James Hardie Industries plc

Welcome to the James Hardy Fiscal Fourth Quarter 2026 Earnings Conference Call. After prepared remarks by management, there will be an opportunity to ask questions. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. I would now like to hand the call over to Chris Russell, Senior Vice President of Global Strategy and Corporate Development. Please go ahead.

Thank you, Operator, and thank you to everyone for joining today's call. I am joined today by Aaron Erter, Chief Executive Officer of James Hardy, Brian Lotta, Chief Financial Officer of James Hardy, and John Skelly, President and General Manager of James Hardy 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 of our earnings presentation 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. In addition, non-GAAP measures should not be considered in isolation or as a substitute for results prepared in accordance with GAAP. Reconciliations of non-GAAP measures discussed today can be found in our earnings presentation, which is posted on our website. 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. Organic net sales comparisons exclude the impact of the ASIC acquisition as well as the impact of exiting our Philippines business in Q2 fiscal year 25. With that opening, I'm pleased to hand the call to Aaron.

Thanks, Chris. I'd like to take a moment to thank Chris for his contributions during this transition period in investor relations and to welcome Bill Seymour, our new Vice President of Investor Relations. Bill brings extensive IR experience to the role and a strong track record in the field. In my remarks today, I will briefly review the highlights for Q4 and fiscal 2026, discuss our strategy, and end with our outlook. We delivered a solid fiscal fourth quarter and full year, despite a challenging construction market. The result of staying focused on what we can control execution, cost, and serving our customers. For the fourth quarter, we delivered net sales of $1.4 billion and adjusted EBITDA of $381 million ahead of expectations with adjusted EBITDA margin of 27.1%. Demand held up across our core categories despite weather-related softness early in the quarter in the United States. and our teams executed well, protecting price, managing costs, and supporting demand as conditions improved. For the full fiscal year, we delivered net sales of $4.8 billion and adjusted EBITDA of $1.3 billion with adjusted EBITDA margin of 26.2%. Reflecting the resilience of our portfolio, and the actions we took across the business. Free cash flow for the year was $314 million, reflecting tightly managed operations in the year, and despite significant one-time integration and acquisition-related costs. While organic net sales declined in our fiber cement business during the year, We are confident in the underlying demand drivers and expect this business to grow in fiscal 2027. This confidence is reinforced by our great products, leading brands, and best in class sales force, which together position us to outperform the market and capture long-term growth opportunities. As I look back on fiscal 2026, we delivered against a number of objectives. A key differentiator for us is the hardy operating system. Through HOSS, we've taken out and offset significant inflationary costs by improving procurement, driving productivity in our plants, and applying operational discipline. Even with lower volumes, we were able to maintain best-in-class margins and keep the business performing at a high level. As we continue to bring the companies together, We are applying the Hardy operating system to the ASAC manufacturing network. We are encouraged by the early progress in the ASAC plants and believe that Haas will drive productivity and savings over the long term. We utilized a Haas framework to make the difficult decision to close two of our legacy fiber cement plants in January 2026. As we move forward, we will continue to leverage Haas as a critical tool to drive productivity, manage costs, and support both margin expansion and reinvestment and growth. Another milestone in the integration we recently completed was combining our sales forces. We believe we have the largest, most downstream-focused sales team in our space. One sales force, one company. and a portfolio of leading pro brands, James Hardy, TimberTech, AZAC, and more. We are seeing commercial synergy momentum build as a result of the combination, with early wins validating the strength of our integrated go-to-market approach. These wins are both numerous and broad-based. You can see two examples in our earnings presentation. One example is our expanded relationship with Lansing Building Products. Lansing has been a longtime and valued partner of James Hardy, and through this expansion, we are consolidating multiple PVC trim brands to Azac across their footprint. This simplifies the offering for the channel, increases attachment of Azac trim on our fiber cement siding jobs, and strengthens our ability to deliver a more complete exterior solution. Another example is our recently announced expansion with CBUSA. This exclusive agreement adds TimberTech to an existing relationship between James Hardy and CBUSA, expanding our share of Wallet, while positioning us as a single source provider of exterior products for custom builders. These are just two examples. The breadth of opportunities and early traction reinforces our confidence in hitting $125 million in run rate commercial revenue synergies exiting fiscal 2027. On cost synergies, we're ahead of schedule without sacrificing service or execution. Integration continues and our conviction in this combination grows. Next, I'd like to discuss our go-to-market strategy in our largest market, North America, starting with the size of the prize. Our $23 billion exterior total addressable market remains heavily underpenetrated by more resilient materials. Wood and vinyl still dominate siding, decking, railing, and outdoor structures, despite real limits on durability and maintenance. a $17 billion plus conversion opportunity. The James Hardy-Azak combination positions us to capture it, build a leading exterior platform with the best brands, and win in both R&R and new construction. To capture it, we're executing against five pillars that drive our growth and margin expansion. First, material conversions. We're replacing wood and vinyl with materials that are more resilient, need less maintenance, and resist fire. We're seeing this play out in real time. Contractors who trust our brands are switching competitive decking to timber tech, and longtime Hardy Siding contractors are adding composite decking to their service offerings. There are approximately 60 million decks in the United States, and the vast majority are wood, representing a long runway as the installed base weathers in the elements. These two-way winds are exactly what we expected from the combination. With