The AZEK Company Inc. (AZEK) 28 Nov 232023 Q4 Earnings call transcript

Welcome to The AZEK Company's Fourth Quarter Fiscal 2023 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded. I'd now like to hand the conference over to Eric Robinson. Please go ahead, Eric.

Thank you, and good afternoon, everyone. We issued our earnings press release and the supplemental earnings presentation this afternoon to the Investor Relations portion of our website at investors.azekco.com. was by release the X-K press website. SEC's earnings also an furnished on The and by estimates, our constitute securities Chief about Jesse and today make the that joined I'm Singh, federal we call, within forecasts, our like remind expectations, prospects. may Operating future the during would of this Peter statements Chief remarks Chief Officer statements Officer. I laws, and that plans including Financial certain to beliefs, everyone forward-looking Clifford, Officer; Executive meaning Such with are variety that risks and statements to to subject of our Commission results and a in described differ periodic uncertainties materially. could Exchange the as cause actual reports filed Securities to We statements. such forward-looking do duty not undertake update any

believe measures A useful is These such for can our our can performance. Additionally, a not or accordance should which evaluating with be GAAP. on Reconciliations earnings press non-GAAP today's during we we will in non-GAAP call, considered prepared website. release, in posted substitute discuss be as our of in be results found isolation in measures which financial non-GAAP measures,

the turn call to Jesse Singh. AZEK me let Now CEO, over

Good quarter, growth and record a results once strong again net thank this adjusted EBITDA XX% quarter AZEK fourth joining profit you delivered The XX.X%. afternoon, us. sales margin net year-over-year, team a a XX.X% of including for and of margin

I'm revenue growth the second net was productivity growth. fourth expansion delivering in approximately team year-over-year, X% navigate uncertain our sales eighth year. proud commitments. The adjusted and in of year in The the quarter market Our outperformed an initiatives Residential grew EBITDA and driving of significant against the team to XX.X% business delivering an against by of consistently able above-market straight margin by and AZEK very how half resulting in deliver

million and returned AZEK of cash of uncertain efficiency allocation growth free continued million leading Exteriors disciplined Rail and driven overall Deck, market. flow repair year, focus double-digit each repurchases. in share an sales business outperformed capital generation and cash Our remodel Residential shareholders conversion and was $XXX our sell-through working in through delivered to which Accessories and performance by throughout categories, expenditures, in and $XXX capital fiscal including our the capital strong on &

growth Pro channels our saw both we We initiatives. execution our from Residential Retail of in the as and benefited our

gains In our and in results rail living. trend space core we and aluminum outdoor and addition Exteriors growth, our to saw new decking shelf in products and business from great planning

year XX% X% of XXXX segment's fiscal XX% fiscal top XXXX Residential XXXX. in Our year-over-year is sales in fiscal stacked growth growth on and net growth in

year inventory the a calendar business similar basis, On unwind in in XXXX the XX% X% results channel. calendar calendar and within growing with XXXX our see we during

We calendar expect continue this in this year. to growth

guidance and of expect quarter in not We calendar our highlights the The of also our midpoint XXXX, Residential specific but the double resiliency model. to grow approximately we our end XXXX. only growth December of believe this subsegment would unique the Assuming segment calendar for AZEK digits capability year-over-year that

XXX we team XX% and levels benefits the we production of and of excellent basis significantly, initiatives delivered to fourth while adjusted by of improved fiscal Our XXX marketing our execution gross as increased on realized reinvesting basis margin margins EBITDA margin and XX.X% to quarter operations branding. and productivity points expansion adjusted points delivering in

year-over-year. And expenditures free a to continue the and generated focus. $XX million, quarter, growing in $XX be conversion disciplined we million flow capital of Cash cash fourth

the flow generation cash supported of quarter repurchases. worth approximately free $XX share during million strong Our

managing levels our levels finished Channel we to inventories fiscal have and been high inventory maintain conservatively positioned year-end, our service. proactively of through goods are

inventory continuing to below the cadence historical lower our and managing with business inventory lead channel as operated times and and operating addition, has averages. partners In needed normalized with purchase

achieve growth position in simplifies October, markets the sheet our business and AZEK month. the on Vycom to a move of and further In future outdoor and business, is opportunities closed manufacturing. leader this This Vycom our We in businesses a puts earlier is a great also and success. margin our strategic and plastic we that transaction industrial portfolio residential our focuses remodel the both announced repair strategic sale better which believe with associated in living higher segment.

and in we our also to margin approach strategy, growth a As take stated portfolio revenue expansion.

options our successfully Boardwalk TimberTech of including products, TimberTech launched in Landmark along PVC Composite new and and railing Advanced During we Exteriors in expansion portfolio. XXXX, an Chestnut with reserves Reclaimed

