AZEK - Earnings call transcript Q1 2025

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Operator

Welcome to The AZEK Company's First Quarter Fiscal 2025 Earnings Call. [Operator Instructions] Please be advised that today's conference call is being recorded. I would now like to hand the conference over to Eric Robinson. Please go ahead, Eric.

Eric Robinson

Thank you, and good afternoon, everyone. We issued our earnings press release and a supplemental earnings presentation this afternoon to the Investor Relations portion of our website at investors.azekco.com. was via release the X-K press website. SEC's earnings also an furnished on The and by estimates, our constitute securities Officer about Jesse Executive today make the that joined I'm Singh, federal we call, with forecasts, Ryan like remind expectations, prospects. may our future the during would of this Officer; statements President remarks Lada, Chief statements Treasurer. I laws, Financial that plans including and certain to beliefs, everyone forward-looking and Chief and meaning Such with are variety that risks and statements to to subject of our Commission results and a in described differ periodic uncertainties materially. could Exchange the as cause actual reports filed Securities to We statements. such forward-looking do duty not undertake update any

believe measures Reconciliations useful our earnings These non-GAAP for can our are be performance. website. Additionally, a not or accordance should supplemental evaluating with be GAAP. which of press release non-GAAP today's during we we will in non-GAAP on call, considered prepared posted and in presentation, substitute discuss found as earnings such in be results in isolation our can which financial measures measures,

Now call AZEK's over let Singh. Jesse me turn CEO, the to

Jesse Singh

Good you us. for afternoon, joining thank and

fiscal are and demonstrating a We report start with growth good again to quarter first disciplined results the to our pleased of execution. effectiveness XXXX initiatives operational

grew presence our categories. Deck, across segment year-over-year driven Accessories the market expanded Exteriors by by product Residential net Our XX% in Rail sales and double-digit sell-through quarter growth and &

as & some Accessories sell-through growing the stability Exteriors Rail we grew double Deck, of portfolio digits product the pace quarter. market high quarter, the the each single saw grew during a within During sell-through at double-digit lines with digits.

success improving and drive expansion channel continues journey, brand focus growing our wood performance. customer Our the our conversion, innovation, to on product in awareness

would while expanded also segment XX.X% EBITDA delivered like I not points dedication, be products expansion of adjusted by record our and sincere members and of adjusted of my and year-over-year growth. year-over-year strong express XX to investments and support team multiyear growth channel AZEK's success making our would in to basis collaboration the to We possible partners, future margin drive track gratitude. without EBITDA XX% new business segment Residential and

We progress key strategic make initiatives. continue against our to

TimberTech Rail, siding XXXX dealer locations are the TimberTech market new of Fulton price consumer well busy wood rail drive Versatex will Rail, and wider to needs XCEED including stocked received and new products generating being address Reliance range part launches, our product the and to and TrimLogic, products allow are and us in These points Our ahead a the partners of excitement of season. our new of conversion. number from siding being with contractor a in

impacting quarter, and in we ramping first these quarter of up our During invested products, production the began modestly margins.

these to scale position expect We as during our terrific to investments drive start-up these we second growth. new and product future platforms quarter continue

We again once partners pro We positions have market gained our stocking industry. We PVC aesthetics our in and and decking and channel majority new initial continue the these collections, demand of see continue the completed which best our recently in strengthen believe our landmark also to expanded vintage the fire with resistance seasonal strong relationships. negotiations to for and we products. our early presence buy the have advanced for

key pro better to channel the and forward look geographies, service in Our expand distribution Canadian of growth position our the the about We're recently markets. to reach ongoing contractors success partnerships excited these announced with us these opportunities partners. in United and our Western to all States our present we

to experience. second investments the making incremental enhance customer and quarter, these merchandising and including channel support are During product to tools we incremental expansions, digital the

sourcing not recycle recycle processing our network, only Indiana but quarter. polyethylene a during waste expands the PVC and operation in recycling continue invest and acquisition first capabilities unique material technologies. through to regional to process materials acquired hard-to-recycle in also also This segregation We capabilities expands our and our

celebrates capacity the this as This named about Matter Benchmark Company's streams. In XXXX TimberTech's in the anniversary capabilities continue the recognition the one that we excited with recycle prestigious success are we TimberTech acquisition of We and Brands usage ways outdoor category. PVC redefining to resonate its offers Fast December, That was and of Brands product in AZEK marketing, trim in decking expand deeply lower-cost the category. also railing innovative our Trim, pioneered celebrate consumers, year, around that expectations XXth products living. This of

set many the this upcoming standard low JLC LIVE. celebrating to for this durability, Builders' alternative NAHB offering wood. milestone and superior XX For We'll has events years, in Show International industry it unique a be the maintenance design including flexibility, year, and

housing repair and continue our the uncertain, broader see for consistent remodel product for portfolio. the living to markets we outdoor remain and While outlook demand

with below new We we conservatively continue positive our contractor ended put improvement initiatives a good and growth, while and growth, in and margins channel we X-week once our margin levels customer sustain surveys drive positive us the making as positive on channel programs, awareness. customers. We savings. recycle have growth service capacity backlogs and initiatives to continuous demand metrics momentum see expand These and initiatives our from quarter brand investments to to margin product see and historical to position sourcing ample drive range. We residential again sell-through inventory signals digital X- manufacturing averages, the in effectively to

