The AZEK Company Announces Strong First Quarter Fiscal 2024 Results Driven by Underlying Residential Segment Demand and Execution of Margin Expansion Initiatives; Raises Full-Year Fiscal 2024 Net Sales and Adjusted EBITDA Outlook
- None.
- None.
Insights
Revenue Growth Analysis: The reported 11% year-over-year increase in consolidated net sales to $240.4 million and a more significant 22% growth rate when excluding the divested Vycom business, indicates a robust demand for AZEK's products, particularly in the Residential segment. This segment, which saw a 24% sales increase, is evidently a key driver of the company's performance. The divestiture of Vycom, while reducing Commercial segment revenue, seems to have allowed AZEK to streamline its operations and focus on its core business, which is reflecting positively in their financials.
Profitability and Margin Expansion: The substantial expansion in net profit margin by 2,260 basis points to 10.7% and adjusted EBITDA margin by 1,620 basis points to 23.2% is indicative of effective cost management and operational efficiency. The margin improvements suggest that the company's initiatives, such as recycling and continuous improvement programs, are yielding financial benefits. The increase in gross profit margin by 1,600 basis points to 38.0% further supports this efficiency narrative.
Share Repurchase Program: The initiation of a $100 million accelerated share repurchase program reflects management's confidence in the company's cash flow generation and financial stability. This move is typically seen as a positive signal to the market about the company's future prospects and often supports the stock price by reducing the number of shares outstanding and potentially increasing earnings per share (EPS).
Industry Positioning and Outlook: AZEK's strong performance in the residential market, supported by material conversion and new product innovations, suggests that the company is effectively capitalizing on trends towards sustainable and low-maintenance outdoor living products. The raised full-year fiscal 2024 outlook, with net sales expected to be between $1.385 to $1.425 billion and Adjusted EBITDA between $353 to $372 million, reflects a positive market response and increased operational visibility. The company's focus on material conversion and channel expansion is likely resonating with consumers' growing environmental concerns and the shift in lifestyle preferences post-pandemic.
Competitive Landscape: The mention of AZEK's inclusion in Newsweek’s 2024 list of Most Responsible Companies and Real Leaders’ 2024 list of Top Impact Companies for the second consecutive year highlights the company's commitment to sustainability. This distinction may enhance the brand's reputation and appeal to both consumers and investors, potentially providing a competitive edge in the industry.
Economic Implications of Raised Outlook: The revision of the full-year fiscal 2024 outlook upwards suggests that AZEK is experiencing stronger than anticipated economic conditions within its market segments. This could be a reflection of a resilient repair and remodel market and a stable consumer spending pattern in the home improvement sector. The company's assumption of a flattish repair & remodel market indicates a cautious yet optimistic view of the broader economic environment, which is an important consideration for stakeholders when assessing the potential for sustained growth.
Analysis of Capital Expenditures: The planned capital expenditures of $80 to $95 million for fiscal year 2024 point towards ongoing investments in production and operational capabilities. This level of reinvestment is crucial for long-term growth and suggests that AZEK is prioritizing the expansion of its manufacturing capacity and the enhancement of its product offerings, which could lead to increased market share and revenue streams in the future.
FIRST QUARTER FISCAL 2024 FINANCIAL HIGHLIGHTS
-
Consolidated Net Sales increased
11% year-over-year to$240.4 million 22% year-over-year -
Residential Segment Net Sales increased
24% year-over-year to$223.0 million -
Net Income increased
$51.6 million $25.7 million $38.5 million $29.5 million $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 430% year-over-year -
Adjusted EBITDA Margin expanded 1,620 basis points year-over-year to
23.2% -
EPS of
$0.17 $0.34 $0.19 $0.10
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 - 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
$1.38 5$1.42 5 billion$353 $372 million -
Second Quarter Fiscal 2024 Outlook – Expecting consolidated net sales between
$407 $413 million $108 $112 million
CEO COMMENTS
“The AZEK team delivered strong results ahead of plan this quarter, including
“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
Gross profit increased by
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
Net income (loss) increased by
Adjusted EBITDA increased by
Adjusted Net Income (loss) increased by
BALANCE SHEET, CASH FLOW and LIQUIDITY
As of December 31, 2023, AZEK had cash and cash equivalents of
Net Cash Provided by Operating Activities for the three months ended December 31, 2023, decreased by
During the quarter, AZEK repurchased approximately 2.3 million initial shares of its Class A common stock under a
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
For the second quarter of fiscal 2024, AZEK expects consolidated net sales in the range of
“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
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
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
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
- 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 |
||||||||
in thousands |
|
December 31,
|
|
September 30,
|
||||
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, |
|
|
— |
|
|
|
— |
|
Class A common stock, |
|
|
156 |
|
|
|
156 |
|
Class B common stock, |
|
|
— |
|
|
|
— |
|
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,
|
|
|
(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 |
||||||||
|
|
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 |
||||||||
|
|
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)
|
|
|
|
|
||||
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, |
|
|
|
|
|
|
|
|||||||
( |
|
2023 |
|
|
2022 |
|
|
$
|
|
|
%
|
|
||||
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, |
|
|
|
|
|
|
|
|||||||
( |
|
2023 |
|
|
2022 |
|
|
$
|
|
|
%
|
|
||||
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, |
||||||||
( |
|
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, |
||||||
( |
|
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 |
(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 |
Adjusted Gross Profit Reconciliation
|
|
Three Months Ended December 31, |
||||
( |
|
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, |
||||||
( |
|
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 |
(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 |
(5) |
Tax impact of adjustments, except for gain on sale of business, are based on applying a combined |
(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, |
||||||||
( |
|
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
312-809-1093
ir@azekco.com
Media Contact:
Amanda Cimaglia
312-809-1093
media@azekco.com
Source: The AZEK Company Inc.
FAQ
What is the ticker symbol for The AZEK Company Inc.?
What was the percentage increase in consolidated net sales for the first quarter of fiscal 2024?
What was the year-over-year increase in adjusted EBITDA for the first quarter of fiscal 2024?
What is the range for the fiscal 2024 net sales outlook provided by AZEK?
