The AZEK Company Inc. (AZEK) Earnings Call Transcript & Summary

All right. Good afternoon, everyone, and thanks for joining us today. I'm John Lovallo. I'm the Senior U.S. homebuilding and building products equity research analyst here at UBS, and we appreciate you joining us for the 2024 Industrials and Transportation Conference. Very excited to have AZEK with us here. We have Pete Clifford, SVP, Chief Operations Officer and the CFO; Ryan Lada, Vice President of Residential Division and CFO; and Eric Robinson, VP of IR and Corporate Finance. I'm sure all of you are aware what AZEK does, but they are the largest -- one of the largest manufacturers of outdoor living products including composite decking, railing, trims, pergolas, lots of leading brands like TimberTech, AZEK Trim Structure. So a big portfolio of very exciting products. With that, guys, thanks for joining us.

Thanks for having us.

We'll start sort of higher level here, maybe with the portfolio. You guys have done a nice job of kind of building out this kind of portfolio that I mentioned with decking, railing, trim, pergolas. Where do we go from here? Are there other areas that make sense? How do you kind of see the portfolio evolving?

Yes. I think first and foremost, we love our core, right? The core business that we're in on the outside houses and in the backyards is where we're going to stay. We'd like to say any acquisition we're going to make. We're not going to have to redo the investor deck that it falls completely down the middle of the fairway. An example of where we can continue to grow from an inorganic perspective, a good example would be railing. Railing is a product category where we have share opportunities, and it is a very fragmented space that's kind of ideal for rollout as an example.

Yes. Makes sense. When we think about the commercial business, I mean, Vycom sold about a year ago at this point, still have a small piece of commercial left in Scranton. Where do you see that kind of going over time? Is it core? Are there synergies? Or is it another opportunity for tightening things?

Yes. I think it's now a little less than 5% of our revenue as a corporation. How we would say it is ultimately, we set our ambition is to be a residential-only business and we prefer to be a residential business with heavy R&R focus. And so that is where all of our capital is being deployed is on the core residential business. And so there's sort of 2 outcomes on our commercial division. One, it either continues to get smaller as a percentage of our revenue or we find an owner of the business that's a better owner than we are.

Yes. And I'd say from a high level, if we think about the performance and the aesthetics of just composite decking over the past decade, I mean it's evolved into something that's pretty spectacular today. Where does it go from here? Are there still kind of step changes that can be made in the technology and the aesthetics and so forth?

Yes. I think -- across all categories, I think there's more to do on aesthetics. It's about having the right colors, the right textures, fire resistance, temperature control of the product as it's laid down, ease of install. There's still plenty of things to do from an innovation perspective to keep the category moving forward.

Yes. And how do you think about the AZEK Board versus any of your competitors? What in your mind is the differentiator?

Yes. I think a couple of things. So first and foremost, I'd say portfolio-wise, I do believe we have the broadest category of collections across good, better, best and premium. Ultimately, I think we have the best aesthetics in the industry. I think we have a key differentiator in terms of technologies. We actually offer both capwood as well as kind of advanced PVC technology. And our PVC technology has positioned us with a lot of strength, especially at the premium end of the marketplace.

Is there any opportunity or any desire to bring that PVC offering, which is beautiful downstream?

I think over time, as we can increase the recycling content, I think that's certainly an opportunity.

Okay. All right. Makes sense. And then if we think about just the recycling journey for AZEK, where are we today? I mean you've made some interesting acquisitions with Returns Polymers, which is clearly beta catalyst. Where are we today? Where are we going?

