Group 1 - Monteverde & Associates PC is recognized as a Top 50 Firm in the 2024 ISS Securities Class Action Services Report and has recovered millions for shareholders [1] - Playa Hotels & Resorts N.V. is proposed to be acquired by Hyatt Hotels Corporation for $13.50 per share in cash, with the tender offer expiring on May 23, 2025 [1] - The AZEK Company Inc. is set to merge with James Hardie Industries plc, where AZEK shareholders will receive $26.45 in cash and 1.0340 ordinary shares of James Hardie per AZEK share [2] - 180 Degree Capital Corp. is merging with Mount Logan Capital Inc., with an estimated post-merger shareholder ownership of approximately 40% for current 180 Degree Capital shareholders [2] - iCAD, Inc. will merge with RadNet, Inc., where iCAD stockholders will receive 0.0677 shares of RadNet common stock for each share of iCAD common stock held [2] Group 2 - Monteverde & Associates PC operates from the Empire State Building and has a successful track record in litigating and recovering money for shareholders [3] - The firm emphasizes that no company, director, or officer is above the law, encouraging shareholders with concerns to seek additional information [4]

[PART I. Financial Information](index=4&type=section&id=PART%20I.%20Financial%20Information) This section presents the unaudited condensed consolidated financial statements and related notes, covering financial position, performance, cash flows, and significant accounting policies [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements, including balance sheets, income, equity, and cash flows, with detailed notes on accounting policies and key financial items [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This table provides a snapshot of the company's assets, liabilities, and stockholders' equity at specific dates | in thousands | March 31, 2025 | September 30, 2024 | | :------------- | :------------- | :----------------- | | **ASSETS:** | | | | Cash and cash equivalents | $146,719 | $164,025 | | Trade receivables, net | $136,905 | $49,922 | | Inventories | $224,052 | $223,682 | | Total current assets | $560,565 | $471,377 | | Property, plant and equipment - net | $488,604 | $462,201 | | Goodwill | $974,385 | $967,816 | | Intangible assets - net | $138,028 | $154,518 | | Total assets | $2,299,253 | $2,167,711 | | **LIABILITIES AND STOCKHOLDERS' EQUITY:** | | | | Accounts payable | $60,780 | $57,909 | | Accrued rebates | $81,951 | $68,211 | | Total current liabilities | $228,472 | $217,038 | | Long-term debt—less current portion | $427,970 | $429,668 | | Total liabilities | $845,080 | $810,846 | | Total stockholders' equity | $1,454,173 | $1,356,865 | | Total liabilities and stockholders' equity | $2,299,253 | $2,167,711 | [Condensed Consolidated Statements of Comprehensive Income](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) This table presents the company's revenues, expenses, and net income over specific periods | in thousands | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Six Months Ended March 31, 2025 | Six Months Ended March 31, 2024 | | :------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net sales | $452,231 | $418,408 | $737,660 | $658,852 | | Gross profit | $167,693 | $157,073 | $271,244 | $247,723 | | Operating income | $79,394 | $73,962 | $106,644 | $85,181 | | Net income | $54,285 | $49,758 | $72,409 | $74,906 | | Basic EPS | $0.38 | $0.34 | $0.50 | $0.51 | | Diluted EPS | $0.37 | $0.34 | $0.50 | $0.51 | [Condensed Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) This table details changes in the company's equity from net income, stock-based compensation, and other transactions over a period | (in thousands) | Balance – September 30, 2024 | Net income (6 months) | Other comprehensive income (loss) (6 months) | Stock-based compensation (6 months) | Exercise of vested stock options (6 months) | Issuance of common stock under employee stock plan, net of shares withheld for taxes (6 months) | Treasury stock purchases (6 months) | Balance – March 31, 2025 | | :------------- | :--------------------------- | :-------------------- | :--------------------------------- | :-------------------------------- | :--------------------------------- | :------------------------------------------------------------------------------------------------ | :----------------------- | :----------------------- | | Total Stockholders' Equity | $1,356,865 | $72,409 | $1,230 | $9,606 | $19,573 | $(5,424) | $(86) | $1,454,173 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This table summarizes the cash inflows and outflows from operating, investing, and financing activities over specific periods | (in thousands) | Six Months Ended March 31, 2025 | Six Months Ended March 31, 2024 | | :------------- | :------------------------------ | :------------------------------ | | Net cash provided by (used in) operating activities | $60,619 | $(31,094) | | Net cash provided by (used in) investing activities | $(85,862) | $95,167 | | Net cash provided by (used in) financing activities | $7,937 | $(114,988) | | Net decrease in cash and cash equivalents | $(17,306) | $(50,915) | | Cash and cash equivalents – End of period | $146,719 | $227,399 | [Notes to Unaudited Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the unaudited condensed consolidated financial statements [1. Organization and Summary of Significant Accounting Policies](index=10&type=section&id=1.%20Organization%20and%20Summary%20of%20Significant%20Accounting%20Policies) The AZEK Company Inc. is a Delaware corporation specializing in low-maintenance, environmentally sustainable building products. The company has entered into a merger agreement with James Hardie Industries plc, expected to close in the second half of calendar year 2025, where AZEK will become an indirect wholly-owned subsidiary. Merger-related costs of $5.0 million were recognized in Q1 2025. The financial statements are prepared in accordance with U.S. GAAP, with no material changes in accounting policies from the 2024 Form 10-K, except for updates on recently issued accounting pronouncements - The AZEK Company Inc. is an industry-leading designer and manufacturer of beautiful, low-maintenance and environmentally sustainable building products for residential, commercial and industrial markets[20](index=20&type=chunk) - On March 23, 2025, the Company entered into a Merger Agreement with James Hardie Industries plc, under which AZEK will become an indirect wholly owned subsidiary of James Hardie. Former AZEK stockholders are expected to own approximately **26%** of the combined company[21](index=21&type=chunk)[22](index=22&type=chunk) - The transaction is expected to close in the second half of calendar year 2025, subject to stockholder and regulatory approvals[23](index=23&type=chunk) - The Company recognized **$5.0 million** in costs related to the proposed Merger with James Hardie in 'Selling, general and administrative expenses' for the three and six months ended March 31, 2025[24](index=24&type=chunk) | Research and Development Expenses (in millions) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Six Months Ended March 31, 2025 | Six Months Ended March 31, 2024 | | :-------------------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Total R&D Expenses | $4.0 | $3.7 | $8.1 | $6.8 | [2. Revenue](index=12&type=section&id=2.%20Revenue) The Company recognizes revenue when control of promised goods is transferred to customers upon shipping. Customer rebates are recorded in 'Net sales' and 'Accrued rebates'/'Trade receivables'. Accrued rebates increased to $82.0 million as of March 31, 2025, from $46.4 million as of March 31, 2024 - Revenue is recognized when control of promised goods is transferred to customers at the point of shipping[35](index=35&type=chunk) | Rebate Activity (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Six Months Ended March 31, 2025 | Six Months Ended March 31, 2024 | | :----------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Beginning balance | $79,664 | $72,393 | $74,796 | $66,958 | | Rebate expense | $44,618 | $35,930 | $65,337 | $58,168 | | Rebate payments | $(22,884) | $(53,328) | $(38,735) | $(70,131) | | Ending balance | $101,398 | $54,995 | $101,398 | $54,995 | [3. Divestiture](index=14&type=section&id=3.%20Divestiture) On November 1, 2023, the Company completed the sale of its Vycom business within the Commercial segment for approximately $131.8 million in net proceeds. This divestiture allowed the Company to focus on higher-value business portions and provided cash for capital allocation priorities, resulting in a $37.7 million pre-tax gain on sale recognized in fiscal year 2024 - The Company sold its Vycom business (Commercial segment) on November 1, 2023, for net proceeds of approximately **$131.8 million**[38](index=38&type=chunk) - The divestiture resulted in a pre-tax gain on sale of **$37.7 million**, recognized in 'Gain on sale of business' for the year ended September 30, 2024[38](index=38&type=chunk) [4. Inventories](index=14&type=section&id=4.