Thank you for standing by. My name is Jordan, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Louisiana Pacific Corporation Second Quarter 2025 Earnings Conference Call. [Operator Instructions] I'd now like to turn the call over to Aaron Howald, VP of Investor Relations. Please go ahead.

Thank you, operator, and good morning, everyone. Thank you for joining us to discuss LP's results for the second quarter of 2025 as well as our updated outlook for the full year. On the call with me this morning are Brad Southern, LP's Chief Executive Officer; and Alan Haughie, LP's Chief Financial Officer. As always, after prepared remarks, we will take a round of questions. During this morning's call, we will refer to a presentation that has been posted to LP's IR web page, which is investor.lpcorp.com. Our 8-K filing, earnings press release, sustainability report, and other materials are also available there. Finally, I will caution you that today's discussion will contain forward-looking statements and non-GAAP financial metrics as described on Slides 2 and 3 of LP's earnings presentation. The appendix of that presentation also contains reconciliations that are further supplemented by this morning's 8-K filing. All of those materials are incorporated herein by reference. And with that, over to Brad.

Thanks, Aaron, and thank you all for joining us today for LP's Second Quarter Earnings Call. I will describe some highlights from the quarter before turning the call over to Alan for segment details and our updated outlook for the second half of the year. The Siding segment once again delivered growth in the second quarter despite an increasingly challenging market backdrop. U.S. housing starts remain below long-term average demand levels and the single-family mix has softened, which has contributed to steadily falling commodity OSB prices. The general sentiment among repair and remodeling contractors is also more cautious than expected earlier in the year. However, once again, LP's Siding segment executed our strategy and achieved a record quarter for volume, revenue and EBITDA. We did this by delivering value for our customers across new construction, R&R, and off-site construction with durable, beautiful, sustainable, and labor-saving SmartSide and ExpertFinish Trim & Siding. Page 5 of the presentation shows a summary of highlights for the second quarter. Siding revenue grew by 11% compared to last year, partially offsetting a negative $102 million impact from lower OSB prices. The result was $755 million in sales, $142 million in EBITDA and $0.99 of adjusted earnings per share for LP in the quarter. Both segments continue to improve operating efficiency, which we measure as overall equipment effectiveness or OEE. Siding OEE in the second quarter reached 78% and OSB hit 79%. OEE drives value by unlocking incremental capacity in Siding and increasing operational flexibility in OSB. I want to thank our operations teams for their dedication to running our mills safely and efficiently, maintaining our assets and delivering OSB and Siding with industry-leading quality. Current market conditions are difficult for our OSB segment, but LP has been here before, and we have demonstrated that our…

Thanks, Brad. I'd also like to add my congratulations to everyone who contributes to LP's strong safety culture. Safety is, of course, it's a reward, but a full trophy case is a nice bonus. Okay. On Page 17 (sic) [ 7 ] of the presentation, you'll see that the second quarter for Siding was one of continued growth. But beyond that, there aren't that many other moving pieces. Revenue increased year- over-year by 11%, with 2% from price and 8% from volume. The volume increase added $35 million of revenue at nearly a 50% incremental EBITDA margin. Both the housing and repair and remodel markets were softer than off-site construction, which includes sheds and manufactured housing. And this mix shift slightly dampened the price benefit of another record quarter for ExpertFinish. But the pure price bar on the waterfall is really the only place where this adverse mix shows up because it was actually margin accretive in the quarter. We invested $2 million more in sales and marketing and saw another $2 million in minor inflationary costs with freight and labor inflation offsetting improved raw material costs. And of course, the tariff situation remains unchanged from the first quarter, and it is tariffs that comprise the bulk of the $4 million in the other bar. Looking through the fairly straightforward waterfall, it was a record quarter for SmartSide volume, revenue and EBITDA, with growth and leverage generating margin expansion. The EBITDA margin of 27% was not a record because LP's Siding mills are still not fully utilized. Continued growth in share gains with the corresponding leverage from higher utilization rates should, all else equal, drive margin increases. That is until they are temporarily dampened again by the cost and lower utilization associated with the starting of the next mill. In…

[Operator Instructions] Your first question comes from the line of George Staphos from Bank of America Securities.

