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AZEK Co Inc. (AZEK)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 FY25 delivered 8% YoY net sales growth to $452.2M, GAAP EPS of $0.37 (+$0.03 YoY), and Adjusted EBITDA of $124.4M with margin expansion to 27.5% (+40 bps YoY) as Residential led with 9% growth; gross margin ticked down 40 bps YoY on new product ramp costs and Commercial softness .
  • Management reaffirmed FY25 guidance: net sales $1.52–$1.55B (+5–8% YoY) and Adjusted EBITDA $403–$418M (+6–10% YoY); FY25 capex was raised to $110–$120M (from $85–$95M) due to a Pennsylvania plant purchase .
  • Residential sell-through grew mid-single digits in Q2, channel inventories remained below historical norms, and contractor backlogs were ~7 weeks; Q3 guidance: sales $413–$429M and Adj. EBITDA $115–$123M (margin 27.8–28.7%) .
  • Merger with James Hardie remains a key 2025 catalyst (target close 2H CY25), with management highlighting $125M cost and $500M commercial synergy opportunities and reaffirming confidence in FY25 outlook .

What Went Well and What Went Wrong

What Went Well

  • Residential strength: Segment net sales +9% YoY to $437.0M; segment Adj. EBITDA +11% YoY to $122.5M with margin +60 bps to 28.0% on channel expansion and new products .
  • Margin execution: Company Adjusted EBITDA margin expanded 40 bps YoY to 27.5% despite growth investments; CFO noted performance was ahead of guidance (and said margin was ahead of consensus), with steady demand indicators (web sessions and contractor leads up double digits) .
  • Strategic progress and awards: New product launches (Harvest+, Reliance Rail, Fulton Rail) continued to gain traction; sustainability recognition from Barron’s and Green Builder Media reinforces brand momentum .

What Went Wrong

  • Gross margin pressure: GAAP gross margin declined 40 bps YoY to 37.1% and Adjusted gross margin declined 60 bps to 37.8%, driven by start-up/ramp costs for new products and weakness in Commercial (Scranton Products) .
  • Commercial drag: Commercial net sales -4.3% YoY to $15.2M; segment Adj. EBITDA -34.4% YoY to $1.9M; margin fell to 12.5% on input cost pressure (improvement expected in 2H25) .
  • Higher FY25 capex: Guidance raised to $110–$120M (from $85–$95M) due to opportunistic Pennsylvania site purchase; near-term FCF for Q2 was ~$0.7M, reflecting elevated capex .

Financial Results

P&L and Margins (Seasonal progression; oldest → newest)

MetricQ4 2024Q1 2025Q2 2025
Revenue ($M)$348.2 $285.4 $452.2
Net Income ($M)$28.4 $18.1 $54.3
GAAP Diluted EPS$0.19 $0.12 $0.37
Adjusted Diluted EPS$0.29 $0.17 $0.45
Gross Margin %37.3% 36.3% 37.1%
Adjusted Gross Margin %38.4% 37.4% 37.8%
Adjusted EBITDA ($M)$91.8 $65.9 $124.4
Adjusted EBITDA Margin %26.3% 23.1% 27.5%
Net Profit Margin %8.1% 6.3% 12.0%

YoY Snapshot (Q2 vs prior year)

MetricQ2 2024Q2 2025
Revenue ($M)$418.4 $452.2
GAAP Diluted EPS$0.34 $0.37
Adjusted Diluted EPS$0.39 $0.45
Gross Margin %37.5% 37.1%
Adjusted EBITDA ($M)$113.3 $124.4
Adjusted EBITDA Margin %27.1% 27.5%

Segment Breakdown (Q2)

SegmentQ2 2024 Net Sales ($M)Q2 2025 Net Sales ($M)Q2 2024 Seg. Adj. EBITDA ($M)Q2 2025 Seg. Adj. EBITDA ($M)Q2 2024 Seg. Adj. EBITDA %Q2 2025 Seg. Adj. EBITDA %
Residential$402.5 $437.0 $110.4 $122.5 27.4% 28.0%
Commercial$15.9 $15.2 $2.9 $1.9 18.3% 12.5%

Cash, Leverage and FCF (Quarterly)

KPIQ1 2025Q2 2025
Cash & Equivalents ($M)$148.1 $146.7
Undrawn Revolver ($M)$372.7 $372.7
Gross Debt incl. leases ($M)$534.2 $538.4
Net Debt ($M)$386.1 $391.7
Net Leverage (x)1.0x 1.0x
Operating Cash Flow ($M)$13.6 $47.1
Capital Expenditures ($M)$21.6 $46.4
Free Cash Flow ($M)$(8.0) $0.7

