Everyone. Again, I am Matt Bouley, Barclays U.S. Home Building and Building Products Analyst. So pleased to be continuing our fireside sessions here with the team from AZEK: CEO Jesse Singh, CFO Ryan Lada, and IR Eric Robinson. So, as everyone knows, you've been doing this all day. We're going to start with our audience response questions. We'll run through those quickly, and then we'll jump right into the Q&A. So the first question, please. Do you currently own AZEK? Overweight? Market rate? Underweight? Or no? It says you like the no because that's a new audience. And this audience? Split between loves it or doesn't own. Okay. Next question, please. Your general bias towards AZEK right now: positive, negative, or neutral? And this audience is certainly leaning positive, but there's a couple negative. Okay. No neutral. Next question, please. In your opinion, through-cycle EPS growth for AZEK will be above, in line with, or below peers? Okay. Well, the audience sees above peer growth. Next question, please. In your opinion, what should AZEK do with excess cash: bolt-on M&A, larger M&A, share repurchase, dividends, debt paydown, or internal investment? All right. More so share repurchases, but a little bit of internal investment and bolt-on M&A. All right. Next question. What multiple '25 earnings should AZEK trade? The range from below 10 to above 21 times. This is the awkward part. Just got to wait. All right. That's a number we have not seen amongst most of the other companies today. Mostly above 21. All right. Next question, please. This is the final question. The most significant share price headwind facing AZEK today: core growth, margin performance, capital deployment, or execution strategy? Let me know which. We'll see. You have to pick something. Okay. Core growth. Something we'll have to work on there. Well, Jesse, Ryan, Eric, thank you all for being here. So we'll start with a really high-level question on the industry. AZEK is a company that's positioned itself as beautiful, low-maintenance building products, right? Decking, trim, rail. I want to talk about the penetration and sort of where we are in the life cycle across the categories that you play in. Where do you think we kind of ended 2024? And kind of where do you see that going across these products? Yeah. By the way, I feel like we need a version of this before every meeting, right? So one of the things about being a CEO is you have to, or any of us on stage, including your job, is you've got to be willing to live with people's opinions about yourself. So I love kind of the direct nature. I think it is actually different than last year. As I recall, last year was, I'd say, a little bit more balanced in terms of things like multiple, etc. And I would say in our industry right now, there's probably, with our customer base, just a little bit more optimism. If you look at the different categories to your question, on the decking being the core of the company, we're probably sitting at someplace in the 20s in terms of conversion. I do think there's a reasonable probability that we've been benefiting from some accelerated conversion in the segments and within which we play. So I think when we look at the market, one of the, because there's a normal question on what's different about what's happening in the different segments. I think where we play, think of pro, think of more premium, think of more contractor-oriented. I do think that conversion continues and has continued. So I think in the penetration play, we're still in early days. We do see a fair amount of opportunity there. I think we're really early, I think, on the rail side of our business, where I think we've got an opportunity to, with the new product ads that we have, to access more of the market and to drive more conversion of that market from wood. We're probably 40% not wood in the rail market. So there's a huge opportunity there. But you need to get at it with different products. Then on the exteriors side and trim in particular, we're probably at about 40% what I would consider wood or wood-like products, and then the other 60% is converted. What I find interesting is there's still an enormous amount of wood being used on top of synthetic siding, right? Whether that's LP or Hardie or other types of products, and in some cases, even vinyl siding. So that presents, I'd say, that movement probably hasn't been as strong. I think there's an opportunity to continue to drive that. So hopefully that hits most of the major product categories. Absolutely. Yeah. Plenty to jump off of there. So when you talk about accelerated conversion, is that an industry facet, or is that more specific to AZEK? And I'd love to kind of hear what are some of the drivers that do seem to be allowing AZEK to grow faster than others in the industry? The dialogue, since we've been public over the last few years, has - you would indicate that the industry, even the way in which our investor deck is, you say, "All right, there's repair and remodel. We stack conversion on top of that, and then we do our stuff to get more of that." I don't think it's playing out as much that way. I think conversion is not naturally happening. Look, I think awareness is happening in the industry. If you're out doing some kind of a job in our space, people are considering alternative materials. So I think that dialogue at a macro level is certainly higher, which I think should lead to more conversion. But I think in the moment that we're at now, to assume that a mediocre-looking deck board on a retailer's shelf is naturally going to sell itself against a wood deck board on a shelf at a retailer is a mistake. You need to engage consumers. You need to give them the right kind of displays. You can't just assume being there is enough to drive conversion. You actually need to do certain activities. And those activities are having very design-specific products. Those activities are making sure people have access to those products. Those activities relate to having great displays. Those activities relate to engaging contractors, architects, all of that, right? So I think the mistake that might be happening in the industry right now is that people are just assuming being there means you're going to get conversion. We need more than that, we believe. A lot of our investment is going against more than