Given fiscal raising the performance, outlook. solid first bottom XXXX the we top full end year our quarter of modestly and are

a expect X% year-over-year. from the of we range reflect modestly a assumptions in XX% and the to we of to Overall, basis, Our net segment see year-over-year growth in of X% to in our X% dilutive range Residential to range segment sales X% on to adjusted EBITDA year-over-year X% EBITDA sales adjusted business. impact as the growth consolidated Residential planning grow X% and XX% commercial our net

by welcome and AZEK our Treasurer, the Chief today's growth planning and Residential remodel Lada, deep remainder trusted He impact. relatively driven extensive has most AZEK-specific Financial experience you he's sell-through repair been joining financial and organization our understanding excited and our as ago. CFO the XXXX call. to Ryan, Officer a year and market to fiscal having nearly to I'm assume Our continue continued for lead X of have already growth. new a since the assumptions of flat making a business, Ryan mid-single-digit Many a initiatives. I'm growth in confident brings of partner significant Ryan met years financial segment. our recently served ability and team Residential our of his to the support

team our Pete I results know also want setting listening, the Clifford, well to and a future his great Pete as next starts and former We up for of our turn success. COO is his wish business the and in sincerely thank journey. finance more to did for to to financial job now CFO, Company. I we he Pete will him Ryan over contributions and The discuss detail. outlook AZEK call the

Ryan Lada

afternoon, for leadership the company. we I Thanks, financial Jesse our step expand look I strategy exciting with drive thrilled execute growth long-term Chief for us joining value forward such business at future at time to and honored Jesse, today. AZEK the the to everyone. good for into to continuing my to and of role and am Thanks as the to our an and finance to Financial shareholders. continue industry of Officer team and shape collaborate and the

In results. and releases channel a sell-through the I product We AZEK downstream the hand. a space the channel improving and historical operating efforts, early consumer and includes of new to Before from momentum XX% days We ended wins share we some for with the believe initiatives, demand drove quarter, wanted shelf our a perspective of on building process on journey. material products continued perspective, as within and we first pro growth down buy the expansion on results, pleased execution expansion playbook. average inventory we years. From This environment. experienced had get into quarter we double-digit previous the customer result the growth conversion, successful from are roughly quarter channel,

demand for KPIs the momentum across positive As indicators, track. we continued

indicated backlogs to the Our improved project are sentiment weeks current that and pro surveys dealer contractor range. in outlook X X and

sessions, robust our sample leads growth side, in digital website the effective. remain year-over-year. We engagement and efforts saw contractor On orders

our a fiscal quarter our our quarter, consistent is As levels year-over-year. reminder, and production production lowest relatively first traditionally were

several year started XXXX. support During ramping launches product in to we fiscal the quarter, production new

expansion. prepared to businesses second In our sourcing our traditional residential and business, capacity continue exteriors and the positions drive and our input configuration, annual additional new we in ongoing rail for commission we stable execute This AIMS in us addition, to to margin our remained facilities quarter. Material well product programs. recycling, costs

margin our a normalized The results SG&A, helped quarter. residential a of a of results with associated modestly in strength our and terms lapping execution expenses continued branding sell-through the more costs double-digit sales customer prior as growth deliver and us profile spend and marketing lower reflect year In of result event. of strong with year-over-year programs first

quarter sales first XXXX, consolidated delivered of million. fiscal of the For we net $XXX

sales double-digit impact the by segment. Our sell-through million were expansion and by first divestiture driven net net growth partially our our our positions Commercial $X of of business channel from the offset in Vycom quarter the

million, gross margin gross $XX and $XXX quarter was was First year-over-year, profit of increase an XX.X%. million

Adjusted as administrative million costs. $X million by or million. $XX gross margin expenses expense was million XX.X%. gross adjusted $XX first adjusted by year-over-year increased or profit for of XX.X%. Net $XXX previously decreased quarter EBITDA million. decrease the in year-over-year margin million. increased was $XX by new segment $X.XX First million reductions mentioned product adjusted The Commercial million Adjusted by $XX modest $XX year-over-year a well related decreased to driven the as Scranton year-over-year is million, $XX quarter first expenses to for lower gross The points the normalization XX to costs weakness and Products to decline primarily $X and by per levels in profit utilization was our to SG&A SG&A plant marketing quarter million driven Adjusted primarily by the year-over-year year-over-year, expansion, share. for profit business. GAAP of quarter basis EBITDA increased an $X income margin XX% increase to

Vycom As now included lapping. we the from a year million which reminder, sale the on the divestiture, gain $XX.X prior are period

year $XX proportion benefits year, XX.X% favorable net the the on by by stock Adjusted of excluded of our came of $XX increased million Adjusted options tax removal a divestiture first sale $X.XX tax the addition, the to quarter, tax for which primarily share. rate In exercised per the Vycom income the to million. year-over-year EPS in prior year-over-year in higher Vycom business. related related sale in X.X% $X.XX to driven diluted the increased gain and to at versus effects prior

the for XX% year-over-year, turning for million, down segment demand $X.X the the up material Now adjusted $X.X the our Vycom in first business, was net disposition XX% the weaker million, purchases. partner due XX% of million, to were quarter segment sales EBITDA were a EBITDA previously Residential decrease channel net was last results. of margin million, Scranton by in by Vycom year-over-year. weaker costs. year-over-year, up $XX fiscal our of XX.X%. Commercial EBITDA million adjusted business. segment driven Residential discussed quarter $XX sales was Commercial first timing business and segment Products $XXX and year demand segment the of the sale Residential quarter for for primarily the to driven increases input primarily our again, year-over-year, adjusted segment quarter

