Capacity Coming Online and Improved Service Levels Drive
Strong Start to Year; Successful “Early Buy” Strengthens AZEK’s
Position Heading into Selling Season; Entered High Growth Adjacency
with StruXure Acquisition
FIRST QUARTER FISCAL 2022 HIGHLIGHTS
- Consolidated net sales increased 22.3% year over year to $259.7
million
- Residential segment net sales increased 19.1% year over year to
$221.1 million
- Net income increased by $6.6 million year over year to $16.7
million
- Adjusted EBITDA increased $10.1 million year over year to $58.5
million
OUTLOOK HIGHLIGHTS
- Increasing Fiscal 2022 Net Sales and Adjusted EBITDA Outlook,
inclusive of recent acquisitions; reaffirming Fiscal 2022
pre-acquisition guidance
- Fiscal 2022 Net Sales Outlook – Expecting consolidated net
sales growth of 17% to 21% year over year, inclusive of recent
acquisitions
- Fiscal 2022 Adjusted EBITDA Outlook – Expecting Adjusted EBITDA
growth of 18% to 22% year over year, inclusive of recent
acquisitions
- Second Quarter Fiscal 2022 Outlook – Expecting consolidated net
sales growth between 24% and 27% year over year, inclusive of
recent acquisitions, and Adjusted EBITDA growth between 17% and 20%
year over year, inclusive of startup costs and the impact from
recent acquisitions
The AZEK Company Inc. (the “Company” or “AZEK”) (NYSE: 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, today announced financial results for the first quarter
ended December 31, 2021 of its fiscal year 2022.
CEO COMMENTS
“We begin fiscal 2022 in a position of strength with incremental
capacity coming online leading to meaningfully improved service
levels for our customers,” Jesse Singh, AZEK’s Chief Executive
Officer, said. “In combination with an innovative and
differentiated product portfolio, we are pursuing opportunities
that expand our channel, geographic footprint, and customer
relationships. Our successful Early Buy performance coupled with
our strategic initiatives give us confidence for the full
year.”
“We continue to see strong momentum in our business and our
leading indicators point to ongoing market expansion. During the
quarter, we continued to invest in our strategic initiatives and
completed two acquisitions. In December, we acquired StruXure
Outdoor, a designer and manufacturer of high quality and innovative
aluminum pergolas and cabanas. StruXure’s products are a natural
complement to our TimberTech portfolio, drive wood conversion, and
are already being installed together by contractors across North
America. We are excited to add a business like StruXure, which we
believe can grow at or above our Residential segment growth rates.
In November, we acquired a regional recycler with strengths in
material sourcing, processing, logistics and scrap management. This
acquisition complements our existing recycling efforts and will
help to advance our goal of recycling one billion pounds of waste
and scrap annually by the end of 2026. We are excited to welcome
these two teams to the AZEK family,” continued Mr. Singh.
“AZEK’s momentum is driven by a clear and focused strategy to
revolutionize outdoor living and to create a more sustainable
future. We continue to see strong underlying market demand driven
by positive demographic trends, an increasing focus on outdoor
living, and the ongoing desire to convert from wood to our types of
low-maintenance, high-performance alternative materials. We are on
track to meet and exceed our long-term goals and we remain
confident in our ability to deliver above market sales growth and
core margin expansion during fiscal 2022,” Singh said.
FIRST QUARTER FISCAL 2022 CONSOLIDATED RESULTS
Net sales for the three months ended December 31, 2021 increased
by $47.4 million, or 22.3%, to $259.7 million, compared to $212.3
million for the three months ended December 31, 2020. The increase
was attributable to higher sales growth in both our Residential and
Commercial segments. Net sales for the three months ended December
31, 2021 increased for our Residential segment by 19.1% and
increased for our Commercial segment by 44.8%, in each case as
compared to the prior year period.
