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AC

AZEK Co Inc. (AZEK)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 revenue was $348.2M, down 10% YoY due to a ~$35M timing shift and Vycom divestiture, but above consensus and the top of guidance; adjusted EBITDA was $91.8M (26.3% margin) and adjusted diluted EPS was $0.29, with GAAP diluted EPS at $0.19 .
  • Residential sell-through grew high single digits YoY in Q4; channel inventories exited the year below historical averages, supporting conservative staging into Q1 FY25 .
  • FY25 outlook: consolidated net sales $1.51–$1.54B (+5–7%), adjusted EBITDA $400–$415M (+5–9%), margin 26.5–27.0%; Q1 FY25 revenue $260–$266M and adjusted EBITDA $58–$60M .
  • Strategic catalysts: new product platforms (Reliance vinyl rail, Fulton steel rail, TrimLogic PVC trim) expanding ~$2B addressable market, and Capital Lumber distribution partnership in the U.S. West; management flagged potential $10M upside from Western distribution ($5M possibly in Q1) .

What Went Well and What Went Wrong

  • What Went Well
    • Revenue topped both consensus and the top of guidance; Q4 adjusted EBITDA margin expanded +10bps YoY to 26.3% despite lower volumes .
    • Residential sell-through grew high single digits in Q4; Deck/Rail sell-through grew high single digits while Exteriors rose low single digits, showing momentum into FY25 .
    • New platforms (Reliance Rail, Fulton Rail, TrimLogic) broaden price points and materially increase addressable market; “we’re accelerating our market expansion into fiscal year 2025” (CEO) .
  • What Went Wrong
    • Q4 consolidated net sales fell 10% YoY to $348.2M; Residential -6% YoY and Commercial -47% YoY, primarily due to channel timing and Vycom sale; GAAP net income decreased by $10.9M YoY to $28.4M .
    • Quarterly cash generation softened: Q4 cash from operations $60.5M vs $126.6M prior year; Q4 free cash flow $37.8M vs $92.2M prior year .
    • Macro caution persists: FY25 planning assumes flat repair & remodel (R&R); management noted modest Exteriors softness and conservative channel inventories, implying near-term demand normalization rather than acceleration .

Financial Results

MetricQ4 2023Q3 2024Q4 2024
Revenue ($USD Millions)$388.8 $434.4 $348.2
Gross Margin (%)37.4% 37.8% 37.3%
Adjusted Gross Margin (%)38.5% 38.7% 38.4%
GAAP Net Income ($USD Millions)$39.2 $50.1 $28.4
Adjusted EBITDA ($USD Millions)$102.0 $119.4 $91.8
Adjusted EBITDA Margin (%)26.2% 27.5% 26.3%
Diluted EPS ($)$0.26 $0.34 $0.19
Adjusted Diluted EPS ($)$0.33 $0.42 $0.29

Segment breakdown (Q4 2024 vs Q4 2023)

Segment MetricQ4 2023Q4 2024
Residential Net Sales ($USD Millions)$349.7 $327.3
Residential Segment Adjusted EBITDA ($USD Millions)$92.7 $85.9
Residential Segment Adjusted EBITDA Margin (%)26.5% 26.3%
Commercial Net Sales ($USD Millions)$39.2 $21.0
Commercial Segment Adjusted EBITDA ($USD Millions)$9.2 $5.8
Commercial Segment Adjusted EBITDA Margin (%)23.6% 27.7%

KPIs and Balance Sheet

KPIQ4 2023Q4 2024
Cash & Cash Equivalents ($USD Millions)$278.3 $164.0
Gross Debt incl. Finance Leases ($USD Millions)$580.3 LT debt + $6.0 current (gross excludes leases in 10/29; Q4 gross inc. leases below) $529.1 gross debt incl. finance leases
Net Debt ($USD Millions)n/a$365.1
Net Leverage (x)n/a1.0x
Cash from Operations ($USD Millions)$126.6 $60.5
Free Cash Flow ($USD Millions)$92.2 $37.8
Working Capital ($USD Millions)n/a$216.0