$XX We available our million and defined ended long-term the debt quarter of with the a minus inventory accounts $XX finance we cash and from have $XXX and and capital which was net fiscal the included at flow first under recycling deployed of the capabilities the up cash year-over-year. fourth was to regional levels expect equivalents actions to XXXX. From of Net capital, an receivable and credit $XXX a borrowings gross and were Working accounts future third support quarter Net cost was million the first at cash debt for to and offset ambitions. $XX appropriate with million $XXX $XXX of million, to $XXX expenditures million, during as ratio for million ended leases. approximately cash revolving and recycling plus year-over-year. We quarter. the this acquire million, payable, of leverage approximately operating operation more in sheet return facility. million of perspective, stood traditional to increase pricing business activities our approximately Capital million Xx we margin quarter, million, of million pressure our new quarters balance $XX $XX $XX taken the in quarter end and

year-over-year. first improvement flow million, the cash free was negative $X $XX quarter, million an For of

allocation as previously capital Our we priorities the same remain communicated.

to in to repurchase we our We our will repurchase and cash continue business, we share authorization. existing inorganically. the opportunistically, will both pursuant And have organically invest shares extent look excess to flow, to

prior our for with Consistent year outlook. we flat our full to assumptions, relatively market are turn R&R let's Now XXXX. modeling a the

updated our reflecting stronger fiscal on $XX first end net year-over-year to assumptions the planning roughly At grow assumptions, XXXX. range, our quarter raising the million Residential sales of bottom the demand. by expected top are sales X% midpoint planning are and We the of net in

the continue We plan range mid-single-digit the the remainder to Residential of for fiscal sell-through year. in

update, million adjusted planning consolidated assumptions in to are fiscal $X.XX billion $XXX billion For our this to XXXX in and EBITDA. net sales million $X.XX $XXX for

Our assumption sales planning would and to X% year-over-year net to roughly range XX% adjusted year-over-year X% imply growth in roughly growth X% EBITDA.

'XX growth. A $X.XXX growth segment assumptions segment share in assumption million representing adjusted segment other EBITDA, and year-over-year net to million following. billion net $XXX planning to Residential to fiscal billion is to sales Our to X% adjusted the $X.XXX for the EBITDA in for year X% XX% few sales include X% $XXX and

expecting are of $XX of range with stated publicly target X% of our expenditure consistent to approximately a million to CapEx capital million, We X% $XX revenue.

we we a have are in range expecting full an above fit the between rate As XX% to tax XX%. into our opportunistic purchasing as GAAP assets such choose that And we year in this mentioned go the for finally, past, to or property strategy. long-term scenario may

modeling For Relations our assist planning fiscal we presentation XXXX, Investor additional website. supplemental with assumptions earnings refer posted have please to on the to year

For fiscal million adjusted million second guidance our for to and $XXX net to million $XXX in consolidated sales quarter is our $XXX million EBITDA. $XXX in quarter, the

to range X% in growth year-over-year and guidance EBITDA. sales adjusted year-over-year X% net growth imply consolidated X% to X% Our would

Residential Our million $XXX.X sales in the in and guidance $XXX to million net million EBITDA. million quarter segment $XXX is $XXX to for adjusted

to in segment imply EBITDA. year-over-year Our X% to guidance X% sales net range X% would year-over-year X% adjusted growth and growth

We second growth in fiscal quarter. are the assuming Residential range sell-through the in mid-single-digit

XX% rate for expecting approximately quarter. We an are of effective tax the

return and margin fiscal expectations we to back third Commercial have pressure half of in the XXXX. one expect will segment margins the will that quarter We taken our more actions have quarter and our in normalize fiscal of back

the this to target margin in continue business. XX% We range segment EBITDA adjusted for

We fiscal that, the closing remainder of to some Jesse quarter are call I'll now in turn and back well positioned execute XXXX. With second the fiscal for the to remarks.

Jesse Singh

a strong Ryan. good and in XXXX, the In financial performance. to Thanks, closing, we're fiscal start confident and navigate current in ability our deliver off to we're dynamics market

of open sustainable for innovative, our margin on We shareholders. With while and our net operator, all continue investing to delivering sales across line creating focused double-digit future for profitable entire in lead while our expansion, growth portfolio with solutions questions. please remaining and financial the priorities the value long-term that,

Operator

from [Operator Maklari. Instructions] question Your Susan first of comes the line

Susan Maklari

Can mentioned know start, the double digits up sell-through a bit demand? about talking maybe Jesse, quarter. you the was with that I we in

that us conservatism? outlook up take mid-single-digit to guide Can and did the getting still there for and the where implies sell-through the for be annual annual just the year. you help You some revenues could how yet possibly you're bridge

