achieve cost and revenue synergies, and drive a step up in free cash flow to support deleveraging. One quarter in, we're pleased with our progress against each of these priorities. Let me get into the highlights of the quarter. Net sales for the quarter were above the high end of our original guidance range, with pro forma growth of 12%, strong outperformance versus the market. Adjusted EBITDA was also above the high end of our guidance range. As you saw in our results today, starting in Q1, we are excluding share-based compensation expense and adjusted EBITDA and other non-GAAP financial measures. We believe excluding stock-based comp provides a clearer view of our underlying performance and makes us more comparable to our peers. We have also heard from a number of our investors that they would like to see this change, and we appreciate that input. We will continue to break out SBC as a separate line item in our reconciliation tables so investors can clearly see the impact of this change. Back to the results. Our outperformance in the quarter was broad-based, but it was led by our fiber cement business, where organic growth of 20% came in ahead of our expectations. Three things primarily drove the beat. First, strong execution against our growth initiatives, including Color Plus, Statement Essentials, and Trim Over, where we're seeing continued proof points on material conversion, particularly in the Northeast and Midwest. Second, strengthen two parts of the market where we are particularly strong that have held up better than the rest. The higher end of the market, including repair and remodel and multifamily new construction. Third, we lapped the inventory de-stock from a year ago. Our strong execution and progress in fiber cement are encouraging as we head into the balance of the year, even as the market environment remains uncertain. In deck rail and accessories, underlying demand remained healthy with nearly double-digit sell-through that re-accelerated through the quarter, driven by strong consumer demand and incremental shelf space across the platform. We're encouraged by the continued strength in timber tech, driven by wood deck conversions, mixed shift to more premium products, and commercial synergy momentum. The Australia, New Zealand, and Europe businesses performed well, both growing revenue double digits and outperforming in a challenging macro environment. We made progress on debt paydown in the quarter, redeeming $400 million of unsecured notes ahead of their 2028 maturity. This keeps us well on track toward our net leverage target of approximately 2.4 times at the end of this fiscal year and less than two times by fiscal Q2, 2028. Turning to the integration, commercial synergy momentum continues to build. We're seeing broad-based wins across our combined sales force, strengthening our conviction in the fiscal 2027, 125 million run rate commercial revenue synergy target. Last quarter, we highlighted two examples, Lansing Building Products and CBUSA. And as you saw earlier this week, we announced an expanded nationwide partnership with Boise Cascade, one of the largest U.S. wholesale distributors of building materials. This agreement makes Boise a national distribution partner across our entire portfolio, from hardy siding and trim to AZAC exteriors and, for the first time, TimberTech decking and railing. In addition to the expanded partnership with Boise, we have expanded our partnership with six major regional distributors, Capital, Dixie, Lumberman's, Parkside, Woodgrain, and Wolf. now carrying the full line of the hardy portfolio they will now become fiber cement partners in addition to their existing decking partnerships extending our reach into the repair and remodel market these expanded partnerships are a validation of our strategy and the culmination of months of planning to bring together james hardy's industry-leading exterior building products with the best-in-class national distributor and best-in-class regional distributors. These expanded partnerships also mark a significant step forward toward achieving our revenue synergy target. On cost synergies, we remain ahead of schedule while under budget for cost to achieve without sacrificing service or execution. Our combined sales force gathered for a company-wide sales meeting in Chicago in late May, bringing our legacy Hardy and ASAC teams together under one roof for the first time. One company, one sales force, one culture with a shared playbook. At 500 Strong, we believe we have the largest and best sales force in the industry, and the early results reflect that. We also continued extending the Hardy operating system across the ASAC manufacturing network, resulting in improved productivity, tighter procurement discipline, and better cost visibility across the combined plant footprint. These examples are the best of both companies coming together in practice. As a reminder, our $23 billion exterior total addressable market in North America remains heavily underpenetrated by more resilient materials, yielding a $17 billion-plus conversion opportunity. We're executing against five pillars to capture it, and I'll touch briefly on each. First, material conversion. We continue to see contractors switch competitive decking to timber tech, and long-time hardy siding contractors add composite and PVC decking to their offering. There are approximately 60 million decks in the U.S., and the vast majority are wood. These two-way wins remain a meaningful contributor to above-market growth. Second, channel expansion. We continue to scale Hardy into TimberTech and ASAC Strong accounts in the north and TimberTech into Hardy Strong accounts in the south, adding new stocking locations across the combined footprint this quarter. Third, innovation and new product development. Our combined product and R&D teams remain focused on solutions that accelerate material conversion, applying the AZAC Innovation Playbook to fiber cement with products like Timber Hue, which offers authentic wood grain finishes in eight colors. Fourth, brand preference. Brand search volume and customer sample orders, a leading indicator of future demand, both continue to grow at a healthy clip in the quarter, reinforcing our position as one of the most recognized brands in our categories and supporting sustained share gains over And fifth, simplifying the consumer journey. Our replatform website continues to improve how homeowners research, compare, and connect with our contractor network. Together, these five pillars remain the core of how we win in North America, and we're pleased with our progress across each of these this quarter. Let me give you an update on our fiber cement growth plan. As discussed last quarter, our focus remains on the Northeast and Midwest, where repair and remodel wood and woodluck siding alone represents an approximately $1 billion conversion opportunity, and where AZAC gives us immediate channel relevance, an established footprint, strong relationships, and complementary products. The expanded statement and statement essentials rollout is gaining traction, continuing with double-digit growth in the Midwest East Pilot, and is now live in an additional five regions. Building on that momentum, we opened two new expanded statement partner stocking locations on the East Coast, improving service and availability of the full collection across our pilot markets, with Color Plus mix continuing to grow. At the same time, we've expanded our Hardy Pro Lab, our mobile contractor training units, to drive statement essentials adoption across the broader Midwest and Northeast footprint. And we're seeing that training translate into sell-through. Our three conversion priorities remain unchanged. Converting vinyl siding, winning against wood, and expanding our presence in premium products. On vinyl, we are accelerating penetration in the Northeast, Midwest, and the Carolinas, backed by expanded Color Plus rollout and contractor training. On wood, fire resilience, especially in the West, continues to be an increasingly important part of the conversation as building codes evolve, insurance requirements tighten, and homeowners place greater emphasis on durability and risk mitigation. Finally, TimberHue and our enhanced artisan lineup, our premium, higher-priced, higher-margin lines, are gaining traction with custom builders and high-end remodelers. Let me close my remarks with a quick word on the external environment before I hand it to Ryan. The housing macro backdrop remains uncertain and broadly similar to what we discussed last quarter. Mortgage rates remain elevated and builder confidence and consumer sentiment remain cautious. Housing starts have converged down toward permits over the quarter. And as I touched on earlier, we are seeing a divergence by price ban with the middle to upper tiers where we participate more significantly, holding up better than the rest of the market. In our outlook, we are not assuming housing industry conditions improve from here. We are focused on what we can control in our own execution, and we remain committed to our fiscal 2027 priorities, market outperformance, a return to growth in fiber cement, attainment of cost and revenue synergies, adjusted EBITDA expansion, and significant growth in free cash flow and further deleveraging. Now, let me turn it over to Ryan, who will walk you through our financial results and outlook in more detail.

