Welcome to The AZEK Company's Third Quarter Fiscal 2023 Earnings Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there'll be a question-and-answer session. Please be advised that today's conference is being recorded. I'd like to hand the conference over to Eric Robinson. Please go ahead, Eric. 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 by an 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. Reconciliation 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 strong financial results, driven by continued execution of our growth and productivity initiatives, operational performance, and double-digit residential sell-through. I am very proud of the team as we delivered these results through our continued focus on growth through new products, material conversion, and customer expansion. We also drove significant margin expansion through operational excellence, sourcing savings, and recycling initiatives. Our results this quarter demonstrate the strength and resiliency of our business and our team's focus on execution to drive above-market growth and margin expansion across varying market conditions. Our leading deck, rail, and accessories and Exteriors categories delivered strong sell-through growth in an uncertain repair and remodel market, driven in part by wood conversion and new business wins. As we have highlighted in the past, we believe that we have a resilient business model and can outgrow the underlying R&R market through the combination of material conversion and our portfolio of growth initiatives. Overall, we remain confident in our long-term strategy to outgrow the market through innovation, new product development, and channel expansion, supported by secular trends around wood conversion, outdoor living, and demographic shifts, increasing the need for housing. In the third quarter of fiscal 2023, we generated $387.6 million of net sales and delivered double-digit net income and Adjusted EBITDA growth. As expected, our fiscal Q3 margins improved significantly, and we delivered 310 basis points of Adjusted EBITDA margin expansion to 25% as we realized the benefits of ongoing cost savings initiatives. We continued to see the impact from our increased focus on cash conversion and disciplined capital expenditures. In the third quarter, generated free cash flow of $160.1 million, growing $52.4 million year-over-year. Our cash flow generation during the quarter supported approximately $48 million worth of share repurchases. During the quarter, we saw double-digit year-over-year residential segment sell-through growth, including strong growth across our Exteriors category and our deck, rail, and accessories category. We also saw strong growth in both our Residential Pro and our retail channels. These categories saw sequential improvement versus the prior quarter and highlight stronger in-season demand versus our flattish sell-through growth during the first half of the fiscal year. We believe that our performance is a combination of category resilience relative to other parts of the repair and remodel industry, combined with AZEK's specific growth programs, including our shelf gains and expansion of new products. Demand signals, including our digital marketing metrics and feedback from our contractor and dealer surveys, also provide a positive backdrop for the remainder of the building season and our fiscal year. We meaningfully expanded our margins within the quarter as we realized the benefits of cost and sourcing actions, a nd more normalized production levels versus the first half of the fiscal year, when we aggressively reduced our production to draw down inventory in our channel and within our own walls. In addition, we were challenged with having to work through higher cost inventory on the balance sheet that masked the cost reductions that we had already implemented. We expanded our Adjusted EBITDA margin sequentially by 570 basis points, year-over-year by 310 basis points. Results within the quarter reflect strong execution by our operations team and our current cost structure. Supply chains have normalized. We continue to work with our channel partners to maintain appropriate residential channel inventory while continuing to focus on delivering industry-leading service. During the quarter, we saw a sequential drop in channel inventory. Consistent with our last two quarters, ended the quarter below our average 2017 to 2019 days on hand in the channel. On the Commercial segment side, as we've indicated over the last couple of quarters, we've seen a more challenging environment resulting from a combination of channel destocking and softer demand in certain non-residential and industrial end markets. The inventory recalibration in our commercial business is proceeding as expected, and we continue to expect the impact from channel destocking to be substantially complete by year-end. During the quarter, we continued to make progress against our strategic initiatives and saw the benefits of our new products and our expanded shelf gains. The new products we have launched in 2023, on top of our previous years of launches, add to our industry-leading premium portfolio of products that utilize our proprietary recycled PVC and color technology capabilities. These product innovations position us to drive incremental growth in our core markets and access outdoor living adjacencies. Within our railing business, new colors in our Classic Composite Series rail and vertical cable rail solutions are seeing strong adoption and feedback from our customers. In exteriors, we continue to see strong performance across our core AZEK and Versatex brands and value-added product innovations like PaintPro Trim and Captivate Siding that expand our market opportunity. Our exteriors team has done a great job of