Good afternoon, ladies and gentlemen and welcome to the Beacon fourth quarter and fiscal year 2021 earnings conference call. My name is Selena and I will be your coordinator for today. At this time, all participants are in a listen-only mode. We will be conducting a question-and-answer session towards the end of this conference call. At that time, I will give you instructions on how to ask a question. [Operator Instructions]. As a reminder, this conference call is being recorded for replay purposes. This call will contain forward-looking statements, including statements about the company's plans and objectives and future economic performance. Forward-looking statements can be identified by the fact that they do not relate strictly to historic or current facts and often use words such as anticipate, estimate, expect, believe, will likely result, outlook, project and other words and expressions of similar meaning. Forward-looking statements are only predictions and are subject to a number of risks and uncertainties. Therefore, actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors, including, but not limited to, those set forth in the Risk Factors section of the company's latest 2020 Form 10-K and subsequent filings with the U.S. Securities and Exchange Commission. These forward-looking statements fall within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, regarding future events and the future financial performance of the company, including the company's financial outlook. The forward-looking statements contained in this call are based on information as of today, November 18, 2021 and except as required by law, the company undertakes no obligation to update or revise any of the forward-looking statements. Finally, this call will contain references to certain non-GAAP measures. A reconciliation of these non-GAAP measures to the most comparable measures calculated and presented in accordance with GAAP is set forth in today's press release and the appendix to the presentation accompanying this call. Both, the press release and the presentation, are available on our website, www.becn.com I would now like to turn the call over to Mr. Binit Sanghvi, Head of Investor Relations. Please proceed, Mr. Sanghvi.

Thank you Selena. Good afternoon and welcome to our fourth quarter and fiscal 2021 earnings call. With me on the call today are Julian Francis, President and CEO and Frank Lonegro, Chief Financial Officer. Our prepared remarks will correspond with the slide deck posted to the Investor Relations section of Beacon's website. After management's prepared remarks, there will be a question-and-answer session. I will now turn the call over to Julian.

Thanks Binit. Good afternoon everyone. Let's begin on slide four. Two years ago, I hosted my first investor call as Beacon's CEO. On that call, I spoke of the opportunity for growth and margin expansion that I believe is in front of us. I spoke of focusing on the customer, improving our branch operations, capitalizing on a scale and driving shareholder value. Today, I am pleased to say that we have made significant progress on these commitments and 2021 has been nothing short of transformational. We have continued to leverage the strength of the platform to generate record full year sales and adjusted EBITDA. In fiscal 2021, we produced sales growth of approximately 12% with higher revenue across all three of our lines of business. I will focus on pricing analytics and operational execution showed results in a challenging supply environment. The focus we have had on improving performance of our bottom quintile branches contributed to that revenue growth. Sales at these branches increased 15% for the full year, 300 basis points faster than the other branches. We also expanded our focus on our OTC branch network, adding hub in Houston and greenfields in key growth markets. The divestiture of the interiors business returned us to being a focused leader within exterior building products. About 80% of our business today is residential or commercial roofing. These are large attractive markets. More than 80% of roofing is classified as repair and replacements and the vast majority of which is non-discretionary. We restored financial flexibility through a combination of debt paydown from the proceeds of the divestiture and a series of refinancing transactions. The result is a stronger balance sheet, lower cash interest and net leverage of 2.1x at the end of the fourth quarter. we now have ample availability to invest…

