The AZEK Company Inc. (AZEK) Q1 2022 Earnings Call Transcript

The AZEK Company Inc. (AZEK -0.77%)
Q1 2022 Earnings Call
Feb 03, 2022, 10:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Welcome to The AZEK Company's first quarter 2022 earnings call. [Operator instructions] Please be advised that today's conference is being recorded. I'd now like to hand the conference over to Amanda Cimaglia, vice president, ESG. Please go ahead, Amanda.

Amanda Cimaglia -- Vice President, Environmental, Social and Governance

Thank you. Good morning, everyone. We issued our earnings press release this morning to the Investor Relations portion of our website at investors.azekco.com, as well as via 8-K, on the SEC's website. I'm joined today by Jesse Singh, our chief executive officer; and Peter Clifford, our chief financial officer.

Before we begin, I would like to remind everyone that during this call, AZEK management may make certain statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These include remarks about future expectations, anticipation, beliefs, estimates, forecasts, plans, and prospects. Such statements are subject to a variety of risks, uncertainties, and other factors that could cause actual results to differ materially from those indicated or implied by such statements. Such risks and other factors are set forth in the company's earnings release posted on the website and will be provided in our Form 10-Q for our first fiscal quarter 2022 as filed with the Securities and Exchange Commission.

The company does not undertake any duty to update such forward-looking statements. Additionally, during today's call, the company will discuss non-GAAP measures, which we believe can be useful in evaluating our performance. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP. Reconciliations of adjusted EBITDA to net income calculated under GAAP and adjusted gross profit to gross profit calculated under GAAP, as well as reconciliations for other non-GAAP measures discussed on this call, can be found in our earnings release, which is posted on our website and will be included in our Form 10-Q for our first quarter of 2022.

At this point, I would like to turn the call over to Jesse Singh.

Jesse Singh -- Chief Executive Officer

Good morning, and thanks for joining us on today's call. We're off to a solid start to fiscal 2022, delivering strong first quarter results and focused execution against our strategic priorities. We continue to see consistent demand across our portfolio and strong results from our initiatives and new products. I'd like to take a moment to thank both our employees and supplier partners for their focus and dedication, operating through a challenging and complex environment.

Their commitment has allowed us to continue to meet end-market demand and uphold high service levels, providing an industry-leading customer experience in a difficult environment. AZEK's momentum is driven by a clear and focused strategy to revolutionize outdoor living and create a more sustainable future. We have been operating with a specific set of initiatives that include driving above-market growth and accelerating material conversion by investing in new product innovation and expanding our downstream-focused sales and marketing teams; expanding our margins through the use of recycled materials in our manufacturing processes and through our continuous improvement programs; positively impacting the world through our commitments to ESG stewardship; investing in our core strengths, which include brand, material science, integrated manufacturing, and customer connection. We continue to see a strong underlying market, driven by positive demographic trends, increasing focus on outdoor living, and the ongoing conversion away from wood toward our types of low maintenance, high-performance alternative materials.

In decking, as an example, we see our market opportunity is almost five times the current market, including wood. We see a similar opportunity in other segments, such as exteriors, where we have seen strong momentum in wood replacement. Our core markets are nearly $9 billion currently, and we see an adjacent opportunity within outdoor living of an additional $11 billion. We also see an opportunity to positively impact the planet as well as our margins through the expanded use of recycled materials, underpinned by our ESG ambition to divert and utilize 1 billion pounds of recycled materials annually by the end of 2026.

Against this market opportunity, we have a focused strategy and have invested in capacity, innovation in new products, people, and acquisitions. We believe that through these actions, we have not simply delivered against our short-term objectives, but we have meaningfully strengthened our position in the marketplace, and the capability of the company to continue to meet and exceed our long-term goals. During the fiscal quarter, we saw continued demand across our portfolio, and we benefited from our increased capacity to position the company for future growth. Our capacity, service levels, and new products have put us in a position to pick up additional share and accelerate wood conversion in key markets.

We recently executed a successful Early Buy season this year with our pro dealers. During this process, we expanded our stocking position at a number of key dealers, and we converted a number of new dealers to our products. As a reminder, Early Buy is the process of engaging pro dealers in the winter months where they decide which products and brands to stock for the following selling season and where they place preseason or Early Buy orders to stage inventory prior to the building season. Our success in this early stage of the season is a result of our continued focus on our customers, increasingly reliable service levels in our broad and differentiated portfolio.

As we exit the capacities-constrained environment in the recent past, we remain on the offensive and are pursuing new business opportunities that expand our channel, geographic reach, and customer relationships. We also introduced a number of new products in the first quarter, including our TimberTech AZEK Landmark collection decking in French white oak and TimberTech EDGE Prime+ decking in dark cocoa, along with the new edge hidden cliff deck fastener. These products once again, highlight our focus on leveraging our unique technologies to create beautiful natural-looking products. Our new capacity has allowed us to scale previously launched products more broadly, and we are expanding the availability of our Edge and Landmark decking collections.

We will be showcasing a few of these at the upcoming International Builder's Show in Orlando, Florida, featured alongside StruXure Pergola X and Cabana X solutions, the newest addition to the AZEK portfolio. Our exteriors business continues to deliver with good momentum and demand across its end markets. The breadth of our exteriors portfolio, including our recently launched innovative attainable trim and shingle siding, both available with our PaintPro technology is driving material conversion and share gains in historically underpenetrated markets. Sales of these new product innovations have more than doubled in the last quarter with customers appreciating the low maintenance, high-performance characteristics of the products over wood competitors.

Our PaintPro technology was launched in 2020 and highlights the strength of our new product development model in driving growth in our core and in adjacencies. Additionally, as customers become more aware and better educated of the performance characteristics and benefits of our AZEK and Versatex trim and siding, it enables increased penetration of our broader portfolio. As part of our focus on expanding our position in outdoor living and positioning ourselves in fast-growing adjacencies, in December, we acquired StruXure Outdoor. StruXure is a designer and manufacturer of high-quality and innovative aluminum pergolas and cabanas.

StruXure is the premium player in an identified market adjacency estimated to be nearly $1 billion and one that is experiencing similar long-term secular growth and material conversion trends away from wood. StruXure's products are highly complementary to our TimberTech decking. And we know that each company's products are already being installed together on projects by contractors across the country. StruXure's products also enhance outdoor hardscape as they have a strong presence in Southern "smile states".

