JELD-WEN Q2 2025 Earnings Call Transcript

Quartr
Provided by Quartr
August 6, 2025

Key Takeaways

  • Positive Sentiment: Disciplined execution drove Q2 results at the high end of internal expectations despite soft volumes, as operational cost actions and early transformation gains mitigated market pressures.
  • Negative Sentiment: Revenue fell 16% year-over-year to $824 million and adjusted EBITDA dropped to $39 million, while leverage rose to 5.7× due to lower volumes and reduced free cash flow.
  • Neutral Sentiment: GELDEN reinstated full–year 2025 guidance, forecasting $3.2–3.4 billion in revenue and $170–200 million in adjusted EBITDA, reflecting tariff impacts, cost inflation, and productivity headwinds.
  • Positive Sentiment: The company expects $100 million of transformation benefits this year—split evenly between footprint rationalizations and short-term cost actions—and is ramping automation at key sites to improve efficiency and service.
  • Neutral Sentiment: Management is evaluating strategic options—including potential non-core asset sales in North American distribution and Europe—to reduce leverage, with a clear capital-structure plan due by year-end.
AI Generated. May Contain Errors.
Earnings Conference Call
JELD-WEN Q2 2025
00:00 / 00:00

There are 10 speakers on the call.

Operator

Thank you for standing by. My name is Kate, and I will be your conference operator today. At this time, I would like to welcome everyone to GELDEN's Second Quarter twenty twenty five Results. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.

Operator

Thank you. I would now like to turn the call over to James, VP of Investor Relations. Please go ahead.

Speaker 1

Thank you, and good morning. We issued our second quarter twenty twenty five earnings release last night and posted a slide presentation to the Investor Relations portion of our website, which can be found at investors.geldwin.com. We will be referencing this presentation during our call. Today, I'm joined by Bill Christensen, Chief Executive Officer and Samantha Stoddard, Chief Financial Officer. Before I turn it over to Bill, I would like to remind everyone that during this call, we will make certain statements that constitute forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Speaker 1

These statements are subject to a variety of risks and uncertainties, including those set forth in our earnings release and provided in our Forms 10 ks and 10 Q filed with the SEC. Gelgwin does not undertake any duty to update forward looking statements, including the guidance we are providing with respect to certain expectations for future results. Additionally, during today's call, we will discuss non GAAP measures, which we believe can be useful in evaluating our performance. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP. A reconciliation of these non GAAP measures to their most directly comparable financial measures calculated under GAAP can be found in our earnings release and in the appendix to our earnings presentation.

Speaker 1

With that, I would like to now turn the call over to Bill.

Speaker 2

Thank you, James, and good morning, everyone. Before we begin, I want to start by thanking our entire team for their continued commitment and focus. We know the environment remains difficult. However, the dedication across the organization continues to impress me. I'm especially proud to report that our safety performance continues to improve in both regions and that is something every employee played a key role in driving.

Speaker 2

The second quarter was about disciplined execution and staying focused on what we can control. We delivered results at the high end of our internal expectations. That reflects cost discipline and the ability of our teams to effectively adapt to a complex and shifting landscape. While volumes remained soft, they came in largely as expected and we acted with urgency to better balance our cost base. Operationally, we made important progress on several fronts.

Speaker 2

We continue to see tangible benefits from our transformation and cost actions, particularly in fixed cost reductions. At the same time, we continue to make foundational progress across our North America operating network. We have replaced a number of key roles combined with clear actions, problem solving and accountability at the site level. Our key priority remains improving service levels across our network. We are also reinstating full year guidance.

Speaker 2

This is not because the environment has become more predictable, but due to the fact that we are now far enough into the year to have a higher degree of visibility. Our guidance reflects expectations based on what we know today, including the continued transformation progress, the August 1 tariff reality and our sustained cost focus. While we do not know when the macro environment will get better, we do know that it will. Housing remains a fundamental need and homeowners continue to invest in improving the spaces where they live. We continue taking the right actions to position the company for long term success and creating significant opportunity when the market recovers.

Speaker 2

Turning now to Slide four and our second quarter highlights. Demand remained soft in the quarter. However, we began to bank the benefits of actions we have taken. Volume pressures persisted across all of our product categories and end markets and we are also beginning to see selective price pressures. However, adjusted EBITDA was in line with the high end of our internal expectations as we took required cost actions in the continuing soft demand environment.

