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The AZEK Company Announces Record Fourth Quarter and Full-Year Fiscal 2021 Results

General News
AZEK Company Logo - Composite Decking Manufacturer

The AZEK Company Inc. (the “Company” or “AZEK”), the industry-leading manufacturer of beautiful, low-maintenance and environmentally sustainable outdoor living products, including TimberTech® decking and Versatex® and AZEK Trim®, today announced financial results for its fourth quarter and fiscal year ended September 30, 2021.

Fourth Quarter Fiscal 2021 Highlights

– Consolidated net sales increased 31.1% year over year to a record $346.1 million
– Residential segment net sales increased 31.1% year over year to $305.1 million
– Net income increased by $103.0 million year over year to $38.6 million
– Adjusted EBITDA increased $15.4 million year over year to $81.5 million

Outlook Highlights

– Fiscal 2022 Net Sales Outlook – Expecting consolidated net sales growth of mid-teens year over year
– Fiscal 2022 Adjusted EBITDA Outlook – Expecting Adjusted EBITDA growth of high-teens year over year
– First Quarter Fiscal 2022 Outlook – Expecting consolidated net sales growth between 18% and 21% year over year, and Adjusted EBITDA growth of between 14% and 17% year over year

CEO Comments

“The AZEK Company delivered another impressive quarter and year – our first full year as a public company – with record growth in net sales, net income and Adjusted EBITDA. Our team continues to execute against our strategy of delivering long-term, sustainable growth and value creation for our customers, partners, employees, and shareholders,” Jesse Singh, AZEK’s Chief Executive Officer said. “We delivered these results while strengthening our team, increasing capacity and broadening our differentiated product portfolio to increase market share and wood conversion.”

“During the fiscal fourth quarter, we meaningfully improved service to our customers, made progress against our decking capacity expansions, and made additional investments to drive long-term, sustainable growth. End-market demand remains strong, driven by repair & remodel market strength, sustained interest in outdoor living, and an accelerated trend in material conversion to our types of beautiful, long-lasting, high-performance products. Given our confidence in the long-term opportunity, we are adding a fourth phase to our decking capacity expansion program. Cumulatively, our multi-phase expansion program is expected to increase decking capacity by more than 100%, versus a 2019 baseline, by the end of calendar year 2022. We believe this increased capacity will give us industry-leading capability as well as the flexibility to pursue new opportunities and continue our best-in-class service levels in 2022 and beyond.”

“We continue to progress against our key initiatives, including growth through innovation, margin expansion through recycle and continuous improvement programs, and positively impacting the world through our commitments to ESG stewardship. In alignment with our FULL-CIRCLE ESG goals, in fiscal 2021 we diverted approximately 500 million pounds of scrap and waste from landfills through our recycling programs, a 25% increase from approximately 400 million pounds in fiscal 2020. Recycled materials now make up approximately 56% of our extruded product portfolio by weight, and we continue to make progress towards our goal of using one billion pounds of recycled material annually by the end of 2026,” Singh continued.

“We remain excited about the future and believe we are well positioned to capitalize on industry tailwinds and our own value-driven execution. I am thankful to our entire team for their unwavering commitment to supporting our customers and partners and look forward to continued success together in 2022,” Singh concluded.

Fourth Quarter Fiscal 2021 Consolidated Results

Net sales for the three months ended September 30, 2021 increased by $82.2 million, or 31.1%, to $346.1 million, compared to $263.9 million for the three months ended September 30, 2020. The increase was attributable to higher sales growth in both our Residential and Commercial segments. Net sales for the three months ended September 30, 2021 increased for our Residential segment by 31.1% and increased for our Commercial segment by 31.3%, in each case as compared to the prior year period.

Gross profit for the three months ended September 30, 2021 increased by $22.0 million, or 24.4%, to $112.3 million, compared to $90.3 million for the three months ended September 30, 2020. The increase in gross profit was primarily driven by the strong sales results in the Residential and Commercial segments as well as pricing and manufacturing productivity, partially offset by higher costs. Gross margin decreased to 32.4% for the three months ended September 30, 2021, compared to 34.2% for the three months ended September 30, 2020. This was partially due to the continued rise in input costs ahead of price realization. Adjusted Gross Profit Margin decreased 250 basis points to 37.7%, compared to 40.2% for the prior year period.

Selling, general and administrative expenses decreased by $89.5 million, to $60.5 million, or 17.5% of net sales, for the three months ended September 30, 2021, compared to $150.0 million, or 56.8% of net sales, for the three months ended September 30, 2020. The decrease was primarily attributable to lower stock-based compensation expense, partially offset by higher personnel costs, public company costs, professional fees and marketing expenses in the period. This occurred as the Company made investments in selling, marketing and R&D capabilities during the quarter.

Net income increased by $103.0 million to $38.6 million, or $0.25 per share, for the three months ended September 30, 2021, compared to a net loss of $64.4 million, or ($0.43) per share, for the three months ended September 30, 2020. This was primarily due to higher sales growth in both our Residential and Commercial segments, higher gross profit and a decrease in interest expense resulting from the reduced principal amount outstanding under our Term Loan Agreement.

Net margin expanded to 11.2% for the three months ended September 30, 2021, as compared to net margin of (24.4%) for the three months ended September 30, 2020.

Adjusted Net Income increased $5.4 million to $49.8 million, or Adjusted Diluted EPS of $0.32 per share, for the three months ended September 30, 2021, as compared to Adjusted Net Income of $44.4 million, or Adjusted Diluted EPS of $0.29 per share, for the three months ended September 30, 2020.