Net income for the three months ended December 31, 2021
increased by $6.6 million to $16.7 million, or $0.11 per share,
compared to $10.1 million, or $0.07 per share, for the three months
ended December 31, 2020. This was primarily due to higher sales and
gross profit in both our Residential and Commercial segments.
Net margin expanded to 6.4% for the three months ended December
31, 2021, as compared to net margin of 4.8% for the three months
ended December 31, 2020.
Adjusted EBITDA increased by $10.1 million to $58.5 million for
the three months ended December 31, 2021, as compared to Adjusted
EBITDA of $48.5 million for the three months ended December 31,
2020. The increase was primarily driven by higher sales growth in
our Residential and Commercial segments as well as higher gross
profit. Adjusted EBITDA Margin declined 30 basis points to 22.5%
from 22.8% for the prior year period.
Adjusted Net Income increased $5.6 million to $28.8 million, or
Adjusted Diluted EPS of $0.18 per share, for the three months ended
December 31, 2021, as compared to Adjusted Net Income of $23.1
million, or Adjusted Diluted EPS of $0.15 per share, for the three
months ended December 31, 2020.
FIRST QUARTER FISCAL 2022 SEGMENT RESULTS
Residential Segment
Net sales for the three months ended December 31, 2021 increased
by $35.5 million, or 19.1%, to $221.1 million from $185.6 million
for the three months ended December 31, 2020. The increase was
primarily attributable to higher net sales in our Deck, Rail &
Accessories and Exteriors businesses.
Segment Adjusted EBITDA for the three months ended December 31,
2021 increased by $10.7 million, or 18.1%, to $69.4 million from
$58.8 million for the three months ended December 31, 2020. The
increase was mainly driven by higher sales, partially offset by
higher raw material costs, manufacturing costs and selling and
marketing expenses. Segment Adjusted EBITDA Margin declined 30
basis points to 31.4% from 31.7% for the prior year period.
Commercial Segment
Net sales for the three months ended December 31, 2021 increased
by $11.9 million, or 44.8%, to $38.6 million from $26.6 million for
the three months ended December 31, 2020. The increase was
primarily attributable to higher net sales in our Vycom and
Scranton Products businesses.
Segment Adjusted EBITDA was $4.7 million for the three months
ended December 31, 2021, compared to $3.3 million for the three
months ended December 31, 2020. The increase was primarily driven
by higher sales in the Vycom business as well as net manufacturing
productivity. Segment Adjusted EBITDA Margin declined 10 basis
points to 12.3% from 12.4% for the prior year period.
BALANCE SHEET, CASH FLOW and LIQUIDITY
As of December 31, 2021, the Company had cash and cash
equivalents of $66.1 million and approximately $146.7 million
available for future borrowings under our Revolving Credit
Facility. Total debt as of December 31, 2021 was $465.0
million.
OUTLOOK
“We have started the year strong, with a successful “Early Buy”
period, the launch of several new products and increased capacity
that has led to improved service levels across our business. We
continue to see a strong market and material conversion momentum
within both Decking and Exteriors. Our TimberTech line of decking
has the most natural looking, highest-performance products on the
market, and we expect to sustain our broad-based growth. Our
Exteriors business is realizing the benefit of our focused sales
efforts and new products that have accelerated wood conversion.
Combined with ongoing strategic capital, recycling and people
investments, we are on track to deliver strong net sales and
Adjusted EBITDA growth through the balance of fiscal 2022,” Singh
said.
For full-year fiscal 2022, AZEK expects consolidated net sales
growth to increase 17% to 21% year over year, inclusive of the
StruXure acquisition. From an Adjusted EBITDA perspective, AZEK
expects to deliver 18% to 22% Adjusted EBITDA growth year over
year, inclusive of the startup costs associated with our capacity
investment programs.
For the second quarter fiscal 2022, AZEK expects consolidated
net sales to grow in the range of 24% to 27% year over year,
inclusive of the StruXure acquisition. From an Adjusted EBITDA
perspective, AZEK expects to deliver growth in the range of 17% to
20% year over year, inclusive of startup costs and the impact from
acquisitions.
