I grew up installing insulation, a very similar story, except my father wasn't in the business. But I've been with Steve. I've known Steve 30 years. So what I won't do is bore you with the same story, okay? Because we can finish each other's sentences. We can. And we all believe in value with our people, how are we going to grow business, how we treat people. But those 40 years in our life, I heard a couple of questions earlier, which may be sit there and think back, boy, what a difference in products and technology, all these type of things. So just an exciting time. If you don't watch that, and you're not excited about being in the TopBuild distribution company, I mean I am. 40 years, and I'm just as excited today. I really am. So as we move forward on the business, since 2017, the Investor Day, I can really only speak regarding 2019, and we've made a world of changes since 2019. This is not the same company. I promise you, okay? And -- but since 2017, we've strategically grown the business, very similar to TruTeam, same model, through organic growth and through M&A. And we have now, since the -- with the acquisition of DI, we have now doubled in size since 2017. You've heard DI a lot. I saw a lot of people interested in the products. It is absolutely the acquisition in October of Distribution International, absolutely transformational deal. This puts us -- we are absolutely the #1 mechanical supplier in the industrial space to go along with, number one, in the residential and commercial space. Joey Viselli will talk more -- he'll do more of a deep dive into the Distribution International business, but I am happy to say to everyone in this room that our integration is tracking ahead of plan. So we're absolutely excited. I said before, only national distributor of insulation products and solutions, and I think that's key. We are the energy experts in our field. Extensive fabrication. Joe is going to get more into that. When we say we're the experts, the architects, the general contractors, the builders even in the distribution end still come to us for how to design their buildings, what systems we need in place. And this is an exciting part with DI, what they bring. And you've heard all day. It started with Robert. It went to Jennifer, went to Robin, went to Steve and Jeff, heard it all the way through this entrepreneurial spirit. We are a public company. We have to operate within guardrails. But I tell you, when you go visit our local branches, you do not feel a public company. You don't. You feel local ownership, you feel people that get paid and to act like they own the business. And that's how we go to market. And you take that and you leverage that national resource, that national footprint, what a winning combination. A couple of key things since 2017, key accomplishments: increased revenue, 79% organically and through M&A. Distribution International has been a big part of that. And we still think there's a lot of runway especially on the mechanical side of the business when it comes to M&A in the future. Expanded adjusted EBITDA margins, 580 basis points. People ask me all the time, "How did you do it?" all right. How did I do it? Look at our customer mix, took out unprofitable customers. Just had to. We added new customers. We looked at different insulation segments. Could be pest control, could be boats, could be other things to where we could sell insulation. And we sell our whole portfolio of products and equipment. We also sell equipment that helps our customers install their products efficiently. Enhanced market presence, more than doubling branch locations. We've gone from 75 Service Partners to 175 in the specialty distribution arena now. I said before, #1 distributor of mechanical insulation. Huge. And then added the fabrication capabilities, which you saw in the video. I mean you saw factories, you saw refineries, you saw ships. You saw all these things, which Joey will get into great detail with. The overview, key stats. 2021, almost $1.3 billion. That includes 10 weeks of Distribution International since it was the middle of October. But I will tell you, the thing I'm most proud of, I looked just a few years ago. And we've gone through a pandemic. We've gone through supply chain. We're going through inflationary times, all these things. But we went from $700 million. So I'm happy to report that last year, Service Partners did more than $1 billion in revenue. So just a great performance. We talked about the EBITDA, what's driving that EBITDA improvement on the margin branches. I discussed that, employees growing. I have the same feel when it comes to employees as Steven does. We love you. We're going to work with you. We're going to coach you. We're going to coach you up, and we're going to have to coach you out. And that's how we do it. We do that every day. One-stop shop for contractors. I'll have Joey, he'll talk more of the distribution and international side, but one-stop shop for contractors of all sizes. We have all size contractors. We have large ones. And being in the business this long, I've known -- I know a lot of these people and they know me. And I know how they make money, and I know how they go to business every day. So we have large ones, and we have the mom-and-pops, which we absolutely love those type of customers. Innovative service solutions. You saw it in the video. We delivered the job sites. We have a lot of customers come to the warehouse to pick up every morning. We have to be ready for them every morning. So innovative service solutions. And then when you see this, my last slide, First thing, it always sticks out to me, and you've heard it numerous times, is the white space. We're in Service Partners today currently isn't -- it's about all the major markets. And we're going to continue to grow that business. And I can tell you why we're going to continue to grow it because our leadership team has probably only been together 3, maybe 4 years. And they're getting better every day. We haven't even tapped them yet. So when you see that -- so I know for a fact, we're going to grow the existing locations to look at that white space. And this is where Distribution International is going to help us, and we're going to combine. They're in Canada, might be an opportunity for us down the road. The metal building insulation business, DI was already in. A major player there, as we said. Service Partners is growing that business. Operational excellence, you've heard that term every day. I will tell you, we work the business every day. Every single day, we want to know what's happening with the managers, and we're trying to fix people that are underperforming every day. And the other thing is -- but we don't not look ahead. We're always looking to see how we can better the company. And as you heard today, we're leveraging technology to optimize our pricing, which is we have brought, through Sri's help, pricing discipline into our business. So with that, I'd say thank you and I'll turn it over to Joey Viselli. Thank you.

