PROSPECTUS SUMMARY

The following summary contains selected information about us and about this offering. It does not contain all of the information that is important to you and your investment decision. Before you make an investment decision, you should review this prospectus in its entirety, including matters set forth under “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our Consolidated Financial Statements and the related Notes included elsewhere in or incorporated by reference into this prospectus. Some of the statements in the following summary constitute forward-looking statements. See “Special Note Regarding Forward-Looking Statements.” Our fiscal year ends on September 30. Any references to fiscal years in this prospectus are to the 12 months ended September 30 of that year and any references to fiscal quarters in this prospectus are to the applicable quarter or quarters within a fiscal year. Certain percentages and other figures provided and used in this prospectus may not add up to 100.0% due to the rounding of individual components. Unless the context otherwise requires, all references in this prospectus to “The AZEK Company,” “AZEK,” “CPG Newco LLC,” the “company,” “we,” “us,” “our” or similar terms refer to CPG Newco LLC and its consolidated subsidiaries, and after the Corporate Conversion, The AZEK Company Inc. and its consolidated subsidiaries.

COMPANY OVERVIEW

We are an industry-leading designer and manufacturer of beautiful, low-maintenance and environmentally sustainable products focused on the highly attractive, large and fast-growing Outdoor Living market. Homeowners are continuing to invest in their outdoor spaces and are increasingly recognizing the significant advantages of long-lasting products, which are converting demand away from traditional materials, particularly wood. Our products transform those outdoor spaces by combining highly appealing aesthetics with significantly lower maintenance costs compared to traditional materials. Our innovative portfolio of Outdoor Living products, including decking, railing, exterior trim, which we refer to as trim in this prospectus, and accessories, inspires consumers to design outdoor spaces tailored to their unique lifestyle needs. We are well known in the industry, and, according to data provided by Principia, we generally hold one of the top two market share positions by revenue in our product categories. In addition to our leading suite of Outdoor Living products, we sell a broad range of highly engineered products that are sold in commercial markets, including partitions, lockers and storage solutions. We are a leader in our product categories because of our significant scale, vertically-integrated manufacturing capabilities, extensive material science expertise and execution-focused management team.

One of our core values is to “always do the right thing”. We make decisions according to what is right, not what is the cheapest, fastest or easiest, and we strive to always operate with integrity, transparency and with the customer in mind. By extension, environmental, social and governance, or ESG, stewardship is part of our corporate DNA. Our inclusive culture is driven by a shared passion for our corporate values and commitment to build a more sustainable future. We are focused on sustainability across our operations. We are committed to further accelerating the use of recycled materials across our portfolio of products, diverting millions of pounds of waste from entering landfills each year and enabling us to meet the growing demand for environmentally-friendly products that advance a circular economy.

Our businesses leverage a shared material technology and U.S.-based manufacturing platform to create products that convert demand from traditional materials to those that are long lasting and low maintenance, fulfilling our brand commitment to deliver products that are “Beautifully Engineered to Last”. Our Residential segment product portfolio is highly complementary and allows us to provide a wide-ranging solutions set to Outdoor Living projects. Our primary consumer brands in our Residential segment, TimberTech and AZEK, are recognized by contractors and consumers for their premium aesthetics, uncompromising quality and performance and for their diversity of style and design options. In our Commercial segment, we manufacture engineered sheet products and high-quality bathroom partitions and lockers.

Over our more than 30-year history, we have developed a reputation as a leading innovator in our markets by leveraging our differentiated manufacturing capabilities, material science and research and development, or R&D, expertise to capitalize on favorable secular growth trends that are accelerating material conversion from traditional materials such as wood, to sustainable, low-maintenance engineered materials, and to expand our markets. We believe our core competency of consistently launching new products into the market, combined with our recent investments in sales, marketing, R&D and manufacturing, will continue to solidify our incumbent position as a market leader and enable us to generate long-term demand for our products through economic cycles. Throughout our history, we have introduced numerous disruptive products and demonstrated our ability to drive material conversion and extend our portfolio, addressing consumer needs across a wide range of price segments.

We have achieved a leading brand reputation through our unwavering commitment to our customers and developing innovative new products that combine the latest style and design trends with our differentiated material science expertise and proprietary production technologies. For example, we have launched products that take premium flooring trends, such as wire-brushed and hand-scraped finishes and multiple widths, into the decking market. Our competitive advantages enable us to create award-winning products and back them with some of the industry’s longest warranties, such as the 50-year fade & stain warranty that we offer on our TimberTech AZEK decking product line. Most of our product categories are in the early growth stage of their life cycles, and we anticipate that they will continue to benefit from substantial material conversion over the long term.

We have created an operating platform that is centered around sustainability, one of our core strategic pillars, which extends across our value chain from product design to raw material sourcing and manufacturing, and we increasingly utilize plastic waste, recycled wood and scrap in our products. We have also made significant recent investments in our recycling capabilities, including our recent acquisition of Return Polymers, which further enhance the sustainability of our manufacturing operations and reduce our costs. In fiscal year 2019, we opened a new polyethylene recycling facility that utilizes advanced technologies to transform a broad range of plastic waste into raw material used in our products. Today, our TimberTech PRO and EDGE decking lines offer high-quality products made from approximately 80% recycled material. Through our recycling programs, approximately 400 million pounds of waste and scrap were diverted from landfills in fiscal year 2020. Furthermore, approximately 99% of scrap generated at our Wilmington, Ohio and Scranton, Pennsylvania manufacturing facilities is re-used, and the majority of our TimberTech, AZEK Exteriors and Versatex products are recyclable at the end of their useful lives. In 2020, we launched an innovative program designed to provide dealers, contractors and mill shops a solution for recycling scrap PVC from construction sites and remodeling projects. Known as the FULL-CIRCLE PVC Recycling Program, we provide our partners with local on-site PVC collection bins. The collected PVC is cleaned, re-processed and recycled for reuse in our manufacturing processes across multiple product lines. In addition to the sustainability advantages and cost benefits of our vertically integrated in-house manufacturing operations, our supplier base is located primarily in the United States, making us less susceptible to trade disruptions or supply chain dislocations resulting from extended crises such as the COVID-19 pandemic.

Within our Residential segment, we sell our products through a national network of more than 4,200 dealers, more than 35 distributors and multiple home improvement retailers providing extensive geographic coverage, enabling us to effectively serve contractors across the United States and Canada. Our geographic breadth, combined with our extensive market knowledge and broad product portfolio, positions us to continue to accelerate our growth within the industry. Our customer-focused sales organization generates pull-through demand for our products by driving increased downstream engagement directly with consumers and key influencers such as architects, builders and contractors, and by focusing on strengthening our position with dealers and growing our presence in retail. We have been investing in our consumer brands, marketing campaigns and digital tools in order to strengthen our relationships with consumers and key influencers, many of

whom serve as advocates of our brands. Within our Commercial segment, we sell our products through a broad distribution network as well as directly to original equipment manufacturers, or OEMs.

Through our Residential and Commercial segments, we deliver market-focused product solutions that drive material conversion. We have experienced strong growth over our history, and over the last several years we have made significant investments in our business to further accelerate our growth and increase our profitability.

 

 

 

(1)

For a discussion of Segment Adjusted EBITDA and Segment Adjusted EBITDA Margin for fiscal year 2020, see the Segments Note in the Notes to our Consolidated Financial Statements and the discussion under “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Segment Results of Operations”, each of which is contained in our 2020 Form 10-K and is incorporated herein by reference. For a discussion of Segment Adjusted EBITDA and Segment Adjusted EBITDA Margin for the six months ended March 31, 2021, see the Segments Note in the Notes to our Consolidated Financial Statements and the discussion under “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Segment Results of Operations”, each of which is contained in our Form 10-Q for the three months ended December 31, 2020 and our Form 10-Q for the three months ended March 31, 2021, each of which is incorporated herein by reference.

(2)

10-Year Net Sales compound annual growth rate, or CAGR, refers to the CAGR for the ten years ended September 30, 2020, on a trailing twelve-month basis. Our growth over this period reflects the contribution to net sales of acquisitions, including the acquisitions of VAST Enterprises and TimberTech in fiscal year 2012 and Ultralox and Versatex in fiscal year 2018.

In fiscal year 2020, our net sales, net loss and Adjusted EBITDA were $899.3 million, $122.2 million and $213.5 million, respectively, and our net sales, net income and Adjusted EBITDA were $505.4 million, $32.8 million and $120.0 million, respectively, for the six months ended March 31, 2021. We intend to continue developing new products, building the leading consumer brand in Outdoor Living and leveraging our downstream-focused sales force, and we believe the demand for our products will benefit from continued material conversion and the resilience of the Outdoor Living market. Adjusted EBITDA is a non-GAAP financial measure used by management as a measure of our core operating results and the effectiveness of our business strategy. For more information on Adjusted EBITDA and for a reconciliation to net income, its most comparable financial measure calculated in accordance with GAAP, see “Prospectus Summary—Non-GAAP Financial Measures.”

INDUSTRY OVERVIEW

Our products are widely used across several large, attractive markets, including residential and commercial end markets. We primarily serve the Outdoor Living market, which we define as the market for decking, railing, trim, wood and wood-look siding, porches, pavers, outdoor furniture, outdoor cabinetry and outdoor lighting designed to enhance the utility and improve the aesthetics of outdoor living spaces. We serve this market with

our highly-engineered decking, railing and exteriors products, which have benefited from increased investment as homeowners choose to spend more leisure time outdoors. As more members of the Millennial generation purchase first homes in the United States, we expect the demand for outdoor living spaces will rise, and the appeal of low- to no-maintenance building and home products to gain further momentum. We believe that consumers are increasingly environmentally-conscious in their purchasing behaviors, and that our sustainable manufacturing practices and the high recycled content of our products address evolving consumer preferences.