%20Inventories) Inventories are valued at the lower of cost or net realizable value, using the FIFO method, and are reduced for slow-moving and obsolete items. Total inventories remained stable at $224.1 million as of March 31, 2025, compared to $223.7 million as of September 30, 2024 | Inventories (in thousands) | March 31, 2025 | September 30, 2024 | | :------------------------- | :------------- | :----------------- | | Raw materials | $51,104 | $52,370 | | Work in process | $26,634 | $25,650 | | Finished goods | $146,314 | $145,662 | | Total inventories | $224,052 | $223,682 | [5. Property, Plant and Equipment—Net](index=14&type=section&id=5.%20Property,%20Plant%20and%20Equipment%E2%80%94Net) Net property, plant and equipment increased to $488.6 million as of March 31, 2025, from $462.2 million as of September 30, 2024. This increase was primarily driven by additions to buildings and improvements and manufacturing equipment. Depreciation expense for the six months ended March 31, 2025, was $45.6 million, up from $41.5 million in the prior year | Property, Plant and Equipment – Net (in thousands) | March 31, 2025 | September 30, 2024 | | :----------------------------------------------- | :------------- | :----------------- | | Land | $5,560 | $3,209 | | Buildings and improvements | $153,429 | $115,828 | | Manufacturing equipment | $700,616 | $668,044 | | Total property, plant and equipment | $907,249 | $831,987 | | Construction in progress | $54,484 | $59,006 | | Accumulated depreciation | $(473,129) | $(428,792) | | Total property, plant and equipment – net | $488,604 | $462,201 | - Depreciation expense was approximately **$45.6 million** for the six months ended March 31, 2025, compared to **$41.5 million** for the six months ended March 31, 2024[41](index=41&type=chunk) [6. Goodwill and Intangible Assets—Net](index=15&type=section&id=6.%20Goodwill%20and%20Intangible%20Assets%E2%80%94Net) Goodwill increased to $974.4 million as of March 31, 2025, primarily due to acquisitions within the Residential segment. Finite-lived intangible assets, including proprietary knowledge, trademarks, and customer relationships, decreased to $138.0 million, with a weighted-average amortization period of 10.3 years | Goodwill (in thousands) | Residential | Commercial | Total | | :---------------------- | :---------- | :--------- | :---- | | Goodwill, net as of September 30, 2024 | $953,882 | $13,934 | $967,816 | | Acquisition | $6,569 | — | $6,569 | | Goodwill, net as of March 31, 2025 | $960,451 | $13,934 | $974,385 | - During the six months ended March 31, 2025, the Company acquired two businesses for a total of **$18.5 million**, which are included in the Residential segment[42](index=42&type=chunk) | Finite-Lived Intangible Assets (in thousands) | March 31, 2025 Net Carrying Value | September 30, 2024 Net Carrying Value | | :-------------------------------------------- | :-------------------------------- | :-------------------------------- | | Proprietary knowledge | $26,087 | $32,132 | | Trademarks | $45,513 | $50,715 | | Customer relationships | $64,955 | $69,852 | | Patents | $1,446 | $1,785 | | Other intangibles | $27 | $34 | | Total intangible assets | $138,028 | $154,518 | - Amortization expense was **$17.3 million** for the six months ended March 31, 2025, down from **$20.0 million** in the prior year. The remaining weighted-average amortization period for acquired intangible assets was **10.3 years** as of March 31, 2025[43](index=43&type=chunk) [7. Composition of Certain Balance Sheet Accounts](index=16&type=section&id=7.%20Composition%20of%20Certain%20Balance%20Sheet%20Accounts) The allowance for doubtful accounts increased slightly to $1.039 million as of March 31, 2025. Accrued expenses and other liabilities decreased to $81.3 million from $87.6 million, primarily due to lower employee-related liabilities and taxes, partially offset by increases in marketing and freight | Allowance for Doubtful Accounts (in thousands) | Six Months Ended March 31, 2025 | Six Months Ended March 31, 2024 | | :--------------------------------------------- | :------------------------------ | :------------------------------ | | Beginning balance | $941 | $1,773 | | Provision (release) | $98 | $(493) | | Divestiture | — | $(32) | | Ending balance | $1,039 | $1,248 | | Accrued Expenses and Other Liabilities (in thousands) | March 31, 2025 | September 30, 2024 | | :---------------------------------------------------- | :------------- | :----------------- | | Employee related liabilities | $35,557 | $45,099 | | Marketing | $6,168 | $3,465 | | Professional fees | $3,058 | $4,674 | | Taxes | $2,226 | $3,707 | | Total accrued expenses and other current liabilities | $81,341 | $87,618 | [8. Debt](index=16&type=section&id=8.%20Debt) The AZEK Group LLC refinanced its credit facilities on September 26, 2024, entering into a new $440.0 million 2024 Term Loan Facility and a $375.0 million 2024 Revolving Credit Facility. As of March 31, 2025, $438.9 million was outstanding under the Term Loan Facility, with no outstanding borrowings on the Revolving Credit Facility, which had $372.7 million available. Interest expense, net, decreased by $1.6 million for the six months ended March 31, 2025, compared to the prior year | Debt (in thousands) | March 31, 2025 | September 30, 2024 | | :------------------ | :------------- | :----------------- | | 2024 Term Loan Facility | $438,900 | $440,000 | | Total | $438,900 | $440,000 | | Long-term debt—less current portion and unamortized deferred financing costs | $427,970 | $429,668 | - On September 26, 2024, The AZEK Group LLC entered into a new **$440.0 million** 2024 Term Loan Facility and a new **$375.0 million** 2024 Revolving Credit Facility, replacing previous credit facilities[47](index=47&type=chunk)[48](index=48&type=chunk)[50](index=50&type=chunk) - As of March 31, 2025, **$438.9 million** was outstanding under the 2024 Term Loan Facility, and there were no outstanding borrowings under the 2024 Revolving Credit Facility, with **$372.7 million** available for future borrowings[56](index=56&type=chunk)[57](index=57&type=chunk) | Interest Expense, Net (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Six Months Ended March 31, 2025 | Six Months Ended March 31, 2024 | | :--------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Interest expense, net | $7,353 | $8,680 | $15,016 | $16,590 | [9. Product Warranties](index=19&type=section&id=9.%20Product%20Warranties) The Company provides product warranties ranging from 5 years to lifetime. The warranty reserve balance as of March 31, 2025, was $19.0 million, with $5.2 million classified as current. Adjustments to the reserve for the six months ended March 31, 2025, were $2.8 million, and warranty claims payments were $2.1 million | Warranty Reserve Activity (in thousands) | Six Months Ended March 31, 2025 | Six Months Ended March 31, 2024 | | :------------------------------------- | :------------------------------ | :------------------------------ | | Beginning balance | $18,291 | $17,012 | | Adjustments to reserve | $2,811 | $151 | | Warranty claims payment | $(2,086) | $(1,538) | | Ending balance | $19,016 | $15,625 | | Current portion of accrued warranty | $(5,182) | $(3,699) | | Accrued warranty – less current portion | $13,834 | $11,926 | [10. Leases](index=20&type=section&id=10.%20Leases) The Company leases various assets under operating and finance leases. Total lease assets increased to $128.6 million as of March 31, 2025, from $102.8 million, and total lease liabilities increased to $140.9 million from $114.4 million. Total lease expense for the six months ended March 31, 2025, was $10.0 million, up from $7.9 million in the prior year | Leases (in thousands) | March 31, 2025 | September 30, 2024 | | :-------------------- | :------------- | :----------------- | | ROU operating lease assets | $39,027 | $22,881 | | ROU finance lease assets | $89,545 | $79,916 | | Total lease assets | $128,572 | $102,797 | | Total lease liabilities | $140,889 | $114,357 | | Lease Expense (in thousands) | Six Months Ended March 31, 2025 | Six Months Ended March 31, 2024 | | :--------------------------- | :------------------------------ | :------------------------------ | | Operating lease expense | $3,392 | $2,874 | | Finance lease amortization of assets | $3,564 | $2,583 | | Finance lease interest on lease liabilities | $2,876 | $2,206 | | Total lease expense | $10,002 | $7,897 | | Weighted-Average Lease Terms/Rates | March 31, 2025 | September 30, 2024 | | :--------------------------------- | :------------- | :----------------- | | Operating leases (years) | 9.8 | 8.6 | | Finance leases (years) | 21.8 | 23.2 | | Operating leases discount rate | 6.4% | 6.5% | | Finance leases discount rate | 5.9% | 6.2% | [11. Fair Value of Financial Instruments](index=21&type=section&id=11.%20Fair%20Value%20of%20Financial%20Instruments) The Company uses interest rate derivative instruments (swaps) to hedge against interest rate volatility on its Senior Secured Credit Facilities, converting a portion of floating-rate debt to fixed-rate. As of March 31, 2025, the fair value of interest rate swaps was a liability of $0.6 million, classified as Level 2. The Company expects to reclassify approximately $0.6 million as an increase to interest expense in the next 12 months - The Company uses interest rate swap agreements to hedge against interest rate volatility on its Senior Secured Credit Facilities, converting **$300 million** notional amount of variable interest to fixed rates (**4.39%** and **4.48%**) until October 31, 2025[65](index=65&type=chunk) | Fair Value of Interest Rate Derivative Instruments (in thousands) | March 31, 2025 | September 30, 2024 | | :------------------------------------------------ | :------------- | :----------------- | | Interest rate swaps (Other current liabilities) | $601 | $1,902 | | Interest rate swaps (Other non-current liabilities) | — | $335 | - The Company expects to reclassify approximately **$0.6 million** (**$0.4 million** after-tax) as an increase to interest expense in the next 12 months from accumulated other comprehensive income (loss)[67](index=67&type=chunk) [12. Segments](index=22&type=section&id=12.