James Hardie Industries plc (NYSE:JHX) Q3 2026 Earnings Call Transcript

James Hardie Industries plc (NYSE:JHX) Q3 2026 Earnings Call Transcript February 10, 2026

James Hardie Industries plc beats earnings expectations. Reported EPS is $0.24, expectations were $0.23.

Operator: Welcome to the James Hardie Industries plc fiscal third quarter 2026 earnings conference call. After prepared remarks by management, there will be an opportunity to ask questions. Please limit yourself to one question and one follow-up. If you have additional questions, please rejoin the queue. I would now like to hand the call over to Christopher Russell, Senior Vice President of Global Strategy, Corporate Development, and Investor Relations. Please go ahead.

Christopher Russell: Thank you, operator, and thank you to everyone for joining today’s call. I am joined today by Aaron M. Erter, Chief Executive Officer of James Hardie Industries plc. Ryan Lada, Chief Financial Officer of James Hardie Industries plc and Jonathan Skelly, President and General Manager of James Hardie North America Building Products. Before we begin the call, please note that during prepared remarks and Q&A, we 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 earnings 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. With that opening, I am pleased to hand the call to Aaron for some opening remarks. Thanks, Chris.

Aaron M. Erter: Hello, everyone, and thanks for joining us today. Before I begin, I would like to take a moment to thank our employees around the world who work every day to safely deliver the highest quality products, solutions, and services to our customers. This team has done an incredible job navigating a period of significant change and excitement with the AZAC combination. I am truly grateful for their dedication, and I am proud to work alongside them each and every day. With me on today’s call is Ryan Lada, our new Chief Financial Officer Many of you know Ryan from his prior role as CFO at AZAC. He brings extensive financial and operating experience and a strong understanding of the building products landscape. I am excited to have Ryan alongside me as we lead the business forward.

Also joining me today is Jonathan Skelly, President and General Manager, James Hardie, North America Building Products Group. John, along with John Matson, our new Chief Sales Officer, have stepped into expanded roles recently. Each leader brings an impressive track record of driving sustainable sales growth and each have deep knowledge of our industry. And each one of them has already contributed meaningfully to the commercial synergies that I will speak about on today’s call. I am confident in their leadership to deliver on our commitment of outperforming the market over the long term. Let’s start with our results. We delivered a solid quarter. Exceeding our guidance and making good progress across the business. Execution was disciplined, commercial momentum improved, and our teams continued to advance the strategic priorities that matter most for long term value creation.

That said, we are not satisfied. We have higher expectations for ourselves. And our ambition is to deliver stronger, more consistent performance over time. That ambition is what is driving the actions we are taking across the business. On the commercial front, we are focused on reaccelerating organic growth in fiber cement and expanding margins across our portfolio through disciplined execution innovation, and operational excellence. The manufacturing optimization actions we implemented in mid January were an important step in aligning our footprint and cost structure with our long term growth and margin objectives. Finally, our combination with AZAC continues to build momentum and is already generating meaningful commercial opportunities. We are confident this combination will be a significant contributor to accelerated top line growth in the years ahead as we bring together the best of James Hardie and AZAC to better serve our customers and create long term value for our shareholders.

Now let’s look at the results for siding and trim in the quarter. Current market conditions remain mixed due to the category’s exposure to the new construction end market in the Southern Region. Organic net sales in the legacy James Hardie North America fiber cement business declined 2% in the quarter, driven by lower volumes, partly offset by higher average net sales price. Single family exteriors volumes were down high single digits, Multifamily was up high single digits, and interiors were down double digits in the quarter. Siding and trim adjusted EBITDA was $269,000,000 in the quarter, with adjusted EBITDA margin of 34.1%. A nearly 500 basis point sequential improvement largely reflecting price mix favorability. As I mentioned in the opening, we are taking actions through the application of the Hardie operating system to improve performance and return to margin expansion in FY ’27.

On January 15, we made the difficult decision to close two of our older less efficient plants and transfer more production volume than some of our newer advanced plants. This decision, with we took to balance our footprint, will focus production on fewer manufacturing lines. These actions will create annual cost savings of $25,000,000 beginning in the ’27. Looking ahead to fiscal 2027, these actions not only strengthen our cost position, but also allow us to have the right capacity in the right locations to execute against our significant material conversion opportunities. From a market perspective, while new home market demand is still uncertain, have seen stable demand trends in line with expectations we outlined in November. In repair and remodel, we have seen demand stabilize at the current low levels.

And while we expect organic net sales to decline modestly in the fiscal fourth quarter are focused on driving organic growth in the Siding and Trim segment and F 27 and beyond. Our overarching strategic focus is increasing our penetration in both the new home and the repair and remodel end markets. Which is over $10,000,000,000 and which we have a significant material runway. Going forward, we believe growth in this segment will be enabled by a few core strategies. First, in the repair and remodeling market, we believe a significant opportunity exists for additional revenue growth in the Northeast and Midwest regions, where we believe there is a nearly $1,000,000,000 repair and remodel focused revenue opportunity in competitive wood and wood look siding alone.

We believe the combination with AZAC positively impacts our ability to compete and win in these regions. Enabled by the combination James Hardie now has long standing relationships with independent lumber yards in the region, a large and talented sales force and the best collective product portfolio to drive material conversion. And while repair and remodel remains our focus, particularly given the synergies from the AZAC acquisition, we continue to see meaningful opportunities with custom and local homebuilders. We believe this underpenetrated segment represents an incremental $750,000,000 opportunity for continued growth in the new home construction end market. We also see additional opportunities to drive growth through product innovation.

Our R&D and product management organizations are focused on product innovation where we see opportunity to introduce resilient and beautiful products to drive material conversion. One example of our product development is Timberhue, a new product that we will showcase at the International Builders Show. That combines a natural wood look with the durability and performance of James Hardie’s fiber cement. Our innovation mindset is not only in our products, but also in the installation techniques of our products. We have worked closely with our contractors and installers to understand and develop installation innovation helping to reduce the overall installed cost of our products. Through installation techniques such as score and snap and the trim over method, we believe we can increase contractor efficiency by approximately 30%.