Thanks Julian and good evening everyone. Turning to slide eight. We achieved nearly $1.9 billion in total net sales in the fourth quarter, up 7% year-over-year, driven primarily by higher prices. We had revenue growth across all three lines of business, led by our complementary products. Price contributed approximately 14% to revenue growth, partially offset by lower volumes versus a strong prior year comparable. Market fundamentals remain strong, as evidenced by our growing backlog. Open orders, for example, continue to rise. On a year-over-year basis, the backlog more than doubled and also rose 15% sequentially. Residential roofing sales were up more than 3% on shingle price execution from earlier in the year, together with our September increase. Shingle volumes were down about 14% year-over-year, as expected, given the record comparable, which benefited from the COVID snapback and stronger hail demand. Specifically, we estimate that about a third of the shingle volume decline in the quarter related to lower wind and hail storm activity as compared to the prior year. Demand from new residential construction remains strong. Sales to our largest national homebuilders were up more than 50% in the fourth quarter. Although the headline single-family starts number remains constrained by supply chain bottlenecks, the fundamental demand trends remain prevalent including millennial household formation, work from home, de-urbanization and historically low interest rates. Similarly, demand for residential repair and replacement remains favorable as homeowners experience higher home prices and increased home equity. Non-residential roofing sales were up approximately 7% in a material constrained environment. Our team did a great job of securing material and staying ahead of inflation. And with longer project cycle times, our backlogs continue to rise, a positive indicator of future demand. Complementary sales increased 17% in the fourth quarter as we achieved higher prices across nearly all…

Thanks Frank. Before we turn the call over to Q&A, I want to update our outlook for the fiscal year transition period, calendar Q4. Please reference Page 12 of the slide materials. Quarter-to-date, same-day sales grew high single digits versus the prior year. We expect that rate to decelerate as we go into Thanksgiving and the holiday season. Underlying demand trends remain positive in residential, even as our new homebuilding customers continue to manage through constraints such as labor and material shortages. Regarding non-residential demand, we expect the macro environment will remain supportive. We have seen a solid demand trend for more than four quarters, in line with favorable moves in the Architectural Billings Index. Although we expect to continue to see lead times and overall project cycle times lengthen, the improvement in sentiment has corresponded with a growth in our backlog metrics. For the three-months fiscal year transition period ending in December, we expect total sales growth to be mid-single digits year-on-year over a strong prior year comparable. This guidance includes the benefit of incremental volumes in the Gulf Coast, post Hurricane Ida. It also includes the acquisition of Midway Wholesale earlier this month. Midway will contribute approximately $20 million in sales during this quarter and is expected to be breakeven EBITDA, which means margin dilutive in the quarter. Gross margin will reflect our expectations for positive price to cost contribution. We expect year-to-year gross margin percent to increase by approximately 100 basis points to around 26.4% and third consecutive quarter of gross margins above 26%. We expect adjusted EBITDA to be between $155 million and $165 million compared to $143 million last year. We expect that higher sales, gross margin expansion and continued cost discipline will result in approximately 8% to 15% growth in adjusted EBITDA, as outlined. In characterizing the results in order to provide an annualized comparable for our new year-end, we expect adjusted EBITDA between $667 million and $677 million in calendar 2021 compared to $465 million in calendar 2020, an increase of more than 43%. As we look forward, I am confident that we have the right team to execute on our long-term ambition. I am also pleased to announce that we will give you an opportunity to hear directly from our leaders at an Investor Day expected to be held on February 23 and 24 in Houston. There, you will hear details about our growth strategy, market execution, capital allocation plans and have the opportunity to see our newly opened Houston hub. I am confident that you will come away with an understanding of how we intend to achieve our full potential as we help our customers build more. With that, Selena, we are now ready to open the line for questions.

[Operator Instructions]. The first question is from Kathryn Thompson with Thompson Research Group. Please proceed.

Hi. Thank you for taking my questions today. In terms of non-res, the non-res market turned positive in the first half fiscal year for Beacon. And could you give an update and turn positive in the second half? Could you give an update on the pace of business? And in particular, I know you mentioned that pricing was a significant factor for growth in all lines of your business. But how much was volume growth in the quarter? And how much was price and mix contributing to gains? And what you are seeing in the non-res end market as you look over the next 12 months?

