The AZEK Company Announces Strong First Quarter Fiscal 2024 Results

Consolidated Net Sales increased 11% year-over-year to $240.4 million; Adjusted Net Sales excluding results for Vycom increased 22% year-over-year

Residential Segment Net Sales increased 24% year-over-year to $223.0 million

Net Income increased $51.6 million year-over-year to $25.7 million inclusive of the $38.5 million Vycom gain on sale; Adjusted Net Income, which excludes the gain on the sale of Vycom, increased $29.5 million year-over-year to $15.6 million

Net profit margin expanded 2,260 basis points year-over-year to 10.7%

Adjusted EBITDA increased 269% year-over-year to $55.7 million; Residential Segment Adjusted EBITDA increased 430% year-over-year

Adjusted EBITDA Margin expanded 1,620 basis points year-over-year to 23.2%

EPS of $0.17 per share increased $0.34 year-over-year inclusive of the Vycom gain on sale; Adjusted Diluted EPS, which excludes the Vycom gain on sale, increased $0.19 year-over-year to $0.10 per share

The AZEK Company Inc. (“AZEK” or the “Company”), the industry-leading manufacturer of beautiful, low-maintenance and environmentally sustainable outdoor living products, including TimberTech^® decking and railing, Versatex^® and AZEK^® Trim and StruXure^® pergolas, announced financial results for its fiscal first quarter ended December 31, 2023.

CEO Comments

“The AZEK team delivered strong results ahead of plan this quarter, including 11% net sales growth year-over-year or Adjusted Net Sales growth excluding the impact of the divested Vycom business of 22% year-over-year, a net profit margin of 10.7% and Adjusted EBITDA Margin of 23.2%. Our Residential segment grew net sales 24% year-over-year driven by strong underlying sell-through growth in our Deck, Rail & Accessories as well as our Exteriors categories,” said Jesse Singh, CEO of The AZEK Company. “Within the quarter, we realized margin improvement compared to the prior year driven by normalized manufacturing utilization and material savings. AZEK’s margin performance also reflects the cumulative results of key initiatives, including recycling and continuous improvement programs through our AZEK Integrated Management System (AIMS),” continued Mr. Singh.

“During the fiscal first quarter, we continued to see double-digit Residential sell-through growth driven by material conversion, execution of recent shelf space gains and contribution from new product innovations across our product portfolio. We ended the fiscal quarter with channel inventory levels continuing to be conservatively below historical averages and with ample manufacturing capacity to effectively service our customers. We also see positive momentum coming out of our recent shelf space negotiations for this upcoming building season and from the new product innovations we have launched for the 2024 season. Once again, I would like to thank the entire AZEK team and our partners that support The AZEK Company,” said Mr. Singh.

“We are raising our full-year 2024 outlook driven by our first quarter results as well as our increased visibility and confidence in our margin drivers. Our growth and productivity initiatives are on-track, and our team is focused on execution to drive above-market growth and margin expansion in fiscal year 2024 and beyond,” continued Mr. Singh.

First Quarter Fiscal 2024 Consolidated Results

Net sales for the three months ended December 31, 2023 increased by $24.2 million, or 11%, to $240.4 million from $216.3 million for the three months ended December 31, 2022. The increase was primarily due to an increase in volume in our Residential segment attributable to key growth initiatives driving demand for AZEK products, partially offset by the sale of our Vycom business in our Commercial segment. Net sales for the three months ended December 31, 2023 increased for our Residential segment by $43.5 million, or 24%, and decreased for our Commercial segment by $19.3 million, or 53%, respectively, as compared to the prior year period. The decrease in our Commercial segment was primarily due to the sale of our Vycom business. Vycom net sales were $3.3 million for the three months ended December 31, 2023 (prior to its divestment on November 1, 2023) compared to $21.7 million for the three months ended December 31, 2022.

Gross profit increased by $43.9 million to $91.4 million for the three months ended December 31, 2023, compared to $47.6 million for the three months ended December 31, 2022. Gross profit margin increased by 1,600 basis points to 38.0% for the three months ended December 31, 2023 compared to 22.0% for the three months ended December 31, 2022.

Effective as of December 31, 2023, AZEK has revised the definition of Adjusted Gross Profit to no longer exclude depreciation expense and the prior period has been recast to reflect the change. Adjusted Gross Profit increased by $43.1 million to $95.3 million for the three months ended December 31, 2023, compared to $52.2 million for the three months ended December 31, 2022. Adjusted Gross Profit Margin increased by 1,550 basis points to 39.6% for the three months ended December 31, 2023 compared to 24.1% for the three months ended December 31, 2022.

Net income (loss) increased by $51.6 million to $25.7 million, or $0.17 per share, for the three months ended December 31, 2023, compared to $(25.8) million, or $(0.17) per share, for the three months ended December 31, 2022. Net profit margin expanded 2,260 basis points to 10.7% for the three months ended December 31, 2023, as compared to net profit margin of (11.9%) for the three months ended December 31, 2022. The gain on sale from the divestiture of the Vycom business within the Commercial segment was $38.5 million.

Adjusted EBITDA increased by $40.6 million to $55.7 million for the three months ended December 31, 2023, compared to Adjusted EBITDA of $15.1 million for the three months ended December 31, 2022. Adjusted EBITDA Margin expanded 1,620 basis points to 23.2% from 7.0% for the prior year period.

