Executive Summary

Record Q3: Net sales $434.4M (+12% y/y), net income $50.1M (11.5% margin), Adjusted EBITDA $119.4M (27.5% margin) and Adjusted EPS $0.42; strength driven by residential execution, operating leverage, productivity, and materials savings .
Guidance: Reaffirmed H2 outlook; raised the bottom end of FY24 guidance to net sales $1.422–$1.438B (prior $1.407–$1.438B) and Adjusted EBITDA $370–$380M (prior $364–$380M); FY24 Adj. EBITDA margin now 26.0%–26.4% (prior ~25.8%–26.4%) .
Mix/timing: ~$35M of channel purchases pulled into Q3 to ensure in-season service; Q4 guide bakes in a ~$35M headwind and mid-single-digit residential sell-through; exteriors softness (Northeast) continues near term .
Capital allocation: New $600M buyback authorization (June), $50M ASR executed (approx. 1.2M shares); Q3 cash from ops $195.1M and FCF $177.5M, net leverage 0.8x – enabling opportunistic repurchases .

What Went Well and What Went Wrong

What Went Well
- Above-market residential growth: Residential net sales +18% y/y to $416.0M; Deck/Rail/Accessories sell-through grew double-digits; overall residential sell-through mid-single digits despite a down R&R market .
- Margin execution: Gross margin +380 bps y/y to 37.8%; Adjusted gross margin +350 bps to 38.7%; Adjusted EBITDA margin +260 bps to 27.5% on operating leverage, productivity, and material savings .
- Cash generation and balance sheet: Q3 operating cash flow $195.1M; FCF $177.5M; net leverage 0.8x; ample liquidity with $346.9M cash and $147.8M revolver availability .
- Strategic channel/product progress: New Doman distribution partnership expands TimberTech in Canada starting 1/1/2025; 2024 product launches include Terrain+ Composite and Aluminum Framing; initial launch of galvanized steel Fulton Rail .
- Management tone: “Record financial results” with continued confidence to “outperform the market” and deliver long-term margin expansion through AZEK-specific initiatives .
What Went Wrong
- Timing pull-forward: ~$35M of channel purchases shifted into June, boosting Q3 and reducing Q4 by ~9% of sales; Q4 guide reflects this headwind .
- Exteriors softness: Market-driven weakness (notably Northeast) contrasted with strong Deck/Rail/Accessories; exteriors expected flat to down modestly near term .
- Non-GAAP add-backs include restatement costs: “Other costs” included $4.9M related to financial statement restatement in Q3; investors should monitor recurring/non-recurring adjustments .
- Macro caution: Management assumes a down R&R market through FY24; choppiness in broader construction economy persists .

Financial Results

Metric	Q1 2024	Q2 2024	Q3 2024
Revenue ($USD Millions)	$240.444	$418.0	$434.369
GAAP Diluted EPS ($)	$0.17	— (not disclosed in available docs)	$0.34
Adjusted Diluted EPS ($)	$0.10	— (not disclosed in available docs)	$0.42
Gross Margin %	38.0%	—	37.8%
Adjusted Gross Margin %	39.6%	—	38.7%
Net Profit Margin %	10.7%	—	11.5%
Adjusted EBITDA ($USD Millions)	$55.667	—	$119.420
Adjusted EBITDA Margin %	23.2%	25.3%–25.6% (prelim)	27.5%
Revenue vs S&P Global Consensus	N/A (consensus unavailable)	N/A (consensus unavailable)	N/A (consensus unavailable)
EPS vs S&P Global Consensus	N/A (consensus unavailable)	N/A (consensus unavailable)	N/A (consensus unavailable)

Notes: S&P Global consensus estimates for AZEK Q3 FY24 were unavailable via our tool at this time; therefore, beat/miss vs estimates cannot be assessed.

Segment breakdown (Q3 FY24)

Segment	Net Sales ($M)	Segment Adjusted EBITDA ($M)	Segment Adjusted EBITDA Margin
Residential	$416.009	$116.965	28.1%
Commercial (Scranton Products)	$18.360	$2.455	13.4%

Key KPIs (Q3 FY24)

KPI	Value
Cash from Operations	$195.075M
Free Cash Flow	$177.521M
Cash & Cash Equivalents	$346.948M
Gross Debt (incl. finance leases)	$666.611M
Net Leverage	0.8x
Share Repurchases	~$50M ASR (~1.2M shares)

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Consolidated Net Sales	FY 2024	$1.407–$1.438B	$1.422–$1.438B	Raised bottom end
Adjusted EBITDA	FY 2024	$364–$380M	$370–$380M	Raised bottom end
Adjusted EBITDA Margin	FY 2024	~25.8%–26.4%	26.0%–26.4%	Slightly higher low end
Residential Net Sales	FY 2024	—	$1.351–$1.365B (+10%–12% y/y)	New detail
Residential Segment Adj. EBITDA	FY 2024	—	$358–$367M	New detail
Scranton Net Sales	FY 2024	—	$71–$73M	New detail
Scranton Adjusted EBITDA	FY 2024	—	$12–$13M	New detail
Capex	FY 2024	$90–$95M	$90–$95M	Maintained
Consolidated Net Sales	Q4 FY 2024	—	$329–$345M	New
Adjusted EBITDA	Q4 FY 2024	—	$82–$92M	New
Adjusted EBITDA Margin	Q4 FY 2024	—	24.9%–26.7%	New
Other Q4 Assumption	Q4 FY 2024	—	~$35M revenue timing headwind from Q3 pull-forward	New

