Please stand by. We're about to begin. Good afternoon, ladies and gentlemen. Welcome to The AZEK Company second quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode, and please be advised that this call is being recorded. After the speakers' prepared remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star one on your telephone keypad. If you would like to withdraw your question, simply press star one again. Now at this time, I would like to turn the call over to Mr. Eric Robinson, VP of Investor Relations. Please go ahead, sir. Thank you. Good afternoon, everyone. We issued our earnings press release and a supplemental earnings presentation this afternoon to the investor relations portion of our website at investors.azekco.com. The earnings press release was also furnished via Form 8-K on the SEC's website. I am joined today by Jesse Singh, our Chief Executive Officer, and Peter Clifford, our Chief Financial Officer. I would like to remind everyone that during this call, we may make certain statements that constitute forward-looking statements within the meaning of the federal securities laws, including remarks about future expectations, beliefs, estimates, forecasts, plans, and prospects. Such statements are subject to a variety of risks and uncertainties as described in our periodic reports filed with the Securities and Exchange Commission that could cause actual results to differ materially. We do not undertake any duty to update such forward-looking statements. Additionally, during today's call, we will discuss Non-GAAP financial measures, which we believe can be useful in evaluating our performance. These Non-GAAP measures should not be considered in isolation or as a substitute for results prepared in accordance with GAAP. Reconciliations of such Non-GAAP measures can be found in our earnings press release, which is posted on our website. Now, let me turn the call over to AZEK's CEO, Jesse Singh. Good afternoon, thank you for joining us. The AZEK team delivered financial results modestly ahead of our guidance for the fiscal second quarter of 2023, driven by steady residential end market demand, disciplined operational management, and an ongoing execution of our initiatives. I am very proud of the team as we navigate the year and lay the foundation for strong performance for years to come. Our team continues to execute our strategy and further strengthen our industry-leading presence across the U.S. and Canada. We are on track to deliver against our strategic initiatives, including driving accelerated material conversion and growth through new product development and channel expansion. We continue to be excited by the opportunities within our approximately $14 billion core market, as well as the potential for growth in our adjacencies. We are confident in our growth strategy, supported by the long-term trends of wood conversion, outdoor living, and demographic shifts increasing the need for housing, combined with our proven ability to drive growth through innovation and other initiatives. In the second quarter of 2023, we generated $377.7 million of net sales and $72.8 million of Adjusted EBITDA. We increased our operating cash flow by approximately $94 million year-over-year to $56.7 million in the fiscal second quarter. As we expected, our Q2 margins improved sequentially versus Q1, driven by modestly improved production volumes and the team's focus on cost savings initiatives. Disciplined operational execution resulted in a nearly $50 million reduction in AZEK balance sheet inventory from the close of fiscal 2022 to the second quarter fiscal 2023. As we progress through this year and into fiscal 2024, we will continue to focus on free cash flow generation via working capital initiatives and a disciplined approach to capital expenditures after the heavy investment period over the last few years. During the quarter, we saw relatively stable demand from our residential business, with sell-through coming in modestly above our assumptions. As a reminder, sell-through is the metric of what is sold into our dealer base from our distributors and is a key indicator of end market demand for our products. As we expected, our residential channel partners purchased less than last year, with certain dealer partners taking a more conservative approach. This was partially offset by the initial impact of our shelf gain highlighted on the last call. Residential channel inventory levels are below last year and approximately 15% below the 2017-2019 historical average days on hand. We continue to believe that the channel inventory correction in our residential segment is behind us, and we are well positioned for the second half of 2023. In addition to managing both internal and external inventory more effectively, we were able to deliver high service levels and are in continuous dialogue with our channel partners to ensure we are getting product to our customers where needed. On the commercial side, as we indicated last quarter, we've seen a more challenging environment resulting from a combination of channel destocking and softer demand in certain commercial end markets, which we expect will be a headwind versus our original planning assumptions. Overall, we remain confident in our ability to deliver against the Adjusted EBITDA range of $250 million-$265 million outlined in our fiscal 2023 planning assumptions as we expand margins in the second half of the year. In combination with an increased focus on operating cash and lower capital investments, we expect to create meaningful free cash flow in fiscal 2023. Turning to an update on our strategic initiatives, the launch of AZEK's 2023 new products, including our new on-trend colors in our premium TimberTech decking and new solutions in our composite and aluminum railing collections, have all been well received by our customers, and we are excited about the uptake we have seen to date. We are excited about this year's introduction of our TimberTech outdoor furniture collection, a premium product produced from high-performance materials by our commercial division and fabricated in our Scranton, Pennsylvania facility. These new product introductions collectively are a strong complement to our deck, rail, pergolas, and accessories platform offered through our TimberTech, StruXure, Ultralox, and INTEX brands and positions us to drive incremental growth in our core markets and access additional adjacencies