capitalizing on new business wins this year and outperforming the market by delivering best-in-class service to our customers. We also saw strong momentum for both our TimberTech brand and our AZEK brand. In the most recent JLC 2023 Brand Use Study results, recently published by Zonda, TimberTech Decking, TimberTech Railing, and AZEK Exteriors trim were ranked as the number one most used brand in the last two years in each of their respective categories. TimberTech composite/PVC decking also ranks number one in quality, making it both number one in quality and number one most used. We believe that our ongoing focus on new products, branding, and customer focus is enabling us to win and gain mind share with our customers. During the quarter, we also expanded our PVC recycling capacity, increased the amount of recycle we consume in our exteriors products, and expanded our FULL-CIRCLE Recycling sourcing network. Our FULL-CIRCLE PVC Recycling program collects scrap generated from construction sites, and we are adding larger format collection bins to address larger scrap, like vinyl siding, collected through construction and demolition streams. These investments are key enablers to support the recycling of millions of pounds of waste and scrap PVC annually and increasing recycled content of our products, consistent with our long-term recycling and margin objectives. AZEK was once again proud to be recognized with new awards this quarter. First, AZEK was named in USA TODAY's first-ever list of America's Climate Leaders. The list highlights leading companies that have shown meaningful reductions in their greenhouse gas emission intensity, as measured by greenhouse gases relative to revenue. AZEK has reduced its Scope 1 and Scope 2 carbon intensity by approximately 15% between 2019 and 2021. TimberTech Advanced PVC Decking was named a 2023 winner in the prestigious Environment + Energy Leader Product of the Year Awards in recognition of its sustainability attributes, including having a lower life cycle carbon footprint versus traditional wood decking. These recognitions, combined with our recently published 2022 FULL-CIRCLE ESG Report, illustrate AZEK's positive momentum and reflect our commitment to positively impacting our products, our people, and the planet. Turning to outlook, we continue to be confident in our business strategy and our ability to deliver within the current fiscal year and for years to come. Our improved residential segment visibility and cost savings initiatives give us confidence to raise our outlook for fiscal year 2023. We exited the quarter with a stronger margin profile. We are in a great position to build upon these gains while continuing to drive incremental cost savings against our long-term goals. Key digital metrics highlight increased interest in our TimberTech brand. We continue to see growing customer engagement, with website traffic and sample orders showing healthy year-over-year growth during the quarter. Our quarterly pro contractor and dealer surveys showed sustained contractor backlogs of approximately eight weeks and expectations for continued demand for the remainder of the building season. These results are consistent with prior surveys, with contractors expecting modest revenue growth in 2023 and also citing labor shortages as their biggest pain point. Our dealer survey saw similar positive sentiment, with our dealers incrementally more confident in the outlook for 2023 and expecting modest revenue growth. In addition to the stability of our existing contractors and dealers, we continue to expand our network, allowing us to access more of the market and drive incremental share and wood conversion. We have added over 800 contractors into our system year- to- date and are seeing incremental growth from our expanded dealer and retail network. In summary, our growth and cost savings initiatives are on track. We're experiencing positive results in our residential segment, and we have increased visibility for the 2023 season. We now expect to deliver Adjusted EBITDA in a range between $275 million-$280 million, an increase from our planning assumption range of $250 million-$265 million. We expect year-over-year Adjusted EBITDA margin expansion in the fourth quarter that is accretive versus the prior quarter and year-over-year. As we progress through the balance of the year and into fiscal 2024, we will continue to focus on growth opportunities, margin expansion, and cash flow generation against our previously discussed 2027 financial objectives. Our team and external partners have done a great job, and we really appreciate their efforts. We continue to see the opportunity to drive above-market growth and margin expansion. This quarter was an important step in the journey, and we are focused on delivering improved results in the future. I will now turn the call over to Pete to provide some additional context on our financial results and outlook. Thanks, Jesse, and 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 third quarter results, I want to provide some color on the operating environment during the quarter. From a high-level perspective, we're continuing to see a positive demand environment in our residential business year-to-date, while our commercial business is effectively managing its way through the channel destocking impacts, which we expect to be substantially completed by the end of the fiscal year. From an operating perspective, we started to see our production volume levels normalize in the quarter, giving us opportunities to drive leverage and conversion costs. As expected, production volume levels were down approximately 10% year-over-year in the quarter, driven primarily by our continued inventory reduction efforts on our own balance sheet. On the commodities front, key