Q1 2026 James Hardie Industries PLC Earnings Call

Speaker #1: Thank you for standing by, and welcome to the James Hardie first quarter fiscal year 2026 results. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session.

Joe Ahlersmeyer: Thank you for standing by and welcome to the James Hardie first quarter fiscal year 26 results. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Joe Allersmeyer, Vice President of Investor Relations. Please go ahead.

Speaker #1: If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Joe Ahlersmeyer, Vice President of Investor Relations.

Speaker #1: Please go ahead.

Speaker #2: Thank you, Operator, and thank you to everyone for joining today's call. Please note that during the course of prepared remarks and Q&A, management may refer to non-GAAP financial measures and make forward-looking statements.

Aaron Erter: Thank you, Operator, and thank you to everyone for joining today's call. Please note that during the course of prepared remarks and Q&A, management may refer to non-GAAP financial measures and make forward-looking statements. You can refer to several related cautionary and other notes on slide two for more information. Forward-looking statements made during today's conference call and in the presentation materials speak only as of the date of this presentation. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Accordingly, investors are cautioned not to place undue reliance on forward-looking statements. Also, unless otherwise indicated, our materials and comments refer to figures in U.S. dollars, and any comparisons made are to the corresponding period in the prior fiscal year. I'm now pleased to hand the call over to our Chief Executive Officer, Mr. Aaron Erder.

Speaker #2: You can refer to several related cautionary and other notes on slide two for more information. Forward-looking statements made during today's conference call and in the presentation materials speak only as of the date of this presentation.

Speaker #2: Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Accordingly, investors are cautioned not to place undue reliance on forward-looking statements.

Speaker #2: Also, unless otherwise indicated, our materials and comments refer to figures in U.S. dollars, and any comparisons made are to the corresponding period in the prior fiscal year.

Speaker #2: I'm now pleased to hand the call over to our Chief Executive Officer, Mr. Aaron Erder.

Speaker #3: Hello everyone. In a moment, I'll discuss our most recent results and how we are thinking about the quarters ahead. But it is only fitting to open my comments with some perspective on our future now that James Hardie and AZAC are one company.

Joe Ahlersmeyer: Hello, everyone. In a moment, I'll discuss our most recent results and how we are thinking about the quarters ahead. But it is only fitting to open my comments with some perspective on our future now that James Hardie and AZAC are one company. The combination of these two businesses, now completed, has created a leading provider of exterior home and outdoor living solutions. We have significantly expanded our offering and, in doing so, have strengthened our customer value proposition and positioned James Hardie to capture multiple opportunities for material conversion, with a total addressable market more than twice the size of legacy James Hardie. Our team is stronger as one, and we are better equipped than ever to serve our customers and create value for all our stakeholders.

Speaker #3: The combination of these two businesses, now completed, has created a leading provider of exterior home and outdoor living solutions. We have significantly expanded our offering, and in doing so, have strengthened our customer value proposition and positioned James Hardie to capture multiple opportunities for material conversion.

Speaker #3: With a total addressable market more than twice the size of legacy James Hardie, our team is stronger as one, and we are better equipped than ever to serve our customers and create value for all our stakeholders.

Speaker #3: I am pleased with the focus shown by everyone through pre-integration planning and now into integration execution, and in particular with the unwavering dedication to working safely each day and serving our customer partners.

Joe Ahlersmeyer: I am pleased with the focus shown by everyone through pre-integration planning and now into integration execution, and in particular, with the unwavering dedication to working safely each day and serving our customer partners. The integration is off to a very positive start, and I look forward to sharing more details on our actions and progress towards our synergy targets in just a few moments. The material conversion opportunity that lies ahead is substantial, and we will strategically invest where we see long-term returns to support our future growth. Please turn to slide five. Presently, demand in both repair and remodel and new construction in North America are challenging. Uncertainty is a common thread throughout conversations with customer and contractor partners.

Speaker #3: The integration is off to a very positive start, and I look forward to sharing more details on our actions and progress towards our synergy targets in just a few moments.

Speaker #3: The material conversion opportunity that lies ahead is substantial, and we will strategically invest where we see long-term returns to support our future growth. Please turn to slide five.

Speaker #3: Presently, demand in both repair and remodel and new construction in North America is challenging. Uncertainty is a common thread throughout conversations with customers and contractor partners.

Speaker #3: Homeowners are deferring large-ticket remodeling projects like re-siding, and affordability remains the key impediment to improvement in single-family new construction. More recently, home builders are moderating their demand expectations and slowing starts to align their home inventory with a decelerating pace of traffic and sales.

Joe Ahlersmeyer: Homeowners are deferring large-ticket remodeling projects like residing, and affordability remains the key impediment to improvement in single-family new construction, where more recently, home builders are moderating their demand expectations and slowing starts to align their home inventory with a decelerating pace of traffic and sales. For legacy James Hardie, first quarter results were largely as we had anticipated and reflect an expected normalization of channel inventories due to moderating growth expectations by our customers as uncertainty built throughout April and early May. And although we had contemplated this dynamic within our initial outlook, incremental market softness across single-family new construction has led to more defensive inventory posturing at distributors and dealers, contributing to a lower volume outlook for our business. In May, we built into our full-year guidance an assumption that end-market demand could decline by approximately mid-single digits, driven by expectations for further decline in repair and remodel.

Speaker #3: For legacy James Hardie, first-quarter results were largely as we had anticipated and reflect an expected normalization of channel inventories due to moderating growth expectations by our customers, as uncertainty built throughout April and early May.

Speaker #3: And although we had contemplated this dynamic within our initial outlook, incremental market softness across single-family new construction has led to more defensive inventory posturing at distributors and dealers, contributing to a lower volume outlook for our business.

Speaker #3: In May, we built into our full-year guidance an assumption that in-market demand could decline by approximately mid-single digits, driven by expectations for further declines in repair and remodel.

Speaker #3: Over the course of the summer, single-family new construction activity has been weaker than anticipated, and we have adjusted our expectations to account for softer demand.

Joe Ahlersmeyer: Over the course of the summer, single-family new construction activity has been weaker than anticipated, and we have adjusted our expectations to account for softer demand. Furthermore, we believe it is prudent to plan for more cautious order patterns and defensive inventory positioning at our channel partners, exacerbated by the slower seasonality of new construction into the back half of the calendar year. Amidst this dynamic, we are also conservatively expecting to benefit from recent home builder exclusivity wins and new product launches more so in FY27 and beyond rather than the back half of FY26 as previously planned. Turning to legacy AZAC results, the business delivered a strong June quarter with performance exceeding previously provided guidance. Deck, rail, and accessories saw mid-single-digit sell-through growth driven by continued expansion in the channel and contribution from innovative new products, particularly within railing.

Speaker #3: Furthermore, we believe it is prudent to plan for more cautious order patterns and defensive inventory positioning at our channel partners, exacerbated by the slower seasonality of new construction and the back half of the calendar year.

Speaker #3: Amidst this dynamic, we are also conservatively expecting to benefit from recent home builder exclusivity wins and new product launches more so in FY27 and beyond, rather than the back half of FY26, as previously planned.

Speaker #3: Turning to legacy AZAC results, the business delivered a strong June quarter, with performance exceeding previously provided guidance. Deck, rail, and accessories saw mid-single-digit sell-through growth, driven by continued expansion in the channel and contribution from innovative new products, particularly within railing.

Speaker #3: In addition to the sustained momentum on the top line, AZAC demonstrated impressive margin performance in the quarter, all the while continuing to invest in long-term growth initiatives.

Joe Ahlersmeyer: In addition to the sustained momentum on the top line, AZAC demonstrated impressive margin performance in the quarter, all the while continuing to invest in long-term growth initiatives. As we stated when we announced the combination, AZAC is a strong complement to James Hardie due to the long-term growth profile and the underpinnings from material conversion. TimberTech's continued growth through softer overall markets demonstrates the resilience of the demand profile for the decking category and the strong value proposition of the product offering. Together, we expect to accelerate top-line performance to drive double-digit long-term growth within our North America businesses. In a few moments, Rachel will expand upon our consolidated FY26 guidance and expectations across our new reportable segments. But first, I would like to share an update on our key strategic priorities, integration efforts, and early progress towards our synergy targets. Please turn to slide six.

Speaker #3: As we stated when we announced the combination, AZAC is a strong complement to James Hardie due to the long-term growth profile and the underpinnings from material conversion.

Speaker #3: Timber Tech's continued growth through softer overall markets demonstrates the resilience of the demand profile for the decking category and the strong value proposition of the product offering.

Speaker #3: Together, we expect to accelerate top-line performance to drive double-digit long-term growth within our North America businesses. In a few moments, Rachel will expand upon our consolidated FY26 guidance and expectations across our new reportable segments.

Speaker #3: But first, I would like to share an update on our key strategic priorities, integration efforts, and early progress towards our synergy targets. Please turn to slide 6.

Speaker #3: We remain committed to outperforming market demand over the long term, and we are employing strategies to deliver on this commitment, notwithstanding near-term conditions. Our actions are centered around our value proposition to customers, and our solid execution against these strategies amplifies our expansive material conversion opportunity. We are resolute in our strategy, which is grounded in being homeowner-focused and customer- and contractor-driven. In essence, this means that the driving force of our business is our unwavering commitment to delivering winning solutions across the customer value chain.

Joe Ahlersmeyer: We remain committed to outperforming market demand over the long term and are employing strategies to deliver on this commitment, notwithstanding near-term conditions. Our actions are centered around our value proposition to customers. Our solid execution against these strategies amplifies our expansive material conversion opportunity. We are resolute in our strategy that is grounded in being homeowner focused, customer, and contractor driven. In essence, this means that the driving force of our business is our unwavering commitment to delivering winning solutions across the customer value chain. Everything we do starts and ends with the customer. We have purposeful strategies to create demand across the value chain, winning over homeowners, contractors, and customers with our value proposition and fostering loyalty to the James Hardie brand.

Speaker #3: Everything we do starts and ends with the customer. We have purposeful strategies to create demand across the value chain—winning over homeowners, contractors, and customers with our value proposition and fostering loyalty to the James Hardie brand.

Speaker #3: We have unmatched resilience and beauty in our innovative and differentiated product offerings. Our localized manufacturing, unrivaled by any other competitor, is instrumental to the growth plans of our largest, fastest-growing customers.

Joe Ahlersmeyer: We have unmatched resilience and beauty in our innovative and differentiated product offerings, and our localized manufacturing, unrivaled by any other competitor, is instrumental to the growth plans of our largest, fastest growing customers. Our customer partnership, our innovation focus, our broad product range, and scaled manufacturing and support network continually deliver material conversion wins. Our core strategies are working, and we will continue to invest strategically to profitably grow the business and bring our strategies to life as our end markets recover. We see immense material conversion opportunity ahead, fueling our growth engine and value creation flywheel. We are winning in the field by partnering with our customers and contractors and delighting homeowners. This success propels our organization forward and fuels my optimism about the future of James Hardie. We have the strongest team in the industry and the right strategy to go after our material conversion opportunity.

Speaker #3: Our customer partnership, our innovation focus, our broad product range, and the scale of our manufacturing and support network continually deliver material conversion wins. Our core strategies are working, and we will continue to invest strategically to profitably grow the business and bring our strategies to life as our in-markets recover.

Speaker #3: We see immense material conversion opportunities ahead, fueling our growth engine and value creation flywheel. We are winning in the field by partnering with our customers and contractors and delighting homeowners.

Speaker #3: This success propels our organization forward and fuels my optimism about the future of James Hardie. We have the strongest team in the industry and the right strategy to go after our material conversion opportunity.

Speaker #3: I've said it before, and I'll say it again: nobody in the industry has a sales team like James Hardie. We have shown an ability to rapidly onboard new contractors to the Alliance, our loyalty program, which we will continue to grow and enhance over the coming years.