Thanks for the questions, Kathryn. Certainly, on the non-res side of the business, the market has been very difficult to manage. We did see growth in the second half of the year, but the supply chain challenges have been manifold. I mean it started off with a lot of the installation products being challenged. We have got fasteners that are being challenged. We have seen about most of the materials in some way, shape or form have been difficult to obtain. And part of it has been in trying to create a package so that we can actually get it to the job site and they can be installed as a single job as opposed to shipping piece by piece. It's the value that the distribution channel provides for the most part. And like I said, it's been a very, very challenging market to manage overall. We do see, as we said in our prepared remarks, positive indicators. Our backlog continues to grow. And I think we remain positive on the outlook for the future. We continue to see what we think is the need for repair and replacement roofs. Obviously, those continue to age. We see growth in certain segments of the market that we believe are positive and secular trends that remain good. So overall, we remain very positive. And I think that the future bodes well for the commercial construction market.

Okay. And then a follow-up question. It's on inventories. How much of the 24% year-over-year increase on the balance sheet is driven by inflation versus volumes versus stocking to keep up with future demand or other factors where you may not have to take into consideration?

Hi Katherine. Thanks. Good question. When you dissect it between price and volume, it's about 50-50 on the price side and the volume side. Within volume, some of that is rebuilding from last year given the fact that was in essence the low point post-COVID for inventory. Some of that's the backlog that Julian mentioned. We are not able to get as much out the door, especially on the commercial side, given some of the challenges we have with fasteners and adhesives. So there's a portion of that volume build that has been more because of supply chain challenges and some of it has been just rebuilding from last year given how low we were.

Okay. Great. Thank you for answering my questions today. Best of luck.

Thank you Ms. Thompson. The next question comes from Mike Dahl with RBC Capital Markets. Please proceed.

Hi. This is [indiscernible], on for Mike. Thanks for taking my question. So as we look towards 2022 and another year of kind of using the bottom quantile in trying to improve that, how should we think about the incremental improvement? Should it be about equal magnitude compared to this year? Or will that kind of decrease over time?

Hi Ryan. Z branches had a great year this year. Julian started this initiative now a couple of years ago. In the last year, iterations for 2020, we reported over $20 million of savings. This year, over $50 million of savings. That's really a derivative of all three aspects of the P&L. Sales were better than the average. Gross margin improvement was better than the average. OpEx was better than the average. So you are seeing the benefit of it come through on the bottomline. All that said, when we look at the trajectory and the absolute differences on each of those lines, especially gross margin and OpEx, there's still hundreds of basis points of improvement capability in those branches to catch-up with what we call the performing branches. So we think this is a multiyear runway and look forward as we get into the Investor Day conversation to give you some trajectory there that has some futuristic ideas behind what we think we can generate. But this is going to be a multiyear initiative. We are going to be talking about the bottom quintile for a number of years to come. There's still a lot here to go after.

But would it be fair to say that that is roughly of equal magnitude each year? It's not something like because you improved them last year, the new group should be better and it will be a smaller magnitude? Is that fair to say?

I think we are going to restack it every year. So there will be branches that are part of the lowest quintile again next year. There will be others that will graduate, so to speak. So we will rerack and restack those. We will raise the bar, obviously, as the company continues to perform better. And as I mentioned, when you have hundreds of basis points of room on gross margin and hundreds of basis points of room on OpEx, there's plenty of opportunity here. I don't think it will be lumpy because we are going to go after it every year in the same fashion. We are going to continue to set aggressive goals and we are going to continue to update you as we set those and deliver against those..

Got it. That's very helpful. I will pass it on. Thank you.

Thank you. Mr. Dahl. The next question comes from Ketan Mamtora with BMO Capital Markets. Please go ahead.

Thank you. First question on Midway. I am just curious kind of what do you expect to generate in terms of EBITDA from Midway? I know you said first quarter or the coming quarter is going to be breakeven. And then is it fair to say that Midway size of acquisition is kind of what you think you will do as tuck-ins whenever you find the right opportunity in terms of size?