XXXX Championship Exteriors hundreds the valuable building Bevel Substructure hosted TimberTech opportunity in new Aluminum Among discussions, Composite Siding. products AZEK partners and product season. contractor launches, dealer where gather TimberTech new of improved introduction event Champions new and Horizontal Railing and these our recently Infill PGA Cable are of we We preview the Collection, and to feedback engage Terrain+ TimberTech our TOUR new the TimberTech the and our new for Framing, had

and an and our products strong expanding offering are strengthening style, expanded with homeowner the We position of position that contractor increase with efficiency. already performance productivity our the better and labor with design Pro with

are Our these the partners products. opportunity about created excited new by

and and to PVC of Exteriors continued our in decking on amount progress content During our the our use the products. recycled initiatives year, increase we we Advanced TimberTech make recycle

[ reach trim of We as new and expanded partners. and our and Lumberman's geographic prefinishing solutions high the recycled content, PaintPro Wassa siding ] welcome also prefinished

our new momentum prefinished products brand and our for XXXX. on well expansion us slate of to from to to in and as provide trim high-quality both Northeast Washington The are increases XXXX the as games awareness we from space state. capitalize Overall, enables positioned shelf siding the well

recognized pleased also be quarter. to this past We several workplace are for awards

for named first the and in a best For work category the XXXX time, construction U.S. company materials AZEK to by was

as year top workplace in Chicago a World a the & Report News well for row. as third

pleased further AZEK's shared as position we're team One to of employer and an values is be for actions choice. the and core wins, commitments recognized of strengthening goal our our best towards the

growth we year-over-year look margin brand, and growing our see towards to we we business metrics confident with Key continued the during long-term and TimberTech continue As digital consumer and our leads interest sample orders deliver expansion. website quarter. in our showing XXXX, and elevated engagement above-market ability strategy in are growth traffic, highlight to fourth

of been Outdoor popular living the home #X spaces XX last remodel most the have the ranked years American Architects. to for according exteriors Institute

October busy Our and outlook have for dealer in a surveys contractor remain XXXX. indicate quarterly they growth and cautious Pro

to normal. have backlogs of add is their some sales overall anecdotally, that and continue indicated Contractors returning process X approximately a prepandemic weeks to

existing and dealers, of to continue our more and In to we wood of access share network, market allowing expand incremental our conversion. addition stability contractors drive to and us the the

contractors over added by education under program and our Pro we brand. continued XXXX, loyalty of the awareness TimberTech driven the fiscal In and composite X,XXX category

to residential as customer such demand and metrics see our year positive begin surveys digital growth we We remain indicators sell-through constructive as XXXX. fiscal continue and the

to see acknowledge continue potential uncertainty, repair indicators, and macroeconomic we continued demand confidence market. the mixed we the for consumer favorable While slower and remodel a

margin material expansion, market, fiscal with channel market we repair a expect to new outperform to record EBITDA including driven residential opportunity provide down fiscal the grow to AZEK's with historical initiatives. our opportunities our and us by XXXX consistent initiatives, will our XXXX. flat customer business for continue Our planning journey innovations conversion, We would specific that assume track sales and believe and and business product an to remodel our year assumptions in model, combined

basis. on segment of Commercial Vycom sales by For the $XXX million. million in the business to annualized billion million of will an $XX AZEK to $XXX the that adjustment account, full reduce $XX the Taking and EBITDA expects of sale consolidated fiscal million net EBITDA $X.XXX year the into XXXX, and adjusted adjusted we approximately in range that $X.XXX sales expect range approximately billion by

to our for to would sales XX% the year-over-year and growth adjusted Vycom Adjusting more continue to our will to we on Peter and XX% X% guidance growth. opportunity provide drive expansion. sale, as year-over-year the see EBITDA above-market growth X% guidance margin net context imply

to additional provide on some call I will our context turn financial to now and results the over outlook. Peter

Jesse, and everyone. good afternoon, Thanks,

a As website. Eric portion the of Relations beginning the supplemental have presentation at the call, uploaded we our earnings Investor highlighted on of

the in into cumulative moment to environment I were offered the November digesting on at the an operating year. rate we XXXX, interest to reflect the When the a sentiment. back time past results, repair year XXXX was Fed's take both market and we the spend get want the quarter we Before consumer uncertain impact and fiscal of of and in remodel hikes unknown our fourth planning assumptions

upside slowdown? expected? environment, channel an the better efficiency Could in conversion the and Could At seize capacity conversion guidance, and the we repurchase a service best-in-class inventory time of material would effectively of deflationary conservatively for of program deflation would and expected Could a levels? keep to market both getting perspective to cash plants were drive a we strong hold we see were down questions advantage take support in dislocations? our the around, to manage than we continue market? manage our we Would pricing our a

outperform On all fiscal to of business XXXX. expectations able was these points, effectively in The manage the AZEK and team

our maintain of fiscal by set up, commitments. business development and react commodity of decking generation we're at us the during service. and And industry-leading we pricing allowed sustain to sum strong a while product year. a results quickly finally, uncertainty, we're manufacturing the it healthy growth we ambitions We capacity continuing the To to support period in challenging and initiatives targets exceed material and production led all repurchase the share and cash appropriately costs, ramping Our stronger normalized to continued to managed able for and new season to our those more environment. able year conversion, outset have to

