Owens Corning Aktie

Ladies and gentlemen, thank you for joining us, and welcome to Owens Corning First Quarter 2026 Earnings Call. [Operator Instructions] I will now hand the conference over to Darren Garvin, Director of Investor Relations. Please go ahead.

Good morning, and thank you for joining us to discuss Owens Corning's First Quarter 2026 Results. Joining me today are Brian Chambers, our Chair and Chief Executive Officer; and Todd Fister, our Chief Financial and Operating Officer. Our earnings release, Form 10-Q and presentation slides were issued earlier this morning and are available on the Investors section of our website at owenscorning.com. Following our prepared remarks, we will open the call for Q&A. To allow for broad participation, please limit yourself to one question.

Before we begin, please refer to Slide 2. Today's remarks will include forward-looking statements, which are subject to risks and uncertainties that could cause actual results to differ materially. We undertake no obligation to update these statements, except as required by law. Please refer to the cautionary statements and risk factors identified in our SEC filings for more detail.

This presentation also includes non-GAAP financial measures. Explanations and reconciliations to GAAP measures can be found in our earnings release and presentation materials available on our website.

Financial metrics discussed today reflect continuing operations except for cash flow measures, which include amounts related to glass reinforcements. With the completed divestiture of glass reinforcements, Q2 will be the final quarter that cash flow includes the impact of discontinued operations. For those following along with the presentation, we will begin on Slide 4.

And with that, I'll turn the call over to our Chair and CEO, Brian Chambers.

Thanks, Darren. Good morning, everyone, and thank you for joining us today. I know many of you have had the opportunity to speak with Darren, who recently assumed leadership of our Investor Relations function, and I want to welcome him to his first earnings call in this role. I also want to recognize and thank [ Ameren Wolford ] for all of her great work leading Investor Relations and wish her well in her new role leading our finance team in Roofing.

To begin, I'll provide a brief overview of our first quarter performance and then discuss our progress in reshaping Owens Corning as a more focused and more integrated building products leader, which generates consistently strong margins and cash flows. Todd will then provide a detailed review of our first quarter financial results, and I'll come back to share our outlook for the second quarter.

Entering the year, we continue to perform at a high level, despite current residential market conditions. Repair and remodel demand and new residential construction activity continue to reflect affordability challenges and consumer uncertainty. Roofing activity was boosted by end of quarter inventory restocking, but remained impacted by low carryover demand from the uniquely quiet storm season in the second half of last year.

Against that backdrop, our team executed well and delivered strong operating performance. For the past several quarters, we've been operating through markets with declining volumes, but our ability to consistently deliver solid results highlights the strength of our enterprise and the structural improvements we have made.

We are demonstrating the durable performance of the new Owens Corning, a focused building products company that outperforms through the cycles and is poised for significant growth as repair and remodel investments and new construction activity increases in the future. I'll share more about our financial performance in a moment.

But first, I'll lead with safety. Our Safer Together operating framework is driving improved results as we start the year. with a first quarter recordable incident rate of 0.46. Our team's commitment to working safely achieved one of the best quarters on record in each of our businesses with nearly 85% of our sites working recordable injury free.

Turning to first quarter financial performance. We generated $2.3 billion in revenue and $369 million in adjusted EBITDA with an adjusted EBITDA margin of 16%. We also returned $63 million to shareholders through a cash dividend. This reflects our ongoing commitment to return $1 billion of cash to shareholders in 2026.

For the past year, we've delivered strong margins on lower market volumes in Roofing and Insulation. In fact, when we compare today's results to similar market conditions over the past 10 years, we have improved margins across both businesses by over 500 basis points.

Across the company, we are seeing the impact of structural improvements made to strengthen our market positions and streamline our operating cost. In Roofing, we are expanding our contractor base through an industry-leading engagement model. growing our high-margin components business and increasing capacity to service a sustained shift toward premium laminate shingles.

In our Insulation business, we've invested in a more profitable mix of products and applications and restructured our manufacturing network to be more efficient and more flexible.

And in Doors, we are applying the same commercial and operational playbook used to increase revenues and improve margins in Roofing and Insulation, utilizing an integrated go-to-market strategy to increase our customer share positions while achieving significant operating cost synergies.

Taken together, these actions reflect how a more focused and integrated Owens Corning is operating today. by leveraging our unique OC advantages to drive growth and productivity and deliver structurally higher and more durable margins.

One key part of the playbook is our integrated go-to-market strategy that combines the breadth and depth of our distribution network with our downstream demand pull-through model. Commercially, we've built one of the strongest distribution networks in building products and are leveraging that strength across the enterprise.

We serve over 4,100 home center locations and more than 8,000 distributed locations, providing broad access to our product categories, which gives our downstream customers with the widest choice of service platforms. Our network has grown through commercial strength that is unparalleled in the market.

Home center customers value our in-store service, merchandising capabilities, unique product portfolio and highly recognized brand, both on the shelf and online, which helps drive traffic and increase average ticket size. As a result, we've earned additional placement across all 3 of our product categories at Lowe's, and we're recently recognized in their annual vendor partner awards for our ability to deliver quality products, innovation, value and service.

Distributors choose Owens Corning because we provide easy-to-sell products, and they increasingly see value in offering a complete residential package, Roofing, Insulation and Doors, as we help them grow with our down channel customers across all 3 product categories.

Through our unique customer engagement model, we've built deep and loyal partnerships with the contractors, builders, dealers and specifiers, who utilize our iconic brand, our wide array of products and our robust marketing and merchandising programs to help them grow their businesses. This partnership accelerates demand creation, deepens distribution partnerships and is a meaningful source of differentiation for Owens Corning.

And we continue to focus on increasing and expanding our network. In Roofing alone, we've grown our contractor network to over 30,000 members. Operationally, alongside our commercial strength, we are leveraging the full scale and capabilities of the enterprise to deliver a winning cost position.

Over the past several years, we've optimized our manufacturing network, improved flexibility and invested in productivity and efficiency across our businesses. This includes expanding our use of intelligent monitoring and AI-enabled tools to improve asset reliability, reduce unplanned downtime and support a structurally lower cost position.

Today, we are monitoring and analyzing over 20,000 process sensors in our plants, using AI to provide real-time alerts that help our teams predict risk before they impact safety, quality or productivity. These capabilities are deployed in nearly 40 plants across our 3 businesses, with plans to continue expanding.

We are also capturing meaningful cost synergies in our Doors business as we leverage enterprise manufacturing and supply chain capabilities and processes. Currently, we are on track to achieve approximately $135 million in run rate enterprise cost synergies by midyear, exceeding the $125 million we committed to. We are also making progress to deliver an additional $75 million of structural cost improvements within our operations. These actions are reducing the cost structure of the business and supporting a path to improve margins.

At the same time, we're simplifying and standardizing work across the company to reduce complexity and improve operating expense efficiency. By continuously identifying opportunities and maintaining a best-in-class cost structure, we are strengthening our ability to self-fund growth initiatives and reinvest in our OC Advantages. Through this work, we are enhancing our ability to perform in today's environment while positioning us to grow revenues and earnings as volumes increase.

We've also taken decisive portfolio actions to unlock cash and deploy capital to the opportunities that best support growth and returns. A key milestone in this effort was the recently completed sale of our glass reinforcement business. As a result, we will see cash proceeds from the transaction of approximately $280 million and expect to generate additional cash of $50 million to $70 million from excess alloy sales over the next year.

With the reshaping of Owens Corning complete, we are positioned to operate as a more integrated company and capture the full value of our complementary product platforms.

To help drive this next phase forward, we recently expanded Todd Fister role to Chief Financial and Operating Officer. Todd's deep strategic and operational expertise, along with his knowledge of our people and the building products industry, will be key to our ability to unlock efficiencies, streamline execution and accelerate organic growth by fully leveraging the OC Advantages across the enterprise. Todd will provide both operational and financial leadership as we conduct a search for a Chief Financial Officer.

Before I turn it over to Todd, I also want to provide a brief update on our sustainability journey, which is fundamental to how we operate and build a strong company. We continue to embed sustainability into our operations by reducing emissions and waste to landfill and increasing the use of recycled materials, actions at lower cost, improve efficiency and support both our winning cost position and our growth in Europe.

In recognition, we were recently honored by S&P Global as a top 1% performer in the Sustainability Yearbook for the building products industry placing us among a select group of sustainability leaders worldwide. We look forward to sharing more details on our progress in the upcoming release of our 20th annual sustainability report.

In summary, our first quarter results demonstrate the strength of the operating model we have built. Moving forward, we will remain focused on leveraging the OC Advantages across our complementary businesses to create value for both our customers and our shareholders.

With that, I'll turn it over to Todd.

Thank you, Brian, and good morning, everyone. Our first quarter results once again demonstrate the benefits of the structural improvements and portfolio transformation we've been executing. As the macro environment improves, we have room to grow the top line and bottom line significantly from this level.

The actions we've executed have meaningfully changed the earnings profile and cash generation potential of Owens Corning, resulting in a business that is more resilient through the cycle, better positioned to manage different markets and capable of generating consistently attractive returns with better capital efficiency.

I'll begin on Slide 5 and walk through our enterprise results for continuing operations in the first quarter. Against this backdrop, first quarter revenue declined 10% year-over-year, largely due to the market environment. Adjusted EBITDA for the quarter was $369 million, and we delivered an adjusted EBITDA margin of 16%.

While these results clearly reflect the impact of market demand, they also highlight the positive durability of our margin structure particularly when compared to prior cycles in Roofing and Insulation.

During the quarter, we recorded $75 million of adjusting items, including amounts related to our continued cost optimization efforts as we operate now as a focused building products company in charges related to a previously disclosed recall in our [ Paroc ] business. We do not expect to incur additional material charges related to the recall products. Adjusted earnings per diluted share for the quarter were $1.22.

Tuning to Slide 6. Free cash flow in the first quarter was a net outflow of $387 million. This use of cash reflects the seasonal working capital we typically experience early in the year in addition to higher capital expenditures. With the completed divestiture of glass reinforcements, Q2 will be the final quarter that cash flow includes the impact of discontinued operations.

Capital additions for continuing operations were $210 million in the quarter, up from last year. We are investing in elevated but targeted levels to support long-term growth, expand capacity and drive productivity and efficiency across the enterprise. For the 12 months ending March 31, 2026, our return on capital was 10%. Our debt-to-EBITDA ratio was 2.5x at the middle of our targeted 2 to 3x range.

At quarter end, the company had liquidity of $1.8 billion, consisting of $272 million in cash and $1.5 billion available under our bank debt facilities. Maintaining a strong investment-grade balance sheet remains a priority.

During the quarter, we returned $63 million to shareholders through a cash dividend. We did not repurchase shares in the first quarter, reflecting the seasonal use of cash for working capital. We remain committed to returning $1 billion to shareholders in 2026 through dividends and share repurchases in addition to the $1 billion we returned to shareholders in 2025,

With the glass reinforcements business sale complete, we plan to use the proceeds to fund organic growth initiatives and return cash to shareholders, consistent with our existing capital allocation priorities. We are focused on generating strong operating cash flow, reinvesting in the business to support our long-term strategy, returning capital to shareholders and maintaining a strong balance sheet.

Now turning to Slide 7. I'll walk through segment results, beginning with Roofing. Overall roofing performance in the first quarter reflects both the realities of the current demand environment and the strength of the business. Our vertically integrated cost position, pricing discipline and contractor engagement model continued to result in attractive margins.

Roofing sales were $960 million, down 14% year-over-year, driven primarily by lower volumes. The U.S. asphalt shingle market was down approximately 10% compared to the prior year. The main drivers were lower storm-related carryover demand and severe weather in parts of the country. and the roofing market was stronger than expected, driven by a pickup in restocking activity late in the first quarter.

While our U.S. shingle and component volumes were slightly behind the overall market, we believe this was related to timing. The sellout of OC products through distribution was good, and we have outperformed the market over the last 12 months.

EBITDA in Roofing was $231 million, down compared to last year, driven by lower volume and the impact of higher cost inventory. In line with our expectation, roughly $30 million in curtailment costs carried over into Q1, with approximately half of that impact offset by favorable productivity in the quarter. Modest inflation outside of asphalt and slightly lower pricing resulted in negative price cost in the quarter.

Despite these impacts, Roofing delivered an EBITDA margin of 24%, which highlights the durability of our business model.

Turning to Slide 8, I'll discuss our Insulation business. Insulation continues to deliver strong and relatively stable performance in current markets. Total sales were $867 million, a 5% decrease from Q1 last year. North American residential volumes declined as expected due to the housing market.

In North America nonresidential, revenue was flat versus prior year as the business continues to perform well with pockets of strength. And in Europe, we continue to see stable markets and benefited from the impact of currency. We remain disciplined in inventory management, which resulted in incremental production downtime versus the prior year.

In addition, targeted price moves and additional inflation resulted in adjusted EBITDA of $167 million, down $58 million from prior year at 19% EBITDA margins. This performance reflects the strength of our broad end market exposure, operational discipline and pricing execution as well as the improvements we've made to the cost structure.

Insulation continues to benefit from secular drivers tied to energy efficiency, building performance and regulatory standards. We are well positioned for these trends, which should create long-term organic growth opportunities.

Moving to Slide 9, I'll provide an update to the Doors business. Stores continues to operate in a challenging demand environment with ongoing pressure across residential construction markets, including existing home sales that are impacted by higher mortgage rates.

Sales in the quarter were $475 million, down 12% from prior year, driven by lower market volumes and the impact of our recent strategic actions. As previously announced, we divested our distribution business late in Q1 and which had net annual revenues of approximately $70 million.

We also sold our Oregon components facility in the fourth quarter of last year, which had annual sales of approximately $50 million and will be a headwind to volume throughout most of the year. The combined net revenue impact of these actions to our first quarter results was approximately $24 million, which will step up in subsequent quarters.

EBITDA was $34 million, representing a margin of 7%, in line with Q4 margins. We are encouraged by the progress in doors and remain confident that the actions underway will meaningfully improve earnings performance as markets strengthen. Overall, for the company, there was about $13 million in net impact from tariffs in Q1 versus prior year.

As a result of the recent Supreme Court ruling on tariffs, the company may be eligible for approximately $50 million in refunds across the enterprise. We already have submitted for approximately $25 million in refunds that could benefit the second quarter, the tariff refunds are not reflected in the outlook that Brian will share in a moment.

In addition, the majority of inflation stemming from the conflict in Iran is expected to impact our results on a lagged basis. The costs associated with the Iran conflict for the second quarter are expected to be approximately $60 million. About half of the cost will impact our roofing business, with the remainder split between insulation and doors. These costs are included in the second quarter outlook.

Turning to Slide 10. I'll briefly cover corporate and outlook-related items for continuing operations. General corporate EBITDA expense is expected to be between $245 million and $255 million for the year. Our effective tax rate for 2026 is expected to be in the range of 24% to 26%.

Depreciation and amortization is expected to be approximately $680 million for the year. And capital additions are expected to be around $800 million, with more than half driving productivity and growth initiatives across the enterprise.

In closing, we are pleased with how our teams executed during the quarter, continuing to deliver resilient performance in the current markets. We remain focused on controlling what we could control, positioning the business for sustained value creation and delivering strong returns for shareholders over the long term.

Finally, having spent over 11 years on Corning in a range of leadership roles, including Insulation President and CFO, I am more excited about our future than ever. As Chief Operating Officer, I look forward to working even closer with our teams to strengthen execution and accelerate organic growth by helping our customers win with the OC Advantages.

And with that, I'll turn the call back to Brian.

Thank you, Todd. Our first quarter performance within current market conditions reflects the impact of the structural improvements we've made and the disciplined execution of our teams.

In terms of the market outlook for the second quarter, we expect discretionary remodel activity and residential new construction in the U.S. to remain under pressure. Absent major storm activity, nondiscretionary reroof demand should remain solid but slightly down versus prior year. Nonresidential construction in North America is expected to remain stable. And in Europe, we anticipate a gradual market recovery.

Given this near-term outlook, we anticipate second quarter revenue of approximately $2.6 billion to $2.7 billion, slightly below prior year. For adjusted EBITDA, we expect to deliver a margin of approximately 20% to 22% for the enterprise.

Now consistent with prior calls, I'll provide a more detailed business specific outlook for the second quarter. Starting with our Roofing business, we anticipate revenue will be down low to mid-single digits versus prior year. While current year storm demand is tracking in line with historical averages, we expect armor market shipments to be down low to mid-single digits in the second quarter based on limited prior-year storm carryover and some pull forward of restocking activity into Q1.

We expect our shingle volumes in the quarter to be above the market, supported by our customer mix and contractor engagement model, driving strong demand for the OC brand. We anticipate components to be in line with single demand. While we are seeing good realization of our April price increase, we expect pricing to be down slightly versus prior year, with ongoing input and transportation inflation resulting in negative price costs in the second quarter.

Given the increased inflation we are seeing in the business, particularly in asphalt, we recently announced another price increase effective June 1. Given our strong market position, we expect Roofing EBITDA margin to be in the low 30% range.

Moving on to our Insulation business, we anticipate revenue to be down low single digits versus prior year, inclusive of the sale of our Building Materials business in China. As a reminder, this business had approximately $130 million of annual revenue, and that transaction closed mid-2025.

Within the business, we expect North American residential revenue to be down low single digits, driven by previous pricing actions in addition to slightly lower volumes. In North America nonresidential, we expect revenue to be up low single digits, driven by slightly positive pricing.

In Europe, we anticipate revenue will be up versus prior year, supported by gradual market recovery and currency tailwinds.

Overall, for the Insulation business, we expect price to be roughly flat. At the same time, we expect ongoing input costs and transportation inflation to result in negative price cost. We also expect continued idle impact from lower production versus last year as we manage inventory levels and working capital. Given all that, we expect Insulation EBITDA margins to be approximately 20%.

Moving to our Doors business. We expect the market to remain soft, driven by low levels of discretionary remodel and new construction activity. We anticipate second quarter revenue will be down mid-single digits versus prior year, driven primarily by our recent divestitures that Todd discussed.

We expect to continue to see the benefits of our integrated go-to-market commercial strategy and ongoing cost optimization work to scale throughout the year. Additionally, we expect relatively flat pricing, coupled with an ongoing inflationary environment inclusive of transportation. Overall, for Doors, we expect second quarter EBITDA margin to sequentially improve to high single digits.

With that review of our business outlook, I want to close with a few enterprise comments. Within current market conditions, we remain focused on disciplined execution of our strategy and leveraging our unique OC advantages to help customers win and grow in the market. Those strengths have supported our performance through a wide range of market conditions and they position us to continue to build Owens Corning as a best-in-industry performer that generates higher or durable margins and cash flows.

We are well positioned to capitalize on key secular trends in housing and energy efficiency that support long-term growth opportunities. And we will stay committed to investing in our people, our capabilities, our brand and our customer relationships while keeping a sharp focus on operational discipline.

Finally, I want to recognize and thank our teams for their ongoing commitment to working safely, taking care of our customers and delivering on our cost and productivity initiatives. That focus is what enables us to perform at a high level in any market environment.

With that, we would like to open the call up for questions.

[Operator Instructions] Your first question comes from the line of John Lovallo with UBS. Please go ahead.

If I missed this, I apologize, but I know last quarter, you talked about expecting to see market improvement as you move through 2026 with top and bottom line results largely in line with current consensus. Are you still comfortable with that? Or have you guys guys kind of backed away, just given some of the uncertainty in the market?

I think the year has started out very consistent with what we expected when we talked about it in the last call. We've seen actually good progression and a little bit of improvement in terms of the performance in Q1, our Q2 guide is, again, right in line getting back to the sticky kind of 20% plus EBITDA margins for the company within all of the current market environment and some of the uncertainty.

So I think it really shows the confidence we have in the business performance, our execution and the strength of our company. And so we feel very good about kind of how the year is starting out consistent with what we talked about last time. And we think we've got a good year ahead of us. given how we're setting up the frame of the company.

So yes, we feel good about our performance at the start of the year. We think it's very consistent with what we talked about on the last call.

Your next question comes from the line of Michael Rehaut with JPMorgan.

Congrats, Todd, on your new role. Wanted to focus on Roofing for a moment. if you could just kind of walk through the drivers of the upside on the margin. And also when you talked about kind of underperforming the market a little bit in the first quarter, I'm curious on the drivers of that, if you maybe were already fully represented in the channel and therefore, there wasn't the same opportunity maybe as some of the other suppliers out there into the channel. And by contrast, what's driving the outlook for outperformance in the second quarter?

When we talk about the upside for Q1, I'd say it's primarily volume driven. So we came into the year expecting that we were going to have a step back in volumes versus prior year. big part of that driven by really very little storm activity and demand carrying over into Q1. And then we thought the timing of the quarter would be based on a little bit of when the restocking activity was going to occur.

With free supply of shingles we thought some of that could be pushed into Q2. So we saw a little acceleration of that towards the end of the quarter relative to the price increase we have in the market. And so that additional volume really just gave us some additional leverage.