Adjusted Net Income (loss) increased by $29.5 million to $15.6 million, or Adjusted Diluted EPS of $0.10 per share, for the three months ended December 31, 2023, compared to Adjusted Net Income of $(13.9) million, or Adjusted Diluted EPS of $(0.09) per share, for the three months ended December 31, 2022.

Balance Sheet, Cash Flow and Liquidity

As of December 31, 2023, AZEK had cash and cash equivalents of $274.8 million and approximately $147.8 million available for future borrowings under its Revolving Credit Facility. Total gross debt, including finance leases, as of December 31, 2023, was $670.6 million.

Net Cash Provided by Operating Activities for the three months ended December 31, 2023, decreased by $22.7 million year-over-year to $(16.3) million. Free Cash Flow for the three months ended December 31, 2023, decreased by $10.1 million year-over-year to $(34.0) million.

During the quarter, AZEK repurchased approximately 2.3 million initial shares of its Class A common stock under a $100 million accelerated share repurchase agreement (“ASR”). The final settlement of the ASR will be based on the volume-weighted average price of our Class A common stock over the repurchase period, subject to certain adjustments. AZEK expects to settle the ASR in the second quarter of fiscal year 2024. As of December 31, 2023, AZEK had approximately $101.1 million available for repurchases under its existing share repurchase program.

Outlook

“We continue to see positive Residential sell-through growth and positive demand indicators from our customer surveys and digital metrics. Customer sentiment is higher than this time last year, and customers appear to be more optimistic for a normal building season in 2024. Channel inventories continue to be conservatively positioned through our fiscal first quarter, and we are proactively managing our production and finished goods inventory levels to maintain high levels of service,” continued Mr. Singh.

“We are raising our full-year fiscal 2024 outlook driven by our first quarter performance as well as increased visibility and confidence in our margin drivers. While we continue to see favorable demand indicators, we remain cautiously optimistic ahead of the traditional building season, which kicks off late spring. Our fiscal year 2024 planning assumptions now assume a flattish repair & remodel market, and consistent with our historical track-record, we would expect to outperform the market driven by AZEK-specific initiatives including material conversion, channel expansion, new product innovations and consumer journey initiatives,” said Mr. Singh.

For the full-year fiscal 2024, AZEK now expects consolidated net sales in the range of $1.385 to $1.425 billion, representing an increase from the prior planning assumption range of $1.335 to $1.395 billion, and Adjusted EBITDA in the range of $353 to $372 million, representing an increase from the prior planning assumptions range of $320 to $335 million. Adjusted EBITDA Margin is expected to be in the range of 25.5% to 26.1%, an increase from approximately 24.0% from the prior planning assumptions. Following the divestiture of the Vycom business, AZEK expects the remaining Commercial segment’s Scranton Products business to deliver net sales in the range of $70 to $74 million and Adjusted EBITDA in the range of $14 to $16 million. AZEK’s Residential segment, including corporate expenses under the new definition, net sales guidance range would imply 7% to 10% year-over-year growth and 30% to 37% year-over-year growth in Segment Adjusted EBITDA. Capital expenditures for fiscal year 2024 are now expected to be in the range of $80 to $95 million.

For the second quarter of fiscal 2024, AZEK expects consolidated net sales in the range of $407 to $413 million and Adjusted EBITDA in the range of $108 to $112 million. Adjusted EBITDA Margin is expected to be in the range of 26.5% to 27.1%.

“We are excited about the long-term material conversion opportunity ahead of AZEK in the large and fast-growing outdoor living and home exteriors markets. Our execution of our strategic growth and margin initiatives, and the benefits we have realized to date, increase our confidence in our long-term financial objectives of driving double-digit annual net sales growth and expanding our Adjusted EBITDA Margin to our target of approximately 27.5%,” concluded Mr. Singh.

For the full first quarter results, click here.

About The AZEK Company

The AZEK Company Inc. (NYSE: AZEK) is the industry-leading designer and manufacturer of beautiful, low maintenance and environmentally sustainable outdoor living products, including TimberTech^® decking and railing, Versatex^® and AZEK^® Trim, and StruXure^® pergolas. Consistently awarded and recognized as the market leader in innovation, quality, aesthetics and sustainability, our products are made from up to 85% recycled material and primarily replace wood on the outside of homes, providing a long-lasting, eco-friendly, and stylish solution to consumers. Leveraging the talents of its approximately 2,000 employees and the strength of relationships across its value chain, The AZEK Company is committed to accelerating the use of recycled material in the manufacturing of its innovative products, keeping hundreds of millions of pounds of waste and scrap out of landfills each year, and revolutionizing the industry to create a more sustainable future. The AZEK Company has recently been named one of America’s Climate Leaders by USA Today, a Top Workplace by the Chicago Tribune and U.S. News and World Report, and a winner of the 2024 Real Leaders® Impact Awards. Headquartered in Chicago, Illinois, the company operates manufacturing and recycling facilities in Ohio, Pennsylvania, Idaho, Georgia, Nevada, New Jersey, Michigan and Minnesota. For additional information, please visit azekco.com.

Contact:

Eric Robinson – Investor Relations Contact – ir@azekco.com – (312) 809-1093

Source: The AZEK Company, Inc.