Guidance Changes

MetricPeriodPrevious Guidance (Q1 FY25: 2025-02-04)Current Guidance (Q2 FY25: 2025-05-06)Change
Consolidated Net SalesFY 2025$1.52–$1.55B $1.52–$1.55B Maintained
Adjusted EBITDAFY 2025$403–$418M $403–$418M Maintained
Adjusted EBITDA MarginFY 202526.5%–27.0% 26.5%–27.0% Maintained
Residential Net SalesFY 2025$1.452–$1.479B $1.452–$1.479B Maintained
Residential Seg. Adj. EBITDAFY 2025$392–$405M $392–$405M Maintained
Commercial Net Sales (Scranton)FY 2025$68–$71M $68–$71M Maintained
Commercial Seg. Adj. EBITDAFY 2025$11–$13M $11–$13M Maintained
Capital ExpendituresFY 2025$85–$95M $110–$120M Raised
DepreciationFY 2025—~$98–$102M New detail
Interest Expense (Net)FY 2025—~$27–$31M New detail
Effective Tax RateFY 2025~25–26% ~25–26% Maintained
2H Consolidated Sales Growth2H FY 2025—0–4% YoY New detail
2H Adjusted EBITDA Growth2H FY 2025—1–8% YoY New detail
Q3 Net SalesQ3 FY 2025—$413–$429M New
Q3 Adjusted EBITDAQ3 FY 2025—$115–$123M (27.8–28.7%) New
Q3 Residential Net SalesQ3 FY 2025—$396–$410M New
Q3 Res. Seg. Adj. EBITDAQ3 FY 2025—$112–$119M New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4’24, Q1’25)Current Period (Q2’25)Trend
Sell-through & channelQ4: high single-digit Residential sell-through; channel inventories below historical . Q1: double-digit sell-through; channel ~15% below historical days; backlogs 6–7 weeks .Q2: mid-single-digit sell-through; channel below historical; backlogs ~7 weeks .Stable demand; conservative channel inventory.
New productsQ4: launched TrimLogic, Reliance Rail, Fulton Rail; expected incremental growth . Q1: ramp-up investments, new shelf wins .Continued traction; some start-up costs weighed on gross margin .Building presence; near-term margin drag, long-term growth.
Tariffs/costsQ4: net pricing small positive; stable to deflationary inputs . Q1: modest pricing, limited tariff exposure .Tariff exposure ~$12–$15M annualized; ~$4–$6M FY25 impact offset via pricing .Managed via pricing; minimal direct impact expected.
Recycling & M&AQ4: vertical recycling expansion; tuck-ins targeted . Q1: acquired regional recycler (IN) .Acquired Northwest Polymers; vertical integration supports margin expansion .Steady investment; structural cost tailwinds.
James Hardie mergerNot applicable in Q4; deal announced Mar 23 .Management reiterated synergy potential; customer feedback positive .Major strategic catalyst pending close.

Management Commentary

  • “We expanded our net profit margin by 10 basis points year-over-year to 12.0% and Adjusted EBITDA margin by 40 basis points year-over-year to 27.5%, even as we invested in marketing, new production and recycling capabilities.” — Jesse Singh, CEO .
  • “Adjusted EBITDA margins reached 27.5%, a 40 basis point improvement year-over-year and ahead of both guidance and consensus.” — Ryan Lada, CFO .
  • “Channel inventory levels ended the quarter conservatively below historical averages… we are reaffirming our full-year guidance.” — Jesse Singh, CEO .
  • “Tariff exposure on an annualized basis is anywhere between $12 million and $15 million… ~$4–$6 million impact in the year, which we were able to price against with modest increases.” — Jonathan Skelly, President (Residential/Commercial) .
  • “We are highly confident that together [with James Hardie], we will unlock $125 million in cost synergies and $500 million in incremental sales synergies.” — Jesse Singh, CEO .

Q&A Highlights

  • 2H setup and mix: Management expects low-to-mid single-digit Residential sell-through assumptions embedded in guidance (conservative vs current trends), with Deck, Rail & Accessories outgrowing Exteriors; timing of holiday-related channel buys also influences Q3 vs Q4 .
  • Cost/price and tariffs: Aggregate cost bucket steady; modest inflation in additives offset by price; quantified tariff exposure ($12–$15M annual) largely priced through .
  • Channel inventories: Below historical norms; company is managing conservatively to avoid overstocking while maintaining service levels .
  • Recycling strategy: Continued acquisitions/localization; recent acquisition primarily benefits FY26, supporting long-term cost reduction targets .
  • Q3 guide specifics: Consolidated net sales $413–$429M; Adj. EBITDA $115–$123M; Resi net sales $396–$410M; margin 27.8–28.7% .

Estimates Context

  • S&P Global (Capital IQ) consensus for Q2 FY25 EPS and revenue was not available via our feed at the time of analysis; we therefore cannot quantify beat/miss versus Wall Street. Management did state Q2 margin performance was ahead of guidance and consensus, and slides indicated results above the high end of company guidance, but external consensus figures are not provided here .

Key Takeaways for Investors

  • Residential momentum and disciplined execution drove Q2 revenue +8% YoY and Adj. EBITDA margin up to 27.5%; new products and channel gains continue to underpin outperformance vs broader R&R .
  • FY25 outlook reaffirmed; watch for raised capex ($110–$120M) translating into capacity/supply-chain advantages (Scranton facility purchase, recycler acquisitions) and potential long-term margin expansion .
  • Commercial (Scranton) remains a near-term headwind (input costs), with management expecting normalization in 2H25 after pricing actions flow through .
  • Near-term trading lens: Q3 guide ($413–$429M sales; $115–$123M Adj. EBITDA) plus 2H growth framed conservatively (0–4% sales growth) could set up for upside if sell-through holds; channel inventory remains lean .
  • Tariff risk appears manageable (~$4–$6M FY25 impact priced through), and cost backdrop remains stable; any incremental inflation likely offset by pricing/efficiencies .
  • Structural catalysts: Ongoing material conversion, vertical recycling investments, and the proposed James Hardie merger (target close 2H CY25) with significant synergy potential; regulatory and shareholder approvals remain milestones to monitor .

Appendix: Source Documents Reviewed

  • Q2 FY25 8-K Item 2.02 and press release (May 6, 2025) .
  • Q2 FY25 earnings call transcript (May 6, 2025) –.
  • Q2 FY25 earnings slides (May 6, 2025) –.
  • Q1 FY25 press release and call (Feb 4, 2025) – –.
  • Q4 FY24 press release and call (Nov 19, 2024) – –.
  • Merger press release (Mar 23, 2025) –.