raw materials have stabilized around our original planning assumptions, and those lower input costs are being realized in our financial results. We continue to drive disciplined cost management of our discretionary spending while supporting key investments in the future. These factors drove the anticipated margin acceleration that we saw in the quarter, exceeding our previously communicated expectations. Lastly, our teams continue to outperform expectations against our working capital initiatives. For the third quarter of 2023, we saw net sales of $387.6 million, which was modestly above our guidance expectations. Net sales declined 1.9% year-over-year. The third quarter included a volume decline of approximately $20 million, which was primarily driven by our commercial segment, partially offset by positive contributions from very modest carryover pricing and M&A. Q3 2023 gross profit increased by $5.8 million or 4.6% year-over-year to $132.2 million. Third quarter 2023 adjusted gross profit increased by $8.6 million or 5.8% year-over-year to $156.2 million. Our adjusted gross profit margin% increased 290 basis points year-over-year to finish at 40.3%. The adjusted gross profit increase was driven primarily by material deflation, more normalized production levels, and execution against cost-saving initiatives. Selling, general, and administrative expenses decreased by $5.1 million to $73.7 million. The bulk of the year-over-year decrease was driven by lower acquisition costs, as well as disciplined cost management within the quarter. Adjusted EBITDA for the quarter increased by $10.4 million, or up 12.1% to $97 million. The Adjusted EBITDA margin rate for the quarter increased 310 basis points to 25% from 21.9% in the prior year. The primary driver of the year-over-year change in Adjusted EBITDA was the impact of material deflation, a more normalized production environment, and execution against cost savings initiatives. Net income for the quarter was $34.9 million, or $0.23 per share. Adjusted net income for the quarter was $45 million, or adjusted diluted EPS of $0.30 per share. Turning to our segment results. Residential segment net sales for the quarter was $352 million, up 2.5% year-over-year. We saw growth in both exteriors as well as deck, rail, and accessories. Residential segment Adjusted EBITDA for the quarter came in at $105.5 million, up approximately 16% year-over-year. Residential Adjusted EBITDA margins were up 350 basis points to 30%. Commercial segment net sales for the quarter were $35.9 million, down approximately 31% year-over-year. These results were in line with our previous quarter's commentary and expectations. Commercial segment Adjusted EBITDA for the quarter came in at $8.8 million, a decrease of $3.5 million year-over-year. It is important to note that despite this channel destocking backdrop, we were able to hold our Adjusted EBITDA margins above 24% in the quarter. From a balance sheet and cash flow perspective, we ended the quarter with cash and cash equivalents of $244.6 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 $241.2 million. We ended the quarter with gross debt of $673.9 million, which included approximately $78.4 million of finance leases. Net debt was $429.3 million, and our net leverage ratio stood at 1.7x at the end of the third quarter. Net cash from operating activities was $166.9 million during the quarter, versus net cash from operating activities of $133.2 million in the prior year period. Capital expenditures for the quarter were approximately $7 million, down $19 million versus the prior year period. Overall, free cash flow in the first nine months of the fiscal year was up $250 million year-over-year. As expected, we were active during the quarter with our share repurchase program. We're purchasing approximately $48 million worth of shares at a weighted average of $24.90 per share. Given the strength of our cash position, we expect to be active again in the fourth quarter with our share repurchases activity. As a reminder, the remaining authorization under our share repurchase program is approximately $263 million. Our capital allocation priorities remain the same as we previously communicated. We will continue to invest in our business, both organically and inorganically, and to the extent we have excess cash flow, we will look to repurchase shares opportunistically. 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. We have now seen enough of the season in residential to confidently call the year. The commercial segment second half is coming in as expected and communicated on our last call. We are confident that the commercial channel destocking will be substantially completed by the end of 4Q 2023. To remind folks of the full year Commercial segment impact that we are expecting in our outlook, is to have sales and EBITDA down approximately 20% year-over-year, with the bulk of that pressure in the second half of the year. We expect full year Commercial EBITDA margins above 20%. With improved Residential segment visibility, coupled with a stable Commercial segment, we are raising our full year 2023 Adjusted EBITDA range to $275 million-$280 million. As we have previously communicated, we expect to see healthy margin expansion in the second half of the year, with the fourth quarter margins accretive to 3Q 2023 and the prior year. Our margin drivers remain lower raw material costs, improved production volumes, and execution against our cost savings initiatives. Before discussing fourth quarter guidance, I want to reflect on the fiscal year-to-date. When offering our planning assumptions in November 2022, we were operating in an uncertain environment with the unknown impact of the Fed's cumulative interest rates on both the repair and remodel spend and