%20Segments) The Company operates in two reportable segments: Residential and Commercial. The Residential segment, driven by home repair and remodel activity, saw net sales increase by 13.3% and Adjusted EBITDA by 15.1% for the six months ended March 31, 2025. The Commercial segment, impacted by the Vycom divestiture and weaker demand, experienced a 14.1% decrease in net sales and a 41.6% decrease in Adjusted EBITDA for the same period - The Company has two reportable segments: Residential (decking, rail, trim, etc.) and Commercial (lockers, bathroom partitions)[72](index=72&type=chunk)[73](index=73&type=chunk) | Segment Net Sales (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Six Months Ended March 31, 2025 | Six Months Ended March 31, 2024 | | :------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Residential | $437,041 | $402,541 | $709,040 | $625,541 | | Commercial | $15,190 | $15,867 | $28,620 | $33,311 | | Total | $452,231 | $418,408 | $737,660 | $658,852 | | Segment Adjusted EBITDA (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Six Months Ended March 31, 2025 | Six Months Ended March 31, 2024 | | :------------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Residential | $122,474 | $110,386 | $186,854 | $162,365 | | Commercial | $1,899 | $2,897 | $3,387 | $5,802 | | Total Adjusted EBITDA for reporting segments | $124,373 | $113,283 | $190,241 | $168,167 | [13. Capital Stock](index=25&type=section&id=13.%20Capital%20Stock) The Board of Directors authorized a Share Repurchase Program of up to $600 million, in addition to the remaining $76 million from a prior authorization. For the six months ended March 31, 2025, the Company repurchased 159 thousand shares for $85 thousand, at an average price of $53.87 per share. As of March 31, 2025, $557.0 million remained available under the program - The Board of Directors authorized a Share Repurchase Program of up to **$600 million** on June 12, 2024, in addition to approximately **$76 million** remaining from a prior authorization[75](index=75&type=chunk)[76](index=76&type=chunk) | Share Repurchases (in thousands, except per share) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Six Months Ended March 31, 2025 | Six Months Ended March 31, 2024 | | :------------------------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Total number of shares repurchased | — | 961 | 159 | 3,252 | | Reacquisition cost | $— | $25,415 | $85 | $126,215 | | Average price per share | $— | $44.32 | $53.87 | $38.81 | - As of March 31, 2025, approximately **$557.0 million** was available for repurchases under the Share Repurchase Program[78](index=78&type=chunk) [14. Stock-Based Compensation](index=25&type=section&id=14.%20Stock-Based%20Compensation) The Company grants stock-based awards under the 2020 Omnibus Incentive Compensation Plan. Stock-based compensation expense for the six months ended March 31, 2025, was $9.6 million, down from $14.8 million in the prior year. As of March 31, 2025, $30.3 million of unrecognized compensation cost remained, with a weighted-average recognition period of 2.0 years | Stock-Based Compensation Expense (in millions) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Six Months Ended March 31, 2025 | Six Months Ended March 31, 2024 | | :--------------------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Stock-based compensation expense | $4.7 | $6.3 | $9.6 | $14.8 | | Income tax benefit | $1.2 | $1.3 | $2.4 | $3.0 | - As of March 31, 2025, the Company had **$30.3 million** of unrecognized compensation cost on unvested stock-based awards, with a weighted average remaining recognition period of **2.0 years**[84](index=84&type=chunk) | Stock Option Activity (Six Months Ended March 31, 2025) | Performance-Based | Service-Based | | :---------------------------------------------------- | :---------------- | :------------ | | Outstanding at October 1, 2024 (shares) | 849,348 | 2,879,532 | | Exercised (shares) | (278,826) | (490,532) | | Outstanding at March 31, 2025 (shares) | 570,522 | 2,441,497 | | Vested and exercisable at March 31, 2025 (shares) | 570,522 | 2,209,356 | | Restricted Stock Unit Activity (Six Months Ended March 31, 2025) | Performance-Based | Service-Based | | :------------------------------------------------------------- | :---------------- | :------------ | | Outstanding and unvested at October 1, 2024 (shares) | 590,072 | 677,024 | | Granted (shares) | 151,284 | 235,986 | | Vested (shares) | (55,859) | (277,567) | | Forfeited (shares) | (83,539) | (39,577) | | Outstanding and unvested at March 31, 2025 (shares) | 549,176 | 595,866 | [15. Earnings Per Share](index=28&type=section&id=15.%20Earnings%20Per%20Share) Basic EPS for the three months ended March 31, 2025, was $0.38, up from $0.34 in the prior year, while diluted EPS was $0.37, also up from $0.34. For the six months, basic and diluted EPS were $0.50, slightly down from $0.51 in the prior year. Certain stock options and restricted stock units were anti-dilutive and excluded from diluted EPS calculations | Net Income Per Common Share | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Six Months Ended March 31, 2025 | Six Months Ended March 31, 2024 | | :-------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net income | $54,285 | $49,758 | $72,409 | $74,906 | | Basic EPS | $0.38 | $0.34 | $0.50 | $0.51 | | Diluted EPS | $0.37 | $0.34 | $0.50 | $0.51 | | Anti-Dilutive Shares | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Six Months Ended March 31, 2025 | Six Months Ended March 31, 2024 | | :------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Stock Options | 129,202 | 425,571 | 96,846 | 499,300 | | Restricted Stock Units | 123,533 | 6,958 | 72,343 | 4,075 | [16. Income Taxes](index=29&type=section&id=16.%20Income%20Taxes) The effective income tax rate for the three months ended March 31, 2025, increased to 24.6% from 23.5% in the prior year, primarily due to lower tax benefits from stock-based compensation and higher taxable income. For the six months, the rate decreased to 21.0% from 29.9%, mainly due to the removal of tax effects related to the Vycom business sale | Effective Income Tax Rate | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Six Months Ended March 31, 2025 | Six Months Ended March 31, 2024 | | :------------------------ | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Effective income tax rate | 24.6% | 23.5% | 21.0% | 29.9% | - The increase in the effective income tax rate for the three months ended March 31, 2025, was primarily driven by lower tax benefits related to stock-based compensation and higher taxable income[93](index=93&type=chunk) - The decrease in the effective income tax rate for the six months ended March 31, 2025, was primarily driven by tax benefits related to stock-based compensation and the removal of the tax effects related to the sale of the Vycom business[93](index=93&type=chunk) [17. Commitments and Contingencies](index=29&type=section&id=17.%20Commitments%20and%20Contingencies) The Company is subject to various legal actions in the normal course of business. Management believes the outcome of current actions will not have a material adverse effect on financial results, though ultimate resolution could be material in a future period. Losses are accrued when probable and estimable - The Company is subject to various legal actions, but management believes the outcome of current actions will not have a material adverse effect on the Company's results of operations or financial position[94](index=94&type=chunk) [18. Condensed Financial Information of Registrant (Parent Company Only)](index=30&type=section&id=18.