Greetings. Welcome to Installed Building Products Fiscal 2022 Fourth Quarter Financial Results Conference Call. [Operator Instructions] Please note, this conference is being recorded. I'll now turn the conference over to Darren Hicks, Managing Director of Investor Relations. Thank you. You may begin.

Good morning, and welcome to Installed Building Products fourth quarter 2022 conference call. Earlier today, we issued a press release on the financial results for the fourth quarter, which can be found in the Investor Relations section of our website. On today's call, management's prepared remarks and answers to your questions may contain forward-looking statements within the meaning of the federal securities laws. These forward-looking statements include statements about future expectations, anticipation, beliefs, estimates, forecasts, plans and prospects. These forward-looking statements are based on management's current expectations and involve risks and uncertainties. Any forward-looking statements made by management during this call is not a guarantee of future performance and actual results may differ materially as a result of various factors, including, without limitation, the potential adverse impact of the ongoing COVID-19 pandemic, general economic and industry conditions, rising home prices, inflation and interest rates, the material price and supply environment, the timing of increases in our selling prices and the factors discussed in the Risk Factors section of the company's annual report on Form 10-K as may be updated from time to time in our SEC filings. Any forward-looking statement speaks only as of the date hereof. The company undertakes no duty or obligation to update any forward-looking statements as a result of new information or future events, except as required by federal securities laws. In addition, management uses certain non-GAAP performance measures on this call, such as adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted net income per diluted share, adjusted gross profit, adjusted gross profit margin and adjusted selling and administrative expense. You can find a reconciliation of such measures to their nearest GAAP equivalent in the company's earnings release and additional reconciliation for adjusted EBITDA for earlier fiscal years in our investor presentation, which are available on our website. This morning's conference call is hosted by Jeff Edwards, our Chairman and Chief Executive Officer; and Michael Miller, our Chief Financial Officer; and joined by Jason Niswonger, our Chief Administrative and Sustainability Officer. I will now turn the call over to Jeff.

Thanks, Darren, and good morning to everyone joining us on today's call. As usual, I will start the call with some highlights and then turn the call over to Michael, who will discuss our financial results and capital position in more detail before we take your questions. IBP achieved another year of record net revenue, net income and adjusted EBITDA. For 2022, consolidated net revenue increased 36% to $2.7 billion. Net income increased 93% to $7.74 per diluted share and adjusted EBITDA increased 54% to $439 million. Throughout the year, we focused on supporting our residential and commercial customers during a very complex operated environment, including navigating continued supply chain challenges and aligning our selling prices with the value we offer customers. The record 2022 results also extend our history of revenue, net income and adjusted EBITDA growth to eight consecutive years every year since IBP became a public company in 2014. I am extremely pleased that our strong performance during 2022 allowed us to continue pursuing our growth-focused capital allocation strategy. We returned a record amount of capital to shareholders in 2022 by investing $138 million to repurchase 1.5 million shares of our common stock and distributing $63 million in cash dividends. In addition, we completed eight acquisitions, representing approximately $109 million of annual revenue during 2022. We believe we can continue to pursue our growth-focused capital allocation strategy throughout the economic cycle, and we remain focused on creating value for our shareholders. Beyond the record results, our role in creating a sustainable future through installing products that promote energy efficiency is an important component of how we define success. During 2022, we published our second annual ESG report outlining the progress we have made along our ESG journey. Employee turnover remained significantly below industry averages, which we believe…

Thank you, Jeff and good morning, everyone. Consolidated net revenue for the fourth quarter increased to a fourth quarter record of $686 million compared to $534 million for the same period last year. The 29% year-over-year improvement in sales during the quarter was mainly driven by an improvement in price mix and the revenue contribution from recent acquisitions. Our Installation segment revenue increased 23% to $641 million, driven by strong growth across IBP's residential new construction market. The Other segment revenue, which includes IBP's manufacturing and distribution operations, increased to $48 million from $12 million, driven by strong operating results as well as the December 2021 acquisition of AMD Distribution and the April 2022 acquisition of Central Aluminum. On the same branch basis, installation revenue improved 20% from the prior year quarter, driven by single family, same branch sales growth of 18%. Multifamily same branch sales increased 37%. Our 2022 fourth quarter residential same branch sales growth was 21% above the prior year quarter, while same branch commercial sales increased 13% in the 2022 fourth quarter. Adjusted gross profit margin improved 240 basis points year-over-year to 31.7% in the fourth quarter, which benefited from strong price mix growth during the quarter. It is important to highlight that our segments have different gross profit profiles. During the 2022 fourth quarter, our installation segment's gross margin was 34% compared to the other segment gross margin of 24%. We believe it is relevant to note the segment impact on our reported gross profit margin, since our other segment includes our more recent acquisitions in the distribution business. The acquisition of AMD Distribution had a limited impact on the prior year fourth quarter as the deal closed in December 2021. The other segment's impact to gross margin in the 2022 fourth quarter was about…