And we deliver have fiscal to we XXXX. XXXX this once execution credibility encounter about demonstrated backdrop. upon XXXX, in fiscal economic talk a confidence similar again backdrop, Despite when the fiscal in and based we we

continue As to the front, during up Jesse see fourth we in positive our quarter, environment demand business. a residential mentioned

the backlogs X positive and of are results sell-through believe these awareness in season brand benefits brand our remained strong, remained digital quarters we stable and time, already the have weeks. our KPIs investments. the the last At used investment been contractor year. quarter for to Sell-through We and reaping and strong same equally X we accelerate at continue approximately the to through and the both

normalized up XQ the an to fiscal production perspective, albeit 'XX returned lapping the From substantially operating levels fourth reduction. channel to in year-over-year inventory the due our large of quarter,

levels our during to service $XX continue inventory down by year-over-year year reduction million. drawing while inventory strong executing against We the maintain quarter full plan, own

us helped our growth, sell-through savings, coupled front, residential record On remained with EBITDA costs raw the the costs quarter. meaningfully supporting execution and recycling stable conversion material of initiatives our fourth input savings. key lower double-digit strong combination achieve material have materials at commodities against adjusted during margins The

the The segment. fiscal our increased XXX% For gross our to quarter by was grew XX% $XXX.X we offset the year-over-year XQ guidance was million, fourth year-over-year declines partially $XX.X Commercial profit by of quarter fourth in XXXX, million. above residential expectations. strength the sales driven million to $XXX.X segment, 'XX by growth which in by or net

million XX% adjusted by XQ $XX.X $XXX.X profit year-over-year or gross to increased million.

basis deflation, percentage utilities year-over-year XXX primarily a manufacturing $X adjusted finish at initiatives onetime profit material driven productivity, Our by reimbursement and increased productivity adjusted million. against gross execution gross profit The material XX%. cost approximately increase margin was to of points

make by EBITDA $XX.X awareness. bulk our increased driver up SG&A utilities $XX.X approximately driven $XX deflation, EBITDA adjusted million, quarter the in expenses million of $XXX.X productivity was marketing to XX% primary investments of points to million. The increased and continued a basis investment adjusted to offset brand in $X partially for of Adjusted was onetime branding. year-over-year fourth the rate and in by manufacturing EBITDA XXX productivity, against quarter to impact initiatives margin the or material year-over-year The and million, year-over-year by million year-over-year the continued material for of execution increased commitment by marketing change XX.X%. the the cost reimbursement increase

Adjusted million by or $XX increased Net $XX.X the quarter diluted per quarter of increased million million million per share. share. fourth $XX.X net $X.XX $X.XX EPS fourth income income $XX.X to for or the adjusted by to for

results. segment for sales our quarter fourth $XXX Now net million, up year-over-year. to the segment was XX% turning Residential

smart growth & Deck, some segment, destocking we our positive Accessories during the both Residential StruXure and navigated the in while Within Rail Exteriors pergola business year. saw

quarter basis Residential came million, fourth year-over-year. Residential segment segment adjusted for EBITDA the EBITDA at up $XXX in adjusted points to were margins XX.X%. up XX% year-over-year approximately XXX

approximately previous These year-over-year. Vycom down quarter $XX.X in down at with XX% segment commentary million Commercial quarter's in year-over-year. were our sales line sales segment, net $XX.X for million, our Commercial results and million, were $X.X Within the came Net expectations.

came segment, EBITDA EBITDA our to in the backdrop, adjusted quarter of despite the $X.X million. to million, demand million the for XX.X% a segment segment $X.X Vycom hold is Commercial Within important Commercial adjusted a $X.X EBITDA softer at It our able for we in margins note, at year-over-year. quarter. decrease are was

million, which plus $XXX receivable with included $XX approximately ended flow From million million down of and available Working $XXX the ended borrowings perspective, a approximately defined accounts and $XXX gross cash as $XXX We million capital we million, AP balance the finance inventory with million equivalents year-over-year. $XXX leases. sheet quarter of cash credit for minus under was our revolving facility. debt cash of and future quarter

fourth stood at million during at an million Net increase from cash quarter, $XX the of the the operating fourth debt million, activities ratio of and X.Xx Net $XXX end was leverage net $XXX quarter. our year-over-year. was

$XX quarter expenditures for Capital the were million. approximately

year For increased flow the XXXX, $XXX to Free full by fiscal million cash million. $XXX year-over-year

As worth shares of expected, quarter at our a repurchase per during with were share the share. of average $XX program. we $XX.XX approximately Repurchasing million weighted active

our fiscal repurchase of be position, share strength to expect quarter our active the in with the we cash Given again activity. first

approximately authorization program the $XXX a remaining is reminder, under repurchase share our As million.