Joe Ahlersmeyer: I've said it before, and I'll say it again: nobody in the industry has a sales team like James Hardie. We have shown an ability to rapidly onboard new contractors to the alliance, our loyalty program, which we will continue to grow and enhance over the coming years. Additionally, approximately 40% of new contractors added in the prior year were introduced to the program by a customer sales representative, a clear proof point of how we have amplified our commercial efforts by leveraging our deep partnership with our customers, leading to not just hundreds but thousands of feet on the street. This comes as a result of our focus across the entire value chain, which is driving demand creation and building brand awareness. Turning to new construction, we continue to achieve success in deepening our partnerships and supporting home builders' growth objectives.

Speaker #3: Additionally, approximately 40% of new contractors added in the prior year were introduced to the program by a customer sales representative. This is a clear proof point of how we have amplified our commercial efforts by leveraging our deep partnership with our customers.

Speaker #3: Leading to not just hundreds, but thousands of feet on the street. This comes as a result of our focus across the entire value chain, which is driving demand creation and building brand awareness.

Speaker #3: Turning to new construction, we continue to achieve success in deepening our partnerships and supporting home builders' growth objectives. Over the last year, in a clear demonstration of the appreciation for our innovative product solutions and unrivaled business support, we have announced multi-year national hard-siting and trim exclusivity agreements with several large home builders, including Beezer Homes in July.

Joe Ahlersmeyer: Over the last year, in a clear demonstration of the appreciation for our innovative product solutions and unrivaled business support, we have announced multi-year national hard siding and trim exclusivity agreements with several large home builders, including Beeser Homes, in July. We were also recognized as a national preferred partner by David Weekly Homes, representing our 18th award in 21 years. We continue to strive for excellence and continuous innovation in terms of the products and solutions we provide to our valued customers. Beauty and resilience define our entire suite of products, with beautiful aesthetics that appeal to homeowners and resilience that provides front-line defense against the elements, moisture, pests, and fire to protect what matters most. During the quarter, our global innovation team, led by our Chief Innovation Officer, Joe Lu, was recognized for outstanding innovative culture by the National Association of Manufacturers.

Speaker #3: We were also recognized as a national preferred partner by David Weekley Homes, representing our 18th award in 21 years. We continue to strive for excellence and continuous innovation in terms of the products and solutions we provide to our valued customers.

Speaker #3: Beauty and resilience define our entire suite of products, with beautiful aesthetics that appeal to homeowners and resilience that provides front-line defense against the elements.

Speaker #3: Moisture, pests, and fire to protect what matters most. During the quarter, our global innovation team, led by our Chief Innovation Officer, Joe Liu, was recognized for outstanding innovative culture by the National Association of Manufacturers.

Speaker #3: By committing to our values of being bold and progressive and collaborating for greatness, we are driving innovation and helping to shape the future of our industry through the introduction of new aesthetics that continue to delight homeowners and provide solutions that increase the productivity of contractors, like Statement Essentials.

Joe Ahlersmeyer: By committing to our values of being bold and progressive and collaborating for greatness, we are driving innovation and helping to shape the future of our industry through the introduction of new aesthetics, which continue to delight homeowners, and solutions increasing the productivity of contractors like Statement Essentials. We are also targeting material conversion wins against brick and stucco with products such as Hardie Architectural Panel, adding incremental runway on top of what has been our core focus in wood look siding. As another example of our product innovation, our Color Plus offering helps create beautiful, distinguished homes with superior aesthetics, customization, and durability. Color Plus is strategically important across both new construction and repair and remodel. Our focused efforts and investments enabled outperformance versus prime products in the first quarter.

Speaker #3: We are also targeting material conversion wins against brick and stucco, with products such as Hardie Architectural Panel. This adds incremental runway on top of what has been our core focus and would look like siding.

Speaker #3: As another example of our product innovation, our ColorPlus offering helps create beautiful, distinguished homes with superior aesthetics, customization, and durability. ColorPlus is strategically important across both new construction and repair and remodel.

Speaker #3: Our focused efforts and investments enabled outperformance versus prime products in the first quarter. The value proposition we can offer with Color Plus also continues to underpin our opportunity to grow alongside large home builders and new construction.

Joe Ahlersmeyer: The value proposition we can offer with Color Plus also continues to underpin our opportunity to grow alongside large home builders in new construction. Color Plus's superior aesthetics and virtually limitless range of color options provide differentiation to the exterior of homes and builder communities, increasing the appeal to the homeowner and therefore expediting the sales cycle and supporting the ASP for our home builder partners. In other words, we are seeing that builders who utilize James Hardie Color Plus are selling homes faster and for more money. We continue to see significant runway for Color Plus growth against inferior solutions within repair and remodel in the Northeast and Midwest, two regions ripe for material conversion through the residing of aging homes with appreciated values that remain clad with other substrates.

Speaker #3: Color Plus's superior aesthetics and virtually limitless range of color options provide differentiation to the exterior of homes and builder communities, increasing the appeal to the homeowner and, therefore, expediting the sales cycle and supporting the ASP for our home builder partners.

Speaker #3: In other words, we are seeing that builders who utilize James Hardie Color Plus are selling homes faster and for more money. We continue to see significant runway for Color Plus growth against inferior solutions within repair and remodel in the Northeast and Midwest.

Speaker #3: Two regions are ripe for material conversion through the re-siting of aging homes with appreciated values that remain clad with other substrates. Our innovation strategies also apply to the installation process for our home builder and contractor partners, which again includes Color Plus.

Joe Ahlersmeyer: Our innovation strategies also apply to the installation process for our home builder and contractor partners, which again includes Color Plus, offering time and cost savings, particularly in areas with constrained labor availability and higher painting costs. We are increasingly innovating to make James Hardie the most intuitive products to install in the marketplace. In parts of the Midwest, and specifically with our Statement collection, we are piloting a number of these innovative products and solutions to reduce the install time and thereby labor costs, and the early results continue to be highly encouraging. We believe these initiatives will unlock a much larger range of addressable homes at more affordable price points. Turning to our global operations, this function is the key to providing the unrivaled business support that our customers demand and have come to expect from James Hardie.

Speaker #3: Offering time and cost savings, particularly in areas with constrained labor availability and higher painting costs, we are increasingly innovating to make James Hardie the most intuitive products to install in the marketplace.

Speaker #3: In parts of the Midwest, and specifically with our statement collection, we are piloting a number of these innovative products and solutions to reduce the install time and thereby labor costs.

Speaker #3: In the early results, continue to be highly encouraging. We believe these initiatives will unlock a much larger range of addressable homes at more affordable price points.

Speaker #3: Turning to our global operations, this function is the key to providing the unrivaled business support that our customers demand and have come to expect from James Hardie.

Speaker #3: We are the industry leader, providing the highest service levels that enable customers to run their supply chains with greater flexibility. Knowing that the strength of our localized manufacturing network will respond to their needs.

Joe Ahlersmeyer: We are the industry leader providing the highest service levels that enable customers to run their supply chains with greater flexibility, knowing that the strength of our localized manufacturing network will respond to their needs. I recently appointed Ryan Kilcollon to the newly established position of Chief Operations Officer. Over his 18 years of experience at James Hardie, most recently as Executive Vice President of Operations, Ryan has demonstrated beyond a doubt that he is the right leader to continue driving excellence across our expanded network of manufacturing and logistics. Currently, Ryan and his team are laser-focused on controlling the controllables and driving continuous improvement to help offset inflation and lower volume. In the quarter, we overdelivered on our global internal cost savings target, led by strong progress in procurement and R&D.

Speaker #3: I recently appointed Ryan Kilcollum to the newly established position of Chief Operations Officer. Over his 18 years of experience at James Hardie, most recently as Executive Vice President of Operations, Ryan has demonstrated beyond a doubt that he is the right leader to continue driving excellence across our expanded network of manufacturing and logistics.

Speaker #3: Currently, Ryan and his team are laser-focused on controlling the controllables and driving continuous improvement to help offset inflation and lower volume. In the quarter, we over-delivered on our global internal cost savings target, led by strong progress in procurement and R&D.

Speaker #3: We continue to see runway for continuous improvement across our manufacturing, commercial, and back-office functions, contributing to both our cost synergy target and organic margin expansion goals.

Joe Ahlersmeyer: We continue to see runway for continuous improvement across our manufacturing, commercial, and back-office functions, contributing to both our cost synergy target and organic margin expansion goals. In both Australia and New Zealand and in Europe, we remain focused on areas in which we have the right to win and where we can continuously improve profitability. In Australia and New Zealand, our strategy is consistent and focused. We are leveraging innovation to accelerate material conversion against brick and masonry, and we are optimizing our network for future growth. In Australia, we continue to grow our strong category share across our end markets through demand creation and strategic partnerships with large home builders, and we expect to outperform the market, which we anticipate will be flat to down in FY26. The ANZ business is well positioned to take full advantage of a future market recovery.

Speaker #3: In both Australia and New Zealand, and in Europe, we remain focused on areas in which we have the right to win and where we can continuously improve profitability.

Speaker #3: In Australia and New Zealand, our strategy is consistent and focused. We are leveraging innovation to accelerate material conversion against brick and masonry, and we are optimizing our network for future growth.

Speaker #3: In Australia, we continue to grow our strong category share across our in-markets through demand creation and strategic partnerships with large home builders. We expect to outperform the market, which we anticipate will be flat to down in FY26.

Speaker #3: The A and Z business is well positioned to take full advantage of a future market recovery. In Europe, the market environment remains similar to recent quarters. We are focused on our core strategy of driving double-digit sales growth and high-value products.

Joe Ahlersmeyer: In Europe, the market environment remains similar to recent quarters. We are focused on our core strategy of driving double-digit sales growth and high-value products. To that point, our Therm 25 fiber gypsum flooring product continues to receive accolades across the industry, including our most recent recognition, the Plus X Award, which highlighted the product's performance across categories for innovation, quality, functionality, ergonomics, and sustainability. We have a solid plan to expand our margins in Europe, comprised of purposeful investment to drive operating leverage alongside sales growth and cost savings from the optimization of our production footprint and freight management. Across our businesses, our teams are committed to executing on purposeful strategies that drive sustained long-term market outperformance. These plans are grounded in capturing the material conversion opportunity and driving value for our customer partners. Please turn to slide seven.

Speaker #3: To that point, our Therm 25 fiber gypsum flooring product continues to receive accolades across the industry, including our most recent recognition: the Plus X Award, which highlighted the product's performance across categories for innovation, quality, functionality, ergonomics, and sustainability.

Speaker #3: We have a solid plan to expand our margins in Europe, comprised of purposeful investment to drive operating leverage alongside sales growth and cost savings from the optimization of our production footprint and freight management.

Speaker #3: Across our businesses, our teams are committed to executing purposeful strategies that drive sustained long-term market outperformance. These plans are grounded in capturing the material conversion opportunity and driving value for our customer partners.

Speaker #3: Please turn to slide seven. On July 1st, we welcome the AZAC team to James Hardie. But before I detail our plans for a seamless integration, I'd like to take a moment to thank Jesse Singh and the rest of the AZAC team, who have been instrumental in the success of AZAC and collaborated closely for an expedited close.

Joe Ahlersmeyer: On July 1st, we welcome the AZAC team into James Hardie. But before I detail our plans for a seamless integration, I'd like to take a moment to thank Jesse Singh and the rest of the AZAC team who have been instrumental in the success of AZAC and collaborated closely for an expedited close. It is imperative that we continue to build upon the strong momentum the AZAC team built by maintaining continuity with our customers and channel partners and achieving alignment across our collective North American organization as we accelerate growth by winning in the market and capturing commercial synergies as one James Hardie. Our integration roadmap starts with the customer, both with how we engage with them and support them.