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

[Operator instructions] Our first question is from Stephen Kim with Evercore ISI. Please proceed.

Yeah, thanks very much, guys, and thanks for all the color, but I do have some additional questions. I guess the first one was that your price mix, looks like it improved sequentially. You had mentioned, I think that your annual mix was stable. Was curious, was there a mix impact in the 4Q sequential move as you went from 3Q to 4Q? And on the other side, volumes were weaker than we expected. And so I'm kind of curious, if we should expect volumes to be a headwind again to sales as we head into 1Q '23?

Hi, this is Michael Miller. Good morning, everybody. Thanks for being on the call. So on the price mix question, we did have certainly more than we've had through the rest of -- through the first three quarters of this year, a mixed benefit, and that mixed benefit was a combination of both higher growth rates from our regional and local builders and also higher growth rates of spray foam, which has a higher average job cost than fiber cost does. So we did see some mix benefit, but most of the price mix improvement in the quarter and through the year was price-driven. On the volume side, we will always value price over volume. but I would say that the quarterly comparison of our volume metric disclosures compared to completions is not always going to perfectly align. The way that we sort of look at the volume growth is on a full year basis, volumes grew 5.5%, whereas completions grew about 3.7%. So we feel good about where we are in terms of the number of jobs that we're doing, but as I said, we will always value price over volume.

Okay. That's fine. Helpful for that helpful. Thanks for that. And so, the second question I had related to -- relates to some comments you made last quarter, I think you said that you would be quick to take any necessary staffing actions in order to protect -- in order to protect your incremental margin. So, was curious as to whether any of those kinds of actions was a contributor to the strong incrementals this quarter, or was it really just -- or was that not really something that you found necessary to do?

It wasn't necessary -- this. Jeff Edwards, by the way. So no, that would not even close. So still busy, still healthy environment for us out there.

Yeah, the same way the sales grew 20% during the quarter or so.

Right. Great. No, that's -- it's obviously great to hear. And then last one for me is just that the builders have recently been talking somewhat excitedly about a pretty significant pickup in January and continuing into February. The Toll Brothers, folks just basically said that their most recent week was the strongest they've seen all year, despite the start -- the pick-up back up in rates. And so I was just curious if you could talk a little bit about to what degree that is, if you're sensing any of that in your conversations and negotiations with your builder customers?

Yeah, we're -- this is Jeff again. We're hearing the same kind of positive news, which is certainly good news. And so, as we all know, we're working through a backlog, but at the same time to the extent that there are as what has been referred to as green shoots by a numbers of you folks and others, and hearing it directly from builders, I think we feel certainly a lot more positive about it than you would have based on their commentary within the last even 45 days.

I mean, obviously, it's still very early in the year, very early in the spring selling season, but the very constructive commentary that we're hearing, particularly from the private builders is very encouraging.

Okay, that's really helpful. Thanks so much, guys.

Our next question is from Michael Rehaut with JPMorgan. Please proceed.

Hi, thanks. It's my Mike Rehaut. I appreciate it. First, I'd love to hear your thoughts kind of more broadly on 2023. Obviously, there's a lot of uncertainties still out there and movement, but, obviously, we've seen the sharp declines in housing starts over the last several months, and any kind of broad thoughts in terms of how you're thinking about the end market from a completion standpoint in 2023, how it might impact your business would be helpful?