We believe this will further open new adjacent opportunities for our combined company. StruXure shares are focus on ESG with each of StruXure's existing product lines being made from up to 50% recycled aluminum. We plan to leverage AZEK's expertise in sourcing, operations, research and development, and material science to improve StruXure's already impressed performance. We also see significant revenue synergies from leveraging our combined portfolio across our broader customer base.

We are excited to welcome StruXure to the AZEK family and look forward to working with the team in the months and years ahead. In addition to StruXure, in November, we closed an acquisition of a regional PVC recycler offering full-service recycled material sourcing, processing, logistics, and scrap management programs. The acquisition is a vertical integration that complements the return polymers team and adds new sources of PVC scrap material, a key input in our polymer-based decking boards and trim, and one that will allow for continued progress toward our goal of utilizing 1 billion pounds of recycle material annually by the end of 2026. Going forward, we will continue to invest organically and through M&A to achieve both our business and ESG objectives.

We are committed to investing ahead of the curve to put ourselves in a position to drive growth and increased conversion in the market. As part of that focus, we continue to make progress against our new capacity adds in our core facilities and our Boise facility build-out. We successfully commissioned additional decking capacity in our core facility in Ohio, and these lines are currently in production. As a reminder, this, combined with previous phases, brings our total completed capacity adds to over 55% against our 2019 baseline.

In our new Boise facility, our supply chain and operations teams have also done well to operate through a difficult environment since we have broken ground, and we are on track on the build-out of the facility with our modular manufacturing processes. Boise is a strategic investment for the company and will provide much-needed capacity and flexibility, and we are very excited by the additional opportunities that the Boise expansion will provide. In total, our announced decking capacity additions will bring our total capacity increase to 100% versus a 2019 baseline. We also continue to be focused on expanding the depth and breadth of our team.

We recently announced the appointment of Dan Boss as Senior Vice President of Research and Development. Dan is joining us from GAF Industries and has a long career in R&D to positions of increasing responsibility and will be an asset to our organization as he assumes leadership of our R&D function. He will be focused on introducing the next phase of AZEK and TimberTech products to our already strong portfolio. Another key appointment to the AZEK management team is Sam Toole, as our Chief Marketing Officer.

Sam joins AZEK from California Closets, where she served as CMO and drove significant growth by developing a multitouch point marketing strategy, increasing the use of digital tools and data and overseeing the production of award-winning content. We are excited by the timing of Sam's arrival as we continue to drive our next phase of growth in wood conversion. She will draw on her collective and varied experiences to improve the customer journey and expand our consumer-driven growth engine. We are excited about the addition of these two strong world-class leaders whose skills and experience will complement the existing management team and enable our next phase of growth.

Turning to first quarter results. AZEK net sales and adjusted EBITDA increased 22% and 21%, respectively, in the first quarter of 2022 over the same period in the prior year. Net sales in our residential segment increased 19%, driven by a strong performance across our deck, rail, and accessories, and exteriors business. As a reminder, we exited 2021 with an improved channel inventory position, and our growth in the quarter reflected more normalized seasonal demand and inventory.

Sell-through in this traditionally slow part of the season grew modestly year over year and notably accelerated into the month of December. A particular source of strength was our decking business, which grew at higher rates than the company average. As previously mentioned, our exteriors business also saw strong performance and continues to benefit from a concerted focus on new product development. Our rail business continues to operate through material and supply chain issues, which constrained growth to low single digits as previously anticipated.

Net sales in our commercial segment saw a strong performance, increasing by approximately 45% year over year due, in part, to pricing actions and robust demand in comparison to an easier comparable period last year. We saw particular strength in certain markets, including outdoor living, marine, industrial, and semiconductor end markets. As we transition through the outlook, I want to provide some context on our results and typical seasonality. AZEK's fiscal first and second quarters are generally considered to be stocking quarters in which distributors and dealers fill the channel with inventory in preparation for the start of the spring selling season.

We've had strong operational execution over the past few quarters and have successfully been able to support our dealers and distributors with increasing service levels. Our distributors and dealers now have the inventory on hand to aggressively drive growth in the market. This has put us in a terrific position to service our end customers and to incrementally pick up share. Heading into the balance of the fiscal year, underlying demand or sell-through will determine net sales.

As mentioned earlier, we are excited by our progress through Early Buy and expect to see the benefits over the next few quarters. This combined with our ongoing investments and pricing set us up for another strong year. From a market perspective, we see continued favorable trends in our internal and external forward-looking demand indicators. AZEK total website traffic increased double digits year over year, and overall leads increased over 50% over the same period in the prior year.

Externally, our contractor and dealer engagement surveys reflects continued optimism with persistent project backlog similar to prior quarters. Our confidence is underpinned by external demand indicators around repair and remodel activity, continued interest in outdoor living and wood conversion accelerating over the past few years. In addition to these positive internal and external data points, we believe our focused strategy and consistent execution are continuing to drive success as witnessed by our strong performance in Early Buy. Now I'll turn the call over to Pete to talk through the financials and guidance. 

Pete Clifford -- Chief Financial Officer

Thanks, Jesse, and good morning, everyone. Before we get into the first quarter results, I wanted to provide some color on the operating environment that we've been seeing in the last couple of months. As expected, we continue to see strong price realization from our pricing actions that took effect at the beginning of the first quarter. On the material side, commodity prices have and, as a general matter, stabilized over the last three to four months.

In our major commodities, polyethylene seems to have peaked late in the summer and early fall and has started to recede in the first quarter, while PVC prices appear to be flattening out this winter. Certain specialty materials remain challenged from both the pricing as well as a supply perspective. We are optimistic that what we can see in the markets today supports the modest deflation assumptions that we adopted in our guidance. Our recycling strategy continues to be our defense against merge in supply challenges and serves as a natural buffer to inflation.

Our capabilities to source, convert, validate, formulate and deploy recycled materials in our manufacturing processes for PVC products continues to be a differentiator for us. Now let's discuss our first quarter '22 results in more detail. Overall, revenue was in line with expectations for the quarter, while margins were modestly better than expected, given some inventory capitalization timing. We continue to see price realization offset material inflation dollars and start to get very close to offsetting rate as we expected in 1Q '22.