Speaker 2

During the quarter, we took further footprint actions to improve our operations. We transitioned our facility in Copel, Texas into a raw materials warehouse, which reduced overall costs and enables us to streamline our internal supply chain. We completed the closure and prep for repurposing of our windows facility in Grinnell, Iowa, including equipment transfers, building clean out and inventory sell down. In addition, we announced the planned closure of our facility in Chiloquin, Oregon. We still remain cautious for the remainder of the year as interest rates remain elevated and affordability challenges continue, but are reinstating full year guidance, which I will discuss later in the call.

Speaker 2

However, as Samantha will detail shortly, even with recent short term actions, we have faced ongoing productivity headwinds from significantly lower demand levels. While we continue to take action to align our operations with current order rates, while actively pursuing additional opportunities to strengthen our partnerships with key customers in support of focused growth initiatives. With that, I will hand it over to Samantha to review our financial results in greater detail.

Speaker 3

Thank you, Bill. Turning to Slide six. Market conditions continue to be challenging, but our results were in line with the high end of our internal expectations. Revenue for the second quarter was $824,000,000 representing a 16 decline year over year. Of this decline, approximately 13% was due to lower core revenues, reflecting anticipated volume reductions across both our North America and Europe segments, with the remainder from the court ordered divestiture of our Towanda operations, which also negatively impacted our year over year comparisons.

Speaker 3

Adjusted EBITDA for the quarter came in at $39,000,000 a decrease of $46,000,000 compared to the prior year. This was mainly driven by significantly lower volumes and slightly unfavorable mix, resulting in an adjusted EBITDA margin of 4.7%. Turning to cash flow. We generated negligible free cash flow in the quarter. This compares to $12,000,000 of free cash flow in the 2024.

Speaker 3

The year over year decline was primarily driven by lower EBITDA. Working capital generated approximately $16,000,000 of cash this quarter compared to a contribution of $4,000,000 in the 2024. Given the pressure from lower EBITDA and continued investment in our transformation initiatives, our net debt leverage ratio increased to 5.7 times. This level of leverage far exceeds our targeted range, and reducing leverage remains one of my highest priorities. To accomplish this, we remain intensely focused on driving EBITDA improvement, exercising disciplined capital allocation and carefully managing working capital.

Speaker 3

In addition, we continue to look at other strategic options to address our high leverage ratio. Note that we have not increased our debt levels. The increasing net leverage is driven by the lower sales volumes and corresponding lower EBITDA. As shown on slide seven, the second quarter revenue decline was primarily driven by a 14% decrease in volume and mix, about onefive of which was due to the carryover of the loss of business from a Midwest retailer, with the remainder due to ongoing market decline. Though there was a slight decline in product mix year over year, the current revenue pressure is predominantly related to continued weakness in volume.

Speaker 3

Additionally, revenue was negatively impacted by the court ordered divestiture of our Towanda operations, while foreign currency translation associated with the stronger euro improved revenue slightly. In a few moments, I'll provide additional context and more detailed insights into the underlying market trends affecting our North America and Europe segments. As shown on Slide eight, adjusted EBITDA declined by 46,000,000 year over year, primarily reflecting the significant volume declines experienced during the quarter. As anticipated, we continue to face notable cost pressures from labor and material inflation, resulting in negative price cost dynamics. Additionally, though we continue to drive significant improvements from our transformation initiatives and our short term cost actions, the lower volume levels created operational inefficiencies across our manufacturing network, further weighing on overall productivity and EBITDA performance.

Speaker 3

Finally,

Speaker 4

we had

Speaker 3

positive SG and A and other income year over year, demonstrating the realization of the cost actions we continue to execute across SG and A. Moving to our segment results on Slide nine. Our North America segment reported revenue of $556,000,000 for the second quarter, representing a 22% decline compared to the prior year. Of this, revenues decreased by 15%, primarily driven by lower volumes. Adjusted EBITDA for North America declined to $35,000,000 compared to $76,000,000 in the same quarter last year.

Speaker 3

This decrease reflects the negative impacts of lower volumes and slightly unfavorable price cost dynamics. Productivity declined slightly year over year driven by reduced manufacturing throughput. The decline was partially offset by positive productivity as a result of our transformation and cost mitigation actions. In Europe, revenue for the second quarter was $268,000,000 down only 2.7% year over year. Volumes continue to be weak in the region, but the weak dollar and selective price increases mostly offset the sales impact from volume declines.