For those of you who will be in Orlando, at the International Builders Show, we will have the opportunity to showcase these innovative installation methods in our booth at the show. Now let’s turn to deck rail and accessories. Performance remained strong in our Doctor and A business. With TimberTech continuing to outperform the broader market by executing against our proven growth playbook. This performance is supported by multiple levers, material conversion underpinning everything that we do. The most recent data suggests the decking market is approximately 25% converted to composite materials. As a reminder, at this point in the conversion curve, every 100 basis points of material conversion equates to approximately 400 basis points of composite decking growth.

We have had sustained material conversion momentum, which gives us confidence in the long term runway. Particularly as homeowners and professionals increasingly prioritize materials that offer superior durability bioresistance, and performance. Wood conversion is driven by downstream focused sales activity at the contractor level with the continued education of contractors on the benefits of our resilient and aesthetically differentiated products relative to inferior substrates. Similar to our siding and trim segment, new product development represents another important growth lever. Supported by our ability to design and successfully launch innovations that enhance the TimberTech portfolio for both consumers and pros. Recent new product introductions, such as the Timbertech advantage rail and impression privacy screen, provide contractors and homeowners with advancements in functionality, aesthetics, and ease of installation.

Consistent with the past, channel expansion remains a key focus as we continue to broaden TimberTech’s presence across distribution, and retail to further accelerate market conversion. Given the highly complementary nature of James Hardie and TimberTech’s geographic footprints and customer bases, we see significant opportunities to facilitate channel expansion through our existing relationships. An example here may be helpful. James Hardy’s traditional strength has been the West and South, where we have had success penetrating the market and have strong coverage in selling locations in the region. At the moment, our fiber cement business has more than double the selling locations than TimberTech in the South. We believe over time, there is a strong opportunity to place TimberTech products in the locations currently carrying James Hardie fiber cement.

All of our sales and commercial initiatives are supported by a strong in house marketing organization. By executing a consistent marketing playbook over the past four years, TimberTech has delivered meaningful progress across key brand health and commercial metrics. Including strong gains in awareness and consideration. These results reflect increased brand visibility broader channel presence, and effective engagement with both the homeowner and the pro. Our focus going forward is strengthening preference and deepening relationships with contractors. With this group, we believe we have outpaced the competition to become the leader in awareness, positioning us to convert that advantage into sustained share growth over time. Taken together, these efforts give us confidence in our ability to drive 500 to 700 basis points of growth above the market, consistent TimberTech’s historical track record.

We delivered on this commitment in the most recent quarter with mid single digit sell through growth, outperforming the broader market that declined at a low single digit rate. Despite continued market softness, we remain confident that our strategic growth initiatives with customers and contractors will support continued market outperformance and low to mid single digit sell through growth in the fourth quarter. As I close the DRNA update, I wanted to share the progress from the seasonal early buy shelf space negotiation period with key channel partners. Which wrapped up in recent weeks. As in prior years, we were focused on reinforcing customer relationships and securing appropriate seasonal inventory positioning. We believe these discussions have further expanded our market presence, positioning us well as we move into the primary decking selling season in the spring.

Turning to the integration with AZEK. We are executing with discipline and urgency across all areas of the integration. With a clear focus on our people, and our customers. As we move into FY ’27 in just a couple months, we have established a clear organizational structure aligned around common goals. And we have a specialized downstream customer focused sales organization designed to deepen relationships, accelerate material conversion, and drive sustainable growth. We also continue to move quickly on cost synergy realization. We have already surpassed our FY ’26 cost synergy goal, and our progress to date increases our confidence in hitting our $125,000,000 cost synergy target. On the commercial synergy front, customer feedback on the combined offering from the one James Hardie team has been very positive.

Have seen a growing number of recent wins across the businesses that we expect to translate into meaningful revenue synergies as we move through FY ’27. Just to give you an idea of some of these a large national one step dealer has committed to choosing AZAC as their exclusive PVC trim brand. Drawn by the combination with James Hardie and the strong loyalty of contractors to our combined portfolio. Another example of our momentum is a recently secured expansion of a relationship with a scaled distributor of exterior building materials that positions James Hardie, as a primary hard siding and trim brand and TimberTech as its primary composite decking brand across North America. This partner has agreed to focus national marketing on the one hearty suite of brands and products, Most importantly, these commitments are reinforced by coordinated go to market efforts.

Targeted hyper local marketing support, and training to drive material conversion. We are also seeing strong momentum in cross selling and across the one Hardie portfolio. Over the past few weeks, we hosted national contractor summits for both TimberTech and James Hardy. One piece of feedback from these meetings is that contractors are increasingly looking to consolidate their portfolios under the one hearty brands. One such example is Rick James of RPS Remodeling, a long time James Hardie siding partner who recently transitioned his company’s decking offering from a competitive product to TimberTech. The positive momentum from these proof points gives us confidence in our ability to deliver a $125,000,000 in annualized commercial synergy run rate exiting FY ’27, in line with our public commitment at the deal close.

I will now turn it over to Ryan to run through the financials. Ryan?

Christopher Russell: Thanks, Aaron. I will start with our third quarter consolidated results. Total net sales grew 30% to $1,240,000,000 which included $275,000,000 of acquired AZEK sales. Our organic sales increased by 1%, adjusted EBITDA $330,000,000 with a 26.6% adjusted EBITDA margin.