Thanks, Jeff. I'm Joey Viselli. I'm the Executive Vice President of Distribution International. I spent the last 7 months bringing these 2 great insulation companies together. I wasn't always fortunate enough like Steve and Jeff to be in insulation on my career. I spent my first 15 years at Procter & Gamble. I was in sales, I was in marketing. I worked on brands like Bounty paper towels and Pampers diapers and Tide detergent. I was fortunate to lead the team that bought the Febreze brand into the global air care space and put it on track to being a $1 billion brand. Great career experience. From there, I went to Goodyear Tire & Rubber Company. I was our Vice President of Marketing for North America. I ran marketing for consumer tires, around marketing for dealers, for OEM, did a few other things there, product management for them. Got to ride in the blimps, which was a fun thing to do. If Goodyear ever takes you on a trip and offers to put you up in a blimp, I'd highly recommend it. It's a lot of fun. But about 13 years ago, I decided I want to do something a little different in my life. I was very, very interested in the sustainability space. And if you're interested in sustainability and if you're interested in energy savings, there's absolutely no better place to go than the insulation business. So in 2009, I went to Knauf Insulation. If you don't know who Knauf is, they're the second largest manufacturer of fiberglass insulation in North America. They're also the second largest manufacturer of fiberglass insulation in the world. I've entered there on the Management Board. I was the first Vice President of Marketing. I was a Vice President of Sales there. I led strategy there. I was fortunate enough to lead the commercial negotiations and integration of the Guardian business when we purchased that business in 2014 from the Koch brothers. And then in 2019, Distribution International purchased a division of Knauf Insulation, and I decided to go to DI at that time. And I've been with DI since 2019. And I was fortunate to pick up more businesses when I was working for them. We integrated their MBI businesses, metal building insulation businesses. I run the marine business. I run the railcar business. I ran the East -- the whole East division of the mechanical insulation business for Distribution International. And then last October, lo and behold, TopBuild came along, and I've been a fortunate member of that family ever since. So that's a little bit about me. But I'm here to kind of give you more of a Distribution International 101. So we're going to spend the next few minutes going through who DI is. DI is a leading manufacturer -- I shouldn't say a manufacturer, fabricator and distributor of mechanical insulation in North America. We do that through a network of branches that serve several markets: the commercial market, think about schools and hospitals; the industrial market, think about refineries, think about big, big factories and manufacturing plants; marine, everything from submarines to cruise ships; HVAC, OEM and a few other markets that use mechanical insulation. Our network of branches is extensive in the United States. You see we have 83 branches in the U.S., basically a heat map of where mechanical and industrial insulation is needed, although still a lot of white space in that map. And Jeff referred to this as a new thing for TopBuild, we're also prominent in Canada. We have 18 branches in Canada to serve that market. We are #1 in Canada in terms of mechanical insulation, and we're #1 in Canada in terms of metal building insulation. So a good space to bring TopBuild into. There's a few special branches I want to talk about here. There's 24 branches in North America that do what we call fabrication. You've heard that referred to before, I'm going to talk about that a little bit in a bit. But it's important when you're in this business to have good fabricating abilities, and we have more fabrication locations than anyone in North America. We have over 0.5 million square feet dedicated to the fabrication of custom precision products for our customers. And then we talked about metal building insulation briefly. We have a network of branches across North America that also makes us #1 in that space. All those businesses roll up to about $830 million of sales. Significant sized business. I'm going to focus now on the mechanical insulation specific part of that business. So what is mechanical insulation and what does it do? First of all, mechanical insulation drives energy efficiency, and that goes into several different places. It can be used for thermal protection. In industrial mechanical applications, it's often very high or very low temperatures. You need very specialty insulation to take care of that. It's good for acoustical. You don't hear a lot of HVAC in this room today because there's insulation on the physical plant and in the ducts, so you don't hear, that doesn't distract you. It also maintain safety on job sites. There are certain OSHA regulations you need to stay within if you have loud mechanical equipment and you insulate that mechanical equipment for the comfort and safety of your employees. Speaking of personal safety, it does prevent other kinds of exposures on job sites. You don't want someone touching a steam pipe with high-temperature steam going through that and getting hurt. And finally, Steve talked a little -- I'm sorry, Robert talked a little bit about our sustainability as a company. And I talked a little bit about it a few minutes ago. There's nothing more sustainable and there's no better way to reduce your carbon footprint if you're a company than to put more mechanical insulation in your footprint, particularly true for industries. So as codes go up as -- those are upheld and enforced more strictly by jurisdictions, that creates good tailwinds for our company to help companies reduce their carbon footprints. So that's who we are, 100 branches in North America. That's kind of what we work with, that's mechanical insulation. Let's talk now about where we fit in the insulation ecosystem. We play a unique role in that insulation ecosystem. That's tied to our size. So we said $830 million, 100 branches. That gives us a couple of things. It gives us great scale that our customers benefit from, and it gives us great intimacy that our customers also benefit from. Let's talk about scale first. If I'm a customer and I have a sudden large job come up, maybe I didn't schedule perfectly for that job, maybe the job site got delayed for a long time and then suddenly, they need all the product. My local insulation supplier can't provide everything I need. Well, I can go to Distribution International and they can look across a network of branches. They can pull that insulation for me and get it to my job site. I'm not responsible for shutting down a job site. That's a benefit to me. If there's something that's obscured that I don't use very often, that's not carried in many places, Distribution International can also look across their footprint, get it to the right branch and get it to me quickly. So scale helps me if I'm a customer, but intimacy is also another thing that, that scale drives 100 branches is 100 opportunities to become a service hero for your customers every day. someone who's working late and didn't get their job ordering on time, they call you right before you close. Can you get this to me. The branch manager says, "No problem." When that driver comes back, I'll send them back out to your job site. Hundred branches across North America every day, creating service heroes that creates great intimacy for our customers and great loyalty for our customers. So that's kind of the unique role we play in the mechanical insulation landscape in North America. So we talked about who we are, kind of the space we play in, how we're unique in that space. Let's talk for a minute about what we do and what we offer. We offer a whole lot of products. We're usually the biggest supplier of those products in the marketplace, that gives us good expertise in handling those products. It also gives us deep relationships to the suppliers of those products, the manufacturers of those products, and we tend to be an easy way for them to go to market. They can move a lot of volume through us through a channel that knows a lot about their products. So if you think of our pie as 100% of our sales, 80% of that pie is insulation. 60% is that top category you see there, core insulation and fabricated mechanical insulation. That's things like mineral wall fiberglass, pipe coverings. There's some in the back of the room, you can look at boards and blankets, cellular glass, which is known as foam glass, it's aerogel, calsil. A lot of products that either go straight to the job site from our facility or it gets touched by us, fabricated for us before it goes to the job site. That 60%, 20% is metal building insulation. Then another 20%, the final 20% of that is all the accessories it takes. Everything it takes to protect you on a job site, protect the props at the job site, things like jacketing, metal and PVC jacketing, the sheeting that you need underneath, the workspace to maintain a good workspace, knifes for cutting insulation, fully 20%, which in a company is $830 million. That's a good amount of sales that goes to those accessories. I talked about fabrication. I talked about how important that was to the industry. Think about driving past a refinery, okay? Or think about walking through a manufacturing facility. You see a lot of standard-sized pipe. You see a lot of standard-sized tanks, you see walls that use standard insulation. You also see fittings and valves and you see huge tanks holding products and huge pipes moving products. Those aren't things that insulation manufacturers manufacture every day, they can't on their lines. That takes a custom fabricator. And again, we have the biggest footprint of custom fabrication locations in North America. If you are someone who's installing products or someone is in charge of people who are installing products, you don't want to go to a bunch of different sources for that -- for those products. You can get both from Distribution International, and that plays a -- that gives us a big advantage. I was talking to a customer -- had dinner with a customer a couple of months ago, they were telling me about a very major job site that you would know about if I mentioned it, but I don't want to mention it because it hadn't gone that well. And they had delayed work and they delayed work and they delayed work. And then they needed a whole lot very quickly. In fact, they needed 10 trucks a week of custom fabricated insulation to keep that job set on track. Nobody but Distribution International could pull its resources, pull its energy, pull its expertise, pull its logistics abilities to get those products in the right place at the right time. So that's advantage -- that's the advantage of that big -- of that big footprint of fabricating products. And again, in the back of the room, we do have examples of those products at break or at lunch, if you want, we can talk about those. So one special type of thing that we have in our branches is fabrication. You've heard us talking about metal building insulation. I want to spend just a minute there. Why is metal-building insulation important? It's because about 35%, 40% of the pre-engine -- of the commercial construction in North America that's low rise, 5 stories or less, it's a lot of buildings built in the United States, built in Canada, they're 5 stories or less, 35%, 40% of those are pre-engineered metal buildings. And every one of those pre-engineered metal buildings needs a custom insulation solution for it. They're all different. They're all shaped differently. They need different types of insulation. So if you want to think about a pre-engineered metal building, think about the gymnasium that you had in your grade school, when you're going up, you could see the metal remember in that building. And you hit against the wall, there's that white stuff against the wall that was -- had a facing on it. That's metal building insulation, but metal building insulations in all kinds of applications that's in government buildings. It's retail buildings, it's offices, it's health care facilities. It's a whole lot of places. Your church often is a metal building that's been done up like a church, for example. So a lot of different applications, and Distribution International has thousands and thousands of installations of those every year. We provide the product for those installations. So across our network in Distribution International, you can see the blue dots there. That's what our footprints look like. That's good news. We're #1. The better news is Service Partners has come along and their parent company has purchased us. And now this is what our network looks like. So we've just doubled the size of our footprint. Think about what that does for a customer. I'll give you an example. If you look in South Carolina, for those of you who've been in the Northeast of your whole lives, South Carolina is one of the southern states there, the blue dot in the middle of it, that's the only Distribution International branch in that area of the country, but that branch puts about -- I'm not going to tell you the exact amount, but millions of dollars of metal building insulation into Florida every year for our customers there. Well, now we have a branch much closer. You see that's a Valdosta, Georgia branch in South Georgia there. That's the state right above Florida. So much better for our customers. We can service them more quickly, right? But it's also better for us. It makes us more efficient. And that's what we've been doing over the last few months. We've been looking at each other's operations saying, how do we become more efficient? What are we going to learn from each other? How do we -- how is each of us go to market, it's a little bit different than the other? How are we pricing the marketplace? We can learn things from each other and go, "Oh, wow, can operate better for our customers in these ways." So a lot of efficiencies to be gained by being part of the -- bringing together these 2 good metal building insulation businesses. I'm going to spend another minute on metal building insulation on the off chance that you haven't visited a metal building laminating facility. This is one of ours here. This is one of the smaller facilities, talk about safety being at the center of everything we do. There are light curtains on this machine. You see a magnetic lockouts and fencing around this machine. You can't touch the machine while it's going. But the gentleman standing in front of a computer screen is processing an order. And what's happened is the customer has come to us and said, "I have plans for a building, here's what they are. Can you give me an insulation solution?" We create that insulation solution. They say, "Yes, I want that." We feed that insulation solution into our computer and that machine starts manufacturing all the panels that get rolled up for a building. So if the roof line goes like this, it's saying, 1 of 2, 3 of 2, 4 of 2, 5 of 2 -- I'm sorry, 1 of 12, 2 of 12, 3 of 12, 4 of 12, it tells you exactly where to put that insulation in the building, okay? And then you see it being installed by contractors. That's a roof solution that we sell to a contractor. And then the final result of some of those pre-engineered metal buildings you see there that -- the top 1 is a sports institute that we put into Boston last year. In the middle is a switch data center. At the bottom, that's a FedEx freight facility, a ground freight facility that we put in. So we do a lot of FedEx facilities. Distribution International does provide the insulation for every Costco built in the world, for example. A whole lot of folks are loyal to us because we have a North American footprint wherever they are, they can get the same experience. We operate as a network. If we're out of product in 1 area, we can flow product to that area to get them the product that they need. That's a little bit more about the metal building insulation business. Distribution brought with it a whole lot of customers to the TopBuild customer family. In fact, we brought 13,000 new customers to the TopBuild customer family. And those customers look like a few -- they're a little bit different than typical TopBuild customers. They can be insulation installers specialized in mechanical systems. These can be big national customers who like dealing with a big national company, they can be small mom-and-pops. There's general contractors who are running complex job sites. They're in charge of everything on the site, and they really don't want a truck that didn't show up with insulation or showed up with a wrong product to shut down their job site, right? They really rely on someone who knows what they're doing. They're specialty installers. Those are folks who go in and put in HVAC systems and chilled water systems in electrical boxes and electrical systems. They are very specialized in what they do. They take care of insulating their own products and they rely on us to supply that insulation. And finally, end customers. You heard the term MRO earlier, and that's what happens after the sale, okay? That's maintenance and repairs and operations. And big customers like Exxon or BASF contract with us to supply to -- they have really big networks of plants and facilities in North America, and they want to give them insulation when they need insulation. And we flow product into those as well. So those are kind of the 4 customer classes that we deal with. So last thing I want to talk to you about is a little bit more about that business split, those end customers, how we go between new build and MRO. Let's go there. So our business is literally split about 50-50. 50% goes into a brand new product that's being built and 50% goes in after that product is being built. I'm going to bring that to life with you a couple of examples. What you're looking at there on the left is an aircraft carrier. That's a Ford craft -- a Ford class aircraft carrier. It takes about 7 years to build that aircraft carrier. During that building process, literally tons of insulation flow into that building, tons of insulation. They do all kinds of things with that insulation. A lot of fireproofing happens there and insulation is a good fireproof for certain types of insulation, so fire won't jump from one part of ship to the other. Thermal. Sound. If you have an attack submarine, for example, you want to keep it quiet, and there's a really high-tech insulation to you line that submarine with to help reduce its sound footprint. But in this ship, there's a lot of insulation. After 7 years, it's done and it launches, it goes out to the ocean. The good news is every 5 years, it comes back to be refitted, and insulation is part of that refitting as well. If you look at the aircraft on the deck of that aircraft carrier, they don't normally sit there in the sun. They're sitting below the decks and a big hangar. That hangar has insulation on the walls, the ceilings and the floors. And over the 5 years that, that ship is deployed, you spill jet fuel on the floors, you've wiped lubricants on the walls, all kinds of things have happened to degrade that insulation. So it comes back to dock. And while other things are being refit on the ship, they strip out all the insulation of that hangar and they reinstall new insulation of that hangar. So it's an ongoing revenue stream for us because we provide a service for that ship. On the right, you're seeing that's a Shell ethylene cracker plant in Pennsylvania. And look at that -- the complexity of that, that's a $5 billion build. There are buildings that need to be insulated. There's pipes that need to be insulated. There's smoke stacks that need refractory. There's all kinds of things in there that need to be insulated. But now that is being completed, we'll contract with Shell to supply products on an ongoing basis. If something happens to one of their pipes and they need to repair it and they take the insulation off of it or if they just need to inspect it, they take the insulation off of it. They need new insulation to go in there. If regulations change, and there are some regulations saying that in certain environments, insulation needs to be changed regularly, they use our insulation for that. And we talked about how large our fabricating footprint is, we have fabricated a lot of custom pieces for that facility. There's a really good chance when they need those pieces again, they'll come back to the people who did it right the first time. Again, that creates a continuous revenue stream for us. So we're going to go into a bit more of a discussion. I do want to wrap this up a bit by saying 2 insulation experts, but not sitting all over each other, highly, highly complementary, different segments that we've worked in, different customer bases that we've worked in, right? So we bring those 2 together, and we can take advantage of the scale that we have as insulation experts, everything from purchasing the logistics, but we also can learn from each other in these new segments. Thanks, guys.

