FIRST QUARTER FISCAL 2024 FINANCIAL HIGHLIGHTS
- 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
RECENT COMPANY HIGHLIGHTS
- Residential initiatives including material conversion, channel
expansion and new products continue to drive strong double-digit
Residential sell-through growth
- Strong margin expansion driven by operating leverage,
productivity initiatives and material savings
- Initiated $100 million accelerated share repurchase program
with cash from operations and proceeds from the recent divestiture
of the Vycom business
- Named to Newsweek’s 2024 list of Most Responsible Companies and
Real Leaders’ 2024 list of Top Impact Companies for the 2nd year in
a row
RAISING FISCAL 2024 OUTLOOK
AZEK provides certain of its outlook on a non-GAAP basis, as the
Company cannot predict some elements that are included in reported
GAAP results, including the impact of acquisition costs and other
costs. Refer to the Outlook section in the discussion of non-GAAP
financial measures below for more details.
- Raising fiscal 2024 net sales outlook to a range between $1.385
to $1.425 billion and Adjusted EBITDA outlook to a range between
$353 to $372 million, driven by the stronger fiscal 1Q results and
increased visibility to margins
- Second Quarter Fiscal 2024 Outlook – Expecting consolidated net
sales between $407 to $413 million and Adjusted EBITDA between $108
to $112 million
The AZEK Company Inc. (NYSE: AZEK) (“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, today 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.
CONFERENCE CALL AND WEBSITE INFORMATION
AZEK will hold a conference call to discuss the results today,
Tuesday, February 6, 2024, at 4:00 p.m. (CT). To access the live
conference call, please register for the call in advance by
visiting https://conferencingportals.com/event/yMYxIFmD.
Registration will also be available during the call. After
registering, a confirmation e-mail will be sent including dial-in
details and unique conference call codes for entry. To ensure you
are connected for the full call please register at least 10 minutes
before the start of the call.
Interested investors and other parties can also listen to a
webcast of the live conference call by logging onto the Investor
Relations section of the Company's website at
https://investors.azekco.com/events-and-presentations/. AZEK uses
its investor relations website at investors.azekco.com as a means
of disclosing material non-public information and for complying
with its disclosure obligations under Regulation FD.
For those unable to listen to the live conference call, a replay
will be available approximately two hours after the call through
the archived webcast on the AZEK website or by dialing (800) 770-
2030 or (647) 362- 9199. The conference ID for the replay is 63923.
The replay will be available until 10:59 p.m. (CT) on February 20,
2024. In addition, an earnings presentation will be posted and
available on the AZEK investor relations website prior to the
conference call.
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.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This earnings release contains forward-looking statements within
the meaning of applicable securities laws. All statements other
than statements of historical facts, including statements regarding
future operations, are forward-looking statements. In some cases,
forward looking statements may be identified by words such as
"believe," "may," "will," "estimate," "continue," "anticipate,"
"intend," "could," "would," "expect," "objective," "plan,"
"potential," "seek," "grow," "target," "if," or the negative of
these terms and similar expressions. Projected financial
information and performance, including our guidance and outlook as
well as statements about our future growth and margin expansion
goals and factors, assumptions and variables underlying these
projections and goals, are forward-looking statements. Other
forward-looking statements may include, without limitation,
statements with respect to our ability to meet the future targets
and goals we establish, including our environmental, social and
governance targets, and the ultimate impact of our actions on our
business as well as the expected benefits to the environment, our
employees, and our communities; statements about our future
expansion plans, capital investments, capacity targets and other
future strategic initiatives; statements about any stock repurchase
plans; statements about potential new products and product
innovation; statements regarding the potential impact of global
events; statements about future pricing for our products or our raw
materials and our ability to offset increases to our raw material
costs and other inflationary pressures; statements about the
markets in which we operate and the economy more generally,
including inflation and interest rates, supply and demand balance,
growth of our various markets and growth in the use of engineered
products as well as our ability to share in such growth; statements
about our production levels; and all other statements with respect
to our expectations, beliefs, plans, strategies, objectives,
prospects, assumptions or future events or performance contained in
this earnings release are forward-looking statements. These
forward-looking statements are subject to a number of risks,
uncertainties and assumptions, including those described in our
Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and in
our other filings with the U.S. Securities and Exchange Commission.