Based on data provided by Principia Consulting, LLC, a third-party industry research and consulting firm, or Principia, the total U.S. market sales of residential decking, railing and trim products were $7.6 billion in 2019 and grew at a 6% CAGR from 2017 to 2019 on a linear foot basis and are expected to grow at a 5% CAGR from 2019 to 2023 on a linear foot basis. With respect to the individual components of the Outdoor Living market, the decking, railing and trim markets were approximately $3.3 billion, $2.2 billion and $2.1 billion, respectively, in 2019. In terms of volume, the decking, railing and trim markets were approximately 3.3 billion, 160.0 million and 2.0 billion linear feet, respectively, in 2019.

Composite decking (which includes wood composite and cellular PVC decking), railing and trim products have continued to increase in market share relative to other materials due to their superior and low-maintenance product qualities. Based on data provided by Principia, between 2017 and 2019, composite decking, composite and aluminum railing and PVC trim products collectively grew at a CAGR of 13% as compared to decking, railing and trim manufactured from wood, which grew at a CAGR of 5%, in each case measured in terms of linear feet. The total U.S. market sales of composite decking, composite and aluminum railing and PVC trim products are expected to grow at a 10% CAGR from 2019 to 2023, compared to decking, railing and trim manufactured from wood which are expected to grow at a 4% CAGR and to decking, railing and trim manufactured from other materials, such as engineered wood, vinyl and other metals, which are expected to grow at a 5% CAGR, in each case measured in terms of linear feet. In addition, based on data provided by The Freedonia Group, Inc., an international market research company, or Freedonia, the total U.S. market sales of wood and wood-look siding, pavers, outdoor furniture and outdoor lighting were $10.9 billion in 2018, and, when combined with the total U.S. market sales of decking, railing and trim according to Principia in 2019, represent an approximately $18.5 billion market. We believe the market for composite products will continue to increase relative to the market for traditional wood products as it benefits from material conversion.

 

 

 

Source: Principia DemandBuilder forecast of linear feet growth.

(1)	Represents total market (all materials). Principia market definition for trim excludes specialty exteriors products, such as tongue and groove profiles, sheets, sills, thresholds and column wraps.

(2)	Decking category includes composite and PVC decking, rail category includes composite and aluminum rail and trim category includes PVC trim.

Based on data provided by Principia, there were approximately 56 million decks in the United States as of 2019, of which approximately 5.4 million were built in 2019, up from approximately 4.1 million in 2014, representing a CAGR of 5.8%. Decking, our single largest product category, represents a significant opportunity for homeowners to extend the total livable space of their home and to design a unique space for relaxation and entertainment. Through our portfolio of Outdoor Living products, we provide a broad range of material and design options to homeowners as they tailor their outdoor living space to their unique lifestyle. In addition, we believe that we have significant opportunities to leverage our material science expertise, brand awareness and channel relationships to expand into additional segments of the Outdoor Living market. We believe that the current COVID-19 crisis, which has caused people to spend an extended amount of time at home, could be an additional catalyst that may cause an increasing number of homeowners to further recognize the benefits that our portfolio of Outdoor Living products can offer.

We believe our products offer a compelling value proposition due to their enhanced durability, quality, attractive aesthetics and lower life-cycle costs relative to traditional materials such as wood. For example, we estimate the total lifecycle cost of our new TimberTech EDGE Prime decking, including materials, labor and annual maintenance, is approximately 38% less expensive over its 25-year warranty period than the cost of a comparable pressure treated lumber deck. Further, given that the cost of our TimberTech EDGE Prime decking products typically constitutes approximately 16% of the total deck project installation cost, consumers have the opportunity to cost-effectively upgrade to our long-lasting, low-maintenance materials by replacing traditional deck boards with our product while utilizing an existing substructure that has been appropriately maintained.

 

 

 

(1)

These assumptions and estimates are based on AZEK market knowledge and feedback from decking-focused contractors with experience installing TimberTech and wood decking products. Actual costs for any particular installation can vary significantly. Assumes pressure treated lumber deck board pricing of $1.18 per linear foot based on December 2020 average prices.

(2)	Total Deck Project Installation Costs represent the total aggregate costs of an initial deck installation for a 16’ x 20’ elevated deck and exclude costs associated with the installation of rail or stairs.

(3)	Total Deck Life-Cycle Costs represent both the aggregate costs of an initial deck installation and the estimated maintenance costs over a 25-year period for a 16’ x 20’ elevated deck excluding potential replacement costs.

(4)	Other costs include substructure installation costs, initial staining and sealing of wood decking materials and the cost of top down fasteners for TimberTech EDGE Prime and pressure treated lumber and hidden fasteners for ipe and TimberTech AZEK Vintage.

(5)	Estimated maintenance costs include an assumed annual cleaning of TimberTech products and an assumed maintenance requirement of annual pressure washing and sanding, staining and sealing a pressure treated lumber deck every three years and an ipe deck every two years to maintain aesthetics.

Based on data provided by Principia, wood represented approximately 64% of the total U.S. decking, railing and trim markets based on 2019 linear feet sold. With respect to the individual components of these markets, based on this data, composite decking represented approximately 20% of the decking market, composite and aluminum railing represented approximately 16% of the railing market and PVC trim products represented approximately 11% of the trim market, each in terms of linear feet.

 

 

 

(1)

Based on data provided by Principia for 2019. Other includes (A) hollow vinyl, plastic lumber and metal for decking, (B) iron, stainless steel, hollow vinyl and other plastic for railing and (C) engineered wood, which represented approximately 17% of the total trim market, fiber cement, vinyl, other polymer composite and other for trim.

(2)	Wood for the decking market includes premium hardwoods, cedar and redwood, which accounted for approximately 13% of the total decking market in 2019 according to data provided by Principia.

We believe there is a significant opportunity for further market penetration by composite products as consumer awareness towards sustainable materials increases and advances in material science and manufacturing improve the range of colors and textures available. We offer products that reduce the relative premium between composite and other materials to increase the affordability and further improve the lifetime value advantages of composite products. In addition, we believe our products are well positioned to benefit from growth across economic cycles given their low market penetration and improving cost and value proposition. We believe that we have been, and will continue to be, a driving force behind the growth of low-maintenance products in our markets.

Our decking, trim, railing and accessory products are primarily sold through both one-step and two-step distribution channels, and we are increasing our direct engagement with consumers. Within our Residential segment, we sell our products to distributors, professional dealers and home improvement retailers, who in turn sell our products to builders, contractors and homeowners. Based on data provided by Principia, the relative industry volumes of composite decking, composite and aluminum railing and PVC trim products sold by distribution channel and by end user channel for 2019 were as follows:

 

 

 

 

 

(1)	Rail includes composite and aluminum rail.

We are a leader within the professional dealer channel due to our depth across product categories, brand reputation and the superior quality of our products. We estimate that our U.S. decking sales represented approximately 35% of total composite decking sales in 2019 and that our U.S. trim sales represented approximately 43% of total PVC trim sales in 2019, in each case within the professional dealer channel. Based on data provided by Principia, in 2019, the retail channel represented approximately 36% of the total $3.3 billion decking market, and, within that channel, composite decking sales represented approximately $0.5 billion. We estimate approximately half of all composite decking sales through that retail channel were special order products. Although approximately 10% of our Residential segment sales were directly through home improvement retailers, we have seen substantial year-over-year growth in special order sales through such retailers, resulting in a CAGR of such gross sales of over 20% between fiscal 2015 and fiscal 2020. We believe we have an opportunity for significant expansion within retail and that this channel represents a key area of potential growth for us in the future. Our Commercial segment sells its products to OEMs and through distribution channels that reach a number of end markets including education, industrial, commercial and marine.

THE AZEK DIFFERENCE

An Industry Leader in the Outdoor Living Market

We are a leader in a number of large and growing segments of the Outdoor Living market and are benefiting from the early stages of material conversion and secular growth trends. Our significant scale, vertically-integrated manufacturing capabilities and extensive material science expertise enable our leadership position. We have leveraged these capabilities to establish a track record of innovation across a broad range of products with superior quality, aesthetics and performance that has been recognized by respected industry sources. In the 2021 BUILDER brand use study of U.S. builders, developers and contractors, TimberTech decking ranked #1 for quality within the decking category, and in 2020 AZEK trim ranked #1 for quality within the decorative mouldings, trim and columns category. Additionally, our engineered bathroom partitions are a leading product specified by architects, and our Aria partitions won a Product Innovation Award from Architectural Products Magazine in 2018. Finally, in 2020, the Vinyl Sustainability Council awarded us the 2020 Vinyl Recycling Award in recognition of our sustainability and recycling innovations in our TimberTech AZEK decking line. These strengths, combined with our downstream focus and expanding marketing and digital strategy, have generated strong brand awareness and preference among contractors and consumers.

Serving Large, High-Growth and Resilient Markets That Are Benefitting from Material Conversion

We believe that the Outdoor Living market is benefiting from material conversion from traditional wood materials to low-maintenance, engineered materials. Based on data provided by Principia, wood represented approximately 64% of the total U.S. decking, railing and trim markets as measured by linear feet sold in 2019. Within the decking market specifically, composites represented approximately 20.4% of the total decking market in 2019, a shift from approximately 18.8% in 2018, representing an acceleration in the annual rate of material conversion from approximately 1% in previous years to 2% in 2019. Premium hardwoods, cedar and redwood comprise approximately 13% of the total decking market. We believe these markets present substantial growth opportunities in the coming years and that our leading scale, vertically-integrated manufacturing capabilities and extensive material science expertise position us to capitalize on these highly attractive markets as material conversion continues.