Great. Thank you, Joey. Thank you, Jeff. Great job. So welcome back to the panel discussion. Thanks for joining us. The oil refinery. So I'm glad all of you are here because I went to this oil refinery like 6 weeks ago, just like one of the best things ever did in my career, but nobody talked to me, let me talk to them about anymore. So I'm got all of you here, I can talk to you about at lunch. So we want to get in a panel discussion on the specialty distribution business. I think a really good job of Jeff kind of outlining the platform and what's happened with Service Partners. And Joey, a really nice job of given that overview of the Distribution International business. I think one question, somebody asked it earlier, so Reuben, I think it was you perfect segue into a question that we do get and that is, hey, if you think about DI, Specialty Distribution and Service Partners coming together into the platform, maybe this is a combo question for both Joey and Jeff. How do you think about the competitive advantages? I think we're pretty clear on it. We see it day to day, but maybe both of you can elaborate your view on the competitive advantages and how you think about growing that market presence?

Well, it's -- we talked about providing entries into new markets. Geographically, if you have locations in a new market that you don't from another business, you can use that to ladder yourself into the market, right? A lot of the expertise we bring together, again, different ways of doing business. We're learning from each other. This is a $3 billion company purchasing a $1 billion company, so a lot of developed expertise on both of those, and we flow to each other. Just efficiencies in our footprint. We have a lot of branches that are close together. If those leases come up, we're going to move them closer together so we can be under one more efficient building. Are we going to -- there's a lot that we've mapped out over the next couple of years to drive those efficiencies.

Yes, and I talked earlier about how the integration is going. It's going ahead of plan. And one of the things that we're seeing is the talent that's within the DI organization. And we're already having meetings where we bring the service partner, regional leaders, together with the DI regional leadership team and talking about best practices, understanding both businesses. So just a world of opportunity there. And I mentioned before, Canada, is that an opportunity for Service Partners down the room. It's -- and we're going to learn. They're already there. They're already doing business in Canada.