Vs Estimates (where disclosed)

  • Management stated Q4 revenue of $348M was above consensus and above the top of guidance range; EPS vs consensus was not disclosed .
  • S&P Global consensus estimates were unavailable via our data connector for AZEK at the time of this analysis; comparisons are anchored to company guidance and management commentary.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent/ActualChange
Consolidated Net Sales ($M)Q4 FY24$329–$345 $348.2 Beat (above top end)
Adjusted EBITDA ($M)Q4 FY24$82–$92 $91.8 In-range (near top end)
Consolidated Net Sales ($B)FY25n/a$1.51–$1.54 New
Adjusted EBITDA ($M)FY25n/a$400–$415 New
Adjusted EBITDA Margin (%)FY25n/a26.5–27.0 New
Residential Net Sales ($B)FY25n/a$1.439–$1.466 New
Residential Segment Adjusted EBITDA ($M)FY25n/a$388–$401 New
Residential Adj. EBITDA Margin (%)FY25n/a27.0–27.4 New
Commercial Net Sales ($M)FY25n/a$71–$74 New
Commercial Segment Adjusted EBITDA ($M)FY25n/a$12–$14 New
Consolidated Net Sales ($M)Q1 FY25n/a$260–$266 New
Adjusted EBITDA ($M)Q1 FY25n/a$58–$60 New
Residential Net Sales ($M)Q1 FY25n/a$247–$252 New
Residential Segment Adjusted EBITDA ($M)Q1 FY25n/a$57–$59 New
Capex ($M)FY25n/a$85–$95 New
Depreciation ($M)FY25n/a~$94–$98 New
Interest Expense ($M)FY25n/a~$27–$31 New
GAAP Tax Rate (%)FY25n/a~27% New
Working Capital (% of Sales)FY25n/a~15% target New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 and Q3 FY24)Current Period (Q4 FY24)Trend
AI/Technology & DigitalDiscussed new Texas recycling ops; heavy R&D and brand investments; no AI mention in Q2; strong digital engagement growth Q3 Hired Chief Digital & Technology Officer (Rakesh Mohan) with technology and AI experience; investing in tech-enabled solutions to expand customer offerings Increasing digital/AI focus
Supply Chain & Channel InventoriesQ2: Channels down ~15% vs historical days; conservative inventory approach; Boise ramping Exit FY24 ~below historical averages; early buy stages typically in Q2; conservative channel positioning in Q1 FY25 Conservative inventory posture maintained
Macro/R&R OutlookQ2: assume flattish R&R; Q3: assume down R&R in Q4; cautious tone FY25 assumes flat R&R; management expects AZEK to outperform via initiatives Cautious macro; company-specific outperformance
Product Performance & MixQ2: Terrain+ decking success, aluminum framing; Fulton rail regional launch; Exteriors growth historically strong but softer in Q3; decking low-teens sell-through earlier in year Deck/Rail sell-through high single digits; Exteriors low single digits; good category growing modestly faster (share pickup), premium robust Balanced portfolio; entry/good regaining share
Regional/DistributionQ3: Doman Canada expansion; shelf gains; Boise utilization Capital Lumber partnership in U.S. West; potential $10M incremental volume first half FY25 ($5M possible in Q1) Expanded Western coverage; near-term upside
Regulatory/Fire ResistanceQ2: CA ignition-resistant designation for premium PVC lines; Class A flame spread Fire-resistance highlighted in portfolio messaging and Good Housekeeping award Ongoing differentiation vs wood in fire zones
Recycling & SustainabilityQ2/Q3: recycling content increases; Texas facility adds pure white PVC sourcing; margin levers include recycling Continued recycling initiatives underpin margin; TrimLogic made with up to 95% recycled PVC Higher recycled content; cost tailwinds
Pricing/CostsQ2: pricing ~flat; stable commodities; conversion cost leverage as Boise ramps FY25 pricing net positive but negligible (<1pt); stable to deflationary commodities Stable pricing; benign cost environment