Ketan, thanks for the question. We said that Midway generates about $130 million of annual sales. The reason for that EBITDA breakeven in the current quarter is primarily around, they are in Kansas City, Nebraska, Missouri, which is weather impacted. So they are cycling down right now. Obviously, we expect to see that recover as we emerge from winter. We are very pleased with that business. We think it's a great business. It's certainly right in the middle of the sweet spot of where we would expect acquisitions to be, obviously, with our new found financial flexibility. We are going to take the opportunity to make sure that we are participating across all elements of the market. But it's certainly something that is going to be profitable. We think we can enhance profitability over time, bringing them on to a digital platform, including private label products there. And also learning from them. I mean they are a market leader in the markets in which they operate. And we think leadership economics matter.

Got it. That's very helpful. I will turn it over. Thank you.

Thank you Mr. Q Mamtora. The next question comes from Garik Shmois with Loop Capital Markets. Please go ahead.

Hi. Thanks. My question is on the topic of organic growth. And you cited a pretty meaningful step-up in international account penetration with homebuilders. Just wondering, as we look out into calendar 2022, how much more runway do you have there? And then maybe just speak to any initial views of kind of organic growth opportunities next year?

Thanks Garik. I appreciate that. But I think that, again, our ability to invest, our ability to make sure we are reinvesting in the business, our ability to continue to grow the topline is critical to what our future is. And we believe we have got multiple paths to be able to do that. Certainly, we have talked about investment in sales capability. We will continue to do that. We think there's a lot of runway for us to improve overall sales capability, expand our sales capability. Now that we are a more focused business, making sure that we have got clear lines of communication into these markets that we think we are able to penetrate, we think enhancing our overall customer experience, where we brought in a Chief Commercial Officer, whose job is to deliver against that customer experience, enhance it. We spent the beginning of this week with a bunch of customers at our Voice of Our Customer event and got a lot of feedback on what we can do to enhance our value proposition to those customers. We certainly think that we can continue to expand our footprint, both through greenfield and M&A. Those are two really separate. And we have set up organizations to really deliver against that promise going forward. Our digital platform is another one we continue to see growth there. It's been a little choppier in the second half of the year as the supply chain challenges have pushed a little bit, on that is inventory availability has been more complex. And then we are also looking at our ability to serve our customers. Our core customers are always going to look at complementary product lines and our ability to continue to grow our complementary product categories. Expand them with things like the Midway acquisition, where they are in some product lines that are different from where we are and that will be another value for growth. So we certainly think there's room for growth. We know this market is still highly fragmented. We think that the returns to scale can be leveraged and we are very, very excited about what the future holds for us.

Great. Thanks guys.

Thank you. Mr. Shmois. The next question comes from Michael Rehaut with JPMorgan. Please proceed.

Hi. Thanks. Good afternoon everyone. Just wanted to, if possible, drive down a little bit on the topline guidance for the calendar fourth quarter, up mid-single digits, including Midway. In the prior quarter, in this most recent quarter, specifically I am kind of thinking about the residential business where you said that volumes were down 14%. How should we think about volumes, either on a consolidated basis but particularly in the residential roofing side in the first quarter? How is that driving, maybe if you could kind of go into a little bit, the driving of the quarterly view? And if possible, maybe just some broad strokes on perhaps how you are thinking about 2022? I know you are not ready to give guidance yet, but just any kind of broad thoughts on the roofing industry perhaps.