CONFERENCE CALL INFORMATION
AZEK will hold a conference call to discuss the results today,
Thursday, February 3, 2022, at 9:00 a.m. (CT).
To access the live conference call, please register for the call
in advance by visiting
https://conferencingportals.com/event/kqzNUoaC. Registration will
also be available during the call. After registering, a
confirmation e-mail with dial-in details and unique conference call
codes for entry will be sent. To ensure you are connected for the
full call please register at least 10 minutes before the start of
the call.
Interested investors and other parties can also listen to a
webcast of the live conference call by logging onto the Investor
Relations section of the Company's website at
https://investors.azekco.com/events-and-presentations/.
For those unable to listen to the live conference call, a replay
will be available approximately two hours after the call through
the archived webcast on the AZEK website or by dialing
1-800-770-2030 (toll free) or 1-647-362-9199 (toll). The conference
ID for the replay is 63923. The replay will be available until
10:59 p.m. (CT) on February 17, 2022.
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 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.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This earnings release contains forward-looking statements within
the meaning of the safe harbor provisions of the United States
Private Securities Litigation Reform Act of 1995. All statements
other than statements of historical facts contained in this
earnings release, including statements regarding future operations
are forward-looking statements. In some cases, forward looking
statements may be identified by words such as "believe," "may,"
"will," "estimate," "continue," "anticipate," "intend," "could,"
"would," "expect," "objective," "plan," "potential," "seek,"
"grow," "target," "if," and similar expressions intended to
identify forward-looking statements. Projected financial
information and performance, including our guidance and outlook as
well as statements about our future growth and margin expansion
goals, are forward-looking statements. Other forward-looking
statements may include, without limitation, other statements with
respect to our ability to meet the future targets and goals we
establish, including our environmental, social and governance
targets, and the ultimate impact of our actions on our business as
well as the expected benefits to the environment, our employees,
and the communities in which we do business, statements about
potential new products and product innovation, statements regarding
the potential impact of the COVID-19 pandemic, statements about
future pricing for our products or our raw materials and our
ability to offset increases to our raw material costs and other
inflationary pressures, statements about the markets in which we
operate and the economy more generally, including growth of our
various markets and growth in the use of engineered products as
well as our ability to share in such growth, statements about
future conversion opportunities from wood and other materials and
our ability to capture market share from such opportunities, and
all other statements with respect to our expectations, beliefs,
plans, strategies, objectives, prospects, assumptions or future
events or performance contained in this earnings release are
forward-looking statements. We have based these forward-looking
statements primarily on our current expectations and projections
about future events and trends that we believe may affect our
financial condition, results of operations, business strategy,
short-term and long-term business operations and objectives and
financial needs. These forward-looking statements are subject to a
number of risks, uncertainties and assumptions, including those
described in the section titled "Risk Factors" set forth in Part I,
Item 1A of the Annual Report on Form 10-K for fiscal 2021 (our
“2021 Annual Report”) and in our other filings with the U.S.
Securities and Exchange Commission. Moreover, we operate in a very
competitive and rapidly changing environment. New risks emerge from
time to time. It is not possible for our management to predict all
risks, nor can we assess the impact of all factors on our business
or the extent to which any factor, or combination of factors, may
cause actual results to differ materially from those contained in
any forward-looking statements we may make. In light of these
risks, uncertainties and assumptions, the future events and trends
discussed in this earnings release may not occur and actual results
may differ materially and adversely from those anticipated or
implied in the forward-looking statements. You should read this
earnings release with the understanding that our actual future
results, levels of activity, performance and events and
circumstances may be materially different from what we expect.