Ryan Lada: Adjusted general corporate and unallocated corporate unallocated R&D costs totaled $47,100,000 in the quarter, As a reminder, nearly half of the P&L benefit from full year ’20 cost synergies resides in corporate expense for the year. Our adjusted effective tax rate was 17.3%, We now expect our full year tax rate to be slightly lower than our prior guide, at around 19%. Adjusted net interest was $68,000,000 and weighted average diluted share count was approximately $583,000,000, dollars We anticipate these items will remain consistent in the fourth quarter. Adjusted net income was $142,000,000 and adjusted diluted earnings per share was $0.24 Year to date, free cash flow was $261,000,000 which includes the benefit of completed land sale in Australia.

However, cash flow remains negatively impacted by one time integration costs, which will step down significantly in fiscal year 2027. Cash generation of our core businesses remains strong, and with capital spending projected at modest levels, we expect free cash flow to accelerate in years ahead. Turning to our Siding and Trim segment, net sales were up 10%, including $81,000,000 from the AZEK acquisition. Siding and Trim organic net sales were down 2%, as lower volumes were partially offset by a mid single digit increase in ASP, Adjusted EBITDA was $269,000,000 with adjusted EBITDA margin of 34.1% down just 70 basis points year over year. This decline, was largely due to a 100 basis point impact from reallocating $9,000,000 of R&D costs to the segment.

Excluding this allocation, adjusted EBITDA margin would have increased year over year, The key drivers of the comparable change in margins were positive price, mix and ongoing cost savings, These were partially offset by lower volumes, unfavorable absorption, and inflation in freight and raw materials. We are employing the Hardie operating system to optimize the business cost structure through network optimization, cost synergies, and structural efficiency improvements. We expect the recently announced site closures and optimization initiatives to generate annualized cost savings of approximately $25,000,000 beginning in the 2027. These cost savings will be driven by reduced fixed costs, and improved utilization across the remaining manufacturing network.

These cost savings are also incremental to any cost synergy savings related to the AZEK acquisition. Together, these actions will position the business for margin recovery, and stronger performance going forward. For DeckRail and Accessories, net sales were up 2% compared to the quarter ended December 31, 2024, prior to the AZAC acquisition by James Hardie. Sell through was up mid single digits consistent with the business performance in the two most recent quarters, Adjusted EBITDA was $49,000,000 resulting in a 25.1% adjusted EBITDA margin. The Deck, Reel and Accessories margin outlook remains strong, with upside from material formulation, recycling initiatives, improved absorption across the manufacturing network, and the application of the Hardie operating system across the manufacturing base.

Turning to Australia and New Zealand, Net sales were up 7% in both U.S. and Australian dollars, due to 1% growth in volume, a 6% rise in ASP, Adjusted EBITDA was up 4% to $41,000,000 with adjusted EBITDA margin of 32.6% down 90 basis points due to unfavorable production cost absorption and the R&D allocations. And in Europe, net sales were up 13%, or 3% in Euros, driven by strong fiber gypsum volume, and a modest decline in average net sales price. EBITDA margin was up two forty basis points to 12.7%, driven by volume leverage, lower gypsum and paper costs, and solid manufacturing efficiency. Turning to our full year outlook, We are increasing our Siding and Trim net sales guidance to a range of $2,953,000,000 to $2,998,000,000 reflecting our outperformance in the third quarter.

For Siding and Trim adjusted EBITDA we are modestly raising our guidance range to $939,000,000 to $962,000,000 At the midpoints, this implies a full year organic net sales decline of approximately 6% and an adjusted EBITDA margin of 31.9%. For Deck, Rail and Accessories, we have also increased our net sales and adjusted EBITDA guidance for the post close period of fiscal year 2026 to account for the outperformance in 3Q. We expect net sales of $787,000,000 to $800,000,000 which assumes sell through upload to mid single digits, This is consistent with recent quarters, and above prior expectations, reflecting continued success in driving material conversion through our core strategies. Based on these demand expectations, we expect Deck, Rail and Accessories adjusted EBITDA of $219,000,000 to $224,000,000 For the total company, now expect full year ’26 adjusted EBITDA of $1,232,000,000 to $1,263,000,000 We are confident in our long term cash generation.

We expect it to accelerate as integration costs wind down, and interest expense declines with debt pay down. Our capital expenditures outlook remains unchanged at approximately $400,000,000 for full year ’26. Including $75,000,000 for AZEK investments. Over the long term, expect CapEx across our North America businesses to run 6% to 7% of combined North America sales. We continue to expect at least $200,000,000 in free cash flow for the year, Our net debt ended the quarter at $4,300,000,000 Pro forma for the AZEK acquisition and the midpoint of our updated guidance full year ’26 net leverage stands at approximately 3x. We remain committed to reducing leverage below two times, within two years post close, as we grow EBITDA, generate cash, and pay down debt.

With that, I will turn the call back to Aaron.

Aaron M. Erter: Thanks, Ryan. Looking ahead to FY ’27, while we are not guiding at this time, our expectation and goal is to return to both organic revenue growth and adjusted EBITDA margin expansion. In DRNA, TimberTech has demonstrated the ability to consistently outgrow the underlying market through our well defined and repeatable growth playbook. We expect that this will continue in FY ’27. As highlighted earlier in the call, we also expect to return to organic growth in our Siding and Trim segment, and fiber cement siding in particular. Our four key strategies for returning to growth include number one, a focus on the $1,000,000,000 repair and remodel opportunity in the Midwest and Northeast. Number two, a deeper focus on penetrating into the $750,000,000 remaining in wood and wood look siding and new construction.

Number three, a focus on new product innovation. And finally, continuing to introduce new and innovative installation techniques to drive efficiency, for our contractors. Additionally, on growth, relative to commercial synergies, we are encouraged by the early commercial wins, which give us confidence in our ability to realize our FY ’27 revenue synergy target exiting the year at $125,000,000 run rate, consistent with our public commitment at the time of the deal announcement. And on cost synergies, we have executed well in FY ’26, We have already surpassed our FY ’26 cost synergy goal and our progress to date increases our confidence in hitting our $125,000,000 cost synergy target. We will give additional details on fiscal 2027 guidance during our year end conference call in May.