Thanks, Aaron. Total net sales for the first quarter were $1.47 billion, growing 64% on a reported basis. and 12% on a pro forma basis above the high end of our original guidance range. As Aaron mentioned, starting this quarter, we're excluding share-based compensation expense from adjusted EBITDA and our other non-GAAP measures. We'll continue to break share-based compensation out as a separate line in our reconciliation tables so investors can see the impact clearly in both current and prior periods. Adjusted EBITDA was $422 million with margins of 28.6% above the high end of our original guide, with and without the share-based compensation exclusion, reflecting volume leverage and the benefit of our cost actions. A few modeling notes. Adjusted corporate and unallocated R&D was $32.3 million in the quarter. Keep in mind, a portion of our cost synergy benefits continue to run through that line. Our adjusted effective tax rate was 21.7%, in line with expectations. Weighted average diluted shares were approximately $584 million in the quarter, and we expect share count to remain broadly consistent throughout the year. Adjusted net interest was $64.8 million in Q1, and we expect it to normalize around $60 million per quarter for the remainder of the fiscal year. Adjusted EPS was $0.36, up 13%, with growth diluted by the increase in shares from the AZEC consideration. As we discussed last quarter, we continue to convert customers as part of our commercial synergy program, and some of those wins involve buying back existing channel inventory. These are investments tied to specific conversion wins, not a reflection of underlying demand, and we'd expect to see these investments continue as we close out more of our commercial synergy pipeline. On costs, we continue to expect approximately $80 to $100 million of cost pressure in fiscal 2027 primarily raw materials freight and energy with roughly two-thirds of that impact in north america the pricing actions we announced in late april are directly offsetting this pressure and we're pleased with the execution and realization to date our raw material cost assumptions have improved modestly but we're seeing offsetting pressure in freight where elevated spot rates and network dynamics are running above our original planning assumptions we are actively working on contracting a higher percentage of our freight lanes to help reduce this pressure oil prices have moved below our planning assumptions but refined products like diesel have not seen the same relief we are holding our assumption of 80 to 100 million of cost pressure in fiscal 2027 and we're continuing to watch this closely given the volatility separately the 25 million in annualized fiscal year 2027 savings from our fontana and somerville plant closures along with continued cost savings across sourcing productivity and formulation are tracking as planned in siding and trim net sales were 859.8 million up 34 with organic growth of 20 ahead of our expectations and led by fiber cement adjusted EBITDA margin was 33.5 reflecting volume leverage pricing and continued plant cost savings from our manufacturing footprint optimization work sell-through was strong exiting the quarter outpacing shipments driving volume leverage and bringing channel inventory to healthy levels in deck rail and accessories net sales were 305.1 million a decline of five percent the year-over-year sales comparison reflects the planned channel inventory normalization we discussed last quarter not a change in the underlying health of the category sell-through improved sequentially each month and we exited the quarter with channel inventory and days on hand at healthy levels we continue to see strong engagement with timbertech and azac across both legacy azac and legacy hardy accounts supporting our confidence in the long-term material conversion opportunity adjusted ebitda margin was 27.1 in australia and new zealand us dollar net sales were 153.3 million up 26 percent with ebitda margin of 34.9%. This reflected strong volume growth, disciplined cost management, and the benefit of FX. In Europe, net sales were $156.4 million, up 15%, with EBITDA margin of 19.4%, reflecting continued expense management, improved manufacturing efficiency, solid fiber gypsum and fiber cement demand, and the benefit of FX. Free cash flow in the quarter was $254 million, driven by higher profitability, lower capital expenditures, improved working capital, and a continued reduction in acquisition and integration-related costs. As Aaron mentioned, we redeemed $400 million of senior unsecured notes in the quarter, bringing net leverage down to 2.7x, on track towards the leverage targets Aaron reiterated. Turning to our outlook for the second quarter in fiscal year 2027, Before I jump in, it's worth flagging as you think about modeling the next few quarters. The distribution changes Aaron discussed create real upside to both the current year and long term, and we've built what visibility we have into our guide. The moving pieces here are mostly on sell-in as new and legacy distributors transition at the same time. Given that, we'd expect some quarter-to-quarter noise there over the next couple of periods. Sell-through though, we expect to remain strong through the transition. We'll also incur some costs along the way, marketing, sales support, and other transition-related investments as we onboard new partners and wind down legacy relationships. Additionally, beginning with our second quarter results, we have fully lapped the ASIC acquisition, so going forward, we will not reference pro forma or organic growth metrics for quarterly comparisons. In Q2, we expect net sales of $1.485 billion to $1.575 billion, or growth of 14.9% to 21.9%. We expect adjusted EBITDA of $420 million to $455 million. Given our first quarter performance, we are raising our full-year outlook. We now expect sales of $5.564 to $5.723 billion, or growth of 5.9% to 9% on a pro forma basis for the full year fiscal 2027. We now expect adjusted EBIT of $1.536 to $1.625 billion. This outlook reflects the flow through of the first quarter performance and the current expectations for the incremental contribution from our new distribution partnerships. We continue to plan the back half prudently against an uncertain macro backdrop. We expect free cash flow to exceed $500 million for the full year and capital expenditures to be approximately 6% to 7% of net sales. With that, I'll turn the call back to Aaron.