These statements are based on information available to us as of
the date of this earnings release. While we believe that such
information provides a reasonable basis for these statements, such
information may be limited or incomplete. Our statements should not
be read to indicate that we have conducted an exhaustive inquiry
into, or review of, all relevant information. We disclaim any
intention and undertake no obligation to update or revise any of
our forward-looking statements after the date of this release to
reflect actual results or future events or circumstances whether as
a result of new information, future events or otherwise, except as
required by law. Given these risks and uncertainties, readers are
cautioned not to place undue reliance on such forward-looking
statements.
NON-GAAP FINANCIAL MEASURES
To supplement our earnings release and consolidated financial
statements prepared and presented in accordance with generally
accepted accounting principles in the United States, or (“GAAP”),
we use certain non-GAAP performance financial measures, as
described within this earnings release, to provide investors with
additional useful information about our financial performance, to
enhance the overall understanding of our past performance and
future prospects and to allow for greater transparency with respect
to important metrics used by our management for financial and
operational decision-making. We are presenting these non-GAAP
financial measures to assist investors in seeing our financial
performance from management’s view and because we believe they
provide an additional tool for investors to use in comparing our
core financial performance over multiple periods with other
companies in our industry. Our GAAP financial results include
significant expenses that may not be indicative of our ongoing
operations as detailed within this earnings release.
However, non-GAAP financial measures have limitations in their
usefulness to investors because they have no standardized meaning
prescribed by GAAP and are not prepared under any comprehensive set
of accounting rules or principles. In addition, non-GAAP financial
measures may be calculated differently from, and therefore may not
be directly comparable to, similarly titled measures used by other
companies. As a result, non-GAAP financial measures should be
viewed as supplementing, and not as an alternative or substitute
for, our earnings release and our consolidated financial statements
prepared and presented in accordance with GAAP.
We define Adjusted Gross Profit as gross profit before
depreciation and amortization, business transformation costs,
acquisition costs and certain other costs as described below.
Adjusted Gross Profit Margin is equal to Adjusted Gross Profit
divided by net sales.
We define Adjusted Net Income as net income (loss) before
amortization, share-based compensation costs, business
transformation costs, acquisition costs, initial public offering
and secondary offering costs and certain other costs as described
below.
We define Adjusted Diluted EPS as Adjusted Net Income divided by
weighted average common shares outstanding – diluted, to reflect
the conversion or exercise, as applicable, of all outstanding
shares of restricted stock awards, restricted stock units and
options to purchase shares of our common stock.
We define Adjusted EBITDA as net income (loss) before interest
expense, net, income tax (benefit) expense and depreciation and
amortization and by adding to or subtracting therefrom items of
expense and income as described above.
Adjusted EBITDA Margin is equal to Adjusted EBITDA divided by
net sales. Net Leverage is equal to gross debt less cash and cash
equivalents, divided by trailing twelve month Adjusted EBITDA. We
believe Adjusted Gross Profit, Adjusted Gross Profit Margin,
Adjusted Net Income, Adjusted Diluted EPS, Adjusted EBITDA,
Adjusted EBITDA Margin and Net Leverage are useful to investors
because they help identify underlying trends in our business that
could otherwise be masked by certain expenses that can vary from
company to company depending on, among other things, its financing,
capital structure and the method by which its assets were acquired,
and can also vary significantly from period to period. We also add
back depreciation and amortization and share-based compensation
because we do not consider them indicative of our core operating
performance. We believe their exclusion facilitates comparisons of
our operating performance on a period-to-period basis. Therefore,
we believe that showing gross profit and net income, as adjusted to
remove the impact of these expenses, is helpful to investors in
assessing our gross profit and net income performance in a way that
is similar to the way management assesses our performance.
Additionally, EBITDA and EBITDA margin are common measures of
operating performance in our industry, and we believe they
facilitate operating comparisons. Our management also uses Adjusted
Gross Profit, Adjusted Gross Profit Margin, Adjusted EBITDA and
Adjusted EBITDA Margin in conjunction with other GAAP financial
measures for planning purposes, including as a measure of our core
operating results and the effectiveness of our business strategy,
and in evaluating our financial performance. Management considers
Adjusted Gross Profit and Adjusted Net Income as useful measures
because our cost of sales includes the depreciation of property,
plant and equipment used in the production of products and the
amortization of various intangibles related to our manufacturing
processes. Further, management considers Net Leverage as a useful
measure to assess our borrowing capacity.