Congratulations on the progress year-to-date, gentlemen. First question, and you've been quite consistent in maintaining a conservative and balanced outlook for Siding and outperforming that over the course of the year. When we look at 3Q, it suggests a little bit of a decrement in margin and progress. Is there anything discrete that we should be mindful of there? Or is that, Alan, just trying to keep some cushion for the unknowables at this juncture in the quarter? And I had a couple of follow-ons.

Well, of course. I'm not going to admit to the existence of a cushion quite. But I'd like to point out that the third quarter of last year was the peak quarter last year. And it's reasonable, I think, particularly in this climate to expect that Q2 might prove to be that peak this year. And so if you look at what we're really doing is looking at Q2 and Q3 combined kind of -- I'd like to say the word-ish a lot, so kind of-ish. And so if you look at those 2 quarters combined, that's a revenue growth of about 7% year-over-year, which I think is pretty healthy. There are some other minor dynamics and shed volumes or panel volumes were certainly very strong in Q2. We're not necessarily expecting that to persist quite as strongly as it did going forward. So I would say it's a sort of a balanced approach. on the revenue line and a very safe approach on the EBITDA line.

Okay. I appreciate that, Alan. And you gave us a fair amount of color for the third quarter. I don't know if it's worth it, but to the extent that you can comment about early trends in third quarter, what the exit rates are on volume for Siding, that would be helpful. And then my last question, I'll turn over and come back into queue. The CapEx numbers came down. It sounds like it's largely in OSB, but was there anything on the Siding side that we should be paying attention to relative to ultimately the growth outlook, the next conversion with Houlton, et cetera.

Right. I'll take the CapEx question and then Brad will take the sort of market-facing question. You're right that the majority of the CapEx reduction is in OSB. And arguably, if we weren't trimming OSB CapEx, I'd probably have left the whole CapEx guidance the same. It's hard to land such a thing on a dime. So the majority of the trimming is in OSB. There's a little bit in siding, but nothing significant.

George, on the Q3 order file, we came into the Q2 order file really, really strong carryover from Q1 into Q2. We saw some weakening of that order file as we went through the quarter, and it's kind of stabilized where we were consistent with the guidance that Alan has given for the quarter. So it's good, but not as good as it was going into the beginnings of Q2.

Your next question comes from the line of Mike Roxland from Truist Securities.

Congrats on a nice quarter despite the backdrop. I wanted to follow up with you on the good cost control effects you mentioned in OSB. Obviously, you had $19 million in EBITDA, well above where we wound up -- we're forecasting for the quarter. Any color you can share on what you actually did, how the businesses ran, what costs they were managed more efficiently, what they did to make sure that they were operating as effectively as possible during the quarter despite the weak pricing backdrop?

Yes. So two key drivers to that. As I mentioned, the OEE really outstanding performance for the quarter. And kudos to our operations teams because it can be difficult at times to maintain efficiency when the kind of market is slowing down in front of you. But we ran just from an efficiency standpoint, the operations, particularly in OSB ran really, really well, which means high uptime, high grade yield and then good speeds when we were running the presses. And then second to that is we have been pretty aggressive on cost containment in that business as we saw the market fall away. And so those two combined really was a significant contributor to our ability to beat some of the algorithms around where margins should be in that business given where pricing is.

Got it. And then just one quick follow-up. I would love to get your thoughts around shrinking home sizes and implications for Siding. I have to believe that even with home sizes shrinking that the currently low penetration rate of wood strand-based siding and the potential for an upcoming, let's say, residing cycle would more than offset shrinking home sizes. But any color you have on that would be great.

Totally agree with what you said. We'd rather -- average home sizes be bigger rather than smaller for both of our businesses. But given the market share opportunities we have across all our different segments, we still -- I mean, we believe securing either new homes to put our siding on or growing market share in repair and remodel will overwhelm any reduction in housing sizes that we see as the industry combat this affordability issue. So yes, it would be a slight headwind for us, but overwhelmingly, we have enough tailwinds to where that should not be a significant factor in our volume growth story for Siding.