Thanks, Ryan. Before we open it up to questions, let me leave you with a few thoughts. We're encouraged with our start to fiscal 2027, a good quarter, with strong outperformance and execution in a market that remains uncertain. This solid performance gives us confidence as we move through the rest of the year, and we remain well positioned when the macro backdrop improves. We look forward to sharing more with you at our Investor Day in New York on September 15th. If you need more information on this, please reach out to our IR team. Finally, I want to thank our team for their continued execution and discipline. None of this happens without you. With that, operator, please open the line for questions.

We will now begin the question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Ryan Merkel with William Blair. Your line is open. Please go ahead.

Hey, everyone. Nice quarter, and thanks for the question. I'd like to start with the North America fiber cement organic growth up 20 percent. Aaron, I know an easy comp helped, but it's really impressive growth. So can you just talk about why you beat your guide, what's working, and then why are we seeing the inflection now?

Yeah. Hey, Brian, thanks for the question. I think many of you know we've talked about fiber cement coming into this year being our number one priority. and the Q1 results, they're very encouraging. With that said, we're not satisfied. I think that as we think about the, you know, I like to bucketize the three main reasons why we're seeing fiber cement grow, why we saw it in Q1, is I'd really frame it as the execution of our strategic initiatives, the D-stock comp, and the rest being really price and mix. And let me dive a little bit more into thinking about our strategic initiatives we've talked a lot about color plus and that being a big focus of ours as we think about really getting after repair and remodel namely in those areas that have been under under penetrated for us we've done that with the expanded statement program which now is live nationwide we just had two more locations added in baltimore and chicapede massachusetts and then we've talked a lot about the trim over and that being a way for us to really get after vinyl siding and we continue to make really good progress a year into this pilot we continue to see encouraging results in the pilot regions we keep wheeling this out to more and more contractors one of the things that i know you've seen and that we put out there is is really our prolapse which are mobile training centers really to take contractors through what trim over is and why it can be easier for them to install and why they can make more money. We've had, you know, 50 events in Q1 and we've done, you know, we've trained over 1,200 contractors out there. The other thing that we're really seeing is, you know, the multifamily business. That's about 15% of our volumes. That has taken off for us in Q1. And then if you look at our growth regions, you know, areas that we really are concentrated in, areas like the the Carolinas, these are more affordable price point metros. They're really running ahead of the national market. The other thing I would say is we've had competitors not able to serve the market. We've been able to take advantage of that. So a lot of this has to do, I'd say, number one, to bucketize it, it's execution of our initiatives. The team has done an outstanding job. The other thing, we talked about the easier comp and then price being the last. So that's how I would bucketize it is we look at the sell through as well. And we haven't talked a lot about sell through. That is something that our teams are concentrated on. It's something that our teams are incentivized on. Our sell through for fiber cement really accelerated each month with June being our strongest with up 19%. So those are the reasons, Ryan, why we would say fiber cement is up about 20%. So a good quarter for us, but like I said, we're not satisfied.