For the first quarter of '22, we delivered net sales growth of 22% year over year to $259.7 million with strong and broad-based growth in both our residential and commercial segments. Gross profit for the first quarter of '22 increased $15.6 million or approximately 21% to $88.6 million. Gross profit margin rates decreased to 34.1% in 1Q '22 compared to 34.4% in the prior year. Adjusted gross profit for the first quarter of '22 increased by $18.3 million or approximately 21% to $107.1 million.

Adjusted gross profit margin percent decreased to 41.2% in 1Q '22 compared to 41.8% in the prior year. Selling and general, administrative expenses increased by $9.7 million to $63.2 million or 24.3% of sales. Adjusted EBITDA for the quarter increased by $10.1 million or up 20.8% to $58.5 million. Adjusted EBITDA margin rates for the quarter declined 30 basis points to 22.5% from 22.8% in the prior year.

Net income increased by $6.6 million to $16.7 million for the quarter compared to $10.1 million for the same period last year. Earnings per share increased by $0.04 per share to $0.11 for the quarter compared to $0.07 per share for the same period last year. Adjusted net income was $28.8 million or $0.18 per share for the first quarter compared to adjusted net income of $23.1 million or $0.15 per share a year ago. Now turning to our segment results.

Residential segment sales for the quarter increased by $35.5 million or approximately 19% to $221.1 million. The increase was primarily attributable to broad-based growth in deck, rail, and accessories and exteriors growing at comparable rates Residential segment adjusted EBITDA for the quarter increased by $10.7 million or approximately 18% to $69.4 million. Commercial segment net sales for the quarter increased $11.9 million or 44.8% to $38.6 million. The increase was primarily attributable to higher net sales in both the Vycom and Scranton Products businesses.

While each grew well in excess of the company average, we saw an acceleration in the Vycom business with continued strength in outdoor living, marine, and semiconductor end markets, continuing a trend from the prior quarter. Commercial segment adjusted EBITDA for the quarter increased by $1.4 million or approximately 43% to $4.7 million. From a balance sheet and capital perspective, we ended the quarter with cash and cash equivalents of $66.1 million and approximately $146.7 million available for future borrowings under our credit facility. Working capital, current assets minus current liabilities, was $274.5 million; gross debt as of 12/31/2021 was $467.7 million; and our credit facility remains undrawn.

Net debt was $401.6 million, and our net leverage ratio stood at 1.4 at the end of the first quarter. Capital expenditures for the quarter reached $65 million, largely driven by timing of cash outflows related to capacity expansion programs. Net cash consumed and operating activities was $30.6 million during the quarter versus net cash generated by operating activities of $20.3 million during the prior year. I want to provide some context to how we are viewing the second quarter and early view to the second half.

As Jesse noted, we believe the combination of healthier channel inventory levels, improved lead times and strong Early Buy participation positions us well for the upcoming season. We anticipate that supply chain and logistics environment will remain unchanged through the first half of the year and our teams are prepared to deal with that complexity as they have over the last several quarters. Omicron did bring an added level of complexity to our business and supply chain in December and January, and we are appropriately managing through it. Commodity prices, as we had mentioned, have stabilized.

Availability of major commodities is improving gradually, and we expect that to continue. The current environment supports our assumption of modest raw material deflation in the back half of this year. As detailed last quarter, we framed up the full year in two parts. The first half was slight margin dilution followed by a stronger second half with margin accretion, excluding the impact of StruXure.

We still see the first-half '22 coming in line with our expectations. And more importantly, we see organic business margin accretion in the half of the fiscal year. As a reminder, during first quarter '22, we had moderate start-up costs that drove 70 basis points of headwind into our reported margins. Finally, with our latest acquisition of StruXure, we are excited to have acquired such a strong growing business and an identified adjacency.

The purchase price was $90 million. And with revenue and cost synergies, we believe it will equate to a sub-10x multiple. The management team at StruXure is terrific, and they're incentivized to deliver for the combined company in the future years. To that end, we believe this business will grow at or above our long-term residential growth rates, and we believe it has the ability to expand margins to approach our corporate average over time while providing a strong return on invested capital to our shareholders.

Now turning to our guidance. For full year fiscal '22, we now expect consolidated net sales to increase approximately 17% to 21% year over year, including $40 million of StruXure-related net sales contribution or 3 points of growth to fiscal '22. Inclusive of the start-up costs associated with our capital investment programs, we expect to deliver approximately 18% to 22% adjusted EBITDA growth year over year, including nearly $5 million of StruXure-related EBITDA contribution. We see full year EBITDA margin dilution impact from the StruXure acquisition of approximately 30 to 40 basis points.

For the second quarter of 2022, we expect consolidated net sales growth of approximately 24% to 27% year over year, including approximately $8 million of StruXure-related net sales contribution. From an adjusted EBITDA perspective, which includes start-up costs, we expect growth of approximately 17% to 20% year over year, including approximately 50 basis points of StruXure-related EBITDA margin dilution impact. The quarter also includes approximately $2 million of start-up expenses, which equates to approximately 50 basis points of our EBITDA margin. As a reminder, given seasonality and other factors, we expect the acquisitions will break even from a profitability perspective in the quarter.

Looking forward for the entire business and similar to our commentary at last quarter's call, we expect to see organic business leverage on our bottom line starting in the third quarter of 2022 and accelerating throughout the second half of 2022. To assist in modeling, we are reiterating our expectation of approximately $180 million to $200 million in capital expenditures for fiscal 2022. We continue to expect $21 million to $22 million of interest expense for the full year. Our tax rate for 2022 is estimated to be approximately 25%.

Our full year weighted average diluted share count is expected to be approximately 157 million to 158 million shares. I'll now turn it back to Jesse for some closing remarks. 

Jesse Singh -- Chief Executive Officer

Thanks, Pete. AZEK has consistently outperformed over the last several years through strong focus, agility, and execution combined with relentless focus on our customers. We are building upon that momentum and remain excited about the long-term opportunities in front of us. We have invested ahead of demand and our position to increase market share through an innovative and differe ntiated product portfolio, best-in-class sales execution, and a culture of continuous improvement Combined with strong repair and remodel activity, sustained interest in outdoor living, and an acceleration in wood conversion trends, we believe we will deliver above-market sales growth and margin improvement.

In other words, we believe we are well-positioned to win for the long term. Thanks again to all of our employees, our partners, our suppliers, our customers, and our contractors. We look forward to continuing to work together to build a brighter future. With that, operator, please open the lines for questions.

Questions & Answers:

Operator

[Operator instructions] Your first question comes from the line of Philip Ng with Jefferies. Your line is now open. 