%20Condensed%20Financial%20Information%20of%20Registrant%20(Parent%20Company%20Only)) The AZEK Company Inc. operates as a holding company, with its financial position primarily consisting of investments in subsidiaries. Total assets and stockholders' equity for the parent company were $1,454.2 million as of March 31, 2025. No cash dividends were paid from subsidiaries to the parent company during the three and six months ended March 31, 2025, compared to $25.0 million and $125.0 million in the prior year, respectively. Restricted payment covenants in the Senior Secured Credit Facilities limit dividend payments from subsidiaries | Parent Company Balance Sheet (in thousands) | March 31, 2025 | September 30, 2024 | | :------------------------------------------ | :------------- | :----------------- | | Investments in subsidiaries | $1,454,173 | $1,356,865 | | Total assets | $1,454,173 | $1,356,865 | | Total stockholders' equity | $1,454,173 | $1,356,865 | - No cash dividends were paid to The AZEK Company Inc. from its consolidated subsidiaries during the three and six months ended March 31, 2025. In contrast, **$25.0 million** and **$125.0 million** were paid during the three and six months ended March 31, 2024, respectively[100](index=100&type=chunk)[102](index=102&type=chunk) - The Senior Secured Credit Facilities contain covenants restricting dividend payments by The AZEK Group LLC unless certain conditions are met, including a Total Net Leverage Ratio no greater than **3.75:1.00**[104](index=104&type=chunk)[175](index=175&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=33&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the Company's financial condition and results of operations, highlighting the proposed merger with James Hardie, the recent divestiture of the Vycom business, and a detailed analysis of financial performance for the three and six months ended March 31, 2025, compared to the prior year. It also discusses segment results, non-GAAP financial measures, liquidity, capital resources, critical accounting policies, and recently issued accounting pronouncements [Overview](index=33&type=section&id=Overview) This section provides a high-level summary of the Company's business, recent strategic developments, and key financial highlights - The AZEK Company is a leading designer and manufacturer of low-maintenance, environmentally sustainable outdoor living products, operating in Residential and Commercial segments[108](index=108&type=chunk) - The Company entered into a Merger Agreement with James Hardie Industries plc on March 23, 2025, expecting to close in the second half of calendar year 2025, with AZEK becoming an indirect wholly-owned subsidiary[110](index=110&type=chunk)[112](index=112&type=chunk) - The Vycom business within the Commercial segment was divested on November 1, 2023, for approximately **$131.8 million**, allowing focus on higher-value business portions and providing cash for capital allocation[113](index=113&type=chunk) [Results of Operations](index=36&type=section&id=Results%20of%20Operations) This section analyzes the Company's financial performance, including net sales, gross profit, operating income, and net income, for the current and prior periods | (U.S. dollars in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | $ Variance | % Variance | | :-------------------------- | :-------------------------------- | :-------------------------------- | :--------- | :--------- | | Net sales | $452,231 | $418,408 | $33,823 | 8.1% | | Cost of sales | $284,538 | $261,335 | $23,203 | 8.9% | | Gross profit | $167,693 | $157,073 | $10,620 | 6.8% | | Selling, general and administrative expenses | $88,267 | $83,198 | $5,069 | 6.1% | | Operating income | $79,394 | $73,962 | $5,432 | 7.3% | | Interest expense, net | $7,353 | $8,680 | $(1,327) | (15.3)% | | Income tax expense | $17,756 | $15,309 | $2,447 | 16.0% | | Net income | $54,285 | $49,758 | $4,527 | 9.1% | - Net sales for the three months ended March 31, 2025, increased by **8.1%** primarily due to higher sales volume in the Residential segment, expanded channel presence, and new products[117](index=117&type=chunk) - Gross profit margin decreased to **37.1%** for the three months ended March 31, 2025, from **37.5%** in the prior year, due to increased freight costs and lower plant utilization, partially offset by higher net sales[119](index=119&type=chunk) | (U.S. dollars in thousands) | Six Months Ended March 31, 2025 | Six Months Ended March 31, 2024 | $ Variance | % Variance | | :-------------------------- | :------------------------------ | :------------------------------ | :--------- | :--------- | | Net sales | $737,660 | $658,852 | $78,808 | 12.0% | | Cost of sales | $466,416 | $411,129 | $55,287 | 13.4% | | Gross profit | $271,244 | $247,723 | $23,521 | 9.5% | | Selling, general and administrative expenses | $163,154 | $160,444 | $2,710 | 1.7% | | Operating income | $106,644 | $85,181 | $21,463 | 25.2% | | Interest expense, net | $15,016 | $16,590 | $(1,574) | (9.5)% | | Gain on sale of business | — | $(38,300) | $38,300 | 100.0% | | Income tax expense | $19,219 | $31,985 | $(12,766) | (39.9)% | | Net income | $72,409 | $74,906 | $(2,497) | (3.3)% | - Net sales for the six months ended March 31, 2025, increased by **12.0%** due to higher sales volume in the Residential segment, partially offset by the Vycom divestiture and weaker demand in the Commercial segment[126](index=126&type=chunk) - Net income decreased by **3.3%** for the six months ended March 31, 2025, primarily reflecting the impact from the Vycom divestiture gain on sale in the prior year[135](index=135&type=chunk) [Segment Results of Operations](index=39&type=section&id=Segment%20Results%20of%20Operations) This section analyzes the financial performance of the Company's Residential and Commercial segments, including net sales and Adjusted EBITDA | Residential Segment (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Six Months Ended March 31, 2025 | Six Months Ended March 31, 2024 | | :--------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net sales | $437,041 | $402,541 | $709,040 | $625,541 | | Segment Adjusted EBITDA | $122,474 | $110,386 | $186,854 | $162,365 | | Segment Adjusted EBITDA Margin | 28.0% | 27.4% | 26.4% | 26.0% | - Residential segment net sales increased by **8.6%** for the three months and **13.3%** for the six months ended March 31, 2025, driven by Deck, Rail & Accessories and Exteriors businesses[139](index=139&type=chunk)[140](index=140&type=chunk) - Residential Segment Adjusted EBITDA increased by **11.0%** for the three months and **15.1%** for the six months ended March 31, 2025, mainly due to higher net sales[141](index=141&type=chunk) | Commercial Segment (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Six Months Ended March 31, 2025 | Six Months Ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net sales | $15,190 | $15,867 | $28,620 | $33,311 | | Segment Adjusted EBITDA | $1,899 | $2,897 | $3,387 | $5,802 | | Segment Adjusted EBITDA Margin | 12.5% | 18.3% | 11.8% | 17.4% | - Commercial segment net sales decreased by **4.3%** for the three months and **14.1%** for the six months ended March 31, 2025, due to weaker demand in Scranton Products and the Vycom divestiture[144](index=144&type=chunk)[145](index=145&type=chunk) - Commercial Segment Adjusted EBITDA decreased by **34.4%** for the three months and **41.6%** for the six months ended March 31, 2025, driven by lower net sales and higher purchased material costs[146](index=146&type=chunk)[147](index=147&type=chunk) [Non-GAAP Financial Measures](index=40&type=section&id=Non-GAAP%20Financial%20Measures) This section provides reconciliations and explanations for non-GAAP financial measures used by management to assess the Company's performance - The Company uses non-GAAP financial measures such as Adjusted Gross Profit, Adjusted Net Income, Adjusted Diluted EPS, Adjusted EBITDA, and Free Cash Flow to provide additional insights into financial performance, excluding certain expenses not indicative of core operations[148](index=148&type=chunk)[151](index=151&type=chunk) | Non-GAAP Financial Measures (in thousands, except per share) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Six Months Ended March 31, 2025 | Six Months Ended March 31, 2024 | | :--------------------------------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Adjusted Gross Profit | $170,940 | $160,865 | $277,623 | $255,384 | | Adjusted Gross Profit Margin | 37.8% | 38.4% | 37.6% | 38.8% | | Adjusted Net Income | $65,602 | $58,320 | $90,698 | $73,352 | | Adjusted Diluted EPS | $0.45 | $0.39 | $0.62 | $0.49 | | Adjusted EBITDA | $124,373 | $113,283 | $190,241 | $168,167 | | Adjusted EBITDA Margin | 27.5% | 27.1% | 25.8% | 25.5% | | Free Cash Flow | $653 | $(34,004) | $(7,378) | $(67,973) | - Adjusted EBITDA for the six months ended March 31, 2025, increased to **$190.2 million** from **$168.2 million** in the prior year, with Adjusted EBITDA Margin increasing to **25.8%** from **25.5%**[150](index=150&type=chunk)[167](index=167&type=chunk) - Free Cash Flow for the six months ended March 31, 2025, improved to **$(7.4) million** from **$(68.0) million** in the prior year, reflecting improved operating cash flows[150](index=150&type=chunk)[170](index=170&type=chunk) [Liquidity and Capital Resources](index=48&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the Company's ability to generate and manage cash flows, including cash balances, debt, credit facilities, and capital allocation strategies - As of March 31, 2025, the Company had cash and cash equivalents of **$146.7 million** and total indebtedness of **$438.9 million**[171](index=171&type=chunk) - The AZEK Group LLC had approximately **$372.7 million** available under its 2024 Revolving Credit Facility for future borrowings as of March 31, 2025[171](index=171&type=chunk)[178](index=178&type=chunk) - Net cash provided by operating activities increased by **$91.7 million** to **$60.6 million** for the six months ended March 31, 2025, primarily due to a slower inventory build and timing of rebate payments[181](index=181&type=chunk) - Net cash used in investing activities was **$(85.9) million** for the six months ended March 31, 2025, primarily for property, plant