With a leadership position. Yes, I do just because it's a big part of the learning and what we wanted to give detail in here today was about the DI business. And so Joey, I think you did a great job of hitting these points relative to the position, the MRO business, our fabrication, customer base. We talked a lot about talent today. One thing is that the M&A opportunities and it's highly fragmented. Maybe just talk about those. There are some nice size, chunky acquisitions out there, very fragmented. Maybe you can speak to that.

If you saw the -- I don't know if you remember back this far, but if you saw the Distribution International footprint, you saw that we didn't have any branches -- not many branches in the Southeast. None in Georgia, Alabama, Florida right now. Obviously, that space is ripe for us to either grow in greenfield or to grow through acquisition. And Distribution International has opened several branches that became profitable very quickly over the last 2 years. We know how to do both. But a lot of white space in the Northeast for us still. There's a lot of places where we would like to grow, and we're going to partner with TopBuild to grow on those spaces.

[Operator Instructions] So Phil, question from you.

Phil Ng from Jefferies. Thanks for the presentation. I'm certainly newer to the DI story in the business. Can you walk us through how this business performs through a cycle, right? I mean there's an MR component, which I would imagine is a little more stable in nature. But talk to us how to think about the business cycle pricing. It's a lot more specialized, so I'm thinking it might be more sticky from a pricing standpoint versus, let's say, fiberglass. But just walk us through how you think about the business performing through and through the cycle.

Yes, maybe I'll kick it off and Joey will definitely add. So one thing about the business to think about current day, Phil, is the industrial side of the business was kind of slower to come back coming out of the pandemic. And we absolutely see that today. So as we see our backlogs, we see our bidding activity, we see big projects coming on here. There's quite a bright space here for the industrial side of the business because of that kind of late recovery. And then let's say, typically, what we've learned in the business is relative to -- it is a slower cycle relative to what may happen on the residential side. So I wouldn't say slower, but a very different cycle than what happens on the residential side. If you think about last time people ask us questions about oil and gas and petro and you have a couple of different projects there, you have turnarounds, which is where they're shutting down a specific part of the refinery to do work, and that can be planned years in advance. And then you have capital projects that come along this plan, some of that being government required or regulations that happens. So there's definitely sight to those and some of that work that's required back to the MRO side. I'd say relative to pricing, Obviously, you're right, a lot of specific projects there, some job pricing that happens, some regional pricing that happens from that perspective as well. I think the DI team has done a nice job relative to how that works and how that works up through the organization and the discipline that's been built from that pricing perspective. So it is different from kind of what you think from the building insulation side, but some of the same disciplines and stuff apply as well and working very closely with the manufacturing partner. But Joey, I'm sure you can add to it.

Sure. I can give you 3 other pieces. One is the cycles don't tend to be as severe as they do in residential new build. So you tend to have a flatter curve. Number two, you bid every job. There are not that many price books that customers have that live on their desks. So you bid every job. So that every one of those jobs you bid is an opportunity to reflect the value add to that job, right, and to reflect increased costs. And number three, a lot of what we do is value add. Look, the specialty and specialty distribution that both Jeff do and I do means we're not box in, box out. We add value to it. Jeff talked about buying machines for his -- to sell to his customers and train them on using those machines. I talked to you about our fabrication facilities, which don't just pass-through insulation, they touch that insulation. They craft it. They have certain efficiencies they're trying to hit that are better than our competitors' efficiency so they can be more profitable. Those add value, and they're not as visible or need to be as visible to customers in terms of every penny that moves in terms of cost. So when you can add value, you can price for that value.

Okay.

Ryan Gilbert, BTIG. The margin expansion in Service Partners has been incredibly impressive over the last few years. In the event we see a deceleration or even a decline in new home construction. How are you thinking about the sustainability of that margin expansion?

Yes. So question is around the margin. Impressive margin expansion of Service Partners and our ability to sustain that as the environment could change. And maybe, Jeff, if you can hit on the disciplines, also the kind of the operating philosophy as well.

Yes. The -- I mean, we're very confident as far as -- from an operational side, how we're going to continue to improve from a productivity standpoint. We've added, like I said, technology into the business. We have a price override system that I get visibility to. We set thresholds, margin thresholds on all the products in Service Partners. And they roll up to a branch manager, to a regional manager and then to me. So -- and I love that because it gives me visibility to all the markets, what's happening real time in all these markets. So I think that's a huge advantage for us. And then, quite honestly, we started talking about commercial 6 months ago. We have a saying in our business, chase the cranes, and we put it on every slide we do today with our sales teams. So we're very, very active in pursuing that commercial piece, which DI is going to help us with as well.

Okay. I think there's a question in the back here.

This is Noah Merkousko with Stephens. On the DI side, I was hoping you could talk maybe a little bit about the fabrication piece and how the margins might be different there and the opportunity for that product to possibly take market share from more traditional products and construction methods.

Yes. The question is around fabrication and really that you hear it on the specialty side of that business and where we are in the value chain. So, Joey?

So it tends to have higher margins than something that you distribute because you touch it and you fabricate it and you add value to it. So you take margin for that service. There are tailwinds in that business that are associated with safety and labor at job sites. So people can traditionally do this at a job site, cut pieces to form fittings, glue them together, try to make them happen on a job site. But there's tremendous labor benefits to having a fabricator take care of them. You come together, they're just 2 pieces that snap together. And so that's providing a lot of tailwinds to our business today. And then again, when there's ups and downs in the market, you want to have a reliable supplier and the supplier is integrated across both distribution and fabrication, to the extent that we are, provide you with a really good option if you don't want to let down your customer.

I can add one other thing to that. You've heard today about the One Team approach. And I know Robert's visited many DI locations. I'm visiting DI location, Stephen's visiting DI locations. And we all put a different set of eyeballs and experience into it. We ask why a lot, right? You're fabricating and there's 3 people on a line. We look and we go, why is it 3? Can it be 2? Or how else can we grow this business? And then they do it on the other side. But that's that One Team approach that always looking to improve.

It's one of the things about the expertise that TopBuild has with integrating acquisitions. They touch those acquisitions a lot. People become familiar with them very quickly. Okay, question?

Mike Rehaut, JPMorgan. I was curious also about the -- I think it was kind of touched on a little bit before, the sustainability of some of the margin improvement that you've been able to demonstrate. And Jeff, you just mentioned the price override system and a margin threshold for products. I'm curious if there's any ability to quantify that? Because that would seem to me like a sustainable improvement in the business. And as investors try and understand where is the downside and what's -- what are you able to keep during a downturn?

So I think it's good question. I'd say, relative to that, Rob will hit on some of that whenever he talks about how we think about the future and what could be. So I think he'll answer some of your questions. But just on that price piece and the dismiss. That's touching all the Service Partners, salespeople on a daily -- basically, every order that comes through our system today is touched by that. And by the way, just because maybe 1 line of the order, 2 lines of the order pass, it's got to be a total margin look at that, and we stopped the order to us. So there's quite the discipline that's been built. And that, by the way, was something transformative we did in the business in '18 and '19. And so we think there is good sustainability. But I think as you think about the total business, Rob will give you some insights into that in his discussion.

Okay. I've got one here.

Okay. We've got time for a couple more, and then we've got hand there and then one from the web.

Talk about growth opportunities in MBI? And do you envision combining your DIs and Service Partners' capabilities there.

Yes. So MBI opportunity and do we look to put those businesses or operations together. Joey, do you want to take that?