Your next question comes from the line of Ketan Mamtora from BMO Capital Markets.

I'd like to come back to the Siding guidance for back half. Alan, if I heard you right, you said volumes in the third quarter would be flat year-over-year. But if I just think about sort of the implied fourth quarter, that would assume kind of revenues up kind of low double digits. Can you just help us understand kind of the nuances here in terms of what's going on in Q3, Q4 and if you are sort of baking in some recovery as we get into Q4?

Well, if you sort of -- I'm going to sort of duplicate the math that's implied, we're looking at a year that's kind of symmetrical. Revenue of $400 million-ish in Q1 and Q4 and then something north of that, $460 million in Q2 and $430 million in Q3. So it is a seasonal pattern with really just that shift between Q2 and Q3. So yes, we're assuming sort of healthy volume growth Q4 of this year, but I think Q4 of last year was relatively low, certainly compared to Q3. So yes, I think it's a reasonably safe volume outlook.

Understood. Okay. And then, Alan, can you just remind us in terms of your operating rates in the second quarter in both OSB and Siding and sort of what's your approach, especially in OSB, given where prices are? You talked about kind of doing everything you can on the cost side, but I'm just curious sort of your approach on the production side.

Aaron, why don't you take this?

Yes. Okay. Thanks. So for OSB in the second quarter, we were sort of mid-80% range operating rates, a bit lower than that and maybe a hair lower than that in Siding as we ramp up new capacity. You can infer the operating rates from our volume guide in the third quarter for Siding. For OSB, we're always hesitant to specifically discuss volume for all the obvious reasons. But what I'll just say is that we are executing our strategy, which is to supply the amount of wood that the market demands. And current prices are telling us now that, that demand is not very high. When customers want more wood, we'll supply it.

Yes. Let me just be repetitive to Aaron. We really have a finger on demand for our customers given who we are in the OSB business. And we're very cognizant of when our customers need wood, we want to supply it. But we certainly do not want to build any inventory in the channel or at our mill locations. And in order to avoid that, that leads to downtime to make sure we're matching capacity and production with demand, and we'll continue to do that indefinitely in our OSB business.

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

My first question is on the Siding. Can you talk a little bit about the sell-through that you saw into the second quarter and how channel inventories are positioned coming into the back half of this year? What gives you the confidence that you can see that level of growth that Alan mentioned in the fourth quarter?

Susan, we feel that way because we did have good sell-through in Q2. As we continue to ship what turned out to be record volumes, our customers continue to order. We -- inventories in the channel around Siding are right where we'd expect them to be this time of year. And so the good pull-through was very reassuring. And I would say, somewhat surprising given some of the economic and housing data that we were looking at throughout the quarter. So we feel really good about end-use demand in Q2 being consistent with what we saw in our order file and what we shipped. And while demand has moderated a little bit compared to where we were this time last quarter, we do believe what's going -- what we're selling today is also ending up with contractors and being installed in homes rather than being put in inventory. So we feel like it's -- the pull-through throughout this year has been really good, and we have reasonable inventories in the channel given where we are in the year.

Okay. That's great to hear, Brad. And then following up on Siding, can you talk a bit about the mix that you're seeing? And any thoughts on how that will move in the back half? What are you seeing in terms of sheds, BuilderSeries, ExpertFinish, and just the implications there?

So if you look at this year, and it was more extreme in Q1 than it was in Q2, but then rather consistent. We -- our strongest product and therefore, end use has been our panel business, where we've had really good pull-throughs for -- in our shed segments, both in Q1 and Q2 and also good pulls in the home centers, which is primarily a panel play, though we do have other SKUs there as well. Secondly, our prefinish business, as we've talked about, record volumes there for ExpertFinish is -- I mean that is strong indication that repair and remodel has been a strong business for us this year. We have invested considerably both in manufacturing and sales and marketing assets over the previous couple of years in order to build momentum there. So it's good to see that product and our penetration in repair and remodel being a significant driver to our results in Q2. And then I would say, thirdly, the new residential construction, while obviously, overall demand for that has moderated as housing starts have kind of plateaued out, our ability to gain market share over the last 12 months has been -- has made that a significant contributor to our growth as well. Looking to the second half, we do -- I mean I do think we'll see some moderation in shed. And in fact, we're seeing that now, but just given how strong it was in Q1 and Q2. And -- but I believe that we'll -- and what we're seeing today is we'll continue to see strength in ExpertFinish, which means repair and remodel could be a good driver for us in Q2 -- Q3 and Q4. And then as we continue to execute with BuilderSeries with our new construction national partners, we see that as steady as we go through the year. And certainly, if we were to see any kind of strengthening in use there with the large national builders, that could be another driver for us in the second half. Hopefully, that answers your question.