To close, we are executing against our clear long term strategy focused on material conversion from wood and other inferior materials. We are well positioned to capture that opportunity through the breadth of our combined portfolio our downstream engagement with contractors and customers. As we look ahead to FY 27 and beyond, we are confident in our ability to continue outperforming the market expand margins, and translate our strategy and execution into consistent long term value creation for our shareholders. And coming up next week, we will be exhibiting at the International Builders’ Show where we plan to highlight the breadth and potential of our combined product portfolio and demonstrate how our complementary offerings across siding, trim, decking, and accessories deliver differentiated solutions for our customers and reinforce the value proposition of the combined company.

For those of you planning to be in attendance, we look forward to seeing you at the show. With that, operator, please open the line for questions.

Q&A Session

Operator: We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, press star 1 on your telephone keypad. To withdraw your question, press star 1 again. Please pick up your handset when asking a question. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Our first question comes from the line of Keith Brian Hughes with Truist. Your line is open. Go ahead.

Aaron M. Erter: A lot of regional variation of light in some of the siding sales. Could you give us an update on that and specifically what you think your expectations are near term, how that could could could change as we get into calendar ’26?

Ryan Lada: Keith, let let me take it from there, and then if

Aaron M. Erter: hey. So, Keith, I I think with you know, as as we have our we we look at what went on, it is pretty consistent. With what we said in November. I will start out a little bit with new construction. So new construction activity, it it is challenging across most of our regions. With Texas, the West, and the Southeast showing you know, the greatest softness out there given their scale and our exposure to these markets. You are aware of all all the data on permits starts. You know? Permits down 9% year over year. And then if we look year to date starts, down 7%, Look. I will I will start out with Texas, because Texas Texas is so significant for us. And for the country. It is about 26% of national closings out there.

So what we are seeing in Texas is builders for the most part have been tightly managing inventory. we have seen some signs of normalization After significant volume declines in Q3, early in the calendar year. The recent weather has created short term production delays, and we are seeing most builders remain conservative. Pacing starts to sales. I look in the Southeast. I look at the The Carolinas. Demand remains soft there with Q3 volumes down year over year. Inventory in key markets like Orlando, Jacksonville, Tampa, and Atlanta remain elevated. The Carolinas and Tennessee continue to benefit from strong migration trends, and and we are seeing healthier starts there. In the West, starts are slow. Builders across the Southwest and and mountain states they are overbuilt in inventory right now.

The Midwest, activity is comparatively resilient. We are seeing areas like, Minneapolis, or, say, Chicago, Ohio, Pittsburgh due to more affordable price points. And we are seeing strong performance in higher price bands as well. Some easing in contractor backlog is creating momentum as the season progresses. So look, overall, in new construction, it is soft across many of the key regions. Inventory levels are elevated. But, you know, cons the good news is consumer sentiment has stabilized. And it is supported by pent up demand, and and we are seeing modest relief in in mortgage rates. As we move to repair and remodel,

Christopher Russell: you know,

Aaron M. Erter: we would say that that is stabilizing. It is choppy, but it is stabilizing. We are not seeing it getting any worse, which is good. We are seeing sentiment improving across all our regions. West, South, Midwest, and Northeast. Particularly where there is aging housing stock, which makes a lot of sense. If we look at our contractor surveys that we brought in this you know, best practice from AZAC, we are seeing some optimism. You know, in in with our contractors. So all in all, you know, I would say new construction continues to be a challenge. But not unexpected from what we talked about a little bit in November. And then if we look at repair and remodel, we would say stabilizing. Last thing before I talk just briefly on Decro and accessories is we look at our inventory levels.

Inventory exiting our third quarter was seasonally appropriate. Over the last weeks, I would say that we have seen a little bit of a tick up with our dealer inventory, because some of the weather disruptions, out there as we have seen, you know, lost building days in in production. Out there with our customers. But all in all, if we look at our channel inventory, very healthy versus last year. DRNA, I will not spend a lot of time on it because we went through it in, you know, the script. But we continued to outperform the market. Sell through was broadly consistent at mid single digits. Only modest regional variation, and and we are seeing stable trends with our contractors. And inventories are appropriate. Hopefully, that answered the question, Keith, because you got cut off a little bit.

No. That is very that is very complete. Can you hear me now, by the way? Alright. Yes. Yeah. Okay. Great. Just wanna one quick follow-up on cost.

Keith Brian Hughes: Are you seeing any potential inflation coming in any of this siding siding inputs as we head into the New Year?

Ryan Lada: Yes. This is Agaqi. This is Ryan. Yeah. We have a modest expectation of inflation on the fiber cement side. You know, not not nothing drastic at this point. Just given where pulp and things are

Christopher Russell: Majority of it is kinda planned towards the back half of, 2027 at this point.

Keith Brian Hughes: Okay. Thanks, Keith. Your next question comes from the line of Daniel Kang from CLSA.

Operator: Your line is open. Please go ahead.

Keith Brian Hughes: Hey, Daniel. Good morning, everyone. Good morning. And just wondering in terms of I guess, we enter your final quarter, we are midway through it. At the moment, market end markets are still soft. But just wondering if you could talk about how your recent price increases have been accepted by your customers and how you are seeing I guess, the all important spring selling season

Aaron M. Erter: Yeah, Daniel. I I would say, look. We we executed our our price increases that they been effective since January 1. Out there. That is on the the fiber cement side, and that would be on the the deck room accessories and the PVC trim side. As well. We we talked a little bit about the increases You know, we we see some benefits from price and and mix. Particularly from the fiber cement side. So look, we the the way we price is is we are doing it, you know, for value, and it is been accepted well from all our customers. Out there.

Keith Brian Hughes: Thanks, Aaron. And you also spoke about, I guess, the early wins in commercial synergies. Is this going to feature much in the FY 2026 year.