that. Got it, and so then that kind of leads into the numbers, but when you talk about five to seven points of growth above market, that's not a small number in 2025. Maybe if you could outline just what are some of the components that drive that level of outgrowth? Yeah. You Yeah. You want to touch upon that? Yeah. On the growth side, we called R&R flat. We still believe that's prudent until we see a difference in the back half of the year. From a growth perspective this year, I think we're weighted a little bit heavier towards new products than we would have been in prior years. And then the other portion of that is really kind of the pro-shelf expansion that we've seen. So from an early buy perspective, right, that's wrapping up this quarter. We're encouraged by the results, positive year-over-year, and believe those two are really contributing to the growth in 2025. Retail would be a little bit more neutral this year for us. Got it. Okay. No, makes sense. And so you mentioned some of the new products. That seems to be a big or is a component of that this year. You've got steel rail, vinyl rail, TrimLogic, a new siding product. Maybe it would help if you kind of size up some of the opportunities with these products and sort of what's driving you to lean in on these. Sure. You want to. Yeah. On the railing side, so vinyl existing market's about $275 million today. It's also the closest price point to wood, which is still 60% railing, still 60% wood. So that's a market we feel like we have the right to play, and it's through our distribution base. It's our current contractors. So the vinyl side's a nice add there. On the steel rail side, that's another $250 million opportunity for us. So ample room to expand there. When you think on the exterior side, right, this is really kind of a premium niche siding type application, right? That total industry may make up roughly a $1 billion of opportunity. Current products in the marketplace today make up roughly about $100 million that are very similar to what we're releasing. So we think that's really the space we're starting to play against. Then TrimLogic, I think, accessing a lower price point. I think we still believe there's roughly $1 billion of wood at that lower entry price point, and TrimLogic helps us access that as well. As you kind of roll out new products, it's not your first rodeo in rolling out innovation. How do you think about kind of the life cycle and the ramp of these products and just how long does it take before they sort of hit the run rate that you're targeting? Yeah. At a high level, one of the strengths we have is we can give the market access, broad access to new products almost overnight. Right? 200 salespeople, pretty strong relationships with a number of key pro dealers, and so wave one on most of these products is that you focus where you believe you have strength, and you focus where there's already contractors that are asking you for the product, so you make sure they get started. You make sure you get an appropriate amount into your channel, into your distributors, and then you make sure that you get an appropriate amount on display at certain dealers, right, so one of our key dealer partners as we speak is taking a couple of trucks of vinyl rail, right, so that's the dealer itself. They'll put it on the shelf. They'll inventory the product. We'll work with the contractors that they deal with to start to build momentum, so a year typically, and then a trial very loyal subset of that of our customer base and maybe ones that are willing to try things from us faster. We'll start engaging and using the product, and so year two is typically a year where you see a meaningful step up in that. We're a little bit further ahead on steel rail this year because we actually did a mid-year launch, so it got into the market last summer in certain pockets. So what we're seeing is where it was in the market, people are using it. They like it. So the demand cycle is already starting. I think on the vinyl rail, it'll probably take a bit longer. And then the same thing with TrimLogic and some of these other trim and the exterior products are a bit more contractor-heavy. So you have to win contractor by contractor. Once they use it, they'll start repeat using it. So it's a little bit more labor-intensive. So even though the markets there might be bigger, it's probably a slower process and ramp. So if you add all that up, the way to think of it is kind of mid-single-digit millions on potentially each of these products year one and maybe something double that year two. Perfect. Got it. So then that leads to the other part of the share gain, which is the pro side, as you mentioned. I mean, how do you think about, I'm going to say use the term win space at two-step distribution. I guess at the end of the day, you're still needing to actually win share. Yeah. We wouldn't say winning it. Two-step distribution, although really important and more important depending on the distributor, gives us the ability to service a market. We wouldn't define that as a win. Yeah. I think you've got my question. Yeah. I think you've got my question. Unless we know that distributor, so where you might be going is someone like a Capital or a Doman that we announced, but I could go through each of our distributors. Certain locations have good relationships, which helps us then get that shelf gain, and in most geographies, we're pretty well covered at the dealer, which is kind of that pro channel. In certain geographies where we're not, having a channel partner with deep relationships is very helpful. Yeah. Yeah. That's exactly what I was going to touch on. And so especially with those two new large customers, just how do you think about what type of downstream capabilities are gained and what's it going to take to really push further into the actual dealer side of the western part of the country? Yeah. So we've had nice momentum in the western part of the U.S., not 100%, but in some major geographies in the western part of the U.S. over the last few years. We happen to have a product portfolio that fits it really well. It's a high-end aesthetic. And in particular, our PVC decking products have a Class A flame spread and a unique designation, which is called ignition resistant. So it doesn't light. And that's incredibly helpful and has