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

Susan Maklari: Okay, sorry about that. The first question is just around the mix. As you talk to customers, are you hearing about any shift or any move down in products or is it more of just an overall delay as the market kind of recovers from the level of demand we saw in the last two years or so?

Jesse Singh: Yeah. So as you as you think about the market, it’s very similar to what we said on the last call, which is in effect our core contractors and the core participants in the market continue to operate for, right. They still have backlogs, they’re still busy. Their crews are still busy. All of that is there. I think some of what you’ve seen in fiscal 2022, as we’ve move through it, some of what you’ve seen as kind of a modest, if we talk about single digit kind of unit declines is more of the intermittent participants, people there may do bathrooms, they may do general projects, they come in and they do — they do a few decks and then they do whatever, right. Some of that has left the system, and — but in general, we continue to see with our core contractor base very much business as usual in general.

Yeah, look you can talk to someone and they may have had someone switch from the most premium line to one of our other markets. But in general, if you just look at the data and our conversations, it has very much been business as usual with our core contractor set.

Susan Maklari: Okay. And then following up, Pete, you talked a little bit about working capital and the ability to generate cash. As we think about the initiatives on inventories and some of the companies specifics on recycling in those types of things, any additional thoughts on how we should be thinking about the ability of the business to generate cash and how that could potentially compare to more recent history or even what you would think of as a more normalized level of generation?

Peter Clifford: Yeah, I mean I think again, we feel comfortable that we could support our repurchase program in a similar fashion. And that’s really going to come from the fact that we think we can generate our traditional cash from operations plus $100 million less of CapEx. And we haven’t really formalized the target externally for working capital, but we know that over the last year, year and a half, we probably put $40 million to $45 million inventory on the balance sheet that we’d like to eventually over the next four quarter or five quarters get off.

Susan Maklari: Okay. Thank you.

Operator: Your next question comes from the line of Ketan Mamtora with BMO. Your line is now open.

Ketan Mamtora: Good afternoon and thanks for taking my questions. I just wanted to come back to the 2023 EBITDA bridge. So if I add up all the big pieces, right, we’ve got $30 million of positive price, we’ve got $30 million of cost deflation, we had the benefit on the M&A side and the startup costs that will not occur again in 2023. And then we’ve got more recycled PVC and kind of more LDP, all these — if I just add up these pieces that gets us sort of positive call it trough numbers $80 million, $90 million and then we’ve got the offset on the volume side, and you talk about the detrimental margins. What is the other big piece that I’m missing, because that still does not get me sort of close to that $250 million, $265 million number that you’ve got out here? Just looking at sort of top high level numbers?