Hi Michael. So on the volumes, which I think was the root of your question, I think you should expect in the transition period on the shingle side down in the same neighborhood, kind of mid to high teens year-over-year. If you go back and you look at the comp from last year, that prior year quarter was the highest December quarter ever and was up 25% over the December 2019 quarter for us in terms of volumes. So the residential side on shingles is going to be more of a price story into the stuff. Julian mentioned in his remarks. October fished quite well. November is starting off quite well as well. So we are kind of heading into that high single digit clip right now. The second half of the quarter is just a more volatile period given holidays and winter is hard to handicap that. But we feel like we are doing pretty well so far in the first half of the quarter and look forward to a good finish. Gross margins are on track to the guide that Julian gave and the OpEx feels like it's in line as well. So we feel pretty good about that guide. It's going to be dilutive a little bit because of the seasonality from the Midway business that Julian mentioned, so think about 20% there. And then all in mid single and hopefully, a little bit more higher than that depending on how we finish out the last six weeks.

Great. Perfect. Thanks so much.

Thank you Mr. Rehaut. The next question comes from Deepa Raghavan with Wells Fargo. Please proceed.

Hi. Good evening everyone. Thanks for taking my question. Just a follow-up to the prior one. The high single digit October, November comment, that was residential mostly or does it cut across your non-res businesses and complementary businesses as well?

It's a good blend, Deepa, across that and we are seeing good traction pretty much across the board. So I don't know that I would parse it any particular way. We have seen good weather in the first half of the quarter, which has been helpful. We have seen some good traction on the pricing increase that we talked about in September. We are obviously seeing the ABI come out. We are seeing a number of different macro measures, which continue to give us a good feel for where we are. The backlog continues to grow. At some point in time, that will unlock as we get some of the key elements of the supply chain, especially on the commercial side to be cooperative. So we continue to believe that what we are seeing is going to translate into good results for us. And look, as Julian mentioned, we are bullish on 2022. We need to get through winter and figure out what the construction season looks like, how early it's going to start, et cetera and what the environment looks like in an inflationary perspective. So, so far so good and we are looking forward to turning the page to 2022.

That's great. I appreciate that you are not giving us too much on 2022. But would you point us to things that we should be mindful of as we carry forward comps from 2021? What would you guide us not to carry forward? What would you guide us to be more optimistic about? Any puts and takes from 2021 that should or should not translate into 2022, that would be helpful color?

Yes. I think on the residential side, 2020 and certainly the second half of calendar 2020 and the first half of calendar 2021 were strong single comps. So that, I think, is an important thing to keep in mind from a line of business perspective. Commercial is one of the folks, I think it was Kathryn who said earlier in the call, the first half comps will be a little bit easier than the second half comps, if you think about it in 2022 versus 2021. A lot of next year is going to depend on the supply chain. If it is more fluid than it is now, obviously that should translate into more sales for us. And if it is continuing to be challenged then the backlog is going to continue to grow and it will unlock at some point in time. But the thing that we are feeling and seeing is the demand is there, right. The supply side of the equation's ability to really fulfill that demand is what the constraint is currently. As you think through your model, there's a couple of things to point out. Obviously, we had a very nice incentive comp year in 2021. We will cycle that back to a target level in 2022. We did experience, as we have called out a number of times, inventory profits this year that obviously we won't have next year unless, say again, an inflationary environment. We have got our eyes on lumber and what happens with lumber prices, even though it's a small portion of our business. I mean, it has had wild swings in terms of gross margin, given where the spot prices have been. And then we will handicap storms to the 10-year average in terms of the way that we plan for things on the hurricane side and the hail side. So a lot of work to be done still in putting those numbers together. Some of the costs from COVID, like the travel and entertainment that we speak about from time to time, that will come back into the equation some next year as well, given the fact that hopefully, vaccinations will continue to pervade the population and we will get back to across the table selling in some respects.

This is helpful color. But can you just provide a little bit more detail on the inventory comment that you made. I mean, last time you talked about having some inventory in select regions of the country, just curious where we stand there? And I will pass it on with this. Thank you very much.