Our allocation priorities the same. capital remain

look both in we we to As we opportunistically. we communicated, And continue previously and to our extent repurchase excess to inorganically. cash will flow, invest shares business, will have the organically

let context and for some are me assuming upcoming on outlook, As year. provide color fiscal to we the turn what we the

a we the business Vycom announced of Commercial As segment's reminder, divestiture XXXX. October our in

expenses within reporting all Starting segment, from corporate residential combine and in commercial reporting reporting a Products the the fiscal Scranton we XXXX to perspective, continue to into we'll expect segment. report

compare We new this peers. fellow Residential products the combines in residential EBITDA change EBITDA believe reporting investors easily plus our words, residential expenses. will business other help with adjusted segment In definition segment corporate more building

million assist with Vycom Net fiscal ended year sales $XX respectively. modeling, the million, and $XX at To adjusted and EBITDA XXXX

As length agreement will total an arm's supply a approximately sheet expenses impact a products between Vycom we and associated to result of divestiture, supply new Scranton incur with with the additional assumptions year. fiscal per reflected fiscal will EBITDA XXXX, a the transaction, approximately million which is impacted in $X XXXX. be million, our of for as by result planning Adjusted $XX for of

XX% cash $XX and in due an Vycom taxes approximately million million to rate the the tax to sale communicated, previously As approximately $XX will result to for of effective XX%. in of XX% quarter to XX% the gain to first the on the on from sale a sale. full effective transaction, Normalized tax rate is the XX% the effective year. gain the Vycom approximately rate the And tax exclude

heading we I into also XXXX, known that our the revisit headed fiscal wanted communicated to adding carryover previously tailwinds to and confidence conviction the have year. into

the over XXXX. discussed about underutilization we we fiscal negative in XXXX, expect a half not in of first the quarters, million we've from past $XX impact what fiscal approximately reoccur which to experienced reminder, As few of

approximately of sheet, flow P&L known XXXX. tailwind continue and expect growth through million, currently invest carry we also of balance The business in by some will and $X to modestly in the which marketing deflation Vycom million deflation activities. approximately underutilization reduces in the will our sale We to carryover on $XX

we 'XX, million from experienced we headwind $XX which side, inventory reoccur the fiscal year of channel to to net million sales expect XXXX. on approximately revenue that prior not in XQ recall reductions, in Finally, $XX our

fiscal the With XXXX. planning move assumptions to that context, let for me

be full single are down will year to digits. repair flat and the low assuming that We for remodel

above-market to control, in and skills we ability our in execution continue our drive are to items the growth. confident For

We carrying into initiative AZEK-specific wins XXXX. over are

billion year, to of to the 'XX lap XXXX, and midpoint channel approximately revenue these our to fiscal reduction, us inventory X% sum adjusted gives to $XXX assumptions. by in million confidence The sales in our will assumptions net our ability $XXX million which XQ $X.XXX We at in drives for impacts the grow assumptions our planning of residential planning carryover high-level in the $X.XXX and EBITDA. billion year-over-year growth

sales to adjusted Vycom growth for growth our guidance X% X% year-over-year XX% imply would in Adjusting sales, year-over-year the XX% and range to net EBITDA.

$X.XXX X% segment, assumptions to $XXX the is EBITDA, EBITDA X% Our as to earlier. year expenses to sales growth combining for $X.XXX million adjusted residential net million $XXX and to segment in adjusted XX% and our segment reporting billion sales billion planning residential segment mentioned in representing growth when year-over-year with XX% corporate

this assumptions invest marketing the $XX the consistent of publicly million, to $XX earlier, capital X% following: $XX million; are and we in expecting target are we're with we range to $XX XX% to year; of our revenue; for expect performance, approximately stated X% CapEx reduction million depreciation brand million expecting year of rate strong to the A are us few to $XX expenditures detailed and of growth-oriented the other targeting approximately we gross awareness full of include million margin in continue XX%. of initiatives; enabling $XX a working capital to approximately to GAAP as finally, we tax year expecting million of for

For posted Relations to presentation assist modeling planning refer our 'XX, the additional earnings assumptions website. please to we fiscal Investor have on with supplemental

Before operating provide to expect quarter, context I the the we wanted our 'XX. environment on for in to guide first we fiscal turn XQ

winds a which, we growth quarter, the country of expecting are the as quarter smaller For as to down mid- we high season. much sell-through building the in know, is single-digit seasonally range. the

with to year's we staging inventory remain line perspective, behavior. channel an the expect From conservative last in

of the of this the As which shelf upcoming period inventory and positions negotiates building industry the ahead the space year reminder, in season. the is channel a in stages

that majority ship will in in own our fiscal conservatively second volume fiscal channel all and of the proactively known and this are assuming buy Channel build, goods our levels to early positioned inventory fiscal ships otherwise inventory service. XQ. of maintain our we quarter, inventories were finished are historically effectively of levels we at managing year-end, AZEK as high

As a million of of $XX margin perspective, and to the fiscal year's in a reduction are reminder, million approximately prior $XX we to 'XX approximately we carryover $XX from deflation quarter. lapping million have including XQ lapping From channel inventory underutilization of benefits, $XX million first million. $XX the expect a approximately

to Vycom revenue into factors $XX to guidance these $XXX million the million EBITDA. million year-over-year imply guidance sales in sales, net our $XX Adjusting Taking adjusted in the adjusted $XXX range million for would and for year-over-year consideration, is million our quarter $XX in and to growth EBITDA. XX% $XX growth million XX% to

We are business. expecting effective is the Vycom again, which, gain result quarter, XX% of the to higher a approximately the an XX% sale as tax rate of for of on

for Our excited, some us closing the the fiscal to back prepared and tackle XXXX. front I'll in to engaged team of now remarks. environment Jesse in that, turn well is With call