and equipment purchases (**$68.0 million**) and acquisitions (**$18.2 million**)[182](index=182&type=chunk) - Net cash provided by financing activities was **$7.9 million** for the six months ended March 31, 2025, mainly from stock option exercises, partially offset by debt principal payments and excise taxes for share repurchases[183](index=183&type=chunk) - As of March 31, 2025, **$557.0 million** remained available for repurchases under the Share Repurchase Program[186](index=186&type=chunk) [Critical Accounting Policies and Estimates](index=52&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section describes the accounting policies that require significant judgment and estimates, which could materially affect the Company's financial results - There have been no material changes to the Company's critical accounting policies compared to those disclosed in the 2024 Form 10-K, except as updated in Note 1 of the Condensed Consolidated Financial Statements[200](index=200&type=chunk) [Recently Issued Accounting Pronouncements](index=52&type=section&id=Recently%20Issued%20Accounting%20Pronouncements) This section outlines new accounting standards that the Company has adopted or plans to adopt, and their potential impact on financial disclosures - The Company intends to adopt ASU 2023-07 (Segment Reporting) for the annual reporting period beginning October 1, 2024, and does not expect a material impact on disclosures[201](index=201&type=chunk) - The Company intends to adopt ASU 2023-09 (Income Taxes) for the annual reporting period beginning October 1, 2025, and does not expect a material impact on disclosures[202](index=202&type=chunk) - The Company intends to adopt ASU 2024-03 (Expense Disaggregation Disclosures) for the annual reporting period beginning October 1, 2027, and is currently evaluating its impact[203](index=203&type=chunk)[204](index=204&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=55&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section outlines the Company's exposure to various market risks, including interest rate risk, credit risk, foreign currency risk, inflation, and raw material price volatility. The Company uses interest rate swaps to hedge against variable interest rates on its debt and manages raw material costs through supplier relationships and short-term contracts, but cannot guarantee offsetting future price increases - The Company is subject to interest rate risk on its variable-rate Senior Secured Credit Facilities, with a **100 basis point** change impacting annual cash interest by approximately **$1.4 million** as of March 31, 2025[205](index=205&type=chunk) - Interest rate swaps are used to hedge against interest rate volatility, converting **$300 million** notional amount of floating-rate debt to fixed rates[206](index=206&type=chunk) - The Company faces inflationary pressures and price fluctuations for raw materials (petrochemical resins, reclaimed materials, waste wood fiber, aluminum, additives), which are managed through sales price increases and production efficiencies, but future offsets are not guaranteed[209](index=209&type=chunk)[210](index=210&type=chunk)[211](index=211&type=chunk) - Credit risk is minimal as cash and equivalents are held at major financial institutions. Foreign currency risk is not material as substantially all business is conducted in U.S. dollars[207](index=207&type=chunk)[208](index=208&type=chunk) [Item 4. Controls and Procedures](index=56&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the principal executive and financial officers, concluded that the Company's disclosure controls and procedures were effective as of March 31, 2025. Previously disclosed material weaknesses in internal control over financial reporting have been remediated through redesigned and enhanced controls, including improved segregation of duties, training, and monitoring - The Company's disclosure controls and procedures were effective at the reasonable assurance level as of March 31, 2025[212](index=212&type=chunk) - Previously identified material weaknesses in internal control over financial reporting have been remediated as of March 31, 2025, following the completion of testing on redesigned and enhanced controls[213](index=213&type=chunk)[214](index=214&type=chunk) - Redesigned and implemented internal controls with external consultant assistance[215](index=215&type=chunk) - Enhanced controls for appropriate segregation of duties in IT environment and business processes[215](index=215&type=chunk) - Provided training on manual journal entry controls and prompt internal reporting[215](index=215&type=chunk) - Enhanced design of inventory reconciliation controls and monitoring level controls for variances[215](index=215&type=chunk) - There were no changes in internal control over financial reporting during the quarter ended March 31, 2025, that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[214](index=214&type=chunk) [PART II. Other Information](index=57&type=section&id=PART%20II.%20Other%20Information) This section provides additional disclosures beyond the financial statements, including legal proceedings, risk factors, equity sales, defaults, mine safety, and exhibits [Item 1. Legal Proceedings](index=57&type=section&id=Item%201.%20Legal%20Proceedings) The Company is routinely involved in various legal actions arising from its operations. Currently, management believes no claims or proceedings will have a material adverse effect on the business, financial condition, results of operations, or cash flows, though litigation outcomes are inherently uncertain - The Company is involved in various legal actions, but currently, there are no claims or proceedings believed to have a material adverse effect on its business, financial condition, results of operations, or cash flows[217](index=217&type=chunk) [Item 1A. Risk Factors](index=57&type=section&id=Item%201A.%20Risk%20Factors) This section updates the risk factors from the 2024 Form 10-K, focusing on new risks related to the proposed merger with James Hardie, including uncertainty of merger consideration value due to stock price fluctuations, potential delays or adverse conditions from regulatory approvals, the risk of merger termination and associated costs, business uncertainties and contractual restrictions during the pending merger, and the reduced ownership and influence of AZEK stockholders in the combined company - New risk factors primarily relate to the proposed merger with James Hardie, including uncertainty of the market value of merger consideration due to James Hardie ordinary share price fluctuations[220](index=220&type=chunk)[221](index=221&type=chunk)[222](index=222&type=chunk) - Risks include potential delays or failure to receive required regulatory approval, which could impose unanticipated conditions or adversely affect the combined company[223](index=223&type=chunk)[224](index=224&type=chunk) - The Merger Agreement may be terminated, leading to adverse consequences such as stock price decline, payment of a **$272 million** termination fee in certain circumstances, and inability to pursue alternative acquisitions[225](index=225&type=chunk)[231](index=231&type=chunk) - During the pending merger, the Company is subject to business uncertainties and contractual restrictions that could harm business relationships, impair ability to retain key personnel, and divert management resources[226](index=226&type=chunk)[227](index=227&type=chunk)[228](index=228&type=chunk) - AZEK stockholders will have a reduced ownership (approximately **26%**) and voting interest in the combined company after the merger, exercising less influence over management[233](index=233&type=chunk) - Changes in trade policies, including tariffs, could negatively impact the Company's business by increasing raw material costs or depressing demand, despite a U.S.-based supply chain[219](index=219&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=61&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There were no unregistered sales of equity securities or use of proceeds to report during the period [Item 3. Defaults Upon Senior Securities](index=61&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) There were no defaults upon senior securities to report during the period [Item 4. Mine Safety Disclosures](index=61&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) There were no mine safety disclosures to report during the period [Item 5. Other Information](index=61&type=section&id=Item%205.%20Other%20Information) There was no other information to report during the period [Item 6. Exhibits](index=62&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including the Merger Agreement, corporate organizational documents, registration rights agreement, officer certifications, and XBRL interactive data files

