Stephen Kim: Yeah. That’s encouraging. Appreciate that color. The second question I had related to the SPI acquisition. We have heard that maybe the metal building installation segment might be part of the holdup here. I was wondering if — when you look at the three businesses that come with SPI, would you be willing to split that business off? And if so, would that have any meaningful impact on your anticipated synergies?
Robert Buck: Yeah. So as you think about the business, you’re right. There’s three parts to it, the mechanical, spray foam, and the MBI. The DoJ has been trying to understand all three. I mean, they’re good businesses in the SPI model. So all the information and what we’re working with them on has been really across the business here of SPI. We really haven’t had to consider that part about the splitting off and stuff. And you’ve known us from the big acquisitions in the past. We’re good at driving synergies in the different models and stuff. So it wouldn’t be the synergy piece here with the whole business. It’s really not a concern of ours. So it’s too early to speculate anything, but something we’ve really not considered given how the process is going forward.
Stephen Kim: Okay. So that’s great. So that’s encouraging. Appreciate all the information and best of luck, guys.
Robert Buck: Thanks.
Operator: Thank you. Our next question comes from the line of Keith Hughes with Truist Securities. Please proceed with your question.
Keith Hughes: Thank you. Two questions. I guess, first on the discussion you had on residential and commercial growth in the press release for ’24. Is that a unit comment or is that a unit in pricing in this business?
Robert Kuhns: Yeah, Keith, this is Rob. That would include price. So it’s volume and price in terms of the mid single digit growth.
Keith Hughes: Okay. And second on the SPI deal, this might be kind of hard to answer in one number because I have a couple different businesses, but what would this take your market share from and to if you’re able to successfully complete it in that market?
Robert Buck: Yeah, I think as we think about the core business of SPI, in the mechanical space, which is the core business of it, it still keeps us in the double-digits and the low teens, if you will, like the double-digits relative to that.
Keith Hughes: Okay. Great. Thank you very much.
Robert Buck: Thank you.
Operator: Thank you. Our next question comes from the line of Joe Ahlersmeyer with Deutsche Bank. Please proceed with your question.
Joe Ahlersmeyer: Hey, everybody. Good morning and congrats on the strong finish to the year.
Robert Buck: Thanks, Joe.
Joe Ahlersmeyer: And Tabitha, also congratulations to you and you will be missed.
Tabitha Zane: Thank you.
Joe Ahlersmeyer: Yeah. If I could just dig in a little more on not exactly SPI, but what it could look like if you don’t close it. Obviously, that is allocable capital, even if it’s not cash on the balance sheet today. So — and you’re also going to generate a lot of cash in the year ahead and beyond that. So if you could maybe just talk about your thoughts around increasing the buybacks over time, especially as your pipeline of targets will probably shrink throughout time, right? So is there a way to think about how capital might shift more to buybacks versus the acquisition deployment?
Robert Kuhns: Yeah. Joe, this is Rob. So from a capital allocation standpoint, I’d say nothing’s changed with our strategy there. M&A is priority one in terms of where we see the best returns. So we’re going to continue to deploy capital there. But just like we’ve said in the past, that’s going to be lumpy and we’re going to stay disciplined in our process there. So we always do look at buyback opportunities, trying to be opportunistic there and weighing it with the pipeline and the deals we have coming. So I think you’ll see us doing buybacks again at some point as well. But we’re also going to stay aggressive on the M&A front.
Joe Ahlersmeyer: Understood.
Robert Buck: Yeah. I would say — adding to that — just say definitely a healthy pipeline. Acquisitions, you saw what we did in ’23 and then we’ve already got three deals that are signed up for 2024 here early on. So a lot of good activities, still very fragmented, a lot of players out there.
Joe Ahlersmeyer: Okay. I think oftentimes investors think about this business in terms of the large production builders. But maybe if you could talk to the smaller portion of your business that goes into R&R or even teardown construction with some of the more custom builders. Just anything you’re seeing on that front as we think about that being part of the solution to solving the underbuilt construct that we’ve got.
Robert Buck: Yes. So relative to the R&R, the rebuild, I mean, I definitely there’s a lot of teardowns in the U.S., which constitutes a new start. But relative to the repair model, that’s something our service partners business does a great job of getting after that. That’s probably the smaller contractor that’s doing that work. So that’s really the targeted customer. And we do see upside in that, whether it be relative to what you’re talking about, but then also just relative to some normal repair and maintenance that happens that we see with our smaller contractor customers on service partner side. So we do see that and that team does a great job of servicing those customers.
Joe Ahlersmeyer: All right. Thanks for the time.
Operator: Thank you. Our next question comes from the line of Rafe Jadrosich with Bank of America. Please proceed with your question.
Rafe Jadrosich: Hi. Good morning. Thanks for taking my questions. And Tabitha, congratulations. You’ll definitely be missed.
Tabitha Zane: Thank you.
Rafe Jadrosich: So the first thing I want to ask is just, you mentioned that insulation is still tight for material right now, but you do have Knauf coming on later this year. In that environment, in a year where you have new capacity coming on, how does that — like how historically has that impacted your business and your allocation relative to your competitors? Is there an opportunity to take market share with new capacity coming on?