Pete. your like The members, partners Thanks, to strong the I contribution and year. supplier again channel for thank and dedicated team a AZEK contractors Thank and would finish Company. you our fiscal support to that

material We long-term opportunity in. remain large the of and exteriors AZEK living plays market the in us conversion and excited that ahead about incredibly home outdoor fast-growing

annual and segment over remarkable Our XX.X% last the and of XX.X% continued years. business X years delivered a compounded capability. has The resiliency growth residential growth has XX last the over to rate show

opportunities industry-leading us. our of our and significant XXXX ahead growth position, margin of Our the our fiscal reflect initiatives, strategic of strength on markets results focus resiliency the expansion year the

allocation cash a strong Our great participate in growth capital in us share in repurchases. opportunistically puts and flow opportunities position generation a to free invest perspective from

begin a any expansion on excellence and as focus margin fiscal year above-market XXXX. us team's condition in operational to of drive growth Our strength position we market across puts

line for With questions. that, the please open operator,

Baird. Your of the from question Instructions] [Operator from comes Tim line first Wojs

just starting on the Maybe sales of guide. kind

X%. residential at X% So guiding the I midpoint, about X%, guess an growth market, you're in R&R X% maybe to down it's

So X% to X% outgrowth.

to outperformance what's kind at come visibility Or initiatives? have the 'XX, what does that pieces be Maybe is is in of do internal, you really going eyes in internal talk about kind fiscal just a it you better from if market this of can it to? really and of there And point. your big

The X% a X the really wins Yes, from points lap. last the Peter. and both our Tim, And would shelf maybe now, the year that initiatives there, this is is inventory space half commercial other more little about is say Pro of right then from carryover I of geography X% than initiatives. is And Retail. and that at of

of I of guess, Okay. some Good. kind of growth, anything I just than I'm of peers guys some what on is 'XX just representative of I mean, sell-through gains, the think in unique investments reporting. or kind kind just you that's faster it's then anything, of if really it your And are are there in wondering fiscal shelf chunky of there's shelf space, just space making. was some the on double-digit there

to bit way, the much. too a By voice I've customers apparently, my for talking apologize I been

So volume relative had about, normalized we've to your pretty question, or most of were talk the you that feathering expansions pickups in.

our added in which at some then cases position, benefits obviously, last in. as we it so in we it the out, of lot to added a middle being last in sell year. the month-to-month. some expand just year, And of of as think you huge amount a it cases of incrementally should And not beginning yields pointed A there's of is Pete position,

And start of you see move in the and channel. highlighted, we sell-through in you'll just forward. Retail both core benefit we the our Pro to as saw double-digit growth So as both channels,

line from from the comes Keith of question next Hughes Truist. Your

a the stand? Building a in talk happening the around what's of kind you on these I conservative in guess just is, of quarter fiscal the something slowed? Can is this mid-single about periods? has double-digit And first comps or coming you question is talked that, sell-through function take quarter Or digits. up.

we've seen now. the any And we question the the that described quarter. a quarter. this more a fourth sit appropriate natural There's December last a kind average be slowdown month Have given we continue to of Yes. it a from as of seen things quarter. to just we would of we go light in I think what it's where in tends as We through quarter we conservative assume this end say moved as into

things consistently we in growth. would do that with use But as we incremental And for best X in volume, last double-digit -- even more last some to have X that the see probably general, can to the if continued months mean, manage channel. we pretty months sell-through conservatively I inventory happen

And Okay. -- Is the that customers, that your you're out replace point door. customers ordering at are we're to the going your things just distributor correct?

Yes. Yes.

One final question. In expecting the reported were quarter seen in your Or are volumes? the growth or is guidance, in price? all have described you here you any

think negligible of positive, You the be and kind for should to price quarter is negligible again year... both year but modestly

Bouley next the Matthew question from of comes Your Barclays. from line

on Sticking hear I that a you've carryover outperformance wins is on year. actually sort Did growth of the of next end you market of the lot that just say built outperforming same kind of of the last topic some year. that of the

sort Day carryover of of Is speaking that for about annual internal wins, additional new line case, Investor just reminiscent things that of the have you beyond question do to your that as kind growth. of that are the there potential spoke room of that, out you additional new that's roll if above-market of business year, through drivers of things like is sight so products where to? And you're for you my kind kind

bit secured confident opportunity. little first, feel pretty carryover some we an us I that additional then the got have Pete give the will modest, -- we of on lapping carryover, where carryover point inventory Yes. wins we've of and we've a as already mentioned,

continue then And top on that, expect we our drive to to of initiatives.

specific growth think focus percentage. a the plane to the we're trying way specific a number our I land on you above-market think or driving not should of at is

our particular range to an those think feel us and achieve given always already we focus us. We're And to comfortable many intent you we execution our and allow given that I to the incremental this and ahead announced see going able expanding of in that uncertain drive a overperformance. to we're portfolio. to we're is products market giving access continue case, number some of of positions. new We that on constantly adjacencies a

assume think for And just planning into move we is we an something should you We're so bigger. next appropriate you always striving what we're assumption giving year. as