Yes. That's great color.

Your next question comes from the line of Sean Steuart from TD Cowen.

A couple of questions. I want to follow up on OSB dynamics. And I guess we typically think of the industry cost curve as flat. Can you reference cost or margin variance across LP's portfolio and how that could inform downtime closure decisions? Just trying to get a sense of the margin differential from your best to worst mills.

Yes. Sean, the cost curve is flat, especially at the mill level. So most times, our downtime decisions are driven by geographic location, transportation cost and then the local demand that is the outlet for most of that production. So it's really not necessarily that we line up variable costs, stack that and decide where to take downtime. It's more dependent on delivered margin based on where the mill is located and based on the customer base it's serving and somewhat based on contracted volume that is kind of in that mill's basket, which could keep the mill operating. So obviously, we do that trying to maintain as high a margin as we can, but it's not necessarily correlated strongly to cost out of the press, although that is a factor.

Okay. Understood. And then revisiting the CapEx guidance, it sounds like this is mostly OSB related to the reduction to the 2025 spend guidance. Any updated perspective on the Houlton expansion? I assume a chunk of what you're delegating to discretionary CapEx this year is getting started on that. Broader perspective on when we can get more context on what the economics of that project might look like?

So we are continuing to do the detailed engineering for that project and trying to absorb all the inflationary impact that it has had on some of the cost estimates that we had done earlier. So the work continues there. I would say, Sean, in the next quarter or 2, we'll be able to get more specific on tying down the cost and the returns. I will say, despite the inflationary impact on steel and construction, if you factor in the price increases that we've gotten over the last couple of years, the returns are still really healthy for a project like that. And we continue to work on it diligently, but just not ready to provide any detailed information yet because we don't have it.

Your next question comes from the line of Mark Weintraub from Seaport Research Partners.

So obviously, really strong performance still in Siding and your volumes are good. There's been some kind of mixes in some -- you talked about sheds being pretty strong and pre-finish being pretty strong. I mean one thing that did strike me is that your estimated prices and kind of accrued revenue divided by shipments is still up, but maybe not quite as strong as I might have thought. But how much of that is -- what's going on in mix? How is that affecting pricing? And -- or how much of it is just kind of the reality of the environment that we're in?

It's more mix than any sort of headwind. Like we said, panels are sort of our lowest -- some of our lowest-priced products, high margin, but lowest priced. I kind of didn't explain it that well in my prepared remarks, I guess. So -- and ExpertFinish, of course, is among the highest priced, but among some currently and temporarily among some of the lowest margin. So yes, I mean, I remember when we actually gave guidance for the year, this question came up, and we had -- at that point in the early part of the year, we were anticipating relatively healthy shed/panel growth and hence, sort of signaled that dampening of the net price that you're going to see. But the fundamental price increases that we have across the portfolio are all strong. So this really is -- it's a strong mix factor. And at times, we've had 9% pricing, which has been 3 points of price, 6 points of mix, and we're seeing something of that -- the opposite effect in 2025. It is, believe it or not, it really is mix.

Right. So shed is outweighing ExpertFinish at the end of the day in terms of the impact on mix.

Yes.

Okay. And then I mean, are you making other adjustments? Obviously, you pull CapEx and it's primarily in OSB. I mean, again, not wanting to split hairs, but like the marketing expense maybe wasn't up as much as it was actually down a little bit in this quarter. Are you making other adjustments? And sort of what -- can you just sort of give color in kind of the bigger thought process? Look, it's a very difficult environment. And so what are -- what's sort of the strategy at this point?