Group 1 - The AZEK Company reported revenue of $452.23 million for the quarter ended March 2025, reflecting an 8.1% increase year-over-year [1] - Earnings per share (EPS) for the quarter was $0.45, up from $0.39 in the same quarter last year, with a surprise of +2.27% compared to the consensus estimate of $0.44 [1] - The reported revenue exceeded the Zacks Consensus Estimate of $443.6 million, resulting in a surprise of +1.95% [1] Group 2 - Net Sales in the Commercial segment were $15.19 million, slightly above the three-analyst average estimate of $15.07 million, but represented a year-over-year decline of -4.3% [4] - Net Sales in the Residential segment reached $437.04 million, surpassing the three-analyst average estimate of $431.37 million, with a year-over-year increase of +8.6% [4] - Adjusted EBITDA for the Commercial segment was $1.90 million, exceeding the average estimate of $1.78 million, while the Residential segment's Adjusted EBITDA was $122.47 million, also above the estimated $119.21 million [4] Group 3 - The AZEK Company's stock has returned +11.3% over the past month, compared to the Zacks S&P 500 composite's +11.5% change [3] - The company currently holds a Zacks Rank 4 (Sell), indicating potential underperformance relative to the broader market in the near term [3]

Financial Data and Key Metrics Changes - In Q2 of fiscal 2025, consolidated net sales reached $452 million, an increase of 8% year over year [26] - Adjusted EBITDA for Q2 increased by $11 million or 10% year over year to $124 million, with an adjusted EBITDA margin of 27.5%, a 40 basis point improvement year over year [28][25] - Net income for Q2 increased by $5 million year over year to $54 million, or $0.37 per share [28] Business Line Data and Key Metrics Changes - Residential segment net sales for Q2 were $437 million, up 9% year over year, driven by sell-through growth and new products [29] - Residential segment adjusted EBITDA for Q2 was $122 million, up 11% year over year, with an adjusted EBITDA margin of 28% [29] - Commercial segment net sales for Q2 were $15 million, down 4% year over year, primarily due to weaker demand [29] Market Data and Key Metrics Changes - The residential segment achieved 9% year-over-year growth in Q2, with mid-single-digit sell-through growth [7] - The company noted a stable contractor backlog of approximately seven weeks, indicating steady demand [19][103] - Channel inventory levels are below historical averages, reflecting a conservative inventory strategy [20][76] Company Strategy and Development Direction - The proposed merger with James Hardie aims to enhance material conversion and create significant synergies, targeting $125 million in cost synergies and $500 million in incremental sales synergies [11][13] - The company is focused on product innovation, channel expansion, and sustainability, aiming for double-digit long-term growth [10][9] - Investments in new product launches and a vertically integrated recycling network are central to the company's growth strategy [16][17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating macroeconomic uncertainties while maintaining strong growth momentum [20][21] - The company anticipates steady demand across its outdoor living portfolio, with positive sell-through trends continuing into April [19] - Despite acknowledging potential economic challenges, management believes the company is well-positioned to outperform the market [21][22] Other Important Information - The company has been recognized on Barron's list of the 100 Most Sustainable U.S. Companies for the first time [18] - The acquisition of Northwest Polymers enhances the company's recycling capabilities, supporting long-term growth and margin expansion [17] Q&A Session Summary Question: Guidance on decking and railing versus exteriors in the second half - Management did not provide specific guidance but noted that deck, rail, and accessories have been outgrowing exteriors [40] Question: Near-term cost structure and PVC pricing - Management indicated that costs have been steady, with some modest inflation offset through pricing actions [41] Question: Sales synergies from the merger - Management highlighted significant sales synergies and emphasized stability in the sales organization during the integration process [46] Question: Recycling asset acquisitions and cost reductions - Management mentioned ongoing investments in recycling to achieve incremental cost savings, with a focus on long-term benefits [49] Question: Demand across retail and pro channels - Growth is observed in both channels, with slightly higher growth in the pro channel compared to retail [55] Question: Impact of tariffs on supply chain - The annualized tariff exposure is estimated between $12 million and $15 million, with pricing actions taken to mitigate impacts [57] Question: Customer reactions to the merger - Positive feedback has been received from contractors and channel partners regarding the merger, indicating excitement about strategic benefits [66] Question: Concerns about affordability due to price increases in components - Management acknowledged tariff impacts on certain products but noted efforts to remain competitive [106]

Financial Data and Key Metrics Changes - In Q2 of fiscal 2025, consolidated net sales reached $452 million, an increase of 8% year over year [25] - Adjusted EBITDA for Q2 increased by $11 million or 10% year over year to $124 million, with an adjusted EBITDA margin of 27.5%, a 40 basis point improvement year over year [27][22] - Net income for Q2 increased by $5 million year over year to $54 million, or $0.37 per share [27] Business Line Data and Key Metrics Changes - Residential segment net sales for Q2 were $437 million, up 9% year over year, driven by sell-through growth and channel expansion [28] - Commercial segment net sales for the quarter were $15 million, down 4% year over year, primarily due to weaker demand in the spring products business [28] - Residential segment adjusted EBITDA for Q2 was $122 million, up 11% year over year, with an adjusted EBITDA margin of 28% [28] Market Data and Key Metrics Changes - The residential segment achieved 9% year-over-year growth in Q2, with high single-digit sell-through growth contributing to this performance [6] - The overall market for repair and remodel has been challenging, but the company has consistently outperformed this market [6][20] - Contractor backlogs remain stable at approximately seven weeks, indicating steady demand [18][101] Company Strategy and Development Direction - The company is focused on material conversion, product innovation, and channel expansion, targeting double-digit long-term growth and sustained margin expansion [10][11] - The proposed merger with James Hardie is expected to enhance growth opportunities and create significant synergies, with an estimated $125 million in cost synergies and $500 million in incremental sales synergies [11][13] - Investments in new product launches and a vertically integrated recycling network are key components of the company's growth strategy [14][15] Management's Comments on Operating Environment and Future Outlook - Management acknowledges uncertainty in the broader economy but remains confident in the company's ability to outperform the market [19][20] - The company expects residential sell-through growth scenarios in the low single-digit to mid-single-digit range for the second half of the fiscal year [31] - Despite macroeconomic challenges, the company believes it can sustain margins while investing in growth initiatives [19][21] Other Important Information - The company has been recognized for its sustainability efforts, being named to Barron's list of the 100 Most Sustainable U.S. Companies for the first time [17] - The acquisition of Northwest Polymers enhances the company's recycling capabilities and supports long-term growth objectives [16] Q&A Session Summary Question: Guidance for the second half regarding decking and railing versus exteriors - Management did not provide specific guidance but noted that deck, rail, and accessories have been outgrowing exteriors [39] Question: Near-term cost structure and PVC pricing - Management indicated that costs have been steady, with some modest inflation offset through pricing actions [40][42] Question: Sales synergies from the merger with James Hardie - Management expressed confidence in significant sales synergies but noted it is early to discuss specifics [46][48] Question: Focus on acquiring additional recycling assets - Management highlighted ongoing investments in recycling to achieve cost savings, with a focus on regional supply [49] Question: Demand across retail and pro channels - Growth is seen in both channels, with slightly higher growth in the pro channel, and some regional weakness noted in the Northeast due to weather [53][55] Question: Impact of tariffs on pricing - The annualized tariff exposure is estimated between $12 million and $15 million, with pricing actions taken to offset these costs [56] Question: Customer reactions to the merger - Positive feedback has been received from contractors and channel partners regarding the merger, indicating excitement about the strategic benefits [61][65] Question: Sell-through assumptions for the back half of the year - Management clarified that the guidance reflects a conservative approach, not indicating a decline in sell-through [66][84] Question: Inventory positioning in the channel - The company is maintaining conservative inventory levels, ensuring they are below historical averages [71][76] Question: Mix pressures and contractor backlogs - No significant shifts in product mix were noted, and contractor backlogs remain steady at seven weeks [100][101]