Speaker #3: It is imperative that we continue to build upon the strong momentum that the AZAC team built. By maintaining continuity with our customers and channel partners, and achieving alignment across our collective North American organization, we will accelerate growth by winning in the market and capturing commercial synergies as one James Hardie.

Speaker #3: Our integration roadmap starts with the customer, both with how we engage with them and support them. We will maintain continuity in terms of the face to our customers, immediately leveraging the combined power of our unified sales force.

Joe Ahlersmeyer: We will maintain continuity in terms of the face to our customers, immediately leveraging the combined power of our unified sales force as well as our portfolio of leading brands, products, and solutions. Our dealer and distributor customers have seen the growth James Hardie can drive across their businesses, and we will continue to provide the support and solutions to further collective growth as key strategic partners. Internally, working safely through zero harm and efficiently through the Hardie operating system remain foundational imperatives. Key to our success today is also unifying our cultures and identifying best practices from both organizations to drive continuous improvement across our global operations, supporting and enabling the success of the combined organization. As I've said to our team, we aren't going to be married to the James Hardie or the AZAC way. We are going to be married to success.

Speaker #3: As well as our portfolio of leading brands, products, and solutions, our dealer and distributor customers have seen the growth James Hardie can drive across their businesses.

Speaker #3: And we will continue to provide the support and solutions to further collective growth as key strategic partners. Internally, working safely through zero harm and efficiently through the Hardie Operating System remain foundational imperatives.

Speaker #3: Key to our success today is also unifying our cultures and identifying best practices from both organizations to drive continuous improvement across our global operations, supporting and enabling the success of the combined organization.

Speaker #3: As I've said to our team, we aren't going to be married to the James Hardie or the Azek way; we are going to be married to success.

Speaker #3: Moving to slide eight, in the short time since the transaction closed, we have made meaningful progress on our cost synergy realization and are seeing business wins from customers recognizing our combined value proposition and wanting to partner with us.

Joe Ahlersmeyer: Moving to slide eight, in the short time since the transaction closed, we have made meaningful progress on our cost synergy realization and are seeing business wins from customers recognizing our combined value proposition and wanting to partner with us. The initial response we have seen has well exceeded my expectations. We have tremendous confidence in our execution of a seamless integration, given the similarities of both companies' cultures, goals, and operating models. Thus far, we are progressing well against our cost synergy commitments, having already actioned cost synergies, accounting for more than 50% of our run rate target for general and administrative cost savings, which we knew would be the quickest to realize. For FY26, this solid run rate will drive approximately $20 million of P&L benefit, primarily in the latter half of the year.

Speaker #3: The initial response we have seen has well exceeded my expectations. We have tremendous confidence in our execution of a seamless integration, given the similarities of both companies' cultures, goals, and operating models.

Speaker #3: Thus far, we are progressing well against our cost synergy commitments, having already actioned cost synergies accounting for more than 50% of our run-rate target for general and administrative cost savings.

Speaker #3: Which we knew would be the quickest to realize. For FY26, a solid run rate will drive approximately $20 million of P&L benefit, primarily in the latter half of the year.

Speaker #3: We are on track to achieve our previously stated target of $125 million in cost synergies over three years, with room to deliver ahead of schedule.

Joe Ahlersmeyer: We are on track to achieve our previously stated target of $125 million of cost synergies over three years, with room to deliver ahead of schedule. Productivity is ingrained in our culture through the Hardie operating system, meaning we will continuously find ways to improve the overall cost structure of our business well after initial cost synergies have been captured. We are acting with thoughtful diligence to build upon our strength as a unified sales organization, which is key to harnessing our combined growth opportunity. Early feedback on our combination with AZAC from dealer customers has been very encouraging. And now that we have come together as one in our pursuing quick commercial synergy wins, our confidence in the strategic logic of the combined enterprise is greater than ever.

Speaker #3: Productivity is ingrained in our culture through the Hardie operating system, meaning we will continuously find ways to improve the overall cost structure of our business, well after initial cost synergies have been captured.

Speaker #3: We are acting with thoughtful diligence to build upon our strength as a unified sales organization, which is key to harnessing our combined growth opportunity.

Speaker #3: Early feedback on our combination with AZAC from dealer customers has been very encouraging. Now that we have come together as one in pursuing quick commercial synergy wins, our confidence in the strategic logic of the combined enterprise is greater than ever.

Speaker #3: We have already executed on several meaningful commercial synergy wins with major customers across the value chain, which serve as proof points of the rationale for bringing together our products into a comprehensive solution. This provides motivation to every single team member of what is now the strongest sales organization across the building products industry.

Joe Ahlersmeyer: We have already executed on several meaningful commercial synergy wins with major customers across the value chain, which serve as proof points of the rationale for bringing together our products into a comprehensive solution and provide motivation to every single team member of what is now the strongest sales organization across the building products industry. We've had important dealer partners already commit to making AZAC their exclusive PVC trim offering, not only because of their strong alignment with James Hardie, but also because of the loyalty of their contractor customers to our brand. We have already seen contractor partners commit to newly offering both TimberTech decking and James Hardie siding. Their willingness to trust and work with James Hardie and TimberTech is informed by their familiarity with our leading brands and best-in-class support teams.

Speaker #3: We've had important dealer partners already commit to making AZAC their exclusive PVC trim offering, not only because of their strong alignment with James Hardie, but also because of the loyalty of their contractor customers to our brand.

Speaker #3: We have already seen contractor partners commit to newly offering both TimberTech decking and James Hardie siding. Their willingness to trust and work with James Hardie and TimberTech is informed by their familiarity with our leading brands and best-in-class support teams.

Speaker #3: We've already seen some wins across the country, including members of our contractor alliance committing to offer TimberTech decking and members of the board in TimberTech's contractor program converting to James Hardie fiber cement siding.

Joe Ahlersmeyer: We've already seen some wins across the country, including members of our contractor alliance committing to offer TimberTech decking and members of the board TimberTech's contractor program converting to James Hardie fiber cement siding. This is a testament to the trust and confidence our contractor partners have in us, and we are actively working to bring these programs and contractors together to accelerate our material conversion opportunity at the contractor level. We have also now an expanded line of Total Exterior Solutions, which best position us to meet the needs of our home builder partners across the broad range of geographies and price points in which they participate. We believe that several recent wins at various levels of scale were due in large part to our home builder partners' appreciation of our expanded offering and comprehensive solutions.

Speaker #3: This is a testament to the trust and confidence our contractor partners have in us. We are actively working to bring these programs and contractors together to accelerate our material conversion opportunity at the contractor level.

Speaker #3: We have also now an expanded line of total exterior solutions, which best positions us to meet the needs of our home builder partners across the broad range of geographies and price points in which they participate.

Speaker #3: We believe that several recent wins at various levels of scale were due in large part to our home builder partners' appreciation of our expanded offering and comprehensive solutions.

Speaker #3: Across all our existing customer partnerships, we have an on-purpose plan to communicate the enhanced value proposition we now offer. We committed to delivering more than $500 million of commercial synergies over five years, with benefits to begin showing in FY27.

Joe Ahlersmeyer: Across all our existing customer partnerships, we have an on-purpose plan to communicate the enhanced value proposition we now offer. We committed to delivering more than $500 million of commercial synergies over five years, with benefits to begin showing in FY27. But my message to the organization has been clear: we will achieve well over $500 million in synergies. We will do it in under five years. And our relentless pursuit of these wins started on day one. The teams have clearly risen to the challenge, and through their actions in the field have turned what once was just a thought into real-world share gains that will drive meaningfully faster growth in the years to come. Now, I'll turn it over to Rachel to review our results in more detail and discuss our outlook. Rachel?

Speaker #3: But my message to the organization has been clear: we will achieve well over $500 million in synergies. We will do it in under five years.

Speaker #3: And our relentless pursuit of these wins started on day one. The teams have clearly risen to the challenge, and through their actions in the field have turned what once was just a thought into real-world share gains that will drive meaningfully faster growth in the years to come.

Speaker #3: Now, I'll turn it over to Rachel to review our results in more detail and discuss our outlook. Rachel?

Speaker #4: Thank you, Aaron. Please turn to slide nine. We delivered Q1 results largely consistent with our internal plan, navigating a dynamic near-term environment while also remaining focused on scaling the organization and investing in our business to drive long-term profitable growth.

Rachel Wilson: Thank you, Aaron. Please turn to slide nine. We delivered Q1 results largely consistent with our internal plan, navigating a dynamic near-term environment while also remaining focused on scaling the organization and investing in our business to drive long-term profitable growth. We will stay focused on the key strategies that have underpinned the strength of our long-term financial performance, including aligning our spend to the market environment, investing ahead of recovery, and evolving our plans to drive outperformance. Lastly, as Aaron mentioned, our integration synergy capture efforts are well underway. In a moment, I will introduce our guidance for FY26, inclusive of AZAC, as well as provide for some modeling considerations for the combined company. But first, please turn to slide 10 for the financial highlights of our fiscal first quarter.

Speaker #4: We will stay focused on the key strategies that have underpinned the strength of our long-term financial performance, including aligning our spend to the market environment, investing ahead of recovery, and evolving our plans to drive outperformance.

Speaker #4: Lastly, as Aaron mentioned, our integration synergy capture efforts are well underway. In a moment, I will introduce our guidance for FY26, inclusive of AZAC, as well as provide some modeling considerations for the combined company.

Speaker #4: But first, please turn to slide 10 for the financial highlights of our fiscal first quarter. Total net sales were 9% below last year's strong first quarter result, mostly consistent with our internal expectations at $900 million globally.

Rachel Wilson: Total net sales were 9% below last year's strong first quarter result, mostly consistent with our internal expectations at $900 million globally. We delivered $226 million of adjusted EBITDA in the quarter, with an adjusted EBITDA margin of 25.1%. Total adjusted EBITDA declined 21% against last year's record one Q, and margins decreased by 370 basis points. Adjusted net income in the quarter was $127 million, and adjusted diluted EPS was $0.29 per share. Lastly, free cash flow was $104 million, up 88%, driven by continued strength in the cash generation profile of our business and moderating capital spending requirements. Turning to our North American results on slide 11, North American net sales declined 12% in the quarter, driven by lower volumes partially offset by an increase in average net sales price, or ASP.

Speaker #4: We delivered $226 million of adjusted EBITDA in the quarter, with an adjusted EBITDA margin of 25.1%. Total adjusted EBITDA declined 21% against last year's record Q1, and margins decreased by 370 basis points.

Speaker #4: Adjusted net income in the quarter was $127 million, and adjusted diluted EPS was $0.29 per share. Lastly, free cash flow was $104 million, up 88%, driven by continued strength in the cash generation profile of our business and moderating capital spending requirements.

Speaker #4: Turning to our North American results on slide 11, North American net sales declined 12% in the quarter, driven by lower volumes, partially offset by an increase in average net sales price (ASP).

Speaker #4: As we anticipated, price realization improved sequentially, as ASP rose by 3% year over year, ahead of the 1% increase in the fourth quarter of FY25.

Rachel Wilson: As we anticipated, price realization improved sequentially, as ASP rose plus 3% year over year, ahead of the 1% increase in the fourth quarter of FY25. Volumes declined double digits in exteriors, consistent with planning embedded in our previous guidance. As expected, many customers made efforts to return to more normal inventory levels in the first quarter. Into the second quarter, we have seen these customers take an incrementally more defensive approach to inventory levels as market growth expectations have moderated from a few months ago. The impact is most notable in the South, specifically in Florida and Georgia, as well as Texas, where we have a significant presence given our strong partnerships with scaled home builders. These geographies, heavily tilted toward new construction, have seen outsized pressure from affordability and elevated home inventories.

