- **Residential Growth Outperformance**: 9% YoY net sales growth driven by new products and channel expansion, vs. flat R&R market.
- **Merger Synergy Confidence**: $625M total synergies (cost + sales) with James Hardie, supported by contractor demand for combined solutions.
- **Margin Expansion Progress**: 27.5% adjusted EBITDA margin in Q2, on track to meet 27.5%+ target ahead of 2027 milestone.
- **Recycling-Driven Efficiency**: $40M+ cost savings from expanded recycling network, with 2026 benefits from NW Polymers acquisition.
- **Tariff Resilience**: Minimal direct impact on U.S.-sourced materials; pricing offsets 2025 tariff exposure.


**【CEO Opening Remarks】**
- **Residential Segment Growth**: Q2 2025 residential net sales increased 9% YoY, driven by mid-single-digit sell-through growth and new product launches (e.g., TimberTech Harvest+ decking, Reliance Rail). 
- **Material Conversion Strategy**: 75% of decking and 60% of rail sold annually are wood-based, with AZEK targeting wood replacement through innovative, low-maintenance products.
- **James Hardie Merger Synergies**: $125M cost savings and $500M incremental sales expected, with contractors expressing strong interest in combined offerings.
- **Recycling Expansion**: Acquired Northwest Polymers to expand West Coast recycling capacity, supporting 27.5% adjusted EBITDA margin target.

**【CFO Financial Highlights】**
- **Q2 2025 Results**: 
  - Consolidated net sales: $452M (+8% YoY)
  - Adjusted EBITDA: $124M (+10% YoY)
  - Adjusted EBITDA margin: 27.5% (+40bps YoY)
  - Residential segment EBITDA: $122M (+11% YoY)
- **FY25 Guidance**: 
  - Net sales: $1.52B-$1.55B (5%-8% YoY growth)
  - Adjusted EBITDA: $403M-$418M (6%-10% YoY growth)
  - Free cash flow: $1M in Q2, with $110M-$120M capex for recycling and facility expansion.
- **Tariff Impact**: $12M-$15M annualized exposure offset by pricing actions, with minimal direct impact due to U.S.-based supply chain.

**【Q&A Key Takeaways】**
- **Channel Inventory Management**: Below-historical inventory levels to maintain flexibility amid macro uncertainty.
- **Sales Synergy Potential**: Contractors see value in combined AZEK-James Hardie offerings, with siding installers expressing interest in AZEK decking.
- **Recycling Cost Savings**: $40M+ savings target from expanded recycling network, with 2026 benefits from Northwest Polymers acquisition.
- **Tariff Mitigation**: Modest price increases offset 2025 tariff impact; no material impact on U.S.-sourced raw materials.


The AZEK Company Inc. (AZEK)-6 May 25-2025 Q2 Earnings call transcript

- **Residential Growth Engine**: 22% YoY net sales growth driven byDeck, Rail & Accessories (double-digit sell-through) and Exteriors (high-single-digit growth). Adjusted EBITDA up 24% to $64M.
- **New Product Push**: 2025 launches (e.g., Fulton Rail, XCEED siding) gaining channel traction, with Q1 investments in production ramp-up modestly impacting margins.
- **FY25 Outlook**: Residential net sales growth 6-8% YoY, with mid-single-digit sell-through growth expected. Free cash flow improving to -$8M in Q1.
- **Margin Leverage**: Residential EBITDA margin expands 40bps to 23.7%, with recycling investments and cost programs driving long-term margin upside.
- **Risks**: Commercial segment margin pressure from Scranton Products, but pricing actions expected to stabilize in H2.


**【CEO Opening Remarks】**
- **Residential Segment Growth**: Q1 net sales grew 22% YoY, driven by double-digit sell-through in Deck, Rail & Accessories and high-single-digit growth in Exteriors. Adjusted EBITDA expanded 24% YoY to $64M, with margin up 40bps to 23.7%.
- **New Product Momentum**: 2025 launches (e.g., TimberTech Fulton Rail, Versatex XCEED siding) are gaining traction, with new products being stocked ahead of peak season. Q1 investments in ramping production modestly impacted margins, with scaling expected in Q2.
- **Market Outlook**: Full-year Residential net sales growth guided at 6-8% YoY, with mid-single-digit sell-through growth expected for the remainder of FY25. Channel inventory remains below historical averages, and contractor backlogs remain healthy at 6-7 weeks.

**【CFO Financial Review】**
- **Q1 Financial Highlights**: 
  - Consolidated net sales: $285M (+15% YoY, excluding Vycom divestiture impact)
  - Adjusted EBITDA: $66M (+20% YoY)
  - Residential segment adjusted EBITDA margin: 23.7% (up 40bps YoY)
  - Free cash flow: -$8M (vs. -$34M YoY)
- **Key Drivers**: 
  - Double-digit Residential sell-through growth offset by lower Commercial segment performance
  - Margins impacted by new product ramp-up costs and lower plant utilization
  - Tax rate favorable at 7.5% (vs. 39.9% YoY)
- **FY25 Outlook**: 
  - Net sales: $1.52-1.55B (5-8% YoY)
  - Adjusted EBITDA: $403-418M (6-10% YoY)
  - Q2 guidance: $437-448M net sales, $115-120M adjusted EBITDA

**【Q&A Key Takeaways】**
- **Demand & Channel**: Q1 outperformance led to modestly raised FY25 guide, but mid-single-digit sell-through growth assumption maintained. Pro channel shelf gains and new product stocking positions support growth.
- **New Product Impact**: Q1/Q2 margin headwinds from ramping production (e.g., vinyl rail facility) expected to ease as scale improves. Siding and trim launches targeting wood conversion.
- **Recycling & Cost Savings**: $11M invested in new recycling facility to expand lower-cost material usage. Margins expected to benefit from ongoing recycling initiatives and cost programs.
- **Tariffs & Supply Chain**: Minimal exposure to Mexico/China tariffs; sourcing alternatives available if needed.
- **Commercial Segment**: Scranton Products business under pressure from input costs, but pricing actions expected to stabilize margins in H2.


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