in outdoor living. In exteriors, we continue to see steady demand and performance across our exterior trim and value-added solutions. Our exteriors business, which tends to have a larger mix of residential new construction projects versus decking, has continued to deliver solid results driven by new business wins, new products like our Captivate prefinished trim, and siding and downstream wood conversion. Overall, our residential sales and marketing initiatives include ongoing downstream market conversion and the successful execution of the pro and retail channel wins we highlighted earlier this year. New shelf space positions will continue to ramp up over the next few quarters and support our ongoing efforts to generate above-market growth, wood conversion, and expansion through new products. During the quarter, we continued our progress on increasing the use of recycled materials in our products, including increasing the amount of recycle in our advanced PVC decking and achieving certain milestones as we move to a lower-cost formulation for our Capped composite decking. We are also nearing the completion of our capacity expansion investment at our Return Polymers PVC recycling plant in Ashland, Ohio. This will roughly triple our PVC recycling capacity since Return Polymers joined the AZEK team in January of 2020. These investments are key enablers to support the recycled content expansion of our advanced PVC decking and exteriors products and long-term recycling and margin objectives. The AZEK Company once again was recognized for a number of awards in the quarter that highlight our leadership in the industry. The AZEK Company received 2 Sustainable Product of the Year awards in the 2023 Green Builder Survey, one for our TimberTech advanced PVC decking and one for AZEK Captivate prefinished siding and trim. These independent awards validate our consistent and ongoing investment in R&D to launch new product innovations that provide unique benefits to our customers and are more environmentally sustainable. Our proprietary TimberTech advanced PVC decking was named a winner in the prestigious 2023 Sustainable Innovation Awards by Good Housekeeping. We are excited to be recognized by Good Housekeeping Institute's panel of lab professionals and sustainability experts who evaluated our product on rigorous criteria, including energy and water reduction, recycled content, recyclability, and more. Judges were also impressed by TimberTech advanced PVC decking's exceptional durability, stunning aesthetics, and remarkable sustainability features. We were also named the number one brand in composite decking by House Beautiful. These awards illustrate the positive momentum that our brand awareness has experienced over the last few years, as validated by multiple third parties, including Zonda's recent 2023 Builder Brand Use Study report. Our progress is a reflection of the tremendous efforts of the AZEK team, and I would like to thank them all for their commitment to our purpose of revolutionizing outdoor living to create a more sustainable future. Moving to outlook, let me provide some perspective on what we're seeing from our demand indicators in our residential business. We move into the core of our season, we continually monitor external and internal data points to understand sentiment and potential demand shifts. Key digital metrics show sustained interest in the category. Outdoor living and composite material popularity are supporting material conversion away from wood. AZEK continues to exhibit consistent consumer engagement with website leads and samples showing healthy year-over-year growth within the quarter. Consistent with prior quarters, we again surveyed our pro contractor and dealer bases to understand sentiment and downstream demand. Conditions remain largely unchanged, with contractor backlogs at approximately eight weeks in this quarter's survey. Contractors have noted that the current backlog level remains modestly higher than the pre-pandemic average backlog. Consistent with prior surveys, contractors are expecting modest revenue growth and cite both labor shortages and economic uncertainty as the biggest pain points. Our dealer survey saw similar sentiment, with our dealers expecting modest revenue growth in 2023. AZEK dealers rated both current and expected future business conditions and project demand as slightly above average. These survey results are supportive of the steady demand we've seen so far in our residential business. We feel it's prudent to balance the constructive sentiment with a cautious view of the back half of the year in our plan, given continued market and economic uncertainty and the fact that we're early in the season. While our residential sell-through volume trends have been modestly better to date, our commercial segment is experiencing some incremental challenges around channel destocking and softness across certain end markets. The channel destocking, as we signaled last quarter, is primarily concentrated in certain end markets and is consistent with the broader industrial market. As a reminder, our commercial business grew nearly 40% year-over-year in fiscal 2022 and continues to deliver attractive margins, which we have worked to improve dramatically over the past two years. We believe that this business can operate at or above 20% segment Adjusted EBITDA margins, and we are confident that once we are through the destocking, that this business will return to normalized growth in 2024, given its strong leadership positions in its respective markets. We expect the commercial business headwind versus our original planning assumptions to be approximately $15 million of segment Adjusted EBITDA for the fiscal year. We are also targeting incremental balance sheet inventory reductions as part of our focus on working capital. As a reminder, our original planning assumption called for a $40 million reduction in inventory. We exceeded this target in Q2 by reducing nearly $50 million of inventory versus the end of fiscal 2022. We see an opportunity to further reduce our current balance sheet inventory by an additional $5 million-$10 million, resulting in modest incremental costs, which are factored into our outlook. In summary, our cost reduction and recycling initiatives are on track. We've experienced modestly better results in the residential segment and are more challenged in our commercial market than we