Owens Corning

Hello everyone and welcome to Owens Corning third 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 over to your host Amber Wolfarth from Owens Corning to begin. So 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 third quarter 2023. Joining us today are Brian Chambers, Owens Corning's chair and chief executive officer, and Todd Pfister, 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 10Q that detailed our financial results for the third quarter 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 two 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 in 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 comparison, 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 has 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 thanks for joining us today. I'd like to begin by welcoming our new chief financial officer, Todd Pfister, to our call this morning. Some of you have had a chance to hear from Todd in his most recent role as president of our insulation business. He brings more than 25 years of financial, operational, and strategic experience to his new role, along with deep industry knowledge and valuable customer perspective. Todd and I have worked closely together over the past several years, and I look forward to continuing to partner with him as our CFO. During our call this morning, I'll start with a broad overview of our performance, including some of the key focus areas driving our success. Todd will then provide further detail on our third quarter results, and I'll come back to discuss what we are currently seeing in our markets and our near-term outlook. Overall, Owens Corning delivered another strong quarter as our global teams continued to execute at a high level in response to dynamic market conditions. The sustained quality and consistency of our performance reflects the strength of our team, our market positions, and our strategy. I'll speak more about this shortly, but first, I'll begin our review of the quarter, as always, with our safety performance. At Owens Corning, our commitment to safety is unconditional. During the third quarter, we maintained a very safe environment with an RIR of .66, with half of our global locations operating injury-free for a year or more. Financially, we delivered revenue of $2.5 billion, similar to third quarter 2022, with adjusted EBIT of $518 million, up 6% year-over-year, and adjusted EBITDA of $644 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 $581 million in the quarter, and consistent with our capital allocation strategy, we returned $187 million to investors through dividends and share repurchases. Throughout the quarter, each of our segments continued to perform well. In roofing, the strength of our contractor network and product offering drove increased demand with a heightened storm season. In insulation, we saw sequential stability in our technical and global businesses while experiencing some near-term buying impact in our residential business as demand tracked more closely to lag housing starts. And in composites, as expected, we saw slower market demand and softer pricing for our glass reinforcement products, while input costs continued to moderate. With slowing demand, we took additional actions to manage our inventories. Our ongoing ability to deliver strong results within these market conditions demonstrates the progress we've made in structuring our company to generate higher, more resilient earnings through the cycle. This improved level of performance is the result of strategic choices we've made and the operating initiatives being driven by our global teams to more fully leverage our enterprise capabilities. From a commercial perspective, we continue to operate with a focus on helping our customers win and grow in the market with innovative products, unique sales and marketing capabilities, and our distinct brand. We've also enhanced our pricing acumen through the use of digital tools shifted our product and customer mix to higher-end segments, and accelerated our product innovation. For example, over the past two years, we have increased investments in R&D by roughly 15% annually to advance our material innovation and development capabilities. Through the first three quarters of 2023, our unique product and process innovation has translated to the launch of 25 new or refreshed products across all three of our businesses. Operationally, we've increased our manufacturing performance and operating efficiencies through a combination of network optimization moves, new process innovations, and productivity initiatives. This ongoing work is increasing the throughput of our existing assets and improving our margins. We are also making targeted production investments in each of our businesses to increase our capacity to meet the growing demand for our building and construction products. Over the past few years, We've announced a glass nonwoven plant expansion and new coating line in our Fort Smith, Arkansas composites location, a new formula NGX insulation plant in Russellville, Arkansas, and new laminate manufacturing capacity at our Medina, Ohio roofing plant. All of these strategic additions are expected to come online between early 2024 and the end of 2025, providing additional capacity to further strengthen our current market positions. As we look at additional opportunities to grow, we will continue to be disciplined operators, focusing on markets and product lines where we can build leading positions through our market knowledge, material science capabilities, and manufacturing expertise. Overall, through our investments and focused execution, we have structurally improved the margin profile of the company and increased our ability to generate significant operating and free cash flow. Our capital allocation strategy continues to prioritize maintaining an investment-grade balance sheet while investing in organic growth and productivity, acquisitions that leverage our unique material science, manufacturing, and market expertise, and returning approximately 50% of free cash flow to shareholders over time through dividends and share repurchases. Over the past two years, given the strength of our operations and confidence in future performance, we have doubled our dividend. And over the past four years, we have bought back approximately 20% of our outstanding shares. Linking all of these choices, investments, and operating priorities together is our enterprise strategy, which we launched two years ago. It focuses on strengthening our position in core products and markets, expanding into new product adjacencies, and developing more multi-material and prefabricated solutions. The result is a company that is well positioned to outperform prior cycles with opportunities for continued growth. Now, before I turn it over to Todd, I'd like to provide an update on another key performance driver, sustainability, which remains core to who we are and what we do at Owens Corning. In September, Owens Corning joined the European Alliance to Save Energy as the newest partner in its mission to advance energy efficiency and contribute to a more sustainable Europe. We look forward to leveraging this new membership to strengthen our partnership with key stakeholders in the region and share knowledge and best practices on sustainability topics across industries. In addition, we recently announced two other sustainability-related developments. Within our roofing business, we are advancing a pair of initiatives aimed at recycling shingles. The first effort involves deconstructing waste shingles to reclaim 100% of component materials. A recycling poly we began with our partners less than a year ago has now been proven at scale, positioning us to begin plant trials to incorporate the extracted materials into the development of new prototype shingles. A second initiative focused on recycling shingles in the asphalt pavement is also progressing. We've partnered with the National Center for Asphalt Technology to generate life cycle assessment data on shingle use in pavement. We believe the results will provide asphalt contractors with a clear value proposition to incorporate recycled shingles into their paving mixtures, which can lower the carbon footprint while maintaining road performance. Together, these initiatives support our goal of recycling 2 million tons of shingles annually in the US by 2030, and our broader ambition to create a circular shingle economy and divert shingle waste from landfills. We look forward to providing further updates as these programs move forward. And finally, Owens Corning was honored to again place in the top 10 of the 100 best corporate citizens list, and first within our industry category. This is the sixth year in a row we have ranked in the top 10. This list recognizes outstanding environmental, social, and governance performance and transparency among the largest publicly traded US companies. This achievement is particularly meaningful as it reinforces the importance of the work we do and the way we do it. It directly speaks to the commitment of our 19,000 employees that support our mission to build a sustainable future through material innovation. With that, I will now turn it over to Todd to discuss our financial results in more detail.