consumer sentiment. Against this backdrop, the key focus areas for our business were around our ability to navigate the channel destocking, sustain pricing in our core markets, deliver on sourcing savings, and manage our conversion costs while protecting capacity and lead times to service our market. Through three quarters, I'm proud of the way the team has executed, while at the same time providing strong service to the market, expanding our position across channels and reducing working capital. At present, channel inventory levels at the end of June were lower than fiscal 2017 to 2019 average days on hand. We are confident that our current lead times will allow us to service demand. As Jesse mentioned upfront, contractor backlogs remain consistent with the prior quarter at roughly eight weeks, as both contractor and dealer sentiment remain above average and were consistent with prior quarter survey. Additional context around our 4Q23 guidance includes: we expect both sales volume as well as production volume levels to be up meaningfully year-over-year as we lap the prior year channel destocking. Key raw materials and commodity projections continue to be in line with our planning assumptions. As expected, we will continue to see lower- cost inventory roll off the balance sheet in 4Q23. Capital expenditures are expected to end the full year at around $85 million, representing a very modest increase in our earlier CapEx expectations. As stated before, we will continue to invest incremental capital as we see growth and margin opportunity across our residential business. Cash conversion and working capital initiatives remain a priority for us. With all that in mind, for 4Q23, we expect consolidated net sales between $356 million-$376 million, and we expect Adjusted EBITDA between $90 million and $95 million. With that, I'll now turn the call back to Jesse for closing remarks. Thanks, Pete. I would again like to thank our dedicated team members, channel and supplier partners, and contractors that support The AZEK Company. Thank you for your commitment and contribution. We are in an excellent position to outperform the market in any environment and realize the margin benefits of our sourcing and recycling initiatives. Our focused working capital improvements and meaningful free cash flow generation put us in a great position from a capital allocation perspective to opportunistically participate in share repurchases. The fundamentals of our business are strong, as is our confidence in the long-term growth, material conversion, and margin expansion opportunity. 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. Please limit your question to one to accommodate people in the queue. The first question comes from Phil Ng from Jefferies. You have the floor. Hey, guys, congrats on a really strong quarter, especially on the margin performance. My question really centers around that. If I look at your guidance, you're assuming roughly 25% EBITDA margin in the back half. Appreciate there's some seasonality in the business, is that not a bad way to think about how margins could look in 2024 if you get some leverage? Kind of how do you see that cadence progressing to your longer-term, 27.5% EBITDA margin target by 2027? It seems like there could be some upside here. Hey, Phil, this is Peter. Obviously, you know, the results here in the third quarter and what we expect in the fourth quarter gives us a tremendous amount of confidence that we're not only on track, but exactly where we'd like to be in pacing to hit the 27.5% in 2027. As far as sort of a, let's call it a baseline, I think what I would share that we've communicated previously that might be helpful as you're thinking about next year, is what we do know about margin impacts is between the accounting change and estimate and the underutilization in the first half of the year was about a $20 million impact that won't reoccur. The second thing that we've articulated is that we expect to leave about $20 million of deflation on the balance sheet here at fiscal year end 2023, that would roll off in 2024. That's approximately $40 million. You know, keep in mind, we would expect to make some investments against that $40 million, but that's probably a good way of framing up or thinking about exits. Okay. Appreciate the color. Thank you. Next question comes from Michael Rehaut, sorry, from JP Morgan. You have the floor. Mike, you there? Can you hear me? Might be on mute. Yeah, Mike. Yeah, now we can. Yeah. Go ahead, Mike. Okay, great. Sorry about that. You know, I wanted to, maybe kind of shift you talking about. I apologize if this might have been hit on in the last question, but, you know, kind of thinking into next year, trying to think about the takes, you know, the, pluses and minuses, the tailwinds and headwinds, different drivers that might influence the margin. You know, as you sit here today, and again, kind of looking at, at your back half performance, you know, in particular, I'm thinking about any incremental carryover on the price cost side, productivity, raw materials, those types of things. Sorry for just sneaking in a second small one. Just curious on how, you know, you said that sell-through is up double digits in 3Q. What does your fourth quarter guidance reflect in that area? Yeah, Mike, you may not have heard it. Pete just answered that first one. I'll summarize, as you know, what Pete just highlighted as a reminder. Underutilization, plus some of the one-time accounting impacts are $20 million on the balance sheet, coming into 2024. I think as we've talked about throughout the entirety of the year, we're really focused on obviously delivering the, delivering the year, but making sure we're really well set up for 2024. On your second question, relative to what