Adjusted Gross Profit, Adjusted Gross Profit Margin, Adjusted
Net Income, Adjusted Diluted EPS, Adjusted EBITDA, Adjusted EBITDA
Margin and Net Leverage have limitations as analytical tools, and
you should not consider them in isolation or as a substitute for
analysis of our results as reported under GAAP. Some of these
limitations are:
- These measures do not reflect our cash expenditures, future
requirements for capital expenditures or contractual
commitments;
- These measures do not reflect changes in, or cash requirements
for, our working capital needs;
- Adjusted EBITDA and Adjusted EBITDA Margin do not reflect the
significant interest expense, or the cash requirements necessary to
service interest or principal payments, on our debt;
- Adjusted EBITDA and Adjusted EBITDA Margin do not reflect our
income tax expense or the cash requirements to pay our taxes;
- Adjusted Gross Profit, Adjusted Net Income, Adjusted Diluted
EPS and Adjusted EBITDA exclude the expense of depreciation, in the
case of Adjusted Gross Profit and Adjusted EBITDA, and
amortization, in each case, of our assets, and, although these are
non-cash expenses, the assets being depreciated may have to be
replaced in the future;
- Adjusted Net Income, Adjusted Diluted EPS and Adjusted EBITDA
exclude the expense associated with our equity compensation plan,
although equity compensation has been, and will continue to be, an
important part of our compensation strategy;
- Adjusted Gross Profit, Adjusted Net Income, Adjusted Diluted
EPS and Adjusted EBITDA exclude certain business transformation
costs, acquisition costs and other costs, each of which can affect
our current and future cash requirements; and
- Other companies in our industry may calculate Adjusted Gross
Profit, Adjusted Gross Profit Margin, Adjusted Net Income, Adjusted
Diluted EPS, Adjusted EBITDA, Adjusted EBITDA Margin and Net
Leverage differently than we do, limiting their usefulness as
comparative measures.
Because of these limitations, none of these metrics should be
considered indicative of discretionary cash available to us to
invest in the growth of our business or as measures of cash that
will be available to us to meet our obligations.
Segment Adjusted EBITDA
Depending on certain circumstances, Segment Adjusted EBITDA may
be calculated differently, from time to time, than our Adjusted
EBITDA and Adjusted EBITDA Margin, which are further discussed
under the heading “Non-GAAP Financial Measures.” Segment Adjusted
EBITDA represents a measure of segment profit reported to our chief
operating decision maker for the purpose of making decisions about
allocating resources to a segment and assessing its performance.
For more information regarding how Segment Adjusted EBITDA is
determined, see the section titled “Management’s Discussion and
Analysis of Financial Condition and Results of Operations—Segment
Results of Operations” set forth in Part I, Item 2 of our Quarterly
Report on Form 10-Q for the first quarter of fiscal 2022 and our
Consolidated Financial Statements and related notes included
therein.
The AZEK Company Inc.