Speaker 3

Adjusted EBITDA was $17,000,000 a decline of $3,000,000 from the prior year, resulting in an adjusted EBITDA margin of 6.4%. While we achieved productivity improvements in the region, it only partially offset the adverse impacts from reduced volume. Before turning it back to Bill, I want to take a moment to address tariffs, which continue to be a focus for many of our investors. If you turn to Slide 10, you will see an overview of our current exposure based on the most recent tariff landscape. At current rates, we estimate the annualized impact of tariffs on our business to be approximately $40,000,000 with around $17,000,000 expected to affect our financial results in 2025.

Speaker 3

While the situation remains dynamic, our pricing actions are designed to recover the vast majority of these costs through customer surcharges. From a sourcing standpoint, our exposure remains relatively limited. Roughly 13% of our combined Tier one and Tier two supplier spend is subject to potential tariff impact. Direct sourcing from China represents less than 1% of our total material spend. Even when including Tier two exposure, our China exposure is still only about 5%.

Speaker 3

We believe this modest exposure positions us well relative to others in the industry. Overall, while the tariff environment remains uncertain, we are focused on staying agile, managing through near term impacts and executing pricing strategies that allow us to mitigate cost pressures without losing sight of customer affordability concerns. With that, I'll turn it back over to Bill, who will now provide further details on our updated market outlook.

Speaker 2

Thanks, Samantha. Turning to Slide 12, I will walk through our updated full year guidance. While the broader macro environment remains soft, we now have greater visibility regarding our expected performance for the remainder of the year. With two quarters behind us, most of the third quarter largely in view and detailed execution plans in place for the months ahead, we are reinstating our full year guidance. We expect full year revenue to be between 3,200,000,000.0 to $3,400,000,000 with core revenue expected to decline between 49%.

Speaker 2

Additionally, we are guiding our EBITDA expectations to reflect two factors. First, a negative price cost relationship and second, continued productivity pressure from lower volumes. On pricing, we are seeing increased competition at the edges and growing customer hesitation to raise prices in a market where affordability remains a concern. On the cost side, input inflation continues particularly in materials, freight and labor. While we continue to pass through most of the tariff impact, these additional cost pressures are weighing more heavily on our outlook.

Speaker 2

At the same time, lower volumes create operational inefficiencies that are impacting core productivity. These two effects price cost and productivity are contributing about equally to our EBITDA guidance. As a result, we expect our full year adjusted EBITDA to be between $170,000,000 to $200,000,000 Unlike in a typical year where the third quarter is meaningfully stronger than the fourth, we now expect EBITDA to be similar in both quarters. This is largely due to the timing and impact of the actions we are taking, including transformation initiatives and targeted commercial efforts to regain share. We continue to expect $100,000,000 of in year transformation benefits.

Speaker 2

About half of that is carryover from last year's actions, while the remainder reflects new initiatives underway in 2025. Most of this year's activity is already in flight and progressing as planned and we expect these benefits to continue to flow through in the second half. We expect to use approximately $10,000,000 in operating cash flow for the full year. This is primarily due to our EBITDA expectations combined with continued improvements in working capital management. While we continue to spend at the $150,000,000 CapEx rate to deliver transformation benefits, should the market remain soft, we would expect 2026 CapEx to be significantly lower than our recent run rate.

Speaker 2

In total, our free cash flow is now projected to be a use of approximately $150,000,000 We continue to maintain ample financial flexibility. We ended the quarter with more than $130,000,000 in cash and an undrawn $500,000,000 revolver. We do not expect to utilize the revolver this year. We do recognize the importance of addressing our leverage and are evaluating a range of options to improve our capital structure and reduce mid term refinancing risk. These options also include evaluating non core assets.

Speaker 2

While no decisions have been made, we are assessing various options including smaller business areas such as our North American distribution business and larger portfolio questions including evaluating whether we are the right long term owner of our European operations. The key message is that we are assessing and have multiple paths available to potentially strengthen our capital structure. Our intention is to provide clarity to the capital market before the end of this year with a clear and actionable plan to reduce our leverage, address our upcoming maturities and strengthen the business for long term success, particularly as we prepare for improved volumes when the market recovers. Turning to Slide 13. This chart provides an updated bridge from our 2024 EBITDA results of $275,000,000 to our current guidance midpoint of $185,000,000 Since our fourth quarter twenty twenty four call in February, a notable change relates to the court ordered Tawanda divestiture.