we're assuming on sell-through, I think in the materials that are posted online, we stated positive sell-through. Really the way to think of it is we're not gonna give a specific range on assumption, except that anything that's positive, i s really what we're expecting and, you know, what will give us an opportunity to deliver the range, that we've highlighted. Is your question answered? Yes. Thank you. Maybe just to squeeze in one last one, and I apologize that I was repetitive on the prior question. Thinking about growth initiatives for next year, you talked about adding distributors and various other growth initiatives, your portfolio, product portfolio. Any way to think about, how that, you know, how that might add to growth in addition to underlying market growth for the segment, for the sector? Sorry. Yeah. Let's start with where we are now. Appreciate the question. If you take a look at, at our trailing 12, I think one of the things that both Pete and I tried to comment on during the scripted portion of the call is that our inventory correction is behind us. W e've taken the appropriate steps. As you look back and you look at our 2022 growth rate in our residential business, it was 12%. If you look at the guide we have for our residential business, the midpoint of the guide or the range of the guide, it really stacks up to our residential business being at 2%-3%, despite some of the inventory corrections for the fiscal year. Now, against that, we've also said that we're seeing double-digit growth. I think if you think about the underlying R&R market, in many cases, many people talked about that as being negative. There's some other discussion about our particular sector, being flat. Then against that, I think when you start to look at our trailing 12, our trailing 12 on our guide, and you extrapolate, you know, what would be logical as you incorporate a more normalized fourth quarter, what you start to see is a trailing 12 across each of those areas that really reflects our execution within our market expansion. I think it's key to recognize, you know, within the industry, that we are showing right now the benefit of that share, and new product growth and new growth initiative, conversation on our year-to-date. We will continue to expect that, as we move forward. Great. Thank you very much. Thank you very much. Next question from Ryan Merkel, from William Blair. Your line is open. Hey, everyone. I had a question on early thoughts on the early buy. Can you just comment on what you're hearing and thinking for distributors and pro dealers? One of the reasons I ask is, one of your competitors mentioned that pro dealers, you know, might push some of the stocking into calendar first quarter 2024. Just curious if you've heard something similar. Yeah. Oh, you know what? I'm sorry, Pete, I 'll take it then. You know, just as you step back and consider what we said at the end of calendar 2022, at the end of our first quarter of this year, we said that we were operating under a very conservative environment, and that we were working with our dealer partners and our distributors to make sure that we had the right inventory levels and the right staging. As we move into the season, we are now in a position where we are lapping conservatism, and as we look at the market, we don't expect any additional conservatism, barring any meaningful change in the market. I think the other key element to highlight is we operated under a more normalized and, call it appropriately conservative early buy last year. So we are now moving into a lapping of that early buy. We do very, very little on our early buy in the, you know, calendar, first quarter. Got it. Thanks, Jesse. Thank you. Next question comes from Keith Hughes, from Truist. Your line is open. Just building on that last question, it seems as though the run right here is very strong, as you, you've said in several questions. It seems as though the channel would really start to build a lot of inventory or at least get ready for the season next year. I don't know, you hear mixed things on that. What are you hearing from the channel about next year? What do they think it's gonna look like? What kind of position are we gonna take? Yeah, i t's extremely difficult to talk about next year. I think as you look at what we have gone through this year, I would say it is it has been a relatively normal pacing, a relatively normal year, with, as Pete pointed out, a very conservative set point relative to what is, you know, the, the inventory that people took on, and how we worked with our channel to make sure that it was appropriately conservative. I think as we look at next year, we're focused on continuing to build on this year. You know, aside from that, we're excited about what we can continue to do from a momentum standpoint. Okay, one other question. Peter, you highlighted some nice numbers for us of some, you know, headwinds that are going away. Are those mostly going to be exhausted after the first half of the year? Yeah, Keith, that's, that's actually accurate. We'll carry over about half a year's deflation, so most of our carryover is all gonna be in 1Q and 2 Q, comp perspective. Obviously, the bulk of the underutilization was all in the first half of the year. Will be even between the quarters or will it slant towards the first? It'll be a little heavier, Keith, the 1 Q, just because the accounting change in estimate was about $6 million. That was all in 1 Q. Yeah. Okay, great. Thank you. Yep. Thank you. Next question comes from Tim Wojs from Baird. Your line is open. Yeah. Hey, good afternoon, guys. Nice, nice job. Maybe just, you know, my question, I guess, you know, Jesse, could you just kind of maybe, as you look at double-digit sellout, I know this is not a, a scientific