This is Michael. No doubt. I mean, everyone on this call knows that permits and starts have been down pretty significantly over the past couple of months. We do believe that, particularly as the comps get easier, there will be some relative stabilization there. As we all also know that the homes under construction to the backlog, both single family continues to be strong on a relative basis. Multifamily is that a very high level. Clearly, we have to get the multifamily completions number growing and bring that backlog down because it's not a very healthy situation where it is right now, but we believe that over the course of '23, there will be improvement on the multifamily completions front, which is important for us because we really made a concerted effort to grow our market share on the multifamily side, which is now 13% of our total revenue. So, we feel very good about the opportunity there in '23. On the single family side, I mean, the backlog is starting to slowly come down, given the permits and starts environment and the order numbers that the public builders have disclosed. There should be for the industry some impact for that as we go into the back half of the second quarter as well as probably the third quarter of this year. But as we were talking in the previous question to the extent that we have a solid spring selling season, which there are a lot of indications that that'll be the case, the cadence of completions versus permits and starts to be such that you're not going to see, assuming a strong spring selling season, you're not going to see that much of a delta or decline in our opinion on single family completions because builders in many conversations that we've had with both public and private builders, they are getting ready for this pickup in order and sales activity so that they can quickly start getting homestead. A lot of the front end trades are not nearly as busy right now. And I think there, everyone is ready to go. I think unlike, say, during the - I'm sorry for maybe to go in a little bit deep on your question, but unlike, say, the great recession, which lasted as long as it did and you have significant contraction in capacity within the industry, we are not seeing that happen right now. What we're seeing is that the industry itself is basically staying size up because we're all anticipating that this slowdown or pause is not going to be extended. And that as we go through the rest of this year, we'll get back to a more normal cadence.

Appreciate it. Obviously, like we both said a lot -- it's a lot of moving parts, because secondly, I'd love to hear your thoughts on price mix for the upcoming year. Obviously, there's been manufacturer price increase by different producers in January, December-January. If you could talk to the realization of that price increase and as you progressed during the year, I don't know if you've had any discussions already with your builder partners about any type of change in pricing structure or that might impact margins. So it's kind of a two-parter there, first on pricing and the OEM price increase and then just thoughts around price mix for '23.

Well, as Michael mentioned to the second part of that question, as Michael mentioned earlier, we make sure that we get paid a fair price and definitely geared towards an index towards pricing versus volume, and so will continue. Our managers and sales people like to say, we don't -- we don't work for free. So ultimately, I think from a pricey perspective, this is a tough job. This is a tough business, right and we told that story before, but on average to head out to the house three times in order -- in order to collect $3,500 let's say, on an average house to put fibre glass insulation in the wall, that's a tough thing to do, right. And so we deserve I think what we get paid when we show up on time would be patent inspections, and so that's kind of our attitude and we get that to good times and bad times.

And we are constantly in dialogue with both the manufacturers and our customers about price and making sure that, as Jeff said, that is a fair and reasonable price for everybody. I would say on your comment about what we don't provide guidance, I think if you just look historically, our price mix this year is at an unprecedentedly high level compared to prior years, and we certainly wouldn't expect to have that kind of outsized price mix growth in 2023.

And just the realization of the December January price increase, if you could provide any insights into how that's going?

Well. We buy from all four.

Yeah, we buy from all four manufacturers. We're in constant dialogue with them and, it's on a hard job to try to do as well as we can in any negotiations around that topic. Clearly, as you pointed out, that it was a price increase in January, and we'll see. It's still a tight industry in terms of a special employment [ph]. There's a little bit of room on that. So at least we're not having to run to supply houses and home depot and Lowes, etcetera, like we had talked about in previous calls. So clearly, that's made our life easier as it relates to kind of running the business on a day to day basis. But volume continues to be very tight, and there's not really a clear site in the scene where that isn't still the case.

Our next question is from Susan Maklari with Goldman Sachs. Please proceed.

Thank you. Good morning, everyone, and congrats on a great quarter and a great year. Well done. My first question is when we think about the dynamics between volume and price mix for this year, obviously in '22, it was really driven by that price mix in '21, and we saw that it was more of volume kind of driven a point in there. How do you think about it going forward or when do you think that those two will start to converge more closely together the way that we had seen pre-COVID?

Well, again, Sue, we don't provide guidance, but, given our commentary from the last question just about what completions might end up looking like and what '23 looks like for the industry, I think what that would say to you is that the likely of price mix and volumes being more closer to historical averages would probably be in '24 or the latter half a -- latter half of '23.