Moreover, new risks emerge from time to time. It is not possible
for our management to predict all risks, nor can we assess the
impact of all factors on our business or the extent to which any
factor, or combination of factors, may cause actual results to
differ materially and adversely from those contained in any
forward-looking statements we may make. You should read this
earnings release with the understanding that our actual future
results, levels of activity, performance and events and
circumstances may be materially different from what we expect and
should not place undue reliance on forward-looking statements.
These statements are based on information available to us as of
the date of this earnings release. While we believe that such
information provides a reasonable basis for these statements, such
information may be limited or incomplete. Our statements should not
be read to indicate that we have conducted an exhaustive inquiry
into, or review of, all relevant information. We disclaim any
intention and undertake no obligation to update or revise any of
our forward-looking statements after the date of this release,
except as required by law.
NON-GAAP FINANCIAL MEASURES
To supplement our earnings release and consolidated financial
statements prepared and presented in accordance with generally
accepted accounting principles in the United States, or (“GAAP”),
we use certain non-GAAP financial measures, as described within
this earnings release, to provide investors with additional useful
information about our financial performance, to enhance the overall
understanding of our past performance and future prospects and to
allow for greater transparency with respect to important metrics
used by our management for financial and operational
decision-making. We are presenting these non-GAAP financial
measures to assist investors in seeing our financial performance
and liquidity from management’s view and because we believe they
provide an additional tool for investors to use in comparing our
core financial performance and liquidity over multiple periods with
other companies in our industry.
- Adjusted Gross Profit: Beginning for the three months
ended December 31, 2023, we define Adjusted Gross Profit as gross
profit before amortization, business transformation costs,
acquisition costs and certain other costs. Adjusted Gross Profit
Margin is equal to Adjusted Gross Profit divided by net sales.
Prior to the three months ended December 31, 2023, depreciation was
also excluded from Adjusted Gross Profit. We believe that including
depreciation expense in our Adjusted Gross Profit definition will
result in easier comparability to our peers. Presentations of
Adjusted Gross Profit and Adjusted Gross Profit Margin for prior
periods have been recast to conform to the current period
presentation for comparability.
- Adjusted Net Income: Defined as net income (loss) before
amortization, share-based compensation costs, business
transformation costs, acquisition costs, initial public offering
and secondary offering costs and certain other costs.
- Adjusted Diluted EPS: Defined as Adjusted Net Income
divided by weighted average common shares outstanding – diluted, to
reflect the conversion or exercise, as applicable, of all
outstanding shares of restricted stock awards, restricted stock
units and options to purchase shares of our common stock.
- Adjusted EBITDA: Defined as net income (loss) before
interest expense, net, income tax (benefit) expense and
depreciation and amortization and by adding to or subtracting
therefrom items of expense and income as described above. Adjusted
EBITDA Margin is equal to Adjusted EBITDA divided by net
sales.
- Net Leverage: Equal to gross debt less cash and cash
equivalents, divided by trailing twelve month Adjusted EBITDA.
- Free Cash Flow: Defined as net cash provided by (used
in) operating activities less purchases of property, plant and
equipment.
In addition, we provide Adjusted Net Sales excluding Vycom,
which is a non-GAAP measure that we define as Consolidated Net
Sales excluding the impact from the divested Vycom business. We
believe Adjusted Net Sales excluding Vycom is useful to investors
because it reflects the ongoing trends in our business following
the divestiture of Vycom.
These non-GAAP financial measures have limitations as analytical
tools, and you should not consider them in isolation or as a
substitute for analysis of our results as reported under GAAP.
Non-GAAP financial measures may be calculated differently from, and
therefore may not be directly comparable to, similarly titled
measures used by other companies. See the accompanying earnings
tables for a reconciliation of these non-GAAP measures to their
most directly comparable GAAP measures.