So absolutely, we're working together to create a common footprint. You saw the opportunities before about being closer to your customers, being able to serve them better. When you service customers better, they reward you with more business. So I do see growth there. And it's great having our footprint, not just in the U.S., but in Canada as well. There are customers who cross borders and they rely on us to service them. For a lot of these big national customers, the bigger your footprint is, the better they know that you can service them. So if they have a building going up over here or over here, they know they're going to get the same experience. And bringing these 2 companies together just helps us guarantee that same experience as we bring our systems together. You heard a lot about the ERP that we're -- that's so strong for TopBuild. That's something that Distribution International will be getting on and the metal building insulation business we'll get on is we'll be able to partner much better with the Service Partners legacy metal building insulation business.

Okay. Time for one last question here.

Joey, just 2 questions for you. On DI, do your customers only take their material via distribution or they take direct from the manufacturers. I know, for instance, in residential, a lot will go from manufacturers to homebuilders. I don't know how different it is here. And then second, as you look at metal buildings, what kind of material is that? Is that MBI or other types of products?

Yes. So just a little more detail on the MBI business. Both thinking about the opportunities, the type of material there. So Joey, you're the MBI guy.

Sure. There's a lot of ways you can insulate a pre-engineered metal building. The vast majority is with fibroblast has been laminated into rolls that go up in that building or into fiberglass that's been put into systems where you have the facing separate, that goes on to a job site, it's installed, perhaps it's a fall protection or prevention system on the roof and then the insulation goes on top of that. So it's largely fiberglass. There is a lot of board that goes into those products now as well. And particularly when you get to tilt ups, which are a little bit different buildings, a lot of board that goes into those buildings.

Okay. Thank you, Joey and Jeff, great job. So I just want to wrap up with Joey and Jeff here. Our specialty distribution goals as we look across this platform in this industry-leading segment that we have striving for 0 active, you've heard it consistently. That's consistent cornerstone of our business across the entire part of TopBuild is our focus on safety, putting the well-being of our employees first. Growing our share in all 3 end markets. You hear we have the leadership position in specialty distribution, residential, industrial and commercial and opportunity in white space to grow that across the footprint, including Canada, continue to invest. We are investing in the business here. I would give you specific examples of we're already investing in fabrication. We're the leader, and we're starting to even distance ourselves more from the competition relative to investments that we're making there to continue to build on that value add. This mindset that drive to improve, great culture DI. And I think Joey talked about this touch, how we touch the acquisitions. And so really engaging and inspiring the DI team, and I would encourage you to talk to Joey or talk to Dave Cushen about how they're feeling being part of the TopBuild family and this drive to improve mindset that's really starting to cascade its way in DI and then expand the relationships. Contractors and builders of all sizes. We talked about Florida. Great thing about Florida, I guess what? Service Partners has a lot of great contractor relationships there. Those relationships are going to be introduced to DI. So expanding those relationships both internally, talk about our employee base, but also external and really foster that power of the team that Jeff spoke to. So key takeaways, the largest North American specialty distribution player, Canada and the U.S. across all 3 end markets. Again, this transformative acquisition of DI is right in our core of insulation and it comes with some really special unique parts, including the maintenance, repair and operations reoccurring revenue stream. The demand drivers in the DI business and thinking about the commercial industrial space, where Service Partners plays as well, it does mitigate cyclicality to Phil's question. We see a different cycle there. And I think Joey answered that with not as deep of a cycle in some of these segments. A differentiated approach, strong margin opportunity expansion by the disciplines and this operational excellence, both, I'd say, process, technology, but also discipline in the business as well. And look, these 2 businesses together are a great strategic fit because they're right in the power area of core installations, so sharing the best practices and really the opportunities to how we're going to drive this operational excellence across this platform. So great job, Joey and Jeff. Thank you very much. Appreciate it.

Thank you.

So last segment here. So Rob wanted a finance video, but we said, look, finance is exciting enough, so we're just going to turn it right over to a great presentation from Rob Kuhns, our CFO.