Got it.

just materials. there. the about from mixing one, recycled to to recycling outlined greater material potential Again, uplift back usage thinking and had the Day, towards going progress Investor you Second guys of margins

question is, and for year, what's are where benefit in recycled about of on towards guide kind EBITDA thinking my from next that you materials? now that implied mixing So the bridge around

we same, and thing Levers same basis year that of the each here guys are expansion in this Peter. right? expect is you Day every still Matt, said the ultimately, Yes, end of the period. we XX we and and forward. to back We preview throughout about kind that quarter. actually as gave Investor we've achieved lean the went updated points margin of that it back of The That's XXXX and what at would XXXX, kind of the kind went through

the recycled and We've got down. to is trim. to recycle, content, cost to which increased well reduce the across opportunity primarily obviously X to categories, move opportunity recycled convert materials those have just our the we deck grades cap composite all cheaper opportunity, as product And PVC

is So recycling for we feel again, innovation. more really iteration good, us, than about

to of we levers other pull. a And have Pete certainly, of we said pointed elements points we deck, basis And productivity. number investor we so of point our opportunity, put year, as in of we'll them, out. our recycling look demonstrated relative certainly but that we've that I drive quarter, last as margin one a can think that, as XXX think the the to you another in XX is at continue to benefit, we've added should And just a minor on what

Ng comes Jefferies. next the Your question of from Philip from line

lap rest a on year. guidance Pete, the for and to finish correctly, is XXXX, assuming your you're initiatives. X% heard you quarter inventory commercial Congrats I the if strong

conservative. pretty seems that So

sounds it fourth sell-out, to mid- the high quarter like single is Your in digits.

wins So that comps, function -- full Is moderation. assuming just sounds you products some your like sellout? implicitly past year? this on add you what in are new assuming And year this year of the some that it's sales a for of it guide,

what the potential I than -- there is now. planning our is I we're say, assuming some bit seeing assumption to would be against the that what slower market for a planning in Yes. assumption we're

given stage, macroeconomic slowdown at plan for to it's And the appropriate R&R and we to think in environment, the data potential become more a negative. this

you assuming So at just way and this the less look we're numbers modestly all were. next that's market of should is really constructive year, how the a

year you've I when think managed Okay. of upbeat. On you was the that kind more done the little conservatively, right? channel color your a survey, us was generally note, given all channel Jesse, you've

So more when next what were your done bought managing How kind are of for buy? they they I'm your early and kind [ survey, expecting, you've of they kind a are XXXX? kind conservative Like year? how of is communicating XXXX ]? partner through anticipating calendar year, the in Last growth channel curious outlook they or year for their of more little -- the for

partners, together Yes. with to categories next the year, the what wide to in they in product. they channel you they see is year variety can we Obviously, right opportunity think look year were you a a the think we're flattish our of as midst in But our I if execute now. I outgrow conversations flattish if aggregate tell out of

macro the that's So view.

that and Now that position. against we're make they're serviced them really good working sure with in a that, well to being they're

are relative to going how year, think normal look at And would last we're early pretty conservative. buy. folks a to of I this as So year

more that. sitting not aggressive. think I'm on going be going they're conservative. be I'm saying of more we're top they're to not saying well I to

what a really they to and pretty matter I buy level. and when consistent at think it's it a of be will choose pattern,

feedback from the flat we that with unique general, aggregate our positive and in outgrow have that. of the channel recognition in think potential to a one ability of I a is But

question from next comes Michael Your the of from JPMorgan. Rehaut line

expecting I just conservatism to first you mid- against to if side. bit the wanted channel on back are heard up first sell-through the in single residential a little And quarter. the high to circle a digits little of inventory bit the right, I

shift is I we into that So be that quarter? the second something that in effect should to guess, expecting,

better of moderate the relative for I a to that the looking progresses bit as the cadence that -- way to want quarter. understanding just Is the number to sell-through about first I'm kind first you're And that in a growth second might correctly the it like -- year half? to to think you be have sounds in sure maybe the Is the year more quarter. right little and for make

I to on guide would the quarter. early start probably it's say, Mike, to too second

channel can think sure months with the to appropriate if I job XX necessary, has over we're to and an level. particular, so doing good in that make conservative inventory last really operate intent a service of been our that X our

now that of we as that in first lapping had We're 'XX. at end the the quarter

with year We channel but still situation and to growth. to able good, expect flattish a last in support be

given just volume And and January we'll we sell-through And quarter quarters, we got visibility, that through visibility February, the progresses. see in then sit. move relative we've to pretty good got look as how at we good And assumptions, backlogs. we've as the obviously, directional

to planning is And just plan trying the what do. a against so that, assumption. beyond the What market everything you're market could is and conservatively gauge do

an now really the EBITDA right our not just is about year. ability we're and against. we're out top May, in March, laying in think good I game what's to going particular, to next in that we assumption of feel both What of prediction deliver happen appropriate April, on planning So our June