That's great. Thanks for all that detail, Aaron. And then my next question, just on the guide for 2Q, the revenue in both segments is well above what most of us were thinking. Any way to parse out the assumptions for sell-through and channel load? Any help you can give us to put that in context?

Yeah, so I'll start out and then I'll hand it over to Ryan here. If you think about our guide as we look at, you know, for, of course, the full year, you know, part of this is just letting our beat run through and then thinking about, as you can imagine, there's lots of puts and takes with what we announced as it relates to distribution with the Boise partnership and some of our regional partnerships and then also the transitions out there. So that is really what we've added to the full year guide. But I'll hand it over to Ryan. He can talk more specifically to Q2.

Yeah, if you think about the Q2 side, from a deck rail and accessories perspective, you know, we're up over 40% year over year. Easiest way to think about that is, you know, we did the channel inventory normalization here in Q1. We saw really strong sell-through above estimated demand in Q1. And that's continued into the quarter so far that we've seen through July. so you're kind of having an upside due to that and then there is about a third of it that's related to loading in our new distribution partners so those are the two major drivers on the drna side and then when you think about siding and trim you know as we mentioned we saw a stronger q1 we saw a stronger sell through and from an inventory perspective we're in a very good position with our channel partners so we feel confident that that execution will continue in you two here got it thanks for passing on thanks ryan your next question comes from the line of brooke campbell crawford with baron joey your line is open please go ahead yeah good evening

i have to take my questions and just the first one on on the implied second half group hello just checking to make sure you can hear me yeah we got you bro can't hear you all right great yeah just checking on the implied second half group ebitda looks to be kind of down a couple percent and when you normalize last year's stock comp so just trying to check any specific dynamics there that would sort of drive that decline year over year just given the really strong first half or is it just you know planning for for the worst here yeah look brooke i think as you can probably appreciate you know as we look at the full year guide and you know uh the second

half uh you know is a sequential step down from h1 is really normal seasonality uh there the other piece is you know certainly uh the uncertainty uh as we look to the back half of the year so uh i think more than anything we're being prudent as we look at the back half of the year yeah i think the only other thing i'd add right as we announce those distribution changes there are some costs that we call it out on the call that we would incur that is uh included in kind of a guide right now to the best of our knowledge.

So that does have a little bit of pressure there. And then as you recall, you know, DRA seasonally, that October through December period is always the lowest quarter. So with sales being down pretty substantial, you do feel some pressure on margin of that quarter typically.

That's great. And just my second one around the trim over method, obviously doing pretty well with traction there. Do you mind just providing like a little bit of history? My understanding is that's been around for quite a while. You know, for whatever reason, Hardee's in the past has not really promoted that more broadly across the U.S. So, you know, was there any sort of risk that previously?