Thank you. Good morning, everyone. Thank you for being here. I'm Rob Kuhns, the CFO for TopBuild. And today, I'm going to tell you about how this unique model that you heard about today is driving -- and our M&A competency are driving shareholder returns above market. So first, a little bit about my background. I've been with TopBuild for 4 years. I took over as CFO on April 1. I took over for John Peterson, who retired on April 1. Before that, he and I worked together. I was a VP Controller for TopBuild for 3.5 years. Prior to that, I was with Mohawk Industries for about 11 years. I started with their Ceramic Tile Division in Dallas, Texas. I was there for 6 years. When they decided to expand their Ceramic business into Europe, I moved to Italy for 2 years and helped with the integration of acquisitions over there, we did integrations in Italy, Russia and Bulgaria. Then after 2 years there, I came back to their corporate headquarters in Calhoun, Georgia and worked there for 3 years. I started my career with Ingersoll-Rand, where I worked for about 10 years and moved around the country. I started in Pennsylvania, went to New Jersey, North Dakota and then down to Texas. So first, the key messages I want you guys to walk away with today is: one, understanding TopBuild's unique and flexible business model and how it positions us to outperform. And when I talk about a unique business, I'm talking about a business with strategic advantages that can't easily be replicated. That unique model has a track record of strong financial performance. It also has a record of generating strong free cash flows that we've strategically allocated primarily into M&A. And by doing all the M&A we have, which is 28 deals over the last 5 years, we've developed a real competency around that, and I'm going to talk a little bit more about. And then on top of that, we've got a conservative balance sheet and ample liquidity to continue this growth strategy and also to absorb any bumps that are may be in the road. So we all love this slide. Robert showed a lot of it earlier, right? It's our 5-year history since our last Investor Day. We've grown sales at a 16% CAGR. That's about 60% from M&A, 40% organic. We expanded EBITDA margins by 700 basis points, and we outperformed the S&P 500 by nearly 6x and our peer group by over 4.5x. Now that's a tremendous track record of success that we're all very proud of. But as you heard today from the groups that have been up here, we're not ones to rest on our laurels, right? Part of our unique culture is that constant drive to improve, and we all think there's a lot more opportunity out there for TopBuild. So I get questions a lot. Rob, what are your priorities going to be as CFO? What are you going to change, right? And I typically say don't expect any sharp turns right or left. And I have a couple of reasons that I say that, right? First, refer to the previous slide, right? Business is performing very well right now, right? And second is I've been with TopBuild the last 4 years and I've had a seat at the table, so I've been a part of the strategy. So with that said, I did want to reiterate what my top 5 priorities are. We want to continue driving profitable growth, which you heard a lot about today. We're going to continue our strategic allocation of capital, primarily focused on M&A. With that M&A, we're going to make sure we drive returns and synergies. And our focus this year is certainly doing that with DI. And then to take TopBuild to the next level, right, to continue to make our model unique, we're going to focus on talent, which you heard a lot about from Jennifer today, and we're going to continue to evolve our technology strategy. You heard Sri and Robin earlier. We're going to continue to invest in that and continue to develop that. So let me talk a little bit, give you my perspective on kind of a simple man's perspective on our ERP strategy that you hear a lot about, right? So you hear us talk a lot about how we share materials, share labor and share equipment, and that's a big strategic advantage for us. Jeff talked about the pricing controls, and we're able to control pricing across our entire footprint and things go up for approval to him and Steve. But on top of that, right, so that's a great advantage. On top of that, then we're doing all the investments like what Sri and Robin talked about. And there's more than what they talked about that I'm going to touch on as well. So you heard about things they're doing with lead app, e-commerce and GPS that are helping to drive productivity. In addition to that, by having a common ERP, we can centralize back-office functions, right? Things like accounts payable can be in one place, which it is. And then we can focus on automating those things, right? There's a lot of technologies out there today to automate the inputting of invoices. We've gone with a cash application cloud that's handling the application of customer cash automatically versus somebody hand keying it in. So these are the types of things we're doing when we talk about fixed cost leverage and back-office automation. Those are the types of things we're doing. And then obviously, having a common ERP, it also gives us the backbone of all of our data in one place, right? And from a data analytics perspective, we can drive a lot of good decisions from that, right? I mean Jeff gave me a great example when he talked about customer profitability and how that's helped drive the Service Partners improvement. That was from a lot of analytics that came from our ops finance team digging into customer profitability, right? We're doing things every day from a pricing analytics, service metrics and branch profitability perspective. So I guess just a final thing on that side. That right-hand side, there's a lot of good things going on today. And it's continuing to evolve, and we're continuing to invest in that side of it. Then this slide is the slide for me as a financial person that I love about TopBuild, right? We're unique. And like I said, a unique business to me is one with sustainable strategic advantages that can't be easily replicated. We're the #1 player in the 3 end markets we serve. We've got national scale and buying power. You saw on display today, we have second to none operational expertise and entrepreneurial spirit. And you can imagine how that feeds through our field operations. And then you've heard a lot about our technology platform as well. You add to that, we've got a very flexible cost structure, right? 70% of our costs are variable, which allows us to flex up or down in any environment. And that's why we say TopBuild is going to outperform regardless of the environment. In addition to that, we're very capital efficient, right? Low CapEx requirements, typically 1.5% to 2% of sales, and working capital of 11% to 13% of sales. Put all that together, what do you have? A business that's generating a lot of free cash flow. And with that free cash flow, we're strategically reinvesting it to drive shareholder value. So let me tell you about that allocation of capital. Over the last 5 years, we've allocated $2.7 billion of capital. First and foremost is investing in our business. Now like we said, it's great. It's a capital-light model, so only 1.5% to 2% of sales needs to go into that. So that's been about $200 million over the last 5 years. I'd say that's about 80% of that goes into equipment and vehicles. The other 20% is going into the technology type investments that we've talked about. The biggest chunk of that $2.7 billion, nearly $2 billion of it has gone into M&A. And like I said, we love M&A because of the returns it generates. We've got the strategically advantaged model that when we roll those companies up typically, we're paying 3 or 4x post synergies on the EBITDA. And then we all know M&A can be a little bit lumpy time to time. So as cash accumulates, we look to return it to our shareholders, and we've returned $450 million through share buybacks over the last 5 years at an average price of $78 a share. We're actually in the middle of our ASR that we also just recently announced, $100 million ASR. So I've talked about M&A and how it's a core competency for TopBuild. And core competency isn't just something I'm putting on a slide, right? You can see it on the far right. We've improved our return on invested capital by 700 basis points over the last 5 years. We follow a strategic rationale focused on that core of insulation, where we know we have strategic advantages. We've got a dedicated team focused on looking for deals on that side of things, and we look for companies with aligned cultures and leadership. And then we probably have 20-plus owners still working in our company, which really helps enhance that entrepreneurial spirit that's in the field. A great example of that is Hayden Drum. He's now a part of our M&A team. He's somebody that has an M&A background, worked in an M&A advisory firm, then went to run his dad's insulation business, which got bought by TopBuild in 2020. And now he's helping us on the M&A front, right, which a huge strategic advantage for him to sit down at the table with somebody and have been in that person's shoes before, right? From a financial process, we follow a very strict due diligence process that involves all aspects of the business: IT, HR, tax, risk, safety, everybody takes a look. And we identify risk and we walk away from deals when we don't -- when we find stuff we don't like. Like I said, from a synergy perspective, we're typically paying 3 to 4x post-synergy and we go and dig into the earnings. We do a queue of e with a third party to make sure the EBITDA stands up, and we go through the synergies in great detail. When we get a deal to the finish line, then we tick in our integration team. Again, a dedicated team there. These folks travel the country, they're road warriors. They've integrated 28 companies. That's over 100 branches they brought on to our systems over the past 5 years. And so when they do that, that helps us drive these synergies quickly and helps drive the returns you're seeing on this slide. So just the spotlight a few of our transactions. Obviously, DI is our largest, the $1 billion we spent in the fourth quarter. Joey has talked to you a lot about it today, and David will be back there to tell you more about the products, if you want to learn more. USI, the second largest deal we ever did. That was back in May of 2018 for $475 million. That was -- they were the third largest player in the residential insulation space at that time with 38 branches, so that's really where we cut our teeth in terms of integration competency. We started with that big integration back in '18. And then in addition to that, we've spent another $475 million on 26 deals ranging from $2 million to $100 million. And no matter the size of the deal, we're checking the boxes every time to make sure it meets our strategic and financial criteria. So just to update you on the DI synergies. As we signed up for day 1, we signed up for $35 million to $40 million of run rate synergies by the end of the second year, and we are right on track for that. We will either meet or exceed that. We're on track to be at a run rate of that, 50% of that by the end of the first year. From a supply chains perspective, those synergies have started kicking in. We saw some of those in Q1, and they're right on track. Back office, some of those have also started to kick in, and more of those will come as we complete the systems integration. And then from an operational improvement side of things, there's a lot of things going on. Joey and Jeff touched on some of them with MBI. We're renegotiating logistics contracts, insurance renewals have come over on the TopBuild. So a lot of activities there and everything is right on track. So then just a reminder of what DI has done to our revenue base. If you look at the chart on the left-hand side, our product mix, this is why we say insulation is our core. If you looked at that 5 years ago, you would have seen 80% insulation. It really hasn't changed today, right? What has changed is the chart on the right, which 5 years ago was 82% residential insulation, today it's 63%. And I know a lot of the sell-side guys in here like to have neat phrases in their reports they put out. So I gave you one for free there. If you want to say that TopBuild has DI-versified their end market revenue, feel free to use it. So then this slide is actually my favorite. Robert showed this earlier, right? But when you put it in context of what I talked about from an M&A perspective, it's a great slide. And the reason I say that is, if you think about it, we're the #1 player in all 3 of those markets. We've got strategic advantages in all 3 of those markets. And when you do the math on that market share, we have 20% share of a $16 billion market. So a lot of white space out there, a lot of opportunity. From a balance sheet perspective, we're modestly levered at 1.84x trailing 12-month EBITDA. We're willing to take that up higher for the right deals. We went up to 2.5x with DI, I think 2.9x with USI. We've got $557 million of available liquidity. And from a debt structure standpoint, we have no near term maturities, and our average cost of debt is somewhere just below 3% today. So we've got the dry powder and flexibility to continue this strategy or absorb any bumps there may be in the road. So I know a lot of you are looking for our projections and numbers to walk away with here today. There's obviously a lot of uncertainty in the markets right now, right, with inflation, the Fed raising interest rates. Can they navigate a soft landing? My bad news is our crystal ball on that is no better than yours, right? But we wanted to give you a few things to think about and tell you how we're kind of looking at things. So for our 2022 outlook, sales of $4.65 billion to $4.8 billion and adjusted EBITDA of $810 million to $860 million. So no change from what we said on May 5. The sales piece of that, right, that's going to be still. We're saying low to mid-single-digits volume growth, and that includes price that we've incurred to date as well as expected price for the rest of the year. And it includes any M&A that we've done to this point, but no future M&A. Our long-term modeling assumptions, 11% to 13% for working capital. 1.5% to 2% for CapEx, so we're going to keep our capital-light model. Incremental EBITDA, again, no change there on organic 22% to 27%; M&A, 11% to 16%. Our tax rate will be 25% to 27%, and we'll make $107 million of revenue for every 50,000 houses insulated. So as we look at 2025, right, like I said, a lot of uncertainty out there. So we thought we'd put a couple of scenarios in front of you. First, our plan is to continue our growth trajectory. And we think there's a lot of reasons we could do that, right? So if we can continue at a 16% compounded annual growth rate, we'll be a $6.4 billion company in 2025. Based on our current target for 2022, we would just need to grow 10% in the next 3 years to drive that. We would keep our same EBITDA assumptions. And I know the question will be, well, what's in there for price and volume? I mean, historically in M&A, historically, I'll tell you, M&A is 60% of our growth, and I would expect it's going to be in that ballpark, 50% to 60%. So then you could model our EBITDA going forward, 22% to 27% on organic, 11% to 16% on M&A. So that's our goals and what we're shooting for moving forward. But I know a lot of people are more pessimistic, right? And we wanted to give you some ideas of how we might perform in a down market. And this is why we say TopBuild will outperform in any market, right, because of our flexible cost structure. 70% of our costs are variable. That's made up of material and installer payroll cost, right? And those guys are paid on piece rate. So those costs go away quickly as our sales go away. So in this scenario, where if sales dropped 30%, again, not our forecast, just an example here. Those costs would drop by 30%. Then what we would need to do is lay out the plan of action to take out 15% of our fixed and semi-variable costs to put us at a decremental in the range of our incremental, which is what we're shooting for in a downside scenario, right? The good news is we've done this before, right? When COVID hit in March of 2020, our sales dropped by 20% in March, and we were looking at a forecast that said that might be the rest of the year. So we laid out that plan, started taking those actions. Luckily, housing recovered quickly, and we didn't have to take all the actions. But if you look at our flow throughs from that year, we had very good flow throughs and a lot of it was because of the actions we took there. A lot of the automation projects we did kicked in and we didn't have to bring all those folks back, so we're willing to take these actions if the time comes. But like I said, this isn't our forecast, we just wanted to give you some idea of what we would do if this happened. Then finally, I wanted to thank any of you that participated in our investor perception study that we did in Q1. We're very proud of the results. It's a testament to this fine work with you guys. And we're committed to consistent and transparent communications with all of you. So finally, to wrap up the key takeaways. We've got a unique and flexible business model with strategic advantages. We've got a strong balance sheet and disciplined capital allocation strategy. We've got a proven M&A track record and a lot of room for growth for M&A, and we're well positioned to outperform in any environment. So with that, I think Robert is going to come up and have some closing remarks.