Segment Adjusted EBITDA
Depending on certain circumstances, Segment Adjusted EBITDA and
Segment Adjusted EBITDA Margin may be calculated differently, from
time to time, than our Adjusted EBITDA and Adjusted EBITDA Margin,
which are further discussed under the heading “Non-GAAP Financial
Measures.” Segment Adjusted EBITDA and Segment Adjusted EBITDA
Margin represent measures of segment profit reported to our chief
operating decision maker for the purpose of making decisions about
allocating resources to a segment and assessing its performance.
For more information regarding how Segment Adjusted EBITDA and
Segment Adjusted EBITDA Margin are determined, see the section
titled “Management’s Discussion and Analysis of Financial Condition
and Results of Operations—Segment Results of Operations” set forth
in Part II, Item 7 of our Annual Report on Form 10-K for fiscal
2023 and our Consolidated Financial Statements and related notes
included therein.
The AZEK Company Inc.
Consolidated Balance
Sheets
(In thousands of U.S. dollars,
except for share and per share amounts)
in thousands
December 31, 2023
September 30, 2023
ASSETS:
Current assets:
Cash and cash equivalents
$
274,759
$
278,314
Trade receivables, net of allowances
32,398
57,660
Inventories
261,562
221,101
Prepaid expenses
16,528
13,595
Other current assets
8,131
12,300
Total current assets
593,378
582,970
Property, plant and equipment - net
456,504
501,023
Goodwill
967,816
994,271
Intangible assets - net
183,604
199,497
Other assets
87,426
87,793
Total assets
$
2,288,728
$
2,365,554
LIABILITIES AND STOCKHOLDERS'
EQUITY:
Current liabilities:
Accounts payable
$
43,119
$
56,015
Accrued rebates
67,925
60,974
Accrued interest
368
260
Current portion of long-term debt
obligations
6,000
6,000
Accrued expenses and other liabilities
80,999
71,994
Total current liabilities
198,411
195,243
Deferred income taxes
47,117
56,330
Long-term debt—less current portion
579,111
580,265
Other non-current liabilities
104,784
104,073
Total liabilities
929,423
935,911
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.001 par value;
1,000,000 shares authorized and no shares issued or outstanding at
December 31, 2023 and September 30, 2023, respectively
—
—
Class A common stock, $0.001 par value;
1,100,000,000 shares authorized, 156,341,203 and 155,967,736 shares
issued at December 31, 2023 and September 30, 2023,
respectively
156
156
Class B common stock, $0.001 par value;
100,000,000 shares authorized, 0 shares and 100 shares issued and
outstanding at December 31, 2023 and September 30, 2023,
respectively
—
—
Additional paid‑in capital
1,650,160
1,662,322
Accumulated deficit
(19,328
)
(45,047
)
Accumulated other comprehensive income
(loss)
(1,217
)
1,878
Treasury stock, at cost, 10,560,030 and
8,268,423 shares at December 31, 2023 and September 30, 2023,
respectively
(270,466
)
(189,666
)
Total stockholders' equity
1,359,305
1,429,643
Total liabilities and stockholders'
equity
$
2,288,728
$
2,365,554
The AZEK Company Inc.
Consolidated Statements of
Comprehensive Income (Loss)
(In thousands of U.S. dollars,
except for share and per share amounts)
Three Months Ended December
31,
in thousands
2023
2022
Net sales
$
240,444
$
216,259
Cost of sales
149,011
168,680
Gross profit
91,433
47,579
Selling, general and administrative
expenses
77,246
73,444
Loss on disposal of property, plant and
equipment
2,185
—
Operating income (loss)
12,002
(25,865
)
Other income and expenses:
Interest expense, net
7,910
9,299
Gain on sale of business
(38,515
)
—
Total other income and expenses
(30,605
)
9,299
Income (loss) before income taxes
42,607
(35,164
)
Income tax expense (benefit)
16,888
(9,328
)
Net income (loss)
$
25,719
$
(25,836
)
Other comprehensive income (loss):
Unrealized loss due to change in fair
value of derivatives, net of tax
$
(3,095
)
$
(1,796
)
Total other comprehensive income
(loss)
(3,095
)
(1,796
)
Comprehensive income (loss)
$
22,624
$
(27,632
)
Net income (loss) per common share:
Basic
$
0.17
$
(0.17
)
Diluted
0.17
(0.17
)
Weighted-average common shares
outstanding:
Basic
147,297,662
150,877,635
Diluted
148,876,282
150,877,635
The AZEK Company Inc.
