The AZEK Company Inc. (NYSE:AZEK) Q4 2022 Earnings Call Transcript

Jesse Singh: Yeah, Matt, this is Jesse. If I could just add one other component. The challenge we have — clearly, we are — we’ve got a number of components that hit Q1, some of the change in process that we talked about that will primarily be Q1, a lot of our year-over-year inventory decline will be focused in Q1 and a lot of our under-utilization, a disproportionate percentage impact will be in Q1. And that’s really against our lowest quarter. So the good news is, we get a lot of that behind us as we work through Q1. So part of the margin impact as we go into subsequent quarters is getting some of these things behind us. The other aspect of it is, typically, the other quarters are meaningfully larger as we flow through. Typically, our first quarter is give or take 17% and 18% of our volume for the year and so having those impacts in Q1, just it naturally has a different impact as we flow through in addition to all the tailwinds that we talked about.

Matthew Bouley: Got you. Okay. No, that’s really helpful. Thanks for that guys. And then second one on the volume outlook, just trying to put the pieces together. So the market planning assumption is down 10. I guess my question is just how does AZEK’s growth compare versus that? Is there an assumption of share gains we should be making? And I think about Q1, where you talked about the $85 million volume decline, which I assume includes destocking and so maybe that I don’t know how that compares with the 10%, if it kind of ends up, such that they offset each other in AZEK’s volumes end up looking like the market volumes and not to put words in your mouth, but just how should we think about AZEK’s growth relative to the market? Thanks.

Peter Clifford: Yeah, let me take the first piece on just sort of help and give some color on sort of the 1Q geography from a sales perspective. So the way you want to think about the $85 million of volume reduction is about $70 million to $75 million of that is the channel inventory recalibration. That small difference between the $75 million and the $85 million is really to sell through that we’ve talked about that we’ve seen positive on a dollar basis, but modestly negative on a unit volume basis. And just one other point on it, as it relates to the first quarter and the $85 million, that’s up almost half of the entire year down 10%.

Jesse Singh: And then, relative to your question on initiatives, clearly we — we believe in what we’re doing and the ability for the initiatives I laid out earlier in the call to impact what we’re doing. Take that for us is we reviewing that as a way to give us increased confidence for us to manage through a potentially more volatile environment than even what our scenario would have been. And so the way to think of it is, it’s not as simple to add on top of what’s there. It really depends on the macro, but we are certainly expecting a benefit from our initiatives. But what we’ve laid out is kind of market-oriented adjustments to volume.

Matthew Bouley: Great. Well, thanks, Jesse. Thanks, Pete.

Operator: Your next question comes from the line of Michael Rehaut with J.P. Morgan. Your line is now open.

Michael Rehaut: Thanks. I appreciate you taking my question and good afternoon.

Peter Clifford: Happy Birthday.