In addition, we believe that the residential repair and remodel market, which is the primary market served by our core products, is significantly more resilient through economic cycles than the home building industry. For example, from 2007 to 2009, single family housing starts declined approximately 57% according to the U.S. Census Bureau, while the home improvement products market declined approximately 14% according to the Home Improvement Research Institute. Moreover, our business demonstrated resilience through this period as net sales declined approximately 15% and cash flows from operations remained positive and increased through this period as a result of product mix, lower raw material costs and working capital management. In addition, even during periods of industry decline, we believe many home improvement projects are deferred rather than permanently cancelled, making it possible for industry activity to rebound quickly. We have increased our focus on serving the residential repair and remodel market over time, and we estimate that, within our Residential segment, approximately 80% of our net sales are attributable to repair and remodel activity. Based on data provided by Principia, in 2019, approximately 95% of total decking, 83% of railing and 46% of trim sales were attributable to the residential repair and remodel market. Our markets are also experiencing multiple favorable long-term secular growth trends. For example, within our Residential segment, consumers increasingly spend their leisure time outdoors and demand products that expand the usable living space of their home and enhance their outdoor lifestyle. In addition, according to the 2020 Home Design Trends Survey by the American Institute of Architects, outdoor living spaces have ranked as the most popular space amongst residential architects in the Home and Property Design report over the past six years. As a result, we believe our business will continue to benefit from strong material conversion, continued repair and remodel activity and favorable secular trends.

Premium Brands Known for Service, Quality, Aesthetics and a Broad Range of Styles and Designs

We achieved our premium brand reputation through our unwavering commitment to developing innovative new products that combine the latest style and design trends with our differentiated material science expertise and proprietary production technologies. For example, we have launched products that take premium flooring trends, such as wire-brushed and hand-scraped finishes and multiple widths, into the decking market.

In addition, we have deployed significant direct sales and service resources that have helped us develop strong brand awareness and loyalty among dealers, home improvement retailers and contractors. Over the last several years, we have made substantial investments to further enhance and strengthen our brands, including launching a variety of innovative new products with superior aesthetics, initiating cutting edge marketing campaigns, expanding our digital footprint and capabilities and unveiling a new set of tools focused on enhancing the consumer experience. We are well known in the industry, and we are generally one of the top two recognized brands in our product categories.

Committed to Sustainably Produced, Long-Lasting, Beautiful Products

Our steadfast focus on sustainability permeates our operations. Through our commitment to increasingly utilize recycled materials in the manufacturing of our products, we are able to reduce deforestation and advance a circular economy aimed at diverting waste from entering landfills and the continual use of resources. Approximately 90% of our gross sales are attributable to products that are manufactured through an extrusion process, and approximately 54% of all of our extruded materials were manufactured from recycled materials in fiscal year 2020, an increase from approximately 44% in fiscal year 2019. We believe there is an opportunity to increase this percentage in the future. Additionally, our operations are designed with sustainability in mind, with our facilities in Wilmington, OH and Scranton, PA employing closed-loop water filtration systems that recycle approximately 97% of water used annually and our polyethylene recycling facility utilizing energy-efficient systems for power, water, heating, cooling and lighting. Further, our products are designed to retain their aesthetic and structural qualities throughout their lifetimes, and the majority of our products are recyclable at the end of their useful lives. The increasing use of recycled content in our products also leads to improvements in our operating margins, as the flexibility of material input sourcing lowers input costs and reduces reliance on virgin raw materials.

Highly Versatile, U.S.-based Manufacturing Platform with Differentiated Capabilities

We are a vertically-integrated manufacturer, delivering superior quality products with a competitive cost position. Our versatile, process-oriented manufacturing operations are built on a foundation of extensive material development and processing capabilities. Our proprietary production technologies, material blending proficiency and range of extrusion methods enable innovation and facilitate expansion into new markets. We have deep experience working with multiple technologies that enable us to provide some of the industry’s most attractive visuals through advanced streaking and multi-color technologies. Our manufacturing footprint includes eight facilities across five geographic locations totaling approximately 2 million square feet, and we have made significant investments in people, processes and systems to increase our manufacturing scale and productivity. In addition, we recently announced plans to open a new manufacturing facility in Boise, Idaho, which is expected to be fully operational during fiscal 2022. In recent years, we have also expanded our vertical manufacturing capabilities with a 100,000 square foot polyethylene recycling facility, which opened in December 2018, and the acquisition of Return Polymers in February 2020, both of which enable further use of recycled content in our product offering and further reduce our reliance on higher-cost alternatives. In 2017, we introduced our AZEK Integrated Management System, or AIMS, to manage and monitor operations, and in 2018, we implemented Lean Six Sigma, or LSS, tools and techniques at our manufacturing facilities to reduce material waste and improve manufacturing efficiency. We believe these initiatives create an opportunity for continued expansion of our margins.

Leader in Product Development and Innovation with a Robust New Product Pipeline

Over the past 30 years, we have built an R&D organization with significant expertise in material science and production process technologies. We leverage our R&D and manufacturing capabilities to deliver innovative new products to market that address evolving customer needs while expanding our use of recycled materials. Our product managers and marketing team actively analyze proprietary consumer research and work with architects, contractors and consumers to identify and develop new products that incorporate consumer feedback, expand our portfolio and extend the range of style and design options we offer. Our R&D team then designs, prototypes and tests these new products prior to full scale production. Our rigorous R&D process incorporates in-house analytical capabilities and comprehensive product testing with more than 260 distinct tests, such as accelerated weathering. During the five years ended September 30, 2020, our team successfully led over 25 significant new product introductions, and, for the twelve-month period ended September 30, 2020, our blended Five Year New Product Vitality across our Residential segment and Commercial segment was approximately 35%. We define Five Year New Product Vitality as the percentage of gross sales in fiscal 2020 derived from products first introduced in fiscal 2020 and the four preceding years, excluding gross sales from Versatex, Ultralox and Return Polymers. We expect to continue to maintain a robust pipeline of new products and technologies that we intend to launch over the next several years, which we believe will help us continue to maintain our leadership in product innovation and drive strong product vitality.

Extensive Network of Contractors, Dealers and Distributors

Throughout our history, we have developed an extensive network in the United States and Canada of loyal contractors, dealers and distributors, many of whom are brand advocates for our products. Our extensive network consists of more than 4,200 dealers, over 150 distributor branch locations and thousands of contractors throughout the United States and Canada. We believe our strong relationships with dealers and contractors are driven by the trust and reliability that we have generated through product innovation, superior quality and performance, and the continuing service and support that we offer. Such support includes specialized training opportunities such as AZEK University and sales support initiatives such as digital lead generation, joint marketing funds, new sample kits, display kiosks, enhanced product literature, print, TV and radio advertising and social media initiatives. AZEK University provides hands-on training for contractors and customers using TimberTech and AZEK Exteriors products and our AZEK Pro Rewards program leverages our new website and digital capabilities to share curated digital leads with our contractors. In our Commercial segment, we sell our highly engineered polymer sheeting products through a network of approximately 130 engineered product distributors across the United States, Canada and Latin America, who sell primarily to OEMs, and we sell our low-maintenance bathroom partitions, shower and dressing stalls, lockers and other storage solutions through a network of approximately 900 dealers who sell to institutional and commercial customers across the United States and in Canada. We believe that the combination of consumer awareness for our product categories and our ability to directly engage with consumers to drive conversion makes us a highly attractive partner for our distributors, dealers, contractors and home improvement retailers, and that combination is a key reason that we expect them to continue to prioritize their own investment in our products and our product categories.

Strong Margin Profile with Significant Opportunity for Expansion

Our business has a strong margin profile driven by our differentiated premium branded products, vertically-integrated U.S.-based manufacturing capabilities and strong customer relationships. We continue to invest in new innovations in current and adjacent markets that we believe will support our long-term growth. Our Residential segment generated Segment Adjusted EBITDA Margin of 30.9% in the year ended September 30, 2020, and we are well positioned to continue to execute on our operational excellence initiatives, including recycling and continuous manufacturing efficiency improvement. As our recent capital investments mature, we believe there is a significant opportunity for us to expand our margins. In addition, a large percentage of our cost base is variable,

providing us with significant financial flexibility and the ability to manage costs to reflect changes in economic conditions.

Proven Management Team Focused on Execution

We have assembled a diverse team of highly experienced and accomplished executives with public company experience, a proven track record of leading global consumer and industrial organizations and driving profitable growth, product innovation, cost reduction and manufacturing efficiency. From fiscal year 2017 to fiscal year 2020, under our management team’s leadership, our Adjusted Gross Profit Margin increased by approximately 440 basis points while we continue to enjoy strong top line growth. Our Chief Executive Officer, Jesse Singh, joined our team in 2016, after serving in numerous leadership roles at 3M, including Chief Commercial Officer, President of 3M’s Health Information Systems business and VP of the Stationery and Office supplies business, which included the iconic Post-it and Scotch Brands. Our Chief Financial Officer, Ralph Nicoletti, joined our team in 2019 after serving as Executive Vice President and Chief Financial Officer of Newell Brands and has more than 35 years of finance experience. Collectively, our team is approximately 45% gender and ethnically diverse and has extensive experience at leading companies, including 3M, Newell Brands, Owens Corning, Eaton, Armstrong, Grainger and Emerson. Our management team has executed key strategic initiatives across the platform to drive accelerated growth and improved profitability, including upgrading operational capabilities, implementing productivity tools, and investing in new products, sales force expansion, marketing, M&A and internal recycling capabilities.

OUR GROWTH STRATEGY

We believe our multi-faceted growth strategy positions us to drive profitable above-market growth in the markets we serve.

Introduce Innovative New Products That Expand Our Markets

We have a proven track record of developing innovative new products across multiple price points that accelerate material conversion, increase the use of recycled materials and expand our markets. Our strong manufacturing capabilities, proprietary production technologies, detailed consumer research and extensive material science expertise allow us to rapidly introduce differentiated products. In our Residential segment, our new products are driving conversion away from traditional wood materials across all pricing segments, from various forms of pressure treated wood at the entry level to more exotic woods such as cedar and ipe at the premium level. In 2019, our Residential segment launched three new product platforms: TimberTech EDGE, Multi-Width decking and PaintPro trim. We believe that TimberTech EDGE will accelerate conversion of low-cost traditional pressure treated wood materials by offering superior aesthetics and performance at an accessible price point. Our entry-level decking category volume, which includes our TimberTech PRO Terrain collection in addition to our TimberTech EDGE collections, increased at a nearly 30% CAGR on a linear foot basis from fiscal 2018 to fiscal 2020. Multi-Width decking, which extends the technological advancements available in our highly successful Vintage platform, expands the range of style and design options available to consumers seeking premium decking solutions and provides a unique combination of superior performance and a natural wood-look and feel. Our premium TimberTech AZEK Vintage collection volume increased at over a 30% CAGR on a linear foot basis from fiscal 2018 to fiscal 2020. PaintPro expands the addressable market for our trim products and accelerates wood conversion by delivering the same high-quality, low-maintenance performance of traditional white PVC trim across a full spectrum of paintable colors.

