Owens Corning Q2 FY2025 earnings call

• Safety: Maintained a very safe operating environment in the second quarter with a recordable incident rate of 0.60; hosted first global Safety Week in June. - Financial Performance: Continued strong and consistent performance; achieved adjusted EBITDA margins at or above 20% for the 20th consecutive quarter; revenues up 10% vs prior year, earnings grew 30% y-o-y; adjusted EBITDA $703 million with margin of 26% in Q2. - Strategic Actions: Completed sale of Building Materials business in China and Korea; sale of glass reinforcements business progressing; started up new laminate shingle line in Medina, Ohio and commissioned new nonwovens coating line in Fort Smith, Arkansas; investing in leading technology through pilot lines; integrating Doors business, having captured over 75% of $125 million enterprise run rate synergy target. - Organizational Moves: Appointed Nico Del Monaco as Roofing President and Jose Canovas as Insulation President; Gunner Smith leaving, recognized for roofing business achievements; company listed on Fortune 500 for 71st consecutive time.

Roofing Business: Q2 sales were $1.3 billion, up 4% from prior year. EBITDA was $457 million for the quarter, up 5% versus prior year, with EBITDA margins of 35%. Insulation Business: Q2 revenues were $934 million, a 4% decrease from Q2 last year. Insulation EBITDA for the second quarter was $225 million, down $21 million from prior year, with EBITDA margins of 24%. Doors Business: In the quarter, the business generated revenue of $554 million, in line with the outlook provided on the last call. EBITDA for the quarter was $75 million with EBITDA margins of 14%.

• Third Quarter Outlook: Anticipates overall market demand for nondiscretionary roofing repair activity to remain solid but declined vs prior year; expects residential new construction and discretionary R&R in U.S. to remain challenged; North America nonresidential construction expected relatively stable; Europe market conditions to gradually improve. Anticipates third quarter revenue for continuing operations to be approximately $2.7 billion to $2.8 billion, slightly below to in line with prior year; adjusted EBITDA margins of approximately 23% to 25% for the enterprise. - Business-Specific Outlooks: - Roofing: Anticipates revenue growth of low to mid-single digits; expects moderate cost and delivery inflation; manufacturing costs and SG&A to be up as investing in assets; expects EBITDA margin similar to prior year (34%). - Insulation: Anticipates overall revenue to decline mid- to high single digits compared to prior year, primarily due to volume decline in North American residential and sale of China building materials business; North American residential insulation revenue expected down low double digits y-o-y; North American nonresidential expected up slightly y-o-y; Europe expected up y-o-y; expects EBITDA margin for insulation to be in the low 20% range. - Doors: Expecting challenging market conditions to continue, resulting in revenue decline of low to mid-single digits vs prior year; EBITDA expected impacted by inflation including ongoing tariff impact; expects EBITDA margin of low double digits to low teens for the quarter. - Tariffs: Expect third quarter to be similar to second quarter with approximately $50 million of gross tariff exposure reduced to a net impact of around $10 million, primarily in the Doors business; expect small step-up in net tariff exposure in fourth quarter, with net tariff impact less than 1% of COGS in second half, favorable to previous guidance of 1% to 2% COGS exposure.

• Tariffs: Ongoing impact of tariffs, with more tariff exposure in Doors business due to cross-border product moves into Canada; need to actively work to mitigate. - Market Conditions: Uncertainties in residential new construction demand; potential volume declines and market softness in certain segments. - Operational Challenges: Cost inflation, including materials, labor, warehousing; potential impact of production downtime and inventory management issues.

Q: John Lovallo asked about North American industry capacity utilization and pricing, especially considering negative price cost in third quarter.

A: Todd Fister responded discussing industry utilization between 1.4-1.5 million housing starts, above 90% typically positive price but no conclusive trends below; seeing limited traction on res price increase, inflation in materials, labor, warehousing, not much positive price to offset; making surgical price moves as needed.

Q: Anthony Pettinari asked about nonres in Europe for insulation.

A: Todd Fister said seeing green shoots in Europe, encouraged with trends off low base; Europe has been weak since Ukraine invasion, teams done well getting costs out, capacity to sell and grow; North America nonres insulation seeing growth in data center construction related to AI, phone less product in commercial/industrial applications, positive price in quarter.

Q: Michael Rehaut asked about doors business guidance and line of sight to high-teen EBITDA margin.

A: Brian Chambers said doors business guiding pretty much in-line with Q2, seeing volume stability, good market pricing stability, good mix; long-term sees business performing 20% or above EBITDA margin, working on cost optimization, network integration on path to $125 million, network optimization opportunities, commercial progress.

Q: Stephen Kim asked about mix in insulation and roofing.

A: Todd Fister said insulation negative mix mostly timing related; Brian Chambers said roofing not seeing big mix variations, laminate shingle demand up, nonwovens integration no impact on mix, fits vertical integration and margin structure.

Q: Sam Reid asked about roofing volumes ahead of ARMA and outperformance.

A: Brian Chambers said expecting step down in market shipments in Q3 due to normalized storm season; outperformance due to contractor engagement model, investment in land capacity at Medina, inventory buying, operating facilities full out; contractor base loyalty driving volume.

Q: Brian Biros asked about specification in nonres insulation.

A: Todd Fister said insulation used in building envelope (controlling temp, moisture) and process equipment; products designed for applications, some specified by name, sticky customer relationships, stable pricing.

Q: Matthew Bouley asked about insulation margins between residential and nonresidential.

A: Todd Fister said res side results of restructuring, flexible cost-efficient network, commercial work; second quarter margin inclusive of inventory rebuilding and curtailment; nonres business growing, creating more durable margins.

Q: Philip Ng asked about North America insulation downtime, destocking, and price gaps.

A: Todd Fister said market volumes trend down, driven by completions decline, shift to multifamily; price gaps roughly in line with historic; curtailment through hot idle, longer maintenance downtime, option to cold idle; destocking seen in channel.

Q: Susan Maklari asked about SG&A investments in roofing and measuring returns.

A: Brian Chambers said targeted investments in commercial strength, brand, technology innovation; measure success by margin profile of invested businesses, look at market environment, CapEx focused on productivity and growth, specific market commercial initiatives to drive revenue and margin.

Q: Mike Dahl asked about resi pricing sequentially.

A: Brian Chambers said good price realization of April increase seen in Q2, expected to continue through Q3, lapping August 24 increase from last year will have impact but April increase realization expected to continue.

Q: Keith Hughes asked about light commercial industrial insulation.

A: Todd Fister said mixed outlook in light commercial, take per unit less than high-tech end markets; seeing strength in high-tech per unit end markets growing at accelerated rate, liking overall exposure.