a something and that, couple about little over guess, average get bit years, last wondering marketing and to a think better platform, think you over gain planning as different from to obviously have if to the I term, margin X margins about that if Okay. years, of understand X this those continued for performance. SG&A of thinking secondly, I'm the of share EBITDA is to think, example. made leverage well. Would over as would couple relative might I the ultimately, I consider incremental a next you you how kind And you continue investments? love of And -- initiatives I'm continues you the or category above the assumptions, overall able pergolas strong build you acquisitions, full out about your and be kind year appreciate investment out longer time. the to of for investment year highlighted in Jesse. gross fiscal brand just

simple a way. real Yes. I it in put will

the I an to the in business. this have if to opportunity continue think year, room we invest we have

not We've XX, not we've benefit a move probably -- you're marketing that, beyond on might is our XX, you as leverage. organization. in assumption a our contribute substantial SG&A. investments current from and sales that leverage it it. going you're negative seen of points see So anything, to made If out XX I basis pretty But think

really We lever being But should as 'XX. that. to mode. You think to through It's could choice. leverage really it's chose is expect get 'XX right should we'll lever we more start position we our pull. But of off if that that decide investment that get how a We leverage to. now, year a move an this in into certainly I

over think Resi time so we incremental for therefore, And EBITDA the should how business? about margins

but please I as think SG&A beyond move should I chime think you of being this positive think year, year, move once beyond Pete, this in, should and to you leverage. what

here, Yes. We but outperform looking of we the it investment 'XX, years, as that's a as as near years. to expect look, term forward the peers. bps most we're well there would And opportunity in much happen is, the part leverage market possibly every XX past thesis clearly won't said continuing as look, most year, as

keep So we want that to momentum.

John question Lovallo the next UBS. comes from of from Your line

increases mentioned 'XX business guide. ability slight be the mean of growth is you to context a sort And that that flat the of pricing one low to the year Pete, in in is, first your XXXX are kind on the Is over in thinking the good relatively similarly, maybe outlook you material The that story? a of changed about XXXX? drive conversion going more thoughts price single-digit how algorithm, guys of time? then of fiscal I to have

Yes.

'XX. here for in traditional kind by to net costs do on Look, -- programming modest X some traditional piece. in annual the backdrop Look, over a now of We some more taken will expect price of price on conversion, pace again the did years. pull cycle up think that still conversion. we've it for pattern. And clearly X at or I gross And happen. pricing had as the all on was the It to lot as down the And to start. of about the happen It's First we'd architects. more increases year that every 'XX a upon far Does does. offset basically questions levers was net our again, we at program pricing product-by-product pricing beginning one is we XXXX performance. a answer a we it slow kind still was sector be It's the look, that the to feel of negligible opened a that's really of based resolute return last comfortable, wake that kind and it converting contractors. influencing morning, same we again, know of conversion the the the the to

sure and consumer the making shelf and right simplifying fighting see journey. space launches for can the we're So product the we in product educating people that got new the so

as both follow-up, like Retail and good. then Makes the were sounds pretty Pro both channel sense. a And in demand it

mix impact you down, consumer has got a any the has you've if little will, bit waned mix on the of and curious seen on kind side, extent. as some confidence to if maybe more economy challenging Just

underpenetrated on calls, right, we our constraints the due we pandemic. been capacity Yes. during in Generally the mix speaking, the product last out X has really as good to were category, called stable,

Prime capacity, here this year and in that obviously some share ample picked good relaunched category. with up we've we've Prime+ As

resiliency is see John, and to in one see the there. continue to I to we think think of our Pro, more see highlight premium. And to And it data. tend of predominantly tend I are you you that, we just things skew all we as pretty strong

our to well. do more premium continue products -- good Our

And been in growing, you is amount in some areas pretty equity at that share equity then pick up pointed of premium what think a and I level. able the expect holdings that as But sits stable values. more out, fair be has entry wealth through economy and the incremental we've Pete to an continue which reality, might to home

from Your comes Maklari from question Goldman Sachs. next line of the Susan

everyone. evening, you. Good Thank

is the of X% of question about range that first the think take to higher versus that when you would about growth end X%, The talk environment to or the for range you next lower next that the the year you gave factors we end can sales year?

to to digits of lower it be negative. ultimately, R&R would mid-single at mean, have is that I the low Yes. of end kind

came more has Can should as the the bit, then anything it of thinking about be there? for when talk And And prepared the the right. products it new of up some seems next rail perhaps about quite that we than opportunity you thinking All Okay. a and years? about like year, maybe the talking initiatives about remarks, in in past. we couple next how think of you're you're

opportunity in which bought rail We PVC all I'll rail take of rail company. super Clearly, a -- highlighted rail that close-in year, multiple bought that good an is another markets, in that. We a XXXX. of we Yes. company is of see Susan, We at them. company our last aluminum tail part we business. in premium play end and the

really both and have upgrading by it. And we've also acquisitions, reinvested our simplifying and core reinvented growth it really, we but nice portfolio seen those from

broad to expect in with And so really having we've at for that we growth in really, to would look had use incredibly And that had the that we're rail growth market. to we positioned us, company. XXXX, as as be overall continue we've would accretive uniquely and expand nice portfolio continue expect that to the the we our to would an portfolio, position

the question of comes next from RBC line from Markets. Mike Your Dahl Capital

tailwinds. cost the on one First

side? million production seeing on on you're just articulated Pete, I And to you XX% deflation stay you -- So talked for material down benefits deflationary in about ]? are known potential more that Vycom continue for work Can and today this known tailwinds, what there sheet. that on account $XX into balance a mats you additional raw and where elaborate in cycle that, being the if raw the they you you your maybe into you to cycle [ comes that deflation think, the divestiture. when is But

what's are half kind a relatively increases the commodities the front an remain planning the and year. have expectation back year input of on from to modest few in perspective view expected of the Mike, kind in embedded look, Yes, the flat with the costs of is, assumptions of all stabilized