Jesse Singh

Susan. Yes. Thanks the question, for

our think stack to mid-single see underlying guide. you is in, We rate of we our on top we highlighted, assumption an what early year we can as really put growth programs, digits. still QX at or of growth the the right have is, we the assess that we came then the better which it's now and But step And way than give raised just XXXX. market X take, back that. as you that overall, R&R. plan of If we

to of to deliver are that. just X% the is assumptions to that to and way think be we the able flat so market we'll above And core it that our holding is X%

way quarter it already adjust that's but it for underlying felt we completed. really to appropriate the change one of think just there's no the the assumptions, to So is in

Susan Maklari

Okay. to And just then the maybe turning new products. That's helpful.

some mentioned You investments going in that there that there. are are

and we the quarters? think anything Just too those over thinking coming the that cadence to we of in momentum should the be start about products quarters next terms in of about should gain couple the how will

Jesse Singh

new that's I where rail specifically, think volume level, up starting shipped products, ramp starts so up the a so right with there's until has in inefficiencies vinyl At stage and no have been some running making then a and there. a us, that these and Yes. recently. facility for high we of you're And we're effectively now

to we the we move shipping So business, then those inventory. revenue. start see left being as you began you're a We just way rest on before taking into I And normal extra replenished this through the which quarters. the about new very a of costs products obviously, you through is starts quarter that system, the the it as of the think bit with the out And core think selling of stage and flow orders. be will it cadence

Operator

of Your next Rehaut the line question Michael comes from of JPMorgan.

Michael Rehaut

you all It recycling statement benefits? change to like of the add of the from that might I just, of Or augmenting the might another efforts ways, visibility the of some expect terms wonder to laid in and/or over with it in year income in start recycling going wanted your -- kind kind this that -- in tuck-in around I your upside what out next it potential just to your how plans get the capacity. at further forward? Does terms seems you've does year. the impact acquisition. of what --

Ryan Lada

Mike, it's Ryan.

to I kind we've adds of plans think past. it laid the in out the

able separate technology acquisition, recent I think weren't that multiple it's the polymer mixed lower-grade with that fronts. to on allows We the material So in do past. exciting us to gained a new we

that future to tailwinds periods which and or mixture headwind to third, what to convert sourcing additional to us adds internal recycle the we This we internally what in a recycling source. we additional then adds capacity it of provides terms faster, can And streams. allow Second, move savings. conversion still of then have

Michael Rehaut

just you market, a about sense helpful. regions to quarter channel, around or you Any that. of the be of about think bit would of, of markets were gains Jesse, the first relative hoping color you're same you year. At I algorithm, any perhaps a Trying the sticking secondly, to about bit some came specific markets how about talked get if in appreciate the region sell-through share thinking than -- distribution end for full roughly Great. think better market Okay. the little for. and there's kind end thinking little executing or the mid-single-digit perhaps broader in you kind either guess a the obviously, how time, really to you're you're where share. how channels, you're gaining product or potentially kind if I

Jesse Singh

I'll to provide try Yes. some insight.

of really So it the supporting opportunities. growth our pro right starts a about, in then base some quarter So with talk quarters, you right better a the of is we comments, coverage right? and stack, products, right gains. if an about that my recent having And sales one of having think outcome growth dealer they particular, at in look is job as prepared coverage, this having and the contractor doing shelf

our in perceive in expanding. you pro that could market So is the position channel the

we're market. that a in Now doing hopefully, growing

important it's we share, can recognize get, growth. sure to we how positioned how think when we for wood I future So much are we well can of look at it's make

year previous through in of years, this we've equation last it's the that particular, but year, in think same this kind I gone ballpark. than bit year So stronger -- versus probably a year as previous

position interrelated market the second few siding providing that, helps it a we start do component, is and solution different getting And of your share trim job contractor. a the helps rail a launching to a more also launch as as into X we're wallet those conversion platform. get of it complete different and dealer speak, platforms, think a to better platforms, platforms is I platform but to you you base, wood which a at you a

to initially, them in then think that's and with we're much fulfill. to as really process longer I but your seeing channel get continue some have some you product a contractors benefit work you the

we a like of sales downstream we both that, as year. force activities. us, And lot recognize marketing a of harder except brand. we've for believe by this are, contributing all types we that, consumer So where it's do at you particular, to happen got consumer they in additive. of active feel and look that's at better pretty or that set those Underlying It's a your to engage our get initiatives,

that quarter look they're the I So think elements those as very and talked the this the we much and are current quarters. we've last in intact quarter, about at subsequent future past,

Michael Rehaut

the could. Great. may One you if quick that last or Any Mexico? when not think may on one, tariffs supply about I or chain Canada exposure out come to

Ryan Lada

Yes.

I as modest, up think this about and and source growth products to well. in to year, $XXX are recent Mexico of million material our internationally. Canada with we China Exposure

would So our in year. think current form, impact relatively we it the have small a on

Jesse Singh

volumes, point, to Canada, Yes. particular Ryan's Think have the as And Canada alternatives Mexico if of both I'm route. our there, have it millions single-digit or other and out in of -- very out types we low then we sorry, that of China. we products need to go sourcing of

Operator

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

Keith Hughes

It in stringing months But and double-digit strong what in quarter? seems as you've like was as sellout together saw December railing. you several the January decking been

Jesse Singh

and about seen want one there. January mean but Yes. here talking on the is of Having season week of was you I in that, guide also both our to consistent don't we've said what at this point overindex month-to-month historically. the challenge kind with

should into comfortable. any and you of So a that, that sell-through didn't concern, create feeling there kind January read left we