Aaron M. Erter: Yeah, Daniel. Good question here. As we look at sales synergies, you know, we will see many of those start to hit the P&L as we get into FY ’27. Right now, a lot of these are being executed as far as the specifics around them, we are making good progress. What I can say and we are not giving guidance for FY ’27, but we have line of sight to our $125,000,000 target of revenue synergies as we exit FY ’27. So we feel very confident of that.

Operator: Your next question comes from the line of Ryan James Merkel of William Blair. Please go ahead.

Keith Brian Hughes: Hey, everyone. Thanks for the question. My first one is on the 4Q guide. Are you assuming that Siding and Trim, the volumes are going to be down in the Similar range as three q. And then on the margins, you know, you had a nice beat in 3Q Why not flow that through in 4Q? Is there a reason?

Aaron M. Erter: Yeah. I will I will let, Ryan go through the guide. But if we look at our siding and trim volume, one of the things I think that you will remember is is we are facing A comp from, you know, an inventory build that we saw in Q4. Last year. But, Ryan, if you wanna walk through some of that.

Ryan Lada: I think the guide reflects exactly what Aaron just hit on. And then from a margin perspective, we have a step up in marketing activity really in our fourth quarter that that is the main driver of the dilution from March. But, yeah, that that is the biggest thing as we enter the season is just increased marketing expenses as we get into the year end here. Yeah. And, Ryan, to get more specific on that,

Aaron M. Erter: these are, you know, things like contractor events. We had them on the legacy Azac side. We had them on the legacy James Hardy side. And then, also, we have, an upcoming sales meeting. So some of those expenses that that you see, really reflect that.

Ryan James Merkel: Okay. Yeah. That makes sense. And then my follow-up, the the large distributor committing to one Hardie, that sounds pretty interesting. My question is, do you have more of those in the pipeline?

Aaron M. Erter: Yeah. Ryan, I am going to turn it over to Jonathan Skelly who runs our North American business, who has been a big architect, a a commercial synergy wins. John, do you wanna take it? Yeah. So it is Orion.

Ryan James Merkel: Obviously, you cannot say too much at this point, but I think I will

Jonathan Skelly: attach it to what Aaron said earlier around, you know, our confidence. You know, to deliver against the exit rate for fiscal twenty seven. Right? So I think the the the customer has welcomed, you know, the opportunity to to consolidate with the the market leading brands. You know, what we are able to do from a downstream sales and execution standpoint to help them grow their business. So we are that that is what is given us the confidence.

Operator: Your next question comes from the line of Peter Steyn from Macquarie. Your line is open. Please go ahead.

Keith Brian Hughes: Hi, Aaron, James. Thanks very much for the opportunity. I actually just wanted to bring together that very conversation together with working capital Your inventory, relative to pro forma, you kind of went

Brook Campbell-Crawford: to seventy five days from perhaps around the seventy one in, the prior comparative period. What I am curious about is what the training will be as you execute commercial synergies, as you gain more position with some of the one steps space, do you believe that you can reduce the volatility that you historically seen in the decking businesses inventory profile in particular, and then across the business, what your expectation would be, for improved efficiencies on, that investment?

Aaron M. Erter: Brad, do wanna handle that one? Yeah. Yeah. I would I would say as you think about, you know, the commercial synergies we are going after,

Jonathan Skelly: you know, there is a little bit of build on our internal balance sheet to be able to satisfy those at those come to fruition. So I think we had a little bit on the prior question, but there is phasing and timing of rollout into the season. We would expect as that normalizes, our inventory and our balance sheet would also come down. But, yeah, the the real build is driven by that, nothing else intentionally. Would

Brook Campbell-Crawford: would there be network redesign benefits that flow over the medium term as well? That is probably more where I am getting at.

Jonathan Skelly: Yeah. Nothing major contemplated in that. I think, you know, with with the optimization of our footprint here that was announced last month, it is really a rebalance of the inventory through that. And the the corresponding freight to fulfill the customer demand.

Operator: Your next question comes Thanks, Peter.

Jonathan Skelly: Your next question comes from the line of Timothy Ronald Wojs from Baird.

Operator: Your line is open. Please go ahead.

Keith Brian Hughes: Hey, guys. Good, good afternoon.

Jonathan Skelly: Maybe just on on fiber cement and and and kind of the pricing contribution in the quarter. It was a pretty you know, healthy step up sequentially, and it sounds like it is mix related. So I am just curious if you could kind of flush out the drivers of the mix improvement and if you are expecting that to kinda continue you know, in the kinda near to intermediate term there.

Aaron M. Erter: Yeah, Tim. So I I think roughly, you know, price account accounted for about four little over 4%. Mix was a little over 1% there. So as as we sell more ColorPlus, you know, we are gonna see the benefits from mix. I think part of this too is as you look at some of the as I opened up and I talk about new construction, some of the products that it you know, really, are attributable to new construction. We saw some less of that. So that is some of the mix benefit that you are seeing. Out there, Tim.

Timothy Ronald Wojs: Okay.

Keith Brian Hughes: Okay. That is helpful.

Aaron M. Erter: And then I guess as as

Timothy Ronald Wojs: you know, you have you are talking about kind of new kinda R&R installation methods. You are you are talking about going after maybe some smaller, more kind of custom builders. Are there any sort of larger, chunkier investments that you need to make Or, I guess, does your go to market strategy kinda change that requires some larger any sort of larger upfront cost to kind of accelerate that?