thing, it's more of an art, but is there a way to kind of think about what a like-for-like sellout number is versus maybe what you're adding, you know, from, from new products or, or new shelf space? Yeah, I think it's a good question. You know, what I would say is what we've said in the past is that our initiatives incrementally would drive, give or take, 3%-5%. Depending on the year, depending on the timing, et cetera, I think from what we can see in the general underlying data, you know, between all of our initiatives, I think it's probably at least 3%-5% from where we stand right now. Once again, that is, you know, a broad brush that's part of that revenue stack th at we've provided over the years. Okay, very good. Good Good luck on the rest of the year, guys. Appreciate it. Thanks, Tim. Thank you. Next question from Susan Maklari, Goldman Sachs. Your line is open. Thank you. Good afternoon, everyone. Pete, in your commentary, you mentioned that deflation, productivity, cost savings were some of the key elements in the margin performance that we saw this quarter. Can you give any more color on the role of each of those? Then, any thoughts on the utilization rate that you expect to have coming out of this year, and the potential for further upside in 2024, and what that perhaps could mean from a margin perspective? Yeah, Susan, this is Peter. Look, I think the easiest way to answer the question i s, you know, from a sequential step-up perspective, we've kind of highlighted, look, you know, from a first half to back half, you know, about 60% of the lift is the $30 million in deflation, and about 40% is sort of the underutilization and change in accounting. As far as, you know, expectations for next year, certainly, you know, we don't know what the volume equation is gonna look like, but we would almost certainly wanna be or need to be positive from a production volume perspective, which would obviously be a nice backdrop for our productions plants to run behind. Okay. Thanks for the color. Good luck with everything. Thank you. Next question comes from Trey Grooms from Stephens. Your line is open. Yeah, good afternoon, everyone. Just quick on the commercial update. You know, you mentioned that the destocking was substantially behind us by year-end, but, you know, is there any way t o kind of parse out, and sorry if I missed it, but kind of parse out how much of the decline in the quarter was driven by softer demand versus destocking? I think you mentioned, Pete, stable commercial environment, maybe I misheard that. Is that to say that it's kind of stabilized here at lower levels in the back half? Maybe any early thoughts from, you know, talking to end customers and maybe their backlogs? Any thoughts on maybe when they might start to see some demand improvement there in that segment? Yeah, Trey, this is Peter. I think we said on our last call, and it still holds here, is a little over half of the impact on the commercial business in the back half of the year is channel destocking. The other piece is demand. As far as just color on the bulk of the industrial markets are already through channel destocking as we exited 3 Q here. The lone market that we're wrestling with in the fourth quarter that we feel comfortable that will materially complete the destocking is semicond so if that helps in terms of color. As far as stabilization, I think the comment was just really around the fact that we see the business still kind of exactly as we called it last quarter. You know, we mentioned for the full year, we thought the top and bottom line would be down about 20% year-over-year. That's still our guide right now, we feel comfortable with it. We also feel comfortable in holding EBITDA margins above 20%. All right. Thanks, Peter. Thanks for the color. Take care. Yeah. Thank you. Next question comes from John Lovallo, UBS. Your line is open. Hi, guys. Thank you for taking my question as well. you know, as you look beyond this year, in terms of industry pricing, I think you've talked in the past that you think that this industry could sort of, you know, garner 2%-3% pricing on an annual basis, just given, you know, the distributor model. Do you still believe that that's true? If so, I mean, is that contemplated in that 27.5%, 2027 EBITDA margin, or would that actually be upside from there? Yeah, look, I think as our conversations in the past with our product portfolio, with the aesthetics, branding, just differentiated products in general, as well as the strength of our channel presence, you know, I think this should be a business where we can offset, let's just say, normal inflation in the marketplace, whether that's a point or two. That's certainly, it's certainly something we're aspiring to. As far as our growth stack, you know, we've kind of said, look, our growth stack is, is ex M&A, and it's ex price. Conceptually, anything that we can get there is, let's say, a hedge against any of the other levers, right? We drive a portfolio of actions getting to 27.5%. You, you could think of it as it's defense against ensuring that we can deliver on the 27.5%. I think the only other thing I would add, John, is, you know, as we look at the value add we have from the string of new products that we have launched and will continue to launch, that really adds differentiated value in the market. We believe that's a really important factor in being able to sustain, you know, the value and, and therefore, the price that we get for our products. It really ends up over the long term being a value proposition for the consumer. We feel really, really good with all of the efforts over the last few years of launching multiple new product lines that we're adding a lot of really differentiated value at the consumer level. Thank you, guys. Thank you. Next