Okay. So Rob and I will be up for a couple of general questions here. But I just wanted to close out from this morning. One, I thank the team, I think, a great job of stepping through our key messages here and the points we want to get across about our confidence in this model, our confidence in how this model will outperform in any environment. Talking about the progress we made to '17, what do we tell you in '17 and how we delivered upon that. So that strong track record of execution, that strong track record of producing continued improved results. Season the cycle test, the leadership team, I hope you see a lot more than that. You see the level of energy. You see the level of experience. You see the level of engagement of this leadership team. But you also see the sense of alignment from the team as well as you see that common thread through what we talked about today. And in a dispersed model, in a service model, to have that alignment is super critical to deliver the success and the execution that we've delivered and will continue to deliver. Flexible and differentiated business model, I think Rob said it well. We talk about the model, -- we talk about the unique model, and it is not easily replicated, nor duplicated. And so we talk about how we diversified the business at 39% commercial and industrial. That's by design. We executed that by design, and that's why we are well equipped to outperform in any environment. The DI acquisition. What a great landing place for DI. TopBuild, where our core is insulation, and that's what we're focused on every day, and we are the experts. Robust free cash flow generation, how that will facilitate the future growth strategy that we've executed really well and we'll execute well in the future. And then this practical approach to how we put tools in place. We put tools in place of folks in the field, focusing the business to drive innovation, technology, digital and really facilitate the growth and the performance in the business. So I think you walk away with that same level of confidence of the business. The playbook that we have, we've developed the playbook, and I think Rob talked about it. We even executed upon that playbook a couple of times. He talked about COVID. But I would -- somebody asked me this question during the break. Go back to 2017, the end of 2017, 2018, residential was stumbling, affordability issues, wasn't a great time. You saw TopBuild continue to improve in that environment and produce improved results in that stumbling, challenged residential environment. And then we talked about the COVID pandemic time frame and how we executed well. So we have a track record of this playbook working and working really well and producing results. So strong execution, a great track record, and as we've said before, plenty of opportunity in this business. And you walk away with this feeling. We're just getting started, and we absolutely believe in this model. The best is yet to come. So really appreciate your time. I hope you found it informative. A couple of things Rob and I will take a few general questions. As Tabitha mentioned, we have kind of the launch and learn tables. If we can sit down with all the presenters today, ask any specific questions. But just to kind of wrap up this section, Rob and I will be glad to take any general questions you may have.

Keith?

The spread between starts and completions have been pretty well documented and just seems to keep getting bigger. I guess where do you stand now in terms of how the backlog that you have or maybe said another way, if starts do start to weaken, when will you actually feel it in some of your work?

Yes. It's a great question. And I would say our backlogs continue to build, quite honestly, across single-family, multifamily and commercial. So if we think about specifically that the residential side of the business, I mean the -- we take the ground level, and we're talking to our local leaders every day. We're not seeing a slowdown in our business. Builders are still very optimistic. As you know, they're governing the sales at that local level piece. So the backlogs are robust, by far the most robust backlog any of us have seen in our history in the business, again, multifamily and single family. I think 2022, as we've said, going to be a strong year throughout the year. How far that carries into 2023, hard to say. But we're not seeing it at the field, ground 0 level right now. And again, conversations with the builders continue to be pretty optimistic.

In 9 months, 12 months?

As far as the...

In terms of how far behind you and the investor be at a risk?

I mean there's 1.6 million houses that have been started that haven't been completed. That's like a record high when you look at the census data. I think for us, it's hard to say exactly where and there, which of those have been insulated at this point, right? But that 1.6 million, that's more than a typical year of starts. So there's more houses under construction than a typical year of starts right now.

Thanks. Appreciate all the comments and numbers. Just wanted to get a little clarity on the 2025 scenario slide where you had the -- just to understand that better, I guess, is that kind of a hypothetical? Is that a target forecast? How do you characterize -- how do you desire us to understand what that number is the $6.4 million?

I mean it's just showing you if we can -- we'd like to stay on the growth path we're on, right? The 16% compounded annual growth rate. And that's what we'll look like if we can do that, right? We think there's a lot of reasons that we could do that. But obviously, like I said, there's so many unknowns right now with the Fed trying to reduce inflation and potential recession. It's hard to say that, that's -- we're not going to give that as our guidance for 2025. But that's a hypothetical of what we could look like in 2025.

I guess just secondly, the diversification has been a big theme today. And going back to the slide of the 10% or 11% share in commercial and mechanical versus the 40% residential. Is it fair to assume that the preponderance of the M&A opportunity going forward is more in those 2 categories and that, in turn, would further diversify your end market exposure over time? And directionally, perhaps how should we think about that, where that number is today could be in 5 years?

Yes. So 2 or 3 points to that, like, I'd say the pipeline of our M&A and our focus for M&A is really across all 3 of those in segments or end markets. Definitely, if you look at the industrial side, there's some larger chunkier acquisitions in that space, given our presence and our share on the residential side. But as I said before, all highly fragmented, all 3 end markets. And so we see great white space, great potential for growth across all 3, including from an M&A perspective. I think you could continue to see that diversification grow. Do we have a target number for that? The answer is no. We think we'll grow all 3, and we think that will come organically and through acquisition as well. But definitely some larger acquisition targets on that mechanical side or industrial side of the business. Reuben had a question?

Maybe in the past, you've talked about how the Distribution or Service Partners business has maybe held up better in down cycles. I think some of the larger installers are forced to go through you. Does that still stand today? Is there anything that's changed in the industry dynamic that would make that different? And then in that same vein, can you talk about how DI has held up in previous economic troubled times, I guess?