Yes, the baseball analogy, I'd kind of say we're in the fifth inning. We've acquired a lot of assets. We have a lot of capability. We have a lot of know-how and that said, I still think there's a lot of room for expansion in terms of capability, know-how, increasing recycling content, getting more efficiency within that supply chain. If you take a look at our full year '24, we continue to make steady progress, increasing our recycled content from about 57% to 64% for the year. We had laid out at our Investor Day back in '22, a glide path to get 650 basis points and about 350 of that was recycling initiatives. Where we think we're at today across those 3 kind of technologies of PVC deck, exteriors and our cap wood positions us to have a lot of headroom. And we think we've executed about half of that. So half is kind of remaining. The only nuance I would articulate on '24 is that when commodity prices tend to drift lower, you tend to look at your conversion costs, your recycling activities. And so we've made a lot of progress there in 2024 as well.

Got it. Let's take a step back and think about the overall market, consumer and so forth. I mean how do you guys -- how are you thinking about how -- in your checks that you guys do with some of the survey work? I mean -- how is the consumer today? How are they feeling? And how do you think that we kind of progress as we move over the next quarter or two?

Yes. I think you hit the nail on the head there in terms of -- we've got a lot of touch points with the consumer base and the channels. So first and foremost, we do pretty high-quality surveys of both our contractors quarterly as well as our dealers tend to get anywhere from 750 to 1,000 kind of responses each quarter. Kind of key takeaways from last quarter and what we can see kind of midstream this quarter is backlogs remained stable and steady at about a little over 7 weeks, pre-pandemic levels were 6 but we kind of think 7 is kind of the new norm. The sentiment from both the dealers as well as the contractors is incrementally more favorable today versus this time last year. Informally, we had our dealer base in for some meetings in early November. And generally speaking, from that audience, I would say, about 10% of the people were pessimistic, about 70% of the people were said business is really good and really stable, and 20% said things are great. So sentiment is very positive. All the digital indicators remain robust. So near term, everything we can see even POS on special order is really, really stable the last several quarters.

It's an interesting stat -- I mean, what do you think the folks that -- the 10% that were less optimistic, we're seeing that maybe the 20% that we're very optimistic we're not seeing? Or conversely, I mean is this a regional thing? Or is this -- what's driving that delta, do you think?

I wish I kind -- I could put in my mind as to which person gave the feedback by geography but I'm not sure I could weave a thread through sort of the 10%.

Yes. Understood. If we think about just the conversion story, which is obviously something that's very near and dear to the key thesis here. How do you think about the difference between decking and railing, and have you seen any changes in that conversion as we've been in a bit of a wonky market over the past couple of years?

Yes, just to put some context, I mean, 75% of the decking industry is wood, about 65% of railing is still wood. So it's an equally kind of compelling conversion opportunity. I think what we've learned that's most important over the last 2 or 3 years was an open question when we entered '22 and '23, and that was -- this conversion still happen? Does it still happen at the same pace if R&R is negative or R&R is flat. And I think the good news is we proved that both of those years, the conversion does still happen even a sluggish or down market. It's the calculation at the industry level is almost a year lag. So it's not that fulfilling for us to look at. But I still think the right cadence is probably somewhere in that 1% to 2% per year. And again, that 1% to 2% equals 3 or 4 points growth for our industry.

Got it. And then if we narrow that down to further 3 to 4 points for the industry off of that 1% to 2%, what is that for AZEK?

Yes. I think that's one of the most important things to understand about our space is I think folks tend to look at share more through a traditional lens of displacing someone and a lot of the share pickup in this industry is really boils down to who is best at capturing that customer who's converting from wood to composites and we really think that's been a big part of our momentum the last couple of years is the people entering the category are seeing our products. They're being influenced by our contractor base and they're choosing our products at a higher rate than they are the rest of the marketplace.

Right. And I think in the past, you guys have talked about sort of getting to close to 50% and other folks have talked to a similar level of conversion. I mean, is that still an achievable level? And if so, is there a time frame that you're thinking about?

Yes. I think the 50% is kind of a minimum. I think, we in the industry tend to be a bit conservative on that. Most of the surveys and work we've done on research of consumers. We really believe there's only about 25% of the market that's always going to buy on cost and they're always going to buy wood. So the opportunity set is probably 75%. Now does it get to 75%. I'm not sure, but I think it's probably higher than 50% someday. And in terms of cadence if you went back 5 to 7 years ago, sort of 25 to 50 bps the conversion a year in most of the last 3 or 4 years, it's been 100 basis points or more. I would think that, that run rate maintains and eventually maybe starts to accelerate at some point from a baseline conversion.