Speaker #4: Volumes declined double digits in exteriors, consistent with planning embedded in our previous guidance. As expected, many customers made efforts to return to more normal inventory levels in the first quarter.

Speaker #4: Into the second quarter, we have seen these customers take an incrementally more defensive approach to inventory levels as market growth expectations have moderated from a few months ago.

Speaker #4: The impact is most notable in the South, specifically in Florida and Georgia, as well as Texas, where we have a significant presence given our strong partnerships with scaled home builders.

Speaker #4: These geographies, heavily tilted toward new construction, have seen outsized pressure from affordability and elevated home inventories. Home builders are aligning production to a softer demand outlook, as evidenced by seasonally adjusted single-family starts in the South falling around 25% since February, and permits in that region declining sequentially each of the last four months.

Rachel Wilson: Home builders are aligning production to a softer demand outlook, as evidenced by seasonally adjusted single-family starts in the South falling around 25% since February, and permits in that region declining sequentially each of the last four months. Interior volumes declined double digits, while multifamily returned to growth with volumes up mid-single digits. North America adjusted EBITDA was $206 million, with an adjusted EBITDA margin of 32.1%, down 400 basis points year over year. Lower volumes, unfavorable cost absorption, and persistent raw material inflation were the primary drivers of this decrease. Pulp was a primary driver of raw material inflation on a year-over-year basis in the first fiscal quarter, though we expect this headwind to subside through the year.

Speaker #4: Interior volumes declined double digits, while multifamily returned to growth with volumes up mid-single digits. North America adjusted EBITDA was $206 million, with an adjusted EBITDA margin of 32.1%, down 400 basis points year over year.

Speaker #4: Lower volumes, unfavorable cost absorption, and persistent raw material inflation were the primary drivers of this decrease. Pulp was a primary driver of raw material inflation on a year-over-year basis in the first fiscal quarter, though we expect this headwind to subside throughout the year.

Speaker #4: For the full year, we still anticipate total raw material inflation to run in the high single digits, but with a risk to the favorable side of the range based on our current pricing and forecast.

Rachel Wilson: For the full year, we still anticipate total raw material inflation to run high single digits, but with a risk to the favorable side of the range based on our current pricing and forecast. We continue to control the controllable, with favorable ASP, cost savings, and our focused clutch actions helping to partially mitigate market volume declines and raw material headwinds. Please turn to slide 12. In our APAC and Europe segments, market conditions continue to be challenging, driven by macroeconomic uncertainty and consumer affordability concerns. Nevertheless, we strive to outperform through market cycles and believe we continue to drive outperformance in both regions during the quarter. APAC comparisons to prior year continue to be influenced by our decision to cease manufacturing and wind down commercial operations in the Philippines.

Speaker #4: We continue to control the controllable with favorable ASP, cost savings, and are focused on clutch actions helping to partially mitigate market volume declines and raw material headwinds.

Speaker #4: Please turn to slide 12. In our APEC and Europe segments, market conditions continue to be challenging, driven by macroeconomic uncertainty and consumer affordability concerns.

Speaker #4: Nevertheless, we strive to outperform through market cycles and believe we continue to drive outperformance in both regions during the quarter. APEC comparisons to the prior year continue to be influenced by our decision to cease manufacturing and wind down commercial operations in the Philippines.

Speaker #4: Including this impact, Asia Pacific net sales declined 10% in the quarter, or 8% in Australian dollars, primarily due to a 25% decrease in volumes, partially offset by a 22% rise in ASP in Australian dollars.

Rachel Wilson: Including this impact, Asia-Pacific net sales declined 10% in the quarter, or 8% in Australian dollars, primarily due to a 25% decrease in volumes, partially offset by a 22% rise in ASP in Australian dollars. Asia-Pacific EBITDA declined 7% to $43 million, and EBITDA margin increased 140 basis points to 35.4%. Speaking only to our remaining operations in Australia and New Zealand, we saw a low single-digit increase in both volume and ASP, leading to a mid-single-digit comparable net sales increase in local currency. EBITDA grew modestly, and EBITDA margin was flat as the benefit from top-line growth and cost savings were offset by increased investment in sales and marketing initiatives. We remain confident in our ability to execute on our strategies and outperform our markets.

Speaker #4: Asia Pacific EBITDA declined 7% to $43 million, and EBITDA margin increased 140 basis points to 35.4%. Speaking only to our remaining operations in Australia and New Zealand, we saw a low single-digit increase in both volume and ASP, leading to a mid-single-digit comparable net sales increase in local currency.

Speaker #4: EBITDA grew modestly, and EBITDA margin was flat, as the benefit from top-line growth and cost savings was offset by increased investment in sales and marketing initiatives.

Speaker #4: We remain confident in our ability to execute on our strategies and outperform our markets. In Europe, net sales increased 7%, or 2% in euros, driven by higher average net sales prices, partially offset by lower volumes, with Germany declining low single digits and the UK growing mid-single digits.

Rachel Wilson: In Europe, net sales increased 7%, or 2% in euros, driven by higher average net sales price, partially offset by lower volumes, with Germany declining low single digits and the UK growing mid-single digits. EBITDA margin increased 50 basis points to 16%, attributable to a higher average net sales price, as well as lower freight and raw material costs. SG&A expense was higher related to increased investment in sales teams supporting growth strategies for high-value products. We continue to expect top-line growth in Europe this year, outperforming against a challenging market backdrop in the region, in part due to our confidence in strong high-value product sales growth despite relatively flat performance in Q1. Our top-line expectations, coupled with manufacturing facility rationalization and freight optimization efforts, also position Europe for improved margin performance in FY26. Now, please turn to slide 13, where I will discuss guidance.

Speaker #4: EBITDA margin increased by 50 basis points to 16%, attributable to a higher average net sales price, as well as lower freight and raw material costs.

Speaker #4: SG&A expense was higher related to increased investment in sales teams, supporting growth strategies for high-value products. We continue to expect top-line growth in Europe this year, outperforming against a challenging market backdrop in the region.

Speaker #4: In part due to our confidence in strong high-value product sales growth, despite relatively flat performance in Q1. Our top-line expectations, coupled with manufacturing facility rationalization and freight optimization efforts, also position Europe for improved margin performance in FY26.

Speaker #4: Now, please turn to slide 13, where I will discuss guidance. Today, we are issuing guidance to incorporate the inorganic contribution from AZAC, which will be split across two new reporting segments, representing our total North American exposure.

Rachel Wilson: Today, we are issuing guidance to incorporate the inorganic contribution from AZAC, which will be split across two new reporting segments representing our total North American exposure: siding and trim, and deck, rail, and accessories. Starting with siding and trim, which will be comprised of our legacy James Hardie North America fiber cement business and AZAC's exteriors business. For our siding and trim segment, we expect FY26 net sales of $2.675 to $2.85 billion. We now believe market demand will decline high single digits in FY26, as demand continues to be negatively influenced by homeowner affordability pressure and uncertain macro conditions. Encouragingly, we continue to expect our disciplined value-driven pricing approach to yield solid price realization throughout FY26. Moving on to our deck, rail, and accessories segment, which consists of AZAC's legacy deck, rail, and accessories business.

Speaker #4: Siting and trim, and deck rail and accessories. Starting with siding and trim, which will be comprised of our legacy James Hardie North America fiber cement business and AZAC's exteriors business.

Speaker #4: For our siding and trim segment, we expect FY26 net sales of $2.675 billion to $2.85 billion. We now believe market demand will decline in the high single digits in FY26, as demand continues to be negatively influenced by homeowner affordability pressure and uncertain macro conditions.

Speaker #4: Encouragingly, we continue to expect our disciplined, value-driven pricing approach to yield solid price realization throughout FY26. Moving on to our deck rail and accessory segment, which consists of AZAC's legacy deck rail and accessories business.

Speaker #4: We expect net sales of $775 million to $800 million for the next nine months. Our sales forecast assumes DRNA sell-through, up low single digits, as secular tailwinds in the outdoor living category and TimberTech market share gains continue to drive outperformance versus the broader R&R market.

Rachel Wilson: We expect net sales of $775 to $800 million for the next nine months. Our sales forecast assumes DRNA sell-through, up low single digits as secular tailwinds in the outdoor living category and TimberTech market share gains continue to drive outperformance versus the broader R&R market. For the total company, FY26 adjusted EBITDA is expected to be $1.05 to $1.15 billion, which includes an approximately $250 million to $265 million contribution from the AZAC acquisition. As it relates to our adjusted EBITDA guidance, please note the following. Corporate costs previously accounted for in the AZAC residential segment will now be recognized in general corporate costs. Our general corporate costs will no longer include unallocated R&D, which as of Q2 will be allocated to the business segments. The reclassification will be neutral to our total adjusted EBITDA.

Speaker #4: For the total company, FY26 adjusted EBITDA is expected to be between $1.05 billion and $1.15 billion, which includes an approximately $250 million to $265 million contribution from the AZAC acquisition.

Speaker #4: As it relates to our adjusted EBITDA guidance, please note the following: corporate costs previously accounted for in the AZAC residential segment will now be recognized in general corporate costs.

Speaker #4: Our general corporate costs will no longer include unallocated R&D, which, as of Q2, will be allocated to the business segments. The reclassification will be neutral to our total adjusted EBITDA.

Speaker #4: Prior to cost synergy realization, general corporate costs are expected to be approximately $225 million on an annual run-rate basis. Lastly, we now expect free cash flow of at least $200 million in FY26.

Rachel Wilson: Prior to cost synergy realization, general corporate costs are expected to be approximately $225 million on an annual run rate basis. Lastly, we now expect free cash flow of at least $200 million in FY26. We remain highly confident in the long-term cash generation profile of our business and are positioned for an acceleration in future years as transaction and integration costs decline, and we reduce our interest expense through debt reduction. Additionally, investment and capacity expansion projects will decline for the next few years as our recent major projects have reached completion, and we continue to improve productivity from our existing capacity footprint through HMOS and advanced manufacturing initiatives. In FY26, we expect total capital expenditures of approximately $400 million, including $75 million of spending for AZAC over the next three quarters.

Speaker #4: We remain highly confident in the long-term cash generation profile of our business and are positioned for an acceleration in future years as transaction and integration costs decline, and we reduce our interest expense for debt reduction.

Speaker #4: Additionally, investment in capacity expansion projects will decline for the next few years as our recent major projects have reached completion, and we continue to improve productivity from our existing capacity footprint through HMOS and advanced manufacturing initiatives.

Speaker #4: In FY26, we expect total capital expenditures of approximately $400 million, including $75 million of spending for AZAC over the next three quarters. Looking further ahead, we expect to maintain a disciplined approach to capital expenditures, with our North American business, inclusive of AZAC, investing 6% to 7% of sales in CapEx over the long term.

Rachel Wilson: Looking further ahead, we expect to maintain a disciplined approach to capital expenditures with our North American business, inclusive of AZAC, investing 6% to 7% of sales in CapEx over the long term. In addition to the guidance provided on slide 13, in the appendix of today's presentation, we have provided further modeling considerations for the combined company, as well as a comprehensive breakdown of our current debt capital structure. Slide 18 provides additional detail to bridge from our adjusted EBITDA guidance to adjusted diluted earnings per share for FY26, including our anticipated depreciation expense, net interest expense, adjusted effective tax rate, and average diluted share count. Taking these modeling considerations into account, our FY26 adjusted EBITDA guidance of $1.05 billion to $1.15 billion corresponds to FY26 adjusted diluted earnings per share of $0.75 to $0.85.

Speaker #4: In addition to the guidance provided on slide 13 in the appendix of today's presentation, we have provided further modeling considerations for the combined company, as well as a comprehensive breakdown of our current debt capital structure.