Condensed Consolidated Balance
Sheets
(In thousands of U.S. dollars,
except for share and per share amounts)
(Unaudited)
in thousands
December 31,
2021
September 30,
2021
ASSETS:
Current assets:
Cash and cash equivalents
$
66,056
$
250,536
Trade receivables, net of allowances
63,057
77,316
Inventories
289,059
188,888
Prepaid expenses
17,641
14,212
Other current assets
1,206
1,446
Total current assets
437,019
532,398
Property, plant and equipment - net
435,304
391,012
Goodwill
992,513
951,390
Intangible assets - net
272,692
242,572
Other assets
77,578
70,462
Total assets
$
2,215,106
$
2,187,834
LIABILITIES AND STOCKHOLDERS'
EQUITY:
Current liabilities:
Accounts payable
$
64,490
$
69,474
Accrued rebates
49,150
44,339
Accrued interest
214
72
Current portion of long-term debt
obligations
—
—
Accrued expenses and other liabilities
48,684
56,522
Total current liabilities
162,538
170,407
Deferred income taxes
50,753
46,371
Long-term debt—less current portion
464,999
464,715
Other non-current liabilities
85,665
79,177
Total liabilities
763,955
760,670
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.001 par value;
1,000,000 shares authorized and no shares issued or outstanding at
December 31, 2021 and September 30, 2021, respectively
—
—
Class A common stock, $0.001 par value;
1,100,000,000 shares authorized, 155,032,377 shares issued and
outstanding at December 31, 2021 and 154,866,313 shares issued and
outstanding at September 30, 2021
155
155
Class B common stock, $0.001 par value;
100,000,000 shares authorized,
100 shares issued and outstanding at
December 31, 2021 and at September 30, 2021, respectively
—
—
Additional paid‑in capital
1,622,516
1,615,236
Accumulated deficit
(171,520
)
(188,227
)
Total stockholders' equity
1,451,151
1,427,164
Total liabilities and stockholders'
equity
$
2,215,106
$
2,187,834
The AZEK Company Inc.
Condensed Consolidated
Statements of Comprehensive Income (Loss)
(In thousands of U.S. dollars,
except for share and per share amounts)
(Unaudited)
Three Months Ended December
31,
in thousands
2021
2020
Net sales
$
259,708
$
212,278
Cost of sales
171,099
139,300
Gross profit
88,609
72,978
Selling, general and administrative
expenses
63,169
53,448
Operating income (loss)
25,440
19,530
Other expenses:
Interest expense
4,148
6,026
Total other expenses
4,148
6,026
Income (loss) before income taxes
21,292
13,504
Income tax expense (benefit)
4,585
3,356
Net income (loss)
$
16,707
$
10,148
Net income (loss) per common share -
basic
$
0.11
$
0.07
Net income (loss) per common share -
diluted
0.11
0.07
Comprehensive income (loss)
$
16,707
$
10,148
Weighted-average common shares outstanding
- basic and diluted
Basic
154,407,244
153,226,378
Diluted
156,854,925
156,018,731
The AZEK Company Inc.
Condensed Consolidated
Statements of Cash Flows
(In thousands of U.S.
dollars)
(Unaudited)
Three Months Ended December
31,
2021
2020
Operating activities:
Net income (loss)
$
16,707
$
10,148
Adjustments to reconcile net income (loss)
to net cash flows provided by (used in) operating activities:
Depreciation
15,202
11,635
Amortization of intangibles
12,880
12,643
Non-cash interest expense
1,154
670
Non-cash lease expense
(39
)
(35
)
Deferred income tax (benefit)
provision
4,381
2,908
Non-cash compensation expense
3,970
2,878
Loss (gain) on disposition of property
18
212
Changes in certain assets and
liabilities:
Trade receivables
18,057
29,652
Inventories
(88,515
)
(36,081
)
Prepaid expenses and other currents
assets
(3,330
)
(2,876
)
Accounts payable
606
(5,097
)
Accrued expenses and interest
(11,626
)
(6,465
)
Other assets and liabilities
(85
)
106
Net cash provided by (used in) operating
activities
(30,620
)
20,298
Investing activities:
Purchases of property, plant and
equipment
(65,333
)
(27,021
)
Proceeds from disposition of fixed
assets
32
17
Acquisitions, net of cash acquired
(91,310
)
—
Net cash provided by (used in) investing
activities
(156,611
)
(27,004
)
Financing activities:
Repayments of finance lease
obligations
(559
)
(426
)
Exercise of vested stock options
3,310
2,364
Payments of initial public offering
related costs
—
(210
)
Net cash provided by (used in) financing
activities
2,751
1,728
Net increase (decrease) in cash and cash
equivalents
(184,480
)
(4,978
)
Cash and cash equivalents – Beginning of
period
250,536
215,012
Cash and cash equivalents – End of
period
$
66,056
$
210,034
Supplemental cash flow
disclosure:
Cash paid for interest, net of amounts
capitalized
$
2,782
$
5,847
Cash paid for income taxes, net
(129
)
(56
)
Supplemental non-cash investing and
financing disclosure:
Capital expenditures in accounts payable
at end of period
$
5,748
$
4,035
Right-of-use operating and finance lease
assets obtained in exchange for lease liabilities
8,915
1,645
Segment Results from Operations
Residential Segment
The following table summarizes certain financial information
relating to the Residential segment results that have been derived
from our unaudited Condensed Consolidated Financial Statements for
the three months ended December 31, 2021 and 2020.