initially assumed. Taken together, we have multiple levers to achieve our full year planning assumptions of 2023 Adjusted EBITDA in the range of $250 million-$265 million and remain confident in our execution capability. From a sequential progression in the back half of the year, we continue to expect Adjusted EBITDA margin improvement through the balance of fiscal 2023, including year-over-year Adjusted EBITDA margin expansion in the fiscal third and fourth quarters as we realize the benefits of sourcing initiatives, sequential volume improvements, and cost-down recycled programs within our results. I will now turn the call over to Pete to provide some additional context on our financial results and outlook. Thanks, Jesse. Good afternoon, everyone. As Eric highlighted at the beginning of the call, we have uploaded a supplemental earnings presentation on the investor relations portion of our website. Before we get into the second quarter results, I wanted to provide some color on the operating environment during the quarter. From a macro perspective, we are seeing a more constructive environment in our residential business year-to-date while experiencing a more challenging environment for our commercial segment. Residential sell-through demand continues to be modestly better than our original assumptions. Residential channel inventory is at levels that are well below 2017-2019 average days on hand. As a reminder, we intentionally worked with our channel partners to manage the inventory entering the system ahead of the building season in a very disciplined way. From an operating perspective, our focal points continue to be managing our conversion costs to match the lower production while maintaining high service levels. Production volume levels were down 33% year-over-year in the quarter. We managed our way through the final planned production trough in early 2Q and started to see production levels increase sequentially late in 2Q 2023. As we communicated previously, we said post completion of the channel inventory reductions in 4Q 2022 and 1Q 2023 that we would pivot in 2Q 2023 to reduce our own inventory on the balance sheet, which we did in a meaningful way during the quarter. On the commodities front, key raw materials have stabilized around our original planning assumptions. For the second quarter of 2023, we saw net sales of $377.7 million, which was modestly above our guidance expectations. Net sales declined 4.7% year-over-year. The second quarter included a volume decline of approximately $58 million, partially offset by positive contributions from carryover pricing in the high single digit range in carryover from M&A. 2Q 2023 gross profit decreased by $14 million or 12% year-over-year to $108.2 million. 2Q 2023 adjusted gross profit decreased by $13 million or 9% year-over-year to $130.7 million. The adjusted gross profit decline was in line with the decline in net sales and higher decremental margins from the lower production levels. As we previously mentioned, we see the bulk of our underutilization behind us. Selling, general and administrative expenses increased by $3.6 million to $74.5 million. The bulk of the year-over-year increase was driven by SG&A contribution from recent M&A and increased marketing investments. Adjusted EBITDA for the second quarter was $72.8 million, ahead of our guidance driven by the sales outperformance in comparison to $90.9 million in the prior year. The primary driver of the year-over-year change in Adjusted EBITDA was the sales volume declines in both production and net sales levels. Net income for the quarter was $16.3 million or $0.11 per share. Adjusted net income for the quarter was $27 million or adjusted diluted EPS of $0.18 per share. Now turning to the segment results. Residential net sales for the quarter were $342 million, down 2.4% year-over-year, driven by the previously mentioned volume declines, partially offset by positive pricing and M&A contribution. Our volume decline was driven by the combination of lower unit sell-through volume as expected and the intentional management of channel inventory heading into the season. Residential Adjusted EBITDA for the quarter came in at $80.4 million, which was down approximately 18% year-over-year. Commercial segment net sales for the quarter were $35.6 million, down 22.5% year-over-year. As expected and articulated last quarter, we saw channel destocking in our Vycom business and softness in some of our end markets. We expect channel destocking in this segment to continue through the fourth quarter of 2023. Commercial segment Adjusted EBITDA for the quarter came in at $7.8 million, a decrease of $900,000 year-over-year. Importantly, the business continues to benefit from the structural improvements made over the last 6 - 8 quarters as we continue to hold our segment Adjusted EBITDA margin rates at or above our 20%+ target. From a balance sheet perspective and cash flow perspective, we ended the quarter with cash and cash equivalents of $126.3 million and approximately $147.2 million available for future borrowings under our revolving credit facility. Working capital defined as inventory plus AR minus AP was $351.8 million. We ended the quarter with gross debt of $675.8 million, which included $78.8 million of finance leases. Net debt was $549.6 million, and our net leverage ratio stood at 2.3 times at the end of the second quarter. Net cash from operating activities was $56.7 million during the quarter versus negative cash use in operating activities of $36.9 million in the prior year period. Capital expenditures for the quarter were approximately $17 million, down $31.7 million versus the prior year period. Overall, free cash flow in the first six months of the fiscal year was up $197 million year-over-year. As we communicated previously, we expect to accelerate our share repurchase activity in the second half of the year. We expect free cash flows to continue to expand in the second half of the year as we enter the seasonally strong cash generating quarters while continuing to drive working capital efficiencies. As a reminder, the remaining authorization under our share repurchase program is approximately at $311 million. We expect to deploy capital opportunistically while being mindful of our long-term net leverage ratio target in the 2x-2.5x range. As we turn to the outlook, let me provide some context and color on what we are seeing and assuming