Speaker 2

In 2024, customers built more inventory ahead of the transaction than we initially anticipated, which temporarily reduced post close twenty twenty five door Fiberskin shipments from our other facilities. As a result, we now expect the EBITDA impact of the court ordered divestiture to be at the high end of our original guidance range of $25,000,000 to $50,000,000 That said, we are beginning to see order rate improvements as third party inventory levels decline. We continue to see slightly lower volumes and mix reflecting continued softness in demand. In addition, operational challenges have contributed to a modest increase in share loss. That said, we remain on track to restore a majority of our on time in full performance by the end of the third quarter.

Speaker 2

As mentioned earlier, price cost dynamics and base productivity have become more of a headwind than originally anticipated. Competitive pricing pressure and the inefficiencies caused by lower volumes are the main contributors. Importantly, we continue to expect approximately $150,000,000 in benefits from our transformation and cost actions. These savings include both carryover benefits from 2024 and the in year actions already in motion. Variable compensation is also expected to be a slightly smaller headwind than previously forecast, reflecting lower headcount as part of our mitigation efforts.

Speaker 2

And finally, foreign exchange and other, which we had originally expected to be a $10,000,000 headwind is now projected to be a slight tailwind due to the weakening of the U. S. Dollar against the euro as well as some other one time benefits. Altogether, these updates bring us to our reinstated full year adjusted EBITDA midpoint of $185,000,000 Turning to Slide 14, I want to close by reiterating the strategic priorities we continue to execute against and the actions we are taking to strengthen the business in both the near term and the long term. We are actively taking the steps necessary to derisk the business, adapt to current conditions and position Geldwyn for future success.

Speaker 2

These efforts are well underway and we will update investors by the end of the year with a detailed plan to improve our capital structure, address our near term maturities and ensure the company is prepared to grow as market conditions improve. As we look ahead, our strategic priorities remain clear and actionable. They are grounded in the work already underway across our operations and focused on the areas where we can create the most value. First, we continue to rebuild strong reliable partnerships with our customers. Service levels are improving across the business, lead times are coming down, and we are doing this while maintaining our commitment to safety, which continues to improve year over year.

Speaker 2

By aligning our teams around clear measurable goals such as safety, quality and on time delivery, we are better positioned to deliver exactly what our customers expect. The right product built with consistency, deliver in full and on time. Second, we are optimizing our manufacturing and distribution network. We continue to operate with excess capacity in parts of the business. That reality is not new and we continue to have a disciplined approach to aligning our footprint with demand while also improving service and minimizing disruption to customers.

Speaker 2

Third, we are investing in automation to reduce costs, improve consistency and drive long term efficiency. Although past underinvestment contributed to operational complexity, we are now making steady progress in modernizing our network and enhancing productivity. One of our largest initiatives, the automation of our door facility in Garland, Texas is now ramping up as per our internal plan, and we are already seeing meaningful benefits from the new automated production line. As we take these steps, I want to recognize and thank our teams for the work they're doing every day. Their focus, energy and commitment make this transformation possible.

Speaker 2

I also want to thank our customers for continuing to work with us as we further improve our service and strengthen our operations. We know that housing remains a long term need and we are confident that the actions we are taking today both operational and strategic are setting this company up for meaningful sustainable improvement. We are addressing the issues head on and we are building a stronger Geldman for the years ahead. Thank you once again for your continued support and interest. With that, I'll now turn the call back over to James for the Q and A.

Speaker 1

Thanks, Phil. Operator, we're now ready to begin Q and A.

Operator

Your first question comes from the line of Susan Maklari with Goldman Sachs. Your line is open. Thank you. Good morning, everyone.

Speaker 5

Good morning. My first question is focusing on the efforts that you have to optimize the network. You walked through, Bill, some of the some of the steps that you've realized in the last quarter or so. Can you just give us a bit more detail on where you are within that process? How we should think about the efforts that will come through in the back half of this year and the implications that could have to the near term margins?

