• Net Sales Growth: 12% year-over-year net sales growth for fiscal 2024.
• Deck, Rail, and Accessories Sales Growth: 18% sales growth for fiscal 2024.
• Net Profit Margin Expansion: Expanded by 600 basis points to 10.6% year over year.
• Adjusted EBITDA Margin Expansion: Expanded by 560 basis points to 26.3% year over year.
• Cash Returned to Shareholders: $243 million through share repurchase program.
• Residential Segment Sell-Through Growth: High single digits for fiscal 2024.
• Fourth Quarter Net Sales: $348 million.
• Fourth Quarter Gross Margin: 37.3%.
• Fourth Quarter Adjusted EBITDA: $92 million, with a margin of 26.3%.
• Fourth Quarter Net Income: $28 million, or $0.19 per share.
• Fourth Quarter Adjusted Net Income: $42 million, or $0.29 per share.
• Free Cash Flow for Fourth Quarter: $38 million.
• Fiscal 2025 Revenue Guidance: $1.51 billion to $1.54 billion.
• Fiscal 2025 Adjusted EBITDA Guidance: $400 million to $415 million.

• Warning! GuruFocus has detected 3 Warning Signs with ELEMF.

Release Date: November 19, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• The AZEK Co Inc (NYSE:AZEK) achieved record financial results with a 12% year-over-year net sales growth in fiscal 2024.
• The company delivered a net profit margin expansion of 600 basis points year over year to 10.6% and adjusted EBITDA margin expansion of 560 basis points to a record 26.3%.
• The deck, rail, and accessories business led the industry with an 18% sales growth for fiscal 2024.
• The AZEK Co Inc (NYSE:AZEK) returned $243 million to shareholders through its share repurchase program.
• The company is well-positioned for future growth with new product launches expected to access more than $2 billion of addressable market opportunity.

Negative Points

• The exteriors business experienced some softness in the back half of the year.
• Fourth-quarter net income decreased year over year by $11 million to $28 million.
• The commercial segment saw a 47% year-over-year decline in net sales due to the sale of the Vycom business.
• Free cash flow for the fourth quarter decreased by $54 million year over year.
• The company anticipates some modest impact on gross margins due to investments in new product launches.

Q & A Highlights

Q: Can you provide more details on your fiscal year '25 assumption for mid-single-digit sell-through growth, particularly in terms of deck versus exterior? A: Jesse Singh, CEO, explained that the 5% growth assumption is based on a zero-growth market, with an intent to drive growth above that. While not specifically parsing out between deck and exterior, historically, both have been relatively similar, with decking being modestly higher recently. Channel sentiment is positive, and they expect a normal progression through 2025.

Q: How will SG&A expenses evolve with new product launches and distribution efforts? A: Peter Clifford, CFO, noted that they plan to continue investing in growth opportunities, supported by strong gross margin execution. Jesse Singh added that new product launches are embedded in their SG&A strategy, and while activity is higher this year, it aligns with their ongoing investment approach.

Q: What factors could drive a recovery in the R&R market, and how might decking outperform broader R&R? A: Jesse Singh highlighted their growth thesis, which includes R&R, material conversion, and outdoor living emphasis, alongside company-specific initiatives. While they prudently assume a flat R&R market, historical trends and third-party insights suggest potential for increased growth, with decking historically outpacing broader R&R.

Q: How are sales trending by price point within your good, better, best category framework? A: Peter Clifford stated that there hasn't been a significant mix down, with premium category growth rates remaining robust. The "good" category is growing modestly faster, attributed to share pickup, as they re-entered the entry price point with Prime and Prime Plus products.

Q: Can you discuss the impact of your distribution expansion in Canada and the partnership with Capital Lumber in the West? A: Jesse Singh explained that the expansion with Doman in Canada provides double distribution and access to Western Canada, while the Capital Lumber partnership enhances downstream focus. They expect some benefit in the first half of the year from Western distribution expansion, potentially adding $10 million in volume.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.