for the balance of the fiscal year. Year to date, we've experienced slightly better results in the residential segment in a more challenged commercial market than what we assumed in our planning assumptions. As Jesse mentioned, we now expect our commercial business to be pressured by approximately $15 million on a segment Adjusted EBITDA basis from our planning assumption profile. It is important to provide some context on our commercial business performance expected for the year. First, we expect the channel destocking to be completed by the end of 4Q 2023. Second, we expect approximately half of the sales impact to be driven by channel destocking. Third of the $15 million of commercial segment EBITDA pressure, approximately $10+ million is expected in the third and fourth quarters of the fiscal year. Finally, even with channel destocking and associated impact to the P&L, we are confident that the hard work that we've done on the business will allow us to hold our full year segment EBITDA margins at or above 20%. We expect the remainder of the business to offset the commercial pressure, and we are reaffirming our full year planning assumption of 2023 Adjusted EBITDA range between $250 million-$265 million. As we have previously communicated, we expect to see healthy margins in the second half of the year, with the third quarter margins accretive to 2Q 23 and the prior year, and we expect to see fourth quarter margins accretive to 3Q 23 and the prior year. Our margin drivers remain raw material costs, improved production volumes, and cost down programs. Additionally, relevant full year planning assumptions include, 1, we are expecting a 3Q 23 volume decline, which will be offset with positive volume growth in 4Q 23 as we lap the prior year channel destock. 2, we expect strong free cash flow generation driven by a return to more traditional CapEx levels in the range between $70 million and $80 million, as well as progress against our targeted reductions in inventory. Additionally, planning assumption context is also available in our supplemental earnings presentation. Before we turn to our fiscal third quarter guidance, I wanted to provide context for the operating environment we expect in the quarter. As a reminder, 3Q is historically the beginning of the building season. At present, channel inventory levels at the end of March are lower than the 2017-2019 average days on hand. We are in constant communication with our distribution partners to ensure that the market has the product needed for the season. We are confident that our current lead times will allow us to service any incremental customer demand. As Jesse mentioned up front, contractor backlogs remain consistent with the prior quarter at roughly eight weeks. Both our contractor and dealer sentiment remain above average and were consistent with the prior quarter survey. These factors are balanced by continued macroeconomic uncertainty. Additional context for our 3Q 2023 guidance includes: production levels have stabilized in the back half of 2Q 2023. We expect production levels to be in line with demand in the second half of the fiscal year. Key raw materials and commodity projections continue to be in line with our planning assumptions. We anticipate $30 million of net benefit in the second half of 2023 as lower cost inventory flows through our balance sheet. We are comfortable that underutilization has fully flowed through in the first half of the year for labor and overhead. Cash conversion and working capital improvements remain a priority for us in the second half of the year. With all this in mind, for 3Q 2023, we expect consolidated net sales between $358 million-$378 million, and we expect Adjusted EBITDA between $81 million and $89 million. With that, I'll now turn the call back to Jesse for closing remarks. Thanks, Pete. I would like to take a moment to again recognize and thank our dedicated team members, channel and supplier partners, and contractors that support The AZEK Company. Thank you for your commitment and your contribution to the results this quarter. We are in an excellent position to outperform the market in an uncertain environment and realize the margin benefits of our sourcing and recycling initiatives through the balance of the year. Our focused working capital improvements and expected meaningful free cash flow generation during the second half of the fiscal year put us in a great position from a cash perspective. The fundamentals of our business are strong, as is our confidence in the long-term growth, material conversion, and margin expansion opportunities. We have a clear strategy and AZEK-specific initiatives to drive above-market growth. With that, operator, please open the line for questions. Thank you, Jesse Singh. Ladies and gentlemen, at this time, any questions, simply press star one. Just a reminder, if you find that your question has already been addressed, you can remove yourself from the queue by pressing star one again. We'll take our first question this afternoon from Timothy Wojs of Baird. Hey, guys. Good afternoon. Nice job. maybe just as you kind of look at the back half of the year, Jesse, I know it's, you know, the 2Quarters so far are kind of your shorter quarters. I guess, what would, what would you need to see or what do you wanna see to kind of give you confidence that the kind of above trend demand that you've seen over the last not above trend, above, you know, you know, demand that's better than you thought kind of initially over the last 2Quarters can kind of show through the back half of the year? Yeah. Thanks for the question, Tim. From what we see now, as we made commentary on the call, you know, we're planning on very modest improvements from our planning assumption. As your question implies, we're being conservative in our view relative to the back half of the year. I think for us, we need to continue to see the season hold, as it's progressing right now, we feel really good about what our contractors and dealers are telling us about their backlogs, what they see on the ground. The communication is positive. We just need to see that positive momentum consistently convert to revenue. You know, we are hopeful, but it's early in the season and as such, we wanna see a few more cards. Okay. That's great. Maybe just a second one as you think about, you know, kind of deflation on an annualized basis, I mean, it sounds like you're kind