Aaron M. Erter: Yeah. Tim, the the biggest investment that we could make there and we have already made, it is gonna be in our Salesforce. Right? So, you know, I will I will let John talk a little bit more around it. But as we move forward and we think about what our sales team is gonna look like, it is gonna be focused more from a downstream standpoint. So we are gonna be focused on contractors out there really converting them. We will have dedicated team on that. We will also have specialists from a fiber cement deck room, accessory standpoint that aids them, and then we will have folks that are, you know, focused on, you know, our customers, like our our dealer partners there. So that investment has already been made. Certainly, training is a big part of it. But as far as any big onetime cost, I would say we made it, you know, as we think about the the acquisition of AZAC. Bringing the two together is gonna help us really accelerate that. But

Jonathan Skelly: John, anything else you wanna add there? That is right. I mean, we we can leverage that existing investment, Tim. And and so as you recall, you know, historical, you know, Dipritech and AZAC was much more repair model driven. Right? So it was a much larger, you know, piece of the business. And so, you know, the downstream team has the relationships you know, within the dealer channel. With custom builders and and with a lot of you know, pull through opportunities on the R&R side. And then conversely, you know, James Hardy has a lot of that opportunity with the new build side. So, you know, legacy, Azac relationships can be leveraged, you know, to help know, pull through more on the repair and model side of fiber cement and then vice versa. We can work together to pull through more decking, railing accessories through into the new builder channel.

Operator: Your next question comes from the line of Keith Chau from MST Marquee. Your line is open. Please go ahead.

Keith Brian Hughes: Hi, Aaron and Ryan. Thanks for taking my questions. The first one, just a follow-up on the 4Q guidance. I wanted to try and think about it sequentially. So revenue is expected to be broadly flat. I think Ryan is said before, inflation, there is some, but not too much. And sequentially, it should at least be a pulp benefit, a price increase benefit. And you should be starting to get the benefit of the capacity reduction. So yes, I I understand there needs to be an investment on the marketing side, but it seems unlikely that you know, that investment in marketing is gonna be overwhelmed by some of the sequential positives. So maybe, Ryan, if you can help me understand the magnitude of marketing investment in fourth quarter relative to the third and how much that actually steps up. Just just so I can get an understanding of why the margin should deteriorate quarter on quarter, please.

Jonathan Skelly: Yeah. Yeah. I think I think there is a few things. Right? So from a market Step up, I do not think we are gonna quantify the actual dollars, but it is significant impact over Q3. I think the second thing with the announced plant closures, the impact of that really is delayed to full year ’27. We will not feel any benefit of that in the quarter. As we go through the wind down activities and the delay on the balance sheet. I think the third thing, right, I mean, Azex from a Q3 perspective, that is Azex, historically, low production and shipment perspective. There are some delayed costs on the balance sheet that roll off in our financial year, Q4. A little bit of the impact you feel on the margin perspective. So those are kind of the three things. You are not getting savings. You have a little bit of balance sheet lag rolling off. Then there is incremental marketing and sales efforts in the quarter.

Keith Chau: Okay. Thanks, Ryan. They might follow-up question just relates to some of those capacity reconfiguration. So I am just trying to understand, particularly for the Fontana, California, closure, we we will where will that region be supplied now from which part of the network? And know, if it is from the South, when the South eventually ramps up again, what is the plan to to keep supplying the in the South of the West going? Particularly in the California region. Thank you.

Aaron M. Erter: Yeah. Keith, I I think I got all of that. How are gonna supply the West? Look. Obviously, this was a difficult decision for us to make. But, also, we feel confident in our ability to be able to supply the whole network. And that includes when we think about the the growth that we are contemplating and also the revenue synergies. As well. Look. Over the last few years, we spent well over a billion dollars. You know, in more efficient, modernized plants and, you know, really adding to our our facilities. So we feel very confident in what we are doing. If we think about, you know, the the plants that we closed down that were very limited as to what they could make. You know? If if we look at Somerville, for instance, they could make plank.

And that was it. Fontana, we could make plank panel and backer. So rest assured, if we think about California, you know, we are gonna be able to supply product from Tacoma to in Northern California, Southern California, Cleburne, and Wax. And, look, we have taken into account the freight costs there as well. And the the contribution that we are gonna see next year that is contemplated the the freight in there as well. So we feel very as much as a tough decision, was the right decision for us to make as we move forward.

Operator: Your next question comes from the line of Philip H. Ng from Jefferies. Your line is now open. Please go ahead.

Jonathan Skelly: Hey, guys. Congrats on a really strong quarter. The progress is, very encouraging. And, Ryan, welcome back. Good to have you back in the fold. I guess to kinda kick things off, question for you, Aaron. Know you guys are not guiding for ’27 yet, but, pretty encouraging to hear your expecting, organic growth to be growing in ’27. Is do you need a little help from the market, or these are largely James Hardie specific initiatives? I am particularly interested in your your siding and trim business. Right? I mean, you highlighted some of the challenges in new construction. So what are what gives you the conviction, I guess, for that piece of business kinda reaccelerate? I know there is some talk of new products getting pushed out. You are seeing some of that? Are you seeing placement with dealers? Penetration wins with builders? Just kinda give us a little more color on your conviction level why your siding business is gonna reaccelerate.

Aaron M. Erter: Yeah. Phil, good good question here. Look. When we say we believe that we are gonna have organic growth, that is, you know, considering if there is there is no worsening of the the market here, than where we are at right now. Right? That that is the the caveat I would put on this. You know, severe worsening of the market. Number one, why we have the conviction as a team. Right? This is a new James Hardie. So as we think about our sales team and the way that John is gonna structure this team and really get after the contractor, we have a lot of confidence there. The the other thing is we look at the commercial synergies that we are we are gonna be able to generate We look at the plans on how we grow fiber cement.

We talked a little bit about the four key areas that we are gonna really drive. All of those give us conviction. The other thing is is we think about this past year and what we are comping against, you know, we we have some opportunity. We believe. So all of those things together, Phil, give us a lot of confidence and be able to provide organic growth in fiber cement. Again,

Jonathan Skelly: Okay. Helpful. You guys gave us a great examples on, wins with, dealers and distributors. Hear you talk too much about Big Box. I believe there is a line review for decking. Any color there on an opportunity to pick up some placement there? Know Azac made a big push on railing, about a year ago. Any more color on, you know, increasing penetration, whether it is on the retail pro channel, particularly in railing as well? Thank you.