Each year, we continue to launch new products across our business, and as of the year ended September 30, 2020, our blended Five Year New Product Vitality across our Residential segment and Commercial segment was approximately 35%. In 2020, we expanded on these product innovations in our Residential segment and launched

a new multi-color TimberTech EDGE Prime+ decking collection, a new Wide-Width profile for the TimberTech AZEK Harvest decking collection and the new, multi-tonal Reserve collection under the TimberTech PRO decking line, among others. In addition, we are implementing a multi-year capital investment program to increase capacity and further support our future growth. We will continue to leverage our material technology capabilities and commission detailed consumer research to regularly introduce new products that set us apart from our competition and accelerate future growth.

Accelerate Market Conversion by Capitalizing on Downstream Investments

We view the continued growth in homeowner outdoor investment and repair and remodel activity as a powerful secular trend driving material conversion across our industry. We believe low-maintenance alternatives at a range of premium quality designs and accessible pricing will continue to increase consumer demand and accelerate material conversion.

Over the four years ended September 30, 2020, we have increased our R&D, sales and marketing expenses by over 30% in the aggregate, and we continue to make additional investments that we believe will accelerate material conversion and growth in our markets. We expanded our marketing organization and sales force with new talent, enabling us to generate greater awareness of our products and enhance our sales growth in underpenetrated markets and geographies. We invested in new premium and traditional merchandising displays for our dealers and special order merchandising and training for pro desk support associates for our home improvement retailers to increase consumer awareness of our products and to accelerate sales growth. Starting in 2018, we have added new trim and retail focused sales teams and have also established a dedicated sales team to enhance our dealer sales in underpenetrated geographies. We believe these initiatives are helping to accelerate our growth. For example, we believe our trim-focused sales team has helped increase our AZEK Exteriors net sales by an approximately 14% CAGR between fiscal year 2018 to fiscal year 2020. In addition to expanding our sales force, we realigned the compensation framework for our sales teams to increase downstream engagement with consumers and key influencers such as architects, builders and contractors, to drive increased pull-through demand for our products. We recently opened our third AZEK University location in Chicago, and we are hosting regular contractor training events to encourage contractors to use our products. We believe we can continue to leverage our downstream investments to accelerate material conversion in our markets, strengthen our position in the pro channel and enhance our retail presence.

Build the Leading Consumer Brand in Outdoor Living

We are well-known for quality, innovation and delivering a broad range of on-trend style and design options to customers. We have made significant investments in sales and marketing and R&D over the past two years to differentiate and strengthen our brands and to simplify and transform the consumer experience for purchasing our products. In 2019, we unified our decking and railing product portfolio under our leading TimberTech brand with a differentiated “Go Against the Grain” marketing campaign. We continue to invest in our marketing organization and alongside our channel partners to increase consumer awareness and preference for our products. Our focused digital strategy, enhanced media presence and differentiated marketing campaigns drive increased engagement with consumers and homeowners as well as key influencers such as architects, builders and contractors. Our new digital platform facilitates the consumer journey from inspiration and design through installation. The experience educates consumers on the features and benefits of our products versus traditional materials, utilizes digital visualization tools to allow consumers to re-imagine their outdoor living spaces and directly connects them to a pre-qualified local contractor. During fiscal year 2020, website traffic to our outdoor living branded websites increased by over 40% and sample orders for our decking products have increased over 50%, in each case when compared to the prior year. We enjoy strong preference for our products among contractors, who typically purchase our products at dealers, and we are investing to increase our presence within home improvement retailers as the majority of consumers include visits to home improvement retailers in their

research of decking products. These consumer engagement strategies are focused on creating additional pull-through demand and accelerating our growth.

Expand Margins Through Enhanced Recycling Capabilities and Productivity Initiatives

Our broad range of U.S.-based manufacturing capabilities, proprietary production technologies and extensive material science expertise position us as a leading innovator in the Outdoor Living market, and our brands command premium prices and afford us a strong margin profile. However, we believe there is an opportunity for significant improvement in our margins as we continue to invest in and expand our recycling capabilities and focus on operational excellence. Since fiscal year 2017, we have invested nearly $60 million in developing and enhancing our recycling capabilities to substantially reduce our material cost, divert waste from landfills and increase our utilization of recycled materials. For example, in fiscal year 2020, we increased the recycled material content used in the core of our deck boards by approximately 20%, as compared to the recycled material content in fiscal year 2019. Increasing the recycled material content in our deck boards has allowed us to substantially reduce the utilization of virgin HDPE in the production of the core of our TimberTech PRO and EDGE products, enabling material cost savings when compared to legacy material content formulations. We are still in the early stages of the material substitution journey across our manufacturing network and realizing the benefits of our investments in recycling, and we expect to drive additional cost savings as we ramp up internal processing and sourcing of recycled materials used in the manufacturing of our products.

In addition to enhancing our recycling capabilities, we have also implemented various LSS initiatives across our manufacturing operations to reduce waste and enhance productivity. We identified and have begun to implement additional projects that we expect will provide incremental net manufacturing productivity in the coming years. We believe AIMS, our investments in people, processes and equipment and our investments in recycling, productivity and operational excellence will enable us to expand our margins through reduced material cost, improved net manufacturing productivity and enhanced business operations.

Execute Strategic Acquisitions That Broaden Our Platform and Enhance Our Manufacturing Operations

Our markets are large and highly fragmented, and they provide a wide range of opportunities for us to execute acquisitions to augment our growth independent of end-market demand. We have completed several strategic acquisitions since our company was founded, and we have proven to be a highly effective consolidation platform. For example, the acquisition of Versatex strengthened our position in the trim and moulding market, enhanced our product capabilities and generated attractive cost savings, and the acquisition of Ultralox extended our railing portfolio to include aluminum solutions with proprietary interlocking technology and expanded our ability to address the high-growth aluminum railing market.

We intend to continue to prudently execute strategic acquisitions and utilize our disciplined process to identify, evaluate, execute and integrate acquired businesses. We actively monitor a pipeline of attractive opportunities across multiple product categories and geographies. We target opportunities that strengthen our existing platforms, enhance our market positions, expand our portfolio of products and technology capabilities and increase our business diversity. In addition, the acquisitions we pursue must also provide opportunities for us to leverage our strong U.S.-based manufacturing capabilities, material formulation proficiency and extensive dealer and distributor network to meaningfully enhance their scale, growth, profitability and cash flow. For example, we recently acquired Return Polymers, which we expect will significantly enhance our in-house recycling capabilities, reduce reliance on external suppliers and further improve our overall manufacturing cost position.

ENVIRONMENTAL AND SOCIAL RESPONSIBILITY; CORPORATE GOVERNANCE

One of our core values is to “always do the right thing”. We make decisions according to what is right, not what is the cheapest, fastest or easiest, and we strive to always operate with integrity, transparency and with the customer in mind. By extension, ESG stewardship is part of our corporate DNA. Our inclusive culture is driven by a shared passion for our corporate values and commitment to build a more sustainable future. We are focused on sustainability across our operations. We are committed to further accelerating the use of recycled materials across our portfolio of products, diverting millions of pounds of waste from entering landfills each year and enabling us to meet the growing demand for environmentally-friendly products that advance a circular economy.

Under the direction of our Chief Executive Officer and the board of directors, we are focused on achieving a high level of environmental and social responsibility and strong corporate governance. The Nominating and Corporate Governance Committee of our board of directors is responsible for overseeing our strategy on corporate social responsibility and sustainability, including ESG matters and related policies and communications. Additionally, we have established an internal ESG Steering Committee comprised of cross-functional leaders from across our organization that is focused on implementing ESG strategies and policies and reports directly to our Chief Executive Officer. Finally, we recently hired a Vice President of ESG who is responsible for continuing to drive the company-wide ESG strategy and initiative, further demonstrating our commitment to ESG stewardship.

Our corporate values serve as a belief system that guides how we work. These values influence our decisions, our interactions with colleagues and customers, and our standards for behavior. Our core value of “always do the right thing” is the foundation of our overarching commitment to ESG stewardship. In accordance with this commitment, we recently became a signatory to the United Nations Global Compact, a voluntary global initiative focused on advancing sustainable and responsible business practices related to human rights, labor, the environment and anti-corruption.

We operate our business in a manner that promotes sustainability and environmental stewardship across our value chain from product design to raw material sourcing and manufacturing to employee, customer and stakeholder communications and engagement. As part of the building materials industry, we believe that we can play a role in advancing the circular economy to create a more sustainable future by increasing the recycling of wood, plastic and water, monitoring our product lifecycle, reducing our carbon footprint and encouraging those in our supply chain to do the same. We estimate that our carbon intensity decreased by 9.2% from 2019 to 2020, as measured in tonnes of carbon dioxide equivalent, or tCO2e, per $1 million net sales. This commitment is evident through our continued effort to introduce sustainable products, products with life spans that are significantly longer than the life spans of the traditional materials they replace (including exotic hardwoods cut from rainforests) with very little need for maintenance or cleaning chemicals, products that reduce deforestation and products that are versatile and recyclable at the end of their useful lives. We estimate that since 2001 approximately three million trees have been saved because our customers chose our decking products over wood. The wood used in the core of our composite decking products is 100% recycled from sources that include, but are not limited to, facilities that manufacture wood mouldings, flooring, windows, doors and other products. Through our recycling programs, approximately 400 million pounds of scrap and waste were diverted from landfills in fiscal year 2020. In February 2021, we announced a goal to utilize 1 billion pounds of recycled material, annually, in the manufacturing of our products by the end of 2026. In addition, in May 2021, we released our inaugural ESG report, which details our commitment to recycling and sustainability, our positive and inclusive social impact and our goal of revolutionizing the Outdoor Living industry into a more sustainable and innovative version of itself. Our report was published in alignment with the Sustainability Accounting Standards Board reporting framework and includes both a retrospective view of our recent ESG performance as well as our outlook for the future.