been helpful as we've moved into the western part of the U.S. And we've had, I think, really nice success there. What our expanded distribution brings in the western part of the U.S. is a pretty large downstream sales force, a sales force that's used to facilitating and generating demand with contractors and architects and builders and other players in the industry. So they're not just a wholesaler, also being terrific at taking care of dealers. So they view themselves as not just taking care of the dealer, but helping the dealer sell, which is typically what our own sales force would have done. So we view this most recent step with channel expansion as a multiplier to what we would have, it would have taken us hiring a large number of people to replicate what we're getting there. So it's incredibly helpful in terms of downstream demand, and it continues to be helpful as we access more and more dealers and geographies where we would have been underpenetrated. Got it. And then, no, that's very helpful. And then so the last piece, you mentioned the retail view this year is relatively neutral in terms of the additional contribution. But just the higher-level question is kind of where do you see the retail business going forward? Where do you want to be penetrated in that channel? Yeah. I mean, we've gone from, as we've talked about, from about 5% of our business to about 15% of our business at retail. We believe a third of the market is retail. We do special order business with both the major players. We expect to continue to do that. We were doing that prior to being in stock at either player. We'll continue to do that. I think on the stock business, we'll see a transition, or we have seen a transition, where we're going to be with one retailer and expanding with that retailer and not expanding or not moving ahead in stock with the other retailer. I think what it does is that still plays our objective of having retail growth be accretive to our overall growth. And so we still see that scenario. Probably won't be there this year. It might, but it may not be there this year. We would expect to be in a position to, if we execute appropriately, to have that opportunity in subsequent years. Long-winded way of saying we might go from 15% to maybe high teens to 20% in retail. And by the way, that's not just decking products. It includes our whole portfolio. I don't know that I see a scenario where we're 30%-40% in retail. I just don't know that that's our model. Yep. Got it. So then if I jump to the margin side and particularly recycled plastic sourcing, you just did another deal two days ago. Yeah. And then you had announced the prior one in Indiana around earnings. So yeah, just any kind of additional elaboration on what you're doing in terms of scaling up your recycled sourcing and kind of what this gives you, what it gives you from a margin perspective with these recent deals? Yeah. You want to? Yeah. Sure. Yeah. I think with the two recent acquisitions, it's multiple factors, right? So I think most people go to just inclusion rate as how you increase recycle. That's a benefit. But I think there's how you source it, and then you think about localization of it. So from both acquisitions, you gained additional capacity and sources of material. With the Indiana application or, yeah, acquisition, we gained an additional technology that you could actually separate mixed polymers or lower grade that typically would end up in a landfill. So we're now able to utilize that technology to process those. And then from the Pacific Northwest one, Boise's West Coast for us, right? So we're shipping recycle across the country today. That provides localization there. So I think all of that really kind of just fits both localization cost and more capacity. When you think about the recycle opportunity, a lot of our material is still sourced. So converting it in-house is a substantial cost savings, especially on the low-density side. So this helps us achieve that over the next couple of years of processing and more of it in-house as well. Got it. So we've tried to get different. I wish we could have an easy dial that says we're 10%, 20%, 30%. Unfortunately, the nature of it doesn't work that way. We view it more as what cost savings have we achieved? Think of all of this as in is basically taking foundational raw materials that make up our product and moving it to the lowest cost structure possible. And so that's all any of this is. And so we've made progress there. We view when we look at the raw material makeup of both our lines of our decking, we see incrementally, we'll see something to the effect of when we're identifying opportunity, there's probably another $40 million in our future over the next handful of years where we see opportunity to reduce that cost of that raw material. And the broad category on that is recycling, whether it's increasing recycling, reducing the cost of the recycle, processing it more efficiently, or in-housing it. So when you start looking at opportunities of that nature in your future, you start to look at what internal capability do we have? Are we well set up to do that? How do we modify our machines to get there internally, which is some capital all within the 5%-7%? And then you look at what else could we add that would help us get there? And these two acquisitions happen to fit that kind of a mindset, right? And it will provide short-term capacity in the next short-term being within the next 12 months that will allow us to localize certain things, which will be incredibly helpful in the short term. But it also provides us a component in that long-term roadmap of getting after that $40 million. Got it. Yeah. $40 million, I mean, that's still, what, 300 basis points, a few hundred? Yeah. If I combine that long-term question with a shorter-term question around the margins this year, because I think the guide is somewhere, maybe you correct me if I'm wrong, 60 basis points EBITDA margin year. I mean, you're guiding the volume growth. You're progressing on your recycled strategy. I guess you're making new investments is maybe one of the offsets. But just kind of what would be, I guess, preventing a bigger margin uplift this year given some of these strategies you've got going on? So you want to, yeah, I think on the margin perspective for this year, right? I