Keith Hughes

fiscal Okay. the new much how to year, products you year are contribute? new early Residential period? the And wins much the of that in for How the going discussed and guide is buy Great. share

Jesse Singh

good really as that then quarter. we we'll getting Obviously, the new expansion, new benefit with And We're call That year. wins a we've as it's speak. of and shelf question. flow expansion the carryover. last that I way shelf talked we think Yes. that of about we had has a mean is benefit the starts we February, start as seeing March, pro natural expansion, good The our, some of it, this April. the

consistent last years. And is to it a since mentioned -- it consistently, question, new incrementally, more a bit then the you'll that I you think the been start of the of the over if little do seeing to being ends up flow we've of it think you're earlier should product as doing So of, X it on expansion way now. you

and we that the it But as general, expansion. gets year And just of it then and you product. through a a the of flow more see You'll expansion the bit There's through our inventory gradual adopted. depends gradual way of obviously, in on but more see a type as we work year.

Operator

next from Phil Ng line of of Your Jefferies. comes the question

Philip Ng

Congrats, about the on platforms good level you're good been the railing perhaps, on new making role, you Ryan, have on seeing? guys. called process engagement talk push and the think few exclusive side. and of do a perhaps of quarter, your leveraging out on distribution You a that the to for first side you've products. new job you bigger -- guess I Can I railing Jesse, on thing,

through what of think help kind year opportunity beyond. could us this that and Just present

Jesse Singh

Yes.

can on called something done opportunity and help right, we XX% -- conversion. is in rail market I'm our rail, much rail facilitate vinyl that presents $XXX like prepared is presents wood. rail opportunity market And of think of remarks million I steel more, if additional quarter almost XX that there the wood out sorry, a and the in vinyl last

So of what the overall opportunity macro you start the with is.

been as portfolio, from where didn't other There suppliers. distribution majority that we for vinyl rail, times product our our partners, think the folks need we particular, in have where -- we were the deal of we had certain have I As right most exclusive. when railing distributors with had lines, source a to know,

which our collaboration where partner worked channel, for of become vast rail. in have and partners, vinyl we of distribution steel we've supplier the channel way through makes now our as sense, think all, I majority our with it that almost the is

So market at we're a getting segment.

-- making and partners are And market XXX-person with contractors sure downstream, channel partners to we dealers then our channel part working force is sales a that demand. our Our appropriately. of current cover obviously, generate the key

of we've Deck, and product -- up about, the had to Accessories. good just & would sum the in we've and I all So is talked think categories growth the way way really that it Rail

growth forward. good to in see as will be nice products. This We we year business move And decking. railing ensures growth in without another our last growth additive component continue strong we that had just these really

And so growth rate continue. to expect we that

Philip Ng

point? attachment Jesse, rate this side standpoint at from railing the where an on are you

Jesse Singh

We don't and it gets think -- of but XX%, kind say high little we're attachment a depending of -- mid- less specifically would general, the as wonky, than teens in disclose geography. on I to

our cost get product and alternative right needs. right meet visual different and Now consumer mean where is thing contractors dealers a important to being the But be we make the what completed, more the or think to I XXX%. the attachment either when someone position doesn't can us has can that do should understanding to to sure for our had that is -- where there a job go

new provide some we, we've we we set that the benefits solution consumers. so to as increase can to launched, with the And products have expect certainly, incrementally our

Philip Ng

not little 'XX, And for there marketplace, terms your any ]? channel implicit was channel conservatively, there your in pretty winter manage far, sellout your then out buy guys your you if a how that And does you you more expecting the in it. even increase price [ incremental perhaps range on year? guidance, of inform thus the some baking appreciating mid-single-digit partners in upbeat? -- or based this Got are Is are

Ryan Lada

to what communicated we modest our And and some price other last modest on on Exteriors similar that first, part, gross then Yes. adjustments increases net I'd business. call, the to products. pricing with on did say decking the on we we offset

price modest early we expect of encouraged to flat So from kind for the year, process. buy were the think by perspective, full an we I increase. And then

in space from think there's and lot momentum in we the were And excitement extremely our dealer drove in and wins the financial channel, products summits previous contractor a some both those for on nice and sentiment I from I and years. last the year. our think expansion had positive. of building outlook We of new shelf quarter, pro kind

Operator

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

Matthew Bouley

new wanted ask on product So the growth investments. to

how a high-level of on balance thinking kind Just about investments here. you're of the growth question these

this envisioned I So Or plan? investments, had are previously I'm more with those on kind to that just something you advantage what lines. of getting kind today? kind than than Or year? prior of color these along more Is backdrop that this at, guess greater So what of the it the guess, years? I greater any of in is have take is growth you line this you're pushing

Ryan Lada

products fact prior no new different we do new years capacity would than added Yes. it's to besides I in say that. the

that. So actually on a rail to facility side, do vinyl we acquired the

So that's an factory. We're added on an incremental turning for our that's Similarly, we new entire in side, online. exteriors Aliquippa an existing facility not on siding, line. coming in

are bit turning a little line on a disproportionate factory. in those an than existing just more So