Okay. And then my follow up is, you obviously have made a lot of progress on the gross margin as well, which was really impressive for the quarter. How do you think about holding on to some of that as conditions perhaps normalize out there, and just more broadly sort of what is the new normal in terms of that gross margin line?

I wasn't joking that the gross margins, which was great, but excuse me. We feel very good about where the gross margin is right now. If you look historically, over the past several years, we've sort landed in a fairly tight range on growth margin and we will continue to work hard to continue to improve gross margin to maintain gross margins, and our -- most of our improvement in EBITDA margin over the past several years has really come from G&A leverage and not just improvement in gross margins. So, we as Jeff said earlier, we don't work for free. We want to get a fair price for what we do, and we believe it's very appropriate given the difficulty of the job that are we are doing.

I was slow to chime in mostly because I was worried that I was going to have to give Michael a highlight. It didn't look good.

Well, those margins are impressive, so exact. All right, thank you, and good luck.

Our next question is from Mike Dahl with RBC Capital Markets. Please proceed.

Thanks for taking my questions. Just another follow up there. If we look at the growth trajectory, the details that you provided in terms of the underlying dynamics between installation and other, you do see more of that gap on margins where maybe a few years back, you would have been in the high 20's and now you're in the 34% range. So it seems like on a like-for-like basis, there has been a notable step up and unique backdrop talk of kind of builders and some of the excitement out there, but also what they're talking about is pushing back more on suppliers. There's conjecture, an installer like yourselves would be the ones that would be at risk of being kind of squeezed out in the middle as kind of the OEMs hold firm and the builders try to push back on trades. Your price comments and price versus volume comments seem a little more pointed maybe I'm reading into it, but what are you hearing in terms of that push back against the trade base, as everyone's trying to drive cost out and are you seeing something different that's making you say like, maybe we are going to end up giving up a little volume this year as we look to be more disciplined on price?

Yeah, we will favor price over volume. No doubt, and as a company that has been fairly -- that's been consistent historically that we would favor price over volume and as we go through the course of the year, obviously, we're going to make adjustments as necessary. and we are in -- we're constantly communicating with both our customers and the manufacturers to make sure that our price costs are in line. As we've said before, we are a very small percentage of the overall cost of the home and we are selling an install solution. So we're not just selling material. We're adding a lot of value by providing our installed solutions and in the case of insulation, not only does it have to have inspection, but it also was required by code. So the builders can't decontent us, and I think that's -- and we're very important part to the cadence of the house, even though we are a very small percentage of the overall cost. So we believe all of those things help us to achieve a fair balance between the cost of the products that we purchase to install and the price that we get from our customers to do that installation.

Okay, that's helpful. Thank you, and my second question is, they made interesting comments about the R&R side and the inflation reduction act clearly, there's some nice incentives out there, reinflated homes still can be a pretty disruptive process. So maybe just give us a little more color on what you're seeing in terms of the R&R side? How much of an impact or if there's any quantification you can provide on what you think the IRA has meant or could mean to your business in '23 would be helpful?

Yeah, this is this is Jason. Hi, Mike. I will say that Inflation Reduction Act that does provide us opportunity on the repair and remodel side, but as we pointed out it is a bit disruptive, and it's more so a fat majority of our business. Our installers are used to go into a job site, not into somebody's home. So it is something that well we do have and see opportunity from the Reduction Act in terms of what it could mean for us in terms of providing some stability or upside opportunity. It is not necessarily a widespread or a nationwide opportunity for us.

Got it. Okay, thank you.

I would say though just on that is that the Inflation Reduction Act really doesn't have the financial impact or wound. It's just starting to have it now because the increases in credits that you receive that those increases went into effect January 01 of '23 and are in the fourth quarter, the repair and remodel business as we met --as Jeff mentioned in his prepared remarks, it was up almost 50% and is now almost 9% of our overall revenue. So if we -- when we think about interesting opportunities in from a sales growth perspective in '23, we certainly are encouraged by the strength that we've seen in both -- and continue to see in both repair and remodel and multifamily, which on a combined basis are over 20% of revenues.

Okay, alright, thanks for that additional color.

Our next question is from Rooms [ph] with Stephens. Please proceed.