Speaker 2

Yeah. Sure. Thanks for the question, Susan. I'd say when we're looking, at a high level on our operating network, we're definitely we're over the 50 yard line, but we still have a lot of work to do. We're being, cautious in the back half of the year and slowing pace slightly on network consolidations, and there's a couple reasons for that.

Speaker 2

Number one, we wanna make sure we're preserving capital because there still is a high level of uncertainty in the market, and we also wanna limit service disruptions. As we've been consolidating sites, we have had some service disruptions for our customers, and our main priority is to make sure we are delivering what our customers need when they need it. So we are slowing the consolidation efforts in the back half of the year. We're still on track to hit our targets by the '26 or '27. But all of the actions that we've taken are baked into the 100,000,000 of transformation benefits that we have flagged on the call today, 50 from last year and 50 of this year, that we would expect to drop throughout the year and and create that 100,000,000.

Speaker 2

So on track, but I'd say slightly slowing the rate of progression based on what I just said.

Speaker 3

And and, Susan, just to add on that, when you look at the phasing of our EBITDA and the back half being more heavily weighted, some of that ties to around some of the actions we've already taken in our network. When you think about, taking the Grinnell Windows site offline and repurposing it, to a door site, that did remove carrying costs, and you'll see that land in the back half of this year.

Speaker 5

Okay. That's that's helpful color. And then maybe turning to some of the opt some of the factors around the operating environment. One of the things you mentioned is that it does seem to be getting a bit tougher to realize pricing. Can you just give us more context on what you're seeing there and how you're thinking about the ability to offset that inflationary pressure that you talked to as we think about the next couple of quarters?

Speaker 2

Yes. Sure. So I think our outlook, we've always said we want to be price cost neutral. Right now, we're guiding to a slight negative, on price cost with inflation above price. There has been selective gives that we've had to make on price to hold volumes in certain markets.

Speaker 2

Tariff surcharges are in, and that's progressing, I'd say, more or less according to plan. But we have seen around the edges some aggressive pricing, in select regions by competitors. So it's it's more of a a targeted approach that I think people are taking based on still a buyer's market. As we look to the back half of the year, I what I signal, the market is still negative in our view, but the rate of decline is slowing, which is for us, I think, one of the first signals that we need to see, you know, to get towards the bottom. So our expectation is price cost negative for the back half of the year, but we've been able to put tariff surcharges in, which is encouraging.

Speaker 2

And I think I'd say that just in the general market, it seems to be maintaining a balance even though, volumes are still tight.

Operator

Okay. Great. Thank you both for the color and

Speaker 3

good luck with the quarter.

Operator

Thank Thank you. Your next question comes from the line of John Dozello with UBS. Your line is open.

Speaker 6

Good morning, guys. Thanks for taking my questions as well. First one is just on some of the potential actions to address the leverage that you talked about, the financial leverage the in North American distribution and one was Europe. Curious, the sense of urgency here. How far along are you in the process of exploring potential options for both of these?

Speaker 6

And if your view is that the market does improve as we move into next year, is there a rush to do this? Just kind of where you guys stand on these two potential options?

Speaker 2

Yes. Thanks for the question, John. Let me just try and recap what Samantha and I stated in the prepared remarks. So obviously with the leverage ratio at 5.7 times coming out of Q2, it's definitely above our target range. So that is a priority for us to address it.

Speaker 2

Our lending base again does not have restrictive covenants. So there's no issues from a lender standpoint that would create short term challenges. And we have ample liquidity for the foreseeable future. This includes a significant line of credit, 500,000,000, which we have not drawn nor do we plan to draw it in the back half of this year. So I think that's setting the stage to really reiterate.

Speaker 2

This is something that we need to do very thoughtfully. And to your point, we don't have time pressure because we have ample liquidity. Obviously, we don't like the elevated leverage and know we need to adjust it into a range that's reasonable, but we're gonna take our time. So I'd say we're, you know, in in the first innings, of really reviewing multiple options, and we do have multiple options, and we wanna make sure we strike a good balance between execution, cost of implementation, and kind of overall capital structure as we're looking out towards a market that, you know, will rebound, and we need to be ready for that. So there's a lot of factors going into this.

Speaker 2

That's why we feel confident that, you know, we can come back to the capital market before the end of the year with specific details. We have some maturities, but that's not until the end of next year. So we really feel that the back half of the year will be two things, running the business, delivering the results, but also making sure we have a very crisp and clear plan on the capital structure.