From a high level, how is that conversion even measured? Whether is it third-party sources that are pulling that data together?

Yes. Yes. It's a combination of third-party data measuring annual sales volume. So they'll go and kind of survey all the producers out there to understand their production volumes and their sales volumes to back into what the conversion is relative to the industry.

Got it. Okay. All right. And then you guys have focused more on kind of penetrating the big box retailers. Just curious how you kind of see that strategy evolving? Remind me, I think, maybe low double digits, 10% to 12% of your portfolio is there now maybe only 5% is off the shelf. But how does that fit into your kind of equation?

Yes. As you're aware, the -- as an industry, about 1/3 of the deck projects go through retail via DIY and obviously, we're in the low teens as a percentage of our total revenue in the retail channel. So as long as we're in the teens and let's say, entitlement is at least well into the 20s, we think that we can grow both the stock business as well as special order over time. It should be an accretive growth opportunities for us for years to come.

And how about in terms of accretion to margin or returns? I mean, how did the margin return profiles kind of line up?

Yes. I think as a general statement, the special order business is not very different than the pro, so a lot of consistency there. The good category in retail can be productive. I think as a general statement, OPP for many is probably dilutive.

Okay. There's been some fluctuations in channel inventories over the past year or so. Any thoughts on where channel inventories are today and how you see that kind of trending?

Yes. I'd say it's a pretty big shift in our business about 2 years ago and how I would categorize it is at that point, coming out of the pause that happened in late '21 or middle of '22 is I really believe we've made our distributors part of our SIOP process and vice versa. So we've always gotten an incredible amount of tracing information on sort of sell-through but we also got an enormous amount of information on just inventory by SKU, by location. So we've really made their data and their business part of our process that we probably know the velocity of SKUs of our channel partners as well as they do. And we're just working in a very different way in the last couple of years. Our intent has been to try and informally drive sort of days on hand, down about 10% from the sort of pretty pandemic 2017 to 2019 baseline. During the year in '24, we were down about 20% at the end of the first quarter, kind of said that felt a little bit too low from a service perspective. We ended the second quarter down 10%, we were flat in the third quarter with historical but that was really the impact of the $35 million that pulled ahead, ex that, we would have been down 10%, and we ended the year at down 10%. So we're going to continue to work with our partners. Jesse and I have said many times, I don't want to ship anything more into the channel than I need to, to serve real demand. And that's our philosophy, and it's been our philosophy for a couple of years. And I wouldn't expect that to change. We've worked very hard to keep our lead times to 4 weeks or less. We did that all year in 2024 with the capacity that we have in front of us. I wouldn't expect to come off of that kind of lead time. And therefore, I don't think there really needs to be a meaningful change in channel inventory.

Okay. So the channel can work perhaps a little bit more just in time than they have in the past?

Yes. Yes.

Okay. That makes sense. All right. A big topic across many industries right now is tariffs and the potential for additional tariffs. And -- maybe just remind us of your exposure to not only China but anything in North America, even Mexico, Canada, that might be headwind?

Yes. So of our -- a little over $0.5 billion of kind of material spend or input costs, a little under $100 million, call it, $90 million is coming from outside the U.S. as a primary vendor. It's really concentrated primarily in 2 countries. We get a fair amount of Thailand and Vietnam, and to a much smaller scale in Mexico and the product categories that are impacted there. Most of the fasteners in the industry come from overseas, ours are similar and a fair amount of the metal rail portfolio has inputs from outside the U.S.

Would there be any opportunity to resource that even domestically?

It is possible over the medium term. As an example, our pergola business is actually all entirely domestic.