Consolidated Statements of
Cash Flows
(In thousands of U.S.
dollars)
Three Months Ended December
31,
2023
2022
Operating activities:
Net income (loss)
$
25,719
$
(25,836
)
Adjustments to reconcile net income (loss)
to net cash flows provided by (used in) operating activities:
Depreciation
21,773
22,002
Amortization of intangibles
10,164
11,837
Non-cash interest expense
412
412
Non-cash lease expense
(48
)
(56
)
Deferred income tax (benefit)
provision
(8,192
)
1,504
Non-cash compensation expense
8,422
5,801
Fair value adjustment for contingent
consideration
—
400
Loss on disposition of property, plant and
equipment
2,185
1,003
Gain on sale of business
(38,515
)
—
Changes in certain assets and
liabilities:
Trade receivables
21,151
21,869
Inventories
(62,127
)
(20,978
)
Prepaid expenses and other currents
assets
(2,031
)
(16,711
)
Accounts payable
(9,319
)
13,029
Accrued expenses and interest
15,448
(7,831
)
Other assets and liabilities
(1,330
)
(36
)
Net cash provided by (used in) operating
activities
(16,288
)
6,409
Investing activities:
Purchases of property, plant and
equipment
(17,681
)
(30,328
)
Proceeds from disposition of fixed
assets
122
65
Divestiture, net of cash disposed
133,089
—
Net cash provided by (used in) investing
activities
115,530
(30,263
)
Financing activities:
Payments on Term Loan Agreement
(1,500
)
(1,500
)
Repayments of finance lease
obligations
(713
)
(650
)
Exercise of vested stock options
3,238
—
Cash paid for shares withheld for
taxes
(3,822
)
(460
)
Purchases of treasury stock
(100,000
)
(7,488
)
Net cash used in financing activities
(102,797
)
(10,098
)
Net decrease in cash and cash
equivalents
(3,555
)
(33,952
)
Cash and cash equivalents – Beginning of
period
278,314
120,817
Cash and cash equivalents – End of
period
$
274,759
$
86,865
Supplemental cash flow
disclosure:
Cash paid for interest, net of amounts
capitalized
$
7,349
$
13,020
Cash paid for income taxes, net
1,351
112
Supplemental non-cash investing and
financing disclosure:
Capital expenditures in accounts payable
at end of period
$
2,603
$
16,275
Right-of-use operating and finance lease
assets obtained in exchange for lease liabilities
2,460
1,968
Segment Results from Operations
Residential Segment
The following table summarizes certain financial information
relating to the Residential segment results that have been derived
from our audited Consolidated Financial Statements for the three
months and years ended September 30, 2023 and 2022.
Three Months Ended December
31,
(U.S. dollars in thousands)
2023
2022
$ Variance
% Variance
Net sales
$
223,000
$
179,484
$
43,516
24.2
%
Segment Adjusted EBITDA (1)
52,762
9,946
42,816
430.5
%
Segment Adjusted EBITDA Margin
23.7
%
5.5
%
N/A
N/A
(1)
Effective as of December 31, 2023,
Residential segment Adjusted EBITDA includes all corporate
expenses, such as selling, general and administrative costs related
to our corporate offices, including payroll and other professional
fees. The prior period has been recast to reflect the change.
Commercial Segment
The following table summarizes certain financial information
relating to the Commercial segment results that have been derived
from our audited Consolidated Financial Statements for the three
months and years ended September 30, 2023 and 2022.