Three Months Ended December
31,
(U.S. dollars in thousands)
2021
2020
$
Variance
%
Variance
Net sales
$
221,133
$
185,640
$
35,493
19.1
%
Segment Adjusted EBITDA
69,431
58,776
10,655
18.1
%
Segment Adjusted EBITDA Margin
31.4
%
31.7
%
N/A
N/A
Commercial Segment
The following table summarizes certain financial information
relating to the Commercial segment results that have been derived
from our unaudited Condensed Consolidated Financial Statements for
the three months ended December 31, 2021 and 2020.
Three Months Ended December
31,
(U.S. dollars in thousands)
2021
2020
$
Variance
%
Variance
Net sales
$
38,575
$
26,638
$
11,937
44.8
%
Segment Adjusted EBITDA
4,748
3,316
1,432
43.2
%
Segment Adjusted EBITDA Margin
12.3
%
12.4
%
N/A
N/A
Adjusted EBITDA and Adjusted EBITDA Margin
Reconciliation
Three Months Ended December
31,
(U.S. dollars in thousands)
2021
2020
Net income (loss)
$
16,707
$
10,148
Interest expense
4,148
6,026
Depreciation and amortization
28,082
24,278
Income tax expense (benefit)
4,585
3,356
Stock-based compensation
4,016
2,980
Acquisition costs (1)
497
—
Other costs (2)
485
1,664
Total adjustments
41,813
38,304
Adjusted EBITDA
$
58,520
$
48,452
Three Months Ended December
31,
2021
2020
Net income (loss)
6.4
%
4.8
%
Interest expense
1.6
%
2.8
%
Depreciation and amortization
10.8
%
11.4
%
Income tax expense (benefit)
1.8
%
1.6
%
Stock-based compensation
1.5
%
1.4
%
Acquisition costs
0.2
%
0.0
%
Other costs
0.2
%
0.8
%
Total adjustments
16.1
%
18.0
%
Adjusted EBITDA Margin
22.5
%
22.8
%
(1)
Acquisition costs reflect costs directly related to completed
acquisitions of $0.5 million in the three months ended December 31,
2021.
(2)
Other costs include costs for legal expense of $0.3 million and
$0.5 million in the three months ended December 31, 2021 and 2020,
respectively, costs related to an incentive plan and other
ancillary expenses associated with the initial public offering of
$0.1 million and $1.0 million in the three months ended December
31, 2021 and 2020, respectively, other costs of $0.1 million for
the three months ended December 31, 2021, and the impact of the
retroactive adoption of ASC 842 of $0.2 million for the three
months ended December 31, 2020.
Adjusted Gross Profit and Adjusted Gross Profit Margin
Reconciliation
Three Months Ended December
31,
(U.S. dollars in thousands)
2021
2020
Gross Profit
$
88,609
$
72,976
Depreciation and amortization (1)
18,481
15,796
Adjusted Gross Profit
$
107,090
$
88,772
Three Months Ended December
31,
2021
2020
Gross Margin
34.1
%
34.4
%
Depreciation and amortization
7.1
%
7.4
%
Adjusted Gross Profit Margin
41.2
%
41.8
%
(1)
Depreciation and amortization for the three months ended December
31, 2021 and 2020 consists of $13.6 million and $10.3 million,
respectively, of depreciation and $4.9 million and $5.5 million,
respectively, of amortization of intangible assets relating to our
manufacturing process.