Okay. Makes sense. So the expectation right now from a high level for you guys for R&R is flat. I know that there's -- it's kind of a baseline that could certainly change. But you're talking about 5 to 7 points of growth above and beyond that. Just remind us of the building blocks of that 5% to 7%.

Yes. So again, I'd just circle back to -- look, it's a planning assumption. It's not necessarily a prediction. That said, as we were here last year, and we talked about a guide that assumed or planning assumptions assume the market being kind of flat to modestly negative. A lot of people thought that was conservative because we hadn't had 2 years of being negative or flat. And I think only one time in history. Well, it happened again this year that we ended flat. So I think it's prudent and pragmatic to set our assumptions and make sure our teams are grounded on being able to execute in any environment. And so I think the assumption of kind of flat makes sense for us again this year. On the 5 to 7, look, our growth stack every year, we talk about 3 or 4 points of growth from conversion. Some years, it's been much better than that. And then usually another 1% to 2% on sort of commercial initiatives. i.e., channel expansion and just various new product introductions.

Okay. And again, understanding that it's just a planning assumption. Do you have any thoughts on potential cadence of that R&R?

Yes. I mean we really have assumed the entire year at sort of mid-single digits kind of sell-through, so we don't have a more pessimistic assumption in the first half versus the second half. It's similar. It's set up to '24 where the assumption is kind of flat across the year at mid-single digits.

Okay. And let's put our more optimistic hats on for a moment and let's say, R&R is better than flat. How does that translate into incremental growth for you guys?

Yes. And again, I think this -- our '25 kind of positions us similar to '24 that if the market is better or for commercial initiatives, I'll perform I think we've demonstrated when we get an incremental dollar of sales, it's an incremental pound of production and incremental pound of production with our capacity today gives us a lot of leverage in our plants. So that's allowed us to get incremental margins that are above the mid-30s that we talked about in our Investor Day.

Okay. Makes sense. Let's turn to just the first quarter revenue outlook. You guys talked about mid-single digit to high single-digit year-over-year growth. Also said that October was running low double digits, I believe, which seems to imply some slowing. Is that conservatism? Or are you seeing anything out in the market now that we sort of support that?

Kind of as mentioned, when we look at our demand indicators, we can't see anything that has meaningfully changed.

Understood. So a little bit of conservatism is fair, maybe?

Yes. And I think as we talked about on our call, we tried to give some perspective that we thought we had a little bit of upside to the guide based upon some load-in that we would expect to see on some of the West Coast distribution changes.

Okay. And not a surprise to anyone in the room, but existing home sales are running at GFC-ish levels. How would an improvement in existing home sales impact demand for deck -- decking and other products?

Yes. I mean maybe an adjacent question, is just we're not driven by interest rates. That said, we've set out loud a few times that we think about 15% of deck projects are actually financed, not all with HELOCs but with some kind of vehicles. So even though it's a really small exposure for us and it's a small part of the total business. I think it's safe to say internally, we believe that part of the business went to zero. And so if you said, what are some catalysts or what are some things that we would be optimistic about if new starts rebounded, I would argue it would rebound in conjunction probably with interest rates cuts. I think there is a part of our business that's pent up around that, that we would see some tailwind from that.

That's a good segue into my next question. I mean for a number of years, the concern out there was that there was pull forward demand and we're kind of going to have to live with the effects of that. I mean, are we at a point now where there's actually pent-up demand?

I think when you talk to people on the ground, there -- there does seem to be on some larger projects that may be more geared on the exterior side where there's been some modest pausing that I do think people, once they start to think that it's going to be cheaper soon. There's a, hey, I'll put it off a quarter, I'll wait until the spring kind of phenomenon that starts to happen. So again, it's hard -- we ask some of those questions in surveys but it's more qualitative than quantitative.