Speaker 6

Okay. That's helpful, Bill. And then just some quick math. It seems like the second half implied incremental EBITDA margins over 60%. But looking at an EBITDA margin of 7.3% versus call it under 4% in the first half.

Speaker 6

Just curious some of the primary levers here to drive that improvement in profitability.

Speaker 3

Sure, John. This is Samantha. The the incremental on the volume itself is still gonna be around 30%. So when you think about the volume lift, we'll have 30% flow through to EBITDA. Then you have discrete actions that are being driven that essentially create additional lift into the EBITDA margin.

Speaker 3

So I talked earlier about some of the footprint actions that we've taken that have already been executed, and we see those benefits flowing through in the back half. The second are more short term cost actions through different reductions in force, again, that have already been executed, and we are seeing that play out in the back half. So when you think about the 100,000,000 of transformation, that's you know, approximately 50,000,000 of that is gonna be in the back half. And then you also have the 50 of short term actions of which are back half loaded. So you're driving, I would say, a much more significant of action specific initiatives in the back half.

Speaker 3

You also have to look that q one of this year was unusually low. I'd also say 2024 was unusually low. And so kind of coming out of that back to more normalized EBITDA actions is what you're seeing in the back half of the year.

Speaker 6

Understood. Thank you, guys.

Speaker 2

Thanks, John.

Operator

Thanks, John. Your next question comes from the line of Phil Ng with Jefferies. Your line is open. Hi. This is Fiona on for

Speaker 7

Phil today. Congrats on the solid quarter. You.

Speaker 3

Thank you.

Speaker 7

We set the volumes on North America were much better than expected. Can you talk more on what you saw in the quarter, for the both geographic locations? And maybe also some color on how much it had been was driven by volume versus mix. Thank you.

Speaker 2

Yeah. So I'd say in in the two regions, let me start with Europe. You know, it was as expected. We're looking at a full year low single digit decline, and that's coming off of a a low double digit decline last year. So, again, decline still a reality in Europe, but the rate of decline slowing significantly.

Speaker 2

Just to remind you, about 60% of our business is residential, and we're calling that down mid single digits and commercial, which is down slightly. That's about 40% of our business. Those are projects, so we have good visibility on the project pipeline and very mixed performance across the geographic areas. I'd say Northern Europe, maybe a little weaker, and Central, and Western Europe stronger. So that's Europe.

Speaker 2

North America, mid single digit volume decline is the expectations that that we're sharing today. And there's two things you need to be thinking through. As you're looking at our rate of decline in two I think a good rule of thumb is 50%, we believe, is market and 50% is share. In the 50% of share loss, there's two big buckets in there, Fiona. One would be the Midwest retailer that we will be lapping coming into q four.

Speaker 2

That was on the Windows side. And then, of course, we have the court ordered to Wanda divestiture, which, was closed in January. So we're also we're gonna have a full year base effect in 2025. And and we're calling new construction and retail. Both are about 45% of our business in North America down low to mid single digits.

Speaker 2

And then the the light commercial and Canadian market, are very project heavy and project driven, they're down 10% plus. So I'd say mid double digits, and that's only about 10% of our business. But, obviously, it has an overweight effect based on the magnitude. So I'd say no surprises. What what we like to see is the rate of decline is decreasing, and there's a couple things that I think the market needs to settle in on.

Speaker 2

One is affordability, and second is interest rates to get things kinda stabilized and, back to a growth scenario. So that's our view for for the back half of the year.

Speaker 3

Fiona, just to touch very quickly on the volume mix. That was a big story in 2024 with mix being, I would say, a significant decline. We are not seeing that impact of mix in 2025. So in the quarter, you're looking at more than 95% of it being volume with a very small portion being mix. We believe we're at the lower end of the mix trough, and it's much more of a volume story this quarter.

Speaker 7

Got it. Thank you so much for all the info, and good luck with everything.

Speaker 2

Thank you.

Operator

Your next question comes from the line of Keith Hughes with Truist. Your line is open.

Speaker 8

Thank you. The what is the first debt maturity next year that you're you're you discussed earlier in the call? I don't think it's a senior note, is it?

Speaker 3

Yeah. So we can talk about it. It doesn't there's no debt maturity next year. It becomes current in December 2027. So or excuse me.

Speaker 3

2026.

Speaker 8

That's a $400,000,000 senior note you're referring to. Correct?