So CDI publications the of industry it's from [ kind of is sort the ]. steady sort view state of

Okay.

the you total, where today? at fully we're encompass So $XX million think

if And does. It you year. dropped the remember, after started very right sharply we commodities

been X they really, the in fast of here dropped of So they kind months. to we've last sideways X stabilized couple and then and right for

idea But roll question, My Okay. the maybe second I up divestiture of the Vycom when all think the when into the I out. the segment. reporting initial to announced, came Residential misinterpreted was this was release

corporate putting into and in changed but expenses into you're remaining separate commercial. Scranton Products what do has keeping on Scranton Anything that to business? Products Now your resi, read with of intent terms to whether the

that building look, mean, most to compare I to think way space for us it peers are make that follow us interested in the I most product us to residential. Yes. obviously a folks folks was easier within it our for

it So put together. those seemed logical two to pieces

question comes Bank next of America. Jadrosich Rafe from Your of line from the

Great.

trends categories you decking that sellout the exterior quarter? in just then assuming are And each ask, versus them? talk wanted you about to your in what of outlook can you First, for last saw I the

I of out think a any parsing we're to At Yes. out we next specific were high as and And positive. year, not business. them level, similar both look roughly

side. conversion we've wood products new a number we've we've drive products side. on Accessory Rail And that Deck, & highlighted the Exterior the on and help got opportunity new As got will also conversion us of

in we've So nice both seen sell-through of them. growth

just earlier buy. early the then on And on it. some Got the comments following up of

-- effectively, but ship the normally, year, that historically the impact of has that your the this you of fell fiscal some in in buy? buys quarter. what other mentioned would first second to is there the first in year of a in rough it's then but in portion a quantify second early And sales You quarter, all What's the quarter, come -- assumption? way the of can typical going it majority

wasn't for to of catalyst product in the I'll as used mean, of because quarter capacity over don't of will on of Obviously, again, in part really it last any the years, the we the our be why in the have was all need there's feel quarter. with capable a the moving that first now, the first I Yes. second it shipments of happen question catalyst kind virtually in to second it X the sort really, take needed for like supplying much of of look, the and as the quarter most expansions second fiscal what capacity is, that's to XQ the quarter.

to percentage, talked then relative about haven't we And that. the

most drive part winter well growth important customers I our to the with is of think the this throughout ourselves negotiation year. position that we

partnership for part So of valuable most partners. with our discussion going to work the mutual this the us, channel grow our of is businesses we're how to together

it important up is does the gives pretty do respect, that it revenue year. good within quarter. quarter are the us visibility discussions the in set What the on and And to

in the another have impact move so in into our fiscal as to, quarter begin staging really January and see the we've we'll as quarters. X the that season they're talked year third competitors -- then October And quarter and and quarter And we and our and past the quarters are really, real quarter. about end fourth

Inc. comes Trey question next of Your the from Stephens Grooms line from

Trey. This for Merkousko is on Noah

from production I first, just continuing to up margins. follow here. sounds It maybe wanted ramp So like on to gross

the that in deflation the You've half. roll back highlighted front the off the and will half of 'XX of raw kind fiscal help year material

would moderate kind the about consider way as think we you'd the are Is guess other half? Or there back that 'XX? here? think -- margins half then be items it right of expect about in and the to to front stronger gross I we should So in

what year-over-year, half consistency the the Obviously, of 'XX. on back or first gross we're then in the this with meaningfully to assume margin of half be accretive would of half I the is second given performance the of year in And expect kind going year, lapping.

comparable number continuing you SG&A, a move when in like on expect pretty is then year? percent And would higher? sales, a investments sense. But as of prevent you meaningfully make makes sounds That 'XX. it. my which 'XX leverage follow-up, to would that SG&A to it Got in think Or about

We're flat to It modestly not be leverage. expecting negative negative. will significantly

Jesse maybe it's think XX probably said, bps. reasonable As to

it. Got That makes of luck Good the sense. the rest year. for

on puts to any as on we us look And about feel range the And XX. it. we that a that that can that by good we we ability about XX.X our we that, path last at XX-plus get really talked margin, depends on that talk EBITDA towards comment volume. deliver in really Appreciate scenario, that that into

needed. as with us Take tell, excited quarter. for we ahead how and with you we thanks for it. so all Appreciate joining with thank to care, ended we're pretty joining. chat the And the We it look that, of about you off-line as feel us. can and forward of -- pleased what's rest feel And

This you concludes today's your may now call. and conference participation, disconnect. for Thank you