Sam Seow

Sam Seow asked about the contribution of raw materials to the sequential siding margin improvement in the third quarter and the expected raw material benefit in the fourth quarter. He also sought clarification on the full-year free cash flow guidance of $200 million, given the year-to-date figure of $260 million.

Answer

CEO Aaron Erter outlined that sequential improvement was driven by volume, ASP, manufacturing costs, and SG&A. CFO Ryan Lada specified that raw material costs contributed about 20% to manufacturing cost improvements in Q3, with modest deflation year-over-year, and that Q2 raw material inflation would carry into Q4. Regarding free cash flow, Ryan Lada explained that the $200 million guidance accounts for timing of AR and integration/deal costs winding down in Q4, with an expected ramp-up in FY 2027 Q1.

Sam Seow asked about the contribution of raw materials to the solid sequential margin improvement in siding and whether that raw material benefit would be sequentially higher in Q4. He also questioned the full-year free cash flow guidance of $200 million, given year-to-date free cash flow of $260 million.

Answer

CEO Aaron Erter outlined that sequential improvement was driven by volume, ASP, manufacturing costs, and SG&A. COO Ryan Kilcullen specified that roughly 20% of the improvement came from manufacturing costs, including modest raw material deflation in Q3 after inflation in Q1/Q2, with Q2 raw material inflation carrying into Q4. For free cash flow, Ryan Kilcullen explained the $200 million guide accounts for timing of AR and integration/deal costs in Q4, expecting a ramp-up from FY2027 Q1 as these costs minimize. Aaron Erter added that FY2027 will benefit from a full year of AZEK cash flow and fewer transaction/integration costs.