Owens Corning

Hello everyone and welcome to Owens Corning's second quarter 2023 earnings call. My name is Daisy and I'll be coordinating your call today. If you would like to register a question, please press star followed by one on your telephone keypad. On today's call, you will only be allowed to ask one question to allow others the chance. I would now like to hand the call over to your host, Amber Wolfarth from Owens Corning to begin. Amber, please go ahead.

Thank you and good morning, everyone. Thank you for taking the time to join us for today's conference call and review of our business results for the second quarter of 2023. Joining us today are Brian Chambers, Owens Corning's chair and chief executive officer, and Ken Parks, our chief financial officer. Following our presentation this morning, we will open this one-hour call to your questions. In order to accommodate as many call participants as possible, please limit yourselves to one question only. Earlier this morning, we issued a news release and filed a 10-Q that detailed our financial results for the second quarter of 2023. For the purposes of our discussion today, we have prepared presentation slides that summarize our performance and results, and we'll refer to these slides during this call. You can access the earnings press release, form 10-Q, and the presentation slides at our website, owenscorning.com. Refer to the investors link under the corporate section of our homepage. A transcript and recording of this call and the supporting slides will be available on our website for future reference. Please reference slide 2 before we begin, where we offer a couple of reminders. First, today's remarks will include forward-looking statements based on our current forecasts and estimates of future events. These statements are subject to risks, uncertainties, and other factors that could cause our actual results to differ materially. We undertake no obligation to update these statements beyond what is required under applicable securities laws. Please refer to the cautionary statements and the risk factors identified in our SEC filings for a more detailed explanation of the inherent risks and uncertainties affecting such forward-looking statements. Second, the presentation slides and today's remarks contain non-GAAP financial measures. Explanations and reconciliations of non-GAAP to GAAP measures may be found in the text and financial tables of our earnings press release and presentation, both of which are available on owenscorning.com. Adjusted EBIT is our primary measure of period-over-period comparisons, and we believe it is a meaningful measure for investors to compare our results. Consistent with our historical practice, we have excluded certain items that we believe are not representative of our ongoing operations when calculating adjusted EBIT and adjusted earnings. We adjust our effective tax rate to remove the effect of quarter-to-quarter fluctuations, which have the potential to be significant in arriving at adjusted earnings and adjusted earnings per share. We also use free cash flow and free cash flow conversion of adjusted earnings as measures helpful to investors to evaluate the company's ability to generate cash and utilize that cash to pursue opportunities that enhance shareholder value. The tables in today's news release and the Form 10-Q include more detailed financial information. For those of you following along with our slide presentation, we will begin on slide four. And now, opening remarks from our chair and CEO, Brian Chambers. Brian?