Yeah, Brooke, you broke up there, and I think we've covered this maybe on a few calls before. If we think about trim over, you know, certainly in some of the areas where already has been around with high production, this type of install methodology has been around. What we wanted to do is make sure when we brought this out and wheeled this out you know from a national standpoint we took the the time needed to test this out fully and it took us a couple years to do that so we felt comfortable and that's why we see this as an advantage for certain contractors that are going across that are going against vinyl again from a trim over methodology standpoint of what it allows you to do is cut down on your labor costs and be able to install hardy you know at a faster rate so contractors can go out there and do more jobs and they can make more money so this has been around this pilot for us that we wheeled out about a year now as i mentioned before we keep seeing success with this and we keep wheeling it out to more regions of the country your next question comes from the line of keith hughes with truest your line is open please go ahead uh thank you first question uh with the new agreement with boise if you could talk you know big picture longer term what this does and which side of the business will have a bigger impact on you know timber tech or hardy plank or whatever your views are there yeah hey keith really good question look we're extremely excited about what we announced with with boise and some of the other regional uh distributors look as you know boise's is a scaled national two-step distributor and we've had a deep and proven relationship with boise with our fiber cement business which was effectively national even before this agreement uh was signed so we're building on a partnership that has has already been proven that works we know what boise can do we think they're one of the best in the business. The other thing is just moving to a full line exclusive relationship does really, you know, three things for us. It concentrates the man behind a single national partner that is now fully aligned with James Hardy and ASAC and TimberTech portfolios rather than really splitting attention across competing lines. And I think that's really important because we talk so much about our large sales force of having 500 plus people. If you put Boise's sales force with that, call it 600 plus people, and you put them together, that's a really formidable type of force that's going out there and selling our whole exterior lineup. And look, it really pairs Boise's national region logistics with our own downstream demand generation, as I mentioned before. So we're driving pull through at the dealer and contractual level while Boise's handling distribution, but they're also driving pull through as well. And look, I think the other thing that is really obvious, Boise now has every reason to grow our brands and actively convert volume because their success is directly tied to ours. And I think that's the best type of partnership out there. So we're really excited about it. To answer your question, who's to gain more? Look, we have some pretty ambitious targets, joint targets with Boise, and we think we're going to be able to continue to grow the fiber cement business. And certainly the timber tech business and the AZAC business is going to be relatively new. So right off the bat, we think we'll see gains there. But one thing to keep in mind um you know is we uh closed on the deal with azac this has been part of our plan uh you know there's a few different chess pieces that we have planned here you know since when we signed the the deal uh this is one of them and helps us be able to grow our business our collective business and helps us to really accelerate uh our revenue synergies out there but more than anything We think signing with Boise, we think with these regional partners, is going to help us service our customers better. And that really is the key point there.

One other question, if I may, Siding and Trim has an excellent price mix growth, high single digits. Is that something that you think will maintain at that level for the rest of the fiscal year?

Yeah, Keith, the way I think about it, look, we have from Siding and Trim, you know, five or so many. We're about five and a half from a price standpoint, roughly, you know, a half a point from a mix. And that's really the growth that we've seen in color. Plus, we think it's more of like a three and a half to four type of range when we look through the rest of the year. Okay, thank you. Sure.

Your next question comes from the line of Keith Chow with MST Marquis. Your line is open. Please go ahead.

Hey, Keith. Keith, you there? Keith? I don't hear Keith. Maybe we'll come back to him. Hello. Hello. Can you hear me? There you are. There you are. We must be having some delay. There we go. Thank you.

Hey, Keith. Hey, Aaron. Hey, Ryan. Thanks for taking my question. First one, just to follow up, Ryan, on some of the comments you made earlier, I think you said, and please correct me if I'm wrong, but the growth you're expecting in uh decking rail and accessories in the second quarter up 40 versus last year i think you mentioned a third of that is related to movements in the channel um so let's just talk in round numbered terms but that's probably roughly 15 million bucks at EBITDA which leaves you somewhere close to 30 million dollars as an underlying improvement for dRNA um now understanding that there is seasonality into that business into the end of the year so you know your uh your september comp is typically september quarter is typically low but then you know that improves into december is it fair to assume that that 30 million dollar ebitda improvement in the second quarter can be annualized going into the full year or is that being way too aggressive I would probably say that's a little bit aggressive, right?

I mean, your Q1 results, you saw the decline driven by the lower sales number and then us intentionally pulling down production and having, you know, slightly less absorption. You know, Q2 kind of gets back to a little bit of a higher flow through due to that incremental volume.

So I think you probably need to do more of like a two to three quarter average just because using 2Q with all that additional volume is probably a little bit too much okay thanks ryan and then i think at the last result you mentioned you're going to potentially at least try and quantify some of the um the costs associated with all of these distribution changes and you know i certainly appreciate that it's not necessarily the easiest thing to do but on the cost side when you're funding boise to make some of these changes and potentially some of the other distribution partners what level of costs do you expect to incur uh in the third and fourth quarters for this financial year and will those cost be taken above the line or below the line please thanks very much yeah so so keith what

i would say from a cost standpoint i mean and also from a sales standpoint uh there's a lot of puts and takes there best we know we've embedded in our guide uh from a sales and cost standpoint you know the one thing that's a little unique as i caught on the call is if there is channel 1135 back you know we would call that out separate the guide does not contemplate that fully you know as you transition you wait to see how it burns down and what kind of inventory transfers between locations um so that would be something we would call out uh we get to the next guide if it was material and i know we called it out that if there was any impact in q1 we would let you know it was pretty minimal it was under a million so we didn't call it out specifically from uh

some of the synergy wins that we had in the first quarter okay that's great thanks thanks very much thanks kate as a reminder when asking your question if you are muted locally please remember to unmute your device your next question comes from the line of phil ing with jefferies your line is open please go ahead well aaron uh wait what a way to celebrate your one year anniversary uh for the azac deal with such strong results and congratulations to the team uh thank you phil um i guess first off question perhaps for ryan um you know you gave us some color for 2q uh with some load-in dynamic on decking in particular. Any more consideration? Does that have an impact perhaps in the back half in terms of your sales? Because your implied sales guidance for both decking and siding is flat. So I don't know if there was any pull forward that will impact the back half from that dynamic. And is the load-in largely just decking? Is there any siding consideration? So just kind of give us some color on the back half framework calling for a flat Yeah, so you think of kind of a loaded in Q2, right?