Speaker #4: Slide 18 provides additional detail to bridge from our adjusted EBITDA guidance to adjusted diluted earnings per share for FY26, including our anticipated depreciation expense, interest expense, adjusted effective tax rate, and average diluted share count.

Speaker #4: Taking these modeling considerations into account, our FY26 adjusted EBITDA guidance of $1.05 billion to $1.15 billion corresponds to FY26 adjusted diluted earnings per share of $0.75 to $0.85.

Speaker #4: Embedded within this forecast is Q2 adjusted EBITDA of approximately $275 million and adjusted diluted EPS of approximately $0.15. Turning to slide 14 in our capital allocation priorities, as our free cash flow accelerates in the coming years, we plan to diligently allocate capital to create value for all shareholders.

Rachel Wilson: Embedded within this forecast is Q2 adjusted EBITDA of approximately $275 million and adjusted diluted EPS of approximately $0.15. Turning to slide 14 in our capital allocation priorities, as our free cash flow accelerates in the coming years, we plan to diligently allocate capital to create value for all shareholders. This includes investing to drive organic growth, reducing our balance sheet leverage in line with our deleveraging commitments, and returning capital to shareholders. Lastly, while we will prioritize the flexibility of our balance sheet, we see significant merit to AZAC's existing inorganic strategies around expanding capabilities in railing and recycling through small tuck-in acquisitions. Finally, we were very pleased to successfully complete our debt financing in June, including a $1.7 billion offering of senior secured notes. The offering was multiple times oversubscribed, and the notes were rated investment-grade by multiple rating agencies.

Speaker #4: This includes investing to drive organic growth, reducing our balance sheet leverage in line with our deleveraging commitments, and returning capital to shareholders. Lastly, while we will prioritize the flexibility of our balance sheet, we see significant merit in AZAC's existing inorganic strategies around expanding capabilities in railing and recycling through small tuck-in acquisitions.

Speaker #4: Finally, we were very pleased to successfully complete our debt financing in June, including a $1.7 billion offering of senior secured notes. The offering was multiple times oversubscribed, and the notes were rated investment grade by multiple rating agencies.

Speaker #4: Shown in the appendix on slide 19, gross debt stands at approximately $5.1 billion, with an annualized effective interest rate of approximately 5.7%, implying annualized interest expense of around $290 million.

Rachel Wilson: Shown in the appendix on slide 19, gross debt stands at approximately $5.1 billion, with an annualized effective interest rate of approximately 5.7%, implying annualized interest expense of around $290 million. We are committed to rapidly reducing our net leverage and are reaffirming our commitment to reduce net leverage to at or below two times by two full years post-close. Maintaining a strong and flexible balance sheet is a core component of our long-term capital allocation priorities, and we remain highly confident that the profitability and cash generation profile of the combined company will drive rapid deleveraging in line with our stated commitments.

Speaker #4: We are committed to rapidly reducing our net leverage and are reaffirming our commitment to reduced net leverage to at or below two times by two full years post-close.

Speaker #4: Maintaining a strong and flexible balance sheet is a core component of our long-term capital allocation priorities, and we remain highly confident that the profitability and cash generation profile of the combined company will drive rapid deleveraging in line with our stated commitments.

Speaker #2: Thanks, Rachel. With the closing of the AZAC acquisition now behind us, we are working diligently to integrate and deliver on cost and commercial synergies on an accelerated timeline.

Joe Ahlersmeyer: Thanks, Rachel. With the closing of the AZAC acquisition now behind us, we are working diligently to integrate and deliver on cost and commercial synergies on an accelerated timeline, positioning ourselves to capture the expansive material conversion opportunity ahead to deliver on our long-term value creation commitments to shareholders. I am so proud of the focus and dedication shown by our one Hardie team over the last 50 days, and I am confident that together we are elevating James Hardie to be a clear leader in the building products industry. With that, Operator, please open the line for questions.

Speaker #2: Positioning ourselves to capture the expansive material conversion opportunity ahead to deliver on our long-term value creation commitments to shareholders. I am so proud of the focus and dedication shown by our one-hearted team over the last 50 days.

Speaker #2: And I am confident that together we are elevating James Hardie to be a clear leader in the building products industry. With that, Operator, please open the line for questions.

Speaker #1: Thank you. If you wish to ask a question, please press *1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press *2.

Operator: Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you are on a speakerphone, please pick up the handset to ask your question. Your first question comes from Phil Ng with Jefferies. Please go ahead.

Speaker #1: If you are on a speakerphone, please pick up the handset to ask your question. Your first question comes from Phil Ng with Jefferies. Please go ahead.

Speaker #5: Hey guys. You know, when I look at your legacy North American fiber cement, in a quarter, volumes were down about 15%. You know, kind of get to your Q2 and full year guide, you know, appreciating your guiding, the segments a little differently.

Phil Ng: Hey, guys. You know, when I look at your legacy North American fiber cement in the quarter, volumes were down about 15%. You know, kind of to get to your 2Q and full-year guide, you know, appreciating you're guiding the segments a little differently, it implies like a 20% decline from 2Q and probably a mid-season decline. So, appreciating a lot going on here with the single-family exposure in the South as well as the Dee stock, can you kind of help us parse out like the single-family outlook versus the inventory element to it? Because it's far more pronounced than I think most of us would have expected. So, just kind of help us think through how long it's going to take to parse out the inventory, appreciating there's two pieces, right? There's a channel as well as, I guess, at the builder level too.

Speaker #5: It implies a 20% decline in QQ, probably a mid-single-digit decline. So, appreciating a lot going on here with the single-family exposure in the south, as well as D stock.

Speaker #5: Can you help us parse out the single-family outlook versus the inventory element? Because it's far more pronounced than I think most of us would have expected.

Speaker #5: So, just kind of help us think through how long it's going to take to parse out the inventory, appreciating that there's two pieces, right? There's a channel, as well as, I guess, at the builder level too.

Speaker #6: Yeah. Hey, Phil. Thanks for the question. Let me start out by saying, look, we continue to make progress on our key strategic focus areas that involve the homeowner, customer, and contractor.

Aaron Erter: Yeah. Hey, Phil, thanks for the question. Let me start out by saying, look, we continue to make progress on our key strategic focus areas that involve the homeowner, customer, and contractor, and we're going to be much stronger with the integration of AZAC. You know, with the homeowner, we continue to be the number one siding brand in the United States. With the contractor, we're the brand of choice for contractors in siding, and with AZAC, that's going to be the case with decking, that's going to be the case with trim, that's going to be the case with pergolase. And we continue to add more contractors to our loyalty program each and every day. And then with our dealer partners, we're relied upon to be business consultants, and hence we are available in 25,000 points of distribution out there.

Speaker #6: And we're going to be much stronger with the integration of AZAC. You know, with the homeowner, we continue to be the number one siding brand in the United States.

Speaker #6: With the contractor, we're the brand of choice for contractors and siding. And with AZEK, that's going to be the case with decking, that's going to be the case with trim, and that's going to be the case with pergolas.

Speaker #6: And we continue to add more contractors to our loyalty program each and every day. With our dealer partners, we rely on them to be business consultants; hence, we are available in 25,000 points of distribution out there.

Speaker #6: Let me just, you know, as we answer this, I think it's important to ground and talk a little bit about Q1 and the results, and then we'll go into our guidance here.

Aaron Erter: Let me just, you know, as we answer this, I think it's important to ground and talk a little bit about Q1 and the results and then go into our guidance here. Look, our Q1 results were as expected, and they were embedded in our FY26 guide. during the calendar year 25 March quarter, our customers ordered to really more optimistic expectations than we are here today, and hence some of the Q1 results that we're seeing. Relatively speaking, as we got into our first quarter, channel inventories were not out of line for the build season. As we progressed through the quarter, we saw our customers focus on inventory more as the outlook began to soften. The Q1 market environment was considered within our full-year guidance.

Speaker #6: Look, our Q1 results were as expected, and they were embedded in our FY26 guide. During the calendar year 25 March quarter, our customers ordered to really more optimistic expectations than we are here today.

Speaker #6: And hence, some of the Q1 results that we're seeing. Relatively speaking, as we got into our first quarter, channel inventories were not out of line.

Speaker #6: For the build season, as we progressed through the quarter, we saw our customers focus on inventory more as the outlook began to soften. The Q1 market environment was considered within our full-year guidance.

Speaker #6: North America R&R, multifamily performed as we expected. We believe we performed in line with the market, really down mid-single digits, inventory drawdown aside.

Aaron Erter: North America R&R multifamily performed per our expectation, and we believe we performed in line with the market, really down mid-single digits, inventory drawdown aside. Single-family new construction starts became our demand with an approximately, you know, one-quarter lag. In other words, the single-family new construction starts from January through March, impact our April through June, and thus that was part of our main guidance. We knew that. single-family new construction starts January through March, we're down five and really consistent with our underlying volume there. So, with this weaker environment, we saw customers ordered less to manage inventory, and we did expect to see this in Q1, hence what you're seeing there. Look, I think, you know, as we look forward, we talk about inventory, it's a forward-looking concept.

Speaker #6: Single-family new construction starts became our demand within approximately a one-quarter lag. In other words, the single-family new construction starts from January through March impact our April through June.

Speaker #6: And thus, that was part of our main guidance. We knew that single-family new construction starts from January through March were down five, and really consistent with our underlying quality there.

Speaker #6: So, with this weaker environment, we saw customers ordering less to manage inventory. We did expect to see this in Q1; hence, what you're seeing there.

Speaker #6: Look, I think, you know, as we look forward, we talked about inventory; it's a forward-looking concept. Customer expectations for growth and calendar year 2025 underpinned our May FY full-year guidance and our Q2 through Q4 expectations.

Aaron Erter: Customer expectations for growth in calendar year 25 underpinned our May FY25, or May full-year guidance, and our Q2 through Q4 expectations. And look, that's why we update it. And I think if you go back and you listen to our Q4 call, we talked a little bit about this, right? We talked about inventory being relatively normalized, but we said we did see blips on the radar out there. We talked about uncertainty as a growing theme in Q1. We talked about challenges in single-family new construction. And look, then we talked about for the full year, you know, our guide included volumes ramping up through the year. so I think it's really important to put that into context as we talk about, you know, Q1 and then our guide as we.

Speaker #6: And look, that's why we update it. I think if you go back and listen to our Q4 call, we talked a little bit about this, right?

Speaker #6: We talked about inventory being relatively normalized, but we did see blips on the radar out there. We discussed uncertainty as a growing theme in Q1.

Speaker #6: We talked about challenges and single-family new construction. And look, then we talked about for the full year, you know, our guidance included volumes ramping up through the year.

Speaker #6: So I think it's really important to put that in context as we talk about, you know, Q1 and then our guidance as we move forward.

Speaker #1: Okay. as you look forward,

Phil Ng: Okay. as you look forward, Aaron, just given the tougher demand backdrop, and it's great that you guys are excelling in cost out actions for the deal. Are there any other things you guys could do in terms of, you know, managing costs a little more effectively? just because demand's obviously pretty challenging right now. Is there headcount stuff you guys can do, add a capacity? Because it's a pretty steep margin correction there, and how what's the game plan to kind of improve that margin profile as we kind of look out forward?

Speaker #3: Aaron, just given the tougher demand backdrop, and it's great that you guys are accelerating cost-out actions for the deal. Are there any other things you guys could do in terms of, you know, managing costs a little more effectively, just because demand's obviously pretty challenged right now?

Speaker #3: Is there headcount stuff you guys can do, idle capacity? Because it's a pretty steep margin correction there. And what's the game plan to kind of improve that margin profile as we look out forward?

Speaker #6: Yeah. Thought, Phil. Good question. Look, I go back to what we talked about has been a discipline for us at James Hardie for years.