of coalescing a little bit around that kind of $50 million annualized number, Pete. Is that the right message? Yeah. you know, if you remember at our last call, the November CDIs were a little bit more optimistic, and we thought we might have a little bit of upside. The more recent CDIs have kind of fallen back and really just support our original planning assumptions. We feel, you know, passionate about our ability to be able to deliver the $50 million of total deflation and the $30 million of P&L impact in 2023. Okay. That's great. I think just an added comment, Tim, you know, part of our focus on bringing our own inventories down is it puts us in a position, you know, if and when there is additional raw material opportunity, that we're in a better position to realize that faster to the bottom line. You know, what we're doing relative inventory is very conscious to make sure that, you know, we're in a good position to take advantage of any additional opportunities, not only this year, but as we move into 2024. Okay. Okay, good. I'll jump back in queue. Good luck, guys. Thanks, Tim. Thank you. We go next now to Keith Hughes with Truist Securities. Thank you. Question on the third quarter guidance, what kind of pricing are you expecting? Year-over-year pricing are you expecting in the residential segment? Yeah. Keith, this is Peter. As you know, our kind of last price increase was taken in May, so we've really only got a partial quarter. You should think of it as kind of low single digits from a price realization perspective. In the fourth quarter, would that basically go flat at that point? Yeah. Okay. In terms of acquisitions, how much did that add to the quarter? The third quarter is really kind of the main lapping. It's about $6 million is how you could think of it. $6 million. Okay, thank you. We really seem to be heading towards some growth in the fourth quarter based on where your guidance is trending in residential. If that's correct, is that gonna be restock, do you think? Is that gonna be actual sell-through to the contractors? What's your six-month outlook on that topic? Yeah. Keith, as you remember, we actually took down or tore down inventory last year in the fourth quarter. That's the main driver. I think also relevant, as Jesse said. Look, in fairness, as we look to see more of the cards, realistically, if we're gonna see any strength in the residential demand, that's almost certainly gonna show up in the fourth quarter. Okay, great. Thank you. Yeah. I think the key here... Go ahead, Jesse. Keith, just on that. I think the key here, as Pete pointed out, is as we move to the implied guide, for the fourth quarter, we're not assuming, you know, any, kind of sell-through growth. What we're assuming is modestly better than our initial 10%, you know, down volume, that we talked about. That's what we mean about seeing additional cards is, you know, we need to see how the sell-through holds up and where we ultimately end up. The current guide. Okay. The current implied guide is really that inventory refill plus our, you know, a modest improvement on our assumptions. Okay. Thank you. We'll take our next question now from Matthew Bouley of Barclays. Hey, guys. good afternoon. Thanks for taking the questions. I think I heard you say that, you know, in commercial, the, you know, the $15 million full year impact, you're saying that $10 million of that would occur in the second half, but that you still expect, margins of 20% for the full year. I guess implying a, you know, sort of meaningful top line decline, in the second half in commercial. I guess I'm just asking if you can put a finer point on that. Sort of where do you expect commercial revenues year-over-year in Q3, and Q4 relative to resi? Thank you. Look, what I think I would say, Matt, is for the full year, how we're thinking about the business, in the, you know, in the guidance here is top line down about 20% for the full year and the bottom line down about 20% for the full year. Okay. Got it. That's helpful. I guess, you know, putting the math together, it seems like you're assuming that, you know, residential earnings in the second half are roughly similar to how you were, you know, previously thinking. Please correct me if I'm wrong there, but, you know, just given some of the trends year-to-date, you know, have been a little bit better than your expectations, at least in terms of sell-through. You know, maybe you're pushing forward on recycling. Is there any other pieces of the bridge, pluses or minuses, that are kind of keeping you from, you know, lifting that residential outlook? Yeah. I mean, I wish there was a less boring story, but as we've kind of said, look, we feel like the pricing picture is nearly identical to what we thought. Deflation is nearly identical to what we thought. We're past the first half kind of one-time costs of the underutilization. You know, this is really a story of the markets modestly better on the residential side, coupled with some initiatives. You know, offsetting volume softness that's really the bulk of it driven by destocking on the commercial side. It's, you know, a story of volume being a bit better on residential and covering, you know, in essence, some softness on the commercial side. All right. Thanks, Pete. Thanks, Jesse. Good luck, guys. Thank you. We'll take our next question now from Michael Rehaut at JPMorgan. Well, thanks. Good afternoon, everyone. Thanks for taking my questions. Wanted to first just, kind of zero in on, you know, as you within residential, as you kind of move this year through a lot of the different types of comparisons that create a bit of noise, and you're actually looking at a POS backdrop that's a lot more stable. Assuming, you know, and it's obviously a big assumption, but assuming 2024, you're looking at a, you know, kind of similar backdrop and the economy doesn't, you know, fall off. Everything else equal, I mean, is it reasonable to, you know, assume that, you know, residential will get back to a more normalized growth cadence? I'm specifically just kind of thinking about share gains here, either, you know, composite over wood, or even your own efforts within the industry to gain share within composites. Yeah. I would say, Mike, you know, it's way too early. We're about halfway through the year in 2023. It's way too early to give, you know, any kind of commentary on 2023. I would just anchor back to what