Thanks, Amber. Good morning, everyone, and thank you for joining us. During our call this morning, I'll provide a broad overview of our second quarter performance and the work we are doing to strengthen and grow our company. Ken will then provide more details on our second quarter results, and then I'll come back to discuss what we are currently seeing in our markets and our near-term outlook. Overall in Q2, Owens Corning delivered another outstanding quarter, highlighting the capability of our teams, the value of our product lines, and the earnings power of the company. This strong performance continues to be driven by the actions and initiatives implemented by our team over the past several years to strengthen our commercial positions and improve our operating efficiencies, driving higher, more resilient earnings. I'll speak further to this in a few moments. but we'll now begin our review of the quarter, as always, with our safety performance. At Owens Corning, our commitment to safety is unconditional. During the second quarter, we maintained a very safe environment with an RIR of 0.59. Two-thirds of our facilities have operated injury-free this year, and more than half have done so for over a year. Financially, we delivered revenue of $2.6 billion, similar to second quarter 2022, with adjusted EBIT of $534 million, up 2% year over year, and adjusted EBITDA of $664 million, resulting in an adjusted EBIT margin of 21% and adjusted EBITDA margin of 26% for the company in the quarter. In addition, we generated free cash flow of $372 million in the quarter, similar to the same period last year. And, consistent with our capital allocation strategy, we returned $160 million to investors through dividends and share repurchases. During the quarter, each of our business segments continued to perform extremely well relative to market conditions, especially our North American businesses. In insulation, we continued to see the impact of good price realization, which helped to offset the impact of lower volumes. In composites, as expected, we saw the positive benefits of moderating costs and stabilizing demand trends driving mid-teens margins. And in roofing, we saw increased storm activity result in stronger demand, while price realization remained favorable. These results continue to highlight the work done by our teams to strengthen the earnings power of the company and position us for long-term success by leveraging our company's unique attributes and leading market positions. Commercially, we are innovating at a faster pace expanding our digital solutions, building stronger customer partnerships, and achieving price realization that reflects the value of our products and brand. Operationally, we are focused on increasing our efficiencies, optimizing our manufacturing networks, investing in factory automation and process technologies to increase productivity, and making targeted capacity expansions. All of this work is connected through the framework of our enterprise strategy, which we launched almost two years ago. focused on strengthening our core product and market positions, expanding into new product adjacencies, and developing more multi-material and prefabricated solutions. This strategy not only leverages our material science, market, and manufacturing expertise in new ways, it capitalizes on key secular trends around housing, sustainable building solutions, and changing construction practices, which create long-term growth opportunities for our company. Over the past few years executing this strategy, we have made both structural improvements and strategic investments within each of our businesses, which leverage our core enterprise capabilities to improve our performance and position us for additional growth. Within installation, we have significantly improved our fixed cost position through a number of network optimization and productivity initiatives, while investing in new capacity and new product platforms that increase our growth potential as the world continues to need more energy efficient solutions. Within composites, we are pivoting to higher value applications focused on the building and construction, renewable energy, and infrastructure markets by expanding key product platforms such as nonwovens and investing in new product lines such as structural composite lumber and decking. And within roofing, we continue to focus on expanding our contractor network innovating new products, increasing our shingle capacity, and driving our roofing component attachment rates higher as we expand our multi-material system offering. Overall, through our investments and our execution, we have built our company to grow at a faster rate, produce higher, more consistent earnings, be more capital efficient, and continue to generate significant operating and free cash flow. In short, Owens Corning is a substantially stronger company today. And we continue to demonstrate that even within more challenging market conditions, we have the strategy, the team, and the operating discipline to keep performing at a high level. Our improved performance is also driven by our commitment to be a leader in innovation and sustainability. During the first half of 2023, we continued to accelerate our product and process innovation, launching 17 newer refreshed products, spanning core platforms in our roofing, insulation, and composite businesses. Notable among our second quarter launches was the introduction of our new Owens Corning Lumber offering used for deck framing. An extension of last year's Ware Deck acquisition, OC Lumber is a structural composite material that provides an alternative to traditional wood and steel. This new material is reinforced with our Advantex fiberglass, a proprietary, corrosion-free technology that adds strength and durability to resist mold, mildew, and pests, permits contact with salt and fresh water, and installs just like wood. With opportunities to displace traditional materials and expand our product lines across residential and commercial structures, we didn't just acquire a decking company. We gained a new technology and capability to enter new markets and build a much bigger business. OC Structural Lumber is a great addition to our family of market-leading products and solutions, and a great example of how investments and product innovation are helping our customers win and grow in the market while creating new growth avenues for our company through material conversion opportunities. Finally, before I turn it over to Ken, I'd like to provide an update on our sustainability efforts. In May, we published our 17th Annual Sustainability Report, which serves as a blueprint for how our 19,000 employees across the world are pursuing and delivering on our mission to build a sustainable future through material innovation. Among our noteworthy first half accomplishments was the completion of a major renewable electricity supply agreement, which is expected to come online in stages through 2024. The agreement represents a major achievement for our company in Europe and a significant contribution to reducing our overall carbon emissions. In addition to wind-driven virtual power purchase agreements already in operation in Finland and Sweden, the new agreement means that 100% of our European production sites and our science and technology centers will be covered by contracts supplying renewable electricity to support our sustainability goals. With that view of our performance and strategic initiatives, I will now turn it over to Ken to discuss our financial results in more detail. Ken?