It's primarily on the decking the RNA side. There is a modest amount of fiber cement, but it's a pretty small number. You know, with some of the other distribution partners that we called out this week as well, you know, there will be some loaded in fiber cement that may impact the back half of the year, depending on timing. So, you know, any time loaded happens, right, you know, you can get a little bit of an impact on pull forward, which is why I mentioned some a quarter-quarter reliability during the call earlier. But that could be just timing as you look and wait and see. As you look and you wait to see the sell through and that could impact the back app slightly. But right now, just given the backdrop from a macro perspective, we're talking was good to kind of keep the back app as we originally guided. And if things improve, we would have an opportunity to guide differently as we execute two-year.

Okay. So it sounds like it's more conservatism. Anywhere to kind of flush out some of this noise, Ryan, how you're thinking about sellout for ducking or siding for this year?

Yeah, I don't think we quantified the full year amount, but I know when we started at the beginning of the year, we said we expected mid-single-digit sell-through in the DRNA side, and we continue to expect that. I mean, the trend we've seen in Q1 was extremely positive. It built each month and built from April on throughout the end of the quarter. and then you know we have preliminary kind of july results and uh we continue to see right around that double digit number in july so we felt uh we feel pretty good about kind of the mid single digits for the remainder of the year on the decking side and then i don't know if you want to hear a comment on the fiber cement side yeah look we talked about q1 and what we saw from a sell-up fiber cement and you know we said it's nine uh nine percent up and you know our june uh end of June, it was 19% up.

So, we continue to see strength there that, you know, is very encouraging for us.

Okay. And then, Aaron, you kind of teased about this already on the commercial synergies, perhaps coming in better than you expected. I think initially when you guys gave us the framework, it didn't count for, you know, any wins on a two-step distribution with a guy like Boise. You know, would that be incremental? And is there any way to kind of size up, perhaps maybe not just this year, like 12 to 18 months out with some of these moves you've made on the distribution side, how much potential upside you could generate on the commercial synergy top line's perspective?

Yeah, Phil, look, what we've said on commercial synergies, we would exit the year, you know, $125 billion. So certainly, you know, there can be some potential upside there. We're not ready to call that yet. But why don't I do this? I have John Stelly in here who leads our North American business, and he and his team are responsible for really going after and getting after these commercial synergies day in and day out. And John can speak to a little bit about what we're seeing there.

Yeah, Phil, I think we talked a little bit about this last call. Again, I think the customer permission and reception has exceeded our expectations, right? So I think we've been able to uncover more more opportunities than we uh you know initially you know expected um again you know some of these things take time to actually get closed and turn into turn into revenue um you know so having said that i i i do believe that you know the targets we played out um are highly achievable um you know with with a combination of boise plus um the enhanced relationships with new uh regional distributors um it could allow us to get there faster it could allow us to to achieve um the capture you know slightly ahead of schedule but we're still comfortable with um what we've laid out in terms of total opportunity yeah hey hey phil just you know to to remind you and everyone

else the the way we bucketize these when we think of commercial synergies are really national dealers retail you know independent lumber yards distribution you know uh regional and you know national builders uh and then you're looking at contractors so those are some of the areas that john and his team are going after and seeking those opportunities each and every day okay appreciate the color guys thank you sure your next question comes from the line of peter stein with macquarie your line is open please go ahead good evening aaron and team thank you very

much uh for your time um aaron perhaps just another question around the distribution um if you think about a couple of the factors that I'm sure was in your conversations and contemplations, service, incremental optimization of the supply chain, and then the potential to enable some of the next things that no doubt follow from here, as you just pointed out. How did you think about And how did Boise and the combination play into those different buckets, i.e. lifting service or incrementally improving ultimately the profitability of your supply chain?

Yeah, look, really good question there, Peter. We contemplated everything when we thought about this move. You know, obviously, this was a huge move for us. As I mentioned before, this is something that we have been thinking about over the last year. So as you can imagine, our teams thought about everything. You know, we also had a lot of comfort as we started out a couple of pilots with TimberTech, with Boise. You think about within Pittsburgh, within Baltimore and really exceeding expectations out there. So number one, and this was even before this move and we looked at all our two-step distributive partners, was how do they service? And, you know, we certainly took that as the number one factor out there. And then, as you can imagine, all the other variables and some of them you mentioned, we looked at.

I won't use my follow-up on a follow-up, if I may. The other The topic that's come up a few times in today's conversation is the hardy operating system and the impact that you're starting to see from a manufacturing perspective. Could you perhaps just allude or give us a little more detail on that and what you're seeing?