think when we've talked about historically 75-100 basis points, that's more of a 10% to 12% growth. So growth being at kind of 5% to 7%, you think you dial that back a little. Second, on a lot of the new product launches this year, it's not just turning on an extrusion line. There are actually new facilities. So that adds to the underutilization. So the vinyl rail facility we acquired last year, repurpose that. That's producing that. That's underutilized slightly. And then on the exterior side, we've been, that capacity will be coming online this year as well. So there's a little bit more underutilization than you'd typically see on a new product launch year. So those Scranton Products had a little bit of headwind in our first and second quarter on price cost, which we're taking care of, and that should be recognized in the third quarter and beyond. And then I think we called out even in our second quarter, we're going to make some additional SG&A investments to support some of the new growth, whether that be training, showrooms, displays, things like that. So I think that's in the back half, we'll pick up on the utilization that was underutilized at 1Q, and we should see that margin uplift. I also think in terms of as best as we try to be linear on our cost savings, sometimes it gets a little lumpy, right? So if you just look at how our cost savings are rolling up, they're probably a bit more back half oriented, which would impact the later quarters of this year, but then start impacting next year. So some of this is just timing of staging of some of the cost reduction opportunities. We had a nice lift last year. It'd be great to get that kind of a lift every year, but it tends to be just a little lumpier. Yep. Got it. So I think about the guide for the full year, you're basically calling for mid-single digit sell-through growth going forward. If I look at Q1, I think deck rail and accessories was strong double-digit, and correct me if I'm wrong, and exteriors was up high single digit. So the question is sort of what drove that, I guess, significant outgrowth relative to the guide in Q1, and sort of what's the expectation around why would that basically decelerate going forward? There's a small part of that on the decking side, as I hear you articulate back what I said, that there's a small amount of that on the decking side that probably has to do with we had a little bit of Depot. We're not going to have that on the stock side starting in January. And then there's always quarter-to-quarter variation. So I would say on the exterior side, I don't know that the market is much better, but two things have happened. One is I think it's not getting worse. And I think we're doing a little bit better on the execution side on exteriors, and we're seeing some of the benefit of new products there. In a market that's not getting worse, we're starting to lap some of what we had the year before. So exteriors, I don't know that we're going to say our exteriors business is going to be high single-digit growth throughout, but that probably normalizes to some growth given it's a little bit more sensitive to the underlying market. And then on the deck rail and accessories, I highlighted one point. It might just be timing. We are not assuming a deceleration, but there are quarter-to-quarter variations. And so we're assuming roughly the market is about the same. And we believe what we're executing gives us capability to grow at least 5-7 percentage points over market. Sometimes our capability is higher. It kind of works that way. Maybe it drove a little bit better conversion. Maybe there were some things that went your way. We just don't want to assume that every quarter. Got it. So what if we kind of jump to the overall portfolio? How are you thinking about what, if any, adjacency versus the current portfolio and the kind of standing of the commercial business within that? Where do you see this evolving over the next couple of years? I think the commercial business is a legacy business, and it will be part of the portfolio as long as it makes sense to be part of the portfolio. And it's a great standalone business. It is separate from, especially with the sale of its sister company, Vycom, it is a separate business. It's a great business that has a current home with us and may have a home with somebody else in the future. I think that so if I go to the rest of the portfolio, I think we really like our core portfolio. The adjacencies we've identified, whether it be product adjacencies with rail or product adjacencies and exteriors with just launching a siding line, a premium siding line, a niche siding line, but still a siding line, those we believe are plenty adjacent. And so we'll continue to execute in the core. We've got capability, unique capability with recycled PVC. We'll continue to look for opportunities to develop product in and around our core with that, but broader adjacencies we'll always look at, but I think at this stage, we've got to have the right value proposition to consider anything, so I would assume the portfolio in the next few years is going to look very much like the portfolio now. If we do acquisitions, it might just bulk up some of the areas we already are in or give us a product line that would be a nice ad, but for the most part, it should look very similar to what the portfolio is now. Got it. Okay. And so that covers the M&A portion of the capital allocation question. But how are you kind of thinking about the balance between the other shareholder return versus organic investment? Well, we were going to put it all into a single big dividend, but you guys don't want it, so we're not going to do that. That's a joke. You want to answer that question? Yeah. I think the priorities are really consistent with what they have been, first and foremost, focused on organic growth, right? So our CapEx is 5%-7% of sales. There may be periods of that if it's purchasing land or something to that extent. And then continuing to look at M&A if there's the right assets. And then we generate more cash in the back half of the year, so we would expect to be more active on share repurchase in the back half. Perfect. That was a great way to close out then. Great. Jesse, Ryan, and Eric, thank you guys for being here. Yep. Nice to see you. Thanks. All right. Appreciate it. Thank you.