I'd say the other piece of it was really within our productivity. The manufacturing team started up and got the operations going exceptionally well, given the harsh winter weather. And so we were able to offset some of that $30 million carryover with better productivity and performance in our manufacturing operations. So those were two of the big drivers in that.

So we underperformed Q1. That's not unusual for us, given our retail presence in the markets, we have a pretty strong retail presence. So retail generally does not participate in any stocking activity. They carry a pretty stable inventory levels to feed through the year.

So generally, Q1, where wholesale distribution may participate in restocking activities, retail doesn't. So we -- it's a little bit about of our customer mix. that drives that. And that feeds into kind of our Q2 outperformance because generally, when we get even on all forms of our distribution buying now to market demand, we see that accelerate a little bit for us, given that presence.

And then based on just the strength of our performance in the business overall, our contractor growth, the other thing -- the other commercial activities we're working, we just see that really coming to fruition to drive some additional volume for us here in Q2.

Your next question comes from the line of Stephen Kim with Evercore ISI.

Yes. Appreciate all the color. And again, let me add my congrats to Todd for the new role. I guess I wanted to maybe focus on Insulation, if I could. I'm curious, you provided a little bit of detail regarding North America resi being down, but then nonres being flat, I think you said Europe was stable with an FX benefit. .

Curious if you could give us a little bit of insight into what you're seeing in the supply die demand dynamics across those 3 as we think about the rest of the year. For example, in North American resi, what is your expectation around what starts are going to do? And how does industry capacity downtime look like in your view, in '26 versus '25?

And then if you look into the other segments or subsegments, are there any things we should be watching for in terms of EBITDA supply or the demand dynamic?

Thanks, Steven. I appreciate the question, and thank you for the congratulations as well. I'd be happy to go through segment by segment and give a little more color on what we're seeing.

So let me start with North America res. Everyone has seen the strong print we saw in March for new starts at around 1.5 million starts for the month. We expect to see the benefit of that start to come through late in Q2, and that was good news as we get into the spring selling season.

When we think about the full year for res, we use consensus. We look at what consensus estimates are for the year and plan accordingly. Consensus has been relatively stable for res it may tick up a bit if we see continued starts activity strong like we saw in March, but we all know the starts bounce around a bit month-to-month depending on overall dynamics. For res, we would go back to what we've shared before, which is we believe the industry can support between 1.4 million and 1.5 million housing starts with the current installed base of capacity given the current heavier mix for multifamily versus single family, we would expect to be at the higher end of that range.

We continue to take idle in our network to manage inventory levels appropriately. -- we typically build inventory in the early part of the year to support the peak season into Q2 and in Q3, but we continue to be disciplined in how much inventory we're building -- we assume that's occurring across the industry as well because we're not seeing a lot of inventory kind of unusual levels of inventory to make its way into the market. So res, we would describe is pretty stable conditions really right now with some encouraging growth coming off of the March starts print.

When we look at nonres, there are pockets of real strength in nonres where we're in very strong demand environment. Anything related to AI data centers the reindustrialization of North America has been strong for us on the nonres side. So in some of those areas, we're close to being sold out or are sold out in specific product lines that feed into those high-growth segments within non-res.

And when we look at Europe, Europe, we're seeing pockets of strength in Europe as well. It's been relatively stable overall. Germany has been a bit weaker. Some of the other regions have been stronger in Europe. But we've got an ability to serve that market. And we've been disciplined in taking downtime in Europe as well throughout this period.

So overall, as we look at the back half of the year, we're somewhere between stable and positive, depending on what happens with North American new residential construction in the year. and we've been disciplined around how we're managing our production network through this period.

Your next question comes from the line of Phil Ng with Jefferies.

Congrats on the strong quarter, and congrats to you, Todd and your new role. I guess to kind of kick things off, a question for Todd. -- given the -- you called out inflation for 2Q, is that like a full ramp? How does that kind of progress as we kind of look through the back half?

And I think, implied in Brian's guidance for 2Q, it's calling for a negative price cost spread for most of your segments. Given the increases you guys have announced, I think, 2 in Roofing and more recently won for Insulation. As we look out to the back half, assuming you get decent traction, should you get back to like a neutral price cost spread or maybe even a little positive? How should we think about that dynamic as we think about the back half?

Thanks, Bill. Let me start with the -- what we're seeing in Q2 from Iran-related inflation, and then we could talk about the price over cost dynamics.

So the $60 million that we discussed in our prepared comments, around half of that is impacting our Roofing business. The remaining half is impacting Insulation and Doors. It skews more towards Insulation though, than Doors. So you could think of roof insulation and then doors last in terms of a relative impact.

When we look at categories of inflation, there's three big categories we're seeing right now. There's asphalt inflation, which is entirely in our Roofing business. We then see delivery inflation, which is a mix of delivery to our customers as well as interplant delivery that we have in our network. And then we have purchased materials that we use as inputs into our process, especially chemicals. We know what's happening with asphalt inflation now very directly as oil goes up,

Historically, we've been able to offset asphalt inflation with price in the Roofing business on a bit of a lag. It takes some time for the price to hit the market and offset the asphalt inflation. Likewise, for customer deliveries, we had fuel surcharges that are long established in our roofing and insulation businesses. Those operate on about a 60-day lag. So it takes some time for for us to get a new fuel index, and then we pass the surcharge on into the market. So there's a bit of a lag there.

And then finally, on the purchase materials, we are seeing inflation on some materials that are really tied to oil. So you look at something like polystyrene and our Insulation business, that's tied to benzene inflation, and we have seen inflation there. So some of those materials we're absorbing right away.

When we think about the outlook, $60 million, when you look at asphalt and diesel, if oil stays about where it's at and those two commodities stay about where they're at we would expect that to be a pretty stable run rate then into the back half of the year.

On purchased materials, it depends how much of that price starts to come through in our purchases of those materials in the back half. So we could see some ramp in purchase materials inflation in the back half. But if oil stays where it's at, we would expect that the first two categories of asphalt and delivery to stay relatively stable.

We're not seeing a lot of benefit of the June price increases in the Q2 guide that Brian highlighted for Roofing or for Insulation. So we would expect a more positive benefit from those in Q3 and Q4, assuming good market traction, which would then start to offset the inflation that we're seeing come through. So Q2 is is the quarter where we're feeling the most pressure of the inflation coming through without corresponding price increases to offset it.

And Brian is going to add one comment as well.

Yes. So maybe just to add to it as well. I think we always want to try to manage our price cost to a positive setup. But there are other levers we are pulling consistently inside the company around cost efficiencies, productivity. And I think the underlying margins that we're guiding to in terms of Roofing getting back to around 30%, Insulation at 20%, a step-up in margins in doors even inside this inflation environment. So we're going to always try to manage price cost to get to a positive level.

But when you look at the underlying margin performance, we got a lot of other levers that we're pulling in terms of bringing that durability to life. And I think ultimately, that's what we're trying to achieve is how do we get to those kind of stable, high durable margins over time through any kind of inflationary environment or any kind of pricing environment we face in the market.

Your next question comes from the line of Susan Maklari with Goldman Sachs.

Building on the last answer to the last question, can you talk a bit more about the efficiencies and the cost improvements, where we are in that process? How do you think about the opportunities across all 3 of these segments? And how we should think about them flowing through to the business over the next 12 to 18 months?

Thanks,. I'll take that one. When we look at the big categories we're driving improvement in we're really focused on how do we drive consistent productivity through operations, sourcing, supply chain in our cost structure. And we have quite a bit of that already in the first quarter of this year. as well as the second quarter. And typically, those projects build through the year as we execute on it and then we start to see run rate benefits come through. .

We're also focused on the step change improvement in efficiency in our Doors business. Brian highlighted the success we've seen on synergies at $135 million run rate. Much of that is already in our P&L for Doors and for the enterprise. But then we're also focused on the additional $75 million of COGS efficiencies in the business. that we're just now starting to see the benefit come through our P&L in Q1 and then into Q2 and building through the course of the year and even into next year.

So we're -- we still have room to go on these, but we are seeing a lot of the benefit of the self-help come through to drive the kind of margin stability that Brian talked about in Q2 where we're, again, above 30% margins in Roofing, right around that 20% level for Insulation. And then we're seeing good performance in Doors relative to overall what the industry seeing.

Your next question comes from the line of Trevor Allinson with Wolfe Research.

I'll go the congratulations to Todd. I want to follow up on the commentary on roofing pricing with 2Q not really seeing a whole lot of benefit from the increases you guys have announced. Is it your expectation that you're going to see normal realization on these increases and that it just is taking some time for those of you in the market, especially with the distributors taking on some inventory in 1Q?

And then if that is the case, as we get into the back half of the year, when these are more fully realized, what are you expecting pricing to be up on a year-over-year basis in the second half of the year in Roofing specifically?

Trevor. So let me make sure you heard the comments. When we talked about the price realizations in Roofing, so we are seeing very good realization in April. And so that is absolutely embedded in, and that's going to continue to progress as we go into the back half of the year.

We've got a little bit in, but not a lot is going to be sitting in the June increase just because it's late in the quarter. So we still expect given current market conditions, that we're going to see good realization off of that June increase as well. It's just going to have a little bit more minimal impact as we finish Q2, but we would expect that then to accelerate in terms of pricing realization as we move into the back half of the year.

So on a year-over-year basis, I guess, just to kind of walk through that comp. We talked about making some targeted moves into Q4, Q1 to reset some programs with distribution customers. So that was creating a bit of a headwind coming into the year in the first quarter that you saw.

So as we move through the year, we're going to see positive realization on the April increase positively June, and we think that could get to a positive price point as we move through the year. But that's kind of the step through and the progression going forward.

But at the end of the day, right now, we're seeing very good realization on April. And given current market conditions, we would expect to see good realization of the June increase as well.

Your next question comes from the line of Anthony Pettinari with Citi.

Good morning. I was wondering if you could talk a little bit more about the tariff refunds and any color on timeline, steps involved kind of relative certainty of receiving these? And I think you indicated that they are not included in your outlook, but I'm not sure if I heard that right. So any color there?

Anthony, happy to give color. So first, you're correct. We have not included any tariff refunds in the Q2 guide. So if we see any of that come through, that would be potential upside to what Brian discussed.

When we look at the process, there is an established process for filing to receive these. We filed for about $25 million of the $50 million potential refund we could receive. We would anticipate filing for the other $25 million when we're able to later this year.

When we look at the timing of this, it could benefit us late in Q2 or potentially into Q3. So we are unsure of the timing of this coming through. When we look at whether or not we should receive the 25. I mean the answer is we should. And in fact, some companies are monetizing now their tariff recoveries for $0.90 or more on the dollar for these near-term recoveries.

So the market is saying it's highly likely to receive these. But the timing is uncertain when we received the first 25 or the second 25, which is why we did not include it in our guidance.

Your next question comes from the line of Mike Dahl with RBC Capital Markets.

I just wanted to go back to Roofing one more time. On the price realization, I mean, when you say very good realization, can you quantify that? Or sense has been kind of mid-single digits and then maybe like low to mid-single digits gets realized on June, which effectively would cumulatively be what you need to cover not just the asphalt inflation, but some of the other inflationary dynamics you're seeing in that business. So can you talk about is that ballpark the right way to think about it?

And then when you think about what the prebuy represented for the industry in 1Q, what's your perception of where channel inventories stand today?

Mike. On the price realization, I continue to say we're seeing very good realization. So I'd say we don't ever cut those down in terms of exact amounts, but a little better than historical, I would say. And if you think about how we look at that on average. So we're seeing a little better realization than we'd historically see. And again, I think that's tied to the market environment, the inflationary environment we're getting.

And then the June increase, we would expect again, given current market conditions that we would continue to see very good realization. We announced a little higher rate in the June amount. So that's reflective of kind of the inflationary environment we're running in.

Over time, our history has proven that we're able to recover asphalt inflation through price, And it generally lags a couple of quarters, given the acceleration of asphalt inflation relative to the price realization rates, and we're seeing that play out this year. But we have high confidence that with our business model and with our strength in the market, we can recover asphalt inflation through price.

Whether we can recover all inflation, that's going to depend a little bit on how the inflationary environment plays out. going forward and if we have to make any other pricing moves relative to that inflation environment. So that will be yet to be seen as the rest of the year plays out.

When I look at the restocking and the buys in Q1, the restocking efforts in Q1 I'd say it had a couple of percent probably move in the industry relative to -- we talked about a market outlook of potentially down up to 20%. It was down close to 10%. So we saw some acceleration coming through over time. But we came into the year expecting to have a weaker first half in overall demand relative to last year. But relative to historical averages, the year is shaping up to be pretty average year for Roofing. So we had a bit of a headwind on no storm carryover coming into the year.

But the setup is still for a solid Roofing year, very constructive roofineer, probably in line with kind of the historical kind of 10-year average for the full year, assuming we get kind of normalized weather patterns. -- that we started to see here in Q2 and if we see that play out in the back half, I think you'd see a first half that's probably down on a year-over-year basis in terms of market shipments. In the second half, that could be up. to get to that kind of construct for a full year that's pretty in line with the averages.

So we feel like the year is shaping up to be another good year. It's going to be a little different shaping in terms of volumes, first half and second half versus last year. but we didn't -- don't expect to see anything that's different from our original outlook for how the year is playing out. Along with as soon as we get -- or as long as we get his weather patterns kind of to a historical [ learn ].

Your next question comes from the line of Matthew Bouley with Barclays.

You have [ An Ku ] on for Matt side. In terms of what you're seeing in the market today, what have you seen in terms of competitive capacity? Are others also taking some capacity down? And just what is the general industry discipline been around this?

Are you talking specific to Roofing or Insulation or general? .

Roofing, yes. .

Roofing. Yes, Roofing capacity, again, no changes in terms of capacity outlooks that we've talked about in the past. So Roofing though is -- it's a material conversions business. So generally, price and margin performance doesn't align to capacity utilization rates like some of the other industries we talked about. We talked about insulation in that frame.

So Roofing being a material conversion business, we feel like we have an advantage given our vertically integrated supply chain and puts us in an advantaged cost position in the market. and that gives us the opportunity to drive the kind of margins and performance in the business that we're seeing today and our guide in terms of Q2.

If I just step and look at some of the capacity additions coming into the market, we started up our [ Medina ] capacity end of last year. That's been very helpful in giving us needed land capacity to service the Midwest region this year. That's coming up. We've got a few other competitors that have announced some line expansions.

But we've also seen some competitors that have announced line closures, and that's kind of how we see the capacity and Roofing playing out over the next 2 or 3 years. We think there's going to be some additions. But we also think there's going to be capacity coming out in some of the older assets coming out in lieu of more efficient assets being added into the market.

So the other thing I've talked about in the past is we continue to see this mix shift from strip shingles to laminate shingles, and that continues to grow. So there is going to be an ongoing need for more laminate capacity in the industry. So some of this capacity is met just to meet the industry needs that we see evolving over the next 2 or 3 years.

Your next question comes from the line of Rafe Jadrosich with Bank of America.

.

You called out some market share gains at Lowe's. Can you just give a little bit more color by segment what the key driver was? And then is there additional opportunity that you see in that channel had retail to take share?

Yes. Thanks. So we really use the Lowe's as much as an example of what our now very complementary product offering is bringing to our customers. So Lowe's is an example of a distribution partner that sells roofing, insulation and doors. And when we can bring our full offering to them now and leverage our iconic brand, our merchandising capabilities to help them grow their businesses it really creates a great partnership where they want to grow with us, given our bringing our broad product offering, given our demand pull-through capabilities in the market.

So we saw that as a great example that we're actually taking to other distributors and other distribution partners that we're starting to see some traction around really leveraging this commercial playbook to grow our business and to help our distribution partners grow their business.

So Lowe's was an example of that. They've been a good partner for us for many years. in the space. And so we're excited that we get the opportunity to kind of expand in our product offering with them and help them grow their business in the market.

Your next question comes from the line of Sam Reid with Wells Fargo. Please go ahead.

Wanted to also talk market share but from a slightly different angle, specifically just looking for any quantification on how much the contractor network share gains might have benefited your roofing business in Q2 -- or Q1, I should say, and what that will look like in Q2?

And then just give us a sense, are those gains kind of narrowing or are they staying kind of relatively consistent?

Thanks, Sam. Yes, I'd say overall, we service today now about 30,000 contractors again they estimated universe of approximately 100,000 plus kind of roofing contractors in the U.S. market. So we think we've got a lot of opportunity to continue to grow and scale our contractor engagement model.

And so -- and we've seen this kind of steady drumbeat of growth over the last few years. We expect that to continue this year and into next. So we still think we've got some upside and opportunity to grow our contractor network. And really, it's demonstrating the value that they're seeing by partnering with us, our brand, our pull-through capabilities, our product offering, our merchandising capabilities, which is really expansive around not just providing a great product but how we train, how we do in marketing efforts, how we do in-home sales training tools.

We do a lot of work in terms of providing digital capabilities and expanding their ability to market in their local markets. So it's really a full service suite that we provide our contractors that really is why we continue to see this growth overall in our contractor base and expect that to continue.

In terms of how that impacted Q1, I would say it's very difficult to kind of target where that contractor strength is coming through. It's early in the year. So generally, given just strong, we don't see the benefits of these contracted conversion until we get into season. So I'd say pretty limited impact in Q1. But certainly, Q2, Q3, we get through the rest of the year, we're going to continue to see the benefits of that expanded base, generating demand for our product as we move forward.

Your next question comes from the line of Collin Verron with Deutsche Bank.

Just wanted to ask one on Doors. I think the guide is for revenue down mid-single digits. You have some divestitures going on there. So any more color sort of what you're seeing from an underlying organic volume perspective and how you're viewing potential demand for the rest of the year? Are we nearing the bottom? Or do you guys still see more headwinds as we move through the rest of the year?

Yes. Thanks, Collin. I think overall, we feel we're making great progress really bringing the OC playbook into our doors business. So from an operational standpoint, Todd talked earlier about the cross synergies we're seeing the operational efficiencies through network optimization, that's really helping to improve the margin performance, and we think that continues to grow as we move through the year. And then from a volume standpoint, we saw in Q1, volumes pretty stable versus Q4, which was a positive sign given some of the market dynamics we faced in the back half of last year and actually saw the order book accelerating to finish the quarter kind of coming into this quarter.

So I think we feel good that we're able to go out and generate some incremental volume for our business relative to this integrated commercial playbook, we're we're going to market with. I talked about Lowe's. One of the categories that we saw an increase with them was in the doors category. We've seen that across our dealer network that I talked about on the last call that we're driving more volume with our distribution network because of the strength of our total portfolio and our brand.

And then we're making quite a lot of investment in that downstream pull-through, particularly with dealers and builders that really benefits our doors pull-through in terms of volume and capacity as we go forward through the year.

So I think we've got a lot of, again, self-help initiatives in place around our commercial activities that we're starting to see some benefits of some of the order but growing. And then that's kind of falling now against a market backdrop that we do think is stabilizing and would expect to see pretty solid performance in new construction. As Todd talked about, hopefully, some solid performance in R&R. But I think we're positioning the business to increase margins kind of sequentially as we go through the year with some big upside as we actually start to see market dynamics get even better.

Your next question comes from the line of Adam Baumgarten with Vertical Research Partners. Please go ahead.

Just back to the roofing price topic, just on the slight decline you're expecting in 2Q. Is that just despite the pretty good realization you were talking about, is that just a product of pricing maybe falling sequentially a bit through the back half and maybe 1 and then you're going to get that increase, but you can't quite overcome some of the maybe slippage you saw earlier?

Yes, Adam, I think that's a fair way to phrase it. We saw some declines, again, based on some targeted pricing moves we made to start the year that felt that flowed through the first quarter. So as we kind of move into Q2, we're seeing some of that carryover. We're seeing the increase from the April increase in good realization. And then we've got the June 1 that's out there and depending on kind of the realization rates of that one.

That's what's kind of causing a little bit of a cautious outlook to say we could still be a little bit negative on price as we go through the quarter.

We have reached the end of the Q&A session. Pardon me, -- we have one more question. This question comes from the line of Keith Hughes with Truist.

Questions on Europe. You called that out as a positive on the guidance. I guess the question, there's a lot of input inflation there kind of more in the United States. How does that square up for the rest of the year?

Thanks, Keith. When we look at Europe, so we see a few things in Europe. Over a long period of time, we've been able to get price consistently in Europe, and we've got price increases in the market right now. We will see some inflation on the energy side, in particular, over time in Europe. But we hedged quite a bit of our energy usage, both in North America and Europe, which tempers the impact of any short-term variability in Q2, Q3.

And Europe is still poised for long-term growth. We've got pockets of Europe that are strong right now. That's being offset with the German market that is still sluggish to recover. So overall, we remain bullish on Europe longer term in terms of the ability to drive top line with really attractive bottom line performance, given all of the self-help work our team has done there to get the cost structure right and poised to rebound in a better market.

There are no further questions at this time. I will now turn the call back to Brian Chambers for closing remarks.