Adjusted Net Income and Adjusted Diluted EPS
Reconciliation
Three Months Ended December
31,
(U.S. dollars in thousands, except per
share amounts)
2021
2020
Net income (loss)
$
16,707
$
10,148
Amortization
12,880
12,643
Stock-based compensation (1)
1,960
2,686
Acquisition costs (2)
497
—
Other costs (3)
485
1,664
Tax impact of adjustments (4)
(3,772
)
(3,999
)
Adjusted Net Income
$
28,757
$
23,142
Three Months Ended December
31,
2021
2020
Net income (loss)
$
0.11
$
0.07
Amortization
0.08
0.08
Stock-based compensation
0.01
0.02
Acquisition costs
—
—
Other costs
—
0.01
Tax impact of adjustments
(0.02
)
(0.03
)
Adjusted Diluted EPS (5)
$
0.18
$
0.15
(1)
Stock-based compensation costs reflect expenses related to our
initial public offering. Expenses related to our recurring awards
granted each fiscal year are excluded from the Adjusted Net Income
reconciliation.
(2)
Acquisition costs reflect costs directly related to completed
acquisitions of $0.5 million in the three months ended December 31,
2021.
(3)
Other costs include costs for legal expense of $0.3 million and
$0.5 million in the three months ended December 31, 2021 and 2020,
respectively, costs related to an incentive plan and other
ancillary expenses associated with the initial public offering of
$0.1 million and $1.0 million in the three months ended December
31, 2021 and 2020, respectively, other costs of $0.1 million for
the three months ended December 31, 2021, and the impact of the
retroactive adoption of ASC 842 of $0.2 million for the three
months ended December 31, 2020.
(4)
Tax impact of adjustments are based on applying a combined U.S.
federal and state statutory tax rate of 24.5% for both the three
months ended December 31, 2021 and 2020.
(5)
Weighted average common shares outstanding used in computing
diluted net income (loss) per common share of 156,854,925 and
156,018,731 for the three months ended December 31, 2021 and 2020,
respectively.
Net Leverage Reconciliation
Twelve Months Ended December
31,
(In thousands)
2021
Net income (loss)
$
99,709
Interest expense
18,433
Depreciation and amortization
105,408
Tax expense (benefit)
29,897
Stock-based compensation costs
23,706
Acquisition costs
497
Initial public offering and secondary
offering costs
2,592
Other costs
4,013
Total adjustments
184,546
Adjusted EBITDA
$
284,255
Long-term debt — less current portion
$
464,999
Unamortized deferred financing fees
2,371
Unamortized original issue discount
284
Gross debt
$
467,654
Cash and cash equivalents
(66,056
)
Net debt
$
401,598
Net Leverage
1.4x
Outlook
We have not reconciled Adjusted EBITDA guidance to its most
comparable GAAP measure as a result of the uncertainty regarding,
and the potential variability of, reconciling items such as the
variability in the provision for income taxes, the estimates for
warranty and rebate accruals and timing of the gain or loss on
disposal of property, plant and equipment. Such reconciling items
that impact Adjusted EBITDA have not occurred, are outside of our
control or cannot be reasonably predicted. Accordingly, a
reconciliation of Adjusted EBITDA to its most comparable GAAP
measure is not available without unreasonable effort. However, it
is important to note that material changes to these reconciling
items could have a significant effect on our Adjusted EBITDA
guidance and future GAAP results.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220203005337/en/
Investor Relations Contact: Amanda Cimaglia 312-809-1093
ir@azekco.com
Media Contact: Amy Widdowson (415) 819-2126
AZEKquestions@zenogroup.com
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