The AZEK Company (AZEK) The 44th Annual William Blair Growth Stock Conference summary

Business overview and strategy

• Manufactures sustainable, low-maintenance outdoor living products from recycled plastics, targeting wood replacement in decking, railing, exteriors, and accessories.

• Holds leading market positions: #2 in decking, #1 in pro composite/PVC decking, and #1 in PVC exterior trim, with top brand positions in the U.S. and Canada.

• Focuses on wood conversion, product innovation, multi-channel expansion, and strategic M&A to drive above-market growth and margin expansion.

• Vertically integrated U.S. manufacturing, with a direct sales force and strong distributor partnerships.

• Addresses a $25 billion total addressable market, with significant opportunity in converting wood to composites and low-maintenance materials.

Market dynamics and growth drivers

• Outdoor living is a resilient, growing segment, with repair and remodel spend favoring exterior improvements and strong secular tailwinds.

• Over 75% of decks and a large share of exteriors are still wood, presenting ongoing conversion opportunities.

• Composite decking market share has accelerated, with annual conversion rates now exceeding 1% per year and projections to reach ~50% in 10-15 years.

• Each 1% conversion equates to 3-4% revenue growth, with a long-term goal of 50% composite market share.

• The company leverages a broad portfolio and innovative technologies to capture growth in decking, railing, exteriors, and adjacent outdoor living categories.

Financial performance and objectives

• Reported $1,435M in LTM FY 2Q24 net sales, with a 10-year net sales CAGR of ~12%, consistently outperforming the 4-5% R&R market growth.

• EBITDA margins have expanded to 27.5%, meeting the 2027 target ahead of schedule, with a plan to expand adjusted EBITDA margin by 500bps versus FY19 baseline.

• Organic growth target is 9-11% annually, driven by market conversion, channel expansion, and product innovation.

• Margin expansion levers include increased recycled content, product configuration, continuous improvement, and SG&A leverage.

• Free cash flow is expected in low double digits as a percentage of sales, with disciplined capital deployment and modest leverage supporting organic growth and M&A.