Financial Performance - Q2 2025 net sales increased by 8.1% year-over-year[46] - Adjusted EBITDA Margin increased by 40 bps year-over-year to 27.5%[44, 46] - The company reaffirms FY 2025 net sales outlook between $1.52 billion and $1.55 billion, representing 5% to 8% year-over-year growth[44] - The company reaffirms Adjusted EBITDA outlook between $403 million and $418 million, representing 6% to 10% year-over-year growth[44] - Residential segment growth was at 9% year-over-year[44] Strategic Initiatives and Market Position - The company is the industry leader in outdoor living[17, 36] - The company is benefiting from long-term material conversion trends[16] - The company is targeting double-digit annual net sales growth[17] - The company is expanding Adj EBITDA margin to a target of approximately 27.5%[17] - The company estimates that wood alternative decking could reach approximately 50% of decking opportunities share over the next 10-15 years and up to 75% over time[33]

[Financial Performance Overview](index=1&type=section&id=Financial%20Performance%20Overview) [Second Quarter Fiscal 2025 Financial Highlights](index=1&type=section&id=Second%20Quarter%20Fiscal%202025%20Financial%20Highlights) Q2 FY2025 saw consolidated net sales up **8%** to **$452.2 million** and Adjusted EBITDA up **10%** to **$124.4 million** Q2 FY2025 Key Financial Metrics | Metric | Value | Change (YoY) | | :--- | :--- | :--- | | Consolidated Net Sales | $452.2 million | +8% | | Residential Segment Net Sales | $437.0 million | +9% | | Net Income | $54.3 million | +9% | | EPS | $0.37 per share | +$0.03 | | Adjusted Net Income | $65.6 million | +12% | | Adjusted Diluted EPS | $0.45 per share | +$0.06 | | Adjusted EBITDA | $124.4 million | +10% | | Adjusted EBITDA Margin | 27.5% | +40 bps | [CEO Commentary](index=1&type=section&id=CEO%20Commentary) CEO highlights strong Q2 performance, residential growth, margin expansion, new product success, and sustainability awards - The Residential business grew **9% year-over-year**, fueled by positive mid-single-digit sell-through growth and expanded channel presence[3](index=3&type=chunk) - Disciplined cost initiatives led to a **10 basis point expansion** in net profit margin and a **40 basis point expansion** in Adjusted EBITDA margin, despite investments in marketing and production[5](index=5&type=chunk) - New product launches, including TimberTech Harvest+ decking and Reliance Rail, are gaining traction and driving expanded shelf space[6](index=6&type=chunk) - The company received several sustainability awards, including being named to Barron's 100 Most Sustainable U.S. Companies list for the first time[7](index=7&type=chunk) [Consolidated Financial Results](index=2&type=section&id=Consolidated%20Financial%20Results) Q2 FY2025 consolidated net sales grew **8%** to **$452.2 million**, with net income up **9%** and Adjusted EBITDA up **10%** Q2 FY2025 Consolidated Results vs. Q2 FY2024 | Metric | Q2 2025 | Q2 2024 | Change | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $452.2M | $418.4M | +$33.8M | +8% | | Gross Profit | $167.7M | $157.1M | +$10.6M | +6.7% | | Net Income | $54.3M | $49.8M | +$4.5M | +9% | | Adjusted EBITDA | $124.4M | $113.3M | +$11.1M | +10% | - The increase in net sales was primarily driven by higher sales volume in the Residential segment, while the Commercial segment saw a decrease due to weaker demand in its Scranton Products business[9](index=9&type=chunk) [Balance Sheet, Cash Flow and Liquidity](index=3&type=section&id=Balance%20Sheet%2C%20Cash%20Flow%20and%20Liquidity) AZEK maintained strong liquidity with **$146.7 million** cash; operating cash flow significantly increased to **$47.1 million** - As of March 31, 2025, the company had cash and cash equivalents of **$146.7 million** and total gross debt of **$538.4 million**[15](index=15&type=chunk) - Net Cash Provided by Operating Activities for the quarter increased by **$61.9 million** year-over-year to **$47.1 million**[16](index=16&type=chunk) - Free Cash Flow for the quarter improved by **$34.7 million** year-over-year to **$0.7 million**, despite a **$27.2 million** increase in capital expenditures[16](index=16&type=chunk) [Outlook and Strategic Initiatives](index=3&type=section&id=Outlook%20and%20Strategic%20Initiatives) [Fiscal Year 2025 Outlook](index=3&type=section&id=Fiscal%20Year%202025%20Outlook) AZEK reaffirmed FY2025 guidance, projecting consolidated net sales of **$1.52 to $1.55 billion** and Adjusted EBITDA of **$403 to $418 million** Full-Year Fiscal 2025 Guidance (Consolidated) | Metric | Range | Growth (YoY) | | :--- | :--- | :--- | | Net Sales | $1.52B - $1.55B | **5% to 8%** | | Adjusted EBITDA | $403M - $418M | **6% to 10%** | | Adjusted EBITDA Margin | **26.5% - 27.0%** | N/A | | Capital Expenditures | **$110M - $120M** | N/A | Full-Year Fiscal 2025 Guidance (By Segment) | Segment | Metric | Range | Growth (YoY) | | :--- | :--- | :--- | :--- | | **Residential** | Net Sales | $1.452B - $1.479B | **6% to 8%** | | | Adj. EBITDA | $392M - $405M | **7% to 11%** | | **Commercial** | Net Sales | $68M - $71M | N/A | | | Adj. EBITDA | $11M - $13M | N/A | Second Half Fiscal 2025 Outlook (Consolidated) | Metric | Growth (YoY) | | :--- | :--- | | Net Sales | **0% to 4%** | | Adjusted EBITDA | **1% to 8%** | [Merger Agreement with James Hardie](index=4&type=section&id=Merger%20Agreement%20with%20James%20Hardie) Merger agreement with James Hardie Industries plc confirmed, expected to close in **H2 2025** pending approvals - AZEK entered into a merger agreement with James Hardie Industries plc on **March 23, 2025**[23](index=23&type=chunk) - The transaction is expected to close in the **second half of calendar year 2025**, subject to regulatory and shareholder approvals[23](index=23&type=chunk) [Financial Statements](index=8&type=section&id=Financial%20Statements) [Consolidated Balance Sheets](index=8&type=section&id=Consolidated%20Balance%20Sheets) Total assets increased to **$2.30 billion** as of March 31, 2025, with corresponding rises in liabilities and equity Key Balance Sheet Items (in thousands) | Account | March 31, 2025 | September 30, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $146,719 | $164,025 | | Total current assets | $560,565 | $471,377 | | Total assets | $2,299,253 | $2,167,711 | | Total current liabilities | $228,472 | $217,038 | | Total liabilities | $845,080 | $810,846 | | Total stockholders' equity | $1,454,173 | $1,356,865 | [Consolidated Statements of Comprehensive Income](index=9&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Q2 FY2025 net sales reached **$452.2 million** with net income of **$54.3 million**, showing growth from prior year Income Statement Summary (in thousands) | Metric | Three Months Ended Mar 31, 2025 | Three Months Ended Mar 31, 2024 | | :--- | :--- | :--- | | Net sales | $452,231 | $418,408 | | Gross profit | $167,693 | $157,073 | | Operating income | $79,394 | $73,962 | | Net income | $54,285 | $49,758 | | Diluted EPS | $0.37 | $0.34 | [Consolidated Statements of Cash Flows](index=10&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities significantly improved to **$60.6 million** for the six months ended March 31, 2025 Cash Flow Summary (Six Months Ended Mar 31, in thousands) | Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $60,619 | $(31,094) | | Net cash provided by (used in) investing activities | $(85,862) | $95,167 | | Net cash provided by (used in) financing activities | $7,937 | $(114,988) | | Net decrease in cash and cash equivalents | $(17,306) | $(50,915) | [Segment Performance and Non-GAAP Reconciliations](index=12&type=section&id=Segment%20Performance%20and%20Non-GAAP%20Reconciliations) [Segment Results from Operations](index=12&type=section&id=Segment%20Results%20from%20Operations) Residential segment drove performance with **8.6%** sales growth, while Commercial segment faced declines in Q2 [Residential Segment](index=12&type=section&id=Residential%20Segment) The Residential segment achieved strong Q2 FY2025 results, with net sales up **8.6%** to **$437.0 million** and Adjusted EBITDA up **11.0%** Residential Segment Performance (Q2 FY2025 vs Q2 FY2024) | Metric | Q2 2025 | Q2 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Net Sales | $437.0M | $402.5M | +8.6% | | Segment Adjusted EBITDA | $122.5M | $110.4M | +11.0% | | Segment Adjusted EBITDA Margin | 28.0% | 27.4% | +60 bps | [Commercial Segment](index=12&type=section&id=Commercial%20Segment) Commercial segment experienced a challenging Q2 FY2025, with net sales declining **4.3%** and Adjusted EBITDA falling **34.4%** Commercial Segment Performance (Q2 FY2025 vs Q2 FY2024) | Metric | Q2 2025 | Q2 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Net Sales | $15.2M | $15.9M | -4.3% | | Segment Adjusted EBITDA | $1.9M | $2.9M | -34.4% | | Segment Adjusted EBITDA Margin | 12.5% | 18.3% | -580 bps | [Non-GAAP Financial Measures Reconciliations](index=14&type=section&id=Non-GAAP%20Financial%20Measures%20Reconciliations) Detailed reconciliations for key non-GAAP metrics, including Adjusted EBITDA, Gross Profit, and Free Cash Flow [Adjusted EBITDA Reconciliation](index=14&type=section&id=Adjusted%20EBITDA%20Reconciliation) Q2 FY2025 Net Income of **$54.3 million** reconciled to Adjusted EBITDA of **$124.4 million**, with a **27.5%** margin Adjusted