I and think AOP contemplated that's and planning -- that was session. our during

I it's guide. consistent our with pretty So think

Matthew Bouley

Okay. Got higher West ramp QX it level, in on yes, on in is quarter. I'm I included happened Was just the it. So there versus last capital but Coast that now there. was I of think on curious the guide? ask how QX? model, that wanted lumber. to And Any just then going now capital the in then anything

Jesse Singh

the way the expected fill in is we highlighted, fill That the of a first mean as bit to I of Yes. half -- we materializing. year.

guide. it's got Now it inventory. think positioning as the it's talked contemplated in that is way of fill, our of that sell we also to and -- to out, And was about last it didn't

the addition been benefit got make very our we're which network, because and very to you been relative much as have then and So our understand subsequent to track, through, And will going very staging it's It's they we both provided our of in to to the We're fill. but existing is much to to quarters. And guide of adjust look expected. it, expansion in that's distribution on we're in to that shelf the collaborative. part kind support of expected there. that not happen general, opportunity improve customers, it's sell going by excited as and existing service

provide position Capital, our to by lot covered in general, fires. a in Doman highlighted think I lot just And a support highlight. -- potential been on the happened for particular, a benefit marketplace. sure concern is our and in on sure that some A we that options an got can in making investments areas make the options hardening understanding little product support expansion that obviously, that we those focus I there's one of distribution the their ongoing set distributors, these And there they are that And as support and ignition-resistant of natural right kinds disasters. a stuff As to would of the recently. And the has reduce -- we're try some particular, the make impact of we actively of Class making we've Ryan sure of A incremental comments, that. that consumers the there flame products our his tragic in to have Western are but and against products of making that's Western providing

Operator

Blair. William Ryan line of the next of comes question Merkel Your from

Ryan Merkel

little it's that? trying was quarter products. on ask that I if in to And bit the impacting They're quantify a mentioned coming in investments wanted else XQ just to making. you I in new investment or way if the to the Jesse, I'm Any anything just second there's you're clarify thinking. below margins what the margins.

Ryan Lada

I kind already it's say Yes. that things a would we've of few highlighted.

facility the that. by that ramp-up, the So first, was new driven there product underutilization is

is lowest impacts first our volume Second, our balance and second that quarter. and that the some our quarter of inefficiency, gets sheet capitalized traditionally on

more second return as our off quarter So in to volume that traditionally we rolls levels.

Products The on then And actions the some partners, back commercial and just an not the year. but Scranton really pricing one year. third quarter of have won't took new support those do that's cost investments of second repeat will in Jesse half is us of The impact place alluded the our that hit until we displays, pressure second forward do merchandising, it, in half things to to whether more moving quarter we our the training, also expect the business. thing of those

Jesse Singh

Yes. quarters I subsequent us of over -- mean, on Ryan, you've impact the lower And years, talk utilization quarter. over about the the heard

of that's You that, should this. think clearly part

from Our up in of benefit utilization lowest QX some and to And QX in QX the QX, already it's we'll going the was -- that ramped we've see in utilization. the was utilization be.

Ryan Merkel

it. Got All right.

than gross year-over-year like we was as it way were Jesse should margins? my the thought, gross answered think quarter Or XQ comes margins that more to but rest the and about in question, first up, progression sounds second So I a which little of of the expansion? the down the utilization go back should how we

Ryan Lada

improve the utilization quarter where Yes, doesn't balance highest. its sequentially, on our sheet headwind then I second third and quarter, that quarter for and at first create the we being would fourth And volume lowest. say and is correct, a then that's our

natural half So that would the yes, be I the improves. think as progression back

Operator

Dahl Your of the Markets. next RBC question Mike Capital comes line of from

Michael Dahl

of win moving necessarily XQ in but Jesse, you and want Doman I -- go the expected know in kind from can pieces to from I you your to XQ. some not already XQ. load-in, and of back both capital, retail some

impacted on you in in pieces can so a also XQ of few stocking your of kind then update And out. one retail and between XQ, moving us if And positions the then just what load-in? give actually Capital of an I there's phasing terms recall,

versus new position. So kind the on business quantify moving stocking terms of of just pieces position, in the a retail you your could those of basis phasing other other ramps help us what Capital the if out big-box from net

Jesse Singh

Yes, yes.

moving But our I So be balance fully the growth. expect, in effect, to point just position forward, X, to and given on we in it X in transition, we've see retailer, those other out, as already in the marketplace, in as the in retail of you out. stock to be as continue do done, stock would front, to we which the think we're way not transition retailer

XX%, of bit then that that a it's the days bit lower normalization, than give really simple the wanted should stage that combination particular, of with about take, take, or the you is a the normalized move product you think QX, for give accounts think above season. And what that strong double for, through at to incremental of a means it And in of beat think you the of which if is or growth, couple percentage, of you new more So north as digit, the way it staging sell-through sure XX%, remaining, a our double questioned if high it's of as year. of and think that think at of we as digit, we progression as you end -- talked distribution, we sales or about as making you highlighted, inventory look call then guided. last that of got little in we've single-digit combined it, as came a we we on

the buy in our go and general, that offset combination in to and sell-through, end again, guide. guide. there's think single-digit you as normalized early margins, think QX the the out you border, getting where a more And to much XX% QX QX, plus as we start the ship will at means about. some -- it's stuff assuming as talked the to down as you we historic very Ryan on But down there. than which I it little last gets the that's as it parsing. what to we totality combined inventory once or that and we things be general, a that year, at pointed But look bit basis. And in said, to we're do on very really this, with So below of minus, quarter into there's of a There's not could of the all as there's And elements or the relates should of should X% always of on if then you we is. growth up on more commentary, process. on top -- some normalized nothing were up a million X% having And do it's