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 & Q2 FY24)	Current Period (Q3 FY24)	Trend
Material conversion & above-market growth	Emphasis on double-digit residential sell-through; 5–7 pts above market target; shelf gains in pro/retail	Continued outperformance; double-digit DRA sell-through; mid-single-digit residential sell-through overall	Steady to improving
Manufacturing productivity & recycling	Margin roadmap; higher recycled content; Boise ramp; Texas recycling facility to expand sourcing	Margin expansion from utilization, product configuration, sourcing, materials savings; Boise fully commissioned; recycling content rising	Improving
Exteriors vs DRA	Positive but mixed; capacity additions for siding; exteriors grew at times	Exteriors softness, esp. Northeast; expected to remain softer near term	Moderating
Channel inventory & timing	Conservative channel inventories below historical avg; plan to rebuild modestly; staging for season	~$35M pulled into Q3; Q4 inventory drawdown to or below historical averages	Short-term timing headwind
Macro/R&R outlook	Flattish R&R assumed in FY24; steady contractor backlogs/sentiment	Assume down R&R through FY24; still mid-single-digit sell-through in Q4; pent-up demand thesis	Slightly more cautious
Pricing	Flat for FY24; modest increases likely in 2025	Pricing not a focus near term; cost levers dominate	Neutral
Retail channel & Canada expansion	Retail shelf gains highlighted; DRA POS strong; planned investments	New Doman partnership for Canada distribution in 2025; retail penetration opportunity persists	Expanding

Management Commentary

“The AZEK team delivered record financial results this quarter… net profit margin expansion of 260 bps y/y to 11.5% and Adjusted EBITDA Margin expansion of 260 bps y/y to a record 27.5%” – CEO Jesse Singh .
“We are reaffirming our outlook for the second half… and raising the bottom end of our full-year guidance… demonstrating our confidence in our ability to outperform the market” – CEO .
“Channel partners purchased approximately $35 million of product earlier… we are adjusting our fiscal fourth quarter assumptions given the timing” – CEO .
“Production levels were up double digits… drove strong utilization and cost absorption… adjusted gross profit margin increased 350 bps to 38.7%” – CFO Peter Clifford .
“We completed a $50 million ASR in June… remaining authorization under our share repurchase program is approximately $625 million” – CFO .

Q&A Highlights

Channel timing and inventories: ~$35M of sales timing into Q3 tied to 4th of July calendar and strong demand; inventories ended Q3 at historical averages; expected at/below historical by year-end .
Exteriors softness & outlook: Weakness concentrated in Northeast; expect exteriors flat to modestly down while DRA remains above mid-single-digit growth .
Margin levers in a weaker macro: Significant remaining runway in recycling, conversion costs, Boise utilization, lean/sourcing; potential modest SG&A leverage longer term .
Retail and Canada expansion: Retail under-indexed but accretive; Doman partnership facilitates Canadian shelf gains and 2025 growth .
Pricing & R&R: Pricing not a major driver near term; focus is on growing 5–7 pts above market regardless of R&R; R&R assumed down in Q4 FY24 but unlikely to be negative for three years in a row .

Estimates Context

S&P Global consensus for Q3 FY24 EPS and revenue was unavailable via our tool at this time; as a result, we cannot assess beat/miss versus Wall Street estimates. If needed, we can refresh once S&P mapping issues are resolved.

Key Takeaways for Investors

Durable execution: Residential momentum, product/channel initiatives, and cost programs delivered record margins and FCF; room remains to extend margin expansion in FY25 .
Guidance floor raised: FY24 bottom-end raise (sales/EBITDA) and Q4 guide reflect prudence on macro plus known ~$35M timing headwind; FY24 EBITDA margin now 26.0%–26.4% .
Mix and cycle insulation: Premium/pro-heavy mix and retail/channel gains mitigate R&R softness; DRA strength offsets exteriors weakness; watch Northeast exteriors recovery .
Capital allocation optionality: 0.8x net leverage, strong cash generation, and large repurchase authorization set up continued buybacks into FY25 .
2025 set-up: Boise utilization tailwind, 2024 launches (Terrain+, Aluminum Framing), Fulton Rail rollout, and Doman distribution support continued share gains in 2025 .
Risk monitors: Macro R&R trajectory (Q4 down assumption), exteriors regional softness, and non-GAAP adjustments (restatement/legal/other costs) .

Appendix: Additional Supporting Details

Q3 consolidated highlights: Net sales $434.4M (+12% y/y); Adjusted net sales ex-Vycom +18% y/y; Net income $50.1M; Adjusted net income $62.0M; GAAP EPS $0.34; Adjusted EPS $0.42; Adjusted EBITDA $119.4M (+24% y/y) .
Segment detail: Residential net sales $416.0M (+18% y/y), Segment Adjusted EBITDA $117.0M (+33% y/y); Commercial net sales $18.4M (–49% y/y) post-Vycom divestiture .
Q4 guide specifics: Revenue $329–$345M; Adjusted EBITDA $82–$92M; margin 24.9%–26.7%; ~$35M channel timing headwind from Q3 .
FY24 segment guide: Residential net sales $1.351–$1.365B (+10%–12% y/y); Segment Adj. EBITDA $358–$367M; Scranton net sales $71–$73M, Adj. EBITDA $12–$13M .
Liquidity/FCF: Cash $346.9M; revolver availability ~$147.8M; Q3 FCF $177.5M; TTM Adjusted EBITDA ~$389.5M; net debt ~$319.7M .

Sources: AZEK Q3 FY24 8-K and press release, earnings call transcript, and related press releases .

AZEK Co Inc. (AZEK)·Q3 2024 Earnings Summary