Three Months Ended December
31,
(U.S. dollars in thousands)
2023
2022
$ Variance
% Variance
Net sales
$
17,444
$
36,775
$
(19,331
)
(52.6
)%
Segment Adjusted EBITDA
2,905
5,154
(2,249
)
(43.6
)%
Segment Adjusted EBITDA Margin
16.7
%
14.0
%
N/A
N/A
Adjusted Net Sales Excluding Vycom Reconciliation
Three Months Ended December
31,
(U.S. dollars in thousands)
2023
2022
Consolidated
Net sales
$
240,444
$
216,259
Impact from sale of Vycom business
(3,319
)
(21,728
)
Adjusted net sales excluding Vycom
$
237,125
$
194,531
Adjusted EBITDA and Adjusted EBITDA Margin
Reconciliation
Three Months Ended December
31,
(U.S. dollars in thousands)
2023
2022
Net income (loss)
$
25,719
$
(25,836
)
Interest expense, net
7,910
9,299
Depreciation and amortization
31,937
33,840
Income tax expense (benefit)
16,888
(9,328
)
Stock-based compensation costs
8,468
3,957
Acquisition and divestiture costs (1)
492
2,954
Gain on sale of business (2)
(38,515
)
—
Other costs (3)
2,768
214
Total adjustments
29,948
40,936
Adjusted EBITDA
$
55,667
$
15,100
Three Months Ended December
31,
2023
2022
Net profit margin
10.7
%
(11.9
)%
Interest expense, net
3.3
%
4.3
%
Depreciation and amortization
13.3
%
15.7
%
Income tax expense (benefit)
7.0
%
(4.3
)%
Stock-based compensation costs
3.5
%
1.8
%
Acquisition and divestiture costs
0.2
%
1.3
%
Gain on sale of business
(16.0
)%
0.0
%
Other costs
1.2
%
0.1
%
Total adjustments
12.5
%
18.9
%
Adjusted EBITDA Margin
23.2
%
7.0
%
_______________________________________
(1)
Acquisition and divestiture costs
reflect costs related to divestiture of $0.5 million for both the
three months ended December 31, 2023 and 2022, respectively, and
costs directly related to completed acquisitions of $2.4 million in
the three months ended December 31, 2022.
(2)
Gain on sale of business relates
to the sale of the Vycom business.
(3)
Other costs reflect costs related
to the removal of dispensable equipment resulting from a
modification of our manufacturing process of $2.4 million in the
three months ended December 31, 2023, reduction in workforce costs
of $0.3 million in the three months ended December 31, 2023, and
costs for legal expenses of $0.1 million and $0.2 million in the
three months ended December 31, 2023 and 2022, respectively.
Adjusted Gross Profit Reconciliation
Three Months Ended December
31,
(U.S. dollars in thousands)
2023
2022
Gross Profit
$
91,433
$
47,579
Amortization (1)
3,869
4,606
Adjusted Gross Profit
$
95,302
$
52,185
Three Months Ended December
31,
2023
2022
Gross Margin
38.0
%
22.0
%
Amortization
1.6
%
2.1
%
Adjusted Gross Profit Margin
39.6
%
24.1
%
_______________________________________
(1)
Effective as of December 31,
2023, we revised the definition of Adjusted Gross Profit to no
longer exclude depreciation expense. The prior period has been
recast to reflect the change.
Adjusted Net Income and Adjusted Diluted EPS
Reconciliation
Three Months Ended December
31,
(U.S. dollars in thousands,
except per share amounts)
2023
2022
Net income (loss)
$
25,719
$
(25,836
)
Amortization
10,164
11,837
Stock-based compensation costs (1)
2,925
1,259
Acquisition and divestiture costs (2)
492
2,954
Gain on sale of business (3)
(38,515
)
—
Other costs (4)
2,768
214
Tax impact of adjustments (5)
12,049
(4,280
)
Adjusted Net Income (Loss)
$
15,602
$
(13,852
)
Three Months Ended December
31,
2023
2022
Net income (loss)
$
0.17
$
(0.17
)
Amortization
0.07
0.08
Stock-based compensation costs
0.02
0.01
Acquisition and divestiture costs
—
0.02
Gain on sale of business
(0.26
)
—
Other costs
0.02
—
Tax impact of adjustments
0.08
(0.03
)
Adjusted Diluted EPS (6)
$
0.10
$
(0.09
)
_______________________________________
(1)
Stock-based compensation costs
reflect expenses related to our initial public offering. Expenses
related to our recurring awards granted each fiscal year are
excluded from the Adjusted Net Income reconciliation.