Good morning. This is actually [indiscernible]. Thanks for taking my questions. So first, pricing really strong this past year in '22, I was hoping you could maybe quantify something without any additional pricing actions in '23. How much carryover benefit does pricing achieved in '22 contribute to growth this year?

You mean how much carry over is there still left to realize in '23?

Right, because given the timing of price increases, partially through last year. Just what at a minimum can we expect?

Well, we don't provide guidance. It would, I would say that each quarter, it's going to come down, which is an obvious statement. As we're going through this first quarter, we are continuing to realize good price mix.

Got it. That's helpful, and I appreciate that you don't give guidance and thank you for all the prior commentary on price and volume, as we look to '23, but given that that there's some risk of volume in 2Q, 3Q, maybe even 4Q, still getting a little price. Is it unreasonable to expect that you can grow overall revenue in '23?

Well, again, we don't provide guidance, but that is really going to depend on what happens with the single family completions and the housing market as it unfolds and when I am saying the housing market, the single family market as it unfolds during the course of the year. While we have heavenly diversified our end market revenues, 60% of our revenue still new single family. So, I think the spring selling season is important this year. It's important every year, but I think yeah, the focus on it is going to be higher this year than probably in past years and as we said earlier, we think that there's very encouraging signs around a potential solid spring selling season and I think that will benefit the whole industry going through the course of '23.

Got it. Thank you. That's helpful, and good luck with the rest of the year.

Our next question is from Adam Baumgarten with Zelman and Associates. Please proceed.

Good morning, everyone. Couple of question on price increases, at this point, do you guys expect the manufacturers of the fibre glass manufacturers to announce additional price increases at some point this year?

Certainly, they still are experiencing inflationary circumstances, let's just say in certain parts of it from an input perspective, etcetera, although there's maybe a little bit of weakening certain instances and freights other things, but, we'll see. I guess I mentioned earlier, rules is type that's not so much. So, I'm certainly would like to, if I believe that about it.

Got it. Okay, makes sense.

Actually, there might be one additional price increase announcement this year, but obviously, we don't know that their decision and how they'll make it, and I think it will completely depend upon how does the market unfolds.

Yeah, okay, make sense and then just searching gears to commercial. I have a slide in the deck that came out this morning about three areas outside the quote core that you seem to be targeting with expansion joints through frustration and building restoration. I guess, question, are you currently in those areas and if not, is that you know an acquisition opportunity for those areas of focus?

We're just looking at different scopes of work. So it's not stuff that we're doing a lot of right now, but it's just a question of what we're -- as we've talked on previous calls, we haven't been -- we've been disappointed in the financial performance of the heavy commercial operations. We expect to see pretty significant meaning in those operations over the course of '23 and we're looking at different scopes of work that will continue to help that improvement in the heavy commercial, which just at levels that given the growth that we've seen across all of the other business, the heavy commercial business is across 6% of overall revenue. So it's not a significant component, but it's an important component and we do think that it presents some interesting long term growth opportunities for us.

Our next question is from Phil Ng with Jefferies. Please proceed.

Hey, good morning. This is Maggie on Phil. First, I guess, could you talk about your backlogs or maybe even more broadly, the industry backlogs, and kind of contextualize that units under construction metric being at these historic highs and how that kind of translates to volumes for you and how far that carries you into 2023?

Well, I think right now, when you're looking at the units under construction, you definitely have to make the distinction between single family and multifamily. Multifamily is really at an unprecedentedly high level right now. It is that multifamily unit backlog is actually larger than the single family, which I don't think there are very many times in history where that has actually happened. So we believe that from an industry perspective, the backlog in multifamily is multi here at this point and as we said earlier, in a previous question or an answer to a previous question, we do believe that we'll see and we think we need to see improvement in multifamily completion through the course of '23. As it relates to the single family, it still is in that sort of 700,000, 750,000 unit range, which we think is reasonably healthy that theoretically implies if you had a more normalized multifamily backlog, probably like a 1.2 million or so pace for completion and well that's below what most people would expect to be sort of a long term average of 1.5 million. It's still is a very comfortable level. On the single family side, in terms of what that backlog means for the industry, as we said again, in an answer to a previous question, a lot is going to depend upon the spring selling season, which is looking very encouraging right now, but given the decline that we've seen in the past a couple of months even longer, permits and stars, I think it's logical to assume that you would have an impact relative to single family completions as we go through the end of the second quarter and into the -- into the third quarter, potentially. Again, I'm going to carry out that statement though based on what happens with the spring selling season and how quickly the builders, which we think is pretty quickly, how quickly builders can react to what is potentially going to be a solid order growth.