Sure. So inventory in the aggregate is higher for the reasons that we mentioned earlier. Some of that is just the inflation in the product itself, some of that is rebuilding inventories from a very low point last year. Some of it is retaining inventory longer because of the length of project cycles and some of the supply chain challenges. We think we are in relatively good shape in the aggregate. We do have situations where we don't have the last product in order to be able to ship the full complement of the job. We have situations where we have a particular location that might be a little lighter, another location might be a little bit heavy. So I think the inventory piece is in decent shape, but we are going to continue to take allocation. We are going to continue to look for opportunities to get ahead of price increases to the extent those are announced. I do think that there's one thing as you model it out, Deepa, as I have mentioned in the past, the inventory profits equation in 2021 has yielded somewhere in the 50 to 100 basis points of gross margin accretion in 2021 that unless we get into another inflationary environment in 2022, it won't repeat.

That's great. Thanks very much.

Thank you Ms. Raghavan. The next question comes from Keith Hughes with Truist. Please proceed.

Thank you. The guidance you gave for 2021 adjusted EBITDA, calendar 2021 adjusted EBITDA, if we are comparing that to hopefully a calendar 2021, it's sort of flattish. I think I am doing these numbers right. So I guess my question is, as you go through the year, what do you think the puts and takes on the EBITDA are going to be that are going to push individual quarters up or down versus the prior year?

Hi Keith. Just to clarify, what Julian gave was a calendarization of 2021, not a guide for 2022.

Okay. All right. Well, I guess my question is going into 2022. What's going to be pushing the numbers up or down as we go through the year?

Keith, I think that if you listened to Frank's answer to the product question, that was some of the questions I think Deepa had. I mean, incentive comp will change. Inventory profits will change depending on the inflationary environment. I think that we will see those things continue to evolve. But overall, as Frank said, I think that we remain bullish about the market environment. We think housing starts and the investment in housing in general, residential reroof market, is positive and we think provided we can work our way through the supply chain challenges that are primarily today in the commercial space, some in the complementary products category as well. The ultimate demand that's underlying this remains robust.

Do you think that shingle volume will turn back positive once you get through these tough comps in calendar 2022?.

They should, Keith. The question will be how long does it take the supply chain to reach a level of fluidity. We do have situations across the branch footprint where we still have extremely low inventories of very specific products, very specific manufacturers. So we have really got to work our way through that. The manufacturers have to work their way through that. They are going to take some downtime here. Hopefully, they come out next year with good production and productivity and production. We all, I think, on the distribution side, built some inventory this year. The question is how much more inventory we are going to be able to build next year. Some of that's going to depend on how long winter lasts when the construction season unlocks. But one thing to just keep in mind, as Julian and I were talking about this earlier, there are millions of houses that need to be built to get back to where we need to be from a long term housing perspective. So that's got to ramp itself up for us to be able to have the homebuilders really fulfill that demand. The backlog that we are seeing that we mentioned, like the setup is good from a demand perspective. We just have to be able to fulfill that demand. And right now, there's quite a bit of challenge in the supply chain that you see. And it's not just building products, it's all the transportation-related items, it's resin and plastics, appliances and all the things that go into building either on the commercial side or the residential side. And the manufacturing and the builders are just not able to cycle their capital as quickly as they have been in the past because the projects are taking longer to complete.

Okay. Thank you.

Thank you Mr. Hughes. The next question comes from David MacGregor with Longbow Research. Please go ahead.

Yes. Thanks for taking my question. And good afternoon everyone. I guess I wanted to ask you a question about market share. And if you think about kind of the extent to which you see OEMs focusing their fulfillment capabilities on their largest customers or like Beacon, I guess one would think that would give you more in stock and as a result an ability to win share. And so I guess how do you think about kind of your ability to win new customers, whether it's the small guy or whether it's at the national account level? It sounds like you have made some pretty good progress there. And your ability to retain those new customers? And what ultimately could that contribute to 2022 growth?

Dave, thanks for the question. Certainly, it's an important metric for us. I would say that the past year, year-and-a-half, we focused very much on staying ahead of the inflation curve, making sure that we have got that sewn up. It's been very difficult to sort of see through the channel over the past 12 months and the supply chain challenges. Certainly, we think we have got scale advantages. And as we are positioned to sort of pivot towards investing in growth, we think we have got a great ability to earn share as we go forward. But one of the things that we are most focused on is really delivering a great experience for our customers. And we think over time, that will help us in the long run.