question, Adam Baumgarten from Zelman & Associates. Your line is open. Hey, good afternoon, guys. It looks like your residential sell-through was, was above your biggest competitor, or at least in the quarter. You mentioned some of those initiatives contributing to the, to the outgrowth. Can you also touch on maybe how sell-through looked in Exteriors? Was it actually above Deck, Rail, and Accessories? I think if you take a look at our guide for the year, there's some noise in terms of inventory movement on deck, rail, and accessories. If you look at our guide, I mentioned, you know, in aggregate, we're gonna end up at, at 2%-3% positive, for residential, given our guide. You consider, the sell-through numbers we just told you, it's been pretty balanced across both areas. Y ou should think, you know, as we move through the quarter we just ended, and as we move into the next quarter, that our sell-through is, is really balanced, on a relative basis between both those businesses. Okay, great. Best of luck. Thank you. Thank you. The next question comes from Rafe Jadrosich from Bank of America. Your line is open. Great. Hi, good afternoon. Thanks for taking my, my questions. It's Rafi. Just, on following up on the sell-out trends, can you just, Jesse, like, the improvement from flattish in the first half of the fiscal year to up double-digit is pretty sharp acceleration. When we look across, like, R&R in general, I don't think we've seen an acceleration like that in other categories. Like, what do you think is driving that big improvement on a sequential basis? Is, like, the conversion rate going higher? Is that just getting more shelf space? Were there any specific customer wins there? Just within sell-out, is there any difference majors between wholesale and, and retail? Thank you. Yeah, I think part of it, when you start to talk about timing, first half and, and second half, I, you know, the main distinction is our second half of the year is actually in the bulk of the season. So I think as we talked about earlier, it's difficult to parse off, parse out, sell-through, you know, in the fourth calendar quarter or in the first calendar quarter, because there's, you know, it's a bit off season in certain geographies, and there's a lot of movement there. I think certainly, we feel really good about the season and our aggregate sell-through as we end the year. So I'll give you just a couple of perspectives. Relative to other parts of R&R, as we've talked about in the past, we do believe the sectors that we play in are more resilient. I think as you look back to 2019 and what we're guiding to now, our residential business is materially bigger, you know, 80%+ larger. That's really a reflection of, you know, the resiliency of the market segment we play in, so I'll start there, combined with, you know, company-specific initiatives. I think we talked about in earlier calls that we had picked up some additional shelf space in both, both our pro channel and also within retail. You have the backdrop of a resilient business, some incremental shelf positions, which allow you to access wood conversion. It allows you to engage broader, customers. You know, layer on top of that, you know, there is additional wood conversion that we believe is happening, and we get incremental benefit from our new products, in particular in our exteriors area, where that part of the R&R market, as, as you can hear from some of the other folks that have reported, is a bit weaker. We still, you know, delivered strong performance. I think it's a, y ou know, as Pete said, it's a portfolio of actions on top of a very resilient sector that we've talked about for years, within the market. Great. Thank you. Thank you. Next question comes from Joe Ahlersmeyer, Deutsche Bank. Your line is open. Thanks. Good evening, everybody. Good evening. I just wanted to ask about mix. Within the sell-through, up double digits, could you talk about any current benefit you're getting from mix, people, you know, choosing higher value products, higher, price point products? Then just any opportunity for that to be a continued part of the algorithm for growth going forward? Yeah, Joe, this is Peter. What I would say is, is, look, with added capacity here in 2023, we've done a kind of modest relaunch of our Prime and Prime Plus. You know, we were under indexed at the kind of good category over the last two years, just due to lack of capacity. As we have pushed those products this year, we've obviously picked up some share along the way and, you know, have, have felt the impact of the modest mix impact of picking up more at the good category level. Meaning you actually had a mix headwind, if you're talking good, better, best, right? Yeah. You can think of it as modest trade down as we picked up share with the new capacity. Got it. Yeah. I'll add, though, that, you know, the way to think of it is, we've seen nice growth in our premium segment also, but what Pete's talking about is, you know, the opportunity we had to access business that we hadn't already had. You know, in aggregate, you know, if anything leads to a very, very modest, you know, almost indistinguishable on the P&L, mix impact from growth of the more entry-level products. That makes sense. Thanks for the context there. Just on the commercial margins, you know, you're facing weaker demand in destock, but yet you've held margins basically flat year-over-year, kind of guiding to that flat year-over-year-ish for the year. Just can you talk us through how you were able to do that? Because obviously, the result was a little different in the residential destock. Yeah, I think that, you know, as we talked about, that team has done an absolutely terrific job of developing value-added segments, of being able to scale the factory