How did AZEK's expenses impact profitability last year?

AZEK's expenses had a significant impact on profitability last year, as evidenced by the company's financial metrics and the broader market analysis. 1. **Operating Expenses and Gross Margin**: AZEK's operating expenses were $36.28 million as of December 31, 2024. The company's gross margin stood at 36.3% for the same period. This indicates that AZEK was able to maintain a healthy gross profit margin despite the operating expenses, which is a positive sign for profitability. |code|Ticker|Name|Date|Gross Profit Margin|Operating Expenses|market_code| |---|---|---|---|---|---|---| |AZEK|AZEK.N|AZEK|2024 Q2|37.5992||169| |AZEK|AZEK.N|AZEK|2024 Q3|37.6911||169| |AZEK|AZEK.N|AZEK|2024 Q4|37.5867||169| |AZEK|AZEK.N|AZEK|2025 Q1|36.2791||169| |code|Ticker|Name|Date|RSI|market_code| |---|---|---|---|---|---| |AZEK|AZEK.N|AZEK|20250328|80.2208|169| 2. **Net Margin and ROE**: AZEK's net margin was 6.35%, and the Return on Equity (ROE) was 1.32%. These figures suggest that while the company was able to generate some profit, the returns were relatively low. Net margin and ROE are crucial metrics for assessing a company's profitability and its ability to generate returns for shareholders. |code|Ticker|Name|Date|ROE(Average)|Net Profit Margin|market_code| |---|---|---|---|---|---|---| |AZEK|AZEK.N|AZEK|2024 Q2|5.3557|11.3692|169| |AZEK|AZEK.N|AZEK|2024 Q3|8.9191|11.4356|169| |AZEK|AZEK.N|AZEK|2024 Q4|11.0856|10.6406|169| |AZEK|AZEK.N|AZEK|2025 Q1|1.3207|6.3497|169| 3. **Impact of Expenses on Profitability**: AZEK's net income decreased by 28% year-over-year to $18.1 million, which is a significant decline. This reduction in net income can be attributed to the operating expenses, as well as other factors such as the divestiture of the Vycom business. The company's earnings per share (EPS) also decreased by $0.05 year-over-year to $0.12 per share. These declines indicate that the expenses had a direct impact on the company's profitability. 4. **Market Conditions and Strategic Decisions**: It's important to consider the broader market conditions and AZEK's strategic decisions when analyzing the impact of expenses on profitability. For instance, the company has been undergoing an acquisition by James Hardie, which could have affected its short-term profitability as it navigates the integration process. Additionally, the divestiture of the Vycom business and the soft contributions from the Commercial segment likely contributed to the decline in net income. In conclusion, while AZEK was able to maintain a gross margin of 36.3%, the company's profitability was impacted by operating expenses, which led to a decrease in net income and a compression of net margin. The ROE of 1.32% also suggests that the company had difficulty generating strong returns on shareholders' equity. The impact of these expenses on profitability was further exacerbated by strategic decisions and market conditions.