All right. Well, I want to thank everyone for making time to join us on today's call and for your ongoing interest in Owens Corning. We look forward to speaking to you again on our second quarter call. Thanks, and have a safe day.

This concludes today's call. Thank you for attending. You may now disconnect.

Good morning, and welcome to the Owens Corning Q4 FY '25 earnings call -- '26. My name is Carla, and I will be coordinating your call today. [Operator Instructions]

I will now hand you over to Amber Wohlfarth to begin. Please go ahead when you're ready, Amber.

Good morning. Thank you for taking the time to join us for today's conference call and review of our business results for the fourth quarter and full year 2025.

Joining us today are Brian Chambers, Owens Corning's Chair and Chief Executive Officer; and Todd Fister, our Chief Financial Officer. Following our presentation this morning, we will open this 1-hour call to your questions. [Operator Instructions]

Earlier this morning, we issued a news release and filed a 10-K that detailed our financial results for the fourth quarter and full year 2025. For the purposes of our discussion today, we have prepared presentation slides summarizing our performance and results, and we'll refer to these slides during this call. You can access the earnings press release, Form 10-K 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, where we offer a few reminders. First, today's remarks will include forward-looking statements that 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 more detail.

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 our earnings press release and presentation available on the Investors section of our website, owenscorning.com.

Third, Financials and metrics for current and historical periods discussed on this call will be for continuing operations, except for 2025 capital expenditures and cash flow measures, which include amounts related to glass reinforcement. For those of you following along with our slide presentation, we will begin on Slide 4.

And now opening remarks from our Chair and CEO, Brian Chambers. Brian?

Thanks, Amber. Good morning, everyone, and thank you for joining us today. During our call this morning, I'll provide a brief overview of our fourth quarter and full year 2025 results and then highlight the actions we've taken throughout the year to deliver consistently strong performance while positioning Owens Corning for future growth. Todd will discuss our fourth quarter and full year financial results in more detail, and I'll come back to share our outlook for the first quarter and end market expectations for the full year.

2025 was a year of progressively more challenging market conditions with weakening U.S. residential trends and distribution destocking in the back half of the year. This included a uniquely quiet storm season in the second half with no major storms making landfall in the U.S. for the first time in a decade which weighed heavily on nondiscretionary roofing repair demand. Despite this backdrop, our team continued to successfully execute our enterprise strategy. delivering strong margins and making great progress on key initiatives to enhance our operational efficiency and accelerate our organic growth. I'll share more about our financial performance and strategic highlights in a moment. But first, I'll begin with our unconditional commitment to safety.

Throughout 2025, we delivered improved results through our Safer Together operating framework. Our recordable incident rate for the year was 0.60, which is industry-leading among U.S. manufacturers. Notably, more than half of our sites operated injury-free, a reflection of the deep personal commitment our employees bring to working safely every day.

Turning to our financial performance. We delivered fourth quarter results consistent with our enterprise guidance with revenue of $2.1 billion and adjusted EBITDA of $362 million with an adjusted EBITDA margin of 17%. For the full year, we generated revenue of $10.1 billion and adjusted EBITDA of $2.3 billion with an adjusted EBITDA margin of 22%. Through a combination of our strong market positions, improved operating efficiencies and favorable product mix shifts, we are generating higher margins on lower market volumes. Our higher earnings profile and working capital focus also enables us to generate significant operating and free cash flow. And through our disciplined capital allocation strategy, we returned $1 billion through dividends and share repurchases in 2025 and have returned over $4 billion of cash to shareholders since 2020. In December, we announced a 15% dividend increase, tripling our quarterly per share payout compared to 5 years ago. This marks our 12th consecutive year of dividend growth and supports our Investor Day commitment of returning another $1 billion of cash to shareholders by the end of 2026.

In the near term, we are proving that the structural improvements and strategic choices made over the past few years to reshape Owens Corning into a leading building products company are delivering significantly better financial results within weaker markets. At the same time, we are also creating multiple paths for revenue and earnings growth as market conditions improve, and we see the benefits of our capacity additions and growth initiatives.

As part of our effort to reshape and focus the company. We have made major strategic moves to shift into more residential product categories that leverage our customer and channel expertise and further strengthen our long-term financial performance. This includes completing the sale of our business in China and Korea which streamlined our geographic footprint and announcing the divestiture of our glass reinforcements business, which serves industrial markets. We've made steady progress in advancing regulatory approvals towards closing, which we expect to take place in the next few months.

We also continue to make good progress integrating our new Doors business. As we have discussed on previous calls, the market environment has been challenging for Doors, with lower housing starts and softer discretionary R&R activity pressuring demand with the added disruption from tariffs. Despite this environment, our team has executed well, streamlining operations, reducing costs and increasing our share of wallet with customers through a more integrated market approach aligned with our commercial strategy.

We are exceeding the $125 million in run rate enterprise cost synergies we committed to by mid-2026, and are on track to deliver an additional $75 million of structural cost improvements within our operations including our recent decision to sell a small distribution business to a major customer.

While near-term results are being weighed down by weak market demand, our team is strengthening the business in ways that will significantly grow the earnings and cash flow of the company as markets recover. Moving forward, we see additional opportunities across the enterprise to grow revenue and earnings as we begin to realize more benefits from a broader residential product offering with an increased repair and remodel focus that now accounts for more than 50% of our revenue including a significant portion from nondiscretionary reroofing.

With an attractive set of complementary building products, we are unlocking the full power of the enterprise to accelerate our performance by leveraging a set of capabilities that are truly unique to Owens Corning and create the OC Advantage. Our iconic brand, unparalleled commercial strength, leading technology and winning cost position, all of which combined to strengthen our market leadership and create multiple paths to deliver revenue and earnings growth.

Owens Corning has industry-leading brand awareness and favorability with homeowners and contractors. This creates exciting pull-through opportunities for our products as we invest to expand its use and impact. Our iconic brand, recognizable by the color pink and The Pink Panther and supported by 90 years of history in building products, provides a high-quality, trustworthy platform for customers that creates loyalty and differentiates us in the market. This brand trust has been highlighted through several recognitions, including being named America's most trusted insulation brand and receiving the Women's Choice Award as a most trusted and recognized roofing brand for 9 consecutive years.

Our unparalleled commercial strength is driven by deep channel expertise, unmatched customer partnerships and a downstream engagement model that helps our contractors, builders and dealers win and grow in the market, while creating pull-through demand for our distribution partners. One example of this is our Pink Advantage Dealer Program, which supports growing the estimated 4,000 privately owned lumber and building materials dealers across the U.S. In 2025, we grew program enrollments 38% by leveraging the learnings from our roofing contractor engagement model and utilizing a more integrated product and marketing offering, featuring our residential insulation, roofing and doors. In 2026, we expect to continue increasing enrollments, creating more loyalty to OC products and significantly increasing our revenues.

Applying a similar model to homebuilders, we are also realizing new opportunities to grow our business through the use of our integrated product offering and enhanced marketing tools. Our leading technology continues to fuel growth through customer-focused innovation and process improvements. In 2025, we launched over 30 new or improved products, maintaining our 20% plus product vitality index by continuing to expand our R&D capabilities to bring new solutions to the market faster to meet customer needs.

To help accelerate the pace of innovation even further, in the fourth quarter, we announced the promotion of José Méndez-Andino to the roll of Chief Innovation Officer. He will lead a center of excellence in innovation, reflecting our focus on product and process leadership to drive organic growth. Last, our winning cost position reflects best-in-class execution, network optimization and vertical integration to drive cost efficiency and productivity gains supporting our commitment to deliver a mid-20% adjusted EBITDA margin profile over the long term.

Through our factory modernization initiative, we continue to improve our manufacturing cost position and increase capacity through targeted capital-efficient investments in our manufacturing network, several of which came online in 2025. In Roofing, we started up our new highly efficient laminate shingle line in Ohio and a high-speed nonwovens line in Arkansas. In Insulation, we expanded our capabilities to serve the growing demand for XPS foam insulation with a new low-cost plant in Arkansas. And in Doors, we are applying our enterprise operational playbook to drive significant structural cost improvements through network optimization actions, including the closure and consolidation of five manufacturing and fabrication facilities as well as focused automation and productivity investments.

We are also enhancing our winning cost position through the use of advanced analytics and AI to drive efficiency, support customer growth and strengthen market leadership. For example, we are applying AI through the use of supply chain optimization agents that help us respond quickly to network adjustments and maintain strong service levels at reduced cost. This capability is being used in our North American fiberglass insulation business today, but will be scaled to our other businesses throughout the year.

To accelerate our digital efforts, Annie Baymiller was recently promoted to the role of Executive Vice President and Chief Information Officer. She will lead the advancement of our digital technology capabilities and next-generation tools, including generative and agentic AI that will be instrumental to unlocking new capabilities and generating additional value.

Before I turn it over to Todd, I want to thank our team for their outstanding efforts in 2025. Owens Corning was again named one of Wall Street Journal's top 250 Best-Managed Companies, ranking 73rd overall and 10th in customer satisfaction. This recognition reflects the dedication of our team to support our customers and drive the success of our company.

In summary, while 2025 was a challenging year for our markets, our performance demonstrated the strength of the company we have built. Our team stayed focused, working safely, controlling our costs, helping our customers win and grow and delivering on our capital allocation commitments. Through disciplined execution, we generated market-leading financial results and continued investing in the growth of the enterprise. As we begin 2026, we are excited by the opportunities we see to continue growing the company and creating value for our customers and shareholders through the execution of our enterprise strategy and implementation of the OC Advantage.

With that, I'll turn the call over to Todd.

Thank you, Brian, and good morning, everyone. As Brian shared, we are navigating soft end markets in all three businesses while demonstrating the resilience of our earnings, cash flows and return of cash to shareholders. Despite near-term market headwinds, we have multiple paths to deliver strong results by leveraging the OC Advantage, delivering on the multiple organic growth investments in new highly efficient manufacturing plants and executing our strategic plans to deliver the full potential of the Doors business. The impact of these structural improvements and investments will be amplified as residential markets recover later in 2026 and into 2027. I'll begin with Slide 5 and review our results for continuing operations for the quarter and full year.

In the fourth quarter, we executed well despite weaker market demand in each of our three businesses. We continue to outperform prior cycles in Roofing and Insulation while delivering overall results in line with guidance. For the full year, we delivered adjusted EBITDA of $2.3 billion at a margin of 22%, marking our fifth consecutive year of 20% plus EBITDA margins. For the year, adjusting items totaled $1.2 billion, primarily due to $1.1 billion of noncash goodwill impairment charges in our Doors business during the third and fourth quarters. These impairments were driven by updated macroeconomic assumptions in our valuation model, given near-term market softness that continued to weaken and do not reflect a change in our longer-term expectations for the earnings potential of the business. Acquisitions with goodwill are particularly sensitive to impairment when market conditions worsen as we have seen in Doors.

Turning to Slide 6. For the year, we generated $1.8 billion of operating cash flow and returned $1 billion of cash to shareholders. Free cash flow for the fourth quarter was $333 million, and free cash flow for the full year was $962 million, down $283 million from last year, primarily due to higher capital additions. Full year capital additions were $824 million, with roughly half of our capital focused on long-term cost efficiency and growth. Our return on capital is 12% for the 12 months ending December 31, 2025. As a reminder, at our Investor Day last year, we gave a long-term target of mid-teens or better return on capital. While currently below mid-teens, there is no change to our long-term target. Year-end debt-to-EBITDA was 2.1x at the low end of our targeted 2 to 3x range.

At year-end, the company had liquidity of $1.8 billion, consisting of $345 million of cash and $1.5 billion of availability under our bank debt facilities. During the fourth quarter, we returned $286 million to shareholders through share repurchases and dividends. Throughout the year, we repurchased 5.9 million shares supporting our Investor Day commitment of $2 billion in cash returned to shareholders in 2025 and 2026.

In December, the Board declared a cash dividend of $0.79 per share, an increase of approximately 15%. Our capital allocation strategy remains centered on generating strong free cash flow, delivering mid-teens return on capital, returning cash to shareholders and maintaining an investment-grade balance sheet while investing in high-return growth opportunities.

Now turning to Slide 7. I'll provide additional details on our segment results. Starting with our Roofing business. We benefited from the strength of our commercial team and their work with our contractors which allowed us to outperform the market in 2025, although the market slowed significantly in the back half of the year. Fourth quarter sales were $774 million, down 27% from the prior year primarily due to lower shingle volumes. The U.S. asphalt shingle market declined a similar percentage year-over-year, driven by unusually low second half storm activity and a reduction in inventory levels at distribution. Our volumes were in line with the market.

The significant decline in volume resulted in EBITDA for the quarter of $199 million, down from prior year. While pricing remained relatively flat in the quarter, inflation continued, resulting in negative price/cost. Additionally, due to the weaker markets, we took production curtailments to manage inventory and perform maintenance. We recognized some impact of the curtailment in Q4 and will have a bigger impact in Q1 as we sell through the higher cost inventory. Despite the significant decline in the market, EBITDA margins for the quarter were 26%.

For the full year, Roofing delivered sales of $4.4 billion, down 4%. The U.S. asphalt shingle market declined approximately 10% for the year, with a strong first half followed by a much weaker second half as a result of very weak storm demand. Our contractor engagement model continued to support demand, resulting in volumes that outperformed the market overall. Full year EBITDA was $1.4 billion with strong EBITDA margins of 32%, supported by positive pricing that more than offset inflation and curtailment.

Turning to Slide 8. The Insulation business delivered another strong year, achieving its fifth consecutive year of 20% plus EBITDA margins. Fourth quarter revenues were $916 million, down 7%, driven by the sale of our building materials business in China as well as lower volumes in North American residential and nonresidential markets. Europe remained stable and benefited from currency tailwinds.

Insulation generated fourth quarter EBITDA of $186 million, down $42 million year-over-year. Slightly negative pricing and modest inflation resulted in negative price/cost for the quarter, and we continue to curtail assets to manage inventory levels. EBITDA margins were 20%. For the year, Insulation delivered net sales of $3.7 billion, down 6% compared to prior year. The decline was primarily due to lower North American residential demand and the divestiture in China. Positive pricing and strong manufacturing performance partially offset inflation and downtime. Full year EBITDA was $848 million with a margin of 23%.

Moving to Slide 9, I'll provide an overview of the Doors business. Throughout the year, the Doors market continued to be extremely challenged due to the weakness in both new construction and unusually low existing home sale that negatively impacted remodeling activity. The business generated fourth quarter revenue of $486 million, down 14% from the prior year, driven by lower volumes across both new construction and discretionary repair/remodel. Additionally, the previously announced sale of a non-core components facility in Oregon resulted in a $13 million revenue headwind in the quarter. On an annual basis, this business generated revenues of approximately $50 million. EBITDA was $33 million with EBITDA margins of 7%. Price/cost remained negative as modestly positive price was more than offset by continued inflation, particularly due to tariffs.

For the full year, Doors net sales were $2.1 billion, and EBITDA was $232 million with an 11% margin. Despite market headwinds, the integration continues to progress well. We have achieved our $125 million enterprise run rate synergy commitment to date, with approximately 40% captured within Doors and 60% captured across the broader enterprise. Demonstrating our ability to scale the OC Advantage through the same playbook that has structurally improved Roofing and Insulation over time. Additionally, as Brian shared, we've taken a number of actions to improve the network efficiency of the business to drive an additional $75 million of cost improvements. These are just starting to show in our earnings.

Across the company, our gross tariff exposure in 2025 was approximately $110 million that was mitigated to a net tariff impact of approximately $30 million, primarily in the Doors business. Our sourcing and supply chain teams continue to demonstrate agility in mitigating tariff exposure and preserving margins. Looking ahead to Q1, based on tariffs in place at the start of the quarter, we anticipate approximately $20 million of gross tariff exposure that will net to an impact of roughly $10 million after mitigating actions, primarily in the Doors business. We are monitoring the dynamic tariff environment due to the recent Supreme Court decision which could have an impact on our overall tariff exposure as the situation evolves.

Moving on to Slide 10, I will discuss our full year 2026 outlook for key financial items, all of which exclude the impacts of our glass reinforcement business. General corporate EBITDA expenses are expected to be approximately $245 million to $255 million. We expect our 2026 effective tax rate to be 24% to 26%. Depreciation and amortization is expected to be approximately $680 million. Capital additions are expected to be approximately $800 million in 2026. Over half of this capital will be deployed in strategic investments we are making to expand capacity and improve efficiency. We expect CapEx to remain elevated in the near term as we work towards completing the high-return capital-efficient projects underway. We remain optimistic about our ability to return significant cash to shareholders as markets recover and our results show the benefits of recent investments and structural improvements.

I'll now turn the call back to Brian to discuss our outlook in more detail.

Thank you, Todd. Our results in 2025 continue to demonstrate the strength of the company. Our strong commercial positions, improved operating efficiencies and favorable product mix shifts positioned us to deliver market-leading financial performance as we work through a weaker demand environment. For 2026, we expect the near-term market environment to remain challenging with conditions improving in the second half of the year. Even within these market conditions, we are confident in our ability to generate strong financial results with multiple levers to pull to outperform the market.

Turning to our first quarter outlook for the market. We expect North American residential new construction and discretionary repair and remodel activity to remain soft, reflecting the lowest level of quarterly housing starts in the past 6 years and unusually low existing home sales.

Within Roofing, we expect to see weaker manufacturing shipments resulting from lower storm carryover and delayed restocking activity. Nonresidential construction activity in North America is expected to be relatively stable. With softness in certain commercial categories, offset by strength in institutional and infrastructure-related projects. And in Europe, market conditions are anticipated to remain stable, while volumes remain below mid-cycle levels. stable market trends and favorable currency tailwinds are supporting improvement, particularly in Insulation.

As Todd shared, we remain disciplined in our inventory management with lower demand. As a result, we will see the production curtailment we took in Q4, work its way through the P&L in Q1, most notably in Roofing as we sell through higher cost inventory. Given this market outlook, we anticipate first quarter revenue from continuing operations of approximately $2.1 billion to $2.2 billion, in line with Q4. We expect to generate adjusted EBITDA margin from continuing operations in the mid-teens. While the near-term environment remains challenged, we expect to see improvements in many of our end markets as the year progresses. Overall, for the full year, we expect North American residential new construction activity to be relatively flat versus 2025. And with a favorable mix shift toward single-family homes.

For discretionary repair and remodeling activity in North America, we anticipate demand to be up slightly with a more challenging comp through Q2 that improves in the back half of the year. In Roofing, we expect the slow start in Q1 to continually improve throughout the year with full year demand in line with historical averages, reflecting a more normal level of in-year storm activity.

For nonresidential construction in North America, we expect to see activity improve throughout the year. And in Europe, we anticipate market conditions to gradually improve with currency benefits throughout the year. Based on this view of our end markets for 2026, our full year outlook for revenue and adjusted EBITDA is largely aligned with current consensus estimates.

Now consistent with prior calls, I'll provide a more detailed business-specific outlook for the first quarter. Starting with Roofing, we anticipate ARMA market shipments to be down low 20% versus the prior year, reflecting a historically quiet second half 2025 storm season, which reduced storm-related repair demand carried into 2026. Delayed distributor restocking activity and more severe winter weather in many parts of the country, impacting repair and remodel as well as new construction activity early in the year.

We anticipate our roofing shingle volumes to be down in line with the market in Q1. And resulting in a revenue decline of low 20% versus prior year. While near-term demand is pressured, we expect nondiscretionary reroofing demand to improve throughout the year with more normalized weather patterns. In components and nonwovens, we anticipate volumes to decline with reduced shingle demand. Pricing is expected to be down slightly to start the year, while inflation continues to pressure price cost. Earlier this month, we announced an April price increase for our roofing products, which we would expect to see realization on in Q2.

From a cost standpoint, we anticipate production curtailment costs carried over from Q4 and incurred in Q1 to result in roughly $30 million of headwind as we see higher cost inventory flow through the P&L. Additionally, we expect to incur modest inflation, including some tariff headwind that we are starting to see for the roofing underlayments we produce and import from India. Overall for Roofing, we expect first quarter EBITDA margin of low 20%, down from Q4, primarily due to the curtailment cost carryover.

In Insulation, we anticipate first quarter revenue to be down mid- to high single digits versus the prior year. This is primarily driven by lower residential volumes and the sale of our building materials business in China. As a reminder, this business had approximately $130 million of revenue annually and we completed the sale midyear 2025.

In our North American residential insulation business, we expect revenue to be down low double digits year-over-year, reflecting a step down in housing starts and continued market uncertainty. For North American nonresidential, we expect revenue to be largely in line with prior year. And in Europe, we anticipate revenue to increase, driven by relatively stable demand and continued currency tailwinds.

Overall, for the Insulation business, we expect price to be down slightly year-over-year, driven primarily by targeted actions in the North American residential market made last year partially offset by positive price in our nonresidential business. While inflation and production curtailments persist, strong operational performance and prior structural cost actions position the business to deliver EBITDA margins just below the 20% level achieved in Q4, even in a softer demand environment.