Philip Ng -- Jefferies -- Analyst

Hey, guys. Good morning. I was curious, have you announced any incremental price increases since October, November time frame, essentially last quarter? And stripping out some of the noise from the acquisition, is the price cost, margin recovery path tracking pretty much in line with what you thought, appreciating it's a pretty complex environment to operate in? 

Pete Clifford -- Chief Financial Officer

Thanks, Phil. This is Peter. Yeah, I think our ratio on price versus inflation here, as we look at the remainder of the year, is entirely intact with how we guided. We still expect to see price realization covering all four quarters of inflation dollars, and we expect here very late 2Q to start covering the rate and maintain that throughout the back half of the year.

As far as any additional price increases, we did take some very small, targeted increases as part of our year-end kind of price maintenance process. And really, it was a very select products. Really, those products impacted by the 4Q '21 PVC increases that were a result of the Hurricane Ida situation. So again, in total, those price increases were very nominal compared to our 2021 price increases.

Philip Ng -- Jefferies -- Analyst

Got it. That's really helpful. And what is this recent acquisition that you made on the recycling side due on the capabilities and in terms of where you're going to shake out from a recycling goal standpoint? I think last quarter, you were kind of at 54%, 56% range, if I remember correctly. And any color how to think about the EBITDA contribution from this deal?

Pete Clifford -- Chief Financial Officer

Yeah. So I think first and foremost, what this acquisition provides us is a secure sourcing of the product. So this is a great avenue for us, first and foremost, again, to help get, bring in some high-quality recycled PVC. Second thing is it adds capacity, adjust material flow that we think over time, this acquisition increases our PVC recycling capacity and access the product by about approximately 20%.

As far as an impact on '22, the way we're thinking about it is we would expect a modest cost savings in 4Q '22, but the bulk of this is really going to be 2023 impact, and that's really just due to the formulation and validation work that we will be starting here this quarter and carrying over into the third quarter.

Jesse Singh -- Chief Executive Officer

The only thing I would add to that is the addition of our new capacity has allowed us to return our focus on expanding our use of recycled materials. And so we are now able to both service our customers and expand our formulation work. So we're not going to guide specifically, but we're in a really good position now as we look out over the next few quarters to continue to expand our use of recycled materials. And obviously, this is helpful.

Philip Ng -- Jefferies -- Analyst

All right. Got it. Thanks a lot, Jesse.

Operator

Your next question comes from the line of Matthew Bouley with Barclays. Your line is now open. 

Matthew Bouley -- Barclays -- Analyst

Good morning, everyone. Thank you for taking the questions and for all the detail in the prepared remarks, as always. So as that capacity has come online, it sounds like you made real tangible progress in improving service levels. And if I'm hearing you correctly, your ability to target new customers is really crystallizing.

So can you outline a little bit what that new customer opportunity is? Are there any pricing implications from going after new customers? And I guess, specifically, if there's anything embedded in the revenue guide related to that? Thank you.

Jesse Singh -- Chief Executive Officer

Well, clearly, the addition of capacity and improved service gives us an opportunity to make sure that we service our existing customer base. And that's really provided a benefit in that we are now fully able to service current demand, able to meet the demand that we've built out over a number of years. But as you pointed out, we're able to now incrementally take on additional business. So I would break it into really three different chunks.

The first one is we've had opportunities to add to our dealer network, both in depth at our existing dealers, but also add new dealers that really see the benefit of our differentiated product. We have had to constrain that over the last few years. We were more able to do that during this particular Early Buy season. And as such, we've gained additional position.

I think the second component is when you're constrained on capacity, as we mentioned on the last call, we haven't fully been able to launch our new products. And specifically, we called out in the prepared remarks, our edge product line, Prime+, and Prime in addition to our landmark product line in our more premium segment. Both those products have been constrained even though they have been launched. We now have an ability to unconstrain that, which will lead to natural growth.

And really, the third bucket is really around, let's call it, newer channels and expanding geographically. And I'm not going to get into specifics there, but we do have additional opportunity over the long-term that we can now aggressively go after. So two buckets where I can provide some clarity and then I'll leave you a little bit of a fuzzy third bucket. 

Matthew Bouley -- Barclays -- Analyst

OK. Well, that's great detail there, Jesse. Thank you for that. So I want to follow up on the acquisition of the PVC recycler maybe at a higher level.

Obviously, you did return polymers a couple of years ago. I just think it's important to kind of lay this all out, helping investors kind of understand what you're doing on the PVC side. So can you kind of frame for us just the state of the PVC recycling market as it stands? And then just generally, how your own efforts to do this internally will sort of expand that opportunity over time? Thank you.

Jesse Singh -- Chief Executive Officer

Yeah. Just taking the recycled market at a high level. So if you look at -- I mean, we really do with two streams of recycle, as you mentioned. One is on the polyethylene side, and that is a relatively well-developed market, whether it be high-density polyethylene or low-density polyethylene or the variance in between.

So there is an established market. As we look at the PVC market, it is just a less established market. There are less players able to use recycled PVC. And as such, there is an opportunity for us to continue to build out our own capability and build out our use of recycled PVC and it's just a less developed market.

And in that environment, it's really important that we continue to build our own infrastructure to be able to access all of that material that's being landfilled. And so it is really important for us that we continue to build our own internal capability to source, to process, and to utilize increasing amounts of recycled PVC and this is just another step in that direction in addition to previously announced capital expansions that we had ongoing at our existing facilities and within return polymers.

Matthew Bouley -- Barclays -- Analyst

Wonderful. Well, thank you for the color, and good luck. 

Jesse Singh -- Chief Executive Officer

Appreciate it. Thank you.

Operator

Your next question comes from the line of Tim Wojs with Baird. Your line is now open. 

Tim Wojs -- Robert W. Baird and Company -- Analyst

Hey, good -- good morning, everybody. Maybe just back on the Early Buy programs, Jesse. I guess what drives the dealer to stock inventory versus the competitors? Is it availability at this point or is there kind of payment term incentives? And I guess, just wondering what the stocking conversions, it does seem like you'll be able to kind of gain sellout share this year, if that's the idea. So am I kind of correct in assuming that?