(2)
Acquisition and divestiture costs
reflect costs related to divestiture of $0.5 million for both the
three months ended December 31, 2023 and 2022, respectively, and
costs directly related to completed acquisitions of $2.4 million in
the three months ended December 31, 2022.
(3)
Gain on sale of business relates
to the sale of the Vycom business.
(4)
Other costs reflect costs related
to the removal of dispensable equipment resulting from a
modification of our manufacturing process of $2.4 million in the
three months ended December 31, 2023, reduction in workforce costs
of $0.3 million in the three months ended December 31, 2023, and
costs for legal expenses of $0.1 million and $0.2 million in the
three months ended December 31, 2023 and 2022, respectively.
(5)
Tax impact of adjustments, except
for gain on sale of business, are based on applying a combined U.S.
federal and state statutory tax rate of 26.5% for the three months
ended December 31, 2023 and 2022, respectively. Tax impact of
adjustment for gain on sale of business is based on applying a
combined U.S. federal and state statutory tax rate of 42.1% for the
three months ended December 31, 2023.
(6)
Weighted average common shares
outstanding used in computing diluted net income per common share
of 148,876,282 and 150,877,635 for the three months ended December
31, 2023 and 2022, respectively.
Free Cash Flow Reconciliation
Three Months Ended December
31,
(U.S. dollars in thousands)
2023
2022
Net cash provided by (used in) operating
activities
$
(16,288
)
$
6,409
Less: Purchases of property, plant and
equipment
(17,681
)
(30,328
)
Free Cash Flow
$
(33,969
)
$
(23,919
)
Net cash provided by (used in) investing
activities
$
115,530
$
(30,263
)
Net cash used in financing activities
$
(102,797
)
$
(10,098
)
Net Leverage Reconciliation
Twelve Months Ended December
31,
(In thousands)
2023
Net income
$
119,510
Interest expense, net
37,904
Depreciation and amortization
130,641
Tax expense
50,145
Stock-based compensation costs
23,215
Acquisition and divestiture costs
4,428
Secondary offering costs
1,065
Gain on sale of business
(38,515
)
Other costs
3,397
Total adjustments
212,280
Adjusted EBITDA
$
331,790
Long-term debt — less current portion
$
579,111
Current portion
6,000
Unamortized deferred financing fees
3,818
Unamortized original issue discount
3,571
Finance leases
78,105
Gross debt
$
670,605
Cash and cash equivalents
(274,759
)
Net debt
$
395,846
Net leverage
1.2x
Outlook
We have not reconciled either of Adjusted EBITDA or Adjusted
EBITDA Margin guidance to its most comparable GAAP measure as a
result of the uncertainty regarding, and the potential variability
of, reconciling items such as the costs of acquisitions, which are
a core part of our ongoing business strategy, and other costs. Such
reconciling items that impact Adjusted EBITDA and Adjusted EBITDA
Margin have not occurred, are outside of our control or cannot be
reasonably predicted. Accordingly, a reconciliation of each of
Adjusted EBITDA and Adjusted EBITDA Margin to its most comparable
GAAP measure is not available without unreasonable effort. However,
it is important to note that material changes to these reconciling
items could have a significant effect on our Adjusted EBITDA and
Adjusted EBITDA Margin guidance and future GAAP results.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240206289894/en/
Investor Relations Contact: Eric Robinson 312-809-1093
ir@azekco.com
Media Contact: Amanda Cimaglia 312-809-1093 media@azekco.com
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