Turning to our Doors business. We expect the market to remain challenged to start the year with continued weakness in discretionary repair and remodel spending and low levels of new residential construction. We anticipate first quarter revenue to be down mid-teens versus prior year, driven primarily by lower volume and the strategic sale of our Oregon components facility and company-owned distribution business, which combined had annual revenues of approximately $150 million. Pricing is expected to be down slightly, while inflation, including tariffs continues to pressure price cost. Importantly, we are realizing the impact of our enterprise synergies and expect to begin seeing the benefits of our network optimization scale throughout the year, which will help offset market headwinds. As a result, we expect EBITDA margin in the first quarter to be in line to the 7% we delivered in Q4 on similar demand.

With that review of our businesses, I want to close out by recognizing the strong results our team delivered in 2025, while positioning Owens Corning for 2026 and beyond. The actions we have taken over the last few years and are continuing to take today are setting the stage for meaningful earnings and cash flow growth as markets improve. We continue to expect secular trends including pent-up demand for new housing, the growing need to renovate and remodel older existing housing, and the demand for more energy-efficient homes to create meaningful growth opportunities for OC. And with our attractive set of complementary building products we will leverage an integrated go-to-market strategy and unique set of capabilities within the OC Advantage to deliver strong financial results and strengthen our market-leading positions.

We have built multiple paths to drive revenue growth and achieve 20% or more adjusted EBITDA margins, mid-teen returns on invested capital and significant cash flow. The new OC is built to outperform in today's market and in the future.

With that, we would like to open the call up for questions.

[Operator Instructions] And our first question comes from John Lovallo with UBS.

I guess how comfortable are you with your visibility into 2Q to 4Q? I believe that you're on track to meet the consensus estimates? And then which estimates are you referring to specifically?

John, I'd say the visibility is kind of a ramp-up based on the market expectations that I just spoke about. I think we expect as I kind of walk through the businesses, the roofing demand profile to continue to increase throughout the year as we get to a more kind of normalized roofing year with weather patterns in the back half that represents kind of more normal storm demand. So we're assuming that kind of market progression.

I think in the discretionary repair/remodel, we expect a challenging first half that gets better in the back half, as we see kind of continuing improvements there, and hopefully, more people investing in repair and remodeling of their homes. And then on the new construction front, we expect a pretty flat environment year-over-year with a little bit of opportunity on the single-family front, which creates a little bit more volume with both our Doors and our Insulation business.

So I think our outlook in the near term is pretty clear to start the quarter. We're seeing volume progression improve throughout the quarter in all three of our businesses. So that gives us confidence. We're seeing the cost improvements coming through the P&L. So near term, we feel very confident. Over the longer term, I think we're going to see and expect to see some market improvements that are going to help drive some of the volumes and overall environment for us.

So I think that's our view as we kind of come into the year and why we wanted to give visibility to a guide of kind of this general consensus estimate. So if we look across all the estimates that have been created for the company. We think the average is right in line with kind of how we see the year playing out on a full year basis. Even though it's a little weaker start, we expect that to progressively improve quarter-over-quarter throughout the rest of the year.

And the next question comes from Michael Rehaut with JPMorgan.

I wanted to focus actually on the CapEx guide for $800 million. I wanted to understand, particularly given the divestiture of the glass reinforces business, which was a more capital-intensive business. What types of investments are contemplated in the $800 million that sounded to be a little bit more growth-oriented or productivity-oriented. And also how you think about an ongoing normalized annual run rate for CapEx in 2027 and beyond?

Mike, this is Todd. I'll take this one. So when you look at the $800 million, you're correct, that does exclude the impact of the glass reinforcements business. So this is across the Roofing, Insulation and Doors, building products core. When you look at what's in the $800 million, it's largely the previously announced projects for Roofing and for Insulation in Prattville and Kansas City that are driving that number to be higher than it has been historically.

When we look at both of those investments, there are investments that support growth, especially in the Roofing business, but also in Insulation. And there are investments that support ongoing cost efficiency and productivity as we upgrade the overall fleet of assets that we have. Those are really temporary, though. I mean we're making those investments. They're onetime investments in our business in both Roofing and in Insulation. So when we look at the long term, we go back to the guide that we gave at our Investor Day that we would expect to return to about 4% CapEx as a percentage of revenue on a structural basis going forward.

We've got a couple of years of stepped-up CapEx in '26 and '27 to get us through some of these major projects that we've already announced. But on an ongoing basis, we end up with a fleet of assets that have lower structural capital requirements on an ongoing basis than what we have today. So we're confident in that step down back that we guided to at Investor Day. But to your point, a slight step-up in '26 and '27.

And the next question comes from Stephen Kim with Evercore ISI.

Yes, I guess first question would be -- I guess, the question would be on your D&A kind of surprised us, it looks like it kind of missed your targets. Could you just talk a little bit about where that upside surprise occurred? What drove it? And then you mentioned in Roofing that your price -- you put a price increase through in April or effective April and should benefit in 2Q. So I just want to make sure I'm clear. Are you assuming that, that price increase or some part of it sticks in your guidance for the full year?

Thanks, Stephen. I appreciate the question. I'll take the D&A question and then turn it over to Brian for the Roofing price context.

So when we looked at D&A, there's a few things that came in a bit higher on capital projects as we think about completing those and having that come through into our results for the year. Largely, we were in line with the guide that we gave overall for D&A. So there's not a whole lot of news there really. There's always some normal noise in D&A on a quarter-to-quarter basis. But our view would be we're in line with the guide, and we would expect to be in line with the guide that we just gave on today's call for 2026 as well.

And then, Stephen, on Roofing pricing, you saw in our guide, we expect pricing to be down slightly to start the year. But I'd say overall, pricing has held up relatively well to start the year. We've made some targeted moves just to address some of the competitive gaps as we start the year, but nothing dramatic. And I'd say nothing unusual to the moves that we make to start the year given some of the regional variations we see in our price points and some of the product demand. So nothing unusual there to start the year and relatively good pricing visibility and stability.

So in terms of the outlook, yes, we've announced a price increase for April 1. I would say we do expect to see some realization beginning in Q2 and moving through the rest of the year, historically, where we see a constructive roofing market, and we expect that to occur this year with Roofing volumes kind of in historical 10-year average ranges, more normalized seasonal weather patterns. And then when we do expect to see continued inflation in the business. So historically, we've been able to get some realization from a spring price increase where we've seen good demand trends and inflationary trends that we're able to offset with price increases. So we would expect to see some realization from that increase as we go through the year.

The next question comes from Anthony Pettinari with Citi.

In Roofing, given we had kind of a strange year last year with no storms and weak demand in the second half. Is it possible to talk a little bit more about sort of where channel inventories are? Have those been kind of completely drawn down? Or are they kind of maybe more seasonally normal? And I'm wondering, related question, if you could talk about the impact of maybe severe weather in December and year-to-date, if that is near-term negative, long-term positive or any view on that?

Yes. So maybe I'll start with that one first. Yes, I think some of the restocking delays is tied to just a really rough start and a lot of winter weather throughout the country which is impacting the ability to get on the roof and do any work, particularly in southern areas of the country, but also impacting the ability for distributors to buy inventory and bring it in. So that has impacted some of the restocking activity to start the year. But I would say, over the course of the year, generally a tough winter results into some additional repair and reroofing activity as the year goes along. So it could potentially give us some volume upside as we take through the year.

You're right, and last year was a very different kind of pattern of demand throughout the year. We saw a pretty significant drop off in the back half of the year to our guide that we gave in the fourth quarter. And on last call, I did indicate that I thought that would kind of spill over into this year in terms of a slower start. But to answer your question on destocking, now we think that destocking was really at an end of the year phenomenon for just distribution to kind of reset their inventory levels to close out the year.

And I said I expected that restocking to kind of come back. Last quarter, we talked about half of that volume decline in Q4 tied to lower out-the-door sales, weaker storm demand, about half tied to destocking, we thought that would come back. And we still expect that in terms of our guide. But I do think that's going to be kind of a Q1, Q2 ramp-up on the restocking efforts. But we've not seen any permanent kind of changes in inventory levels that distribution is holding. We think that's going to be a ramp-up to get to seasonal inventory levels that they're going to want to carry to service demand, and we expect that to really increase again in the back half of Q1 to close out Q1 and then really to start Q2.

The next question comes from Matthew Bouley with Barclays.

I wanted to ask about this contractor pull-through opportunities you were speaking about. Obviously, that's been a hallmark of the Roofing business. It sounded like you're speaking to leveraging that across the rest of the company and maybe doing the same with homebuilders. So I'm curious if you can lay out, I mean, is this really specifically a change or an enhancement to what you've been previously doing? And then kind of remind us what the benefits were in Roofing that you would be looking to replicate elsewhere.

Yes. This is a big area that we're very excited about. When we talk about unparalleled commercial strength, and it's been a focus and a hallmark of our ability to create downstream demand with contractors, builders, dealers that create pull-through then for our distribution partners. And so we've had a very successful contractor engagement model. We've talked about it a number of times. We increased that contractor network. We did that so in 2025 as well.

And it's really based on not just a product offering, but training, merchandising, marketing, co-branding, digital support services. So it's a full suite of services that really help our contractors win and grow in the market with our products and our brand. And so we've leveraged those learnings to say, how can we take that then to lumber and building material dealers, more than 4,000. These are family run, generally smaller dealer networks that will service rural areas with a broad product offering. Roofing, Insulation and Doors.

So the engagement model, we've taken some of the parts of training and merchandising and co-branding from our roofing contractor engagement. We brought that over to the dealer side and have brought that into the market this year with really a lot of interest and a lot of support and a significant increase in enrollments of dealers now that are committing to the OC brand and the full suite of products, because they're very complementary to what they're taking into the market. So 38% increase in enrollments. We think that we can continue that kind of double-digit rate of enrollment increase in '26. That creates a lot of pull-through and some significant revenue opportunities for us.

So I think we're excited about that. It's kind of a green shoot. If I go back to John's earlier question, when we think about the progression of the year playing out for us as well, clearly, we want to see some market improvements but there are a lot of self-help initiatives on both the commercial and operational front that are going to kind of roll through the rest of the year. This would be one of them. As these enrollments engage as we start to see product demand pull through when we get into the season, we think that's going to drive some incremental revenue for us.

And then I also commented on the builder front, we're kind of taking that model as well now and taking that to homebuilders. Again, a full suite of residential products, Insulation, Roofing and Doors, valuable iconic brand that the builders can use to co-brand some merchandising capabilities. So we're excited on how this downstream and pull-through model is really growing, and we're starting to see some early indications through enrollments that we think are going to lead to product pull-through and additional revenue as we go through the rest of the year and beyond.

And the next question comes from Trevor Allinson with Wolfe Research.

The question is on the full year potential for Roofing. 1Q is going to be down pretty significantly, as you've articulated, but you've got some pretty easy comps in the back half of the year. Just with that in mind, how are you thinking about full year revenue potential in Roofing? Is a flat year still on the table? Or does it really weak 1Q due to lack of storms here set you back too far for that to be a realistic scenario in 2026?

Yes. Not sure if we get back all the way to a full year kind of depends on how the dynamics play out. But I'd say from a volume standpoint, again, we think it's going to be a weaker start. But I would say it's pretty consistent with what we saw emerging in Q4. So when I talked about our guide in Q4 stepping down and a weaker Q1. So I would say there is nothing new in our near-term market outlook that has changed from when we were on the last call. I think we expected a slower ramp up to start the year. So I think that wouldn't impact.

I think if you think about the volume progression, we would expect to see, I think you would see Q2, Q3, Q4 more in line with 10-year averages. That would be our expectation as we go through the year after a slower start. And that is going to lead to some revenue growth opportunities sequentially throughout the year, but not sure if it will get us all the way back. I think that's going to depend largely on the market dynamics, if we see a stronger storm season, some higher opportunities there, and a little bit on the pricing dynamic and see how that plays out through the rest of the year.

And the next question comes from Philip Ng with Jefferies.

You called out some targeted pricing action in Insulation and Doors. Brian, perhaps you can give us a little more perspective on size and the magnitude? Were there price gaps that you want to close out? And from here on, increasing demand is still a little murky. Should we expect price stability? And were there any share gain opportunities as a result of this?

Yes. I'd start, and maybe I can have Todd come in on some of the Insulation pricing. On Doors, again, I'd say pricing has held up relatively well in a pretty challenging demand environment, which is, I think, a positive sign in terms of the value of the doors and how that can progress going forward with a little bit of upside volume and some potential pricing opportunities later in the year and into next. So I'd say that they are very targeted moves, very regional moves on the Doors front and nothing terribly dramatic, but really responding to more competitive pressures to start the year and to reset some programs to start the year with some of the growth initiatives we have in place.

But I would say, overall, fairly stable to finish the year and to start the year, some targeted moves to address some of those competitive gaps and program adjustments we were going to make. But I think it gives us a platform for growth potentially as we go forward and we get into a more constructive demand environment, the opportunity for some pricing going forward.

And Phil, I'll give a little more color on the Insulation side. When we look at the non-res part of insulation, we're still in a fairly constructive pricing environment, where we're able to get price in parts of that business that you see coming through our results in Q4 and our guide in Q1.

When we look at res, I would describe these targeted actions is fairly normal targeted competitive responses that we have in the market. Nothing really unusual. Despite the weakness that we've seen in single-family starts and lagged starts overall. It's been a relatively stable pricing environment overall in res. But we're still absorbing significant inflation. So we are seeing margin compression in that business, as a result of some of the targeted price actions that we've taken, but also the inflation in labor and materials that we continue to absorb in the business. But overall, I'd describe it as a relatively stable pricing environment in res and still positive and constructive in non-res.

The next question comes from Sam Reid with Wells Fargo.

I believe on the prepared remarks, you alluded to some asset curtailment on the Insulation side. So maybe just characterize and perhaps quantify the level of curtailment there that you might have undertaken in Q4 and maybe early Q1? And then also, any views on industry capacity utilization and not to be greedy, but perhaps a split on how that might look in that batts and rolls versus loosefill.

Thanks, Sam. I appreciate the question. So let me start with how we're operating the business right now on the assets, and then I'll give color on capacity utilization. So we previously announced we curtailed one of our manufacturing plants in Utah already. We did that relatively early in the process to get that production out to manage our inventory levels. And we've been continuing to manage inventory levels carefully through the end of the year.

The back half of '25 was a bit of a catch-up, though, because the market did decline in the back half versus the first half. So we were sitting on more inventory than we wanted coming out of Q2 that we then work down progressively in Q3 and Q4, and then we anticipate working down inventory again with curtailment in first quarter. Now we do have some normal seasonal build that we do in the first quarter to support the season. So we're also contemplating that.

The curtailment that we're taking, it tends to be more hot idle curtailment versus cold idle curtailments. In Nephi, we took completely cold. We furloughed employees in the manufacturing plant. And other plants were taking hot idle, which means we're not producing, but we're leaving the furnaces operational so we can start up when the market recovers.

When we look at the overall magnitude of this, I mean it's a big impact for us. It was a big impact in the back half of last year including the catch-up that we had to do from the first half where we built a bit of inventory. And it's also a significant impact for us in Q1 of '26 in the guide. When we look at capacity utilization for the industry, it is different for batts and rolls then loosefill. Loosefill is tight right now. We've seen a couple of our competitors have some operational challenges that we've been able to take advantage of in Q4 and into Q1. But it also means our inventory levels are low because we did everything we could to support customers in that period. We are in free supply for batts and rolls. So there is available supply in that space.

Overall, for the industry, what we've said historically is we think industry capacity can support 1.4 million to 1.5 million starts. When you look at the mix of single-family and multifamily, single-family has been fairly weak. Multifamily has been a little better. A single-family start has about 30% more pounds of insulation than a multifamily start. So we're probably at the higher end of that 1.4 million to 1.5 million range in terms of what the industry could support today. So you can do the math based on the housing starts and where we landed in Q4 and Q1, it's below the 90% level which historically has been more constructive for price in res, but we're probably somewhere in the 80s based on that math.

And the next question comes from Mike Dahl with RBC Capital Markets.

I just want to go back to Roofing, a 2-part question. On the volume declines, is that what you're seeing already year-to-date? Because I appreciate the weather has been difficult and there's still some carryover dynamic, but our sense is that sell-through volumes haven't been down quite that much broadly speaking. And then the second one being kind of dovetailing that into price that you do expect to get price realization on the April increase, how quickly do you need to see volumes come back in March or April to see that in your view? Because it seems like it would be a tough setup with a little sequential price fade and volumes down 20-plus for two straight quarters to get a lot on that.

Yes. No, I appreciate the question. Just in terms of the volume side, just on the -- some of this is going to be a little bit of a year-over-year comp. So I would agree, I think everything that we talk about with our customers, I think the sell-through is down, but not down as much. But if you look at kind of the restocking activity last year versus what we're seeing the pace of restocking this year, that is down a little more. So it's a combination of lower out-the-door sales and then a little bit on a year-over-year comp of just less inventory restocking that we're seeing in the quarter.

Now again, I don't think that's a permanent issue, I think that flows into some higher volumes in Q2. I think it's a little bit of just timing. And the rough weather to start has actually kind of slowed that restocking activity down in the northern parts of the country. It's tough to even start that in January and here in early February. So we think it's going to be more loaded into March to close out the quarter and then to start April.

So when we look at our order entry and our backlogs, they continue to grow throughout the quarter. We expect to have a pretty good March shipping pattern emerge. And then we think that's going to continue into April and early May. So I think the setup to restock is in place. It's just being a little delayed, and that's why it's impacting a little bit more of the year-over-year decline from our manufacturing shipments.

But again, I think that environment sets us up where we think it would be constructive to realize some incremental pricing as we expect demand to improve. And as I said, I think as we go through Q2, Q3, we expect that to continue to improve. We're seeing inflationary pressures that we need to overcome. So I think that's something that we would expect to start to get some realization into Q2 and beyond with the pricing announcement.

The next question comes from Brian Biros with Thompson Research.

Can you just revisit the synergies from the Doors acquisition? It sounds like you're still on track to realize those even in a tough environment that probably wasn't factored in at the time of the purchase. So maybe just remind us how those synergy targets are being achieved in the absence of growth or even in the absence of a flat environment for that business?

Yes, happy to kind of walk that through. So at the time of the acquisition, we said that we expected about $125 million of cost synergies through the acquisition. Those are going to be primarily OpEx-related synergies as we brought the businesses together. We expected about 40% of that to realize in the Doors P&L, about 60% throughout the rest of the enterprise. And in my comments, Todd's comments, we're on track to achieve that and actually exceed that by mid-2026. We probably see now visibility to maybe even $10 million to $15 million more upside to that as we go through the first half of the year. So I think the team has done great work finding those operational cost synergies and with respect to a weaker demand environment, that has not slowed us down in terms of looking for those operational cost efficiencies, and we've been able to drive those and realize those through the P&L.

I think in addition to that, we talked about another $75 million of operational cost synergies really tied to our manufacturing network. So about 1/3 of that tied to network optimization, about 1/3 tied to automation, about 1/3 to kind of general productivity initiatives that we have in place. And we've announced some closure consolidations. So we're right on track to delivering on that $25 million to $30 million of additional operational cost improvements through network optimization. We think that feathers in through the year, but we think we finished the year on that run rate. And then we still have opportunities around productivity, automation, some of those other efficiency gains that we're applying that we think, again, scale through the rest of the year.

So disappointed in the market opportunity, and we certainly have been challenged by market volumes and the volume deleverage. But from an operational cost and the structural cost improvements we expected to put into the business, those are in place and actually, I think, exceeding what we thought we could achieve, which gives us a really great cost platform as we see market volumes improve. We see our organic growth initiatives increase. We really think we see some great incremental operating leverage as we take the business forward.

The next question comes from Susan Maklari with Goldman Sachs.

My question is around your commitment to shareholder returns. Can you talk about how you're thinking of that given the environment that we are all in, the target you set out at your Investor Day for $2 billion over 2025, 2026. And I guess within that, are there any potential divestitures that you're thinking about today as you look across the entire business? Anything else that you think of that could be non-core in there?

Thanks. I appreciate the question. So we remain committed to the $2 billion return of cash to shareholders in '25 and '26. We returned about $1 billion last year in markets that are similar to what we expect to see in '26. We increased our dividend 15% in December to also support continued growth in our dividend, as Brian highlighted earlier in his comments. So we remain committed to what we said at Investor Day. We're in a very good spot from a leverage standpoint at 2.1x EBITDA at year-end. So we have ample capacity both in terms of the really strong operating cash flows we continue to see in the business even in these down market conditions as well as our balance sheet.

When we look at divestitures, as Brian highlighted, we have a small divestiture. We just completed in our Doors business, the Doors distribution business. We also are continuing to work on the glass reinforcements divestiture. So both sides are working actively through regulatory work to get clearances as well as all the work to make sure we're set up for a successful day 1 post close on glass reinforcements.

And our final question comes from Adam Baumgarten with Vertical Research Partners.

Just curious on the Insulation side, how long you plan to curtail production given the weakness in the markets? And then switching gears to the non-res side, maybe where you're seeing strength, where you're seeing maybe relative weakness and positioning in terms of the data center construction wave and how you can kind of share in that.