Yes. So Mark, we're really focused on cost containment and management in our OSB business, every penny -- looking at every penny, looking at allocated cost to that business. So that's an environment where we are very conservative on cost. On Siding, when you have the kind of growth that we've had in the last 6 quarters and some -- and a lot of that can be attributed to the increased sales and marketing investment that we've made over the last couple of years. We talked about adding a Houlton incremental capacity. We just converted Sagola. We're going to continue to invest in sales and marketing. It won't be consistent quarter-to-quarter. That stuff is -- can be seasonal or the way we time a marketing campaign or onboarding new sales assets is it can be rather lumpy. So you'll see volatility in that. But the trend for us in Siding is continued investment to drive growth. We just feel like we have so much available market share. And I hate to say this because I ran the business for 15 years and have been close to it for the last 5, but still not great name recognition and brand recognition across the national footprint of builders and contractors. So we just look out at the market and see lots of opportunity. And obviously, we're trying to accelerate that with capacity and with new products, but also we do have to stay aggressive on sales and marketing as long as we see those opportunities in front of us. And we see, as I think Alan's prepared remarks, a long runway for growth, and we certainly believe that, and we'll continue to invest so that we can realize it in the future.

Much appreciated. Maybe just to follow up real quickly on that. Are there any additional kind of markers on the growth that you can highlight that's going to sort of help feed the machine in the quarters to come?

Yes. Well, if you -- not to be repetitive to prior remarks, but so -- in the ExpertFinish, there's so much opportunity there. We launched brush smooth product recently, just now -- this year being now getting that into the market and getting it commercialized, opens up a swath of unavailable market where smooth is the preferred texture. And then our natural series, which is the 2-tone in markets where that's a preferred look that provides opportunity as well. I mean -- and then on the contractor side, we've got 3-dimensional corners now, which is a great labor saving and ease of installation opportunity. So it's great for those of you all who have been to our booth at the IBS, just to see every year, we're hanging new products up on those walls. And we don't hit -- we're not hitting 1,000 with them, but we've got a pretty high batting average. And those -- everything I mentioned right there opens up markets that we were way underpenetrated in. So yes, so that's been -- there's no question that our innovation over the past 5 -- we'll say, post-COVID has been the key to driving our demand growth because it just opened up the available market window. And we'll continue. And part of that investment, Mark, that we've made in SG&A and what we call marketing expense is around investment in our innovation teams.

Your next question comes from the line of Matthew McKellar from RBC.

A couple of related questions on how you're competing with other substrates. First, in the new residential market, in particular, is it your sense that vinyl is still donating the most share or materials like brick now under more pressure with more focus on affordability? And second, would you expect higher lumber prices on the back of increased duties and potential tariffs on non-U.S. supply to be meaningful for how you compete with sawn wood siding in the U.S. market?

So I mean, remind me if I missed one of those. But on the brick side, yes, I think there is an opportunity with the cost of brick, this drive for affordability, the availability of labor to lay brick. We hear about opportunities for conversion there and maybe some small builders have been able to do some of that. I don't want to make that's not a meaningful contributor right now, but it is something that may provide opportunity in the future. Yes, I do think that the biggest opportunity we have -- continue to have is vinyl conversion, both in new construction and manufactured housing and with repair and remodel. The affordability can drive people to a vinyl siding. So we've got that as the constraint maybe to conversion to converting more. But we certainly, from a preference standpoint and from long-term value proposition, we see that as very fertile ground for us. And then yes, I understand what you're saying around the trim. We do compete somewhat with solid sawn trim products. Our pricing normally is higher than a solid sawn wood because of the value prop there. But if we were to see pricing increase on solid sawn, that would be an advantage for us in our trim business. So -- but it's not -- I would say, once we've converted our -- once we've converted a contractor to our engineered wood trim, unless prices get really, really low, there's not a lot of conversion back to solid sawn in my experience.

Your next question comes from the line of Steven Ramsey from Thompson Research Group.