Management Commentary

  • “The successful execution of our strategic growth initiatives in fiscal 2024 enabled us to deliver high-single-digit year-over-year Residential sell-through growth… Our focus on manufacturing productivity, sourcing savings, recycling and operating leverage delivered net profit margin expansion… and Adjusted EBITDA Margin expansion… to a record 26.3%.” — Jesse Singh, CEO .
  • “During the fiscal fourth quarter, Deck, Rail & Accessories sell-through grew high single digits and Exteriors grew low single digits… Overall Residential segment sell-through grew approximately high single digits, while net sales declined approximately 6% year over year driven by the previously discussed $35 million shift in earlier product purchases…” — Jesse Singh .
  • “Our planning assumptions… imply 5% to 7% year-over-year growth in net sales and 5% to 9% year-over-year growth in adjusted EBITDA… Residential segment… $1.439 billion to $1.466 billion… $388 million to $401 million in segment adjusted EBITDA.” — Peter Clifford, COO/CFO .
  • “We are launching… TimberTech Reliance Rail (vinyl), Fulton Rail (steel), and TrimLogic… made with up to 95% recycled PVC material… expanding our access to nearly $2 billion of market opportunity.” — Management .

Q&A Highlights

  • SG&A investment cadence: Management will reinvest gross margin strength into growth (marketing, sales) and expects modest SG&A leverage in FY25 while supporting new product launches .
  • R&R recovery potential: FY25 guide assumes flat R&R; if broader R&R recovers, AZEK expects incremental benefit; long-term growth stack includes material conversion and outdoor living .
  • Distribution expansion cadence: Western U.S. partnership could add ~$10M, with potential ~$5M upside to Q1; Canada expansion (Doman) increases access and shelf space .
  • Pricing/cost dynamics: Pricing net positive but negligible in FY25; commodities stable/deflationary; margin levers intact (recycling, product reconfiguration, plant leverage) .
  • Inventory staging: Early Buy typically ships in Q2; channel inventories to remain at/below historical days; guidance excludes timing benefit from Western alignment (could be modestly favorable in H1) .

Estimates Context

  • Management indicated Q4 revenue exceeded consensus; EPS vs consensus was not disclosed on the call .
  • S&P Global consensus data were unavailable via our connector for AZEK at the time of analysis; we anchor comparisons to company guidance and call commentary. Where estimates become available, adjustments may include higher FY25 revenue assumptions (given Q4 top-line beat and new distribution/product ramps) and modestly higher margin trajectories tempered by new product ramp costs .

Key Takeaways for Investors

  • Q4 revenue beat vs consensus and guidance top end despite YoY decline, driven by channel timing and Vycom sale; margin discipline held with adj. EBITDA margin at 26.3% .
  • FY25 outlook sets a baseline for 5–7% top-line growth and 5–9% adj. EBITDA growth on flat R&R, with potential incremental upside from Western distribution (~$10M first half; ~$5M possibly in Q1) and Canada expansion .
  • Watch the margin impact of new products (Reliance/Fulton/TrimLogic) during ramp; management flagged modest gross margin headwinds during scale-up, offset by recycling and productivity gains .
  • Inventory posture remains conservative; early buy staged for Q2 and channel inventories below historical averages, reducing near-term destocking risk .
  • Capital structure flexibility: ~$557M remaining under repurchase program at FY-end and net leverage ~1.0x, supporting opportunistic buybacks and tuck-in M&A (esp. recycling assets) .
  • Product/brand momentum: awards (Good Housekeeping), ignition-resistant designation in CA, broadened rail and trim portfolios should accelerate wood-to-engineered material conversion in fire-prone and cost-sensitive segments .
  • Near-term trading lens: revenue beat vs consensus is supportive; guidance consistent and conservative on macro; track Q1 execution on distribution timing, sell-through, and any margin mix effects from new platforms .