Continued Strong Sales Growth in Fourth Quarter and Full
Year; Expanding Decking Capacity with Additional New Fourth Phase;
Cumulative Capacity Expected to Increase Over 100% by End of
2022
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
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 and Versatex® and AZEK Trim®, today announced
financial results for its fourth quarter and fiscal year ended
September 30, 2021.
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.
CONFERENCE CALL INFORMATION
AZEK will hold a conference call to discuss the results today,
Thursday, November 18, 2021, 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 December 2, 2021.
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.
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 II, Item 7 of our 2021
Annual Report and our Consolidated Financial Statements and related
notes included in our 2021 Annual Report.
The AZEK Company Inc.
Consolidated Balance
Sheets
(In thousands of U.S. dollars,
except for share and per share amounts)
As of September 30,
2021
2020
ASSETS:
Current assets:
Cash and cash equivalents
$
250,536
$
215,012
Trade receivables, net of allowances
77,316
70,886
Inventories
188,888
130,070
Prepaid expenses
14,212
8,367
Other current assets
1,446
360
Total current assets
532,398
424,695
Property, plant and equipment, net
391,012
261,774
Goodwill
951,390
951,390
Intangible assets, net
242,572
292,374
Other assets
70,462
1,623
Total assets
$
2,187,834
$
1,931,856
LIABILITIES AND STOCKHOLDERS’
EQUITY:
Current liabilities:
Accounts payable
$
69,474
$
42,059
Accrued rebates
44,339
30,362
Accrued interest
72
1,103
Current portion of long-term debt
obligations
—
—
Accrued expenses and other liabilities
56,522
50,516
Total current liabilities
170,407
124,040
Deferred income taxes
46,371
21,260
Long-term debt — less current portion
464,715
462,982
Other non-current liabilities
79,177
19,686
Total liabilities
$
760,670
$
627,968
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.001 par value;
1,000,000 shares authorized and no shares issued and outstanding at
September 30, 2021 and September 30, 2020, respectively
—
—
Class A common stock, $0.001 par value;
1,100,000,000 shares authorized, 154,866,313 shares issued and
outstanding at September 30, 2021, and 154,637,240 issued and
outstanding at September 30, 2020
155
155
Class B common stock, $0.001 par value;
100,000,000 shares authorized, 100 shares issued and outstanding at
September 30, 2021 and September 30, 2020
—
—
Additional paid-in capital
1,615,236
1,587,208
Accumulated deficit
(188,227
)
(283,475
)
Total stockholders’ equity
1,427,164
1,303,888
Total liabilities and stockholders’
equity
$
2,187,834
$
1,931,856
The AZEK Company Inc.
Condensed Consolidated
Statements of Comprehensive Income (Loss)
(In thousands of U.S. dollars,
except for share and per share amounts)
Three Months Ended September
30,
Twelve Months Ended September
30,
2021
2020
2021
2020
Net sales
$
346,120
$
263,920
$
1,178,974
$
899,259
Cost of sales
233,833
173,656
789,023
603,209
Gross profit
112,287
90,264
389,951
296,050
Selling, general and administrative
expenses
60,467
149,945
244,205
308,275
Other general expenses
—
1,900
2,592
8,616
Loss on disposal of plant, property and
equipment
401
510
1,025
904
Operating income (loss)
51,419
(62,091
)
142,129
(21,745
)
Other expenses:
Interest expense
3,883
6,297
20,311
71,179
Loss on extinguishment of debt
—
49
—
37,587
Total other expenses
3,883
6,346
20,311
108,766
Income (loss) before income taxes
47,536
(68,437
)
121,818
(130,511
)
Income tax expense (benefit)
8,943
(4,078
)
28,668
(8,278
)
Net income (loss)
$
38,593
$
(64,359
)
$
93,150
$
(122,233
)
Net income (loss) per common share:
Basic
$
0.25
$
(0.43
)
$
0.61
$
(1.01
)
Diluted
$
0.25
$
(0.43
)
$
0.59
$
(1.01
)
Comprehensive income (loss)
$
38,593
$
(64,359
)
$
93,150
$
(122,233
)
Weighted average shares used in
calculating net income (loss) per common share:
Basic
154,232,718
150,040,704
153,777,859
120,775,717
Diluted
156,686,478
150,040,704
156,666,394
120,775,717
The AZEK Company Inc.