we talked about, which is we feel really good about our initiatives. This year, both on the top and bottom line. This year, you know, we've had some really nice momentum against those initiatives. When you have either product launches or shelf gains, or even margin initiatives, when they hit within the year, you get the benefit rolling into the following year. So it's difficult to really handicap the market and the environment next year, and it wouldn't be prudent to do so. But we feel really good about our ability to execute the initiatives we talked about to drive above-market growth. We think we're really well-positioned as, and we continue to position ourselves, so that we can continue to take advantage of the opportunities that we see, you know, near the tail end of this year into next year. An example of that is, you know, we are not waiting to draw down our inventory. We're taking steps to be prudent on that inventory drawdown when and where we see opportunity. We believe that gives us more opportunity as we, as we move into 2024 to really realize, you know, what might be available to us. Right. No, no, understood. I think secondly, you know, Pete, you kind of referred to the fact that you're gonna be in a better position in the back half of the year from a share repurchase standpoint. Any type of guardrails you might offer up in terms of degree of magnitude in terms of the amount of capital that you might have at your disposal in that area? Obviously, you know, last year, you did a little more than $80 million of share repurchase and, you know, it's gonna be a pretty good, you know, free cash flow year this year. Any thoughts around, you know, how to frame the potential for share repurchase in the back half? Mike, this is Peter. To your point, look, I think our guardrail has historically been, you know, a desire to want to stay within our leverage ratio targets, 2 - 2.5 times. Just with that said, given our, you know, EBITDA expansion in the back half of the year, you know, it would suggest we can at least do as much as we did last year, possibly more, and probably still stay, you know, modestly below the 2.5 times. Okay. That's 2 - 2.5 on a debt to capital, not debt to EBITDA, not net debt to EBITDA, correct? Yes, correct. All right. Great. Thanks so much. Thank you. We go next now to Philip Ng at Jefferies. Hey, guys. Jesse, it'd be helpful if you give a little more color on how sell-through demand progressed through the quarter into April. I know it's coming a little better, any more explicit color would be helpful. You did mention that your channel partners are still having pretty low inventory. Have you started seeing them come back and restock? If things are stronger, can you build enough, I guess, to meet that demand this decking season? You know, on the, on the latter point, as we talked about, you know, we have a large amount of capacity and we are appropriately ramping production in each of our areas. We're well set up to, you know, the best we've ever been to be able to meet any incremental demand above and beyond not only what we've guided to, but above and beyond any conversations of upside that we may have had with our partners. Relative to sell-through demand, I'm not gonna, you know, parse out month by month. I would say that, in general, if you look across the time period of, you know, let's call it year to date, in general, things have been relatively consistent, as we look across that timeframe. You're naturally gonna ask a question because it's been published in a number of different areas, how have we seen weather, et cetera? I would say that certainly some geographies have, you know, have seen an impact of, you know, kind of timing and weather and those kinds of things. In general, in our case, they have been offset by strength in other geographies. So, you know, as we look at things in totality, you know, we've seen pretty steady sell-through growth, with, you know, timing, geography, you know, kinds of variations. In general, you know, we feel really, we feel really good and that continues, you know, as we stand here today. Super. From a margin standpoint, perhaps for you, Pete, I think implicitly implies that EBITDA margins in the back half are probably gonna be, you know, in the mid 20% range. Is that something we could build off when we look out to 2024? Just because historically there's not a ton of movement through the year. The first half was certainly very noisy. Can we work off the back half? If there's growth, would there be leverage to that? How should we think about, you know, looking out to 2024 from a margin standpoint? Yeah. I mean, here, what I would say, Phil, is look, again, as Jesse stated on, you know, I think we wanna avoid sort of 2024 guidance, but what I think I would say is similar to last year. I think we can be transparent about what we see as sort of the items that kind of carry over to next year that, you know, give us comfort or confidence. Obviously, we've already talked about the $20 million of carryover deflation. Obviously, we don't have the unusuals of the first half of 2023 reoccurring next year. We're not gonna have the 1Q 2023 channel inventory reduction in sales. We should be seeing more closely a full year of our low density impact on our capped composite. There's a number of things out there that we're confident that we can build on next year. I think we want to get closer to year-end before we start giving folks the right jump off. Pete, was it right that we should think about not a lot of volatility in the margins through the year, typically? Yeah. Other than 1 Q, that's our kind of seasonal low, so 1Q tends to be our lowest kind of gross margin quarter. Okay. To your point, I think there's a lot more sustainability 2Q through 4Q, typically. Okay. Super. Thank you. We go next now to Ryan Merkel at William Blair. Hey, guys. Wanted to go back to commercial. Can you just talk about some of the drivers of the sudden slowdown? How did you ring fence sort of the $15 million change to guidance? Yeah. I'll take a very high level. You know, our commercial business, you know, participates in a lot of markets and, you know, in looking at the inventory in their channel, I think we mentioned on the last call that we were seeing some slowdown and some expected destock. I think we specifically made commentary on the last call that as we see, you know, some more positives on the residential