Okay. And I would say over the past few years, you've been pretty clear that you believe that the quality of the product that you guys are manufacturing, just the industry structure, the distribution channel and so forth should provide the opportunity for annual price increases. It's not a big part -- it wasn't a big part of the fiscal year '24 plan. It doesn't seem to be one -- a big part of the fiscal year '25 plan. How do you think about this longer term? Is this a business where like other distribution focused businesses where we could expect that type of pricing?

Yes. So I think the '24 story was set up with -- look, we took significant price in '20 and '21 and early '22. So it felt like there was a little bit of fatigue in the sector. In '25, it's less than 1%. But what I would say is how I would describe it is -- it wasn't quite a traditional year in deck pricing but it wasn't far off. And I think in channel checks, that will tell a story that there was some price taken on decking, similarly '24 was offset with. We kind of said that we would do some more backside pricing on programs for our exteriors business. There is a little bit more competition on the exterior side in terms of other technologies. Whether it be engineered wood or fiber cement. So we've been disciplined in how we've used those dollars to support further penetration and conversion on the exterior side. So I guess the key to the question is, I think in '26, you'd see a normal decking and probably a closer to normal pricing for exteriors.

Yes, makes sense. And just on the Exterior business, just remind us how much of that is, let's say, single-family versus multifamily, how much is new construction, which I think is predominantly, but that kind of mix.

Yes. So it's about -- first off, it's about 25% of our portfolio. About half of it is what we would call new starts driven. The other half is R&R. We are heavily indexed to single family. There's a little bit of multifamily but it's very modest. And I think we've learned through this time period of the sluggishness on the new starts is that we're probably over-indexed to custom homes, and those have fared better than the production new starts.

And what are some of the other Exterior adjacencies, if you will, for products. Are there other areas outside the home like exteriors that would make sense?

Eric, you want to...

Yes. Sure. Happy to take that. I think, look, when you think about our strategy and our material science and material conversion strategy, look, anything in the backyard on the outside of the home that we believe that we can drive more recycled content in that they're the wood conversion story that we can leverage our channel partners and our sales team to drive the product and drive kind of a cross-sell with our existing portfolio, I think, would be intriguing to us. And so it tends to lend itself. Peter mentioned railing earlier, railing is a nice opportunity. On the exterior side, we look at things that are beyond just the exterior trim and the exterior. So like we've got some niche siding applications that we've launched recently. We've got a nice shingle siding product that is kind of an accent to walls on the outside homes. And then you've seen us experiment with some new kind of bevel and lap siding solutions as well that tend to be more kind of niche premium products that are going after wood applications, like a cedar plank, for example, it's still a pretty large market out there that we've launched some products that go after that market. And so I think Siding could be an intriguing application for us in niche kind of markets there. And then I also -- I'd point you to kind of our new -- well, there's a new product that we launched called TrimLogic. And that product is really neat, and it's an innovation in our market where if you think of the AZEK Trim, it's historically been kind of a classic bright white Trim that you see in a lot of coastal homes are in Northeast and lower Mid-Atlantic markets. But this product here is -- it actually has 95% recycled material, recycled content in the product. And so -- that's -- it's getting to not only a new visual that allows you to paint the product and custom tailor it to whatever visuals you want in your home, if you don't want to have light on the home. But it also -- because of their high recycled content enables us to get a different price point as well that's attractive in certain markets and regions.

That's interesting. Is there an opportunity to introduce more PVC for some of the exterior products?

Yes. So we made significant progress this year. We entered the year kind of about 30% content, exited the year at 40%. And as Eric mentioned, we can probably move in bite-size pieces that are a little bit larger in the near term on exteriors. And the why is not just because of the content being starting lower -- it's this opportunity as we launch new products that are painted, the recycling, the paint becomes the cap and so the recycling content becomes much, much easier to put in a much higher recycled content on paint and products.

Okay. And a similar question on the railing side. What's the kind of the mix or the exposure to multifamily versus single family?

The lion's share of our business is still single family but it's -- we've got more exposure on multifamily on railing than we do on the exterior side of the business.