Consolidated Statements of
Cash Flows
(In thousands of U.S.
dollars)
Twelve Months Ended September
30,
2021
2020
2019
Operating activities:
Net income (loss)
$
93,150
$
(122,233
)
$
(20,196
)
Adjustments to reconcile net income (loss)
to net cash flows provided by (used in) operating activities:
Depreciation expense
51,802
44,637
33,703
Amortization expense
49,802
55,144
60,226
Non-cash interest expense
3,110
6,994
3,986
Non-cash lease expense
(88
)
Deferred income tax expense (benefit)
25,529
(10,110
)
(5,321
)
Non-cash compensation expense
22,250
117,084
4,564
Fair value adjustment for contingent
consideration
—
—
53
Loss on disposition of property, plant and
equipment
1,025
904
1,495
Bad debt provision
342
512
383
Loss on extinguishment of debt
—
37,587
—
Changes in operating assets and
liabilities:
Trade receivables
(6,772
)
(17,656
)
(9,015
)
Inventories
(58,819
)
(12,146
)
(4,492
)
Prepaid expenses and other current
assets
(5,892
)
1,035
(4,550
)
Accounts payable
16,071
(4,361
)
11,679
Accrued expenses and interest
14,910
2,664
20,376
Other assets and liabilities
1,259
(1,694
)
1,981
Net cash provided by (used in) operating
activities
207,679
98,361
94,872
Investing activities:
Purchases of property, plant and
equipment
(175,119
)
(95,594
)
(63,006
)
Proceeds from sale of property, plant and
equipment
46
253
71
Acquisitions, net of cash acquired
—
(18,453
)
—
Net cash provided by (used in) investing
activities
(175,073
)
(113,794
)
(62,935
)
Financing activities:
Proceeds from initial public offering, net
of related costs
—
820,467
—
Proceeds from 2025 Senior Notes
—
346,500
—
Redemption of 2021 and 2025 Senior
Notes
—
(665,000
)
—
Payments of debt extinguishment costs
related to 2021 and 2025 Senior Notes
—
(24,938
)
—
Proceeds under Revolving Credit
Facility
—
129,000
40,000
Payments under Revolving Credit
Facility
—
(129,000
)
(40,000
)
Proceeds from long-term debt
—
—
—
Payments on long-term debt obligations
—
(341,958
)
(8,304
)
Payments of financing fees related to Term
Loan Agreement
(939
)
—
—
Payments of debt issuance costs related to
2025 Senior Notes
—
(7,754
)
—
Proceeds (repayments) of finance lease
obligations
(1,921
)
(807
)
1,405
Payments of Ultralox contingent
consideration
—
—
(2,000
)
Payments of initial public offering
related costs
(210
)
—
(584
)
Redemption of capital contributions prior
to initial public offering
—
(3,553
)
(101
)
Capital contributions prior to initial
public offering
—
1,500
1,311
Exercise of vested stock options
5,988
41
—
Net cash provided by (used in) financing
activities
2,918
124,498
(8,273
)
Net increase (decrease) in cash and cash
equivalents
35,524
109,065
23,664
Cash and cash equivalents at beginning of
period
215,012
105,947
82,283
Cash and cash equivalents at end of
period
$
250,536
$
215,012
$
105,947
Supplemental cash flow
disclosure:
Cash paid for interest, net of amounts
capitalized
$
17,119
$
76,670
$
78,807
Cash paid for income taxes, net
4,620
1,376
1,252
Supplemental non-cash investing and
financing disclosure:
Capital expenditures in accounts payable
at end of period
$
16,177
$
2,089
$
3,674
Property, plant and equipment acquired
under finance lease obligations
—
966
1,637
Right of use operating and finance lease
assets obtained in exchange for lease liabilities
$
57,817
$
—
$
—
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 and twelve months ended September 30, 2021 and 2020.
Three Months Ended September
30,
Twelve Months Ended September
30,
(U.S. dollars in thousands)
2021
2020
$ Variance
% Variance
2021
2020
$ Variance
% Variance
Net sales
$
305,078
$
232,653
$
72,425
31.1
%
$
1,044,126
$
771,167
$
272,959
35.4
%
Segment Adjusted EBITDA
91,564
74,013
17,551
23.7
%
314,563
238,060
76,503
32.1
%
Segment Adjusted EBITDA Margin
30.0
%
31.8
%
N/A
N/A
30.1
%
30.9
%
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 and twelve months ended September 30, 2021 and 2020.