Okay. I mean it would seem as though there's going to be some, with the incremental accounts that you are bringing on, there's going to be some incremental volume that you carry over into the new year. And I guess I am just trying to dimension that or get some sense from you what you think that might represent?

Again, I do. We continue to believe, as I said, that this is a focus for us, serving our customers, growing our business. We think we have got multiple paths to growth. We think that whether it's our customer experience, our ability to service our customers through our OTC strategy, our sales capabilities, our digital offering. And then certainly, M&A and our greenfield strategy gives us the ability to continue to grow and grow market share.

Okay. And just as a follow-up. Is there any way you can talk about price cost by residential versus commercial versus complementary and what you are seeing there.

Yes. I will give you some directional commentary, David. As we mentioned on the prepared remarks, price cost was about 220 basis points favorable. If you want to break it down by resi, commercial and complementary, on the resi side, pricing was higher than the average, which was about 1,400 basis points, the average was about 1,400 basis points. So pricing was higher than the average, but cost was also higher than the average. On the commercial side, the price and the costs were lower than the average. And the same holds true on the complementary side.

Okay. Terrific. Thanks very much. Good luck.

Thank you Mr. MacGregor. [Operator Instructions]. The next question comes from Trey Grooms with Stephens, Inc. Please proceed.

Hi. Thank you. So you talked about this a little bit around roofing and on the non-res side. But can you talk about product availability in the complementary business? Are you seeing any improvement there? And then with all of the pricing action that we have seen with a lot of the complementary products and also seeing a bit of a pause with housing starts, understanding a lot of that goes into new res. How are you thinking about the components of the complementary business in calendar 4Q and then as we kind of move into 2022? Thank you.

Thanks Trey. Certainly, the certain products inside our complementary business are definitely experiencing inflation. We are seeing a challenging environment on the supply chain side for, as Frank said, some resins and some of the chemicals that go into those products. Obviously, lumber forms a part of that as well and that's experiencing the opposite challenge. But I think there is certainly opportunities for us to continue to continue to grow in that category. Like I said, we are excited about our Midway acquisition. They have got some great lines of complementary products that we are excited about. I think that we are going to continue to see some inflation in that area over the next several quarters. And obviously, we will be very focused on staying ahead of that. Today, I think that the supply chain challenges that we have seen there seem to be easing marginally. Again, I think that some of that is probably related to a slight softening in demand as we come into the winter season, but we are staying very vigilant and staying ahead of the cost curves.

And Trey, I think on the complementary side, the area that we probably have the most watchful eye on is vinyl siding, given any number of things that have happened in Texas, more broadly. So that's probably the area that we have our keen eye on. We saw an interesting dynamic in the fiscal fourth quarter between the growth rates on vinyl and the growth rates on fiber cement. Obviously, it's been a little bit easier to get cement than it has to get vinyl. So it will be interesting to see that one play out next year.

That's helpful. Thanks for taking my question. I will pass it on.

Thank you Mr. Grooms. The next question comes from Kevin Hocevar You may proceed..

Hi everybody. A good afternoon. A question for you on the price/cost side. Frank, I think you mentioned 50 to 100 basis points this year of timing-related price cost benefits. And I know this quarter was 220 basis points of price cost benefits overall. I think last quarter was more too. So there's some pricing exclusive of the timing-related benefits is also you are realizing more pricing than cost, it seems overall. So as we think about 2022, kind of going forward, it sounds like inventories are maybe getting back to pretty normal type levels, maybe not quite there in some regions, but getting closer. So I am curious your thoughts on the ability to hold on to those kind of the non-timing-related price cost benefits and maybe a little bit more normalized type environment in terms of inventory positions.