Robert Buck: Yeah. Good morning, Rafe. It’s Robert. So a couple of things there. So yeah, you’re right. New capacity coming on mid-year. Now it will take some time to get the lines up and going there. So although that starts up mid-year, you’re probably thinking more about later in the third quarter, running capacity there. And then as we mentioned, there’s a lot of maintenance happening in the industry this year. So it doesn’t really have a capacity impact here in 2024. And to your point about, from a TopBuild perspective, if you think about when that plant was announced, which I’m going to say was probably back in 2022, we stated there that we worked with the management team with Knauf about how they were planning capacity and planning that operation and stuff. So they’re definitely a good partner with us and we’re definitely partnering with them relative to bringing up their new plant there in McGregor, Texas.
Rafe Jadrosich: Got it. Just to follow up on that, do you have either commitments or contracts or anything specific around that when there’s new capacity coming on that the manufacturer will arrange with you ahead of time?
Robert Buck: We’ll definitely do some advanced planning with them. That’s probably the best way to say it.
Rafe Jadrosich: Got it. Okay. And then the second question is just on your — can you remind us on your multi-family exposure relative to single family? And I know you’re coming up with the backlog sort of stretches through the end of this year. What does that actually mean in terms of what are you implying or baking into your guidance in terms of multi-family? Is that flat for the year? Is that down, small? What’s the quantification?
Robert Kuhns: Yeah, Rafe, this is Rob. So I’d say from a multi-family perspective, in terms of the market, we’re going to be indexed similarly to single family and multi-family as the market goes. So we’re somewhat indifferent to either as far as what’s in our assumptions for guidance. We’ve got multi-family essentially from a unit’s perspective, basically flat, right? So we know starts are declining, but with the backlog we have, we feel like we can — from what we insulate perspective, have pretty much a flattish year from a multi-family side of things.
Rafe Jadrosich: Okay. Thank you.
Operator: Thank you. Our next question comes from the line of Adam Baumgarten with Zelman and Associates. Please proceed with your question.
Unidentified Analyst: Hi, this is Mario [ph] for Adam.
Robert Buck: Good morning.
Unidentified Analyst: A quick question on antitrust. Given the attention on the FBI deal, do you have any thoughts on what this could mean for your ability to do other large deals in this space?
Robert Buck: Yeah. So as we mentioned, the process is pretty normal today as to what’s happening with the DoJ. So it’s too early to speculate anything there, as we mentioned on a previous question that came up. But at the same time, we operate in a very, very fragmented environment here across all three, really residential, commercial, and industrial. So we still see it as a healthy M&A environment, healthy pipeline out there for the future. And M&A is always our first choice, as Rob mentioned earlier, we think about buybacks and the best use of capital here. So we’re not speculating on anything here. We’re just going with the normal process with the DoJ right now and the process is progressing.
Unidentified Analyst: That’s helpful. Thank you. And just another one. Can you provide any further details or thoughts on the split between industrial, heavy commercial, and light commercial? Do you expect all of them to be in that mid single digit growth, or do you expect some variation between the industry? Thank you.
Robert Kuhns: Yeah. Mario, this is Rob. So I’d say not too different between the end markets. So as you know, on the install side, about 15% of our business is commercial. It’s roughly 50/50 light and heavy commercial. And I’d say we’re expecting both sides of that to grow in that mid single digit type range this year. And then on the distribution side of the business, the commercial/industrial piece is 60% of our business over there. You got service partners servicing the commercial building side of things. And then you’ve got with DI, we’re doing the mechanical installation side of things. And I’d say across both of those end markets, we’re expecting kind of that mid single digit growth as well.
Unidentified Analyst: Thank you.
Operator: Thank you. Our next question comes from the line of Ken Zener with Seaport Research Partners. Please proceed with your question.
Ken Zener: Thank you so much, guys. Rob, I just wanted you to clarify and expand upon the mid single digit, both the unit and price, and how that is consistent with the trends we are seeing today. With price up, price still tight, seems like you’re looking for actually even more conservative volume gains in residential. Is that correct assumption? Thank you very much. Sorry.
Robert Kuhns: Yeah. So, like we said, I mean, the guidance we’ve given is — it’s price and volume in that residential and the commercial/industrial number. From a volume perspective, right, we’re expecting on the residential side single family starts to remain kind of at the level they’re at today, kind of around a million starts-ish, right? So any upside to that will be certainly upside to our guide. Multi-family, like I said, we’re expecting to be flattish given the backlog. And so then we’ve got some — so that leads to a little bit of volume growth. I’d say probably low single digit volume growth when you compare that year-over-year. So then we’ve got some price layered on top of that. And then, similarly on the commercial/industrial side, it’s — some of those products I’d say are a little less inflationary on that side.
So we’ve got our assumption for price and volume based into that mid single digit as well. And like we’ve said, with the environment like we see it right now, could there be more price increases and more inflation than we’re anticipating? That certainly seems probably the more likely scenario. So, again, that would be upside to the guidance we’ve got.
Ken Zener: Thank you for your clarification.
Robert Kuhns: No problem.
Operator: Thank you. There are no further questions at this time.
End of Q&A:
Robert Buck: Thank you for joining us today. We look forward to talking with you in early May when we’ll share our Q1 results. Thank you.
Operator: This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.