Okay, great. Thanks for all of that color, and then I guess on that. it's been touched on a few times on the call so far, kind of the more recent optimism from the builders and I think late last year, coming into this year, the consensus was kind of we would need to see interest rates come down or at least stabilize or some progress on getting home prices at a more affordable level for these mortgage rate levels to really see a rebound in housing demand, but we haven't really seen significant progress on either of those. So you know from your conversations with customers, what's their sense, what are they attributing this more recent strength to and how sustainable do they see that?

I think it's more indicative of the idea that we haven't even -- we never did yet get back to stabilize kind of a 1.5 million type production on residential and so from that perspective, it's underbuilt in it -- there was only so long that the market could sit on the sidelines at least, although I've heard that, a lot of what's happening is that, there wasn't -- they have picked up a smidge again too, but they pulled back from seven close to the six. There's been maybe limited interest in adjustable rate mortgages unlike maybe in the past I heard that. But I think there's been an offer of buydowns from the builders, but that many times it gets somebody in the door, but they ultimately end up not using it and still go ahead and end up as not only a traffic unit, but as a buyer. I know anecdotally from the fact that we're selling a few things that some buyers are clearly looking at the idea that if they could do a one year or two year or have been a three year with no penalties to get out of it, they can kind of ride through this period of time here, but they've got to kind of move on with their life, right, and they'll revive as soon settle down here. It was the next hopefully 12 to 24 months.

Yeah, I think the home buyer is adjusted and they're accepting the new reality, and I think people have come to groups of the fact that they're not going to get a 3% mortgage, but they still need some place to live and their family is growing, or they got a new job and it goes on.

For those of us that are pretty old, at least 60 in June, that's not real, old enough, I guess 6% we're in that range is pretty darn attractive historically speaking. It's only those that have kind of been familiar with the last 15 years, 10 years or really 10 years or less, right, where there's a rate that have been less way, that you've read so much about.

Okay, got it. Thanks so much and good luck on the next quarter.

Our next question is from Jeffrey Stevenson with Loop Capital Markets. Please proceed.

Hi, thanks for taking my questions today. I was wondering if you could provide any additional color on how installation volumes trended throughout the quarter because volumes were a little lighter than anticipated and wondered if an earlier in the construction season around the holidays played any role in that or was it largely due to the tough completions comp you referenced earlier?

Yes, it's really more just the timing of when we're doing work, quite frankly, and as we said earlier, and I think if you -- looking at it on a full year basis, in terms of our volume growth of 5.5% versus total completions growth of 3.7% make sense and we will favor price over volume and we think that, that is the right decision and we have lots of experience where we give up volume in the short term, only to get it back because our competitors can't perform to the level that our customers want. So we're happy to be patient and wait for volume.

No, that makes sense, and then my second question is one of your primary differentiators as your asset light model and high variable cost structure, and I'm just wondering, as we move into the spring construction season, what indicators you'll be following the determined whether you need to make any adjustments if demand improves or slows more than anticipated?

Well, fortunately, because our cost structure, the bulk of our cost are material and install labor and they flex to the volume of jobs that we have and the job opportunity that we have. So we will -- we continuously make adjustments to the installer workforce and the amount of material that we're acquiring or purchasing knowing in advance what our expected volumes are. So, I would say that the macro information that is available is helpful to inform our outlook, but the most important thing that we run the business by is what's going on at the local level on a day to day basis. It's that constant communication with our customer about and what they're expecting from a volume perspective and the jobs that they are on. So it's a content situation where we're adjusting the business. Now, if we have, which is completely unexpected or not anticipated from our perspective, but if we do have an extended if the spring selling season is with us, which we do not expect, but if that's the case, then we will continue to make adjustments, not just to the installer workforce and material purchase, but we will make adjustments to the other variable costs in the business, but right now, from all the information that we have and all the feedback that we receive from the field, we feel, constructive given a very uncertain environment.