Aaron Erter: Yeah, Phil, good question. Look, I go back to what we talked about has been a discipline for us at James Hardie for years, and we're bringing that discipline with the new James Hardie with AZAC being a part of it, and that's really our Hardie operating system. So that extends into our HMOS, which is how we manage our manufacturing plants. You know, obviously, as the volumes come down, it gets more and more challenging, but we have the right focus. you know, when the when volumes are high, you focus on throughput. You know, now we're focused more on yield. obviously, we're managing shifts, as best we can. We're pedaling and clutching on certain expenditures out there. we've frozen headcount. And look, we're in the process of process of integrating two companies here. so we think, you know, there can potentially be opportunities there.

Speaker #6: And we're bringing that discipline with the new James Hardie, with AZAC being a part of it. And that's really our Hardie Operating System. So, that extends into our HMOS, which is how we manage our manufacturing plants.

Speaker #6: You know, obviously, as the volumes come down, it gets more and more challenging. But we have the right focus. You know, when volumes are high, you focus on throughput.

Speaker #6: You know, now we're focused more on yield. Obviously, we're managing shifts as best we can. We're pedaling and clutching on certain expenditures out there.

Speaker #6: We've frozen headcount. And look, we're in the process of integrating two companies here. So we think, you know, there can potentially be opportunities there.

Speaker #6: So, our team is disciplined. We are focused on this, you know, and we continue to accelerate our efforts.

Aaron Erter: So our team is disciplined. We are focused on this. you know, we continue to accelerate our efforts.

Speaker #3: Okay. Appreciate the color there. Thank you.

Phil Ng: Okay. Appreciate the call, Aaron. Thank you.

Speaker #6: Thanks, Phil.

Aaron Erter: Thanks, Phil.

Speaker #1: And your next question comes from Keith Chow with MST. Please go ahead.

Operator: And your next question comes from Keith Chow with MST. Please go ahead.

Speaker #7: And I'm just back on the inventory point, please. So, you know, you mentioned we spoke about it at the last quarter, which we certainly did.

Keith Chow: And I'm just back on the inventory point, please. So, you know, you mentioned we spoke about it at the last quarter, which we certainly did, and that was seven and a half weeks into the quarter. So, you know, the destocking into the second half of the quarter must have been quite severe. But I just want to maybe if you can simplify it for us, volumes were down 15% in the period. How much of that was actually attributed to inventory destocking? And then as we look into the second quarter, how much of that impact will persist into the second quarter? And your views on your competitive standing as well in the market, please. Thank you.

Speaker #7: And that was seven and a half weeks into the quarter. So, you know, the destocking into the second half of the quarter must have been quite severe.

Speaker #7: I just want to know if you can simplify it for us. Volumes were down 15% for the period. How much of that was actually attributed to inventory de-stocking?

Speaker #7: And then, as we look into the second quarter, how much of that impact will persist into the second quarter? And your views on your competitive standing as well in the market, please.

Speaker #7: Thank you.

Speaker #6: Yeah. Hey, Keith. Thanks for the question here. Let me give you a little bit of a timeline of, you know, when we think about inventory here.

Aaron Erter: Yeah. Hey, Keith, thanks for the question here. Let me give you a little bit of a timeline of, you know, when we think about inventory here. You know, we talked just talked about it, but I'll reiterate it again. So Q4 FY25 in March, you know, we we saw our customers prepared for growth, right? You think about the time, you know, the election that happened in November, you know, people were ready for growth. look, and we talked about inventory not too high, but, you know, full, well-positioned for growth in the building season out there. You know, as we got into April, you know, we we cited this on the call, you know, a little bit of noise, a little bit of uncertainty. you know, you get into May, we have our call, you know, June, environment softening.

Speaker #6: You know, we talked about it, but I'll reiterate it again. So, Q4 FY25, in March, we saw our customers prepared for growth, right?

Speaker #6: You think about the time, you know, the election had happened in November. You know, people were ready for growth. Look, and we talked about inventory not too high.

Speaker #6: But, you know, we are full and well-positioned for growth in the building season out there. As we got into April, you know, and we cited this on the call, there was a little bit of noise and a little bit of uncertainty.

Speaker #6: You know, as we get into May, we have our call. You know, in June, the environment is softening. You know, as we got into April, people were managing their inventory, right?

Aaron Erter: You know, as we got into April, you know, people were managing their inventory, right? So we already started to see a little bit of that destock as you talk about April through May. And then look, as we got into July, you know, June, it was softening, and then as we got into July, we really saw customers getting into defensive inventory posture. and look, this is a big part of the impetus for our lower outlook, you know, with inventory, with the dramatic change in single-family new construction. And then with that said, you know, some of the benefits that we counted in for FY26, whether that be new products, but whether that be the benefits from, you know, some of our exclusivities with home builders, those are all pushed out here.

Speaker #6: So we already started to see a little bit of that D stock, as you talk about April through May. And then, look, as we got into July, you know, June it was softening, and then as we got into July, we really saw customers getting into a defensive inventory posture.

Speaker #6: And look, this is a big part of the impetus for our lower outlook. You know, with inventory, with the dramatic change in single-family new construction. And then, with that said, you know, some of the benefits that we counted in for FY26, whether that be new products or the benefits from, you know, some of our exclusivities with home builders, those are all pushed out.

Speaker #6: Here. The other thing I think it's really important to remember, as we look forward, is our year, right? It ends March 31st. So, as you look at the uncertainty and the visibility going from January of what is calendar year 2026 to March, that's further out than, you know, a lot of people who are reporting here.

Aaron Erter: The other thing I think it's really important to remember, as we look forward is our year, right, ends March 31st. So as you look at the uncertainty and the visibility as you go from January of what is calendar year 26 to March, that's further out than, you know, a lot of people who are reporting here. I think the other part of your question is, you know, with our our competitors out there. And look, I would just say this. We have really good competitors, you know, don't have a bad thing to say about any of them. They compete well. We're all trying to go out there and, you know, utilize our value proposition. Look, I think what we have to remember is James Hardie has the leading position in most significant parts of the North American side market.

Speaker #6: I think the other part of your question is, you know, with our competitors out there. And look, I would just say this: we have really good competitors. I don't have a bad thing to say about any of them.

Speaker #6: They compete well. We're all trying to go out there and, you know, utilize our value proposition. Look, I think what we have to remember is James Hardie has the leading position in most significant parts of the North American side market.

Speaker #6: This includes exclusive partnerships, the top home builders, trusted relationships with pros in the industry, unmatched service, right? Everything we talked about as far as just, you know, our value proposition.

Aaron Erter: This includes exclusive partnerships with top home builders, trusted relationships with pros in the industry, unmatched service, right? Everything we talked about as far as just, you know, our value proposition. Our position across the value chain is reflected in, as what we always say, homeowner focused, customer and contractor driven. we are, you know, in different parts of the country, right? You know, and what I'm getting to here is certain areas that we are really strong with, large home builders. We think about, you know, where a lot of the new construction is going on in the South region of the United States. we're seeing weakness there, right? So that is part of, you know, as we look for the guide for the rest of the year. So I think probably you're referring to, or someone will ask about PDG.

Speaker #6: Our position across the value chain is reflected in what we always say: homeowner focus, customer and contractor driven. We are, you know, in different parts of the country, right?

Speaker #6: You know, and what I'm getting to here is certain areas that we are really strong with—large home builders. We think about, you know, where a lot of the new construction's going on in the South region of the United States.

Speaker #6: We're seeing weakness there, right? So that is part of, you know, as we look for the guide for the rest of the year. I think probably you're referring to, or someone will ask about PDG.

Speaker #6: PDG is something that's really hard to quantify and look at in this type of dynamic market because not everything is moving in unison. It's all a little disparate, and it's a dynamic market out there.

Aaron Erter: PDG is something that's really hard to quantify and look at in this type of dynamic market, because not everything is moving in unison. it's all a little disparate, and it's a dynamic market out there. But look, in the areas we participate, we believe that we're holding our own. We believe that we continue to make strides with our main initiatives. And look, we go back to what is our long-term growth profile, and that is our organic fiber cement business. There's a tremendous amount of runway for us out there. If we think of the material conversion opportunities, you know, 80% of the homes out there are not clad in James Hardie. We have a tremendous opportunity. And then you add the opportunity that we have with AZAC with the exteriors and outdoor living.

Speaker #6: But look, in the areas we participate, we believe that we're holding our own. We believe that we continue to make strides with our main initiatives.

Speaker #6: And look, we go back to what is our long-term growth profile. And that is our organic fiber cement business. There's a tremendous amount of runway for us out there.

Speaker #6: If we think of the material conversion opportunities, you know, 80% of the homes out there are not clad in James Hardie. We have a tremendous opportunity.

Speaker #6: And then you add the opportunity that we have with AZAC, with the exteriors and outdoor living. You put these two together, and what we're seeing early on from some of the synergy results is that we're going to continue to be able to accelerate this.

Aaron Erter: You put these two together, we think, and what we're seeing early on from some of the synergy results is we're going to continue to be able to accelerate this. That's what we're excited about from a long-term perspective.

Speaker #6: That's what we're excited about from a long-term perspective.

Speaker #7: Sorry, Aaron. Just coming back, just seeing if you can put a framework or a number around the inventory destocking for the period and the impact going forward, please, in the second quarter.

Keith Chow: Sorry, Aaron, just coming back. I'm just seeing if you can put a framework or a number around the inventory destocking for the period and the impact going forward, please, in the second quarter. Any hangover into the second quarter?

Speaker #7: Any hangover into the second quarter?

Speaker #6: Yeah. Look, Q1 inventory aside, we believe we performed in line with the market, right? Which would be down mid-single digits. That's what I would say.

Aaron Erter: Yeah, look, Q1 inventory aside, we believe we performed in line with market, right, which would be down mid-single digits. That's what I would say. And then Q2 and Q3, you know, we think we continue to see, you know, some type of destock out there with our customer partners. And going back to our value proposition, you know, as our customer partners are more cautious and making sure they're really vigilant with their inventory, we do have the supply chain with our localized manufacturing that are able to partner with them and be able to supply what they need when they need it.

Speaker #6: And then Q2 and Q3, you know, we think we continue to see, you know, some type of D stock out there. With our customer partners and going back to our value proposition, you know, as our customer partners are more cautious, and making sure they're really vigilant with their inventory, we do have the supply chain with our localized manufacturing.

Speaker #6: that are able to partner with them and be able to supply what they need when they need it.

Speaker #7: That's great. Thank you, Aaron.

Keith Chow: That's great. Thank you, Aaron.

Speaker #6: Thanks, Keith.

Speaker #1: And your next question comes from Ryan Merkel with William Blair. Please go ahead.

Operator: And your next question comes from Ryan Merkel with William Blair. Please go ahead.

Speaker #8: Hey, everyone, and thanks for the question. I guess, Aaron, first off, the big issue here seems to be the single-family new construction in the South.

Phil Ng: Hey, everyone, and thanks for the question. I guess, Aaron, first off, the big issue here seems to be the single-family new construction in the South. And if we zero in on that, how did the quarter evolve for that part of your business from sort of April to today? And is it still slowing, or is it sort of stabilizing at this point?

Speaker #8: And if we zero in on that, how did the quarter evolve for that part of your business from sort of April to today? And is it still slowing, or is it sort of stabilizing at this point?

Speaker #6: Yeah. Hey, Ryan. I'll just start by saying, you know, as I mentioned before, just to remind you. Then I'll turn it over to Rachel if she can add some context here.