Yes. So on the Service Partners side of the business relative, yes, those dynamics still exist today. I mean if there was going backwards from that perspective. So the theme there is larger contractors as volumes could reduce, they have our time going direct to manufacturers from that perspective. At the same time, we are in a material tight allocation. And from a supply perspective, it's a little different dynamic. But yes, that Service Partners model for exactly what you just mentioned, holds up really well in both sides of that cycle for that reason that, as use Jeff's term, that one-stop shop. Because now they may be needing smaller volumes of a multitude of items of which we can supply all of those. From a DI perspective, as I look definitely coming out of COVID, a stronger organization. If you looked at what happened in the business, I think we talked about this whenever we announced the deal, some struggles in -- during the pandemic time frame and kind of coming out of Q1 of 2020. But that business came out stronger. They did some nice -- made some nice strategic decisions in the business relative to how it's operating from an overhead perspective. Again, different cycle, and I think Joey said it really well, not typically as deep of a cycle there. Given some of that MRO business of which some of it is required. That's why we like the diversification of that business. We think it brings some stability for sure, a proven track record and then that diversification, both commercial and the industrial side.

A quick question in terms of your comments there as it relates to M&A. I guess you had commented that you're optimistic builders aren't seeing a slowdown. Rob talking about so many unknowns. How do you sort of put those 2 together as you're evaluating acquisitions right now? How does that influence thinking about capital allocation?

Well, I mean we got our eyes wide open, right, in terms of what the -- is being set out there. At the end of the day, we control what we can control in terms of running the business. And then we listen to what's going on out there with -- in terms of allocating capital, we're always looking for the highest return on our capital, right? And so we're looking -- we look at our stock buybacks that way. We look at acquisitions that way. And so we're evaluating that with every deal, and we're going to continue doing that as we move forward here.

Rob, thanks for the slide with the downside scenario, down 30% seems pretty Draconian, but let's see if the decline is half that, is the decremental margin similar in that 27% range?

Our goal is to have it in that range, right? The factor is how quickly -- how long do you think the decline is going to last? And do you want to let go of all your labor, right? Because if you think you just have to hire them back in 3 months, if it's an air pocket, we may hold on to them longer and the decremental may get a little bit higher then, right? But if we think we're in a recession for a while, we'll be in that 22% to 27% range.

Okay. So regardless of the decline from a top line magnitude standpoint, that's still a pretty good guardrail.

Yes.

Okay, And then from a pricing standpoint, in a decline, is there an ability to kind of hold on to pricing longer than, let's say, your input? And does that -- is that a good guide in terms of thinking about decrementals? And then from a cash flow standpoint, you talked about how free cash flow is very important. How does your free cash flow conversion hold up in a downturn as well?

Let me take the pricing piece first. So -- and then Rob can talk free cash flow. I think from the pricing piece, we talked about distribution, I think about the install piece of it, Phil, I think about -- you've got material, but you have labor. And so there could be some decline there. Labor is still going to be a precious resource and a constraint in the construction industry. We talk about definitely how we're winning from a labor perspective. So I think there is more price resiliency there from that perspective because you do have the labor factor, which I think if we went back to October, and we were probably on earnings, we were saying, hey, it shifted. The builders are more concerned back about labor now. Maybe now shift a little bit back towards material, but that labor is still front and center top of mind as well.

Yes. And from a cash flow perspective, our conversion cycle will be similar. I'd say in that first year, there's actually a cash flow benefit as you take working capital out of the business as sales declined. So there's actually a onetime bump we would get in that scenario. But from there on out, I would expect it to be similar. So that's one of the things we love about the model, right? It's capital-efficient. It's flexible until the cash flows hold up in a downturn.

I think Adam had a question.

A couple of questions. Just on DI, just with decremental, just given the fabrication component of it. Would we expect those to be higher than average versus the legacy business?

We don't break it out between the segments or within the segments in terms of the decrementals.

Okay. Got it. And then just -- you talked a lot about insulation, but there are other categories you guys are in. And I know in the past, there's been a talk of glass and maybe some other ancillary areas that could be attractive. And any update there? Has maybe DI pushed out those opportunities for now, just given all the integration and opportunities there?

Yes. I think it's actually a great question, Adam. So from the glass perspective, we still have some good businesses there. We do some glass as complementary products on the residential side, still doing some glass that came along with the USI acquisition. But we would say so much white space in that core event. I think it's something you hear from us now and consistently the past couple of years and especially now with the DI acquisition, there's so much runway in white space in our core of insulation across these 3 end markets, not to say turn our back on glass, but we are very focused in our core of insulation. If you talk about resources, where we're putting our time and effort, integration is important, but we're also putting it where we know we can drive the best profitable growth. And that's kind of our guiding light and it's definitely in that core of insulation.

Could you give a range of how much volume growth you would expect to get from the implementation of code as it comes up to the more recent standards, which are more energy efficient.

Yes, that's a tough one. Codes, you think about code and code adoption across the U.S., it's a very local situation. How is adopted by local municipalities, how it's enforced by code inspectors and stuff as well. So we've said definitely a tailwind for the industry. If you think about anything from people trying to drive lower emissions to changing code to your perspective. Or some things that are probably going to come out of, think the deep freeze will happen in Texas and that Gulf area last year in the February time frame of 2020 that's going to create some tailwinds. But just to say, hey, code's going to do it or just some of the ICC code changes, that's kind of a tougher one to kind of put a pin to. Because it is very, very local about the adoption. Just because State of Texas say we're adopting this, it doesn't mean the city of Austin is doing it or a certain county around Austin is doing it. So but definitely a tailwind for the industry.

Noah Merkousko again with Stephens. In that 25 scenario where you're growing 10%, I think you were saying 4% to 5%, is that going to be organic. Maybe if you could talk a little bit about the split between price mix and volume. And then assuming there is volume growth, how do we understand that in the context of supply and manufacturing capacity being so tight and understanding there's not a lot coming online.

Yes. So like I said, we aren't going to break out the price and volume there, right? It's just a hypothetical if we can continue at this growth trajectory. Just given the uncertainty out there, we didn't want to put a line in the sand for 2025. So we didn't get into that detail. It's more of a hypothetical. If we can grow our sales, like we have the last 5 years that we're very proud of, this is what the business is going to look like.

Maybe I just want to clarify one of that, like is it possible for you all to see volume growth given the capacity constraints that manufacturers have over the next 3 years?

Yes, because we'd say right now, what's holding back our sales on the residential side is not our fiberglass capacity, right? If you talk to the builders, fiberglass isn't going to come up in the top 5 or 10 products they talk about holding them back. So there's a lot of other things that need to get worked out in the supply chain that's going to help us with some volume growth there. But Robert may have something to add to that as well.

No. I think Rob is right. I mean it's really up and down the supply chain of what's extended that cycle that Keith asked the question about. I think relative to fiberglass, we've been pretty public to say I think, as well as OC and others. Probably 1.5 million plus or minus is the fiberglass capacity. But at the same time, there's other materials. You've heard about the spray foam constraints. But the open sell side of spray foam is coming back, we're seeing supply chain improvements there. So that will facilitate some more capacity as well. So there's changing dynamics there. We probably think that the industry overall -- and by the way, I just kind of keep reminding us labor -- not TopBuild, but labor in the construction industry is probably going to be a governing factor potentially for the future as well. Okay. One last question. What's for launch? Is that correct? Okay. So as promised, we -- wherever breakfast was, we'll have the lunch session. So each one of the speaker groups will be at a different table. Feel free to join us. I'm glad to answer any questions there. And again, I can't thank you enough for being here and enjoy telling the TopBuild story. So and the product showcase visit that wall of insulation. Thank you.

Thank you.