Very helpful. Thank you.

Our next question is from Dan Oppenheim with Credit Suisse. Please proceed.

Great, thanks very much and thanks for the comments in terms of your expectations and sort of long term based on sort of under building and such. Just wondering if you think about the acquisitions that you're looking into dialogue with some of the smaller companies out there, how does your outlook for the coming years in terms of thinking about continued growth in getting back to normalized instructions impact your thoughts and acquisitions that make you look to do more this year in terms if there is a short term slowdown, should we expect you to then sort of think in terms of long term and growth of the acquisition here during '23? I'm just wondering how you're looking about that?

Well, this is Jeff. We continue as we've said in our prepared comments to kind of target at least $100 million dollars a year in revenue acquisition, maybe straight down the fairway in terms of kind of what we're used to in normal -- in terms of products etcetera and acquisitions, but what I would say is, we basically for the most part, we're buying businesses obviously off of trailing earnings, right, and I don't think there's very many contractors out there at this point that are showing numbers that reflect a great deal of weakness. Historically, what I would say from the last time there was any degree of weakness, there's chances are unless there's a health issue or something else, none of these sellers are that's necessarily forced by any means to sell. They almost never have any debt. They're not in a tight spot, and if the numbers aren't where they would like them to be in terms of kind of I don't have a good profitable year, they're probably not going to be sellers. So I don't see is just historically speaking and thinking about what's coming to get, as picking up a whole lot of bargains. I think it's going to be very normal in that regard. So, honestly, we'd rather -- we like it when the buyer feels good about it. When the seller feels good about the kind of the transaction, and when we feel pretty good about the purchase that usually makes for kind of a more copacetic, smooth transition and go-forward and that would have better business ultimately.

But I would say that M&A is our number one capital priority. Our balance sheet is such that if there are opportunities beyond $100 million that Jeff referenced in terms of targeted acquired revenue, we will absolutely do those acquisitions. We believe that the current environment, while there is a lot of uncertainty, if we look long term because we're not buying these businesses for a quarter or for a year. We're buying them for the long term. We believe fundamentally long term that, new residential construction market in the United States has the backdrop, the demographic backdrop and the fact that we, even with the acceleration that we saw in '21 and '22, we have for the past more than the past 10 years underbuilt, housing in this county and fundamentally if we look over the medium to long term, we believe that's extremely constructive M&A that we're looking at.

Our final question is from Jonathan [ph] with Truist Securities. Please proceed.

Hey, thanks for taking my question. I am on for Keith Hughes this morning. So pricing was strong in Q4, and you mentioned that you're prioritizing that over volume, but with that in mind, and without giving specific guidance, I was wondering if you could talk about your confidence level that margin expansion will continue through 2023 if volumes come down?

Well, again, we don't provide guidance, but as we said in an answer to an earlier question, if you look on average over the past five, six years, gross margin has then sort of in that 30% range, high 20%, 30% range and because we're going to value price over volume, we believe that the historical range should be consistent as we go through the next couple of years as well. Clearly, a lot of the -- or some of the G&A leverage that we've been getting, which has been helping to improve our EBITDA margin is because of high volumes and/or price mix growth. So, we wouldn't expect that if we were in a lower volume growth, lower growth volume environment, lower growth price mix and environment, we would not expect to get the same G&A leverage improvements that we've been getting, particularly in '22, but quite frankly, we have since the day we went public, we have always talked about mid-teens EBITDA margins when we reach stabilization in the housing industry. It's just that, which call it completions of about 1.5% 1.6%, which Jeff pointed out in the answer to our earlier question, we even, through '21 and '22, we did not get to that point, but yet we are mid-teens EBITDA margins. We've actually been there for a couple of years now. So, we feel very good about our ability to sort of maintain the margin profile and when we say things like that, we don't mean quarter-to-quarter. We mean, on a full year basis and we don't look at the business, although we have to report quarterly, we do not look at the business certainly, on a quarterly basis. We're looking and making investment for the medium and long term, because that's fundamentally how we build a great business.

We have reached the end of our question-and-answer session. I would like to turn the conference back over to management for closing comments.

Thank you all for all your questions and I look forward to our next quarterly call. Thanks again.

Thank you. This will conclude today's conference. You may disconnect your lines at this time and thank you for your participation.