Michael Dahl

then, Okay. That's helpful. a question. second guess, I very And just

happening dynamic to in terms alluded awareness in a West fast-growing that's But an L.A. general. plays near-term standpoint, kind You of Obviously, for from of out into. standpoint, in product a from tragedy region your Coast been pretty you there's longer-term the that the a

look is XQ any the or of sort that as any So kind near-term disruption, of near-term you at XQ quantification here? contemplating there you're very

Jesse Singh

got houses some point and you I've there as general, friends in have that out, In around. and Yes.

that And so that obviously, to none that out have tragedy of obviously, our major is of a the to of neighborhoods. positive. experience And and heart elimination people kind goes

stuff, I one there's diversification, in in geography and downs, that ups that of it, large think general, geographic there's from it's diversified specific weather hurricanes of not that enough impact. and standpoint, always, or aggregate has whether aggregate, or that enough I our an disproportionate a we're call would because sort

impact expect don't a situation. we meaningful -- it's have that So to from

Operator

comes the of UBS. question from Your John of next Lovallo line

John Lovallo

Ryan, year? repurchases you just capital of I for ones quick but you move I think as maybe you through on the share a see noted priorities we do how during remain that opportunistic. about quarter. the the allocation. opportunity allocation the couple capital being know repos I talked unchanged, No mean And share

Ryan Lada

XQ cash QX year, is and quarter generation end of at the also Yes. retired of fiscal some typically lowest I'd 'XX. say we the debt our

and strategy the think same pursue we near potentially, to we looking the made, we have in acquisition recycle the for I would With the actually year. be of opportunities the are a couple other term

would we it to year, didn't like if normal think utilized. previously. Last just the of proceeds would that back And in obviously the half divestiture be have more the bit done we recall, repeat little from the had year Vycom this we I weighted XQ, you a which year.

of change think a probably I bit no the that on strategy, So -- timing. just in little phasing

John Lovallo

then what most Understood. on type Okay. front? the guys are are now? M&A you seeing And looking of to attractive you What deals right

Jesse Singh

Yes.

one we recycle did obviously, -- deal. As

to question, able Mike increased around to -- factories. the important we it's to think our localize and really meet chains position in demand be I and put ourselves as our supply I asked a think

then our out, certainly expand our localize we at additional And additional look looking assets we Day. the so way. And a that as on -- capacity analysis Investor would market and out help the we're us potential similar for obviously, recycle in laid

expansion in different our seen a of areas. You've number

position. current acquisitions that market growth for will We a like methodology help and consumer solid that provide broader our to for current We tuck-in our our contractor look of array continue really base our with solutions focus, current type and them.

augment do additional the for tuck-in at most looking part, we're, just So with that how we acquisitions.

Operator

next of of Stephens. comes Trey Your from question the line Grooms

Trey Grooms

better to in that So been continued demand you're versus the as had higher-end products or the 'XX, your I premium you primarily entry look continuing much to overall guess at you play outperformance Or the has have be any looking level. you change earlier demand sell-through where seeing in guys strong? your back where And to the case? holding pretty seen with for in be

Jesse Singh

all different seen Yes. I it stage. good all we we frame growth portfolio this pretty the of play just segments look and our we've types of would the that both in across at in, as as, channels

that continues can jobs. know continues the to of distinction a draw that I don't the The new see our expand hard-line benefit from to pro portfolio. be busy. the pro we find across aside So of specific I continue to entirety And and

Trey Grooms

one Ryan. remains maybe levels, then inventory nicely in for And right. guys specifically All you check. Inventory

expectations based building Is So of demand the how of then, it where on like adjustments there as season? we in lower-than-normal move any needed about do we channel kind as move busier levels you inventory Or into feel about of your it season? course, the is decking inventory? into light and your you'd especially

Ryan Lada

Yes.

year-over-year and that I second changes think year extent roughly can. I here in from there's think to then that's fiscal and XQ would from still our did the really look it we wouldn't our any given phasing, the of to starts. other that lead the inventory really flat XQ a times season inventory full results, our the build deplete I to we But the some really fiscal channel, X-week the product targeting as really build major level. maintaining That's in we ship year our production quarter as buy just to perspective. to with year-end. balance calendar availability and ensuring exited We prepping we on we kind at why think early

Operator

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

Ketan Mamtora

your start there. established Jesse, the bit couple obviously with, out players of on side? maybe to a about you talk can There are a little strategy siding

about of in what's strategy of of kind you you sort what kind are talk siding? and targeting So can the

Jesse Singh

Yes.

these corners that into wood trim Exteriors of various look go column there's on top So at back and the a accent -- in right? step So sort you our you general, targets right? -- business on amount that of siding. So our accents siding players, stuff, an got on business, and and Exteriors of top if we've of wraps, it disproportionate is

drive So our to accented on wood focus Exteriors an is our basis. conversion strategy. That's been

-- we the look that accent super most siding, you recent and that have either products that premium. like of premium we've technology it premium to think but a want premium or as think premium vinyl installs about of that premium launched, those Now as -- to a alternative the want folks to that achieve alternative advantage for take

it's And us, will and niche current Exteriors for huge so our But for, additive base. there with it market -- replacement, or that we product that kind the growth product a consistent that of us, tiny to way in that seen. small, a our product beyond or for to market contractor is new be to niche obviously, a think it remains a is grows niche business. believe of Whether of it's high-end wood siding product It's a very siding accent market. an not

Ketan Mamtora

decking and Understood. well, and sort very as you you And HDPE can follow-up, of on then helpful. us, the with the are side conversion as for remind just That's to where a LDPE PVC then just Jesse, both recycled exteriors?