Our Environmental, Health and Safety, or EHS, Policy outlines our management programs and expectations throughout our operations and businesses. We manage operational hazards and risks to provide workplaces that are safe and healthy for our employees, visitors, contractors, customers, and the communities in which we

operate. We train our employees, so they have the awareness, knowledge and skills to work in a safe and environmentally responsible manner. We continually are reviewing and improving our EHS performance through ongoing training, objectives and management systems. In addition, we have committed to increase the minimum wage of our hourly employees to $15.00 by the end of 2021.

As a company, we are committed to being responsible and respected citizens in the communities in which we live and work. We are dedicated to supporting organizations that help people live more productive, educated and enriched lives and encourage our employees to contribute their time to support various community and charitable activities in alignment with their values.

Our corporate governance policies set clear expectations and responsibilities for our leaders, employees and business partners to ensure we conduct our operations in a manner that is consistent with high standards of business ethics and accountability and is based on maintaining a close alignment of our interests with those of our stakeholders. Notable features of our corporate governance structure include the following:

 

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Nine of our ten directors have been determined to be independent for purposes of the NYSE corporate governance listing standards and Rule 10A-3 under the Exchange Act.

 

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Our non-executive chairperson of the board of directors convenes and chairs executive sessions of the independent directors to discuss certain matters without executive officers present.

 

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Three of our directors qualify as an “audit committee financial expert” as defined by the SEC.

 

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Two of our directors, including the chairperson of our Audit Committee, are women, and another two of our directors are considered of diverse ethnicity and race, constituting approximately 40% of our board of directors in furtherance of our board diversity policy.

 

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Our Corporate Governance Guidelines provide for a target retirement age of 75 for our directors.

 

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Our Insider Trading Policy prohibits the purchase or sale of our securities by any of our directors, officers, employees and consultants on the basis of material nonpublic information, and also prohibits our directors and officers from hedging our equity securities, holding such securities in a margin account or pledging such securities as collateral for a loan.

 

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We have adopted a Compensation Recovery Policy whereby we are able to recoup performance- or incentive-based compensation in the event of an accounting restatement due to material noncompliance with any financial reporting requirements under the securities laws.

 

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Our Nominating and Corporate Governance Committee oversees and directs our ESG strategies, activities, policies and communications.

 

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ESG is a component of individual performance under our 2021 management incentive compensation plan.

In order to foster high standards of ethics and conduct in all business relationships, we have adopted a Code of Conduct and Ethics policy, or the Code of Conduct. This policy covers a wide range of business practices and procedures and applies to our officers, directors, employees, agents, representatives, and consultants. In addition and as a part of the Code of Conduct, we have implemented whistleblowing procedures that allow covered persons to report, on a confidential basis, concerns regarding, among other things, any questionable or unethical accounting, internal accounting controls or auditing matters with our Audit Committee as well as any potential Code of Conduct or ethics violations with our Nominating and Corporate Governance Committee or our Chief Legal Officer. We review all of these policies on a periodic basis with our employees.

Our business is managed by our executive officers, subject to the supervision and oversight of our board of directors. Our directors stay informed about our business by attending meetings of our board of directors and its committees and through supplemental reports and communications.

OUR RESPONSE TO COVID-19

Since the onset of the COVID-19 pandemic, we have been focused on protecting our employees’ health and safety, meeting our customers’ needs as they navigate an uncertain financial and operating environment, working closely with our suppliers to protect our ongoing business operations and rapidly adjusting our short-, medium- and long-term operational plans to proactively and effectively respond to the current and potential future public health crises. While the COVID-19 pandemic presents serious concerns for our business and operations, our employees and their families, our customers and our suppliers, we believe that we are adapting well to the wide-ranging changes that the global economy is currently undergoing, and we remain confident that we will continue to maintain business continuity, produce and sell our products safely and in compliance with applicable laws and governmental orders and mandates, maintain our robust and flexible supply chains and be in a strong position to maintain financial success even in the event of a potentially extended economic downturn, in part because our manufacturing facilities have continued and continue to operate as they have been determined to be “essential businesses” in the jurisdictions where they are located.

Based on recent demand trends that we have experienced, our medium-term expectations include increased interest among homeowners in enhancing their Outdoor Living spaces as they spend more time at home during, and likely following, the COVID-19 pandemic. We also believe there could be increased interest in homeownership as consumers look for larger living spaces. Further, we anticipate that consumers will increasingly shop online, and we continue to enhance our digital sales capabilities and direct, personal interaction with homeowners to more easily allow them to research, and ultimately purchase, our products.

We have taken a number of steps to adapt our business and operations to the current environment. First and foremost, we have implemented measures to protect the health and safety of our employees. These measures include providing for employees who are able to work remotely to do so, enacting and enforcing employee spacing protocols in our factories, reducing the need for face-to-face interactions, and providing facial protection and other personal protection equipment to on-site employees.

We have also taken steps to engage directly with our distributors to share information and ensure we are servicing the market appropriately. In addition to engaging directly with distributors, we are adapting how we reach customers in response to changing consumer behavior. For example, we are focused on expanding and enhancing our digital “shop from home” content and marketing, while leveraging our call center to support customers and generate leads. We are expanding our do-it-yourself tools and continuing our contractor and architect training in a digital format, emphasizing contactless designs and proposals for new projects.

At the onset of the COVID-19 pandemic, we took steps to reduce costs and to align our manufacturing to then-current and expected demand. As initial stay-at-home orders were lifted and construction remained essential, demand conditions improved, and, by June 2020, we saw a sharp acceleration in demand across our residential channels as consumers, spending more time at home, invested and continue to invest in home improvement and their Outdoor Living spaces.

Based on demand trends and our increased confidence in the significant long-term large wood conversion opportunity, certain costs that were reduced at the onset of the COVID-19 pandemic are expected to return, and we are accelerating and expanding the deployment of our previously announced approximately $180 million capacity expansion plan. The first and second phases of our multi-phase capacity expansion plan are expected to be complete by the end of the third quarter of fiscal year 2021, providing cumulatively approximately 40% more decking capacity relative to our decking capacity at the end of fiscal year 2019. The third phase involves the opening of a new manufacturing facility, which we recently announced will be located in Boise, Idaho and is expected to be fully operational during fiscal 2022 and contribute approximately 30% more decking capacity. We also recently announced an upsizing of our capacity expansion program by approximately $50 million to $60 million for the remainder of fiscal year 2021. This upsizing is expected to add an incremental 15% of decking and recycling capacity in early 2022 in addition to the previously mentioned 70% increase. Cumulatively, we now expect a total of approximately 85% in incremental decking capacity when compared to the end of fiscal 2019, combined with increases in recycling, railing and exteriors capacity over the next 18 months.

Although we have implemented measures to mitigate the impact of the COVID-19 pandemic on our business, financial condition and results of operations, including reducing our production and expenses, we expect that these measures may not fully mitigate the impact of the COVID-19 pandemic on our business, financial condition and results of operations. We cannot predict the degree to, or the period over, which we will be affected by the pandemic and resulting governmental and other measures. The global impact of the COVID-19 pandemic continues to rapidly evolve, and we will continue to monitor the situation closely. As the COVID-19 pandemic continues, it may also have the effect of heightening many of the risks described in or incorporated by reference into this prospectus.

Implications of Being an Emerging Growth Company

We qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. An emerging growth company may take advantage of relief from certain reporting requirements and other burdens that are otherwise applicable generally to public companies. These provisions include:

 

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reduced obligations with respect to financial data, including presenting only three years of audited financial statements and only three years of selected financial data;

 

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an exemption from compliance with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act;

 

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reduced disclosure about our executive compensation arrangements in our periodic reports, proxy statements, and registration statements; and

 

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exemptions from the requirements of holding non-binding advisory votes on executive compensation or golden parachute arrangements.

In addition, under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have elected to avail ourselves of this exemption from new or revised accounting standards, and, therefore, we will not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies or that have opted out of using such extended transition period, which may make comparison of our financial statements with those of other public companies more difficult. We may take advantage of these reporting exemptions until we no longer qualify as an emerging growth company, or, with respect to adoption of certain new or revised accounting standards, until we irrevocably elect to opt out of using the extended transition period. Based on our public float calculation at March 31, 2021, we will be deemed a Large Accelerated Filer and will cease to qualify as an emerging growth company effective September 30, 2021. The loss of emerging growth company status will also result in losing the reporting exemptions noted above.

Our Sponsors

Prior to this offering, Ares and OTPP, and, together with Ares, the Sponsors, owned approximately 35.8% of our common stock. After giving effect to this offering, Ares and OTPP will hold 20,221,090 and 20,220,990 shares of our Class A common stock, respectively. OTPP will continue to hold 100 shares of our Class B common stock, which will represent all outstanding shares of our Class B common stock. After giving effect to this offering, Ares and OTPP will hold approximately 13.1% and 13.1%, respectively, of our aggregate common stock.

Even though our Sponsors no longer own a majority of our common stock, our Sponsors will continue to have significant power to control our affairs and policies, including with respect to the election of directors (and through the election of directors, the appointment of management). For a description of certain potential conflicts between the Sponsors and our other stockholders, see “Risk Factors—The Sponsors will continue to hold a

substantial portion of our outstanding common stock following this offering, and the Sponsors’ interests may conflict with our interests and the interests of other stockholders.” For a description of the Sponsors’ ownership interests in us and their rights with respect to such ownership interests, including the right to designate individuals to be included in the slate of nominees for election to our board of directors, see “Principal and Selling Stockholders” and “Description of Capital Stock” included elsewhere in this prospectus and “Related Person Transactions” contained in our Definitive Proxy Statement on Schedule 14A, filed with the SEC on April 1, 2021, and incorporated herein by reference.