Three Months Ended September
30,
Twelve Months Ended September
30,
(U.S. dollars in thousands)
2021
2020
$ Variance
% Variance
2021
2020
$ Variance
% Variance
Net sales
$
41,042
$
31,267
$
9,775
31.3
%
$
134,848
$
128,092
$
6,756
5.3
%
Segment Adjusted EBITDA
6,019
3,872
2,147
55.4
%
19,323
15,051
4,272
28.4
%
Segment Adjusted EBITDA Margin
14.7
%
12.4
%
N/A
N/A
14.3
%
11.8
%
N/A
N/A
Adjusted EBITDA and Adjusted EBITDAMargin
Reconciliation
Three Months Ended September
30,
Twelve Months Ended September
30,
(U.S. dollars in thousands)
2021
2020
2021
2020
Net income (loss)
$
38,593
$
(64,359
)
$
93,150
$
(122,233
)
Interest expense
3,883
6,297
20,311
71,179
Depreciation and amortization
26,284
24,556
101,604
99,781
Tax expense (benefit)
8,943
(4,078
)
28,668
(8,278
)
Stock-based compensation costs
3,024
100,348
22,670
120,517
Business transformation costs (1)
—
159
—
594
Acquisition costs (2)
—
58
—
1,596
Initial public offering and secondary
offering costs (3)
—
1,900
2,592
8,616
Other costs (4)
780
1,139
5,192
4,154
Capital structure transaction costs
(5)
—
49
—
37,587
Total adjustments
42,914
130,428
181,037
335,746
Adjusted EBITDA
$
81,507
$
66,069
$
274,187
$
213,513
Three Months Ended September
30,
Twelve Months Ended September
30,
2021
2020
2021
2020
Net margin
11.2%
(24.4)%
7.9%
(13.6)%
Interest expense
1.1
2.4
1.7
7.9
Depreciation and amortization
7.6
9.3
8.6
11.1
Tax expense (benefit)
2.6
(1.5)
2.5
(0.9)
Stock-based compensation costs
0.8
38.0
1.9
13.4
Business transformation costs
—
0.1
—
0.1
Acquisition costs
—
0.0
—
0.2
Initial public offering and secondary
offering costs
—
0.7
0.2
0.9
Other costs
0.2
0.4
0.5
0.4
Capital structure transaction costs
—
—
—
4.2
Total adjustments
12.3%
49.4%
15.4%
37.3%
Adjusted EBITDA Margin
23.5%
25.0%
23.3%
23.7%
(1)
Business transformation costs reflect
compensation costs related to the transformation of the senior
management team of $0.2 million for the fourth quarter 2020 and
$0.6 million for fiscal year 2020.
(2)
Acquisition costs reflect costs directly
related to completed acquisitions of $0.9 million for fiscal year
2020 and inventory step-up adjustments related to recording the
inventory of acquired businesses at fair value on the date of
acquisition of $0.7 million for fiscal year 2020.
(3)
Initial public offering and secondary
offering costs includes $1.4 million in fees related to the
Secondary offering of our Class A common stock completed in fiscal
year 2020.
(4)
Other costs reflect costs for legal
expenses of $0.5 million, $0.5 million, $2.3 million and $0.9
million for the fourth quarters 2021 and 2020 and the fiscal years
2021 and 2020, respectively, impact of the retroactive adoption of
ASC 842 leases of $0.5 million for fiscal year 2021, reduction in
workforce costs of $0.4 million for fiscal year 2020, and costs
related to an incentive plan and other ancillary expenses
associated with the initial public offering of $0.3 million, $0.6
million, $2.4 million and $2.9 million for the fourth quarters 2021
and 2020 and the fiscal years 2021 and 2020, respectively.
(5)
Capital structure transaction costs
include loss on extinguishment of debt of $0.1 million for 2025
Senior Notes for fourth quarter 2020 and $1.9 million for the 2021
Senior Notes and $35.7 million for the 2025 Senior Notes for fiscal
year 2020.
Adjusted Gross Profit Reconciliation
Three Months Ended September
30,
Twelve Months Ended September
30,
(U.S. dollars in thousands)
2021
2020
2021
2020
Gross Profit
$
112,287
$
90,264
$
389,951
$
296,050
Depreciation and amortization (1)
18,051
15,813
67,903
62,276
Acquisition costs (2)
—
—
—
665
Other costs (3)
30
—
72
75
Adjusted Gross Profit
$
130,368
$
106,077
$
457,926
$
359,066
Three Months Ended September
30,
Twelve Months Ended September
30,
2021
2020
2021
2020
Gross Margin
32.4%
34.2%
33.1%
32.9%
Depreciation and amortization
5.3
6.0
5.7%
6.9%
Acquisition costs
—
—
—
0.1%
Other costs
—
—
—
—
Adjusted Gross Profit Margin
37.7%
40.2%
38.8%
39.9%
(1)
Depreciation and amortization for the
fourth quarters 2021 and 2020, and for fiscal years 2021 and 2020
consists of $12.6 million, $9.7 million, $46.0 million and $37.6
million, respectively, of depreciation and $5.4 million, $6.1
million, $21.9 million and $24.7 million, respectively, of
amortization of intangible assets, comprised of intangibles
relating to our manufacturing processes.