Jesse Singh -- Chief Executive Officer

Yeah. Any time -- so let me answer that last question first. Obviously, being able to have access to more position in the market and more availability and more access to shelf space, you would hope that that would convert to ongoing growth in the market. A key execution point is not only getting on the shelf but doing what we do and what we're most proud of, which is working with our contractors, working with consumers to make sure they see the value of the product so that we can pull it off the shelf.

But clearly, it is a, in our mind, a positive step in the process of continuing to drive share against wood and other types of materials. Relative to the decision process, I think every one of our partners has a different set of criteria. Typically, these are reasonably sophisticated and well-sophisticated companies. They want to make sure they partner with companies that have the ability to provide good service, the ability to have a product that's going to sell, and also the ability to continue to work with them to grow their business.

And I would say, in a lot of cases, those are the major drivers, the combination of service, the right product, and the ability to drive their growth in the marketplace for the long term. And that's really -- with our more realistic looking decking product and our better wood conversion, exteriors products, we are able to provide a better long-term value. Incrementally on the incentives, we operate within a reasonable set of incentives to make sure that we're supporting long-term growth. But in general, we're not a price-driven or incentive-driven kind of a business.

Our dealers are sophisticated enough to know that they're building something for the long term.

Tim Wojs -- Robert W. Baird and Company -- Analyst

OK, OK. Good. That's helpful. And then I guess just on the year around SG&A as a percentage of revenue, how would you kind of balance that relative to maybe revenue growth and kind of maybe some increased brand spending as you kind of increase that as you layer in capacity?

Pete Clifford -- Chief Financial Officer

Look, I think in the back half of the year, we will continue as we have through the first half to make strategic investments in sales and marketing. We are a growth company and so that has stepped up a bit in the first quarter, year over year, especially, with a more normalized kind of TimberTech Championship event. But again, as we see creating our own demand in the back half of the year, marketing is going to be a focal point here throughout the year.

Tim Wojs -- Robert W. Baird and Company -- Analyst

OK. Could you get leverage here --

Jesse Singh -- Chief Executive Officer

I'll just add, Tim. I'm sorry, I'll just add, Tim. I think it's important for us to continue to support our growth. And part of this is being appropriate on leverage.

But a key part of it is also, if we see opportunity, we're going to continue to invest against that opportunity as we're building this for the long-term. I'm sorry, I cut you off there, Tim, on your second question.

Tim Wojs -- Robert W. Baird and Company -- Analyst

Yeah. No, I was just wondering, would you be able to get SG&A leverage this year? Or do you think it might grow just a little faster than sales?

Pete Clifford -- Chief Financial Officer

Yeah. I mean, historically, we've kind of articulated the ambition that in most years, we'd like to see ourselves get modest SG&A leverage. It's not going to be in every quarter, but it's a year, that's kind of our ambition.

Tim Wojs -- Robert W. Baird and Company -- Analyst

OK, OK. Great. Well, thanks for everything, guys. Appreciate it. 

Pete Clifford -- Chief Financial Officer

Appreciate it. Thanks, Tim.

Operator

Your next question comes from the line of Michael Rehaut with J.P. Morgan. Your line is now open.

Maggie Wellborn -- J.P. Morgan -- Analyst

Hi. This is Maggie on for Mike. First, just a couple of questions related to the capacity expansion. I believe you said in 1Q, start-up costs were a 70 bps headwind and there it's expected at 50 bps in 2Q.

So as you go through this year, what is your full year guidance contemplating in terms of start-up costs and --

Pete Clifford -- Chief Financial Officer

Yeah, so let me take -- as we kind of articulated on the full year guidance call, we're looking at $8 million to $10 million. I think that's still the right range for the full year, which sort of implies that dilution range of kind of, call it, 50 to 70 basis points.

Maggie Wellborn -- J.P. Morgan -- Analyst

Got it. And second, another quick one. As the capacity comes online, you mentioned those three buckets of kind of sales growth opportunities and the third -- that you didn't want to get into with newer channels and expanding geographically. Do you have any sort of a time frame on when you might start exploring those opportunities more?

Jesse Singh -- Chief Executive Officer

Yeah. I think the key for us is, if you look at our portfolio of growth actions, right, downstream sales and marketing continue to expand our channel, new products, and acquisitions. That portfolio of actions on growth is just something we are continually working on. And I just want to highlight a lot of what we do may seem transactional, but even in the situation where we had some positive Early Buy wins, we've been working with those accounts for a couple of years and in some cases, multiple years.

So I think the way to think of our growth scenarios is we do things continually, and we're doing things over the long haul in those buckets I talked about. So it's an ongoing process. And as we have, this additional capacity, we can execute against it and that's something I referred to on the last call.

Maggie Wellborn -- J.P. Morgan -- Analyst

Got it. Thank you.

Operator

Your next question comes from the line of Ryan Merkel with William Blair. Your line is now open.

Ryan Merkel -- William Blair and Company -- Analyst

Thanks, and good morning. Jesse, first off, I was hoping you could address two concerns that investors have, potential for pull forward demand, just given everyone rush to do outdoor living. And then also higher prices, if there's going to be any impact on demand from that. Any evidence? What's your view?

Jesse Singh -- Chief Executive Officer

Yeah. As we've looked at our leading indicators and our activity in the market, there's been really nice, consistent activity and growth. And as we talked about during the calls over the last 18 months, we do believe that as people continue to use our types of materials, so take decking as an example. As they focus on outdoor living, they continue to expand the use of our types of materials.

What you see is that material on the ground leads to other people trying to -- being aware of that material and using that material. And it gets back to that neighborhood effect, right? Someone in your neighborhood has installed our product. They've got a beautiful TimberTech deck. The perception historically may have been composites been looked that good.

Neighbors come over, and they start then moving in that direction. So clearly, the activity that we've seen during the pandemic has led to a greater interest. And we see that as an opportunity as basic additional locations that can drive additional growth. I think some of the volatility that you're going to see in some of the numbers quarter to quarter across our industry, it has as much to do with channel fill.

And I think if you peel back the underlying demand, you would see pretty strong consistent demand quarter to quarter. And as we project moving forward, we continue to assume that that kind of activity will continue. And I forgot your second question. I'm sorry.

Ryan Merkel -- William Blair and Company -- Analyst

Just higher prices. Have you seen that impact demand maybe even for PVC since such a high-end product, any risk there?

Jesse Singh -- Chief Executive Officer

Yeah. We've -- as we've looked at our activity in the marketplace and we've done a lot of analytics related to our value end market of our products, we continue to see a great value proposition in each of the categories that we play, given the pricing that we have. And we continue to see that play out. We have not seen a slowdown of momentum.

