AZEK Q4 Earnings & Revenues Top Estimates, Rises Y/Y
The AZEK Company Inc. AZEK reported impressive fourth-quarter fiscal 2023 results, with earnings and revenues surpassing the Zacks Consensus Estimate. On a year-over-year basis, the top and the bottom line increased.
The upside was backed by strong Residential sales growth and margin execution. Also, solid contractor conversion, new products, channel expansion and shelf space wins added to the positive.
Inside the Headline
The company reported adjusted earnings per share (EPS) of 36 cents, surpassing the Zacks Consensus Estimate by 20%. In the prior-year quarter, the company reported adjusted EPS of 16 cents.
The AZEK Company Inc. Price, Consensus and EPS Surprise
The AZEK Company Inc. price-consensus-eps-surprise-chart | The AZEK Company Inc. Quote
Net sales of $388.8 million beat the consensus mark of $370.8 million by 4.9% and rose 27.6% on a year-over-year basis.
Segment Details
Residential Segment: The segment's net sales came in at $349.6 million during the reported quarter, up 37.6% from the prior-year quarter’s levels. The upside was driven by strong growth in Deck, Rail & Accessories and Exteriors.
The adjusted EBITDA of $118 million, increased 82.9% year over year. The adjusted EBITDA margin expanded 830 basis points (bps) from the prior-year quarter to 33.7%.
Commercial Segment: Net sales in the segment fell 22.4% from the year-ago quarter’s levels to $39.2 million due to channel inventory de-stocking and softer demand.
The adjusted EBITDA totaled $9.2 million, up 36.5% year over year. The adjusted EBITDA margin fell 530 bps from the prior-year quarter’s figure to 23.6%.
Operating Highlights
The company's adjusted gross profit margin expanded 750 bps year over year to 45%, driven by material deflation, enhanced manufacturing productivity, successful execution of material cost productivity initiatives and a one-time utilities reimbursement of around $2 million.
Adjusted EBITDA rose 63.4% to $106.4 million in the reported period. The adjusted EBITDA margin also increased 600 bps from the prior year to 27.4%.
Balance Sheet & Cash Flow
As of Sep 30, 2023, AZEK had liquidity of $425.5 million, including cash and cash equivalents worth $278.3 million compared with $120.8 million at the fiscal 2022-end. The net long-term debt as of Sep 30, 2023, stood at $580.3 million, down from $584.9 million at the fiscal 2022-end.
At the fiscal fourth quarter’s end, net cash provided by operating activities totaled $362.5 million compared with $105.8 million in the prior year.
During the quarter, the company repurchased approximately 1.9 million shares of its Class A common stock for a total purchase price of about $60.6 million.
Free cash flow was $92.2 million in the reported quarter compared with $8.7 million in the prior year.
Fiscal 2023 Highlights
In fiscal 2023, AZEK reported adjusted EPS of 74 cents, down 23.7% year over year. Net Sales of $1,370.3 million were up 1.1%. Adjusted EBITDA declined 3.3% year over year to $291.2 million. The Adjusted EBITDA margin fell 90 bps year over year to 21.3%.
Fiscal 2024 Guidance
For first-quarter fiscal 2024, AZEK expects consolidated net sales in the range of $230-$236 million. The adjusted EBITDA is expected to be in the range of $45-$48 million.
For the fiscal 2024, the company anticipates consolidated net sales between $1.335 billion and $1.395 billion. The adjusted EBITDA is expected to be in the range of $320 to $335 million.
Following the sale of the Vycom business, AZEK expects the Scranton Products business in the remaining Commercial segment to deliver net sales between $70 million and $74 million. The adjusted EBITDA is expected to be in the range of $14-$16 million.
Excluding the Commercial segment, AZEK's net sales guidance suggests 3-8% year-over-year growth. The combined Adjusted EBITDA for the Residential Segment and corporate expenses is expected to witness 18-23% year-over-year growth.
Capital expenditures for the fiscal 2024 are expected to be in the range of $70-$95 million.
Zacks Rank
AZEK currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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