Corporate Conversion

In connection with our IPO, our predecessor was converted into a Delaware corporation pursuant to a statutory conversion and changed its name to The AZEK Company Inc. In addition, a special purpose entity, CPG Holdco LLC, which was formed at the time of the acquisition of our predecessor solely for the purpose of holding membership interests in our predecessor and that continued to hold such interests until the Corporate Conversion, was merged with and into us. In this prospectus, we refer to all of the transactions related to our conversion into a corporation and the merger described above as the Corporate Conversion. As a result of the Corporate Conversion, The AZEK Company Inc. succeeded to all of the property and assets of our predecessor and succeeded to all of the debts and obligations of our predecessor. The AZEK Company Inc. is governed by a certificate of incorporation filed with the Delaware Secretary of State and bylaws, the material provisions of which are described under the heading “Description of Capital Stock.”

Corporate Information

Our predecessor, CPG Newco LLC (formerly known as AOT Building Products Newco LLC) was formed on August 15, 2013 in connection with the Sponsors’ acquisition of CPG International LLC. On June 11, 2020, we became a Delaware corporation and changed our name to The AZEK Company Inc. Our principal executive offices are located at 1330 W Fulton Street, Suite 350, Chicago, Illinois 60607, and our telephone number is 877-275-2935. Our website address is www.azekco.com. Information contained on, or that can be accessed through, our website is not part of and is not incorporated by reference into this prospectus, and you should not consider information on our website to be part of this prospectus.

“The AZEK Company,” “AZEK,” “TimberTech,” “TimberTech EDGE,” “TimberTech PRO,” “TimberTech AZEK,” “PaintPro,” “Harvest Collection,” “Arbor Collection,” “Vintage Collection,” “ULTRALOX,” “VERSATEX,” “Vycom,” “Impression Rail Express,” “Scranton Products,” “Return Polymers,” the AZEK logo, the TimberTech logo, the ULTRALOX logo, the VERSATEX Logo, the Vycom logo, the Scranton Products logo, the Return Polymers logo and other trademarks or service marks of The AZEK Company and its direct and indirect subsidiaries appearing in this prospectus are the property of The AZEK Company. This prospectus contains additional trade names, trademarks and service marks of others, which are the property of their respective owners. Solely for convenience, trademarks and trade names referred to in this prospectus generally appear without the ^® or ^™ symbols.

The Offering

 

Class A common stock offered by the selling stockholders

15,000,000 shares

 

Class A common stock to be outstanding after this offering

154,739,238 shares

 

Class B common stock to be outstanding after this offering

100 shares

 

Total Class A common stock and Class B common stock to be outstanding after this offering

154,739,338 shares

 

Option to purchase additional shares of Class A common stock

The selling stockholders have granted the underwriters an option, exercisable for 30 days after the date of this prospectus, to purchase up to 2,250,000 additional shares of Class A common stock from the selling stockholders at the public offering price, less the underwriting discount.

 

Use of proceeds

The selling stockholders will receive all of the net proceeds from this offering. We will not receive any proceeds from the sale of shares in this offering. See “Use of Proceeds.”

 

Voting and conversion rights

Following this offering, we will continue to have two classes of common stock: Class A common stock and Class B common stock. The rights of the holders of Class A common stock and Class B common stock are identical, except with respect to voting and conversion.

 

Each share of our Class A common stock entitles its holder to one vote per share on all matters to be voted upon by the stockholders. Each share of our Class B common stock entitles its holder to one vote per share on all matters to be voted upon by stockholders, except with respect to the election, removal or replacement of directors. Shares of our Class B common stock will not entitle the holders thereof to vote with respect to the election, removal or replacement of directors. Holders of Class A common stock and Class B common stock will generally vote together as a single class on all matters other than with respect to the election, removal or replacement of directors.

 

Holders of our shares of Class B common stock may convert their shares of Class B common stock into shares of our Class A common stock on a one-for-one basis, in whole or in part, at any time and from time to time at their option. Additionally, each share of Class A common stock is convertible into one share of Class B common stock at any time and from time to time at the option of the holder so long as such holder holds one or more shares of Class B common stock at the time of conversion. OTPP will continue to hold all shares of our

Class B common stock outstanding immediately following this offering. See “Description of Capital Stock.”

 

Dividend policy

We currently do not anticipate declaring or paying any cash dividends for the foreseeable future. Any future determination relating to dividend policy will be made at the discretion of our board of directors and will depend on a number of factors, including restrictions in our current and future debt instruments, our future earnings, capital requirements, financial condition, future prospects, and applicable Delaware law, which provides that dividends are only payable out of surplus or current net profits. See “Dividend Policy.”

 

Risk factors

See “Risk Factors” and the other information included in and incorporated by reference into this prospectus for a discussion of factors you should carefully consider before deciding to invest in our Class A common stock. See “Incorporation of Certain Information by Reference.”

 

NYSE symbol

“AZEK”

All references to common stock that are not qualified by reference to a particular class refer to our Class A common stock and our Class B common stock collectively.

In addition, unless otherwise expressly stated or the context otherwise requires, the information in this prospectus assumes no exercise of the underwriters’ option to purchase 2,250,000 additional shares of our common stock from the selling stockholders.

Unless we indicate otherwise or the context otherwise requires, all information in this prospectus reflects 154,739,238 shares of Class A common stock and 100 shares of Class B common stock outstanding as of March 31, 2021 and does not give effect to or reflect the following shares as of March 31, 2021:

 

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5,031,602 shares of Class A common stock issuable upon the exercise of options, with a weighted average exercise price of $23.27 per share (of such options, 2,693,580 were vested and exercisable as of March 31, 2021);

 

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464,274 shares of Class A common stock issuable upon the vesting of restricted stock units; and

 

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4,606,519 shares of Class A common stock available for further issuance under our 2020 Omnibus Incentive Plan after the completion of this offering.

Summary Consolidated Financial Data

The summary consolidated statements of income data and summary consolidated statements of cash flow data for fiscal years 2020, 2019 and 2018 have been derived from our Consolidated Financial Statements incorporated by reference into this prospectus. The summary consolidated statements of income data and summary consolidated statements of cash flow data for the six months ended March 31, 2021 and 2020 and the summary consolidated balance sheet data as of March 31, 2021 have been derived from our unaudited Consolidated Financial Statements incorporated by reference into this prospectus. In the opinion of management, our unaudited Consolidated Financial Statements were prepared on the same basis as our audited Consolidated Financial Statements and include all adjustments necessary for a fair presentation of the financial information set forth in those statements.

Our historical results are not necessarily indicative of future operating results and our results for the six months ended March 31, 2021 are not necessarily indicative of the results that may be expected for the full fiscal year or any other period. Because this table is a summary and does not provide all of the data contained in our Consolidated Financial Statements, it should be read together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our Consolidated Financial Statements and related Notes included in our 2020 Form 10-K, our Form 10-Q for the three months ended December 31, 2020 and our Form 10-Q for the three months ended March 31, 2021, each of which is incorporated by reference into this prospectus.

 

(U.S. dollars in thousands, except share and per share data)		Six Months Ended March 31,								Years Ended September 30,
		2021				2020				2020				2019				2018
Consolidated Statements of Income Data:
Net sales		$	505,399			$	411,628			$	899,259			$	794,203			$	681,805
Cost of sales			334,560				280,965				603,209				541,006				479,769
Gross profit			170,839				130,663				296,050				253,197				202,036
Selling, general and administrative expenses			112,926				93,166				308,275				183,572				144,688
Other general expenses			1,149				5,093				8,616				9,076				4,182
Loss (gain) on disposal of property, plant and equipment			298				28				904				1,495				791
Operating income (loss)			56,466				32,376				(21,745	)			59,054				52,375
Interest expense			12,712				39,734				71,179				83,205				68,742
Loss on extinguishment of debt			—				—				37,587				—				—
Income (loss) before income taxes			43,754				(7,358	)			(130,511	)			(24,151	)			(16,367	)
Income tax expense (benefit)			10,914				(1,600	)			(8,278	)			(3,955	)			(23,112	)
Net income (loss)		$	32,840			$	(5,758	)		$	(122,233	)		$	(20,196	)		$	6,745
Net income (loss) per common share
Basic		$	0.21			$	(0.05	)		$	(1.01	)		$	(0.19	)		$	0.06
Diluted		$	0.21			$	(0.05	)		$	(1.01	)		$	(0.19	)		$	0.06
Weighted average shares used in calculating net income (loss) per share
Basic			153,366,516				108,162,741				120,775,717				108,162,741				108,162,741
Diluted			156,377,902				108,162,741				120,775,717				108,162,741				108,162,741

		Six Months Ended March 31,								Years Ended September 30,
(U.S. dollars in thousands, except share and per share data)		2021				2020				2020				2019				2018
Consolidated Statements of Cash Flow Data:
Net cash provided by (used in) operating activities		$	6,955			$	(68,032	)		$	98,361			$	94,872			$	67,302
Net cash provided by (used in) investing activities			(71,963	)			(60,240	)			(113,794	)			(62,935	)			(335,682	)
Net cash provided by (used in) financing activities			1,313				117,023				124,498				(8,273	)			248,742
Purchases of property, plant and equipment			(71,995	)			(42,606	)			(95,594	)			(63,006	)			(42,758	)
Non-GAAP Financial Measures:
Adjusted Gross Profit(1)		$	203,437			$	161,755			$	359,066			$	314,858			$	254,075
Adjusted Gross Profit Margin(2)			40.3	%			39.3	%			39.9	%			39.6	%			37.3	%
Adjusted Net Income(3)		$	62,289			$	22,030			$	72,632			$	46,663			$	44,645
Adjusted Diluted EPS(4)		$	0.40			$	0.20			$	0.59			$	0.43			$	0.41
Adjusted EBITDA(5)		$	119,963			$	89,624			$	213,513			$	179,566			$	150,065
Adjusted EBITDA Margin(6)			23.7	%			21.8	%			23.7	%			22.6	%			22.0	%

 

(1)	We define Adjusted Gross Profit as gross profit before depreciation and amortization, business transformation costs and acquisition costs.