Okay. And I'm sure it's not an easy thing to kind of nail down because not all decks have railings. But is there an attachment rate number that you have in your head?

I don't know that we like that as much as kind of a share percentage. And I think it's possible for the railing industry to look like the decking industry in 10 years that over the last decade, there's been a consolidation on the decking side, and I think railing is primed to do the same thing.

Makes sense. So we talked a bit about pricing. Let's talk about costs for a moment. How are your input costs trending? And what's sort of the outlook for price cost as we move forward here into the near term?

Yes, I'd say stable is the word I'd use to describe it. We're not expecting meaningful deflation or meaningful inflation for most of our inputs this year, and that's been pretty consistent in the last 3 or 4 quarters. A lot of things dropped 5 or 6 quarters ago really quickly, and then they stabilized and we've had, as we've said on the last 2 calls, a lot of stability and material input costs.

And when we think about those material input costs, we think about the resins and PVC, I mean, is any of that -- is that all domestically sourced?

Yes, it is.

Got it.

And obviously, one of the huge advantages of recycling is it all domestic.

Yes. No. Okay. Understood. Let me pause here for a moment just to see if there's any questions in the audience. If not, we'll just continue on. We do have a question. Just bear with us a moment. I was going to share a microphone.

During the height of COVID, some of the bigger composite decking manufacturers like yourself, you guys are all operating at full capacity and some of the smaller guys had some capacity. So I think there was a little bit of share shift from some of the bigger guys to some of the smaller guys. Since then, you guys have all sort of ramped your capacity and it seems like that share has gone back to some of the bigger guys. So I guess the question is, as you get closer to that 50% to 75% conversion, how does the share of the 2 to 3 biggest composite decking manufacturers? Like how does that compare to the smaller guys? And can you just talk a little bit about the health of some of the smaller composite decking manufacturers right now?

Yes. I would just say the pattern or the trend for the last decade has been consolidation and concentration on decking. I think that probably just continues to happen similarly over the next kind of 5 to 10 years. I think the key for us in the industry is not getting in a position where the industry is under invested in capacity to make sure that we're investing for growth. And if we do that, we keep lead times low, then I think those who do that well will be positioned to win.

Maybe just to dovetail off of that. Are there any acquisition opportunities that would make sense. I mean does it make sense to roll up this industry or is there just much better services and organic growth opportunity for you guys?

Look, I think we like our share position. You could always have it be better but ultimately, the structure of the industry is constructed for us. Again, I think we have an opportunity to do meaningful bolt-on acquisitions as it relates to railing. There's certainly product categories in exteriors where maybe we have an opportunity to broaden our basket across good, better, best and premium. But again, I think the structure of the industry is set up so that couple of large players are out in front on investment and only accelerating conversion versus slowing it down from lack of investment.

I guess for any of the smaller decking players, though, are there -- what would you be buying? Would you be buying technology? Are there technologies that you guys don't have? I mean what would be sort of the...

On the decking side, I don't know that -- I never say never but I don't know that we need to buy anybody to move the business forward.

Yes. Okay. Makes sense. All right. If we think about the high end of your fiscal year '25 outlook for adjusted EBITDA margin shakes out around 27%. The sort of midterm target you put out there is 27.5%, pretty close to where you've been targeting. How much -- I mean, a, I guess, do you see things trend continuing to trend positively to that 27.5%? And then more importantly, is that just -- that's just one goal post, right?

And then yes. I would say our time of late has not been spent dreaming about what the next target is. We've been pushing people internally to say, let's just get to 27.5% sooner. When we get there, we can have a conversation about what's the right next goalpost. I'd just go back to -- look, we feel really good about the opportunities on the margin side that lie in front of us. As mentioned, we know we have a clear path to continue to make meaningful progress against recycling initiatives. We've got a large plant in Boise that, frankly, we're going to continue to probably double or triple production over the next 5 to 7 years, which is going to give us tremendous lift in terms of reducing our conversion cost per pound there. We do believe that we can get back to a normal pricing cycle at some point. So there's lots of -- there's not one lever. We've got a portfolio of actions in front of us as well as the fact that we really haven't actually leaned into SG&A. We really believe as a business, we've been fortunate with our gross margin expansion that we've been able to be aggressive and make bets and investments on growth in SG&A but we also do believe that when you're growing 10% organically, you should need to add 10% to SG&A. So there is an opportunity for us to get leverage on SG&A even as a margin equation story.