And just as a reminder, if you go to our investor deck, you can see, on a relative basis, the cost of our types of material on a deck are a small part of the overall cost of a deck. And we have multiple pricing options depending on where our consumers are. I think the other key thing for us, we've got such great-looking products that we do tend to skew a little bit more to a less price-sensitive consumer, especially as you're looking at the price over the long-term. And we see a similar opportunity as we're driving wood penetration and wood conversion in our exteriors business.

Ryan Merkel -- William Blair and Company -- Analyst

Got it. That's helpful. All right. And then a quick follow-up.

I know guidance for the year assumes high single-digit volume growth. And my question is, if sell-through is stronger, do you have the capacity to deliver upside to that high single-digit? It sounds like yes, but I just want to confirm.

Jesse Singh -- Chief Executive Officer

Yeah. I mean, our capacity right now, we are now -- and we mentioned this on the last call that that was going to be the case. With the additional capacity that we have brought online in our fiscal first quarter, we now have the ability to meet and exceed production against what we see is our future demand profile, and we have additional capacity coming online. So we are very much in a position where -- which is where we said we wanted to be, where we can service meaningfully larger volumes for this year and certainly into next year.

Ryan Merkel -- William Blair and Company -- Analyst

That's great to hear. I'll pass it on. Thanks, Jesse.

Operator

Your next question comes from the line of Susan Maklari with Goldman Sachs.

Susan Maklari -- Goldman Sachs -- Analyst

Thank you. Good morning, everyone. My first question was, obviously, there's been a lot of sort of uncertainty around the housing market in general as we face the potential for a rising rate environment. Can you talk about the ability to continue to drive growth even if the housing complex does change? And I guess, with that, any commentary on how most consumers tend to fund these projects? And what is the role of them having to perhaps buy against the house or other methods of them sort of financing these things?

Jesse Singh -- Chief Executive Officer

Yeah. On that -- on the latter comment, we typically don't see our consumers -- and this is -- it's hard to get exact data. But on the data that we have, we typically don't see consumers financing our types of repair and remodel projects drawing on the equity of their homes. And then relative to the macro environment, on a relative basis, and you're going to hear this probably from a number of building products and homebuilder CEOs in earnings call.

On a relative basis, we still see incredible strength in this particular segment. If you look at the dynamics of the interest rate environment we're in, it is still at historically low levels. We see a historically low level of inventory on the market. We see really strong housing values, and we continue to see the demographic dynamics of more homeowners coming into the market.

And for the foreseeable future, from what we can see from the data, we are -- the housing sector and the repair and remodel sector is in a nice position to continue focus and growth in the future. And I think more specifically at our sector, you're dealing with an increased focus on outdoor living, and you're also dealing with the opportunity that we have that I mentioned on the call that we'll talk about probably on every call which is there is a lot of sales right now in products that should be our types of products, right? We continue to see an opportunity to convert wood in all of our products and convert other types of materials. And so against that backdrop, there's certainly interest rate noise, but we continue to see a multiyear opportunity here with the combination of the macro environment, and then our more specific environment, which is driven by material conversion, new products and a focus on outdoor living.

Susan Maklari -- Goldman Sachs -- Analyst

OK. That's very helpful color. Thank you. And then following up, you talked a lot about the exteriors business in your commentary.

Can you give us a little bit more color on your ability to service that market? How you're thinking about the future growth rates there? And any other sort of upcoming initiatives that we should be aware of or thinking of?

Jesse Singh -- Chief Executive Officer

Yeah. We're really excited by what we've been able to do in that business. As a reminder, in that particular business, we have two major brands, AZEK and Versatex. And both of those brands bring innovation to market.

And that innovation is really driven around driving contractor productivity and driven around providing a great alternative to wood. And if you think about all the aging of the home, it's that -- the paint peeling on your trim that can be some of the most annoying than the paint peeling on the outside of the house. And we have solutions that drive contractor productivity and at the same time, provide a terrific consumer benefit. So against that, we continue to invest in new products.

We continue to invest in channel expansion. And we continue to invest in our downstream sales and marketing efforts with -- not only with consumers, but the other elements of the chain. And as I pointed out in my prepared remarks, we're really seeing benefits of that. Once people get used to using our types of materials in new geographies, they tend to -- it's not a one-time purchase.

They tend to use that material and then they tend to expand the use of that material. And so we're excited by the beachheads that we continue to establish over the last year and expect to continue to establish. Relative to specific growth rate, we haven't guided on that particular business outside of our deck, rail, and accessories business and now our fertilize business. But we all -- we're -- we view that the growth opportunities are similar in all of our outdoor living and residential businesses. 

Susan Maklari -- Goldman Sachs -- Analyst

Thank you. That's very helpful, and good luck with everything.

Jesse Singh -- Chief Executive Officer

Thank you.

Operator

Your next question comes from the line of Ketan Mamtora with BMO Capital Markets. Your line is now open. 

Ketan Mamtora -- BMO Capital Markets -- Analyst

Good morning, and thanks for taking my question. Jesse, first question on the StruXure acquisition. Kind of sort of what makes this an attractive category as you guys look at the broader outdoor living space? And maybe talk about the material conversion opportunity that's in front of you when you look at sort of the pergolas and the cabanas business and even the sort of the multiyear margin improvement runway?

Jesse Singh -- Chief Executive Officer

Yeah, I'll take the market, and I'll have Pete touch upon what we've done with other acquisitions and the margin progression there. So the way to think of it and what got us -- our project name on -- for this particular acquisition was called Project Sky. And I think it's [inaudible], right? So right now, we produce effectively an outdoor decking product, which is the flooring. We've got an exteriors product, which, let's call it the walls, of an outdoor living space.

And as we continue to look at framing outdoor spaces from creating an outdoor room, a pergola is a natural kind of demarcation. And what StruXure really is about is creating comfort in outdoor living spaces, right? It's got a louveric system. It can let the sun in when it's sunny. It can louver to protect from the elements, if it's rainy.

And what it does is it's a natural step to creating comfort in the outdoor area, and it's extremely complementary to what we have. Now we have some custom pergolas and so on that are out there right now, but this really gives us scale in that market. And as you think about the long-term conversion opportunity, most is right now are constructed in a what we call stick-built way, right? It's fabricating products, whether it's out of aluminum or out of wood and in some cases, also out of AZEK and Versatex. But it's really a fabricated process, whereas what StruXure is doing it is really -- it's making that process much more efficient and in their higher-end products, making it more customizable.