(2)
Acquisition costs reflect inventory
step-up adjustments related to recording the inventory of acquired
businesses at fair value on the date of acquisition.
(3)
Other costs includes impact of retroactive
adoption of ASC 842 leases of $0.1 million for fiscal year 2021 and
reduction in workforce costs of $0.1 million for fiscal year
2020.
Adjusted Net Income
Reconciliation
Three Months Ended September
30,
Twelve Months Ended September
30,
(U.S. dollars in thousands, except per
share amounts)
2021
2020
2021
2020
Net income (loss)
$
38,593
$
(64,359
)
$
93,150
$
(122,233
)
Amortization
12,136
13,522
49,802
55,144
Stock-based compensation costs (1)
1,806
100,348
18,746
120,517
Business transformation costs (2)
—
159
—
594
Acquisition costs (3)
—
58
—
1,596
Initial public offering and secondary
offering costs (4)
—
1,900
2,592
8,616
Other costs (5)
780
1,139
5,192
4,154
Capital structure transaction costs
(6)
—
49
—
37,587
Tax impact of adjustments (7)
(3,522
)
(8,463
)
(16,549
)
(33,343
)
Adjusted Net Income
$
49,793
$
44,353
$
152,933
$
72,632
Three Months Ended September
30,
Twelve Months Ended September
30,
2021
2020
2021
2020
Net income (loss) per common share —
diluted
$
0.25
$
(0.42
)
$
0.59
$
(1.00
)
Amortization
0.08
0.09
0.32
0.45
Stock-based compensation costs
0.01
0.65
0.12
0.99
Business transformation costs
—
—
—
—
Acquisition costs
—
—
—
0.01
Initial public offering and secondary
offering costs
—
0.01
0.02
0.07
Other costs
0.01
0.01
0.03
0.03
Capital structure transaction costs
—
—
—
0.31
Tax impact of adjustments
(0.03
)
(0.05
)
(0.10
)
(0.27
)
Adjusted Diluted EPS (8)
$
0.32
$
0.29
$
0.98
$
0.59
(1)
Stock-based compensation costs for the
year ended September 30, 2021 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)
Business transformation costs reflect
compensation costs related to the transformation of the senior
management team of $0.2 million for the fourth quarter 2020 and
$0.6 million for fiscal year 2020.
(3)
Acquisition costs reflect costs directly
related to completed acquisitions of $0.9 million for fiscal year
2020 and inventory step-up adjustments related to recording the
inventory of acquired businesses at fair value on the date of
acquisition of $0.7 million for fiscal year 2020.
(4)
Initial public offering and secondary
offering costs includes $1.4 million in fees related to the
Secondary offering of our Class A common stock in fiscal year
2020.
(5)
Other costs reflect costs for legal
expenses of $0.5 million, $0.5 million, $2.3 million and $0.9
million for the fourth quarters 2021 and 2020 and the fiscal years
2021 and 2020, respectively, impact of the retroactive adoption of
ASC 842 leases of $0.5 million for fiscal year 2021, reduction in
workforce costs of $0.4 million for fiscal year 2020, and costs
related to an incentive plan and other ancillary expenses
associated with the initial public offering of $0.3 million, $0.6
million, $2.4 million and $2.9 million for the fourth quarters 2021
and 2020 and the fiscal years 2021 and 2020, respectively.
(6)
Capital structure transaction costs
include loss on extinguishment of debt of $0.1 million for 2025
Senior Notes for fourth quarter 2020 and $1.9 million for the 2021
Senior Notes and $35.7 million for the 2025 Senior Notes for fiscal
year 2020.
(7)
Tax impact of adjustments is based on
applying a combined U.S. federal and state statutory tax rate of
24.5% for fourth quarters 2021 and 2020, and for fiscal years 2021
and 2020.
(8)
Weighted average common shares outstanding
used in computing diluted net income (loss) per common share is
156,686,478 shares for fourth quarter 2021, 154,812,555 shares for
fourth quarter 2020, 156,666,394 shares for fiscal year 2021, and
122,128,515 shares for fiscal year 2020.
Net Leverage Reconciliation
Twelve Months Ended September
30, 2021
Net income (loss)
$
93,150
Interest expense
20,311
Depreciation and amortization
101,604
Income tax expense (benefit)
28,668
Stock based compensation
22,670
Initial public offering costs
2,592
Other costs
5,192
Total adjustments
181,037
Adjusted EBITDA
$
274,187
Long-term debt less current portion
$
464,715
Unamortized deferred financing fees
2,625
Unamortized original issue discount
314
Gross debt
$
467,654
Cash and cash equivalents
(250,536
)
Net debt
$
217,118
Net Leverage
0.8x
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/20211118005495/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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