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

Michael Rehaut: Thank you very much. I appreciate that. First question I wanted to break down a little bit was the organic decline in 4Q. On the residential side, you said that it’s about $24 million of contribution from the acquisition, so that puts you down organically about down 25%. And I think it looks like it might be a similar type of rate that you are looking in plus or minus for the first quarter. So you compare that to your largest competitor with a guidance of revenue down, plus or minus 40%. And I was hoping to get any insights from you around what the difference could be and perhaps breaking out decking rail and accessories versus exteriors, if that might explain some of the differential, given that you’re a little more — you have exposure on the exterior side, what might be driving, what appears to be a pretty big difference?

Jesse Singh: Yeah, I think if you just — and I can’t speak specifically to what other players are experiencing in the market, although, we’re close to the market and we might have an opinion. Let me give you a couple of just basic data points, right. One is the way to think of our residential business is, it’s about two-thirds deck, rail and accessories and one-third exteriors. I’m giving you rough numbers, on average, it’ll vary quarter-to-quarter. And against that. I think what we mentioned in our prepared remarks was that, in effect all of the inventory correction that we are going through is within deck rail and accessories. And so we believe that what we’re going through is appropriate for where we are now. I think when you do calculation, so if you look at our fiscal and calendar 2022, and then you start to consider our fiscal and calendar guide for 2023, I think the math would tell you is that from a revenue standpoint, we are doing pretty well compared to other players in the marketplace.

Peter Clifford: And Mike, just to help a little bit, 4Q kind of came in line with what we talked on our last earnings call for the full year as well. You should think of the fourth quarter price as kind of low teens M&A, call it, approximately 7%. The inventory destock was about 25% headwind, which kind of leaves the normalized unit volume kind of down low single digits, again kind of consistent with how we’ve been thinking about sell-through as kind of positive on dollars and modestly negative on units.

Michael Rehaut: Thank you, Pete. That’s very helpful and Jesse. I guess secondly, looking at the EBITDA guidance for the first quarter and apologies if I missed all of these different numbers earlier from your prepared remarks. But I believe you mentioned 50% decremental if I heard right for the first half of the year, when you look at your first quarter ’22, you did about $60 million — $59 million of EBITDA. And so, if you’re talking about roughly $50 million less revenue in first quarter ’23, you’ve added 50% decremental $25 million, what’s the gap between that decremental and some of the other variables that gets you down to your guidance. I know you mentioned the $8 million of inventory flow through, if there’s any other kind of drivers that we should be thinking about?