Aaron Erter: Yeah. Hey, Ryan, I'll just start by saying, you know, as I mentioned before, and just to remind you, and then I'll turn it over to Rachel if she can add some context here, is we've talked in length, right, over the last two years of our partnership with the large home builders. And we really value that partnership. We wouldn't trade that for anything. but also, if you think about a lot of or the majority of, you know, some of the starts out there, they've really been happening in the South. so that has impacted us. As much as, you know, we talk about the outside analysts, you know, when we start this out for the year, we said, okay, single-family new construction is going to be flat to maybe down one. I mean, that's changed almost by 10 points.

Speaker #6: We've talked in length over the last two years of our partnership with the large home builders, and we really value that partnership.

Speaker #6: We wouldn't trade that for anything. But also, if you think about a lot of, or the majority of, you know, some of the starts out there, they've really been happening in the South.

Speaker #6: So that has impacted us as much as, you know, we talk about the outside analysts. You know, when we start this out for the year, we said, "Okay, single-family new construction is going to be flat to maybe down one." I mean, that's changed almost by 10 points.

Speaker #6: And it's magnified, and it's accelerated in areas like the South. But Rich, you want to maybe hit this?

Aaron Erter: And it's magnified, and it's accelerated in areas like the South. But Rach, you want to maybe hit this?

Speaker #4: Yeah. So, you know, the first comment is, as Aaron pointed out, single-family new construction, whether you want to look at the NHV or Birds or, you know, on a national level, they are moving their estimates from May until August or July, or most recently, by over 10 points.

Rachel Wilson: Yeah. So, yeah, the first comment is, as Aaron pointed out, single-family new construction, whether you want to look at the NAHB or Burns or, you know, on a national level, they are moving their estimates from May until August or July or most recent by over 10 points. That is a very large swing, in that timespan as you think about from May until now. As you think about South, Plymouth is an example of the leading indicator. If you look at April, it was 541, May 529, and June 517. So again, we're prudently planning that, you know, this isn't done.

Speaker #4: That is a very large swing. In that time span, as you think about it from May until now, as you think about South permits as an example, as a leading indicator, if you look at April, it was 5.41; May, 5.29; and June, 5.17.

Speaker #4: So again, we're prudently planning that, you know, this isn't done. so as we thought about our guidance, and we really thought about the three factors, Aaron's talked about, of what could weigh, we thought about the third was the difference between a big single digit to a high single digit market decline in single-family new construction.

Rachel Wilson: so as we thought about our guidance and we really thought about the three factors Aaron's talked about, of what could weigh, we thought about the third was the difference between a mid-single digit to a high single digit market decline in single-family new construction, another third due to the inventory calibration, and a final third really with that push out on some of the new product launches and wins that we initially flagged for the back half of the year.

Speaker #4: Another third is due to the inventory calibration, and a final third really comes from that push out on some of the new product launches and wins that we've initially flagged for the back half of the year.

Speaker #8: Got it.

Speaker #6: Yeah.

Phil Ng: Got it. Yeah, that's really helpful, Colin.

Speaker #7: Thank you.

Speaker #8: Really helpful color.

Speaker #6: Okay. And, Ryan, just the other thing I think I mentioned before, you know, as we look at our new guide, I mean, what we assumed in there, right, is taking, you know, stock of the market, which we just walked through.

Aaron Erter: Okay. And Ryan, just the other thing I think I mentioned it before, you know, as we look at our new guide, I mean, what we assumed in there, right, is taking, you know, stock of the market, which we just walked through, taking stock of, you know, the cautiousness in the inventory takedown, and then some of our initiatives out there. but look, you know, on the positive, you know, with this exposure, you think of longer term, I think we have an enviable position, right, of leadership when we think about our partnership with these large home builders. They're going to win, right? And we're partnered with them. And then, as I said before, as you know, our customer partners are more cautious around things like inventory, we do have the value proposition to partner with them.

Speaker #6: Taking stock of, you know, the cautiousness in the inventory takedown. And then some of our initiatives out there. But look, you know, on the positive side, with this exposure, you think of the longer term, I think we have an enviable position of leadership when we think about our partnership with these large home builders.

Speaker #6: they're going to win, right? And we're partnered with them. And then, as I said before, as, you know, our customer partners are more cautious, around things like inventory, we do have the value proposition to partner with them.

Speaker #6: And that's the localized manufacturing we talk about, and be able to deliver high service levels, really short lead times, which is going to be critical as we move forward.

Aaron Erter: And that's the localized manufacturing we talk about and be able to deliver high service levels, really short lead times, which is is going to be critical as we move forward.

Speaker #8: Got it. Thanks for that. And then my follow-up is a question on AZAC and the EBITDA contribution. Most of us were sort of penciling in EBITDA of $3.10 to $3.15, and your guidance is a bit below that.

Phil Ng: Got it. Thanks for that. And then my follow-up is a question on AZAC and the EBITDA contribution. Most of us were sort of penciling in EBITDA 310 to 315, and your guidance is a bit below that. If you can just walk us through some of the assumptions there, and are you assuming a more conservative outlook for the deck, rail, and accessories the next two quarters?

Speaker #8: If you can just walk us through some of the assumptions there, are you assuming a more conservative outlook for the deck rail and accessories for the next two quarters?

Speaker #6: Yeah, I would just start out by saying, you know, the one month that we've had AZAC as part of the company and what they were able to demonstrate continues to show the leadership and the strength of the business.

Aaron Erter: Yeah, I would just start out by saying, you know, the one month that we've had AZAC as part of the company and what they were able to demonstrate continues to show the leadership and the strength of the business. But Rachel, you want to walk through the EBITDA?

Speaker #6: But, Rachel, do you want to walk through the EBITDA?

Speaker #4: Yeah, absolutely. You know, first, our residential sell-through grew at mid-single digits in the June quarter. As we think about our FY26 outlook, the DRNA sell-through and a growth planning assumption is in the low single digits.

Rachel Wilson: Yeah, absolutely. You know, first, our residential sell-through grew at mid-single digits in the June quarter. As we think about our FY26 outlook, the DRNA sell-through and a growth planning assumption is in the low single digits. And we're not seeing that in moderation right now in the sell-through trend, but our outlook does contemplate maintaining a conservative channel inventory positioning and potential negative impacts continuing in the macroeconomic uncertainty. So, you know, we'll see. It's really to your point about that macroeconomic guide.

Speaker #4: And we're not seeing that in moderation right now in the sell-through trend. But our outlook does contemplate maintaining a conservative channel inventory positioning and potential negative impacts continuing in the macroeconomic uncertainty.

Speaker #4: So, you know, we will see. It's really to your point about that macroeconomic guide.

Speaker #8: All right. Thanks. I'll pass it on.

Phil Ng: All right. Thanks. I'll pass it on.

Speaker #6: Thanks, Ryan.

Aaron Erter: Thanks, Ryan.

Speaker #1: And your next question comes from Lee Power with JP Morgan. Please go ahead.

Operator: And your next question comes from Lee Power with JP Morgan. Please go ahead.

Speaker #7: Hi, Aaron. Hi, Rachel. Aaron, maybe you just want to talk a little bit about where you think you sit at the moment with sharing the major builders?

Keith Chow: Hi, Aaron. Hi, Rachel. Aaron, do you maybe just want to talk a little bit about where you think you sit at the moment with sharing the major builders? Like you've obviously had a lot of announcements in terms of the top 20, you already controlled a lot of that. Where do you think you are, and maybe are those share gains being kind of matched with those builders who are outside the top 20?

Speaker #7: Like, you've obviously had a lot of announcements, in terms of the top 20, you already controlled a lot of that. Where do you think you are, and maybe are those share gains being kind of matched with those builders who are outside the top 20?

Speaker #6: Yeah, Lee, that's a good question. Like I started out saying before, we are in an enviable position. The team has worked extremely hard. I think many of you know Sean Gadd, who runs the business for us.

Aaron Erter: Yeah, Lee, good question. Like I started out in saying before, is we're in an enviable position. The team has worked extremely hard. I think many of you know Sean Gadd, who, you know, runs the business for us. He and his team have worked over the last couple of years to build those relationships. And look, we talk about the top 25 builders, but it really extends out to the top 200 builders out there. And, you know, we would say as we look at some of the agreements that we've signed that we continue to take share in our partnership with them. So, like I said, you know, single-family new construction, as we look at the outlook, we look at some of the partnership we have. you know, this this is part of the reason why, we are resetting some of the expectations, out there.

Speaker #6: He and his team have worked over the last couple of years to build those relationships. And look, we talk about the top 25 builders, but it really extends out to the top 200.

Speaker #6: Builders out there. And, you know, we would say as we look at some of the agreements that we've signed, we continue to take share in our partnership with them.

Speaker #6: So, like I said, you know, single-family new construction, as we look at the outlook, we look at some of the partnerships we have. This is part of the reason why we are resetting some of the expectations.

Speaker #6: Out there. But look, this is a blip on the radar. Again, from a long-term perspective, when you think about the industry and who's going to win, I mean, these are customer partners that we want to be linked with.

Aaron Erter: But look, this is a blip on the radar. Again, from a long-term perspective, when you think about the industry and who's going to win, I mean, these are customer partners that we want to be linked with. And, you know, we're fortunate to be able to do that and bring them the value proposition we have.

Speaker #6: And, you know, we're fortunate to be able to do that and bring them the value proposition we have.

Speaker #7: Thanks. And then just a follow-up, just on cost. Like, in the past, you've chatted a lot about the clutch. How do you think that plays out in the new term?

Keith Chow: Thanks. And then just to follow up, just on cost, like in the past, you've chatted a lot about the clutch. Like, how do you think that that that that plays out in the near term? And then maybe a comment from Rachel, just how important that will be around, hitting your your your leverage target that you've put out there post the acquisition.

Speaker #7: And then maybe a comment from Rachel on how important that will be in hitting your leverage target that you've put out there post-acquisition?

Speaker #6: Yeah, Lee, good question. Look, I think we answered this a little bit when we talked about costs and some of the areas in which, you know, we can target.

Aaron Erter: Yeah, Lee, good question. Look, I think we answered this a little bit when we talked about costs and some of the areas in which, you know, we can target. I think one of the things we we have to remember, and look, we we take this very seriously as as we look at, you know, where we're at, and we want to make sure we're delivering upon our commitments, is, you know, where we can take cost out, we are going to do so. so that means areas like marketing. That means how do we get more efficient in our plans? How do we accelerate some of our procurement efforts? We are very confident in our ability to be able to do that. This has been a dynamic market, as you can appreciate.

Speaker #6: I think one of the things we have to remember—and look, we take this very seriously as we look at, you know, where we're at—and we want to make sure we're delivering upon our commitments.

Speaker #6: You know, where we can take costs out, we are going to do so. That means areas like marketing. That means how do we get more efficient in our plans?

Speaker #6: How do we accelerate some of our procurement efforts? We are very confident in our ability to be able to do that. This has been a dynamic market.

Speaker #6: As you can appreciate, we also don't want to make any rash decisions that are going to impact, you know, our long-term growth. So we are keeping that in mind and balancing that accordingly.

Aaron Erter: we also don't want to make any rash decisions that are going to impact, you know, our long-term growth. so we are keeping that in mind, and we're balancing that accordingly.

Speaker #6: Rich, go ahead.

Rachel Wilson: Let me just pick up on the comment around the deleveraging. And look, it starts and ends with having a strong margin in the right growth. And as a reminder, James Hardie's been delivering a 10% revenue CAGR for a long period. And over the past five years, we've delivered EBITDA margins in excess of 25% every single year. And that really reflects our strategic position and is unchanged in our outlook. So as we proceed forward, thinking ahead to the two times leverage position, at the two full years post-close, we do think that we are well positioned to obtain that.

Speaker #4: I'll just jump on off the comment around the leveraging. Look, it starts and ends with having a strong margin in the right growth.

Speaker #4: And as a reminder, James Hardie has been delivering a 10% revenue CAGR for a long period. Over the past five years, we've delivered EBITDA margins in excess of 25% every single year.