Thanks, Adam. Let me start with the second part of that on the non-res side. We do continue to see strength in data centers as well as in industrial process applications for our insulation materials. So when you look at some of the pipe and mechanical insulation that we sell, when you look at the FOAMGLAS product line globally, those are really nice products for us. We're seeing strength in some institutional markets as well. There are some pockets of weakness. Some of it is related to just overall economic uncertainty and some project delays that are occurring, in particular, in our Latin America business, which is part of our North American non-res. But overall, we would describe that as good demand for our products, especially on the data center side and the industrial side.

When we look at curtailment, we're matching our production to what we anticipate needing for the peak season that we have. So we're going to be disciplined in our management of inventory and working capital to make sure we're managing cash flows appropriately through the year. But we also want to make sure we have an eye towards supporting our customers in the market when the market does come back. And we're balancing both of those when we think about the curtailment choices that we're making today.

And being conscious of time, we will conclude the question-and-answer session. And I will hand back over to you now, Brian, for any final comments.

Thanks, Carla. Well, I want to thank everyone for making time to join us on today's call and for your ongoing interest in Owens Corning, and we look forward to speaking to you again on our first quarter call. Thanks, and have a safe day.

This concludes today's call. Thank you, everyone, for joining. You may now disconnect. Have a great rest of your day.

Hello, everyone, and welcome to Owens Corning's Third Quarter 2025 Earnings Call. My name is Lydia, and I will be your operator today. [Operator Instructions] I'll now hand you over to Amber Wohlfarth, Vice President, Corporate FP&A and Investor Relations, to begin. Please go ahead.

Good morning. Thank you for taking the time to join us for today's conference call and review of our business results for the third quarter 2025.

Joining us today are Brian Chambers, Owens Corning's Chair and Chief Executive Officer; and Todd Fister, our Chief Financial Officer.

Following our presentation this morning, we will open this 1-hour call to your questions. In order to accommodate as many call participants as possible, please limit yourself to 1 question only.

Earlier this morning, we issued a news release and filed a 10-Q that detailed our financial results for the third quarter 2025. For the purposes of our discussion today, we have prepared presentation slides summarizing 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 home page. A transcript and recording of this call and the supporting slides will be available on our website for future reference.

Now please reference Slide 2 where we offer a few reminders. First, today's remarks will include forward-looking statements that 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 more detail.

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 our earnings press release and presentation available on the Investors section of our website, owenscorning.com.

Third, financials and metrics for current and historical periods discussed on this call will be for continuing operations, except for capital expenditures and cash flow measures, which include amounts related to glass reinforcement until the closing of the sale of the business. For those of you following along with our slide presentation, we will begin on Slide 4.

And now opening remarks from our Chair and CEO, Brian Chambers. Brian?

Thanks, Amber. Good morning, everyone, and thank you for joining us today. During our call, I'll provide an overview of our third quarter results and our work to continue outperforming the market in the near term while investing to strengthen and grow our company for the future. Todd will then provide more detail on our financial performance and I'll come back to discuss what we're currently seeing in the market and our outlook for the remainder of the year.

In the third quarter, we delivered solid results despite challenging market conditions, demonstrating the strength and agility of our team and the power of our operating model. Because of the strategic choices and structural improvements we have made, the new Owens Corning continues to operate with greater efficiency outperforming prior cycles. I'll share more about our financial performance in a moment, but first, I'll begin with safety.

In October, we celebrated our annual manufacturing appreciation month, which includes recognizing our teams for their unconditional commitment to safety as they produce the high-quality products our customers rely on. That ongoing commitment was reflected in our third quarter safety performance where our recordable incident rate was 0.56.

Financially, in the quarter, we generated $2.7 billion in revenue and $638 million in adjusted EBITDA, delivering an adjusted EBITDA margin of 24%. We also generated strong cash flow and continued to return capital to shareholders through dividends and share repurchases. Through the first 3 quarters of the year, we have returned over $700 million of the $2 billion we committed to returning over this year and next. This performance reflects our disciplined capital allocation and confidence in our ongoing cash-generating capabilities.

Our financial results continue to reflect our ability to perform at a high level in challenging market conditions as we see weakening residential trends in the U.S. impacting our volumes in both repair and remodel and new construction product lines. In Roofing, market demand in the quarter was impacted by a uniquely quiet storm season with no named storms making landfall in the U.S. in the third quarter for the first time in a decade. In Insulation, we saw our nonresidential and European markets remain relatively stable, but continue to see the impact of slower housing starts in our residential insulation business.

Despite these weakening residential trends, both businesses continue to benefit from the structural improvements made over the past several years. In fact, when we compare today's results to similar market conditions seen over the past 10 years, we have improved margins by over 500 basis points in both our Roofing and Insulation businesses.

In our Doors business, volumes continue to be impacted by both slower discretionary spending and repair and remodel and weaker new construction activity, resulting in lower-than-expected earnings. Even with these headwinds, we continue to make good progress on achieving the anticipated costs and operational synergies and are beginning to see the benefits of our unique commercial position working with common customers.

While I'm disappointed in the current financial performance, I am pleased with how our team is responding to position the business for long-term success and remain confident in our ability to achieve our margin and cash flow goals for the business. In fact, across all three businesses, we see revenue and margin growth potential, driven by our execution and the favorable long-term secular tailwinds in North America and Europe, two of the largest and most attractive building products markets globally. In the U.S., mortgage rates are slowly coming down, improving housing affordability, which we expect to trigger residential market activity as we move through 2026.

We also see increasing investments in several nonresidential segments, including data centers, manufacturing and energy. And in Europe, macro indicators continue to improve, which will lead to growth, particularly in the nonresidential sector.

Our financial performance to date and into the future, reflects the strength of the company we've built, one that can sustain annual EBITDA margins above 20% even as markets fluctuate. In the near term, we will continue to be disciplined operators focused on our cost, our customer share and our capital allocation. We will leverage our structurally improved cost positions that we have achieved through network optimization and operational efficiencies, while making strategic investments that strengthen our market-leading positions and support our growth.

In Roofing, this includes unlocking efficiencies and creating network flexibility through ongoing debottlenecking efforts, the successful start-up of our new laminate shingle line in Medina earlier this year and the future addition of a new plant located in the Southeast, the largest asphalt shingle region in the country. This facility, which will be built in Alabama, will include leading technology and have the capacity to produce approximately 6 million squares of laminate shingles annually, enhancing service across our network.

As we continue to invest for growth in Roofing, we're also building loyalty and demand through our industry-leading contractor engagement model. Since the beginning of the year, our contractor network has grown by about 9%, with that growth accelerating throughout the year, reflecting our unparalleled commercial strength and the value we create for our customers.

In Insulation, the strategic investments we have made give us more balanced end market exposure across residential and nonresidential applications and we continue to make structural improvements to maintain a winning cost position, such as our new state-of-the-art fiberglass line in Kansas City, which will provide us with the low-cost flexible production line capable of serving both nonresidential and residential customers, depending on market demand.

We're also capitalizing on the growing demand in both residential and commercial applications for XBS foam with a new low-cost plant in Arkansas. We recently celebrated the grand opening of this facility which is on track to be fully operational in early 2026.

In Doors, we're capturing cost synergies and applying the same commercial and operational playbook that has driven success in Roofing and Insulation. Over one year into the integration, we have line of sight to achieving all of the $125 million in enterprise cost synergies we committed to by the end of year two of ownership. In addition, we have identified an additional $75 million of structural cost savings through operational improvements and plant consolidations, giving us a lower cost position to leverage as volumes increase.

We're also starting to see the benefit of our commercial strength as we expand the success of our contractor engagement model in Roofing to shape the PINK Advantage dealer program in our Doors business. Through this program, we can serve the more than 4,000 small privately owned dealers across the U.S. while creating downstream demand and product pull-through distribution. We are seeing acceleration in dealer sign-ups and have increased the membership count by more than 35% this year.

In addition, we are starting to see the power of our enterprise retail capabilities, creating new opportunities for Doors in home centers by leveraging our highly recognized and valued brand with homeowners and small contractors, as well as our in-store service and merchandising capabilities. By utilizing the unique capabilities of the OC advantage in Doors, we are positioning the business for increased revenue and margin growth.

Through our reshaped product and geographic focus, we built a company powered by three market-leading businesses with multiple opportunities to win and grow. In line with our building products focused strategy, we continue to make progress on the divestiture of our glass reinforcements business, targeting completion by the end of the year as we work through closing and regulatory approvals.

Before turning it over to Todd, I would like to thank and congratulate my Owens Corning colleagues for their role in our most recent recognition. We have been named to the 100 Best Corporate Citizens list which ranks the largest publicly traded U.S. companies on their environmental, social and governance performance and transparency. Owens Corning ranked third, marking our eighth consecutive year in the top 10 and reflecting our commitment to doing business the right way.

Overall, for the quarter, we delivered solid results in a challenging environment, outperforming previous cycles and operating with greater efficiency and resiliency. Our durable margins and strong cash generation reflect the power of our operating playbook and the strength of our market positions. As we navigate near-term market dynamics and seasonal inventory controls, we remain committed to serving our customers, maximizing our performance and investing in the growth of the enterprise, creating multiple paths to deliver long-term value.

With that, I'll turn it over to Todd.

Thank you, Brian, and good morning, everyone. As Brian said, our performance in the third quarter demonstrates the impact of our structural improvements in portfolio transformation, delivering more resilient earnings in challenging markets.

I'd now like to turn to Slide 5 to discuss the results for continuing operations for the quarter. In the third quarter, we continued to build on a strong first half and execute well despite weaker end markets. While revenue decreased 3% over prior year as a result of lower volumes, we still generated adjusted EBITDA of $638 million and adjusted EBITDA margins of 24%. In the quarter, we had adjusting items of $784 million primarily due to a noncash goodwill impairment charge in our Doors business of $780 million. This impairment is driven by updates to the macro assumptions in our accounting valuation model due to near-term market weakness, not a change in our longer-term view of the earnings potential of the business. Adjusted earnings per diluted share for the third quarter were $3.67.

Turning to Slide 6. Free cash flow for the quarter was $752 million compared to $558 million in the same period last year. We benefited from disciplined working capital management as well as lower cash taxes as a result of the tax bill updates earlier this year, which more than offset the impact of higher capital investments. We continue to invest in capital projects at elevated levels in the near term to drive improvement in long-term efficiency and growth. As a result, capital additions for the quarter were $166 million, up $25 million from the same quarter prior year.

Our return on capital was 13% for the 12 months ending September 30, 2025. As a reminder, at our Investor Day earlier this year, we gave a long-term target of mid-teens or better return on capital. While currently below mid-teens due to the Doors acquisition, there is no change to our long-term target. At quarter end, the company had debt-to-EBITDA of 2x at the low end of our targeted range of 2 to 3x.

During the third quarter, we returned $278 million to shareholders through share repurchases and dividends. We repurchased common stock for $220 million and paid a cash dividend totaling $58 million. Year-to-date through the third quarter, we've returned more than $700 million to shareholders and we are on track to meeting our commitment of returning $2 billion to shareholders between 2025 and 2026.

Our capital allocation strategy remains focused on generating strong free cash flow, delivering mid-teens returns on capital, returning cash to shareholders and maintaining an investment-grade balance sheet while we invest in attractive capital projects for growth. Our capital allocation strategy is focused on compounding long-term value for shareholders.

Now turning to Slide 7, I'll provide additional details on our segment results. Starting with our Roofing business. Our results in the third quarter continue to demonstrate the power of our contractor engagement strategy and vertically integrated cost position to outperform the market and deliver resilient earnings. Sales in the third quarter were $1.2 billion, up 2% from prior year. In the quarter, revenue growth was driven by positive price realization on our April increase with volumes relatively flat. The U.S. asphalt shingle market on a volume basis was down low double digits compared to the prior year.

The big driver of the year-over-year decline was lower storm-related demand. As Brian shared, for the first time in a decade, no named storms in the Atlantic made landfall in the U.S. Our U.S. shingle volume down slightly outperformed the market as we continue to see good demand for our shingles and ongoing contractor pull-through distribution. We had another strong quarter of EBITDA performance as we navigated a declining shingles market. EBITDA was $423 million for the quarter, up slightly from prior year. Positive price more than offset the impact of cost inflation. Overall, for the quarter, we delivered EBITDA margins of 34%, in line with prior year.

Now please turn to Slide 8 for a summary of our Insulation business. In the third quarter, Insulation sustained 20-plus percent EBITDA margins in more difficult markets, showing the impact of the structural improvements we have made. We continue to deliver results above historical performance in similar markets, highlighting our ability to create value for customers. Q3 revenues were $941 million, a 7% decrease from Q3 last year. The decline was primarily due to lower demand for residential products in North America and the sale of our building materials business in China. In North America residential, we saw volume decline in line with our expectations for fiberglass due to ongoing weakness in demand for residential new construction.

In North America nonresidential, revenue was down slightly versus prior year on the timing of projects in the U.S. and Mexico. And in Europe, we continue to see stable markets. Strong operational performance partially offset the impact of lower demand that resulted in additional production downtime as we remain disciplined in inventory management. Insulation delivered EBITDA margins of 23% in the third quarter, resulting in EBITDA of $212 million, down $36 million from prior year.

Moving to Slide 9. I'll provide an overview of the Doors business. Overall, the business is responding well to a challenging market. In the quarter, the business generated revenue of $545 million, down 5% from prior year. The decline in revenue was primarily due to lower volumes as the Doors business continues to navigate challenging market conditions for both new residential construction and discretionary repair and remodel. We are also seeing a decline in EBITDA versus prior year as a result of lost leverage.

Price cost was negative in the quarter as pricing was down slightly and inflation, primarily tariffs, continues to impact the business. Despite these market headwinds, the integration is progressing well. We are run rating slightly ahead of our $125 million of enterprise synergies. To date, we have captured about 40% of our synergies in Doors and the other 60% across the remainder of the enterprise. This reflects our ability to scale the OC advantage while applying the same playbook that structurally improve margins and Roofing and Insulation over time.

We continue to take actions in support of achieving these savings and driving network optimization, which include the decision we made in the third quarter to close a facility in Texas and another announcement this week to close a facility in Canada. EBITDA for the quarter was $56 million with EBITDA margins of 10%. Overall for the company, there was about $12 million in net impact from tariffs in Q3. Our sourcing and supply chain teams have continued to demonstrate agility and discipline mitigating tariff exposure and preserving margins. We expect net tariff exposure to continue at a similar rate in Q4, with the biggest headwind in the Doors business.

As a reminder, last year in Doors, we also saw a $14 million onetime benefit from tariff recovery efforts in Q4 that will not repeat this year. This impact is included in the outlook Brian will share in a moment.

Moving on to Slide 10, I will discuss our full year 2025 outlook for key financial items. General corporate EBITDA expenses are expected to be approximately $240 million, at the low end of the range we had previously shared of $240 million to $260 million. We expect our 2025 effective tax rate to be 24% to 26%, anticipate a cash tax benefit of approximately $100 million in the year for the recent tax bill. Capital additions are expected to be approximately $800 million. This level of capital investment reflects the strategic choices we are making to expand capacity and drive improved efficiency. This CapEx continues to include glass reinforcements which is expected to be approximately $80 million in 2025.

We expect CapEx to remain elevated in the near term as we work towards completing the high-return capital-efficient projects currently underway. We remain focused on executing our strategy, delivering strong returns and compounding long-term value for our shareholders.

Now please turn to Slide 11, and I'll turn the call back to Brian to further discuss our outlook. Brian?

Thank you, Todd. In the third quarter, our team continued to perform well, responding to slowing demand trends in most of our product lines. For the fourth quarter, we expect residential new construction and remodeling to remain challenged, with softer market conditions and customers carefully managing year-end inventory. For nondiscretionary roofing repair activity, we expect the market to be down significantly on lower second half storm activity and Q4 seasonality.

Nonresidential construction activity in North America is expected to decline slightly and market conditions in Europe are anticipated to gradually improve. As Todd shared, we remain disciplined in our inventory management in this environment. As a result, we will realize additional year-over-year production curtailment in the fourth quarter.

Given this near-term outlook, we anticipate fourth quarter revenue for continuing operations to be approximately $2.1 billion to $2.2 billion, down mid- to high teens versus prior year. For adjusted EBITDA, we expect to deliver margins of approximately 16% to 18% for the enterprise.

Now consistent with prior calls, I'll provide a more detailed business specific outlook for the fourth quarter. Starting with our Roofing business, we anticipate our revenue to be down mid-20% versus prior year. While we typically see a decline in roofing shipments in the fourth quarter due to colder weather, we expect to see a more significant drop this year due to much lower storm activity and a more pronounced reduction in end-of-year inventory levels at distribution versus prior year.

Given this environment, we expect a high 20% decline in ARMA market shipments. Based on our strong contractor engagement model, we would expect our volume to decline slightly less than the market overall. We anticipate volume declines for components and nonwovens to be down a similar amount tied to lower demand for shingles. For the quarter, we expect pricing to be up slightly versus prior year, but with ongoing inflation, we anticipate seeing negative price cost for the fourth quarter.

We also expect to take additional production curtailment to manage inventory and perform needed maintenance on our production lines. partially offset by productivity. Overall, for Roofing, we expect to generate a mid-20% EBITDA margin in the fourth quarter.

Moving on to our Insulation business. We anticipate overall revenue to decline high single digits compared to the prior year, primarily due to a volume decline in North American residential and the sale of our building materials business in China. As a reminder, this business had approximately $130 million of revenue annually. In our North American residential insulation business, we expect revenue to be down low double digits versus prior year due to lower demand as we work through a step down in housing starts and overall market uncertainty.

Additionally, we anticipate targeted price moves to result in slightly lower price year-over-year. For North American nonresidential, we expect revenues to be down slightly versus prior year, in line with the declines Todd shared for the third quarter tied to lower project-related demand in North America. And in Europe, we anticipate revenue to be up versus prior year as we see gradual market recovery and currency tailwinds.

Overall, for the Insulation business, we expect ongoing cost inflation resulting in negative price cost in the quarter. Additionally, we anticipate strong operational performance and cost controls to largely offset the incremental production curtailment tied to the volume decline from the market pressure in North American Residential.

Given all this, we expect EBITDA margin for the Insulation to be slightly above 20%.

Turning to Doors. We expect our business to continue to be challenged by slower discretionary repair and remodel spending and weaker new construction activity. Also in the quarter, similar to our other residential product lines, we expect to see distributors reduce end-of-year inventories. As a result, we expect revenue in Q4 to decline high single digits versus prior year, driven primarily by lower demand. While we anticipate synergies and cost control realization to continue, we expect EBITDA to be impacted by lower volume and the resulting leverage loss from production curtailment.

Additionally, we expect price cost to remain negative with relatively flat pricing and ongoing inflation driven primarily by tariffs. Overall, for Doors, we expect fourth quarter EBITDA margin of approximately 10%, similar to Q3.

With that review of business outlook, I want to close out with a few enterprise comments. Based on this outlook for the fourth quarter, we expect 2025 revenue for the enterprise to be up modestly versus prior year, inclusive of the full year impact of the Doors business. Despite ongoing market challenges throughout the year, we expect to deliver full year EBITDA margin of approximately 22% to 23%. As we finish the year, we remain focused on executing our strategy with discipline, leveraging our reshaped portfolio, structurally advantaged cost position and the unique capabilities of the OC advantage.

These strengths position us well to navigate near-term market pressures, while continuing to invest in the long-term efficiency and growth of our enterprise to achieve the targets shared at Investor Day in May. Moving forward, we remain energized by the opportunities to continue positioning Owens Corning as a best-in-industry performer. We are building a stronger, more resilient company, one that delivers higher earnings and cash flow, creates lasting value for our shareholders and is built to outperform.

In closing, I want to recognize the continued dedication and resilience of our global Owens Corning team. Their commitment to safety, operational excellence and customer service is what enables us to perform at such a high level in any market environment.

With that, we would like to open the call for questions.

[Operator Instructions] Our first question today comes from Stephen Kim with Evercore ISI.

I appreciate all the color. Obviously, a tough market out there. I'm going to focus on Roofing and particularly the margins. I think you've guided for margin -- sorry, pricing in 4Q to be up slightly year-over-year. But we have been understanding that there's some growing pricing pressure sequentially in Roofing. And I'm wondering if you could describe where do you feel more pressure? Is it more prevalent among manufacturing peers, distribution, retail or end users? And how does your pricing strategy generally change if the pressure comes from one channel versus another?

Stephen, thanks for the question. I think pricing has continued to remain positive all year. We've talked about that in terms of our realization. And it's really driven by the value that we're bringing to our contractors and distributors, through our brand, through our innovation, through our commercial strength in the market. So that positioning in the market, that investments we've made to build out all of those capabilities, I think, reflect a strong pricing for our products, and that's retained and been maintained throughout the year.