(2)	We define Adjusted Gross Profit Margin as Adjusted Gross Profit divided by net sales.

(3)

We define Adjusted Net Income as net income (loss) before amortization, stock-based compensation costs, asset impairment costs, business transformation costs, acquisition costs, initial public offering costs, capital structure transaction costs and certain other costs. In addition, Adjusted Net Income for fiscal year 2018 excludes the net benefit related to the remeasurement of our deferred tax assets and deferred tax liabilities as a result of the Tax Act.

(4)	We define Adjusted Diluted EPS as Adjusted Net Income divided by weighted average common shares outstanding—diluted, to reflect the conversion or exercise, as applicable, of all outstanding shares of restricted stock awards, restricted stock units and options to purchase shares of our common stock.

(5)	We define Adjusted EBITDA as net income (loss) before interest expense, net, income tax (benefit) expense and depreciation and amortization and by adding to or subtracting therefrom certain items of expense and income.

(6)	Adjusted EBITDA Margin is equal to Adjusted EBITDA divided by net sales.

 

(In thousands)		As of March 31, 2021
Consolidated Balance Sheet Data:
Cash and cash equivalents		$	151,317
Working capital(1)			331,575
Total assets			1,990,401
Total current liabilities			126,205
Total long-term debt—less current portion			464,146
Total stockholders’ equity			1,349,403

 

(1)	Working capital represents current assets less current liabilities.

Non-GAAP Financial Measures

To supplement our Consolidated Financial Statements prepared and presented in accordance with generally accepted accounting principles in the United States, or GAAP, we use certain non-GAAP performance financial measures, as described below, to provide investors with additional useful information about our financial performance, to enhance the overall understanding of our past performance and future prospects and to allow for greater transparency with respect to important metrics used by our management for financial and operational decision-making. We are presenting these non-GAAP financial measures to assist investors in seeing our financial performance from management’s view and because we believe they provide an additional tool for investors to use in comparing our core financial performance over multiple periods with other companies in our industry. Our GAAP financial results include significant expenses that may not be indicative of our ongoing operations as detailed in the tables below.

However, non-GAAP financial measures have limitations in their usefulness to investors because they have no standardized meaning prescribed by GAAP and are not prepared under any comprehensive set of accounting rules or principles. In addition, non-GAAP financial measures may be calculated differently from, and therefore may not be directly comparable to, similarly titled measures used by other companies. As a result, non-GAAP financial measures should be viewed as supplementing, and not as an alternative or substitute for, our Consolidated Financial Statements prepared and presented in accordance with GAAP.

 

		Six Months Ended March 31,								Years Ended September 30,
(U.S. dollars in thousands, except per share data)		2021				2020				2020				2019				2018
Non-GAAP Financial Measures:
Adjusted Gross Profit		$	203,437			$	161,755			$	359,066			$	314,858			$	254,075
Adjusted Gross Profit Margin			40.3	%			39.3	%			39.9	%			39.6	%			37.3	%
Adjusted Net Income		$	62,289			$	22,030			$	72,632			$	46,663			$	44,645
Adjusted Diluted EPS		$	0.40			$	0.20			$	0.59			$	0.43			$	0.41
Adjusted EBITDA		$	119,963			$	89,624			$	213,513			$	179,566			$	150,065
Adjusted EBITDA Margin			23.7	%			21.8	%			23.7	%			22.6	%			22.0	%

Adjusted Gross Profit, Adjusted Gross Profit Margin, Adjusted Net Income, Adjusted Diluted EPS, Adjusted EBITDA and Adjusted EBITDA Margin

We define Adjusted Gross Profit as gross profit before depreciation and amortization, business transformation costs and acquisition costs as described below. Adjusted Gross Profit Margin is equal to Adjusted Gross Profit divided by net sales. We define Adjusted Net Income as net income (loss) before amortization, stock-based compensation costs, business transformation costs, acquisition costs, initial public offering costs, capital structure transaction costs and certain other costs as described below. We define Adjusted Diluted EPS as Adjusted Net Income divided by weighted average common shares outstanding—diluted, to reflect the conversion or exercise, as applicable, of all outstanding shares of restricted stock awards, restricted stock units and options to purchase shares of our common stock. We define Adjusted EBITDA as net income (loss) before interest expense, net, income tax (benefit) expense and depreciation and amortization and by adding to or subtracting therefrom items of expense and income as described above. Adjusted EBITDA Margin is equal to Adjusted EBITDA divided by net sales. We believe Adjusted Gross Profit, Adjusted Gross Profit Margin, Adjusted Net Income, Adjusted Diluted EPS, Adjusted EBITDA and Adjusted EBITDA Margin are useful to investors because they help identify underlying trends in our business that could otherwise be masked by certain expenses that can vary from company to company depending on, among other things, its financing, capital structure and the method by which its assets were acquired, and can also vary significantly from period to period. We also add back depreciation and amortization and stock-based compensation because we do not consider them indicative of our core operating performance. We believe their exclusion facilitates comparisons of our operating

performance on a period-to-period basis. Therefore, we believe that showing gross profit and net income, as adjusted to remove the impact of these expenses, is helpful to investors in assessing our gross profit and net income performance in a way that is similar to the way management assesses our performance. Additionally, EBITDA and EBITDA margin are common measures of operating performance in our industry, and we believe they facilitate operating comparisons. Our management also uses Adjusted Gross Profit, Adjusted Gross Profit Margin, Adjusted EBITDA and Adjusted EBITDA Margin in conjunction with other GAAP financial measures for planning purposes, including as a measure of our core operating results and the effectiveness of our business strategy, and in evaluating our financial performance. Management considers Adjusted Gross Profit and Adjusted Net Income and Adjusted Diluted EPS as useful measures because our cost of sales includes the depreciation of property, plant and equipment used in the production of products and the amortization of various intangibles related to our manufacturing processes.

Adjusted Gross Profit, Adjusted Gross Profit Margin, Adjusted Net Income, Adjusted Diluted EPS, Adjusted EBITDA and Adjusted EBITDA Margin have limitations as analytical tools, and you should not consider them in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:

 

•

These measures do not reflect our cash expenditures, future requirements for capital expenditures or contractual commitments;

 

•

These measures do not reflect changes in, or cash requirements for, our working capital needs;

 

•

Adjusted EBITDA and Adjusted EBITDA Margin do not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our debt;

 

•

Adjusted EBITDA and Adjusted EBITDA Margin do not reflect our income tax expense or the cash requirements to pay our taxes;

 

•

Adjusted Gross Profit, Adjusted Net Income, Adjusted Diluted EPS and Adjusted EBITDA exclude the expense of depreciation, in the case of Adjusted Gross Profit and Adjusted EBITDA, and amortization, in each case, of our assets, and, although these are non-cash expenses, the assets being depreciated or amortized may have to be replaced in the future;

 

•

Adjusted Net Income, Adjusted Diluted EPS and Adjusted EBITDA exclude the expense associated with our equity compensation plan, although equity compensation has been, and will continue to be, an important part of our compensation strategy;

 

•

Adjusted Gross Profit, Adjusted Net Income, Adjusted Diluted EPS and Adjusted EBITDA exclude certain business transformation costs, acquisition costs and other costs, each of which can affect our current and future cash requirements; and

 

•

Other companies in our industry may calculate Adjusted Gross Profit, Adjusted Gross Profit Margin, Adjusted Net Income, Adjusted Diluted EPS, Adjusted EBITDA and Adjusted EBITDA Margin differently than we do, limiting their usefulness as comparative measures.

Because of these limitations, none of these metrics should be considered indicative of discretionary cash available to us to invest in the growth of our business or as measures of cash that will be available to us to meet our obligations.

The following table presents reconciliations of the most comparable financial measures calculated in accordance with GAAP to these non-GAAP financial measures for the periods indicated:

Adjusted Gross Profit and Adjusted Gross Profit Margin Reconciliation

 

		Six Months Ended March 31,								Years Ended September 30,
(U.S. dollars in thousands)		2021				2020				2020				2019				2018
Gross profit		$	170,839			$	130,663			$	296,050			$	253,197			$	202,036
Depreciation and amortization(1)			32,598				30,538				62,276				56,398				49,611
Business transformation costs(2)			—				—				—				5,263				—
Acquisition costs(3)			—				554				665				—				2,428
Other costs(4)			—				—				75				—				—
Adjusted Gross Profit		$	203,437			$	161,755			$	359,066			$	314,858			$	254,075
		Six Months Ended March 31,								Years Ended September 30,
		2021				2020				2020				2019				2018
Gross margin			33.8	%			31.8	%			32.9	%			31.9	%			29.6	%
Depreciation and amortization			6.5				7.4				6.9				7.1				7.3
Business transformation costs			—				—				—				0.6				—
Acquisition costs			—				0.1				0.1				—				0.4
Other costs			—				—				—				—				—
Adjusted Gross Profit Margin			40.3	%			39.3	%			39.9	%			39.6	%			37.3	%

 

(1)

Depreciation and amortization for the six months ended March 31, 2021 and 2020 and for fiscal years 2020, 2019 and 2018 consists of $21.6 million, $18.1 million, $37.6 million, $28.9 million and $23.0 million, respectively, of depreciation and $11.0 million, $12.4 million, $24.7 million, $27.5 million and $26.6 million, respectively, of amortization of intangible assets, comprised of intangibles relating to our manufacturing processes.

(2)	Business transformation costs reflect startup costs of our new recycling facility of $5.3 million for fiscal year 2019.

(3)	Acquisition costs reflect inventory step-up adjustments related to recording the inventory of acquired businesses at fair value on the date of acquisition.

(4)	Other costs include reduction in workforce costs of $0.1 million for fiscal year 2020.