Yeah, certainly just for all of you on the call, our hardy operating system is really our version of lean. And so that started out with our manufacturing plants and has really extended to other areas. you know, areas like procurement, we think about formulation. So we have a target level of savings that we go out and get after, you know, every single year. That is on track. You know, everyone is involved in the Hardy operating system, but really Ryan Kilcullen, who leads our operations, spearheads that for us. And our plans are running extremely well. Even when we saw lower volumes, they ran well and as you can imagine getting more volume has helped them to run even better so we continue to see progress there as we think about synergies and around cost synergies and some opportunities we have we've talked for some time about really implementing the hardy operating system within the legacy azac plants so ryan and his team have done that and we're already seeing really solid results. When we think about efficiency, when we think about downtime, that's been something, even those plants ran well, now we have a unified system across our entire network.

Thank you, Aaron.

Thanks. Your next question comes from the line of Tim Voych with Baird. Your line is open. Please go ahead.

Hey, guys. Good afternoon. Nice job. Maybe just first question um when you guys have historically done two-step distribution changes in the past and i know they've been at a much smaller scale but in your in your history what is the typical kind of training period or training ramp for those sales forces to be kind of fully effective um you know from from kind of beginning to um you know kind of when they're fully effective you know selling your product.

Yeah. Tim, we'll hand that over to John to answer that.

Yeah, Tim, I think in the Boise situation, clearly they've been selling composite decking for a long period of time. So there's a lot of experience overall with the category. And so what we need to do is get them trained and armed and ready around the value proposition of timber tech, right? And so we're already in the process of doing that um and again we we expect that curve uh to ramp up pretty quickly um a relevant data point you'll recall when when timbertech you know converted uh capital out west you know a few years back again it was a very similar situation uh they were already experienced in the category uh and we leveraged uh we leveraged that knowledge gotten trained on on the to protect value proposition um and that enabled us to move very quickly and drive you really strong growth with that conversion so we expect us to see that again some of the other regional distributors that we've taken on that will add fiber cement siding several of them were already in the siding category so they're again familiar with the category and there'll be a similar training process around game starting value proposition and then the joint sales targeting from the commercial organizations joint marketing across the marketing organizations to drive that downstream pull-through demand.

Okay. Okay, very good. And then, Ryan, just on the cost inflation, I think the 80 to 100 million is the same as it was last quarter. How much of that did you feel in the first quarter and how much is baked into the second?

Yeah, we probably felt probably, yeah, I don't think we qualified it, but I would say 20 to 25 million in Q1 and mainly on the brain side there. right so a lot of the raw materials would be hung up on the balance sheet just the way the inventory is brought in uh but from a freight perspective that was immediate and as you see even when rates come down the freight doesn't drop fast um so that that was kind of the major driver there i mean we have seen a little bit of relief on the commodity and actual raw material side but as we call it out the freight piece um you know we're running at a higher volume and then there is some general discrepancies in the freight market right now. So those spot rates are higher than normal. So we're working actively to try to contract more of our freight lanes under contract versus spot. So we do actively work that kind of relief, but that's why we kept it at the 80 to 100 million.

Okay. Okay. Great. See you guys in September. Thank you. Thanks.

Your next question comes from the line of Harry Saunders with E&P. Your line is open. Please go ahead.

Good evening, Aaron and team. Thanks for taking my questions. Firstly, I know we've touched on this, just wondering what the share-based payment expense was previously assumed in the old guidance range before and perhaps sort of what we could assume for the balance of the year, just as a run rate, please. Yeah, go ahead, Brad.

Yeah, so in the risk-based guide that we would have released at this point around there, it was about $50 million of share-based comp. You know, I think in Q1, we go out about 15 million um so i i think you could probably use that kind of as a run rate based on the current valuation of the stock so i think that i would kind of plan on it as that annualized from q1 understood thank you um and just also wondering i know we've touched on this as well a bit but have you quantified the net stocking benefit um given i guess you're giving up some coverage as well elsewhere.

But any net stocking benefit from the Boise and other deals, you know, have you quantified that for Q2 and for the balance of the year, please?

Yeah, I mean, it's embedded in our guide. I mean, I think the way to look at it from a full year standpoint is we took our beat and we rolled that forward and then we kept the back half relatively flat, if you will. And, you know, the other piece of that that you see is going to be the puts and takes from the two-step distribution changes.

Got it. Thank you very much.

Welcome. Your next question comes from the line of Matthew Booley with Barclays. Your line is open. Please go ahead.

Hey, good evening, everyone. Thank you for taking the questions. Questions on the kind of balance of sort of your own organic growth initiatives and then the commercial synergies. So basically, where are you on those commercial synergies in the first half of the year, Q1 and Q2? I know you kept the full year at 125 and said there might be some upside. But if I'm kind of rank ordering them, I guess, when we look about your growth here relative to the market, commercial synergies, some of your initiatives like Color Plus, Trimover, et cetera. What do you think is kind of the most powerful couple of drivers that are leading this level of growth?