side, that, you know, we might need that to offset some of the destocking that might occur on the commercial side. I think all you're hearing, you know, today is, you know, we're able to get much more specific data on it. It's not unusual in certain markets and in some commercial markets where, you know, you can now get a better assessment of whether or not there is excess and what that excess is. I think what we saw is as we moved through the second quarter, you know, our channel partners, and in some cases the OEMs that use our product, basically, either being impacted by their end markets or realizing that they have enough production for a period of time, and them communicating the specifics of what the ramifications are to us. I, you know, we signaled it on the last call, and I think we sized it on this call. Pete, with that, let me turn it over to you on the ring fence conversation. I think, Ryan, what gives us comfort, as Jesse said, look, this wasn't just a conversation with our channel partners. We really tried to get down to end users and the OEMs to understand inventory in the total system, not just in the channel. Really did a lot of work to kind of parse out demand versus, you know, channel destocking. This is the best information we have, the team got, you know, exceptionally granular in their view to kind of get us to where we're at right now. Okay. That's helpful. Looking at exteriors, I know it sounds like things are pretty good there, but what's the risk of a destock in exteriors at some point in the near future? Yeah. Exteriors, you know, their inventory correction, if you will, first was modest. You have to look at the dynamics of that business. We really didn't have an inability to supply the volume. We were always able to supply the volume over the last three years. As such, there was modest inventory build, and that inventory build was really corrected a year ago. We have been operating with our exteriors business for well over six months, effectively from the beginning of the fiscal year with our exteriors business really reflecting the actual demand. I think that business has done a terrific job of continuing to service customers and continuing to gain share against wood through our new products. That's really put us in a position where in that business, you know, we believe that, you know, we can, we can point to some clear areas where we are outgrowing the market. As a reminder, that business does have some, you know, modest exposure to new construction and, you know, through our initiatives, so far we've been able to offset any kind of weakness we've seen in our, in particular our production new construction part of the portfolio. Got it. I'll pass it on. Thanks. Appreciate it. Thank you. We'll take our next question now from Susan Maklari at Goldman Sachs. Thank you. Good afternoon, everyone. Hi, Susan. Hello. My first question is, can you talk a little bit about mix? Have you seen any changes to that as we're going into the season? I guess if there are any changes, are there implications there as you think about the price and how that will flow through in the next couple quarters? Yeah. Just on the price side, as Pete highlighted, you know, we feel really good about where we stand relative to price and everything that, you know, we are putting in our assumptions is pretty consistent with how we viewed things at the beginning of the year. Relative to mix, you know, it's an area that we're always probing. I think in our case, in some of our specific product areas, the mix we've sustained. In certain cases where we have picked up incremental position or incremental share in areas where we were unable to participate over the last few years. In certain cases, those would be at, you know, more the good part of the portfolio. The way, you know, from what we can see right now from a mix standpoint, the mix is in general holding, and some of the incremental that we gained is having a modest, you know, impact on our mix. Right now, you know, our premium products continue to be premium products, and the opportunity that we see is one that we're just taking advantage of in other segments. Okay, that's helpful. Following up, you know, you've talked to the residential business growing at an 8%-10% rate over time. As you think about where the business will be as you exit 2023 and think about 2024, do you think that you can get back to that 8%-10% next year? Is that still a good rate to think about over the longer term? Yeah. I think certainly it's a good rate to think about over the longer term. What underpins that number that we highlighted a year ago during our Investor Day and Analyst Day is, you know, roughly a low to mid-single digit RNR growth rate. I think if you look at estimates right now for RNR in 2023, they are negative. You know, we're building on top of that. I think as we move into 2024, we certainly believe that if RNR returns back to the normal growth rate, we'll have an opportunity with our initiatives to outgrow the underlying RNR market at the levels we talked about. You know, once again, the way to think of it for us, in a more normalized environment is, you know, we would certainly wanna target, you know, call it 4%-5% above the underlying RNR growth rate. You know, everything that we're seeing, our new products, our new execution, our new opportunities, that we've had this year, I think put us in a good position to be able to deliver that. Okay. Thank you. Good luck with everything. Thanks. Really appreciate it, Susan. We'll go next now to John Lovallo at Bank of America. Hey, good afternoon, guys. This is actually Spencer Kaufman on for John. Thank you for fitting me in here. you know, maybe just the first one, based on your three-quarter guide and the, and the full-year guide for EBITDA, you know, it implied pretty similar EBITDA in both the third and fourth quarters. Hoping you could just help us, you know, through some of the puts and takes there and also just the timing of the $30 million of those cost savings. Yeah. This is Peter. look, the split on the deflation's fairly balanced between the third and fourth quarter. you know, again, I, you know, the drivers are still consistent with last quarter and how to think about the back half of the year. the three pieces are, again, deflation. Second one is the kind of non-recurring underutilization and accounting change that hit the first half of the year, coupled