Core Insights - The company reported a 9% decline in total net sales to $900 million in fiscal Q1 2026, attributed to inventory normalization and softer global demand [5][53] - North American net sales fell 12%, driven by lower volumes, although there was a 3% increase in average net sales price [6][54] - Adjusted EBITDA decreased by 21% year-over-year to $226 million, with a margin of 25.1%, reflecting volume pressures and raw material inflation [3][53] Financial Performance - Adjusted EBITDA margin fell 370 basis points to 25.1% in Q1 2026, with North America adjusted EBITDA margin down 400 basis points year-over-year [3][6] - Free cash flow improved by 88% to $104 million due to better operating cash generation and reduced capital expenditures [7][53] - The company expects free cash flow of at least $200 million for fiscal 2026, with capital expenditures projected at approximately $400 million [10][63] Market Outlook - Guidance for fiscal 2026 anticipates a high single-digit decline in total market demand, influenced by homeowner affordability pressures and uncertain macro conditions [3][61] - The company expects adjusted EBITDA for fiscal 2026 to be between $1.05 billion and $1.15 billion, including a contribution of $250 million to $265 million from the AZEK acquisition [9][62] - North America fiber cement outlook predicts a low double-digit volume decline for fiscal 2026, primarily volume-driven [11] Strategic Initiatives - The completion of the AZEK acquisition has doubled the company's total addressable market and expanded its product offerings [8][19] - The company aims to achieve over $500 million in commercial synergies within five years, with benefits expected to begin in fiscal 2027 [12][50] - Management is focused on integrating operations and realizing cost synergies, with over 50% of targeted general and administrative cost synergies already actioned [8][44] Regional Performance - Asia Pacific net sales declined 10%, with a 25% volume decrease offset by a 22% rise in average selling price [7][57] - Europe experienced a 7% increase in net sales, driven by higher average selling prices, with an EBITDA margin improvement to 16% [7][59] - The company remains committed to outperforming market demand in both APAC and Europe despite challenging conditions [58][60]

Financial Data and Key Metrics Changes - Total net sales decreased by 9% year-over-year to $900 million, reflecting a normalization of channel inventories and lower demand expectations [32][34] - Adjusted EBITDA was $226 million, with a margin of 25.1%, down 21% from the previous year [32] - Adjusted net income was $127 million, with adjusted diluted EPS of $0.29 per share [32] - Free cash flow increased by 88% to $104 million, driven by strong cash generation and moderating capital spending [32] Business Line Data and Key Metrics Changes - North American net sales declined by 12%, primarily due to lower volumes, although average selling prices (ASP) increased by 3% year-over-year [33][34] - Legacy AZEK performed well, with mid single-digit sell-through growth in June, driven by new product contributions [9] - North American adjusted EBITDA was $206 million, with a margin of 32.1%, down 400 basis points year-over-year due to lower volumes and raw material inflation [35] Market Data and Key Metrics Changes - Single-family new construction starts in the South fell approximately 25% since February, leading to a more cautious inventory posture among builders [34] - Asia Pacific net sales declined by 10%, influenced by the cessation of operations in the Philippines, while ASP rose by 22% in Australian dollars [37] - European net sales increased by 7%, driven by higher ASP, with EBITDA margin improving to 16% [38] Company Strategy and Development Direction - The integration of James Hardie and AZEK aims to create a leading provider of exterior home and outdoor living solutions, with a focus on material conversion opportunities [4][5] - The company is committed to a homeowner-focused strategy, emphasizing customer and contractor partnerships to drive demand [11][12] - Future growth will be supported by strategic investments in innovation and localized manufacturing to enhance customer value [12][19] Management's Comments on Operating Environment and Future Outlook - Management noted that demand in both repair and remodel and new construction in North America is currently challenging, with homeowners deferring large projects due to affordability issues [6][8] - The company anticipates a mid-single-digit decline in end-market demand for the full year, adjusting expectations for softer demand in new construction [8][10] - Management expressed optimism about long-term growth potential, particularly through material conversion opportunities and strategic partnerships with homebuilders [13][72] Other Important Information - The company is on track to achieve $125 million in cost synergies over three years, with over 50% of the run rate target already realized [26] - Free cash flow for FY '26 is expected to be at least $200 million, with capital expenditures projected at approximately $400 million [42][43] - The company successfully completed a $1.7 billion debt financing, with gross debt standing at approximately $5.1 billion [45] Q&A Session Summary Question: Can you help parse out the single-family outlook versus the inventory element? - Management indicated that the Q1 results were as expected, with customers adjusting inventory levels due to a softer outlook, particularly in single-family new construction [50][52] Question: What is the plan to improve margin profiles given the demand challenges? - Management emphasized a disciplined approach to cost management, including freezing headcount and focusing on yield as volumes decline [58][60] Question: How much of the volume decline was attributed to inventory destocking? - Management noted that inventory destocking was significant, particularly in the second quarter, and that they expect some continued impact from this in the upcoming quarters [66][74] Question: How is the single-family new construction segment evolving? - Management reported that single-family new construction has been impacted significantly, with a notable decline in starts, particularly in the South [78][79] Question: What are the assumptions behind the EBITDA contribution from AZEK? - Management clarified that the guidance reflects a conservative outlook due to macroeconomic uncertainties and a cautious approach to channel inventory [85]

Core Insights - The company reported a decline in net sales and adjusted EBITDA for Q4 FY2025, reflecting soft end-market demand and ongoing market challenges [4][5][12] - Management anticipates a mid-single-digit decline in North American market volumes for FY2026, marking a fourth consecutive year of declines in large-ticket repair and remodel activity [9][13][25] - The pending merger with Azek is expected to drive significant revenue and cost synergies, enhancing growth and margin expansion opportunities [11][45][82] Financial Performance - Global net sales for Q4 FY2025 were $972 million, down 3% year-over-year, with adjusted EBITDA of $269 million, a 4% decline [4][5][62] - North America net sales reached $2.9 billion for FY2025, with a 2% revenue decline and a 3% volume decline [5][6][65] - Adjusted net income for Q4 FY2025 was $156 million, with adjusted diluted EPS of $0.36 [5][63] Regional Performance - Asia Pacific net sales declined 17% in US dollars and 13% in Australian dollars during Q4 FY2025, with a 31% decline in volumes attributed to the closure of the Philippines [3][7][69] - Europe achieved record net sales of $135 million in Q4 FY2025, up 5% in USD, driven by strong performance in high-value products [8][71] Cost and Margin Analysis - North America EBIT margin fell to 28.2% in Q4 FY2025, down 350 basis points year-over-year, primarily due to increased depreciation and amortization [6][66] - North America EBITDA margin was 34.4% in Q4 FY2025, down 190 basis points, with full-year EBITDA reaching $1 billion [6][67] - The company faced low double-digit inflation in raw materials, impacting margins, but managed to maintain strong cost control measures [9][63] Strategic Outlook - The company expects low single-digit net sales growth in North America for FY2026, with a focus on maintaining EBITDA margins near 35% [9][74] - Capital expenditures for FY2026 are projected to decline by nearly $100 million to approximately $325 million, supporting free cash flow growth [10][79] - The merger with Azek is anticipated to create a leading growth platform in building products, with expected baseline revenue synergies of $500 million [11][47][82]