Speaker 3

Correct. Correct.

Speaker 8

Okay.

Speaker 3

That's the 2027 notes, 400,000,000.

Speaker 8

Okay. So I guess the you talked about, you know, some for strut potential strategic actions. I wanna focus on, things in Europe. After you sold Australia, there was talk of, you know, maybe something potentially with Europe, then it kinda went off the table. Now it's back on the table for potential change.

Speaker 8

I guess the question is, is it the balance sheet that's driving this? Or is there something more strategic in Europe that may have changed over the last couple of years that could lead to something different than the structure we see today?

Speaker 2

Yeah. Thanks for the question, Keith. So we we said all along, you know, one of the things that we need to be doing is really asking the question, are we the best owner of a European asset similar to what we did with Australasia? And there's a couple, you know, there's a couple reflections as we're thinking through that. Number one, you know, we're making progress in the region, and we have a great local leadership team, is really digging into the operational improvements that were necessary, but we're starting to see traction.

Speaker 2

And number two, it's been a pretty challenging market for the last couple of years, but as interest rates have come down and, hopefully, there'll be a resolution to the war in Ukraine at some point, I do think that there's, more blue skies ahead than currently visible. And, clearly, it would be one of the ways that we could significantly reduce debt using proceeds like we did with Australasia. And finally, we need to understand as the market recovers and growth capital will need to be injected into the region, what are the costs and benefits of that, and making sure that we're gonna be able to fully fund that growth. And if not, then we need to consider different alternatives that may be better for the European platform and their long term growth view. So there's no decisions.

Speaker 2

It's early innings of us really evaluating all options. And we've always said we need to fix things before we can assess it, And we're making pretty good progress on the fixed piece, so we do think we're getting into the pocket of where we need to be asking questions like, are we best long term owner?

Speaker 8

Okay. Final question. In the guide, you talked about core revenue being down four to 9%. What would that translate with Towanda? What would that translate into total company revenue decline?

Speaker 3

So from an overall standpoint, Keith, the revenue decline that we're expecting from Towanda, and you remember we guided right around the time of the announcement of the divestiture in December 2024, we would expect that to be closer to the high end of the range. So think about, you know, 170 again to around 200,000,000. That's the high end that we would expect from the loss of Towanda. So when you think about kind of putting it in the pocket, it's around five or 6% of North America.

Speaker 8

Okay. Great. Thank you very much.

Speaker 2

Thank you.

Speaker 4

Thanks, Keith.

Operator

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

Speaker 4

Good morning. You have Anika Dallakia on for Matt today. Thank you for taking the question.

Speaker 9

Good

Speaker 4

morning. Good morning. So looking morning. So looking at the EBITDA bridge for the quarter, we saw positive productivity, turning from negative last quarter. So it seems like we're starting to see some of those transformation costs flow through.

Speaker 3

But when I look at

Speaker 4

the fiscal year bridge, it still shows the negative productivity, which is suggesting that it's driving negative volume. So I'm just thinking about how you're thinking about this bucket moving into 2026 and your ability to achieve productivity in a negative volume environment? Thanks.

Speaker 3

Sure. So talking about when you think of overall productivity, you're factoring in some of the short term cost actions and some of the transformation. So when we think about transformation, we talked earlier about the footprint actions, and that's driving a lot of fixed overhead productivity year over year. When I think of in the guidance bridge and showing kind of that negative base productivity, that's truly the volume leverage on lower volumes that we have across our network. Think of it from a lower utilization of our capacity.

Speaker 3

However, we do wanna have capacity that is ready for when the market does rebound so that we can grow, and we are already targeting growth initiatives that we expect to start realizing in q four when you see kind of the phasing of our revenue in the back half of the year. So from a productivity standpoint, again, total productivity will likely still be higher for the full year. But, again, that base productivity, I would say, negative offset some of the transformation cost actions is really just, again, around some of the volume leverage.

Speaker 4

Great. That's helpful. Thank you. And then for my second question, just shifting gears a little bit, I'm wondering if you can parse out any details on how windows are performing relative to doors. Are you seeing maybe a greater mix down on one versus the other?

Speaker 4

And then in terms of tariffs, is one more domestically sourced or how we should think about that? Any details on those categories would be helpful. Thanks.

