Operating segments for the Company are determined based on information used by the chief operating decision maker (“CODM”) in deciding how to evaluate performance and allocate resources to each of the segments. The CODM reviews Adjusted EBITDA and Adjusted EBITDA Margin as the key segment measures of performance. Adjusted EBITDA is defined as segment operating income (loss) plus depreciation and amortization, adjusted by adding thereto or subtracting therefrom stock-based compensation costs, business transformation costs, acquisition costs, capital structure transaction costs, and certain other costs. Adjusted EBITDA Margin is defined as Adjusted EBITDA divided by net sales.

The Company has two reportable segments, Residential and Commercial. The reportable segments were determined primarily based on products and end markets as follows:

• Residential—The Residential segment manufactures and distributes decking, rail, trim and accessories through a national network of dealers and distributors and multiple home improvement retailers providing extensive geographic coverage and enabling the Company to effectively serve contractors. The addition of StruXure expands our product offerings in the Residential segment. The addition of regional recyclers provides full-service recycled PVC material processing, sourcing, logistical support, and scrap management programs. This segment is impacted by trends in and the strength of home repair and remodel activity.

• Commercial—The Commercial segment manufactures, fabricates and distributes resin based extruded sheeting products for a variety of commercial and industrial applications through a widespread distribution network as well as directly to original equipment manufacturers. This segment includes Scranton Products which manufactures lockers and partitions and Vycom which manufactures resin based sheeting products. This segment is impacted by trends in and the strength of the repair and remodel sector.

The segment data below includes data for Residential and Commercial for the three and six months ended March 31, 2023 and 2022 (in thousands).


	Three Months Ended March 31,						Six Months Ended March 31,
	2023			2022			2023			2022
Net sales to customers
Residential	$	342,116		$	350,358		$	521,600		$	571,491
Commercial		35,576			45,897			72,351			84,472
Total	$	377,692		$	396,255		$	593,951		$	655,963
Adjusted EBITDA
Residential	$	80,375		$	98,350		$	106,382		$	167,781
Commercial		7,829			8,675			12,983			13,423
Total Adjusted EBITDA for reporting segments	$	88,204		$	107,025		$	119,365		$	181,204
Unallocated net expenses		(15,394	)		(16,104	)		(31,455	)		(31,763	)
Adjustments to Income before income tax provision
Depreciation and amortization		(31,635	)		(29,042	)		(65,475	)		(57,124	)
Stock-based compensation costs		(5,626	)		(4,928	)		(9,583	)		(8,944	)
Acquisition costs (1)		(1,421	)		(5,136	)		(3,856	)		(5,633	)
Other costs (2)		(415	)		(177	)		(1,148	)		(662	)
Interest expense, net		(10,774	)		(4,010	)		(20,073	)		(8,158	)
Income (loss) before income tax provision	$	22,939		$	47,628		$	(12,225	)	$	68,920

(1)

Acquisition costs reflect costs directly related to completed acquisitions of $1.4 million and $3.9 million in the three months ended March 31, 2023 and 2022, respectively, and $3.9 million and $4.4 million in the six months ended March 31, 2023 and 2022, respectively, and inventory step-up adjustments related to recording inventory of acquired businesses at fair value on the date of acquisition of $1.2 million for the three and six months ended March 31, 2022.

(2)

Other costs include costs related to a reduction in workforce of $0.2 million in the three and six months ended March 31, 2023, respectively, costs for legal expense of $0.1 million in the three months ended March 31, 2022, and $0.2 million and $0.4 million in the six months ended March 31, 2023 and 2022 respectively, costs related to an incentive plan and other ancillary expenses associated with the initial public offering of $0.1 million for the six months ended March 31, 2022, and other costs of $0.2 million and $0.1 million for the three months ended March 31, 2023 and 2022, respectively, and $0.7 million and $0.2 million for the six months ended March 31, 2023 and 2022, respectively.