Adjusted Net Income and Adjusted Diluted EPS Reconciliation

 

		Six Months Ended March 31,								Years Ended September 30,
(In thousands, except per share data)		2021				2020				2020				2019				2018
Net income (loss)		$	32,840			$	(5,758	)		$	(122,233	)		$	(20,196	)		$	6,745
Amortization(1)			25,183				27,737				55,144				60,226				51,372
Stock-based compensation costs(2)			8,773				1,381				120,517				3,682				3,099
Asset impairment costs(3)			—				—				—				—				920
Business transformation costs(4)			—				326				594				16,560				5,822
Acquisition costs(5)			—				1,356				1,596				4,110				7,361
Initial public offering and secondary offering costs(6)			1,149				5,093				8,616				9,076				789
Other costs(7)			2,694				464				4,154				(6,845	)			1,667
Capital structure transaction costs(8)			—				—				37,587				—				367
Tax impact of adjustments(9)			(8,350	)			(8,569	)			(33,343	)			(19,950	)			(10,990	)
Tax Act remeasurement(10)			—				—				—				—				(22,507	)
Adjusted Net Income		$	62,289			$	22,030			$	72,632			$	46,663			$	44,645
		Six Months Ended March 31,								Years Ended September 30,
		2021				2020				2020				2019				2018
Net income (loss) per common share—diluted		$	0.21			$	(0.05	)		$	(1.00	)		$	(0.19	)		$	0.06
Amortization			0.15				0.26				0.45				0.56				0.47
Stock-based compensation costs			0.06				0.01				0.99				0.04				0.03
Asset impairment costs			—				—				—				—				0.01
Business transformation costs			—				—				—				0.15				0.05
Acquisition costs			—				—				0.01				0.04				0.07
Initial public offering and secondary offering costs			0.01				0.06				0.07				0.08				0.01
Other costs			0.02				—				0.03				(0.06	)			0.02
Capital structure transaction costs			—				—				0.31				—				—
Tax impact of adjustments			(0.05	)			(0.08	)			(0.27	)			(0.19	)			(0.10	)
Tax Act remeasurement			—				—				—				—				(0.21	)
Adjusted Diluted EPS(11)		$	0.40			$	0.20			$	0.59			$	0.43			$	0.41

 

(1)	Effective as of September 30, 2020, we revised the definition of Adjusted Net Income to remove depreciation expense. The prior periods have been recast to reflect the change.

(2)	Stock-based compensation costs for the six months ended March 31, 2021 reflect expenses related to our initial public offering. Expenses related to our recurring awards granted each fiscal year are excluded from the Adjusted Net Income reconciliation.

(3)	Asset impairment costs reflect tangible and intangible asset impairment costs of $0.9 million for fiscal year 2018.

(4)

Business transformation costs reflect consulting and other costs related to repositioning of our brands of $0.0 million, $4.3 million and $0.0 million for fiscal years 2020, 2019 and 2018, respectively, compensation and other costs related to the transformation of the senior management team of $0.3 million for the six months ended March 31, 2020 and $0.6 million, $2.3 million and $0.2 million for fiscal years 2020, 2019 and 2018, respectively, costs related to the relocation of our corporate headquarters of $2.0 million for fiscal year 2019, start-up costs of our new recycling facility of $5.3 million for fiscal year 2019, and other integration-related costs of $2.7 million and $5.6 million for fiscal years 2019 and 2018, respectively.

(5)

Acquisition costs reflect costs directly related to completed acquisitions of $0.8 million for the six months ended March 31, 2020 and $0.9 million, $4.1 million and $4.9 million for fiscal years 2020, 2019 and 2018, respectively, and inventory step-up adjustments related to recording the inventory of acquired businesses at fair value on the date of acquisition of $0.6 million, $0.7 million, $0.0 million and $2.4 million for the six months ended March 31, 2020 fiscal years 2020, 2019 and 2018, respectively.

(6)	Initial public offering and secondary offering costs includes $1.4 million in fees and expenses related to the secondary offering of our Class A common stock in fiscal year 2020.

(7)

Other costs reflect costs for legal expenses of $1.0 million for the six months ended March 31, 2021 and $0.9 million, $0.9 million and $1.5 million for fiscal years 2020, 2019 and 2018, respectively, reduction in workforce costs of $0.4 million for fiscal year 2020, other miscellaneous adjustments of $0.2 million for fiscal year 2018, income from an insurance recovery of legal loss of $7.7 million for fiscal year 2019, and costs related to an incentive plan and other ancillary expenses associated with the initial public offering of $1.7 million and $0.5 million for the six months ended March 31, 2021 and 2020, respectively, and $2.9 million for fiscal year 2020.

(8)	Capital structure transaction costs include loss on extinguishment of debt of $1.9 million for the 2021 Senior Notes and $35.7 million for the 2025 Senior Notes for fiscal year 2020, and debt related issuance costs of $0.4 million for fiscal year 2018.

(9)	Tax impact of adjustments is based on applying a combined U.S. federal and state statutory tax rate of 24.5% for each of the six months ended March 31, 2021 and 2020 and 24.5%, 24.0% and 24.0% for fiscal years 2020, 2019 and 2018, respectively.

(10)	Tax Act remeasurement is a one-time tax benefit of $22.5 million as a result of the remeasurement of certain deferred taxes due to the enactment of the Tax Act.

(11)

Weighted average common shares outstanding used in computing diluted net income (loss) per common share is 156,377,902 shares for the six months ended March 31, 2021, 122,128,515 shares for fiscal year 2020, and 108,162,741 shares for the six months ended March 31, 2020 and for fiscal years 2019 and 2018.

Adjusted EBITDA and Adjusted EBITDA Margin Reconciliation

 

		Six Months Ended March 31,								Years Ended September 30,
(U.S. dollars in thousands)		2021				2020				2020				2019				2018
Net income (loss)		$	32,840			$	(5,758	)		$	(122,233	)		$	(20,196	)		$	6,745
Interest expense			12,712				39,734				71,179				83,205				68,742
Depreciation and amortization			49,518				48,628				99,781				93,929				77,665
Tax expense (benefit)			10,914				(1,600	)			(8,278	)			(3,955	)			(23,112	)
Stock-based compensation costs			10,136				1,381				120,517				3,682				3,099
Asset impairment costs(1)			—				—				—				—				920
Business transformation costs(2)			—				326				594				16,560				5,822
Acquisition costs(3)			—				1,356				1,596				4,110				7,361
Initial public offering and secondary offering costs(4)			1,149				5,093				8,616				9,076				789
Other costs(5)			2,694				464				4,154				(6,845	)			1,667
Capital structure transaction costs(6)			—				—				37,587				—				367
Total adjustments			87,123				95,382				335,746				199,762				143,320
Adjusted EBITDA		$	119,963			$	89,624			$	213,513			$	179,566			$	150,065

		Six Months Ended March 31,								Years Ended September 30,
		2021				2020				2020				2019				2018
Net margin			6.5	%			(1.4	)%			(13.6	)%			(2.5	)%			1.0	%
Interest expense			2.5				9.7				7.9				10.5				10.1
Depreciation and amortization			9.8				11.9				11.1				11.8				11.4
Tax expense (benefit)			2.2				(0.4	)			(0.9	)			(0.5	)			(3.4	)
Stock-based compensation costs			2.0				0.3				13.4				0.5				0.4
Asset impairment costs			—				—				—				—				0.1
Business transformation costs			—				0.1				0.1				2.1				0.9
Acquisition costs			—				0.3				0.2				0.5				1.1
Initial public offering and secondary offering costs			0.2				1.2				0.9				1.1				0.1
Other costs			0.5				0.0				0.4				(0.9	)			0.2
Capital structure transaction costs			—				—				4.2				—				0.1
Total adjustments			17.2				23.2				37.3				25.1				21.0
Adjusted EBITDA Margin			23.7	%			21.8	%			23.7	%			22.6	%			22.0	%

 

 

(1)	Asset impairment costs reflect tangible and intangible asset impairment costs of $0.9 million for fiscal year 2018.

(2)

Business transformation costs reflect consulting and other costs related to repositioning of our brands of $0.0 million, $4.3 million and $0.0 million for fiscal years 2020, 2019 and 2018, respectively, compensation costs related to the transformation of the senior management team of $0.3 million for the six months ended March 31, 2020 and $0.6 million, $2.3 million and $0.2 million for fiscal years 2020, 2019 and 2018, respectively, costs related to the relocation of our corporate headquarters of $2.0 million for fiscal year 2019, start-up costs of our new recycling facility of $5.3 million for fiscal year 2019, and other integration-related costs of $2.7 million and $5.6 million for the fiscal years 2019 and 2018, respectively.

(3)

Acquisition costs reflect costs directly related to completed acquisitions of $0.8 million for the six months ended March 31, 2020 and $0.9 million, $4.1 million and $4.9 million for fiscal years 2020, 2019 and 2018, respectively, and inventory step-up adjustments related to recording the inventory of acquired businesses at fair value on the date of acquisition of $0.6 million for the six months ended March 31, 2021 and $0.7 million, $0.0 million and $2.4 million for fiscal years 2020, 2019 and 2018, respectively.

(4)	Initial public offering costs includes $1.4 million in fees related to the Secondary offering of our Class A common stock completed in fiscal year 2020.

(5)

Other costs reflect costs for legal expenses of $1.0 million for the six months ended March 31, 2021 and $0.9 million, $0.9 million and $1.5 million for fiscal years 2020, 2019 and 2018, respectively, reduction in workforce costs of $0.4 million for fiscal year 2020, other miscellaneous adjustments of $0.2 million for fiscal year 2018, income from an insurance recovery of legal loss of $7.7 million for fiscal year 2019, and costs related to an incentive plan and other ancillary expenses associated with the initial public offering of $1.7 million and $0.5 million for the six months ended March 31, 2021 and 2020, respectively, and $2.9 million for fiscal year 2020.

(6)	Capital structure transaction costs include loss on extinguishment of debt of $1.9 million for the 2021 Senior Notes and $35.7 million for the 2025 Senior Notes for fiscal year 2020, and debt related issuance costs of $0.4 million for fiscal year 2018.