our brands, products, and contractor relationships, we are positioned to continue to deliver above-market growth. Second, channel expansion. in scaling what each business does best across the combined footprint. In the south, approximately 2,500 locations stock Hardy, but not TimberTech yet. A clear runway for our outdoor portfolio into accounts where we have established relationships. In the north, the inverse. Approximately 700 strong TimberTech and AZEC locations where Hardy isn't yet stocked. Disciplined approach. real growth opportunities. The third pillar is innovation. The product and R&D teams from both companies are now combined, focused on solutions that accelerate exterior conversion. Innovation has been a key element of ASAC's 500 to 700 basis points above market growth per year. We're applying that same playbook to fiber cement to expand our market and drive new product growth over time. Fourth, brand preference. James Hardy, Azak, and TimberTech are among the most recognized brands in our categories, and we're extending that lead through targeted marketing, contractor education, and innovation, most of it in-house. The impact is clear. In our DRNA business, brand search volume has increased at a 40% CAGR over the past three years, while customer sample orders, a leading indicator of future demand, have grown at nearly 15% annually over the same period. This marketing strength also carries through to our loyal TimberTech pros, where our data suggests that the consumer demand we are generating has established TimberTech as the leader in brand awareness among contractors. This positions us for sustained share gains over time. As we move forward, we have combined the marketing teams and are applying the ASAC in-house marketing approach to the fiber cement side of the business. As we scale this competency, we expect to drive increased awareness, consideration, and brand preference. Fifth, simplifying the consumer journey. We're making it easier for homeowners to choose and purchase our products. A key part of this has been a full replatforming of our website, designed to improve how homeowners research, compare, and ultimately select products for their homes. Just as important, it better connects homeowners to our contractor network, helping turn interest into action. Underpinning it all is the Hardy operating system. Continuous improvement in safety, quality, service, and cost. Together, this is a clear path to sustainable growth, margin resilience, and long-term value. Now let me talk a little bit about our fiber cement growth plan. Beyond these five pillars, our fiber cement growth plan is central to the strategy. We have clear plans to re-accelerate siding and trim. And as noted, we expect fiber cement to return to organic volume growth in fiscal 2027. Step one, a deliberate focus on the Northeast and Midwest, where we're underpenetrated, and where R&R would and would look siting alone is an approximately $1 billion conversion opportunity. ASAC gives us immediate relevance, established channels, strong relationships, and complementary products. In these markets, we're actively pursuing the opportunity across multiple fronts. including expanded dealer engagement, targeted training programs, and scaled contractor conversion initiatives. Central to this effort is the continued rollout of expanded statement and statement essentials, which ensure James Hardy has the right offering for each contractor in our value chain. We launched this program with a Midwest pilot in April 2025, and the results to date provide clear evidence that the strategy is working. We are seeing consistent acceleration and shift to revenue across each quarter, with growth culminating in double-digit percentage gains. This reflects improved execution in the market and early success in converting demand into realized revenue, and we are scaling this approach to other regions throughout our footprint. We're hitting these markets on multiple fronts. Hardy Pro Lab, a series of mobile training units, supports contractor adoption with hands-on training on ease, speed, and economics of fiber cement install. Based on Midwest pilot success, we've expanded the program across approximately 50 dealer locations in the broader Midwest and Northeast with strong early traction. Our approach focuses on three opportunities. One, converting vinyl siding. Two, winning against all wood siding types. And three, expanding our presence in premium products. First, vinyl. We're accelerating penetration in the Northeast, Midwest, Carolinas, and Canada, backed by new products, expanded Color Plus rollout, and more contractor engagement and training. Second, winning against wood. We are rolling out easier and faster to install products, targeted downstream sales and marketing, and expanded channel access, including the legacy AZAC dealer network. Fire resilience is becoming an increasingly critical factor in this dynamic. As building codes evolve, insurance requirements tighten, and homeowners place greater emphasis on durability and risk mitigation, fiber cement's non-combustible properties are emerging as a more meaningful differentiator versus wood and other combustible materials. While this is most pronounced in higher-risk regions, we are also seeing broader awareness and adoption across markets, reinforcing the structural advantage of our portfolio and supporting continued material conversion. Third, premium products. Timber hue and enhancements to artisan and other premium lines target custom builders and high-end remodelers. leveraging our independent channel strength where design and durability drive the decision. Together, these priorities position us to accelerate conversion, take share, and drive durable volume growth and fiber cement siting. Let me talk to you a little bit about our external environment and outlook. Ryan will cover our outlook in more detail, but let me quickly frame how we see the external environment and touch on our approach to fiscal 2027. The market has shifted substantially in the last few months. At the start of the year, we planned for broadly flat market demand in fiscal 2027. Since then, key variables have changed. 30-year mortgage rates below 6% late February moved meaningfully higher after the Middle East escalation. Builder confidence and consumer sentiment have softened. Across our dealers and contractors, nearly half cite economic uncertainty as their biggest challenge. While the broader market remains somewhat challenging, I want to be clear, we are optimistic about our path forward. We are seeing solid momentum in the business and are intensely focused on execution. We expect to deliver market outperformance, a return to growth in fiber cement, adjusted EBITDA expansion, and we expect to significantly grow our free cash flow, which will drive meaningful deleveraging. Now, over to Ryan, who will take us through the financials.