I wanted to think about manufactured housing and sheds from a couple of angles. First, can you share high level where manufactured housing can be for the Siding business, thinking about how the affordability challenges may be pushing some buyers towards that product and basically, if that can be an expanded TAM for your Siding products? And then secondly, on sheds, where demand is this year, how far it is off the prior peaks or where it compares to past levels and if we're at highs on that side of things or if there's more gains to be had in the next couple of years?

On the shed side, look, it was phenomenal during COVID, the shed demand. I don't know off the top of my head. And if Aaron, if you do, you can comment. I don't know if we're back to that peak. But what we saw was COVID peak, a dip and now it's back to what I would call more normal type of volumes there, normal and strong, especially compared to prior periods, which is how we're gauging it. It's been a really good year for us. I don't think in any way it overbuilt or there's pull forward demand like we saw during COVID. So I mean that's a really good piece of business for us, consistent panel volume that we run very efficiently and has been -- has really good margin. So it's good to be in there. On manufactured housing, that's an opportunity for us. It's -- I believe that one of the ways the industry is going to tackle affordability is through manufactured housing. When you have a modular building that is transported down the road, our siding is a great solution for that. It provides an aesthetic that is a step above what's currently the predominant product there, which is vinyl. We have a warranty. It can be pre-finished, which could really help from an efficiency standpoint with the manufacturer and its structural, which can add some stability to the home. So we see that as an opportunity. We've always had some market share there through the years, but I do see that as that industry taking market share as affordability continues to be an issue. And we're well-positioned to take advantage of that through the our long history serving that channel.

Okay. That's great color. And then shifting to Structural Solutions and OSB still half of volume and volume held flat, albeit at low levels. Can you talk about where you're seeing demand within that portfolio and if there's anything to dissect between new product adoption or discretionary purchasing?

Yes. So the demand is kind of across the portfolio. Obviously, our strength in that from a volume standpoint, our strength comes from our flooring product and our TechShield Radiant Barrier products. Both of those are tied to new construction. Look, especially with flooring, when affordability becomes an issue, people can tend to buy down the value chain as far as flooring. But those are the two products that drive volume for us. And we're pleased with where we are as far as the percentage. It is off some of the peaks we've had with Structural Solutions, but I think that is really because the price -- the affordability issue, the people are driving for lowest cost when they can get it. So we'll continue to sell our value prop and still it's a significant part of what we do. But other than just reiterating the strength of our flooring and Radiant Barrier products, the rest of what we do there has been kind of steady to moderate growth over the last couple of years.

Your final question comes from the line of Kurt Yinger from D.A. Davidson.

Just one question on kind of the new residential opportunity set for Siding. Your largest peer has kind of announced a number of these multiyear kind of exclusivity agreements. I was just hoping if you could help us understand whether with that, the opportunity for share gains is kind of relegated to the smaller and medium-sized builders until those were sort of to expire or whether there's more nuance or kind of intricacy in terms of trying to drive penetration among those production guys given that?

It's nuanced. And so we pursue opportunities all the time. Those opportunities can come, for example, from the multi-family unit of a builder whose business we don't have on the single-family side. And so there's a myriad of ways that we stay active with all of the large builders as far as being in the conversation around supplying their siding needs along with their OSB needs. And we continue to get wins. And so we see continued opportunity there. And -- as I mentioned before on this call, we don't win them all, obviously. But we've had some wins. Our BuilderSeries volume wouldn't be growing the way it's growing, and we'll continue to be competitive. We went for many, many years, most of our time inside and without a real value proposition for the large national and large regional builders. We have that now and that value proposition plays well, especially when coupled with our OSB offering. So we're full steam ahead on growing in that segment and do see opportunities for continued growth as we look forward.

That concludes the question-and-answer session. I will now turn the call over to Aaron for closing remarks.

Okay. Thank you, Jordan. With no further questions, we'll end the call there. Thank you all for joining us to discuss LP's results for the second quarter of 2025. And as always, we'll be available for follow-ups throughout the day and the rest of the week. Thanks, everyone.

This concludes the meeting. You may now disconnect.