Speaker #4: And that really reflects our strategic position and is unchanged in our outlook. So as we proceed forward, thinking ahead to the two times leverage position, the two full years post-close, we do think that we are well positioned to obtain that.

Speaker #7: Excellent. Thank you.

Keith Chow: Excellent. Thank you.

Speaker #6: Thanks, Lee.

Aaron Erter: Thanks, Lee.

Speaker #1: And your next question comes from Timothy Wosh with Baird. Please go ahead.

Operator: And your next question comes from Timothy Woesch with Baird. Please go ahead.

Speaker #7: Yeah. Hi, good. Good afternoon, everybody. maybe just a question on just AZAC. is there, you know, to kind of go on Ryan's question, is there, are there any definitional differences between kind of the adjusted EBITDA that you're including in your guidance and what AZAC reported in the DRNA segment that they had publicly disclosed?

Timothy Woesch: Yeah, hi, good afternoon, everybody. Maybe just a question on just AZAC. Is there, you know, to kind of go on Ryan's question, are there any definitional differences between kind of the adjusted EBITDA that you're including in your guidance and what AZAC reported in the DRNA segment that they had publicly disclosed? Because, you know, I know there's some comparison issues. I mean, there's just timeframe issues. But I mean, the guidance or the EBITDA that we're including or that you're including in guidance, I mean, it is it's down year over year relative to last year. And obviously, you know, we've seen pretty decent growth in EBITDA at AZAC. So could you just help us bridge if there's any sort of technical differences between the EBITDA contributions? And you know, that business seems to be performing pretty well. Why would EBITDA be down year over year?

Speaker #7: Because, you know, I know there's some comparison issues. I mean, there's just time frame issues. But, I mean, the guidance or the EBITDA that we're including, or that you're including in guidance, I mean, it is down year over year relative to last year.

Speaker #7: And obviously, you know, we've seen pretty decent growth in EBITDA at AZAC. So could you just help us bridge if there's any sort of technical differences between the EBITDA contributions? That business seems to be performing pretty well.

Speaker #7: Why would EBITDA be down year over year?

Speaker #4: Yeah. I'll take that. You know, there are some technical differences. First, at the James Hardie definition, we do include the cost of stock-based compensation within our EBITDA.

Rachel Wilson: Yeah, I'll take that. You know, there are some technical differences. First, at the James Hardie definition, we do include the cost of stock-based compensation within our EBITDA. We do not exclude it. We also have some divisional differences. So siding and trim is our former North American fiber cement business along with their AZAC exteriors business, whereas DRNA is the rest of the legacy AZAC business. We also have, within corporate, we've given some guidance for that for a run rate of about $225 million on a combined consolidated basis. So we do, though, have those definitional differences.

Speaker #4: We do not exclude it. We also have some divisional differences. So, siding and trim is our former North American fiber cement business, along with their Azek Exteriors business, whereas DRNA is the rest of the legacy Azek business.

Speaker #4: We also have, within corporate, given some guidance for a run rate of about $225 million on a combined consolidated basis. So we do, though, have those definitional differences.

Speaker #6: Yeah. And Tim, we can take you through all those.

Aaron Erter: Yeah, and Tim, we can take you through all those.

Speaker #7: Okay. Yeah. I think it’d be helpful if there is something on stock comp. I guess the allocation of EBITDA is all kind of in the bag.

Timothy Woesch: Okay. Yeah, I think it'd just be helpful if there is something on stock comp. I guess the allocation of EBITDA is all kind of in the bag. If there's a big stock comp number, I think that would be helpful. Otherwise, we can take it offline.

Speaker #7: If there's a big stock comp number, I think that would be helpful. Otherwise, we can take it offline.

Speaker #6: Okay. Great.

Aaron Erter: Okay, great.

Speaker #7: And then I guess just maybe to level set everybody, could you give us what you're expecting for volumes in the North American fiber cement business?

Timothy Woesch: And now, I guess just maybe to level set everybody, could you give us what you're expecting for volumes in the North American fiber cement business, you know, the legacy business in Q2 and in the back half of the year for the full year, please?

Speaker #7: You know, the legacy business in Q2, and in the back half of the year for the full year, please?

Speaker #4: So, our guide does anticipate the legacy North American fiber cement business, in-gallon loads, to be in double digits. This is more volume-related as we are expecting positive ASP not only in North America but, frankly, in all of our regions.

Rachel Wilson: So our guide does anticipate the legacy North American fiber cement business being down loose double digits. And that is up more volume-related as we are expecting positive ASP, not only in North America, but frankly, in all of our regions. So we are on track for that.

Speaker #4: So we are on track for that.

Speaker #7: Okay. Okay. Appreciate it. Thank you.

Timothy Woesch: Okay. Okay. Appreciate it. Thank you.

Speaker #1: And your next question comes from Keith Hughes with Truist. Please go ahead.

Operator: And your next question comes from Keith Hughes with Truist. Please go ahead.

Speaker #7: Thank you. Based on some of your answers to questions, it appears that in the guide, you're expecting inventory reductions of somewhat similar quantities, excuse me, the remainder of the year we saw in the quarter.

Aaron Erter: Thank you. Based on some of your answers to questions, it appears like in the guide, you're expecting inventory reduction of somewhat similar quantities, excuse me, the remainder of the year based on the quarter. I don't think I've ever seen that before. that and what your largest siding bearers reporting smacks of the big share loss. Could you talk about where you think your share position is? I've never seen anything quite like this before. Yeah. So Keith, I think what, you know, as we look at Q2, Q3, we would say that, you know, customers are going to continue to manage their inventory down. And that speaks to the cautiousness that we're seeing out there in the marketplace. You know, we talked a little bit about, you know, the market from an R&R standpoint and then the dynamics from a single-family new construction standpoint as well.

Speaker #7: I don't think I've ever seen that before. That and what your largest siding bearers are reporting smacks of some big share loss. Could you talk about where you think your share position is?

Speaker #7: I've never seen anything quite like this before.

Speaker #6: Yeah, so, Keith, I think what, you know, as we look at Q2 and Q3, we would say that, you know, customers are going to continue to manage their inventory.

Speaker #6: Down. And that speaks to the cautiousness that we're seeing out there in the marketplace. You know, we talked a little bit about, you know, the market from an R&R standpoint, and then the dynamics from a single-family new construction standpoint as well.

Speaker #6: So, yeah, we would see that, you know, in Q2 and Q3, Keith.

Aaron Erter: so yeah, we would see that, you know, in Q2 and Q3, Keith. So therefore, it looks like there's, at a minimum, some share loss going on here, or to your comment in the quarter you performed at the market. Usually, you're above the market. What's going on with the momentum of pace of your share in the siding market? Yeah. So Keith, I think one of the things we have to remember here is the difference from a timing standpoint. You know, when you look at our year, I think the other thing is the segments in which we compete, you know, are not apples to apples with, you know, some of our competitors out there. so I would not say we're losing any share.

Speaker #7: So, therefore, it looks like there's, at a minimum, some share loss going on here, to your comment, in the quarter you performed at the market.

Speaker #7: Usually, you're above the market. What's going on with the momentum and pace of your, you know, share in the siding market?

Speaker #6: Yeah. So, Keith, I think one of the things we have to remember here is the difference from a timing standpoint. You know, when you look at our year, I think the other thing is the segments in which we compete.

Speaker #6: You know, we are not apples to apples with, you know, some of our competitors out there. So I would not say we're losing any share.

Speaker #6: If we talk about our segments, you know, large, you know, home builders out there, I just mentioned it, we keep gaining share with the with those top 200 out there.

Aaron Erter: If we talk about our segments, you know, large, you know, home builders out there, I just mentioned that we keep gaining share with the with those top 200 out there. If we think about some of the geographies in which we participate in, you know, more of the metro areas, we do not see that we're losing any share out there. so it is a difference from a timing. It's a difference in segments, that we compete in. Okay. Let me switch to AZAC. You've owned it for a month. We're lowering the sales, the sell-through. Trex is not lowering theirs. are there, are you having some integration? Obvious, not problems, but you know, there's always a little bit of hiccups when you do integrations, is.Seeing

Speaker #6: If we think about some of the geographies in which we participate, you know, more of the metro areas, we do not see that we're losing any share out there.

Speaker #6: So it is different from a timing; it's different segments that we can compete in.

Speaker #7: Okay. Let me switch to AZAC. You know, you've owned it for a month. We're lowering the sales, the sell-through. Tracks are not lowering bears.

Speaker #7: I are there are you having some integration, obvious not problems, but you know, there's always a little bit of hiccups when you do integrations.

Speaker #7: Are you seeing any of that coming in as you work on these two businesses together?

Joe Ahlersmeyer: any of that coming in as you work on these two businesses together?

Speaker #6: No, no, Keith, look, we're not seeing anything but progress. We don't see a slowdown with that business. I think more than anything, you know, we're being prudent as we look at some of the challenges out there in the marketplace.

Aaron Erter: No, Keith, look, we're we're not seeing anything but but progress. we don't see a a slowdown with that business. I think more than anything, you know, we're we're being prudent as we look at, you know, some of the challenges out there in the marketplace. We don't see a slowdown with that business. We're very, very confident in the AZAC business.

Speaker #6: We don't see a slowdown with that business. We're very, very confident in the AZAC business.

Speaker #7: Okay. Thank you.

Joe Ahlersmeyer: Okay, thank you.

Speaker #6: Thanks, Keith.

Aaron Erter: Thanks, Keith.

Speaker #1: And your next question comes from Peter Stein with Macquarie. Please go ahead.

Rachel Wilson: And your next question comes from Peter Stein with McQuery. Please go ahead.

Operator: Good afternoon, Aaron and Rachel. Thanks for your time. I may just, ask you, Aaron, specifically around the commercial synergies. You've put forward a very, optimistic view, both in volume and or, sorry, value and timeline. and, in the context of, Ryan Kilcullen, going to the COO role, I'm particularly interested in how you're thinking about the integration network-wise between AZAC and, Heidi, and how that plays into the realization of your, commercial synergies, in the dealer channel.

Aaron Erter: Yeah, hey, Peter, really good question. I I think it's being 50 days in, probably too early to talk about, you know, how we would look at the the network. What I can talk to is some of the revenue synergies. And like I mentioned before, we're really encouraged with some of the early wins, what I would call quick wins out there. Look, as as we close this a few days after, I hit the road with with John Skelly, who's run the legacy AZAC business, and Sean Gadd, who's run the the legacy Heidi business. And we've gone out and seen pretty much most of our major customers out there on both sides. so the conversations have been really encouraging. obviously, on a public call, we're not going to talk about it.

Aaron Erter: But we've had some some verbal commitments from some of our large dealer partners, with some early wins, you know, to be able to come over to and and take some of our product. you know, as we talk about with our contractors, you know, what we've been doing, and you know, again, 50 days in, is looking at both of our our contractor partners and our networks and our loyalty networks, and been able to really, distribute leads, across those networks out there. there are leads for James Hardie products coming from AZAC reps in the north, and for AZAC products come from James Hardie reps in the south and west. And look, this is, I think, more so than anything, just a testament to how these two businesses complement each other and how each business's individual strengths match an opportunity with each other.

Aaron Erter: So we're in early days, but we're very, very encouraged from what we're seeing out there. So, everyone, I think we're going to wrap it up here. Appreciate the, the questions and taking the time. Look, we continue to see significant opportunity ahead for James Hardie as we execute against our focused growth strategies and further accelerate growth through our combination with AZAC. I want to thank all of you for joining today's call, and please reach out to the team with any additional questions you may have. All right? Thank you, operator.

Rachel Wilson: That does conclude our conference for today. Thank you for participating. You may now.

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