Adjusted EBITDA increased by $15.4 million to $81.5 million for the three months ended September 30, 2021, as compared to Adjusted EBITDA of $66.1 million for the three months ended September 30, 2020. The increase was mainly driven by higher sales growth in both our Residential and Commercial segments and higher gross profit. Adjusted EBITDA Margin declined 150 basis points to 23.5% from 25.0% for the prior year period.

Fourth Quarter Fiscal 2021 Segment Results

Residential Segment

Net sales for the three months ended September 30, 2021 increased by $72.4 million, or 31.1%, to $305.1 million from $232.7 million for the three months ended September 30, 2020. The increase was primarily attributable to higher net sales in both our Deck, Rail & Accessories and Exteriors businesses.

Segment Adjusted EBITDA for the three months ended September 30, 2021 increased by $17.6 million, or 23.7%, to $91.6 million from $74.0 million for the three months ended September 30, 2020. The increase was mainly driven by higher sales, pricing and manufacturing productivity, partially offset by higher raw material and manufacturing costs and selling, general and administrative expenses. Segment Adjusted EBITDA Margin declined 180 basis points to 30.0% from 31.8% for the prior year period.

Commercial Segment

Net sales for the three months ended September 30, 2021 increased by $9.8 million, or 31.3%, to $41.0 million from $31.3 million for the three months ended September 30, 2020. The increase was primarily attributable to higher net sales in our Vycom business, partially offset by decreased net sales in our Scranton Products business.

Segment Adjusted EBITDA of the Commercial segment was $6.0 million for the three months ended September 30, 2021, compared to $3.9 million for the three months ended September 30, 2020. The increase was primarily driven by higher sales in the Vycom business and net manufacturing productivity, partially offset by higher selling, general and administrative expenses. Segment Adjusted EBITDA Margin expanded 230 basis points to 14.7% from 12.4% for the prior year period.

Twelve Months Ended September 30, 2021 Results

Net sales for the twelve months ended September 30, 2021 increased by $279.7 million, or 31.1%, to $1,179.0 million from $899.3 million for the twelve months ended September 30, 2020. The increase was primarily attributable to higher sales growth in our Residential segment, which grew 35.4%, and 5.3% growth in the Commercial segment.

Net income increased by $215.4 million to $93.2 million, or $0.59 per share, for the twelve months ended September 30, 2021, compared to a net loss of $122.2 million, or ($1.01) per share for the twelve months ended September 30, 2020. This was primarily driven by strong operating results and a decrease in interest expense resulting from the reduced principal amount outstanding under our Term Loan Agreement, the redemption of our 2021 Senior Notes during the year ended September 30, 2020 and lower average interest rates during the year. Net margin expanded to 7.9% for the twelve months ended September 30, 2021, compared to net margin of (13.6%) for the twelve months ended September 30, 2020.

Adjusted Net Income was $152.9 million, or Adjusted Diluted EPS of $0.98 per share, for the twelve months ended September 30, 2021, compared to Adjusted Net Income of $72.6 million, or Adjusted Diluted EPS of $0.59 per share, for the twelve months ended September 30, 2020.

Adjusted EBITDA for the twelve months ended September 30, 2021 increased by $60.7 million to $274.2 million from $213.5 million for the twelve months ended September 30, 2020.

Balance Sheet, Cash Flow and Liquidity

As of September 30, 2021, the Company had cash and cash equivalents of $250.5 million and approximately $146.7 million available for future borrowings under our Revolving Credit Facility. Total debt as of September 30, 2021 was $464.7 million.

Net cash provided by operating activities was $207.7 million for the twelve months ended September 30, 2021, as compared to $98.4 million in the twelve months ended September 30, 2020.

Outlook

“We believe we are well positioned to deliver strong net sales and Adjusted EBITDA growth into fiscal 2022. Consistent with prior years, we are appropriately investing for the future, with continued focus on marketing, R&D and innovation, and new product development as well as increasing capacity to meet both current and future customer demand and improving service levels to our channel partners. We are excited about our progress to date, are confident in our strategy and ability to win, and remain committed to our long-term strategic and financial objectives heading into fiscal 2022,” Singh said.

For full-year fiscal 2022, AZEK expects consolidated net sales growth to increase in the mid-teens year over year. From an Adjusted EBITDA perspective, AZEK expects to deliver growth in the high teens with modest margin expansion year over year, inclusive of the startup costs associated with our capital investment programs. AZEK expects to see leverage on Adjusted EBITDA exiting the second quarter of fiscal 2022 and accelerating through the second half of fiscal 2022.

For the first quarter fiscal 2022, AZEK expects consolidated net sales to grow in the range of 18% to 21% year over year. From an Adjusted EBITDA perspective, AZEK expects to deliver growth in the range of 14% to 17% year over year, inclusive of the startup costs associated with our capital investment programs.

For the full fourth quarter results, click here.

About The AZEK Company

The AZEK Company Inc. (NYSE: AZEK) is the industry-leading designer and manufacturer of beautiful, low maintenance and environmentally sustainable outdoor living products, including TimberTech® decking and Versatex® and AZEK Trim®. Consistently recognized as a market leader in innovation, quality and aesthetics, products across AZEK’s portfolio are made from up to 100% recycled material and primarily replace wood on the outside of homes, providing a long-lasting, eco-friendly and stylish solution to consumers. Leveraging the talents of its approximately 2,000 employees and the strength of relationships across its value chain, The AZEK Company is committed to accelerating the use of recycled material in the manufacturing of its innovative products, keeping millions of pounds of waste out of landfills each year, and revolutionizing the industry to create a more sustainable future. Headquartered in Chicago, Illinois, the company operates manufacturing facilities in Ohio, Pennsylvania and Minnesota, and recently announced a new facility will open in Boise, Idaho.

Contact:

Amy Widdowson – Media Contact – AZEKquestions@zenogroup.com – (650) 597-7132

Source: The AZEK Company, Inc.