Jesse Singh

Yes.

we But in. chime please that -- so transition. Ryan, LD, and on transition to on -- continue from the HD So

cutting over. that We've day we're methodical that. lines goes on by, pretty been every So

convert. we're converted, and half So probably we than to continue more

that, to way the the best process of going some in savings LD. see done the where in one we which the Now of as we're is areas we've

the And to so we a job using into what processing percentage I LD, a do converting better internally higher would the we're of say cost realize to of that LD need now savings. fully

of year, this now. And our progresses, year be as we -- process set a made certainly so improvements terms to our the year, there'll meaningful in move next savings lower-cost ability And recycled the process seeing of internally. ability into right next to expect in last since that to as we're that we unlock We've material materials. we year meaningful

the up. Ryan, ramp process all to flow of really We've kind a in PVC the and obviously, a lines. how we on good on gotten there's spot cost and PVC spot cost We've did business. incrementally use continue our to just reduce start percentage we've continue of from our Exteriors the then as helpful lines, pipeline And so of minor ahead sit got next better. And the on to And the months percentage as PVC, of over us long know process we've if material more got we add. to -- of business. be good up a I to modifications gotten that to where reduction to ramp similarly, XX continue to then raw the recycle. to we we'll acquisition we will we got to And we on make up to now, that. We've to our be you've decking side, to the material some allow step that don't continue us doing that anything which got

Ryan Lada

you've think it I No, covered all.

Operator

of Your of Wolfe next Allinson question comes from line Trevor the Research.

Trevor Allinson

to these other top you your is just a of less way. points basis some of that. wanted new that having bringing question impact the these margins talked you factors in little on, the of rate? some function little guys I of growth it you're margin points be the that than to you of maybe year. margin there leverage This some a lower of In get as past, of closer bit versus expansion you're assumes inflation year-over-year some XXX a that have at XXX Or that guys the an growth? or whether expansion that the about XX% Scranton have big earlier usually about, Is to line guiding talked XX% of asked as in products neighborhood of the doing per different year, primarily EBITDA margin on revisit basis

Ryan Lada

combination everything you it's say actually would a I of mentioned. Yes.

the And new underutilization So that this year, is with full Scranton the first all we XXX start-ups, that XX I lower basis off, year. think why fits sales that of growth when into number for the headwind we and expectation. Products talk kind as well to facility -- launches, volume the had second, as points, then typically on product planned business, a at our

nothing's So strategy. the on changed really

growth to factors XXX basis those versus we're the I think less outlook would it's modeling just XX% why given and contribute sales then lower than to the XX% points.

Jesse Singh

Yes. expansion, is out, ramp-up. margin it I of is be thing pointed you love And for Ryan as only quarter-to-quarter. think some perfectly would I would investments to that to the linear with add And respect and

that's And on some of savings. really timing of cost some the

it's year, we products. And the of of half and move new not through so only back as the the ramp-up the utilization

of We year as of particular benefit, some also of some next back start cost the move programs. year, the some end the in step-ups will of our we into seeing to in

reiterate, of it's really to there get our this margin feel at X-year our And to what obviously, So about we looked just timing ramp-up you've in ramps. And ability we've of mix general, earlier talked we to we're -- margins. as our expand reduction pretty as much earlier an we We're control and than to and get seen. cost our much to confident have ability continue just to going it's at highlighted on target, also stage, a about. there track

Trevor Allinson

can then pricing I what year sense. Scranton small of but your in back the lot here the And business, you of a of margin the quarter? you first what then I impact cover impacts what on to a color. appreciate it's expecting the inflationary that? makes all quantify guys question, kind second your a Yes, of push kind -- that for that appreciate in part And are sort had on to half of of

Ryan Lada

them we source side, to right, business sold Yes. sheet in build material directly prior the the reality when From used the Vycom the the from we product. is to year, the

a it's source Now piece.

balance So with lag caught on that. the the sheet up

business, the to it increase. on it's that really the quarters given side backlog that X.X on a pricing Products But And materialize. of from So to perspective Scranton was X takes then the the headwind of single-digit low Scranton business. from majority Products, a the margin

doesn't fiscal that of until reality fourth and the quarter us of our third start impacting the year. So

Jesse Singh

Great. of weeks and forward that's everyone's Thank various many over we you. appreciate look IBS. question you the had. we the events, last few at to next believe participation, talking including I to the and Really seeing

Have a to much, So talking with that, we thank look so and you. you evening. great forward to

Operator

ask that concludes conference please you your Ladies for participating your you call thank and today. that disconnect and We gentlemen, for lines.

The AZEK Company Inc. (AZEK) 4 Feb 252025 Q1 Earnings call transcript