appropriately without, y eah, it's a narrower factory and a narrower footprint, so it has an ability to scale up and down relative to volume changes incredibly efficiently. I think they've just done a really nice job of both of those things, managing through volume, some volume volatility and decline while they continue to drive value-added products. So it's been a really nice business performance, as you highlighted, for that team as they've managed through, you know, a destock that's occurring in many parts of the rest of the economy. Appreciate it. Good luck, guys. Thank you. Thank you. Before we continue, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. The next question comes from Kurt Yinger, D.A. Davidson. Your line is open. Great. Thank you. just a two-parter on recycling. First, could you just remind us what the next mile marker is in terms of the low for high density, kind of recycled polyethylene substitution? And then secondly, you, you touched on the full circle kind of PVC program and accessing some new materials there. Is that something that's driving down kind of per pound cost of recycled PVC materials at this stage, or any color there? Yeah, let me, let me start with the latter. I think, you know, we've highlighted, over, you know, the last year, over the last couple years, you know, the strength we really have as the largest vertically integrated PVC recycler, in the country. What that's allowed us to do is to really push and source, a lot of alternative materials, and our ability to use those materials within our products, both in Exteriors and our deck, rail, and accessories business, we believe is pretty unique. As such, you should think of that journey within PVC recycling as being a combination of a few things. One is increasing the percentage of recycle. I think the second is, of course, optimizing the way we process recycle, and I think the third element is using lower and lower cost recycle. When we put these bins out there, and we work with our channel partners and other construction and demolition companies, we are the alternative to landfill, and it's a value add to our channel partners, but it's also obviously a very cost-effective, you know, recycle stream because it's just really the transport of the product back. It is certainly part of our ongoing effort to use lower and lower value recycle within PVC. I'll make a quick comment on the on the cap composite side, and on some of the other initiatives we have. I, I think in general, you should think of us continuing to incrementally make progress on the PVC side. We currently have, you know, lower cost formulations running in our factory and shipping out to customers using, you know, a higher percentage of low density products. I think the staging of that is something that we'll continue to see through 2024. That's an ongoing process, an ongoing conversion, and it's really important that we not disrupt our customers as we do that conversion. As I mentioned, we've done some of that. There's more to go, and as we see windows to do that conversion on our lines, we'll continue to see that. As we said in the call, on our exteriors business, we've been able to, you know, incrementally increase our recycled content also, which has had a nice positive environmental impact in that business. Got it. Okay, well, thanks for all the color, Jesse. Appreciate it. Thank you. Next question comes from Steven Ramsey with Thompson Research Group. Your line is open. Hi, good evening. Thinking about the context of your consumer indicators are positive, contractor sentiment seems positive and more positive than distributor sentiment, and your sentiment aligns more with consumers and contractors. What do you think catalyzes the distribution part of the chain to adopt a more positive sentiment at this point? You mean I think if I interpret your question, what is causing our channel partners to be more conservative? Is that how I should interpret the question? Right. What's the catalyst at this point to get them over the line to your side? Yeah. No, I look, we are very aligned with our channel partners. It's really important to acknowledge that we've been able to recognize, you know, in aggregate, growth in the market. That doesn't mean every channel partner, you know, has equal growth, but as you expand channel partners, as you work with channel partners, you know, we've been able to realize growth together. I think what's key here is we continue to think it's appropriate to be conservative on how we manage inventory together so that we can continue to drive higher and higher turns together while servicing our customers. It also de-risks the future in case there's some additional, you know, volatility. I think you can live with the combination of short-term demand, short-term, optimism in certain pockets, and, and in this case, I would say short-term continuity of demand, while also, you know, being concerned and, acknowledging that it's appropriate to have the right amount of inventory on the ground, to not get ahead of ourselves. I think the team, our channel partners, you know, we feel really good that we're working together to make sure that we've got that appropriate balance. I think that'll set us up well, as we move into, you know, 2024 and beyond, as you know, we're constantly gonna be dealing with some appropriate, you know, defensive, conservative position as we work through that, really sets us up and, you know, to continue to, to just focus on downstream growth. Great. Thank you. Thank you. I would now like to turn the line over to Jesse Singh. Really appreciate all of your time this evening, and we look forward to chatting with many of you, and have a great evening. Thank you. This concludes today's conference call. You may now disconnect.