with additional volume in the back half of the year. it's purely driven by the seasonality of the third and fourth quarter. I mean, those are the three elements, and they're still completely intact. Okay. Understood. Earlier you mentioned that channel inventory levels are about 15% below average levels from 2017 to 2019. I mean, do you think that we could get back to those levels over the next 12 months or so? You know, what would need to happen to get there? Yeah. I, you know, first off, I think from our vantage point, having a more conservative amount of inventory in the channel is a good thing at this point in time. When you're dealing with the potential for uncertainty or the potential... I'm not saying it'll manifest itself, but when you're dealing with the potential for some market uncertainty, you know, I think our key objective was to de-risk both our own inventory and inventory in the channel, de-risk our future results by getting our inventory in a good spot. I think what the channel ultimately carries, where it ends up, I think will be an outcome of, you know, where we see the confidence and where we see the opportunity. Clearly, if sell-through, you know, comes in above our conservative estimates, there'll need to be some additional inventory in the channel but that would still allow us to operate on lower days on hand. You know, it's a good position to be in now. It was a good position to be in at the end of Q2. As we move through the year, where we end up, we're assuming a conservative end to a channel inventory at the end of Q4. What's appropriate will really be based on, you know, how we see the future market. Okay. If I could just follow up on that quickly, Jesse. I mean, if you just kind of think about all the capacity that the big three have added over the last few years, you know, does the channel need the same amount of inventory as before, given they could probably get it quicker now? You know, how should we think about that piece? I think at, you know, from... I'm not gonna speak to the other folks. As I look at our own business, I think we're in a better position ourselves to carry less inventory ourselves, because, you know, historically, we have not had enough capacity to always fulfill demand in season. As such, we've had to be heavier on inventory. I think with the capacity adds we've had now, that we've already made, it puts us in a position to be able to manage our own working capital very much more effectively. It allows us to service our customers, more effectively. I think, you know, each customer has their own model relative to how they service their customers, and they'll determine, you know, what the right inventory level is for them. I think at a minimum, it sets ourselves up to be able to operate with lower working capital. Got it. Thank you, guys. Ladies and gentlemen, we have time for one more question this afternoon. We'll take that now from Kurt Yinger at D.A. Davidson. Good afternoon, everyone. I just wanted to go back on the full-year guide. It wasn't sort of clear to me what's kind of embedded at this stage because it doesn't sound like you've necessarily come off the original residential volume planning assumptions, and that's some of the conservatism you've referenced. You also believe you can kind of offset the downside in commercial. Could you just maybe help me square those two things? Yeah, Kurt, this is Peter. Look, the easiest way to think about it is we said at the beginning of the year, our original planning assumptions were for kind of sell-through unit volume closer to 10. What's embedded in the residential view right now, is probably low single digits improvement, on that down 10. That's the $40 million that we're covering on the commercial side. As Jesse mentioned, look, we're looking for more cards in the season, and if the demand environment's a bit better, you're likely to see that upside, surface in the fourth quarter, results. Got it. Makes perfect sense. Just lastly, in terms of the recycling opportunities, could you maybe just give us a few mile markers to watch for over maybe the next year or so in terms of. You know, continuing to increase recycled PVC utilization, maybe some formulation changes on the wood plastic composite side. Are there any big hurdles that you still need to clear to kind of get there? You know, let me start at a high level. You know, relative to wood plastic, as we've talked about, we're shifting our formulation from, you know, a mix of half high-density polyethylene to half low-density polyethylene. You know, we're in process of doing that. We're staging it appropriately. You know, our expectations now, you know, barring any delays and, you know, we've used our extra capacity to get there is, you know, that's something that would be a positive shift in the portfolio as we move into 2024. I think as we've highlighted both on our exteriors business and on our deck and rail business, we see incremental opportunity to increase the percentage of recycled PVC used, you know, almost on a quarterly basis. You know, for us, that falls into the bucket of incremental improvements, and we would expect that to continue. It's embedded in some of the, you know, our performance over the last couple of years, and we would expect that to be embedded in the performance as we move into 2024. Got it. Thanks for the color and for squeezing me in as well. Appreciate it. Thank you. Just one clarifying point. you know, Pete mentioned low single-digit improvement. I just wanted to make sure that as we talk about sell-through, that that comes across clearly where we were assuming close to double-digit negatives on sell-through. we are seeing modest incremental improvement off the low or off the double digits. You should then read, you know, we're now assuming, you know, kind of mid to high single-digit sell-through declines. Thank you. Ladies and gentlemen, that is all the time we have for questions today. Mr. Singh, I'd like to turn things back to you for any closing or concluding remarks. Thank you all for joining the call this evening. We look forward to having many discussions over the next days and weeks. Thank you again. We'll chat with you soon. Thank you, Mr. Singh. Ladies and gentlemen, that will conclude The AZEK Company second quarter 2023 earnings call. Again, we'd like to thank you all so much for joining us and wish you all a great remainder of your day. Goodbye.