EBITDA Reconciliation (Q2 FY2025, in thousands) | Line Item | Amount | | :--- | :--- | | Net Income | $54,285 | | Interest expense, net | $7,353 | | Depreciation and amortization | $33,433 | | Income tax expense | $17,756 | | Stock-based compensation costs | $4,716 | | Other costs | $6,830 | | **Adjusted EBITDA** | **$124,373** | [Adjusted Gross Profit Reconciliation](index=16&type=section&id=Adjusted%20Gross%20Profit%20Reconciliation) GAAP Gross Profit of **$167.7 million** for Q2 FY2025 reconciled to Adjusted Gross Profit of **$170.9 million** (**37.8%** margin) Adjusted Gross Profit Reconciliation (Q2 FY2025, in thousands) | Line Item | Amount | | :--- | :--- | | Gross Profit | $167,693 | | Amortization | $3,054 | | Acquisition costs | $120 | | Other costs | $73 | | **Adjusted Gross Profit** | **$170,940** | [Adjusted Net Income and Adjusted Diluted EPS Reconciliation](index=17&type=section&id=Adjusted%20Net%20Income%20and%20Adjusted%20Diluted%20EPS%20Reconciliation) Q2 FY2025 GAAP Net Income of **$54.3 million** (**$0.37 per diluted share**) reconciled to Adjusted Net Income of **$65.6 million** (**$0.45 per diluted share**) Adjusted Net Income & EPS Reconciliation (Q2 FY2025) | Metric | GAAP | Adjustments | Adjusted (Non-GAAP) | | :--- | :--- | :--- | :--- | | Net Income | $54.3M | +$11.3M | $65.6M | | Diluted EPS | $0.37 | +$0.08 | $0.45 | [Adjusted SG&A Reconciliation](index=19&type=section&id=Adjusted%20SG%26A%20Reconciliation) GAAP SG&A of **$88.3 million** for Q2 FY2025 reconciled to Adjusted SG&A of **$71.4 million**, excluding specific costs Adjusted SG&A Reconciliation (Q2 FY2025, in thousands) | Line Item | Amount | | :--- | :--- | | SG&A | $88,267 | | Less: Amortization | ($5,513) | | Less: Share-based compensation costs | ($4,716) | | Less: Acquisition and divestiture costs | ($342) | | Less: Other costs | ($6,294) | | **Adjusted SG&A** | **$71,402** | [Free Cash Flow Reconciliation](index=20&type=section&id=Free%20Cash%20Flow%20Reconciliation) Free Cash Flow for Q2 FY2025 was **$0.7 million**, derived from operating activities less capital expenditures Free Cash Flow Reconciliation (Q2 FY2025, in thousands) | Line Item | Amount | | :--- | :--- | | Net cash provided by operating activities | $47,054 | | Less: Purchases of property, plant and equipment | ($46,401) | | **Free Cash Flow** | **$653** | [Net Leverage Reconciliation](index=20&type=section&id=Net%20Leverage%20Reconciliation) Net Leverage ratio was **1.0x** as of March 31, 2025, based on net debt and trailing twelve-month Adjusted EBITDA Net Leverage Calculation (as of March 31, 2025, in thousands) | Metric | Amount | | :--- | :--- | | Gross debt | $538,392 | | Less: Cash and cash equivalents | ($146,719) | | **Net debt** | **$391,673** | | Trailing Twelve Month Adjusted EBITDA | $401,415 | | **Net leverage** | **1.0x** | [Supplementary Information](index=4&type=section&id=Supplementary%20Information) [Conference Call and Website Information](index=4&type=section&id=Conference%20Call%20and%20Website%20Information) Details for the **May 6, 2025**, earnings conference call and access to webcast and replay information were provided - A conference call to discuss the results was scheduled for **May 6, 2025, at 4:00 p.m. (CT)**[24](index=24&type=chunk) - A live webcast and an earnings presentation are available on the Investor Relations section of the company's website[25](index=25&type=chunk)[26](index=26&type=chunk) [About The AZEK Company](index=4&type=section&id=About%20The%20AZEK%20Company) AZEK is a leading manufacturer of sustainable outdoor living products, emphasizing recycled content and recent awards - AZEK is an industry-leading manufacturer of low-maintenance, sustainable outdoor living products, with key brands like TimberTech®, Versatex®, and StruXure®[27](index=27&type=chunk) - The company's products are made from **up to 85% recycled material**, helping to keep **hundreds of millions of pounds** of waste out of landfills annually[27](index=27&type=chunk) - Recent recognitions include being named to Newsweek's America's Most Responsible Companies, Barron's 100 Most Sustainable U.S. Companies, and TIME's World's Best Companies in Sustainable Growth for 2025[28](index=28&type=chunk) [Special Note Regarding Forward-Looking Statements](index=5&type=section&id=Special%20Note%20Regarding%20Forward-Looking%20Statements) Cautions investors that the release contains forward-looking statements subject to risks, including the proposed merger - The earnings release contains forward-looking statements concerning future performance, guidance, growth goals, and the proposed merger with James Hardie[29](index=29&type=chunk) - These statements are subject to risks and uncertainties, and actual future results may differ materially from expectations. The company disclaims any obligation to update these statements[29](index=29&type=chunk)[31](index=31&type=chunk) [Non-GAAP Financial Measures](index=6&type=section&id=Non-GAAP%20Financial%20Measures) Explains the use of non-GAAP measures like Adjusted EBITDA to supplement GAAP results, noting their limitations - The company uses non-GAAP financial measures to provide investors with additional information about its financial performance and to enhance the understanding of past and future prospects[32](index=32&type=chunk) - Key non-GAAP measures used include Adjusted Gross Profit, Adjusted Net Income, Adjusted Diluted EPS, Adjusted EBITDA, and Free Cash Flow[35](index=35&type=chunk) - The company cautions that these non-GAAP measures have limitations and may not be comparable to similarly titled measures used by other companies[33](index=33&type=chunk)

Group 1 - The AZEK Company is expected to report quarterly earnings of $0.44 per share, reflecting a 12.8% increase year over year [1] - Analysts forecast revenues of $443.6 million, indicating a 6% year-over-year growth [1] - There has been no revision in the consensus EPS estimate for the quarter over the past 30 days, suggesting stability in analysts' projections [1] Group 2 - Analysts project 'Net Sales- Commercial' to reach $15.07 million, a decrease of 5% from the prior-year quarter [4] - The estimated 'Net Sales- Residential' is $431.37 million, representing a 7.2% increase year over year [4] - The average prediction for 'Adjusted EBITDA- Residential' is $119.21 million, up from $110.39 million in the previous year [4] Group 3 - Shares of The AZEK Company have increased by 8.1% in the past month, outperforming the Zacks S&P 500 composite, which moved up by 0.4% [5] - The company holds a Zacks Rank 3 (Hold), indicating it is expected to perform in line with the overall market in the near future [5]

Core Viewpoint - The AZEK Company is expected to report a year-over-year increase in earnings and revenues for the quarter ended March 2025, with a consensus EPS estimate of $0.44, reflecting a 12.8% increase, and revenues projected at $443.6 million, up 6% from the previous year [1][3]. Earnings Report Expectations - The earnings report is anticipated to be released on May 6, 2025, and could influence the stock price positively if results exceed expectations, while a miss could lead to a decline [2]. Estimate Revisions Trend - The consensus EPS estimate has remained unchanged over the last 30 days, indicating that analysts have not significantly altered their outlook for the company [4]. Earnings Whisper and ESP - The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate, with the Most Accurate Estimate being lower than the consensus for The AZEK Company, resulting in an Earnings ESP of -2.72%, suggesting a bearish outlook [5][10]. Historical Performance - The AZEK Company has beaten consensus EPS estimates three out of the last four quarters, with a notable surprise of +21.43% in the last reported quarter [12][13]. Bottom Line - The AZEK Company does not appear to be a strong candidate for an earnings beat based on current estimates and rankings, indicating that investors should consider additional factors before making investment decisions [16].

Core Viewpoint - James Hardie Industries' shares fell by 15.8% following the announcement of its agreement to combine with Azek, raising questions about the justification for the decline [1] Group 1: Deal Overview - James Hardie is acquiring Azek for a total transaction value of $8.75 billion, combining shares and cash, with James Hardie shareholders owning 74% and Azek shareholders 26% of the combined company [2] - Azek's 2025 guidance projects sales of $1.535 billion and adjusted EBITDA of $411 million, indicating high valuations for the $8.75 billion deal [2] Group 2: Strategic Rationale - Management anticipates generating $350 million in EBITDA synergies from the merger, representing 5.9% of combined sales, which is considered a strong target [3] - The acquisition enhances James Hardie's revenue share from the less cyclical repair and remodel market and increases its North American housing exposure from 74% to 81% [3][4] Group 3: Market Context - The deal occurs amid high interest rates, which have not decreased as expected, leading to negative sentiment regarding the acquisition in a challenged industry [5] - Historical trends suggest that interest rates may eventually decline, potentially making the acquisition a strategic opportunity in the long run [5]