The AZEK Company Announces Third Quarter Fiscal 2022 Financial Results
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, Versatex® and AZEK Trim® and StruXure™ pergolas, announced financial results for the third quarter ended June 30, 2022 of its fiscal year 2022.
Third Quarter Fiscall 2022 Highlights
- Consolidated net sales increased 20.6% year over year to $395.0 million
- Net income increased 26.2% year over year to $27.5 million
- Adjusted Net Income increased 11.3% year over year to $45.2 million
- EPS increased 28.6% year over year to $0.18
- Adjusted Diluted EPS increased 11.5% year over year to $0.29
- Adjusted EBITDA increased 19.0% year over year to $86.5 million
- Fiscal 2022 Net Sales Outlook – Expecting consolidated net sales between $1.327 to $1.353 billion, inclusive of a recalibration of channel inventory
- Fiscal 2022 Adjusted EBITDA Outlook – Expecting Adjusted EBITDA of $295 to $307 million, inclusive of startup costs
“We delivered another strong quarter of net sales growth, led by solid in-season demand, and Adjusted EBITDA growth, including outperformance in our margins driven by our operational execution and recycling initiatives, combined with pricing actions offsetting material inflation,” said Jesse Singh, AZEK’s Chief Executive Officer. “We saw continued demand from our channel partners, sustained contractor backlogs and positive sell through over a strong comparable period in 2021. Our contractors continue to be busy and consumer interest in our TimberTech decking is driving strong digital lead and sample order activity growth,” commented Mr. Singh.
“As we move into fiscal Q4, we have seen some signs of demand moderation versus the prior year and our service levels have returned to historical norms, as we have benefited from increased capacity and improved operational execution. We saw the channel begin to recalibrate late in the third quarter and we are working with our dealer and distributor partners to reduce their inventory levels primarily in fiscal Q4 2022 and into fiscal Q1 2023. We believe this will better position AZEK and our channel partners to drive continued expansion of our market position in fiscal year 2023. We are proactively managing the business from a cost and capital perspective and will remain nimble in our execution while maintaining focus on delivering our long-term growth and margin expansion goals,” continued Mr. Singh.
“We made notable progress against our strategic initiatives during the quarter, including investments in our brand and consumer journey as evidenced by strong customer engagement and double-digit growth in our digital leads and sample orders activity. Our sales efforts continue to convert more contractors and channel partners to the AZEK family. Last month, we released our second annual FULL-CIRCLE ESG report, which highlights how ESG is central to both our purpose and growth as a Company. A key part of our ESG journey is accelerating our use of recycled materials, which has the added benefit of reducing our costs,” said Mr. Singh.
“We continue to deploy capital in a disciplined manner and supplement our existing core markets with strategic acquisitions. We are proud to announce the acquisition of INTEX Millwork Solutions, LLC in early August. INTEX® is a provider of high-quality railing solutions, column wraps, and pergolas that strengthens AZEK’s existing Railing and Exteriors portfolios with similar material science targeting wood conversion. The acquisition continues our inorganic momentum in fiscal 2022, as our previously announced acquisition of StruXure continues to exceed our expectations and expand our industry-leading position with customers and contractors alike. During the quarter, we also returned value to our shareholders by repurchasing $58 million worth of Class A shares as part of our recently announced share repurchase program,” continued Mr. Singh.
“We play in incredibly attractive categories that are driven by repair and remodel and material conversion. We are in the early stages of a multiyear expansion and conversion within our markets and are as excited as ever about the compelling long-term growth and margin expansion opportunity in front of us,” said Mr. Singh.
Third Quarter Fiscal 2022 Consolidated Results
Net sales for the three months ended June 30, 2022 increased by $67.5 million, or 20.6%, to $395.0 million from $327.5 million for the three months ended June 30, 2021. Net sales for the three months ended June 30, 2022 increased for our Residential segment by 17.8% and increased for our Commercial segment by 43.3%, in each case as compared to the prior year period.
Net income increased by $5.7 million to $27.5 million, or $0.18 per share, for the three months ended June 30, 2022 compared to $21.8 million, or $0.14 per share, for the three months ended June 30, 2021.
Net margin expanded to 7.0% for the three months ended June 30, 2022, as compared to net margin of 6.6% for the three months ended June 30, 2021.
Adjusted EBITDA increased by $13.8 million to $86.5 million for the three months ended June 30, 2022, as compared to Adjusted EBITDA of $72.7 million for the three months ended June 30, 2021. Adjusted EBITDA Margin declined 30 basis points to 21.9% from 22.2% for the prior year period. As previously guided, Adjusted EBITDA Margin included approximately 100 basis points of near-term dilution due to capacity startup costs and the impact of our recent acquisition of StruXure.
Adjusted Net Income increased $4.6 million to $45.2 million, or Adjusted Diluted EPS of $0.29 per share, for the three months ended June 30, 2022, as compared to Adjusted Net Income of $40.6 million, or Adjusted Diluted EPS of $0.26 per share, for the three months ended June 30, 2021.
Balance Sheet, Cash Flow and Liquidity
As of June 30, 2022, the Company had cash and cash equivalents of $159.6 million and approximately $147.2 million available for future borrowings under our Revolving Credit Facility. Total debt as of June 30, 2022 was $664.3 million. During the quarter, the Company repurchased approximately 3.0 million shares of its Class A common stock for an aggregate purchase price of approximately $58 million.
“As we look forward, we continue to make progress on our recycling and AIMS continuous improvement initiatives, and experience strong price realization. We expect these actions to meaningfully contribute to our fourth quarter results. We are as excited as ever about the compelling long-term growth and margin expansion opportunity in front of us. We have an attractive, resilient business model, with multiple levers to drive growth and margin expansion that we believe can outperform in any economic environment,” concluded Mr. Singh.
For full year fiscal 2022, AZEK expects consolidated net sales between $1.327 billion to $1.353 billion, inclusive of the impact from acquisitions. From an Adjusted EBITDA perspective, AZEK expects to deliver $295 million to $307 million, inclusive of the startup costs associated with our capital investment programs and the impact from acquisitions. AZEK expects Adjusted Diluted EPS between $0.95 to $1.01 per share. AZEK expects capital expenditures to be closer to the low end of our $180 million to $200 million range.
For the fourth quarter fiscal 2022, AZEK expects consolidated net sales between $276 million to $302 million, inclusive of the StruXure acquisition. From an Adjusted EBITDA perspective, AZEK expects to deliver $59 million to $71 million, inclusive of startup costs and the impact from acquisitions. AZEK expects Adjusted Diluted EPS between $0.15 to $0.19 per share.
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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® and StruXure™ pergolas. Consistently recognized as a market leader in innovation, quality and aesthetics, products across AZEK’s portfolio are made from up to 90% 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, Idaho, Georgia, Nevada, New Jersey and Minnesota.
Eric Robinson – Investor Relations Contact – email@example.com – (312) 809-1093
Source: The AZEK Company, Inc.