And typically, we see some pricing moves as we close out the year, and we see that more generally in a more normalized roofing market, which clearly we are facing today with limited storm activity, Q4 seasonality, distributors taking a harder look at inventory levels. So in the fourth quarter, particularly, we normally see some pricing moves to -- make some pricing moves as distribution adjust their end-of-year inventories. And we've made some of those pricing moves to remain competitive, and those have been very targeted. When we look at pricing actions like that in Roofing or in Insulation or in Doors, we're very targeted. We're very focused regionally. We're very focused on specific product lines.

So we've made some of those moves. So I'd say the pricing environment though is fairly typical to what we have seen in past fourth quarter cycles, nothing unusual given any of the distribution changes or any of the consolidation moves out there. So those are what I would call pretty typical seasonal pressures. And we're still, as we said in our guide, maintaining a positive price in the quarter. But we are seeing some continued inflation. So we're going to have a negative price/cost mix when we take into account the ongoing inflation in the quarter.

So in terms of the overall pricing strategy, we remain consistent with how we price our products. We want to be competitive in the market, but we also want to be recognized for the value we bring relative to our brand, our innovation, our service, our commercial skills and capabilities, and that's how we'll continue to price our roofing products and all our products as we go forward.

Our next question comes from Anthony Pettinari with Citi.

In insulation, I think you discussed North America nonres revenue down slightly in 3Q with the timing of projects, I think you cited. And you also discussed revenue slightly down. And I'm just wondering if you can give us some background on nonres demand? And are these projects -- are they moving from 3Q to 4Q or '25 to '26 or any further detail on the nonres side?

Anthony, thank you for the question. I can give more detail in both Q3 and Q4. We're seeing some project delays in both the U.S. and in Mexico. When we think about the delays, we do view it as shifts from quarter-to-quarter, but potentially also shifts from '25 into '26. We've seen some customers in the space share similar data for the commercial and industrial segment that they're also seeing some project delays. So we don't think this is unique to us. We think it's more a broad phenomenon that we're seeing in the industry.

We are seeing a bit of a slowdown in construction activity in Mexico, where we do report that through our North American nonres piece of the business. Some of those delays appear to be related to just overall economic activity in Mexico. This could be delayed a bit longer into next year. But in the U.S., we think it's more related to just normal kind of delays we see in projects that occur from time to time. So not too unusual relative to what we've often seen.

Our next question comes from John Lovallo with UBS.

Maybe just sliding over to the Door segment to round it out here. You took a sizable impairment based on the outlook for the business. However, it does seem like you guys are outperforming your largest peers. So I guess the question to part one, do you still think you're gaining share in this business despite the softer market? And then what assumptions within the kind of the fair value analysis changed the most in that and should we expect further impairments in the fourth quarter?

Well, John, let me start with some more detail on the impairment itself, and then I'll kick it over to Brian to share more on the business and what we're doing from a share standpoint. So as a reminder for everybody, when we finalize goodwill, by definition, there's 0 cushion between the value of the goodwill and the assumptions that we have in the model. And then on an accounting basis, if we have triggering events in a quarter, we have to retest that model and all the assumptions.

So we did have a triggering event in Q3, which was the revenue decline that we saw. And when you look at these goodwill models, they're really sensitive to early year dynamics, in particular around market growth rates and then the subsequent impact on our margins. So when we look at the business, we did need to take an impairment in the quarter based on the accounting model. We remain confident that we're going to see margin improvement over time, but the model has put a heavy weight on the near-term results as we discount some of those future year results just as we look at the math of it.

So really, from our standpoint, no fundamental change in long term, how we view the business, how we view the earnings potential. It's just we're facing in the near-term market weakness here that is different from what we assumed when we calculated goodwill originally in the models.

And John, maybe I'll pick it up from that. I think we continue to stay very focused on the actions we can take to position the business for success in both the near term in this environment and then longer term. We've talked about the ongoing focus on cost synergies. We continue to see good realization there and on track to the $125 million in overall enterprise synergies. We announced another $75 million of targeted production efficiencies, and we're making very good progress on that.

And then I talked last quarter on some green shoots that were emerging around some of the commercial opportunities we saw in the market. And I think we continue to see those come through, and I highlighted some of those in the prepared comments. We continue to see great conversion at the lumber dealer level. And these are dealers that are servicing very local communities with a wide variety of products, but inclusive of the doors, and we're seeing some increased interest in positioning as we bring the broad product offering of Owens Corning to these dealers in Roofing, Insulation and Doors that they can take in the market, build their business and grow their business through our brand and our marketing and merchandising capabilities.

So we're seeing some business pick up in that -- in that specific area. And then we continue to see a lot of interest across broad distribution around the full product offering we bring and have been able to differentiate ourselves around our service proposition and quality, and the teams have done really, really great work to build a really strong value proposition around service and quality that we think is benefiting in the market today.

And then the last one I talked about was around the home center. Again, back to leveraging the OC capabilities, the brand, our merchandising capabilities, we've seen some pickups there and some business opportunities. Unfortunately, a lot of that in the near term is getting overshadowed by the market declines, but we do see that accelerating. As we see kind of market volumes pick up as we move into next year, we see some more of those volumes coming through, and we think that's going to give us some great incremental operating leverage as we take the business forward.

Our next question comes from Michael Rehaut with JPMorgan.

Wanted to zero in on hopefully a couple of areas, if you don't mind. One is, just trying to get a sense and parse out in Roofing and it sounds like a little bit perhaps in Insulation. In terms of the year-over-year revenue expected decline in 4Q, if it's possible to try and break out, how much of that was due to inventory reduction in the channel? And then secondly, in Insulation, maybe if you could just describe what's going on from a pricing standpoint sequentially and if that's something that you would expect to persist into '26 absent any rebound in demand?

Mike, let me start with roofing and then I'll have Todd kind of come in on the Insulation front. On the Roofing step down in the quarter, it's probably a combination of three factors that are driving the more substantial kind of decline in the quarterly volumes. One is, as we work through the year, I think we've seen the market resetting to more normalized storm volumes. And we saw that in Q2. We expected in Q3, we're going to see some declines relative to some lower storm activity versus prior year. In fact, in Q3, we saw really no major storm activity, as we talked about first time in the decade.

So we saw that kind of step down more dramatically. So I think in Q4 now, when you look at the big sequential and both -- and the year-over-year decline, I mean best guess is we probably say maybe it's probably half and half, half tied to a bigger step down in storm activity that's limiting volume and about half in terms of more dramatic inventory corrections versus prior year on lower overall demand. So as I look at the opportunities in the quarter, it's probably been a few years since we've seen this kind of significant step down, Q4 2022 is probably the last time we saw a pretty weak second half storm year in '22, and we saw that step down in volume.

So we have seen these kind of big decreases. That was about a 20% decrease in Q4. This one is a little more impactful, though, because of the lower storm activity we feel. So best view about half and half. The good news is that inventory reduction generally comes back in the first part of next year as distributors start to restock for the new season. But I think we're going to see a pretty cautious buying behavior across all of our distribution customers to close out this year, given the market uncertainty.

I'll comment on what we're seeing in the Insulation market in Q4 and then sequential pricing in res Insulation. So when we look at the res side of the story in Q4, we are seeing a decline in lagged housing starts in Q4 on a year-over-year basis. We're expecting the market to decline more than the decline in lagged starts. So why is that? Some of that is the mix of single-family versus multifamily. We're seeing a bit weaker mix on the single-family side. But some of that also is just conservative inventory posture as Brian just described on the Roofing side, also in Insulation. We are in free supply now. There's enough capacity to serve our customers' needs.

So there's less of a need for folks to build large inventory positions at year-end. So it's hard to put a specific number on the destocking that we expect. We believe more of it is driven by the slowdown in res housing and just overall demand for the market. But we do think destocking is a part of the story.

When we look at pricing in Q3, we made surgical pricing moves on the res side, as we talked about on the last call, targeting specific product lines, specific regions, specific areas where we needed to respond to competitive issues. Overall, though, we expect a relatively stable pricing environment into Q4. So while the guide includes a bit of year-over-year pricing down on res, that's really the carryover of that Q3 set of surgical actions that we made into Q4 rather than new actions that we anticipate in the quarter.

Our next question comes from Trevor Allinson with Wolfe Research.

I wanted to ask about capacity utilization rates. Can you comment about on where those were in both your U.S. resi Insulation and Roofing businesses in 3Q? And then given anticipated softer market conditions, where you expecting utilization rates to move into the fourth quarter?

Trevor, I'll start with the res side, and then Brian can talk through the Roofing side. So the highest level, we still view the industry, if all assets are running in the industry, is capable of supporting 1.4 million to 1.5 million starts. When we look at Q3 and Q4, we are tracking below that 1.4 million to 1.5 million range. As I shared before, we're seeing a weaker mix of single-family versus multifamily. And just again, as a reminder, single-family starts carry about 30% more pounds of insulation per unit than multifamily starts.

Now what's happening is we are taking idle. So we took our NiFi plant cold and we talked in the last call about hot idle versus cold idle. We decided to take the NiFi line down completely. We also have maintenance downtime that we're taking in the fourth quarter. That's fairly normal on our assets, but we're able to fit a little more maintenance into the quarter now that we've got time to do it. So both of those for us are reducing the amount of production we've got in the quarter.

We suspect that competitors are taking similar opportunities to do maintenance. We know of a couple of lines that also have been curtailed in the industry. So it's really hard today to point to a specific number in terms of capacity utilization. But what I would share is we've done a good job of maintaining relatively stable sequential share from Q2 into Q3. And then we're positioned to maintain pretty stable sequential share now in the fourth quarter.

So we're balancing out with that sequential stability in share. We're taking idle to make sure we maintain the right level of inventory in our assets in our businesses.

Yes, Trevor. And then for Roofing, clearly, with the step-down in demand, capacity utilization rates are going to come down. For us, we're going to take advantage of that in the fourth quarter to do some maintenance on our assets. It's going to be the first quarter in a while -- fourth quarter and while we can take some more extended downtimes to do that preventative maintenance work. But overall, I'd say in Roofing, we don't track capacity utilization rates the same as Insulation. It's a material conversion business. So the pricing and margin dynamics in the business are generally not tied to capacity utilization rates.

They're tied value and price capture over inflation and tied to those material conversion economics of efficiency. So we don't see the same dynamics and trends in terms of the margin of the Roofing business because of the nature of a material conversion side of it. I will say, though, we will see in Q4 as we take down some of the production curtailments that, that does create some higher cost inventory that does generally spill over into the next quarter. So we would expect with some more extended downtimes this year, that's going to have an impact in terms of Q1 margin rates in the business on some higher cost inventory that we're going to have to work through.

That's fairly normal in the seasonal business of Roofing. But I think we've not seen kind of this level of downtime in the last several years. So that's going to have a little bit bigger impact as we take that inventory into Q1 and sell it.

Our next question comes from Matthew Bouley with Barclays.

So on Insulation, I guess the volume declines have been fairly sharp for 3 quarters at this point, more so in North America residential while still holding the EBITDA margin above 20%. I think back to the Investor Day, you spoke to the Insulation margin range. I believe, it was 20% to 27% on a full year basis on 1.2 million total starts at the low end. So understanding you're not guiding beyond 1 quarter, but do you have a view that in that light, we could be reaching a trough on Insulation margins or is this more just going to be dependent on utilization and pricing? I'm just curious on the ability to hold the line on that low end there.

Overall, there's no change to our guide from Investor Day in terms of where we view Insulation margins on a full year basis in that 20% to 27% range. We are seeing pressure on the margins in Q3 and Q4 as we see a relatively stable pricing environment, but we are still absorbing cost inflation in the business. We're also taking on idle to catch up for a bit of a heavier inventory position as we ended the first half of the year that we're correcting now in the back half as we've seen the market continue to be relatively weak from a volume standpoint. So that starts to get spread out more as we get into next year as we reset inventory levels at year-end.

So fundamentally, no change to the guide on the business. in terms of what we expect to see. And we were really happy with the execution in the third quarter as we see the strategy play out of really focusing over time on growth in the non-res and European pieces of the business, that are holding up really well from a volume standpoint, but also a pricing standpoint. And while res pricing, we've had to make some selective moves, we are seeing some product lines and end markets within the non-res and Europe piece where we're seeing positive price in our market.

So the long-term strategy is -- continues to pay off for us. In terms of relative stability in the Insulation business, but we are working through this choppier period on the res side.

Our next question comes from Philip Ng with Jefferies.

I appreciate all the great color. Brian, I guess, from an inventory destock, whether it's your system or the channel, how long do you expect this to kind of take to flush out? Is this a 1 quarter event? Or is it going to take a few quarters? And when I look at your Roofing margin guidance for the fourth quarter, you're calling for a mid-20% EBITDA margin, certainly magnified by the destock and the seasonal dynamic. But as inventory and store demand normalizes at these lower levels, the 27% to 35% EBITDA Roofing margins you provided at your Investor Day, is there a good way to think about that as we kind of settle at these levels looking out to 2026?

Yes. Thanks, Phil. Let me start and then I'll talk about the destock. The margin profile of the routing business, when we set the guide of approximately 30% annual on average in that range, was really contemplating at the 30% level, a more normal seasonal business. And I think we're going to see that. So normally, in the Roofing business, you got to go back a few years, but we would see lower margin performance in Q4 and in Q1 coming out of the downtimes and some higher cost inventory. And then Q2, Q3 is where we see an acceleration in margins based on operating leverage and just higher demand.

So that seasonality in that cycle where we would call the Q4 at mid-20% would not take us away from our expectation that we can still operate on an annualized basis around that 30% EBITDA margin business. So I think it's just we have not seen the seasonality in the business for several years. And so that cycle and that performance through the year, that moves up in the mid part of the year and then comes back down fourth quarter and then Q1 is more typical, more normal. And given the guide we're setting, we still think we have the ability to achieve that 30% on average annual margin profile for the business.

So on the inventory destocking, I think we normally see things in Q4 get destocked and then restocked in Q1. I would say because of probably the cautious buying nature in distribution that we're seeing this quarter, it might take into the second quarter, into the first half to really see everything get restocked. We would normally see a big portion of that come through in Q1 as distributors are getting ready for the season. But I think some of that's going to kind of play out in terms of the beginnings of Q2 storm season, how people are going to buy and set up for the year. But I would expect that distributors will get back to more normalized inventory levels, but that might, depending on the start of the year, take more into the second quarter.

Our next question comes from Michael Dahl with RBC.

Yes, Brian, I just want to follow up on that, just so we're clear because if I think about what this implies for 4Q, I think this is going to be the lowest Roofing volumes in a decade if your guide is correct. And so I guess the first part of the question is, I didn't get the sense that inventories were necessarily that elevated. So just the -- like as you go into year-end, do you have a more quantitative sense of where channel inventories would be relative to normal? And then to your point in response to Phil, I think the last time we saw this in kind of '22, you did see a similar year-on-year decline in 1Q of '23. We still have a tough comp against 1Q '25 when we flip to next year. So should we still be thinking about a 20%-plus decline in shipments in 1Q? Is that kind of the order of magnitude that you're thinking about at least initially?

Yes, Mike, in short, yes, I think you're describing it how we're kind of seeing it play out in real time. I think the -- it would be the lowest Roofing volume in about a decade, given the fact that there has been no named storms here in Q3 on top of a pretty light overall storm season. So the combination of those two factors are just leading to some lower storm activity as we finish the year. That on top of just normal Q4 seasonality, I think -- and I think a little bit more cautious on distributor buying behaviors given that. So the last time we saw this in '23, you're exactly right. We saw our Q1 that was also down 22%, 23% in terms of prior year shipments and that could be the set up.

We're not guiding to Q1, but that certainly feels like a realistic setup to how 2026 is going to start. Now that you also saw more normalized storm volumes coming through, and we saw the margin progression in the business and the volume progression in the business throughout the year. But I think the next couple of quarters for Roofing volumes are going to be pretty light, relative to the last couple of years, and we'd probably take on that shape of the year.

Our next question comes from Garik Shmois with Lake Capital Markets.

Just to follow up on that point. On Roofing, historically, the industry has done a good job of pricing to recover cost inflation, just given these volume run rates that you're describing. As we get into the next season, do you anticipate any change in the industry's ability to recover the cost inflation you're seeing right now? Or is there anything changing perhaps competitively or from a capacity standpoint or anything happening in distribution that might give you some pause?

At this point, I would say no, nothing that would change our view of kind of the historical pricing practices that we've had in the business and the overall ability to recover inflation through price. I go back to roofing shingles are still the most affordable roofing material in the market. It is still architecturally the most widely used product in the market. So there are a number of fundamental demand drivers. It is a nondiscretionary repair and replace product category. So I think we're seeing some adjustments and resetting on more normalized storm volume.

But when I look at kind of the fundamental repair remodeling drivers of the business, those are still staying very strong in terms of the need for roofing materials when a roof is damaged. So I think those underlying drivers of nondiscretionary repair business, the ability -- the fact that it's the lowest-cost roofing material in the market, but the fact that it's architecturally the most desired, I still think create demand drivers even though it's stepping down on a year-over-year basis on an absolute basis, that would still allow us to get pricing in the market and the expectation that we'd be able to recover inflation over time.

Our next question comes from Susan Maklari with Goldman Sachs.

I want to change a bit and talk about capital allocation. Understanding that 1 or 2 quarters doesn't necessarily change the longer-term needs. But can you talk about what you're looking for to determine if you need to make any changes to plans to add capacity across the different segments? And then with that as well, can you just talk about your priorities for capital allocation in this kind of an environment? And anything that has changed relative to the last couple of quarters?

Thanks, I appreciate the question. From a capital allocation standpoint, as we think about the major projects we've got underway, these are multiyear projects that generally are going to add capacity in the out years, in 2027 and beyond. When we look at our markets, we still have a lot of confidence in the long-term tailwinds that support both the new construction and repair and remodel activity in North America and in Europe. So there's no fundamental change long term to our outlook for the business. And we know we're in short-cycle businesses where things could change very quickly on the upside as well around market conditions in really all 3 of our businesses.

When we look at those larger projects, there's no change today in our work underway against those, in part because they support growth, but they also support cost efficiency and capital efficiency for us going forward. So these are important projects for us as we think about generating long-term EBITDA growth and cash flow growth for investors. Right now, our priority from a balance sheet standpoint is staying very, very disciplined when it comes to working capital. As you've heard throughout the call today, we're taking idle and curtailment on our existing assets to make sure we keep enough inventory to serve our customers, but we remain appropriately postured for the current market environment in terms of total inventory in the business.

As a result of that and focus on accounts payable, we're maintaining good cash flows in a fairly challenging market environment today that's enabling us to continue to invest in these longer-term projects to support earnings and cash flow growth. It's enabling us to continue to make great progress on our target of returning $2 billion to shareholders this year and next year through dividends and repurchases. We are $700 million along that journey already this year. But then at the same time, we're preserving a really strong balance sheet at the low end of our targeted range of 2 to 3x.

So really no change in terms of how we're thinking about capital allocation in today's market environment, even with the challenging market conditions that we're seeing, which speaks again to the new Owens Corning and the cash generation power of the business that we've created.

Next in queue we have Sam Reid with Wells Fargo.

One more on Roofing. I was just hoping you could disaggregate some of the inventory comments, but perhaps in the context of the components business, just thinking through that destock, stock up dynamic that you talked to on some of the prior answers, I would just love to know if the components business is going to follow a similar path or whether there could be a divergence between shingles and components?

Yes. Thanks for the question, Sam. The -- we would expect that the inventory destocking on components would follow a similar path to shingles. Generally, distribution will buy those products in tandem. They'll manage the balance of out-the-door sales of shingles and the level of components and attachment rates and keep those inventory positions in balance. So we would expect a similar step down in terms of volumes in our components business in Q4. And then we also talked about nonwovens. We're vertically integrated, which gives us a great cost and innovation advantage, but we'd expect to see a similar step down there.

But in the component side, I think it followed the same path. And then again, when we think about the first part of 2026 and distributors starting to rebuild those inventories, I would also expect the same restocking mindset towards components to match the shingle restocking that we would expect to see in the first part of next year.

Next, we have Rafe Jadrosich from Bank of America.

Can you just walk us through the downtime that your impact to EBITDA that you're assuming for Roofing, Insulation and Doors in the fourth quarter? And then if the macro sort of stays consistent and soft into next year, is that something that you would expect to persist? Or is any of that related to temporary sort of maintenance downtime?

I think overall -- maybe I'll give an overarching answer because it's going to vary a little bit by business, but you can see some of the downtime curtailments. I'd say in Insulation, we've been able to manage those really, really well. You look at third quarter downtimes. We've been able to offset by the productivity. And then some of that, you can see in the MD&A. We'd expect to continue similar trends here in Q4 in terms of that.

Roofing will be a more significant sequential and year-over-year impact because of the extent of downtimes we're going to start to take in the business. But when we think about the decremental margins in Q4 year-over-year, it is primarily all volume and deleverage that fits inside of that. So the bulk of that volume and then a little bit more incremental. And then in Doors, you'll see that come through some higher manufacturing costs in Q3. We think that continues into Q4 with kind of similar levels.