And as we move to some of the other products, we'll show at the builder show, it's more of a standard solution that can quickly be assembled on site. And so as we highlighted, we view the opportunity of really creating these outdoor overhead pergolas and cabanas as a growing trend, think about houses, how much time we spend outdoors. Think about the other spaces that are out there in the commercial businesses. We view this as a $1 billion market opportunity, and we also view the opportunity to create a lot of synergy with what we're in and what they can do.

And I think the other thing that presents us is, as I mentioned on the call, their products also go down on hardscapes, right? And so it allows us to get at certain geographies where there may not be a deck on the ground, but certainly, they need some of the other aspects of what we can provide. And relative to the margin structure, I'll turn it over to Pete for just a couple of quick comments there. 

Pete Clifford -- Chief Financial Officer

Yeah. Thanks, Ketan. Ultimately, look, the margin expansion story for StruXure is very similar to AZEK. The levers that we see pulling as a team together, I'd put in a couple of buckets.

First and foremost, growth. We feel like we can accelerate an already fast-growing business, given our strength in the channel and our contracting partners. So certainly helping you with just leverage with faster growth. Second bucket, I would call, sourcing.

As we know we've got a meaningful aluminum rail business ourselves, and we look at the synergies together in purchasing power. I think there's a way for us to buy more efficiently and effectively on a combined basis. Third one is just, I think, our ability to kind of drive some of the AIMS kind of ops toolbox into the StruXure business. I think, it's going to help them drive more productivity and probably overall just stronger throughput in a way that they support their growth looking forward.

And then the last bucket I would kind of say is again, very similar to AZEK in this pricing/commodity situation or the structural opportunity with margins that the StruXure team is priced for value in the pergolas space. And as aluminum sits here at historically very high prices when it recedes, we see that same opportunity that we have on PVC that their pricing is going to be pretty sticky and they should have an opportunity again to kind of more meaningfully change their margin structure.

Ketan Mamtora -- BMO Capital Markets -- Analyst

Got it. That's very helpful color. I turn it over. 

Operator

Your next question comes from the line of John Lovallo your -- with UBS. Your line is now open.

John Lovallo -- UBS -- Analyst

Good morning, everyone, and thank you for taking my questions. First one, and maybe for you, Pete, is can you quantify how much polyethylene deflation you experienced on a quarter-over-quarter basis? And then how does this compare to what's embedded in the full year outlook?

Pete Clifford -- Chief Financial Officer

Yes. As we mentioned, we're not expecting a lot of deflation in the second quarter. That's kind of what most of the indexes project, and that's kind of what we see. As far as what we're anticipating, seeing in the back half of the year, I kind of call it net-net, very similar to what we expected at the beginning of the year with our guidance, I would kind of say.

If there's anything that's modestly different, I would say it's probably the slope. On polyethylene, deflation is probably a little slower, but there's probably an opportunity for modestly more PVC. But net-net, those are bottle wash as we think about the business. So again, I'd leave you with takeaway of what we can see in front of us here entering the second quarter, I think, supports the modest deflation that we've assumed in our guidance.

John Lovallo -- UBS -- Analyst

OK. Maybe just a follow-up on that. If we were to assume that polyethylene and PVC declined by, call it, 10% from today's levels, how much would that benefit the second-half margins?

Pete Clifford -- Chief Financial Officer

Yeah. I mean, it's a good opportunity here for me to educate folks on. When we think about our balance sheet lag as a business, let's start there. So from a material perspective, a rollback typically is three to four months.

And typically, this time of year, with inventory being a little bit elevated, it's closer to the four months where labor and overhead tends to be pretty constant throughout the cycle at about two months. So what that really implies is that ultimately, if we see commodity prices drop more steeply, but it comes after like, let's say, the middle of May. It's very difficult for us to really recognize or see any of that impact in our '22 results. It just becomes upside for 2023.

John Lovallo -- UBS -- Analyst

Got it. Thank you.

Operator

Your next question comes from the line of Trey Grooms with Stephens. Your line is now open.

Trey Grooms -- Stephens, Inc.

Hey, good morning. Thank you for taking my questions. So you -- just, I guess, the first thing is on the supply thing issues out there. Omicron brought some challenges you mentioned in December and January.

Are you seeing any changes in that there? Are you anticipating any change in the 2Q guide?

Pete Clifford -- Chief Financial Officer

No. I think embedded in our second quarter guide is the fact that, again, some of the favorability in 1Q was sort of timing that works its way through in the second quarter and that we see the first half of '22 kind of expectations exactly where we expected. So Omicron was definitely disruptive, but look, the last year and a half -- the two years has been very disruptive from a supply chain perspective. So we've said on previous calls, our teams have really done a nice job continuing to manage through no matter what the environment is.

And so we think we're well prepared from our own visibility here in January or as we get to the first week of February, it feels like from an absentee perspective, most of the varying impacts on crested in the third week of January, and we're starting to now see that taper off. So we think the worst of it is behind us, and we're optimistic about the second quarter.

Jesse Singh -- Chief Executive Officer

Yeah. I would just stress. It's -- our team -- we try not to use too many superlatives, right? And because we're doing our jobs, but I think the team has done a remarkable job of managing through the volatility to the point that we're not talking about it much on the call. There has clearly been a lot of moving parts relative to things like labor, supply chain, all of those elements.

But we've been able to manage that within the operating cadence of the business such that we continue to service customers uninterrupted, we continue to deliver against our financial objectives. And it really is an outcome of some really, really strong operational management and also planning for the volatility, which I think the team has done a nice job of.

Trey Grooms -- Stephens, Inc.

Great, and thanks for that, Jesse. And I guess earlier -- and I dropped off the call, so apologies if you touched on this. But I think you mentioned sell-through grew modestly and accelerated through December. Did that acceleration continued through January or what did you see there? And then the full year guide assumes high single-digit volume growth, what is that for the assumption for 2Q, if you could?

Jesse Singh -- Chief Executive Officer

Yeah. I would just say at a high level, relative to sell-through, as you know, you've been around this industry that. We're in the low season where there's still clearly activity. We still see strong backlogs.

