Building products maker 'AZEK' jumps in trading debut
The AZEK Company CEO Jesse Singh joins Yahoo Finance’s Akiko Fujita to discuss the company's first day of trading, as AZEK's stock soars.
AKIKO FUJITA: Sustainable building materials maker AZEK getting a big pop in its debut today. The shares there up about 20% right now. The maker of low-maintenance but sustainable building materials for outdoor living making its debut at the New York Stock Exchange. We are joined by Jesse Singh. He is the CEO of AZEK. And Jesse first of all, congratulations on your listing today.
I have to imagine, you've been looking at the markets this week knowing this day was coming and saw the big selloff yesterday thinking, well, is this the right way to tie my IPO. But you've got a pretty healthy pop going today.
JESSE SINGH: Well, well, look, we're really excited about, you know, the accomplishment and the transition to the next phase of the company. You know, we've been working on building out the company for years. And you know, this is a next natural step. As you pointed out, you know, we started this journey, you know, to take the next step aggressively in the fall into February.
And so in terms of volatility, you know, there's been a little bit of that as we've looked at the market. But in general, you know, we see a terrific long-term potential for the company. And that's where a lot of our focus is on.
AKIKO FUJITA: Let's talk about the sector itself. You know, on the one hand, we've seen a lot of these home improvement projects or, you know, a lot of people who have been at home sort of reworking their homes, that that's kind of been good for the sector. But you've also mentioned in your prospectus about the challenges stemming from the pandemic. Walk me through how you see that playing out right now because there's some questions about whether we are in fact, in the recovery process or there's still more downside to come.
JESSE SINGH: Well, we came into this pandemic with pretty significant momentum both as an industry and as a company. So our trailing 12 is 15.8% growth. We're participating in a terrific market, outdoor living combined with an opportunity for material conversion. So we came into this pandemic with pretty significant strength. And as you might imagine, you know, once people started staying home, in aggregate you saw a contraction across-- driven by macro elements, you know, across multiple industries.
But-- but what we've seen more recently is sentiment continue to improve. You know, people are staying at home. They're concerned about, you know, how to operate safely. And they're spending more and more time outside. And it really gives them an opportunity to increase their square footage, you know, while staying at home and be able to really enjoy that environment.
So it was an ongoing trend coming into this and. You know, we-- after a bit of a dip, we continue to see really nice potential opportunity for acceleration into the future.
AKIKO FUJITA: So you're riding some momentum here. But you've also got a pretty big debt load. We're looking at $1.2 billion right now. What's the step here to try and improve that picture?
JESSE SINGH: Well, the IPO itself is a key part of realigning our capital structure. the primary-- the primary use the proceeds for funds coming from the IPO. We're selling only primary shares. Is to pay down the debt-- so if you just do the math of what we raised and our debt load, you start to see that, you know, we've really set our capital structure up well for the future and we fully expect to continue to make the types of investments that we were making. And we'll be well set up to do that, investments like the expansion of recycle and more aggressive in the area of digital.
AKIKO FUJITA: Sustainability is something we've heard from-- you know, increasingly sort of come into the conscious as we talk about individual companies. I mean, you're right in the thick of things. But I wonder if-- you know, the thinking is always that if you want to make something a little more sustainable, you're going to-- that comes at a higher cost. What do you see in terms of the trajectory on that front in making it much more affordable for those who are looking to incorporate that into their building process but thinking, well, maybe those materials just aren't fitting into my budget right now?
JESSE SINGH: Well, you know, the way in which we deploy recycle, it's actually a benefit. So if you consider the difference between using virgin plastics which have pretty high economic value, you know, something like a plastic used to make a milk bottle, and you compare that to a plastic bag, there are significant differences in economic value there.
So for us, the more we expand our recycling capability, the more we focus on sustainability, it really sets us up well to have a real positive impact on our cost structure moving forward. So in terms of advice to other folks, you know, there-- you have to get creative. But we continue to see more and more opportunities to do both, increase the amount of recycle in our products but also use it in a way that enhances the product and also, you know, gives us an opportunity to-- to drive cost reductions.
AKIKO FUJITA: And Jesse, what do you see as your biggest growth driver moving forward?
JESSE SINGH: Yeah, well, as I mentioned, the-- the market has some really nice tailwinds. If you consider our decking product, which is our main product line, 80% of the market is still wood. And ourselves and our main competitors share what's remaining there. And that is-- wood is not a great value proposition for the outside of homes. We don't make our cars out of wood. And they last 10 years. And yet we use a lot of wood on the outside of houses, especially in areas like decking.
So we see that transition as a key driver. And part of how we're addressing it is we're really focused on new product development to give people a choice, so that if they do decide to go outside and build something, they can do it in a way that brings the same style and design that's inside out into their outdoor spaces.
AKIKO FUJITA: OK, Jesse Singh, great to talk to you on this big day for the company. The CEO of AZEK.