So as we move into next year, I think given the volumes that we're running at today, we might see some more incremental depending on the business in terms of how we set up the year to stay very disciplined around working capital and inventory management and cash flow. But I think the bigger impact will probably be on the year-over-year comps in the businesses where you'll see a higher amount of production downtime going forward versus prior year. That will impact some of the margin performance in all three businesses to start the year. But we'll have to see how the rest of the year plays out if that would continue.

But we are going to be very disciplined in terms of managing working capital and inventories as we operate the business going forward.

This concludes our Q&A session. So I'll pass you back over to Brian Chambers for any closing comments.

Thanks, Lydia. I'd like to thank everyone for making time to join us on today's call and for your ongoing interest in Owens Corning. We look forward to speaking to you again in the fourth quarter call. Thanks, and have a very safe day.

This concludes today's call. Thank you very much for joining.

Hello, everyone, and welcome to Owens Corning's Second Quarter 2025 Earnings Call. My name is Lydia, and I will be your operator today. [Operator Instructions].

I now hand you over to Amber Wohlfarth Vice President of Corporate FP&A, Investor Relations, to begin. Please go ahead.

Good morning. 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 2025. Joining us today are Brian Chambers, Owens Corning's Chair and Chief Executive Officer; and Todd Fister, our Chief Financial Officer.

Following our presentation this morning, we will open this 1-hour call to your questions. In order to accommodate as many call participants as possible, please limit yourselves to 1 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 2025. For the purposes of our discussion today, we have prepared presentation slides summarizing 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, owensporting.com. Refer to the Investors link under the Corporate section of our home page. A transcript and recording of this call and the supporting slides will be available on our website for future reference.

Please reference Slide 2 where we offer a few reminders. First, today's remarks will include forward-looking statements that 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 more detail.

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 our earnings press release and presentation available on the Investors section of our website, owenscorning.com.

Third, financials and metrics for current and historical periods discussed on this call will be for continuing operations, except for capital expenditures and cash flow measures, which include amounts related to glass reinforcements until the closing of the sale of this business. For those of you following along with our slide presentation, we will begin on Slide 4.

And now opening remarks from our Chair and CEO, Brian Chambers. Brian?

Thanks, Amber. Good morning, everyone, and thank you for joining us on our call today. At our Investor Day in May, we detailed how we are a new Owens Corning, a company that has been reshaped into a high-performing building products leader in North America and Europe, and structurally improved to drive above-market growth sustainable and more resilient margins and substantial cash flow, powered by the OS advantage, a set of capabilities that are unique to our company and central to our success.

Our team delivered second quarter results that continue to demonstrate how the new Owens Corning outperforms in any set of market conditions. During today's call, I will share highlights of our second quarter results. and discuss the strategic actions we're taking to continue to outperform the market and deliver long-term value. Todd will then provide a detailed review of our financial results for the quarter. and I'll come back to share an overview of the current operating environment and our outlook for the third quarter.

As always, I will begin with safety. We maintained a very safe operating environment in the second quarter with a recordable incident rate of 0.60. In June, we hosted our first global Safety Week, a best practice adopted from our newly acquired Doors business that has been scaled across the enterprise and build on our Safer Together operating framework connecting processing and systems with behaviors and leadership to create a safer workplace.

Turning to our financial results. We continued our strong and consistent performance in the second quarter despite a more challenging environment. For the 20th consecutive quarter, we achieved adjusted EBITDA margins at or above 20%, an incredible milestone. Revenues were up 10% versus prior year, and earnings grew 30% year-over-year. Adjusted EBITDA in the second quarter was $703 million, with an adjusted EBITDA margin of 26%. This performance is a direct result of the structural changes we've made and is another proof point our ability to deliver higher and more resilient margins even in the face of softening market conditions.

We also generated good cash flow and continue to return capital to shareholders through dividends and share repurchases. Through the first half of the year, we returned nearly $440 million of the $2 billion we committed to returning over this year and next. This commitment reflects our disciplined capital allocation strategy and confidence in our cash-generating capabilities.

As I shared at Investor Day, our performance as a result of a clear set of strategic choices and investments we've made that has shifted our product and geographic focus to high-value building materials sold in the most attractive markets. In short, we are a different company today than we have been historically, with a track record of growing revenues, increasing our margin profile and returning significant cash to our shareholders over the past 5 years.

One key driver of this performance shift is our strategic business mix, which positions us to outperform given our unique product and application exposure. Today, over half of Owens Corning's revenue is generated from North American repair and remodel activity, including more than 1/3 from nondiscretionary reroute, which remained solid in the quarter.

In nonresidential markets, which makes up about 25% of our revenues, North America demand in the quarter was stable, and we continue to see encouraging improvement in Europe. So while residential new construction demand continues to face pressure, it represents only about 1/4 of our overall revenue. This strategic product mix positions us well to navigate near-term headwinds and to benefit from several longer-term secular tailwinds including an aging and underbuilt housing stock in the U.S. and Europe, growing demand for products that improve energy efficiency and increasing investments in North American manufacturing and infrastructure.

A second key driver of our strong performance is the strategic actions we've taken to concentrate resources on geographies and applications where we can build leading positions and deliver above-market growth. In July, we completed the sale of our building materials business in China and Korea to a member of the region's management team. The transaction included 6 insulation manufacturing facilities in China and a roofing manufacturing facility in Korea, and represented annual revenue of approximately $130 million.

In addition, the sale of our glass reinforcements business is progressing, and we expect the transaction to close later this year, subject to regulatory approvals. Another key driver to our performance are the strategic investments and choices we are making to strengthen our market-leading positions by expanding capacity, modernizing assets and increasing operating efficiencies.

In our Roofing business, we started up our new laminate shingle line in the [ Dine ] Ohio during the second quarter. This line adds 2 million squares of capacity and has begun supporting current demand from our growing contractor network. In Fort Smith, Arkansas, we also commissioned a new nonwovens coating line co-located with our existing non-Women's plant.

Both of these investments are examples of how we're investing to deliver above-market growth while enhancing our winning cost position. In addition to these capacity expansions, we are investing in leading technology through the use of new pilot lines across our roofing and insulation businesses. These lines accelerate both product and process innovation, enabling us to bring new solutions to the market faster to help our customers win and grow.

We are also unlocking value through the integration of our Doors business, where we are leveraging our enterprise scale and capabilities to drive efficiencies. Tis past May marked 1 year since we closed the Masonite acquisition, and we've made significant progress applying the OC playbook to doors. We are drawing on our unparalleled commercial strength deepen customer relationships and expand our reach as we structurally improve margins over time, like we have done in our Insulation and Roofing businesses.

We have already captured more than 75% of our enterprise run rate synergy target of $125 million, the majority of which we committed to achieve by the end of year 2 of ownership. In addition, we are targeting another $75 million of cost improvements, mostly through our doors network optimization actions that will begin to make an impact in 2026. Through each of these initiatives, we are investing with purpose, to meet customer demand, modernize our production lines, improved capital efficiency and sustain strong margins and consistent returns.

As we move forward, we will continue to capitalize on our position as a building products leader serving North American Europe to execute our enterprise strategy to grow the company and deliver durable results across market cycles. Fueling our strategy is the OC advantage, which includes our iconic brand, unparalleled commercial strength, leading technology and winning cost position. These advantages form a playbook that can be scaled across the company to create multiple paths to generate value for our customers and shareholders.

Before I close, I want to highlight a few recent organizational moves. In July, we announced the appointment of Nicolas Monaco to the role of Roofing President and named Jose Canovas, President of the inflation business. Both our seasoned leaders with a proven ability to strengthen customer partnerships and maximize operating performance.

Nico most recently led the insulation business. and his expertise in leveraging our high-value branded building products and customer engagement model to generate growth. Jose has held leadership roles at OC for more than a decade, most recently leading our nonresidential insulation business. and has demonstrated his ability to deliver value across dynamic markets.

We are excited to leverage their expertise to drive strategic growth within their businesses and across the enterprise. I also want to thank and recognize Gunner Smith was leaving to pursue another professional opportunity for his countless contributions to Owens Corning. Under his leadership, the roofing business achieved outstanding results through an incredibly talented team, broad product offering and durable contractor engagement model, which will leave a lasting impact on our customers and our company.

And finally, I want to recognize our team for earning the spot on the Fortune 500 list for the 71st consecutive time, one of only 49 companies to appear on this prestigious list every year since its inception. This achievement reflects the company's depth and breadth of talent, the strength of our iconic branded products and unwavering focus on our customers' success, and a commitment to winning in the right way.

With that, I'll turn the call over to Todd to discuss our second quarter in more detail.

Thank you, Brian, and good morning, everyone. As Brian mentioned, our results in the second quarter and through the first half of the year demonstrate the value we are creating through the OC advantage in our overall enterprise strategy. We continue to demonstrate the strength of the enterprise as we sustained higher and more resilient earnings in softening markets.

I'd now like to turn to Slide 5 to discuss the results for the quarter. As a reminder, these results are for continuing operations. In the second quarter, we built on our strong Q1 performance. Revenue increased 10%, driven by the strategic addition of our doors business last May. Our unparalleled commercial strength, coupled with our winning cost position, generated adjusted EBITDA of $703 million and an adjusted EBITDA margin of 26%.

The sale of our Building Materials business in China and Korea is another step in sharpening our focus on what we do best, building products in North America and Europe. In the quarter, we had adjusting items of $26 million driven by an additional held-for-sale loss of $24 million on this business. Adjusted earnings per diluted share for the second quarter were $4.21, reflecting both the strength of our earnings as well as the continued capital allocation commitment and ongoing share repurchase activity.

Turning to Slide 6, to go further into our cash generation and capital deployment during Q2. Free cash flow for the quarter was $129 million compared to $336 million in the same period last year, driven by the timing of working capital, including an increase in inventory as a result of our ongoing tariff mitigation efforts and higher capital additions.

As we have shared, we are investing in capital projects at elevated levels in the near term to expand capacity and drive improvement in long-term capital efficiency. As a result, capital additions for the quarter were $198 million, up $41 million from the same quarter prior year. Our return on capital was 13% for the 12 months ending June 30, 2025.

At quarter end, the company had debt-to-EBITDA of 2.1x at the low end of our targeted range of 2 to 3x. During the second quarter, we returned $279 million to shareholders through share repurchases and dividends. We repurchased common stock for $220 million and paid a cash dividend totaling $59 million. We also received Board approval for a new share repurchase authorization for up to 12 million shares. This authorization supports our commitment to a $2 billion return of cash to shareholders through 2026. We are still on track for this level of return as we expect seasonality to create a step-up in free cash flow generation in the second half of the year.

Our cattle allocation strategy remains focused on generating strong free cash flow delivering mid-teen returns on capital, returning cash to shareholders and maintaining an investment-grade balance sheet, while we invest in attractive capital projects for growth. Our capital allocation strategy is focused on compounding long-term value for shareholders.

Now turning to Slide 7, I'll provide additional details on our segment results. Our Roofing business continues to exemplify the strength of our enterprise model, leveraging our contractor engagement strategy and vertically integrated cost position to outperform the market and deliver resilient earnings in the second quarter. Sales in the second quarter were $1.3 billion, up 4% from prior year.

In the quarter, revenue growth was primarily driven by positive price realization on our April increase. Components volume was in line with prior year, and we saw growth in nonOwens, where we've been investing in capacity. The U.S. asphalt shingle market on a volume basis was down mid-single digits compared to the prior year unless storm-related demand.

Our U.S. shingle volume outperformed the market as demand for our shingles continue to be strong. EBITDA was $457 million for the quarter, up 5% versus prior year. Positive price more than offset the impact of modest cost inflation and higher manufacturing costs as we continue to invest in our assets to meet the high level of demand for our products.

Overall, for the quarter, we delivered EBITDA margins of 35%. Now please turn to Slide 8 for a summary of our Insulation business. Our Insulation business demonstrated the impact of structural improvements and disciplined execution, sustaining 20-plus percent EBITDA margins despite market headwinds. This highlights our ability to win with customers and deliver results well above historical performance in similar markets. Q2 revenues were $934 million, a 4% decrease from Q2 last year.

In North America residential, volume was down due to market uncertainty and a weaker demand in residential new construction. In North America nonresidential volume was up, including demand to service data center construction related to AI, as well as demand for our phone less product being used in commercial and industrial applications.

In Europe, we continue to see market stabilization. These businesses both recognized positive price in the quarter. Insulation EBITDA for the second quarter was $225 million, down $21 million from prior year. Strong operational performance partially offset the impact of lower demand and the corresponding production downtime, as we remain disciplined in our inventory management.

Additionally, positive price nearly offset the impact of cost inflation. Insulation delivered EBITDA margins of 24% in the second quarter.

Moving to Slide 9, I'll provide an overview of the Doors business. Overall, the business continued to perform well in a challenging market. In the quarter, the business generated revenue of $554 million, in line with the outlook we provided on our last call. Revenue was up modestly from Q1, primarily on higher volume in North America.

EBITDA for the quarter was $75 million with EBITDA margins of 14%. The integration is progressing well, reflecting our ability to apply our unique capabilities. When we closed on the acquisition, we had line of sight to delivering $125 million of enterprise synergies with about half hitting the doors business.

To date, we have seen about 40% of our synergies captured in the business and the other 60% across the remainder of the enterprise. This reflects our ability to scale the OC advantage while applying the same playbook that structurally improved margins in Roofing and Insulation.

We are on track to exceed the original enterprise commitment with an additional $75 million of structural cost savings generated through operational improvements. We have already begun taking actions to achieve these savings, including a recent example where we made the decision to close a components facility in Oregon in the second quarter.

Overall, for the company, there was minimal impact from tariffs on our financial results in Q2. Our sourcing and supply chain teams have continued to demonstrate agility and discipline mitigating tariff exposure in preserving margins. As a result, we expect the third quarter to be similar to the second quarter with approximately $50 million of gross tariff exposure reduced to a net impact of around $10 million, primarily in the Doors business. This impact is included in the outlook Brian will share in a moment.

Owens Corning is well positioned to address rising tariffs with our primarily local for local manufacturing and U.S. MCA compliant product portfolio, but we expect a small step-up in net tariff exposure in the fourth quarter. With the latest round of tariffs in our mitigation efforts, we expect the net tariff impact to be less than 1% of COGS in the second half. favorable to our previous guidance of 1% to 2% COGS exposure.

Moving on to Slide 10, I will discuss our full year 2025 outlook for key financial items. General corporate EBITDA expenses are expected to range from $240 million to $260 million. As a reminder, this year-over-year increase includes our best view of expenses for the glass reinforcements business that will not be included in discontinued operations.

We expect our 2025 effective tax rate to be 24% to 26% and anticipate a cash tax benefit of more than $90 million in the year from the recent tax bill. Capital additions are expected to be approximately $800 million. This level of capital investment reflects the strategic investments we are making to expand capacity and drive improved efficiency.

This CapEx continues to include glass reinforcements, which is expected to be approximately $80 million in 2025. We expect CapEx to remain elevated in the near term as we work towards completing the high-return capital efficient projects we have in process.

Now please turn to Slide 11, and I'll turn the call back to Brian to further discuss our outlook. Brian?

Thank you, Todd. Our second quarter results reflect the strength of our company and the disciplined execution of our strategy, even as we navigate a more challenging macro environment, with leading positions in roofing, insulation and doors, our product and application diversity continues to support good margin stability even as we face tougher market conditions.

In the third quarter, we expect overall market demand for nondiscretionary roofing repair activity to remain solid, but declined versus prior year, driven by lower storm activity. We expect residential new construction and discretionary R&R in the U.S. to remain challenged.

In North America nonresidential construction, we expect a relatively stable market. And in Europe, we expect market conditions in the second half to gradually improve with the broader economic recovery in the region. Given this near-term outlook, we anticipate third quarter revenue for continuing operations to be approximately $2.7 billion to $2.8 billion, slightly below to in line with prior year.

For adjusted EBITDA, we expect to deliver another strong quarter with margins of approximately 23% to 25% for the enterprise.

Now consistent with prior calls, I'll provide a more detailed business specific outlook for the third quarter. Starting with our Roofing business. We anticipate revenue growth of low to mid-single digits. While market demand for shingles in many regions should remain solid. We expect ARMA shipments to decline from prior year, assuming normalized storm demand versus elevated levels in 2024.

We expect our shingle volumes to remain relatively stable versus prior year as we continue to see strong demand for the OC brand and our roofing products. We anticipate normalized attachment rates and components to continue and another quarter of top line growth in nonwovens.

In the third quarter, we expect moderate cost and delivery inflation. We also anticipate manufacturing costs and SG&A to be up as we invest in our assets and absorb the necessary maintenance cost. For the business, we expect positive price from our previous announcements to drive year-over-year top line growth and positive price/cost.

Overall, for roofing, we expect to generate an EBITDA margin similar to prior year, which was 34%.

Moving on to our Insulation business. We anticipate overall revenue to decline mid- to high single digits compared to the prior year, primarily due to a volume decline in North American residential and the sale of our building materials business in China. As a reminder, this business had approximately $130 million of revenue annually.

In our North American residential insulation business, we expect revenue to be down low double digits versus prior year due to lower demand as we work through a step down in housing starts and lower backlog.

For North American nonresidential, we expect revenue to be up slightly versus prior year. And in Europe, we anticipate revenue to be up versus prior year as we see gradual market recovery and currency tailwinds. Overall, for the Insulation business, we expect ongoing cost inflation, resulting in negative price cost in the quarter.

Additionally, with the volume pressure in North American residential, we anticipate incremental production downtime, partially offset by productivity. Given all this, we expect EBITDA margin for insulation to be in the low 20% range.

Turning to our Doors business. We continue to perform well relative to market conditions as we realize synergies and drive ongoing network optimization. Now that we have operated the Doors business for a full year post acquisition, we will begin providing guidance versus prior year.

In Q3, we expect challenging market conditions to continue, resulting in a revenue decline of low to mid-single digits versus prior year, driven primarily by lower demand and pricing down slightly. While we anticipate synergies and cost control realization to continue, we expect EBITDA to be impacted by inflation, including the ongoing impact of announced tariffs.

In the near term, Doors faces more tariff exposure than our other businesses due to the cross-border product moves into Canada, which we are actively working to mitigate. Overall, for doors, we expect EBITDA margin of low double digits to low teens for the quarter.

As Todd mentioned, another factor that could impact our enterprise results in Q3 is the implementation of additional tariffs. We expect the net impact of tariffs for Owens Corning in the third quarter to be similar to what we incurred in Q2. In summary, our team delivered strong performance in the second quarter with an outstanding response to a dynamic market, executing with discipline and focus.

The strategic choices and structural improvements we've made over the past several years have created a new Owens Corning, a more focused, resilient company that is built to outperform. We remain confident in our ability to deliver higher, more durable margins through a cycle generates strong free cash flow and create long-term value for our shareholders.

As we move through the second half of the year, we will continue to invest in our people, our capabilities and our customer relationships while maintaining a sharp focus on execution and operational discipline.

With that, we would like to open the call up for questions.

[Operator Instructions]. Our first question today comes from John Lovallo with UBS.

The question is on North American industry capacity utilization. I think it was in the low to mid-80% range. I think you guys highlighted that 90% is typically kind of the pricing trigger point. The question is how has capacity utilization trended since last quarter? And how are you thinking about pricing, especially considering the expectation for negative price cost in the third quarter?

John, this is Todd. Happy to provide more color on res pricing and market conditions. Let me start at the highest level for the enterprise because we've done a lot of work over time to grow into the repair and remodel space in roofing with nondiscretionary remodel as well as repair and remodel elsewhere. And we're at a point where the res exposure on an enterprise basis is a lot smaller than it used to be historically. We're down to about 13% of enterprise revenue in North America res in Q2.

So with that as the backdrop, when we look at the second quarter, we had another quarter of weak leg starts, and that's following a weak quarter that we had in Q1. So we were down about 5% in leg starts in Q1, down 1% in Q2, and then legs start to be down another 1% for Q3.

When you look at what TopBuild announced earlier this week, they showed 11% lower volume in Q2 in their TruTeam business, which is the installation business that handles a lot of the res fiberglass. And they guided to low double-digit declines in res for 2025.

We're seeing then market volumes be a little worse than leg starts, is a result of a couple of things. One is we're seeing completions decline at a faster rate than leg starts. We're also seeing a shift away from single-family construction towards multifamily in the back half of this year. And we have a higher take per unit for single-family than we do for multifamily.

So if I step back up with that context to industry utilization, we still believe the industry can support between 1.4 million and 1.5 million housing starts, depending on the mix of single-family, multifamily and that does imply first half utilization that was below 90%.

What we've shared is above 90%, typically has been a market where we're able to get positive price. But there's no conclusive trends below 90%. In some of those markets, we're able to get positive price in other markets, price is neutral and price can decline as well below that 90% utilization level.