Aaron M. Erter: Yeah. Look, I will start out and I will have John chime in here. All our customers are are very important to us, and we talked about a number of the buckets. That we believe are going to be opportunities for us. And we certainly see retail as being an opportunity. And we are making good progress, you know, on the the James Hardie side and also from a a legacy TimberTech side. Look. Is is someone who has called on, retail and big boxes for almost thirty years now, It does not happen overnight. So we are looking at, you know, getting single after single with, you know, our retail partners. And, you know, just building upon that. So we have a lot of confidence that is gonna happen. Nothing major to announce right now. But, John, do you wanna take that? Yeah. Yeah. Nothing major to announce is is correct, but we continue to, you know, expand

Jonathan Skelly: our positions there. So even without line reviews, you know, we continue to broaden our stocking store base continue to amplify our special order business, and continue to make your retail and that channel expansion we regularly talk about a bigger part of the business.

Operator: Your next question comes from the line of Samuel Seow from Citi. Your line is open now. Please go ahead.

Keith Brian Hughes: Oh, hi there. Thanks for taking the question. You had a pretty solid margin improvement, very sequential in Siding. I just wanted to maybe ask if you could talk about the contribution of raw materials. You know, was it positive sequentially in the third quarter there? And then as we about the fourth quarter, should that raw material benefit be sequentially higher again?

Jonathan Skelly: Thanks.

Aaron M. Erter: Yeah. Hey, Sam. Good question. I will turn it over to Ryan here in a second, but just to walk through it. I mean, if we think about the sequential improvement, it it was really built from a high level standpoint. We think about volume. We think about ASP. Think about our manufacturing costs, we think about SG&A. Right? So from a a raw standpoint, Ryan, you just wanna dive into that? Yeah. Yeah. Would say if you think about kinda how we look at it, roughly 40% of it was

Jonathan Skelly: contributed from price mix. About 20% came from manufacturing costs, and that was raw material costs. So we did see a step down The first February, and then there was some cost actions just to mitigate there. And the other 40% basically came from SG&A management on the cost side. And I and to your question on the raw material inflation that we saw in each that will actually carry into 4Q as well.

Samuel Seow: Awesome. Awesome. Hey. And then just quickly on the guide and free cash flow. Year to date, it looks like your free cash flow is about $2.60. Odd, but you are guiding to 200 for the full year. Just want to understand if that is conservative or something we are missing there. Thank you.

Jonathan Skelly: Yeah. Yeah. I think the big thing there, right, is yeah, yeah, we are at $2.60 year to date after three quarters. The big the biggest thing is just timing of AR and things as we get into the year end here. So there might be a little bit of conservatism there, but we were holding that flat at 200. We know we will hit that. Then kinda wind down on integration and deal cost this quarter as well. Wanted to leave ample room for that. But we expect from full year twenty seven Q1 on should see a nice ramp up as those integration and deal costs minimize.

Aaron M. Erter: Yeah. And and if we look at FY ’27, all else equal, I mean, we will have a cash flow quarter. Right? You know, the the other quarter you know, plus lack of transaction costs and and pure integration costs, as you mentioned. Yeah.

Jonathan Skelly: K. Your next

Operator: question comes from the line of Matthew Bouley from Barclays. Your line is open. Please go ahead.

Jonathan Skelly: Good evening, everyone. Thank you for taking the questions. So the the score in Snap and the the new install techniques, sounds like more to be seen at the builder show next week. I think I heard you say that contractor efficiency is better by 30%. So in the past, you guys have talked about some of the early returns here. I am curious there is any update, maybe sort of outline as you have been undergoing the strategy what you are doing to incentivize or motivate contractors to kind of play along here. Thank you.

Aaron M. Erter: Yeah. Hey, Matt. Good question. I mean, look. This is all part of you know, how we win in fiber cement, and in particular, how believe that we are gonna win know, around R&R. It is it is a big part of it. And, you know, we touched on innovation We do believe that these new installation techniques are innovative. We spent years on this So we are wheeling this out, you know, methodically. Across the country. So as we think about this as supported by, you know, our our statement essentials collection, and that is really targeted you know, on competing against vinyl out there. So this installation technique plus that product that is readily available we believe is gonna help decrease the differential versus vinyl.

And for our contractors to be able to go out and win more jobs out there. So we launched this, you know, in in April ’25, we think about the statement essentials collection. In in the East and the in the Midwest, and then in the Midwest Central. We launched in January. I am not gonna give you the full rollout, I do not necessarily want our competition to hear this. But as we look through what will be, you know, call it, as we get into our Q1, of FY ’27, we are gonna have the majority of the Statement Essentials collection wheeled out. I talked about our Salesforce and how we are gonna have dedicated team focused on our contractors. That is gonna be wheeled out, April 1 as well. So they go in tandem with each other, and then it is gonna be supported you know, at the local level by marketing and training.

So that is the plan right now. We will update you on these calls on our progress. And how we are doing. You know, I think a big part of it is just seeing our color plus number grow and particularly for these regions. So, that is where we are at, Matt.

Jonathan Skelly: Okay. Perfect. No. Thank you for that, Aaron. Second one, I just wanted to drill down into that marketing investments in in q Just to be clear, was that mainly due to the trade shows and contractor events? And as you alluded to or was there also a step up, you know, perhaps related to you know, what we are hearing in decking, of course, where there is a little bit more of a market spend going

Aaron M. Erter: across the street. Thank you. Yeah. Matt, good question here. This was related to trade shows. This was related to our sales meeting, and this was related to contractor events. Not any type of major step up from a marketing standpoint at all. And, you know, some of those costs that we have there because we have dual expenses, expect to be, you know, onetime. And not reflected as we move forward.

Operator: Your next call your next call comes from the line of Brook Campbell-Crawford from Barney Joey. Your line is open. Please go ahead.