We still see contractors needing to work, and we still see consistent sell-through. We're not going to get into specifics on either the quarter or what we see beyond what we've disclosed, except to say that there's nothing inconsistent that we're seeing now with our expectations, and we feel pretty good about our ability. Once we get into the full season to continue to meet our growth objectives, and we're confident in our ability to achieve our guide overall. We're not going to parse kind of the volume or anything specific sell-through, especially at this time of the year, there's -- as you might imagine, there's day-to-day volatility just based on the snow melted or the snow fell.

But in general, it's been good. 

Trey Grooms -- Stephens, Inc.

I understand that. And I just -- I wanted to touch on it because I thought it interesting given the time of year that it actually accelerated through December, given the -- that it is a seasonally kind of cold, wet in holidays and that type of thing. So anyway, I just wanted to touch on it. But thanks again for taking my questions, and good luck.

Jesse Singh -- Chief Executive Officer

Yeah. I mean, it's probably -- it is much -- I think we're going to move to a more normalized conversation about the month-to-month sell-through, which will be a mix of kind of backlog and weather and all those other normal things at this time of the year. And so clearly, we've had a backlog, so that we expect to continue.

Trey Grooms -- Stephens, Inc.

Understood Thank you again.

Operator

Your next question comes from the line of Mike Dahl with RBC Capital Markets. Your line is now open.

Mike Dahl -- RBC Capital Markets -- Analyst

Hi. Thanks for squeezing me in. I have a couple of follow-up questions around StruXure and M&A or adjacencies, in general. The first question is kind of a multipart.

Jesse, can you talk more about StruXure's go to market? What their channel exposure is like? And when you look at your customer base, your dealers, your retailers, what percentage of your customers already stock some sort of a product like this? And maybe could you also tie in what the capacity is currently for StruXure? And do you need to make additional investments there?

Jesse Singh -- Chief Executive Officer

So let me start just at a high level. StruXure's products are products that are delivered to people that install the product. And so the nature of a lot of the business is the product is specified by someone who's going to install it, the orders then go through and the product is delivered. And in some cases, you're using standard components.

And so those products are inventoried by the installer. And so at a high level, where we see the current synergy is a number of our contractors are StruXure installers, right? So they will source our types of products through their normal channel. They'll work directly with StruXure to have those kinds of products delivered. So -- and then there's another set of folks that are StruXure dealers and installers.

If you go to the website, you can interact with one of them, they'll come out, give you a quote and do a really nice job of installing the product. So that's its current state. I think without getting too specific. As we move forward, there's an opportunity to really expand our position in StruXure's position, especially with that contractor base.

That contractor base in many cases, our contractor base, which is tens of thousands, in many cases, might just be using or building their own or designing their own or needing a product like StruXure. So we see an opportunity from a synergy standpoint to continue to build out those points of deployment, leveraging our current network and working together with StruXure's current network. And there's a -- I won't get into specifics, but there's a portfolio difference. There's other implications relative to how we do that.

But over the long-term, there's clearly opportunity there. And I'll just -- Pete, I'll just take the capacity comment, very high level on StruXure. StruXure has -- is certainly, at this point, full. It's -- there is an opportunity to work with the StruXure team to continue to increase throughput, continue to reduce lead times, continue to expand their ability to meet market demand.

And in some cases, that might be modest capital. But in a lot of cases, it's just debottlenecking their current process and so we see a great opportunity as a combined entity to not only get synergy on the margin side that Pete talked about through sourcing and working through our AIMS program, but we also see an opportunity to scale their production capability to better meet the needs of customers. Some of that has to do with just capital deployment when I'm in working capital. Some of that has to do, which naturally we have a greater ability to do.

And some of that just has to do with continuing to invest in debottlenecking and improving their processes.

Mike Dahl -- RBC Capital Markets -- Analyst

OK. That's really helpful. And then my second question or a follow-up. A little bit more holistically you do have the aluminum rail business, but this is an acquisition that kind of takes you further into additional material conversion when you're getting into metals and aluminum.

When you look around the backyard of a house or the exterior of the house, there's still a lot of different verticals that would be potential for material conversion. How do you think about the broader opportunity? And at this point in your life cycle, kind of how aggressive would you be willing to kind of go after further maybe larger acquisitions in some of these adjacencies?

Jesse Singh -- Chief Executive Officer

We really like our business model. We like the opportunity for differentiated products that are -- where we can get paid for the value that we add. We like the opportunity for material replacement. We like the opportunity with the focus on outdoor living and that secular growth trend.

And clearly, as the structure acquisition highlights, we also like the opportunity to continue to expand our position there. We are comfortable already with the three material sets that we talked about: polyethylene, PVC, and aluminum. This just builds on that. And to your point, over the long-term, we continue to see opportunities to be more relevant in that outdoor space.

But we're going to want to stick to the growth, margin, branded price profile that we've had. And as we navigate through that, we'll selectively look at acquisitions that meet those criteria. And I think as I've said prior to these most recent two acquisitions, if you look at what we have acquired in the past, we're now at five acquisitions. In the last few years, it's probably indicative of the kinds of things we would look at in the future.

And we just see a huge runway and a huge opportunity to become the player as we look at driving growth in our market segment.

Mike Dahl -- RBC Capital Markets -- Analyst

That's great. Thanks, Jesse.

Operator

This concludes the question-and-answer session. I will now turn the call back over to Jesse Singh.

Jesse Singh -- Chief Executive Officer

Really appreciate all of you taking the time to join us today. And as always, feel free to follow up with additional questions. And for those of you that we at the builder's show, we will have a nice outdoor living area for you to come spend some time with us. So thanks again for your time, and have a great day.

Operator

[Operator signoff]

Duration: 76 minutes

Call participants:

Amanda Cimaglia -- Vice President, Environmental, Social and Governance

Jesse Singh -- Chief Executive Officer

Pete Clifford -- Chief Financial Officer

Philip Ng -- Jefferies -- Analyst

Matthew Bouley -- Barclays -- Analyst

Tim Wojs -- Robert W. Baird and Company -- Analyst

Maggie Wellborn -- J.P. Morgan -- Analyst

Ryan Merkel -- William Blair and Company -- Analyst

Susan Maklari -- Goldman Sachs -- Analyst

Ketan Mamtora -- BMO Capital Markets -- Analyst

John Lovallo -- UBS -- Analyst

Trey Grooms -- Stephens, Inc.

Mike Dahl -- RBC Capital Markets -- Analyst

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