Louisiana-Pacific Corporation

Good day, and welcome to the Q3 2023 Louisiana Pacific Corporation Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Mr. Aaron Howald, Vice President of Investor Relations and Business Development. Please go ahead, sir.

Thank you, Operator, and good morning, everyone. Thank you for joining us to discuss LP's results for the third quarter of 2023, as well as our updated full-year outlook. My name is Aaron Howald, and I am LP's Vice President of Investor Relations and Business Development. With me this morning are Brad Southern, LP's Chief Executive Officer, and Alan Hockey, LP's Chief Financial Officer. During this morning's call, we will refer to a presentation that is available on LP's IR webpage, which is investor.lpcorp.com. Our 8K filing is also available there, along with our earnings press release and other materials detailing LP's strategy and sustainable business models. Today's discussion will contain forward-looking statements and non-GAAP financial metrics as described on slides two and three of the earnings presentation. The appendix of the presentation also contains reconciliations that are further supplemented by this morning's 8K. I will incorporate that content herein by reference rather than reading those slides. And with that, I'll turn the call over to Brad.

Thanks, Aaron, and thank you all for joining us to discuss LP's Q3 results and our full-year outlook. The third quarter was our strongest of the year by far for both Siding and OSB. It was also a quarter in which LP's teams achieved key milestones for growth and sustainability, and one in which we were recognized for our continuing focus on building a stronger and more inclusive culture. Page five of the presentation shows financial highlights for the quarter. LP generated $728 million in net sales in the quarter, which was 15% lower than Q3 of last year. But higher OSB prices and improved sell-through and inventory normalization and siting led to a higher overall EBITDA margin than last year. With the result that LP earned $190 million in EBITDA, only 5% less in Q3 of last year. As a result, LP exceeded the high end of our guidance range despite OSB prices falling in September. The $190 million in EBITDA translated very cleanly to $187 million in operating cash flow, and LP ended the quarter with $160 million in cash on hand after returning $17 million to shareholders via dividends and investing $49 million in growth and sustaining capital. We repaid our evolving credit facility and ended the quarter with over $700 million in liquidity. Page 7 of the presentation shows siding growth relative to the housing market on a trailing 12-month basis. Remember that Q3 of 2022 was the best quarter on record for siding volume and revenue as we remained on a managed order file until early December of last year. Despite this very difficult comp, on a trailing 12-month basis, SmartSide sales volume beat single-family housing starts by 10 percentage points. Starts were down 16%, but siting volume was down only 6%, and siting prices were up 8%. As you can see in the pie chart to the right, expert finish was stable at 8% of volume in the quarter. In the first half of 2023, siting sales were dampened by inventory destocking after we finally transitioned from a managed order file late last year. Q3 saw the normalization of sell-through rates and inventory levels. As expected, and despite a market that is facing increasing affordability challenges, higher interest rates, and elevated economic uncertainty, the third quarter saw sequentially higher volumes and average selling prices in the siding business compared to Q2. As a result, we believe that the order patterns and channel inventory levels we are experiencing now are consistent with normal seasonal patterns with minimal lingering headwinds from destocking. This was not the first time that the siding business has been on a managed order file, and the inventory digestion period before the resumption of a normal order cadence takes time. I am proud of the perseverance and dedication that siding sales and operations teams demonstrated as we worked through this process. Before I hand the call over to Alan, I want to mention a few additional accomplishments in the quarter. Last month, we officially opened our newest pre-finishing facility in Bass, New York. This brings enhanced scale, efficiency, and geographic expansion to expert finish. I want to officially welcome the BATH team to LP. BATH is the third new facility for the siding business in the past two years after the conversions of Holton and Segola. I am proud of the safe and efficient execution of all our recent capacity additions in siding and confident that we are well positioned for resumed growth in the diverse markets we serve. In the third quarter, LP published our third sustainability report, as well as environmental product declarations for the structural solutions portfolio of value-added OSB products. Structural solutions products like textual gradient barrier, weather logic sheathing with integrated air and water barrier, and legacy flooring all sequester more carbon than is emitted during their manufacturing and lifecycle. Our customers and shareholders can be confident that LP's suite of engineered wood products combined with our responsible and sustainable management of forest resources means that LP can deliver best-in-class OSB and siding products while also having a positive impact on the environment. This is most notable in siding where competing products are made predominantly of cement or vinyl. When it comes to durable products with great curb appeal and positive impact for builders, contractors, homeowners, and the environment, It is very hard to beat LP's portfolio of sustainable and carbon negative engineered wood building solutions. Lastly, before I turn the call over to Alan, I'm happy to say that LP was named by our local newspaper, the Tennessean, and USA Today as a top workplace in Middle Tennessee, and by Newsweek as one of America's greatest workplaces. Building a safe and inclusive culture where all of our team members feel welcome and encouraged is its own reward. And while we will never stop trying to improve, I am proud of our company and the progress we continue to make. And with that, I will turn the call over to Alan.