Jonathan Skelly: Yeah. Thanks for taking the question. Just one on the outlook here for FY ’27. And, you know, you are talking about lots of great activity and initiatives you have going on in The U.S. at the moment,

Keith Brian Hughes: which is good to hear. Just wanted to understand, Aaron, do you think the business is capable of growing volume at that kind of 4% above market? And then deliver synergies on top of this? Or do you more think of these initiatives

Jonathan Skelly: you know, so synergies effectively helping to deliver on the 4%? I am just trying to understand if we should expect both or just sort of 4% above market as a total target?

Aaron M. Erter: Yeah, Brooke. Good question. Look, we are not giving guidance. I think what you are referring to when we talk about 4% is that has been our PDT target. Right? And, you know, obviously, this year, we are are not at that rate and there is many different reasons for that. But you know, as we think about the inventory build, we think about, you know, some of the magnitude of of new construction that we have seen in in areas that we are really tied to like Texas. As we get into next year, we expect to get back on that train of 4% PDG growth. Talked about some of the initiatives that we have to be able to do that. And that would be our our base. And then, you know, our expectation is synergies are gonna be on top of that. So that is our aspiration. I am not giving guidance, but, you know, that that is what we are aiming to do, Brooke.

Keith Brian Hughes: Sure. That is helpful. And just one quick follow-up on the

Jonathan Skelly: fourth quarter. If we just look at AZEK, I guess, you outperformed your guidance in the third quarter. If you look at the growth rate, the 39% growth year over year relative to

Keith Brian Hughes: the prior period for AZAC EBITDA. And then the fourth quarter guidance implies my numbers, EBITDA falls like 4%. Year over year. So really quite material change in the direction of growth there in ASICs. Would you mind just giving a a couple of comments on on why that might happen?

Aaron M. Erter: Yeah. Look. We do not see Nasdaq slowing. At at all. You know, I think it is appropriate from what we see from seasonal standpoint So it it is reflected with that.

Matthew McKellar: Any of you guys wanna you wanna jump in? Yeah. Yeah. I would I would say with back little bit of a similar point earlier. Our as we end the calendar year, our Q3 year was the slowest quarter from a production and sales perspective. So that creates a headwind going 4Q. So that is really only modest change on that you are gonna feel on the margin side there. And then, you know, just it is it is a higher activity from an S&A investment at that period as we head on with the trade shows and different things like that.

Keith Brian Hughes: Alright. Thank you. I will pass it on.

Jonathan Skelly: Thank you. Your next question

Operator: comes from the line of Trevor Allinson from Wolfe. Line is unmuted. Please go ahead. Good evening. Thank you for taking my questions. Want to follow-up on your comments on some early wins regarding the revenue synergies. You have had a chance to go through a winter buy period here now as a combined portfolio. Think you are getting some of these wins more quickly than you had originally anticipated? And then think about the synergies between slotting and trim and decking. Is there one side of the business where you would expect

Jonathan Skelly: commercial synergies to come through either sooner or more meaningful in fiscal ’27.

Aaron M. Erter: Yeah. Trevor, I will I will take the last verse and then I will hand it over to John. Look. We we believe that we are we see opportunity from a commercial synergy standpoint. Across all our our businesses. You know, D R and A know, fiber cement, and then from exterior trim standpoint. So we do see opportunities across the board. John, do you wanna take it as far as our

Jonathan Skelly: presence? Yeah. I mean, again, I think, you know, as we highlighted in the prepared remarks, right, this is a consistent part of our growth algorithm. Right? Is, you know, going to revise

Matthew McKellar: and expanding

Jonathan Skelly: our shelf positions and our presence, you know, across across all the dealer channels. Obviously, now sales guys like to have good stuff to talk about. Now they have more to talk about. Right? So I think you you know, we we have been able to to create a lot of energy and excitement, you know, at the customer with a expanded portfolio of of the leading brands. And so I think that is been resonating with customers. And again, I will connect that back to the confidence we have

Matthew McKellar: about delivering on our commitments.

Jonathan Skelly: Around that that synergy capture. Okay. Yeah. Makes sense. Thanks for that. And then second is on your approach to deciding pricing here and what is still weaker demand environment and and one where affordability is

Matthew McKellar: is still a big factor for the homebuilders. You guys clearly produce a a value add product, but I I would think you would still need to be aware of your pricing spread versus vinyl. So with that in mind,

Jonathan Skelly: you talk about your expectations for realization on your pricing, pricing in place at the beginning of the year? And are there any concerns about some elasticity driven volume headwinds as a result?

Matthew McKellar: Thanks.

Aaron M. Erter: Yeah. Yeah, Trevor. Good question. Look. We price strategically, and we price for value. And, look, our our pricing is is not necessarily as we look at homeowners, we understand their needs. You know, it may be different when we think about repair and remodel. So we price accordingly, and we do not believe that we are losing any type of volume because our pricing

Ryan Lada: There are no further questions at this time. I will now turn the call back

Operator: to Aaron M. Erter, CEO, for closing remarks.

Aaron M. Erter: Alright. Hey. Thanks, everyone. Really appreciate it. Wanna wanna thank the James Hardie team. Wanna thank our customers as well. For their support. Look. I I just end this by saying our integration is on schedule, and we are we are executing on plan. You know, our cost and our commercial synergies are on track. As you heard here, and, you know, we will talk more about it, we plan to get five or cement back in growth mode. In FY ’27. AZEK legacy AZEK business, is on track. We see continued growth there. And, look, we set the business up, you know, for FY ’27 with some of the cost actions that we have taken. You think about what we have done with the plants, the footprint optimization, SG&A, we continue to run the business with a focus on our hearty operating system. You know, we look forward to ending the year strong, and we look forward to FY ’27. So with that, thank you all. Appreciate the time here this evening.

Operator: This concludes today’s call. Thank you all for attending. You may now disconnect.