Speaker 3

Yeah. So I'll address the the tariff question first. We're not seeing, any significant change between windows and doors as affected by tariffs. I would say, you know, pretty consistent between both businesses. The from a Windows standpoint, you asked also about the mix.

Speaker 3

The mix down that we experienced really happened in 2024. So we're still seeing folks being more challenged by affordability concerns, staying at that lower end of of the product base, but we are not seeing a further mix down in 2025. It's very minimal. As I said, you know, let's call it three to 5% of the total volume mix headwinds that we see. I would say, in general, it's been in pretty pretty consistent between both businesses.

Speaker 3

I wouldn't have anything specific to call out. We haven't seen that mix up, if that makes sense.

Speaker 4

Got it. Thank you, and good luck.

Speaker 8

Thanks. You.

Operator

Going to the next question, I would like to remind everyone in order to ask a question, please press star then the number one on your telephone keypad. Your next question comes from the line of Mike Dahl with RBC Capital Markets. Your line is open.

Speaker 9

Hi. This is Chris on for Mike. Just going back to the full year guide and what's implied for the back half. Could could you maybe give us some more color on the volume mix dynamics you're expecting in the back half of the year, how that compares between kind of the nonres versus new res end market, in North America and Europe?

Speaker 3

Sure. So on the back half of the year, I think there's two different factors that you have to think about, Chris. The first one is that from a year on year comp standpoint, we are lapping some of the share loss on that Midwest retailer, and so it's an easier comp going into the back half of the year. The other is that we are targeting the area that we are targeting for growth is around sort of our traditional channel, and we are already seeing some of the gains picking up through some of our, again, very specific targeted actions to grow our Windows base with builders because we have additional share that we could gain there as well as some initiatives that we're driving through the transformation office around kind of a stock build program. So you have the combination of lapping some of the year on year comp as well as targeted growth.

Speaker 3

And so you do see a stronger volume in q four than traditionally that we have felt, I would say, from a phasing perspective year on year.

Speaker 9

Yeah. And just to clarify, from an end market perspective, understanding that the moving parts around share loss and potential share gain, but just from an end market perspective for NewRez and how are you guys thinking about market declines building in the back half of the year?

Speaker 2

Yeah. So we're we're calling it, Chris, as we said, we're calling it down low to mid single digits in North America, and it's fairly balanced new and resi in our portfolio. So we expect that run rate to to continue through the back half of the year. But again, if you comp it year over year, the rate of decline is slowing. And also, all as Samantha called out, don't forget that there's a a share aspect that you have to consider with our court order divestiture of Towanda and the loss of the Midwest retailer versus kind of the underlying market decline.

Speaker 2

Got it.

Speaker 9

Okay. And if I could just sneak one last one in. Just going back to the second half implied ramp of transformation and headwind mitigation. Know you said some of that's already been playing out in the first half of the year, but is there any way you could give maybe some some bucketing around that? Kind of what what specific actions are driving, you know, the step up in the back half of the year, either on the headwind mitigation side or for the transformation side?

Speaker 9

That'd be helpful. Thank you.

Speaker 3

Sure. So transformation, you can think about it being very evenly split on, you know, fifty fifty, when you think of the 100,000,000 bucket. So I think that's a pretty fair assessment. On the cost mitigation side of the $50,000,000 actions in the full year, you're gonna have, I would say, slightly more than two thirds of that in the back half of the year that you don't have in the first half. In addition, in q one, you had significant negative productivity because the volumes dropped off more significantly in q four twenty four and q one twenty five that we were not able to adapt our operating structure as quickly as possible.

Speaker 3

So that's also having an impact in, I would say, the first half from a base productivity decline that you see improving throughout the year. In terms of the big buckets of what that would be, I would say the two largest buckets would be around plant closures, most of which that we have are what of which we have already announced, plus reductions in force, a significant portion which we have announced in March, and we're seeing that play out in the back half. Those are, I would say, the two largest predominant buckets. And then the other last piece being some of the transformation initiative on growth and then the deck the incremental EBITDA flowing through on those picking up as well.

Speaker 9

Understood. Appreciate all the color.

Speaker 2

Alright. Thanks, Chris.

Operator

I will turn the call back over to James Armstrong for closing remarks.

Speaker 1

Thank you for joining our call today. If you have any follow ups, please reach out, and I would be happy to help with any questions. This ends our call today, and please have a great day.

Operator

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

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