So what we're seeing right now is we saw limited traction on the price increase that we took this year for res, fiberglass. We're still seeing a lot of inflation come through in the business. We have inflation on materials, some longer contracts that didn't reset in the peak inflationary period. We're starting to absorb some of that inflation now. We're seeing inflation in labor. We're seeing inflation and warehousing expenses. And we're not seeing much positive price in the market to offset that.

We are making very surgical price moves as needed in the market for certain products, in certain markets. But again, they're very targeted and they're very surgical moves to meet competitive situations with pricing. So overall, we are seeing a market where there is free supply. We're not sold out as we have been in recent quarters.

We're navigating through that effectively with our teams. We're maintaining a price premium over competitors. We're maintaining a relatively stable share in the market. So we're doing the things we want to do commercially in this market. and we know how to navigate through this. We've seen this multiple times before with utilization at this level. So nothing unusual for us and our teams. Thanks, John, for the question.

Our next question today comes from Anthony Pettinari with Citi.

Maybe sticking with insulation, but nonres in Europe. I think you expect revenue to be up for both of those businesses in 3Q. I'm wondering if it's possible to kind of size that and then talk about the price/cost dynamic that you're seeing in commercial and Europe installation.

Thanks, Anthony. I'd be happy to give more color on nonres in Europe. When we look at revenue dynamics in those 2 markets, we are guiding to positive growth in Q3. It's fairly modest growth in both I'll talk a bit about North America and then we can talk about Europe.

In North America, the overall backdrop for the market is a bit of a decline in construction spending in the nonres space. what's interesting is we're seeing growth in the market in some of the end markets where take per unit is higher for insulation. So we highlighted data centers in our prepared remarks. But that's a really important one because the take per unit is really high for data centers. And we know there's a lot of construction occurring to support the boom in AI.

But we're seeing the same thing in some of the process insulation we sell for manufacturing and an insulation for oil and gas, all of those are good end markets for us now. So we're seeing relatively good conditions for our products in market. I'll remind everybody in the nonres space, these products tend to be more specified into the applications. And we tend to compete on multiple performance attributes.

What that means for us practically is pricing tends to be a bit more stable in this space. And we're seeing that come through our Q2 results where we are seeing positive price in nonres. We are seeing inflation come through in this market. Similar dynamics to what we've seen in many of the product lines to what I described in res, but pricing isn't -- typically has not moved the same way we've seen it move in the nonres space. in North America -- or in North America res space compared to North American nonres.

When we look at Europe, Europe overall, we're seeing green shoots and especially in some of the markets where we've got a strong position in the Nordics, in the U.K. We're seeing pockets in Southern Europe be strong. We're seeing others in the industry share that on their earnings calls. Our revenue was down in Q2 in Europe, largely due to a couple of product lines that we chose to exit in the region.

But overall, we're encouraged with the trends off of a low base in Europe. Europe has been weak since we saw the Ukraine invasion. Our teams have done a great job in Europe getting costs out of our business and driving productivity. We're in a really good position now with capacity to sell and to grow into where we're going to like the incremental margins on that business as the market recovers.

So it's early days in the European recovery. but we're encouraged with what we see with the green shoots. Thanks, Anthony.

Our next question comes from Michael Rehaut of JPMorgan.

Nice results. Wanted to shift gears a little bit to the doors business. You guided for the third quarter low double digit to low teens, which might imply slight improvement, if I'm reading into that correctly from the 2Q performance.

Just wanted to get a sense of what's driving that if it's the ongoing cost synergy realization? And kind of bigger picture, when you look at this business, pre-acquisition. If you look at North America, Europe blended, they did about a 19% EBITDA margin. Obviously, over the last year or 2 has taken a real hit from the new res market, but how do you see line of sight back to that? Obviously, the 75 additional synergies may give you another 3 points. But how would you see line of sight back to like a 20-ish type of EBITDA margin?

Mike, thanks for the comments and the questions. And we are really pleased overall with the performance of the business. Every business, I think, is outperforming the market, even with the tough res market environment, as Todd pointed out, our res business is still performing at a very high level, very blended in terms of our noncommercial Europe residential rates.

Our Roofing business is performing at a probably high level. In our doors business, continues to perform at a really high level relative to the market challenges we're facing into. So in terms of our Q3 guide versus Q2, to answer your first part of your question, we're actually guiding to pretty much in-line performance to Q2. So while this is going to be the first quarter, our Q3 guide on a year-over-year basis. And while we're seeing volumes kind of step down on the year-over-year, sequentially, we've seen really good volume stability through the first half of the year, and we expect that to continue.

So I think we're seeing that kind of continued volume stability, which is the core of why we're giving a guide that's pretty much in line with Q2. We're seeing good market pricing stability and good pricing stability. We're seeing good mix staying pretty constant. So we've seen certainly a step down in both the new construction and R&R part of the business year-over-year, but some good stability month-over-month and quarter-over-quarter.

And we think that gives us confidence we can sustain that kind of margin performance. We do expect to see a little bit of tariff headwind in Q3 with some of the step-up tariff rates, particularly around steel and aluminum. And we're also starting to work through some of the inventory pre-buys and some of the materials we're bringing in to be in front of that. So that's going to be a little bit of headwind, that we think is offset through some of the continuing cost optimization work through our network integration.

So back to your second part, you're right in terms of how you characterize the long-term performance in that high-teen EBITDA margin performance, we feel that the business can perform at or above that level. That was what made it an attractive product category for us to get into. It is a category that we could scale up. We could grow -- and we felt we could really improve the margin performance with our ownership advantages, kind of applying the same playbook around commercial execution, operational execution that we've done in roofing and insulation to improve the margin performance in those businesses within doors.

And that's the path we laid out at Investor Day around the long-term guide that we can see an EBITDA margin performance in this business 20% or above. In the near term, there's going to be a lot of work around the cost optimization side. Network integration is tracking on path to our $125 million. We also then continue to see network optimization opportunities. That's going to be another leg up. We're just getting started with that.

We did announce the closure of a facility in Oregon, that's part of that network optimization as we think about where we can realize productivity benefits and drive more scale efficiency inside the network, so that's going to be another big leg up in terms of margin improvement as we optimize the production network.

And then we continue to make great progress commercially. In terms of how we're looking at positioning this product along with roofing and with insulation on a more integrated basis to some of our larger distribution partners. And we're starting to see a little bit of traction in that work where we can take a more integrated product offering to our contractor base, our builder base, our dealer base and then that gets pulled through distribution, and we think that's the third piece of this in terms of the commercial execution side that drives margin performance.

But certainly, in the near term, we're going to work through a choppy environment. A lot of the cost optimization and network realization work we're seeing is being consumed by kind of tariffs and some of the volume headwinds we're facing into the market today. But we're really set up with an improved cost structure, I think, an improved commercial position that once we start to see market conditions come back, I think we really can accelerate the earnings at a pretty fast pace going forward.

Our next question comes from Stephen Kim with Evercore ISI.

Appreciate all the color here so far. I wanted to ask you guys about mix. In Insulation, just kind of starting there, I think you'd indicated that there was overall some negative mix, which offset some of your positive pure price. But I think you also indicated that FOAMGLAS sales were stronger, nonres is performing well, and the North American residential was kind of pulling of some softness, which I think everybody understands. But is it nonres and FOAMGLAS kind of higher mix. So I was wondering if you could provide a little more clarity on the negative mix in insulation.

And then in Roofing, I wanted to kind of get a sense for what you're seeing there in terms of mix. You've had a lot of really good mix. Some of that was due to the Protective Packaging going away. Some of that was the increase in laminated shingles. Kind of curious what we should be thinking there? And is there any impact from the reclass of nonwovens that might pull out the numbers a little bit. Just help us understand mix broadly in roofing as well.

Stephen, I'll take insulation first, and then Brian can step in on the roofing piece. So we did see negative mix in Q2. We believe it's mostly timing related to some projects and when they hit compared to prior year. So we don't see it as an ongoing dynamic. We don't think this is something that is permanent. Just a little bit of noise in Q2 as a result of that timing.

Yes. And Stephen, on Roofing, we're really not seeing big variations in terms of overall mix. that's impacting the results. We've continued to see a step-up of laminate shingle demand in the market, and we've been keeping pace with that, with our investments. It's why we've been investing to increase our land capacity at Medina and the new facility in the Southeast. So we've seen that continue to tick up, but continue to support that in components.

We've really have settled into a really nice attachment rate, so part of that is the branded roofing system we can offer contractors can take into the home where they buy our underlayments or starter or [indiscernible] rigs all part of a complete system in package, OC branded. And that has really driven a lot of the components volume. But we've seen those attachment rates stay fairly steady, a little bit of positive momentum, but in increments.

And then to your other question on the nonwovens bring that in, that really is not having any impact in terms of the mix overall. Part of the focus and desire to bring that into roofing is it really is an integral part of the vertical integration strategy in roofing, to have that nonwoven seeding in and gives us great opportunities, driving productivity in our manufacturing processes, driving innovation with the structural design of the shingle.

And then the external sales carry a margin profile very similar to our overall roofing business. So it's a great fit in terms of the complements the vertical integration piece and gives us a good margin structure very similar to components and in the roofing business. So really no impact in terms of overall mix with the nonwovens business coming in.

P1 Next question comes from Sam Reid with Wells Fargo.

It sounds like you're planning to drive roofing volumes ahead of ARMA in the third quarter. maybe just contextualize what you mean by industry single market down. Does it mean down low single digits, down mid-single digits? And then maybe talk through your outperformance. Is that just better execution on your part? Or would you also characterize that as some incremental volumes coming out of Medina, would just love to get a sense of the contribution from that new capacity on roofing and how plays into your guidance?

Yes. Thanks, Sam. Overall, we came into the second quarter expecting to see a step down in market shipments based on a more normalized storm season. And that's really what we think happened in Q2 and what we expect to continue to happen here in Q3. So in the third quarter, while we expect it to be very solid from a historical standard, it could be down mid-single digits depending on storm activity as well. So we could see a similar evolution of that.

Again, overall in the market, good conditions, but it's a step down to more normalized storm volume. So the last time we saw this was in the back half of 2022, and this is where you saw the strength of our contractor engagement model. And that's really the success of our business is centered around that model where we go out, we convert contractors to our brand, our products.

We help them win and grow in the market through our marketing tools, our digital tools, our commercial and training capabilities, all those things that really drive the contractors' success helps them grow their businesses. And then in turn, that creates a loyalty to our product brand and also creates demand for our distribution partners. So it's a win-win across the channel in terms of how we focus that.

And we continue to invest to improve and increase that contractor engagement model and add contractors to the network. So when we talk about outperformance relative to the market, what we delivered in Q2 and what we expect to deliver in Q3, we're really not driving volume. We're just responding and servicing the contractor base that has built their business around our products and brands. and are continuing to grow in the market. So it's really servicing that base overall.

It is why we've invested in increasing land capacity. You mentioned Medina. So we were able to start that up towards the end of the second quarter. That volume is ramping up and getting into the market, but that's going to be a ramp-up over the back half of the year, really won't get to full capacity utilization until we get to the first part of next year when we hit that spring selling season, but it absolutely is a big part of now having more land capacity to service that contractor demand that we've seen.

And frankly, we have been lagging in service to our distribution partners as well as our contractors. So we expect that even if the market conditions shift down a little bit like we would expect to see, we're going to see good demand for our contractors that's going to drive volume through distribution. We also think across the board, we probably have some lean inventories in several regions of OC product, relative to other brands in the market. So we think there's going to be some inventory buying there.

And then lastly, we're going to continue to operate our facilities full out in the quarter because we're operating with very, very low inventory levels. We've been doing this for several years. And we would actually like to be able to rebuild some inventory levels in our facilities just to improve our service and commitments and service cycles to our customers. So that's all work that's kind of going in as we work through Q3 and finish the year.

Our next question comes from Brian Biros with Thompson Research Group.

I guess can you talk a little bit more about the specification in your nonres insulation nonres in our view as a long outlook for good growth. You talked a little bit about it earlier. But if you could expand on, I guess, how your products play into that opportunity in data centers and manufacturing that you mentioned? And maybe Sure, if you have any metrics around win rates or market share in those specific end markets would be great.

Thanks, Brian. We don't share a lot on win rates or market share within the verticals. But I can give more context on how our insulation is used on the nonres side. There's 2 major areas that you would see our insulation in, for example, a data center or in a manufacturing facility.

One is in the building envelope itself to make sure that we control temperature, but also moisture within a data center, which tends to have pretty extensive HVAC requirements associated with all the equipment that's there. And Insulation plays a really big role in making sure that the building itself performs at a high level. These also are mission-critical facilities. We're making sure that you control moisture, especially in the roofing system is important. In a couple of our products, in particular, our XPS foam product and our cellular glass product performed really well when it comes to moisture performance. So the building is one piece of it.

The other piece is process equipment. So when you think about HVAC itself or when you think about hot or cool air liquid in a manufacturing plan or a data center or other facility, it is important to insulate pipes and pieces of process equipment. -- and you would see our products go into those markets as well, either directly with us selling a final product that goes into the application or indirectly as we sell a product into someone that then converts it into a final product for the application.

So we're encouraged with what we see as the long-term secular trends towards onshoring of manufacturing as well as the growth in oil and gas as well as the growth in data centers. All of that plays well to the products that we have. Typically, our products are designed. They're engineered for the application that they're in. So in some cases, we have hard specifications where our product is specified by name.

In other cases, our product is designed for that application, which makes it a stickier relationship with the customer going forward. and also creates the more stable pricing dynamics we see in that space.

Our next question comes from Matthew Bouley with Barclays.

I wanted to ask about sort of high level on insulation and margins specifically. I'm wondering if you can either either quantify or maybe speak directionally to the difference in margins between the residential business and the nonresidential businesses within insulation. And I ask because once upon a time when the segment was much heavier residential and you saw these type of double-digit declines in residential revenues, the margins would have been, I'll say, significantly more volatile, but today, you're holding these EBITDA margins at 24% in Q2 and guiding to low 20% range in Q3. So how do you explain that change today versus then? And kind of any color on that relative profitability between residential and nonresidential.

Thanks, Matt Happy to add more color on why we're delivering stable margins in the business. What you're seeing on the res side is the culmination of the work we've been doing for really a decade now in restructuring that business. And making sure that we've got a flexible and cost-efficient network to serve our markets and our customers.

It was actions like the sale of our Santa Clara plant, starting up a lower cost, more flexible facility in idn, Utah to serve that market, leveraging our capacity differently and focusing on both our planned overhead costs as well as our variable cost in our network.

So we've done all of that. At the same time, we did a lot of commercial work to make sure we serve customers that we're really happy to be positioned with long term. And all of that has created a business that we believe is more resilient and could perform at higher margin levels than we have historically in similar types of markets.

The additional color I would add for the second quarter is while we were able to rebuild inventories in insulation in the quarter, which we sought to do for actually a number of years as we were sold out in that business. We also saw some curtailment impacting our results, our margins in Insulation in Q2, and we would expect to see that again in Q3.

So the margin results, you commented on are actually inclusive of taking idle to make sure we remain disciplined from a working capital standpoint in our insulation business around inventory in the quarter. So we're not sharing the margins specifically by subsegment as we have historically. But certainly, all of the work that we've done to position in our res business, but then also to grow our nonres business and create higher and more durable margins there, is paying off in terms of really strong insulation EBITDA margins and what are weakening residential markets, and we're happy with that result.

Our next question comes from Philip Ng with Jefferies.

Another question on Insulation, sorry, guys. I guess on North America, Todd, you kind of hit it on taking some downtime. Can you expand on that? Like are you taking -- and have you have any comp, are you contemplating taking more extended downtime? What are your carriers doing I suspect some of the weakness you're seeing in North American resi destocking, where kind of we in that destocking cycle?

And just lastly, when you look at your price gaps for pricing for North American resi insulation, have the gap widened this year? Any color would be really helpful.

Thanks, Phil. Happy to add more color. Let me start with the market and what we're seeing, and then I can work into what we're doing within our business. As I shared before, we are seeing volumes in the market, we believe, for the industry, trend down at a greater rate than leg starts.

And in part, that's driven by completions declining at a greater rate than leg starts are declining. It's also the shift towards multifamily away from single family. I also believe it is destocking that we're seeing because we shifted from an industry that was tight in terms of supply, not that long ago, to an industry that now I would characterize as being in free supply.

So we are seeing an environment where inventories through the channel, we believe, have been destocked in the quarter. In terms of price gaps, I'd characterize it as we're roughly in line with where historic gaps have been. I don't think we're seeing a real shift in either direction in terms of the gaps. Those gaps are a function of the value we provide to customers, and that value is still there today as it was a year ago and 2 years ago and 5 years ago in terms of what we provide.

What we're doing now for curtailment is we have a target inventory that we wanted to rebuild in the second quarter to make sure we can service our customers well. And we were light on inventory quarter after quarter of the last few years. So we wanted to rebuild that and we were able to rebuild that in the second quarter. But we also want to make sure we're disciplined in terms of free cash generation and working capital. So we started to take curtailment.

The form that's taking for us now is what we would call hot idle curtailment, which is the lines are still operational, but we're taking longer maintenance downtime. We're slowing down lines. We're doing the normal things we do to build curtailment into our business. We still have optionality to move to what we would call cold idle, which is where we take a line down completely, where it takes a while for that to restart.

We tend to look at longer-term supply-demand dynamics within the industry before we make those more permanent or semi-permanent capital and capacity decisions. So that's still possible for us to do. But right now, we're managing curtailment through hot idle and trying to manage it through longer maintenance downtime and other kind of normal course actions. Thank you, Phil.

The next question comes from Susan Maklari with Goldman Sachs.

My question is on the SG&A. You mentioned in your prepared remarks that you are looking to increase there, especially in roofing. When you consider the current operating environment, how do you think about measuring the returns on the investments that you're making in there? And also, what is your ability to flex that spend depending on how things change in the broader housing and macro in the next couple of quarters.

Thanks, Sue. We are seeing some step-up of very specific investments, particularly in roofing, where we've built really a great model. I'll go back to the center of our success is that contractor engagement model we have built. That's really driving the margin performance of the business going forward.

So we will continue to invest in the right commercial tools, marketing tools, digital tools and commercial resources to support a growing contractor base. That would be an example of a very targeted investment to drive revenue growth and to support margin growth as well in the business. And that's how we really look at it across the enterprise. We are looking very surgically to where we want to make investments around our commercial strength, our brand, our technology and innovation efforts that we've stepped up to drive product and process investment innovations at a faster rate.

So those are investments that we make that really come through then the business returns. So how we measure success is in the margin profile than the business that we're investing in. And do we continue to see opportunities to grow revenues and expand the margin rates inside the businesses based on those investments.

We always look at the overall market environment. So we want to be aware of how dynamics are shifting, how that might impact volumes, price, margins, and performance of the business. But the investments we've made on both the CapEx side, you've seen us making, are really focused on productivity investments around automation and modernization of our assets and on growth, that we think supports our market positions over time.

And then you're going to see us invest in very specific market commercial initiatives where we can drive again and support that revenue and margin profile within the businesses through those investments going forward.

Our next question today comes from Mike Dahl with RBC Capital Markets.

Just wanted to ask on resi in gold pricing. It seems like there was a pretty healthy uptake on the April increase. Our sense is maybe some like slight regional variations just given the differences in demand that have emerged. So as you think about the market being down in the back half of the year, how would you characterize pricing sequentially? And what are your expectations embedded in the guide for price maybe more specifically for resi and gold at least through 3Q?

Thanks, Mike. Yes, we have seen good price realization of our April increase. We saw that materialize through Q2. And embedded in our guide is a continued realization of that that pricing as we see good demand for our product, as I talked about earlier, in terms of the contractor demand we're still seeing outdoor sales of our products are strong, and we're seeing just good overall market demand.

So as the markets play out in terms of the back half of the year, I would expect that we would continue to see good price realization. We are lapping August 24 increase from last year. that will have a little bit of an impact as we go forward. But in terms of the April increase, we continue to see good price realization in the market and expect that to continue through Q3.

Our next question comes from Keith Hughes with Truist.

Thank you. Just shifting over to the domestic commercial industrial insulation. You said some positive comments here around several ag markets we always focus on. If you could speak a little bit more some of the light commercial -- it seems like it's been a little more pressured than some of the heavy. What's -- how's your results been there? What's the outlook?

Keith, when we look at light commercial, we do sell insulation into some of those markets, retail, health care, office buildings, warehouses -- there is a mixed outlook there depending on the specific end markets. And I would say that the take per unit for installation in those kind of facilities compared to the ones that I talked about earlier is a lot less. So while we do see mixed results in some of those end markets, overall, we're seeing enough strength in the high-tech per unit end markets that are growing at an accelerated rate. we like the overall answer for that domestic commercial and industrial exposure.

Thank you. We're unfortunately out of time for any further questions today. So I'll pass back over to Brian Chambers for any closing comments.

Thanks, Lydia. I'd like to thank everyone for making time to join us on today's call and your ongoing interest in Owens Corning. We look forward to speaking to you again on our third quarter call. Thanks, and have a safe day.

This concludes our call today. Thank you very much for joining. You may now disconnect your lines.