Now is that a longer-term type initiative, do you believe? Or is that something you'd expect some leverage in '25?

I think we would -- I'll say, if we continue to exceed with growth, I think we will continue to invest aggressively in the business. And if the market really is flat, and our growth is just in line, we will probably have some modest leverage in SG&A this year.

Okay. Makes sense. Let's talk about working capital, about 15% of sales right now. Initially, I think at the Investor Day, put out a target of 18% so outperforming that. What are some of the puts and takes there? What's driving that outperformance? And is that 18%? How would you kind of characterize that?

Yes. look, some of it was probably a little bit of conservatism in the Investor Day as we are just getting better at sort of forecasting our balance sheet candidly. But what's different is our terms have gotten better. So if you were to go back in time, our turns were really low at 3 back in '22 we're above 4 today. The next milestone for us is trying to get to 6, which I think is not unrealistic over time. And our DSO, this is an industry that has a general role on the pro contractor side, takes a cash discount. So our DSO is sub-30 days. And I think that's completely doable and something that we can hold on to. So I don't think that our working capital needs to go back to 18%, and I think we can hover around sort of mid-teens as a go-forward kind of opportunity set.

How should we think about -- in the context of that, then how should we think about just kind of overall cash flow? What do you see as kind of a trend level for you guys?

Yes. I think we said at the Investor Day, and my preference is the talk as a percentage of revenue. A good rule of thumb that we're trying to push ourselves to is cash flow from operations of kind of high teens. Ultimately, sort of CapEx of that 5% to 7%, which puts you at sort of low teens to 10% kind of has a free cash flow kind of target within the business. I think that's very achievable.

So on the CapEx side, I think you guys underspent a little bit this year. What sort of drove that? Is that just timing of projects? And how should we think about CapEx as we move forward here?

Yes, not so much timing because in our guide for this year, we didn't really have some kind of catch-up I think ultimately, we've been challenging ourselves internally that our legacy assumption was that about half of our CapEx spend is maintenance. And I think with modernization and new equipment that we put in over the last 3 years. I think we're finding what we hoped and as that maintenance in some years is not going to be half of the budget. And I think this past year, we did pretty well from a maintenance CapEx spend.

Makes sense. And we talked about some of what the potential opportunities within the M&A space might be for you guys, what areas you should sort of focus on. But how does the overall M&A market feel right now in terms of its overall health?

Yes. Finally, I'd say it's normalized after having a sort of dysfunctional marketplace coming out of the pandemic expectations for valuation we're way out of line. And then most folks for the year after that pulled their assets out of the marketplace and wanted to get to a better market. I think we're there, funnel is active. I think there's good assets out there and I think we'd be disappointed if we didn't deploy a little bit more capital from an M&A perspective this year than last year. And that's really speaking to kind of core product technologies on sort of the decking and railing and exterior side. And I think you should always assume that we're going to be aggressive on maintaining the moat that we've built around sort of the verticality of recycling. So we'll continue to be active there as well.

Okay. Last one, repurchased $243 million of stock last year. How are you guys thinking about that in 2025?

Yes. I mean, I think it will be another strong year from a share repurchase perspective. Just one note in the $243 million for '24. We did have the benefit of about $110 million of proceeds from the sale of our Vycom business. So that's the only thing I'd call out the '24 was a great year, but it was a little bit elevated from a share buyback perspective because of Vycom.

All right. Well, we are almost exactly at time. So we're going to leave it there. Thank you very much, guys.

Really appreciate it. Thank you.