Yes. Good question, Kevin. I think what you are seeing in the last couple of quarters is actually that roll-off of the inventory profits. When you have a price increase in April and in June, so we got two in the fiscal third quarter. We got one in the fiscal fourth quarter. Those take about 90 days or so each to roll-off. The commentary around the 50 to 100 basis points was really thinking about on a full-year-over-full-year basis. So I would almost think about that like a calendar-over-calendar basis as you were thinking about how to model that. The inventory, again, is only about half volume and the other half is inflation. So I don't know that we are all the way back to where we need to be. Certainly, there are lots of regions, lots of branches who would say, look, we are at critical levels on certain aspects of inventory. And there are other places, maybe they are near to a shingle plan as demand may not be as strong in that particular location, well, they are a bit less with inventory. As you know, some of these products are very hard to transport beyond a couple of 300 miles. So you end up with a little bit of a dichotomy between the branches that have and the branches that have not. So we are going to continue to look for opportunities to fill in where we need to regionally. And then I can't overemphasize there are some elements that just are not available in any meaningful quantities. A lot of that's happening on the commercial side, which is why we are seeing a lot of that backlog build. So we are going to be very precise with inventory. You can see that we have invested dollars, working capital on inventories for all the right reasons. It's because of what we are seeing on the demand side. And then as we think about 2022, we have to give some thought to whether or not we are going to be in an inflationary environment next year as well, in which case, continuing to exact a level of inventory profits is slightly good economical thing to do as well.

And Kevin, I will add to that. I certainly don't want to give the impression that margin expansion is solely a result of inventory profits. Certainly, we benefited from that this year. But as you yourself mentioned, we have executed ahead of the pricing inflation that we have seen. But we have got multiple levers to pull on the margin side of things, including additional pricing analytics and a more skillful management of price overall. Our digital platform, our TRI-BUILT and then managing OpEx and productivity, all things that we believe mean that we are structurally changing our margin profile.

Okay. That's great. Thank you so much.

Thank you Mr. Hocevar. The next question comes from Quinn Fredrickson with Baird. Please proceed.

Hi guys. Good afternoon. Just wanted to see, is there any way you could quantify the impacts that you mentioned of not being able to ship kind of the complete product set for some of the commercial jobs that that had on the non-resi business? And then are you anticipating any catch-ups here in the calendar fourth quarter from being able to ship those? Or does it require the supply chain to get a lot better to meet that demand?

Yes. So on the question of the supply chain, yes, it needs to get better in order for us to unlock a fair amount of that. Not only are we selling what we can, that backlog is continuing to build. We haven't given the dollarization of it, so to speak. But there is certainly percentage points of growth associated on the commercial side and obviously, both on residential and complementary as well. That's why that backlog is as large as it is. I mean it's twice what it was a year ago or more than twice what it was a year ago and up 15% on a quarter-over-quarter basis. And that's with a pretty good quarter. So we are seeing some robust demand there. It's down to some very specific products, as I mentioned and some very specific locations. And right now and everything that I read and we talk about internally and we hear from other companies, there is not a silver bullet. This is something that we are going to all struggle with into 2022. What we are hopeful of is that we can unlock a lot of these jobs that are in the backlog as we turn the page into 2022 and that will certainly help on the non-res growth side.

All right. Thank you very much.

Thank you Mr. Fredrickson. That concludes the question session. Now I would like to turn the call back over to Mr. Francis for his closing remarks.

Thank you Selena and thanks for everyone for joining us this evening. This has been a transformational year for Beacon. I am incredibly proud of the results that we have delivered in a very challenging environment. We have built a new team at Beacon, a new portfolio. We have transformed the balance sheet and we are now looking forward to the ability to invest in growth and enhancing our overall margin profile for this business.. We hope that our employees, customers, suppliers and the investors are all safe and happy and we wish you all happy Thanksgiving. Thank you for joining us this evening.