Yeah, great question. Look, we haven't given exactly what those commercial synergies are, you know, quarter by quarter, as you can imagine. And John talked a little bit about this. They're fluid as it relates to when they happen. I mean, what we can reaffirm is, you know, the one hundred twenty five million dollar exit run rate. And certainly we think there could be possibly upside of that with some of the new news we talked about. So from a commercial synergy standpoint, you know, that's how I would talk about that. As far as how we bucketize, you know, what is having the greatest impact, you know, I mentioned for Q1, a third, a third, a third, you know, basically of three different buckets, and that's strategic initiatives. You know, obviously, we had a little bit of help from the de-stocking and certainly then price as well, but we really are seeing strong execution on our initiatives, particularly in fiber cement around areas like color plus. We mentioned the expanded statement collection, which is just getting started. We talked about the trim over. And these are things, yes, we're seeing the benefits in one quarter, but these are sustained growth items for us as we think about our strategy moving forward.

Got it. No, thank you for that, Aaron. Secondly, given what you just guided for Q2 and your comments about inventory, it sounds like this probably didn't really happen. but my question is on often in this industry when you have price increases you might see some pre-buys and things like that and so just you know given you had a couple uh price announcements during the quarter there did you see any kind of unusual inventory swings uh related to that thank you yeah we really didn't and we're sitting i mean broadly speak i mean i can say this across our segments we're at a normalize inventory level absolutely all right great thanks good luck thank you thank you your next question comes from the line of daniel sykes with jarden your line is

open please go ahead hi aaron ryan thanks for taking my questions i just had two really um number one just on the volumes and obviously it is you know it's very strong with the double digit growth and exterior products um i was just wondering whether you could quantify the the de-stocking i know you mentioned it was kind of a soft comp but in the context of that double digit growth? What was the destocking impact in there?

Yeah, as far as from a dollar volume standpoint, I mean, we would say it was roughly, you know, 40 to $50 million from a destocking standpoint. And when we talked about our growth in fiber cement, we talked about those components, you know, really being roughly, you know, a third, a third, a third of that type of 20% growth.

Okay, great. And then just another one, just in terms of the definitional changes to just the EBITDA in relation to the old FY27 guidance. Can you just confirm, was that under the same definition or is the definition changed in this new guidance?

So the original guide included stock based comp in our adjusted EBITDA. So now it would be excluded moving forward. So I think the easiest way to restate the original guide would just basically add 50 million of stock comp back from the low to the high end of the guide at every point um so that would be the major change i think given where the stock value is today you know some of that will go up a little bit and that's why i think we realized about 15 million in the quarter i think annualizing that's a safe bet for the remainder of the year uh but that that's the major change there was about 50 million dollars uh you could flow through at any point of the guide okay good thanks guys thank you your next question comes from the line of Rafe Yadrasich with Bank of America.

Your line is open. Please go ahead.

Hi, good evening. Thanks for taking my question. Obviously, the pretty big beat and raise, just the segment margins going forward are coming down on a percent basis for the full year for both siding and decking.

Can you just talk about what the headwinds are there is that because of either inventory buyback or investments or mix uh just sort of bridge us to what's happening on a percent basis yeah i would say the the major piece is you know we called out the freight uh issue that we you know we're seeing on the spot rate kind of just availability the other piece is really just driven off of uh investments in these distribution partners you know that's everything from sales to market activity to ensuring the right uh you know of like great setups there. So that's the major driver there. And then, you know, as the back half, as we said, right? I mean, Q3, that October to December period is always the lowest from a DRNA perspective. So, you know, as it is like with volumes up, the flow throughs are still a little bit higher. You're not investing at the same rate. These investments kind of hit us from Q2 on. So that's why you see that partial decline.

Okay, that's helpful. And then following up on the decking and railing, the sell through up double digit, you called out shelf space, taking some incremental shelf space. Can you just give a little bit more color on where that's happening? It does look like there's been some placement at Home Depot. I'm wondering if there's been more expansion at retail or if there's specific channels where you're seeing that. Yeah, we'll let Jono answer that.

Yeah, so what you see is in the quarter, that's prime season. And so we landed a lot of additional shelf space gains during last year's early buy season. And so what you're seeing is that's when you actually get those conversions, right? That's when you place the inventory into the channel. And then once you drive the sell through with that double-digit sell through, that's what gets you the pre-order points. So those new gains, in addition to the core business, which continue to operate at a very high level, that's what led to some of the health performance itself through core business performing and then pulling through the product at the gains that we got through early by as what drove that that double digit okay I think that's thank you we have reached the end of the question and answer session this concludes today's call thank you for attending you may now disconnect