TREX - Earnings call transcript Q4 2019

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Operator

Good afternoon and welcome to the Trex Company Fourth Quarter and Full Year 2019 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note that this event is being recorded.

I would now like to turn the conference over to Viktoriia Nakhla. ahead. go Please

Viktoriia Nakhla

President And With Eilee. President all joining Executive for Chief Officer. Thank on thank the today. Vice Fairbanks, Bryan us Officer; Cline, Chief call us Financial Executive you, and you and are and Jim

Bill Bryan containing is fourth release webcast also other Counsel on quarter available release and as XX This full Senior Vice call of of today a financial being press XXXX. Trex the management. website. days. after Joining and is President, as close Secretary, Company's results also Jim for on page conference for and available This Gupp, Company's Relations and issued year the be market well website members the the is General The Investor Company will

over like Gupp. now to Bill call the turn to would Bill? I

Bill Gupp

Thank you, Victoria.

let call this that subject conditions meaning actual begin, expressed to statements laws. statements we performance regarding results could forward-looking These the me in of statements those remind materially that and and expected differ statements. uncertainties within certain the risks forward-looking future securities constitute everyone on the from cause Before federal to Company's are

For uncertainties, our recent as The revise result any Company please a of XX-K obligation update otherwise. risks such any most to XXXX XX-Qs a forward-looking XXXX or events was or well publicly and with see Form and new our the it SEC. of Form as statements, other discussion filings and information, Act future expressly whether disclaims

can trex.com. in earnings EBITDA considered net reconciliation and EBITDA a found is be non-GAAP our this income A in to of call release Additionally, metric. to press will referenced be

the to Cline. With Jim that over call I turn introduction, will

Jim Cline

similar outlook. call recycled to XX% worked importantly, Thus costs, for all was a stage made fourth for to for per the is as quarter strong Trex sales were you, The which exceptional able high-single-digit of challenging to to content. in and from convert for respectable our most you business we year quarter a start-up share. performance Despite XXXX joining thank all fourth Thank XXXX. measures and a set Decking, marked increase to meet finish this our earnings demand significant And strong by and afternoon year the and full-year Trex a review XXXX Bill. we growth

Both headed consolidated and is at which strong of compares momentum the impressive favorably experienced quarter, end the a positive residential to we as into it sales strong XXXX. very rate double-digit XXXX. increased a buying This as we fourth season at continues early in

performance combined levels. progressive -- to earnings and sequentially by on fourth expanded that the third points quarter our the combined by demand Consolidated significant spend enabled the residential gross resulting lower an from basis gains. in profit quarter sales quarter gross improvements fourth This production SG&A consolidated margin progressively have for strong a the drove XX% margin us XX growth growth basis trends quarter. improved XX% leverage, with operating reflected meaningful Additionally, XXX progressively into convert sales points in

features access pressure us the overall while look the more to most natural further sizable North basics, price it are next our wood basics This products of addressable composites that growth substantial differences decking significantly enhanced composite Trex American the XX% lumber. decking and expanded market variegated the about years. the The total Enhanced conscious has natural a least of at currently value and the narrowed penetrating to Trex Trex-enhanced naturals market, XX% for enhanced enhanced and wood. given have like advantage market solid by that an market. between account provide estimate There aesthetic our for considerable between We us the decking products very market of XX a dominated targets, buyer over and this has colors decking. gives untapped launch products treated large as runway that gap color the

the are seeing consumers invest time -- the offered signs to having many experienced are low to Similar looking consumer in spend natural are early patterns, high-priced Naturals we made decking Within composite lineups, we are having that a past. products. consider in Transcend willing decking, decision in have the to and maintenance more our aesthetics and

market-leading This continue to performance is and overall Transcend for appeals decking. Trex who strong demands also We the Transcend. product flagship with that support anonymous a our buyer aesthetics, to see durability

bringing XX% invest legacy, for recyclable to As the is their new Trex a options used from aluminum railing to recyclable. manufacture and made outdoor signature top consumers more railing in railing. is to we and aluminum innovate our XXX% market to Through ecofriendly continue areas, living signature Trex's

Beyond to preassembled up reduce ranging the time with easier installation the panels, from horizontal that typical to railing mesh most to committed panels variety by rails railing to design XX%. glass options also signature is of the Trex popular options making installation of for

Additionally, Trex namely into International the Builders' has month, commercial Transcend boards also licensing new two for in agreements. cladding Trex Las ideal last products Vegas and introduced new Show deck both applications. residential entered several using Trex at high-performance And

and the First, a Trex-branded spaces. and that outdoor stainless solutions Trex function cabinetry a Outdoor enhance stylish of collection further living Fire water Water, durable line outdoor & features elements steel fire second, and of of

who was year's was you mood Show, Builders interest attended composite Home tremendous the of clearly those decking. that and For bullish, in very this there

from extensive line brand, integrated trend. Trex to and has our most benefit industry-leading the positioned and product this positive With

focused products wood on best-in-class and remain delivering expanding from the market. our officially conversion production capacity We driving decking accelerated

we to Bryan with the like our the afternoon. turn succession I'd that to a this issued for I earnings release on simultaneously comment call review, financial Before over

him was seeing, asked President to I in with As I have and role I closely as CEO. upon those couldn't of you effective be XX Board Chief I this appointed Fairbanks, retirement assume April choice the happier Bryan Officer Trex together on named positions has of Executive Bryan are this from CFO the when my worked year. XXXX since and

for partnership in great Company's to a have and executives worked all stakeholders. had value significant and shareholders the and have with then since key tandem deliver the operating We growth accelerate

with pleased the to to the and opportunity appoint Bryan Chairman, to giving me also rest with management me as the work of the team. I'm closely continue decision Trex Board's

call Bryan Now, turn the fourth for expansion I'd over quarter the program. financial of to capital to discussion our like and and Bryan? full-year review

Bryan Fairbanks

and growth words. team move Thank you, you kind as leadership those Thank Jim. into success Company's I and I this and appreciated our new working with drive to look Jim I continued to the role. all forward demand that for of strong report for into has joining XXXX. I'm Trex reflecting our on fourth in record which performance, earnings, continued this high products sales afternoon's to resulted pleased quarter another call. year

This XXXX value growth several led our million, were namely outdoor increase net consolidated our quarter by in driven Trex with and quarter growth beauty, factors, of brand $XXX minimal Fourth in comparable the was products. XX% Residential the high-quality sales year-on-year to Trex leadership, lasting by above was coupled sales products $XXX Strong XX% a long-term million. XXXX. maintenance

on compared also large million ago the sales earlier. Trex projects. from quarter, wood markets Jim quarter, net $XX the conversion projects million It the in contributed to mainly accelerating the year commercial completion $XX those that fewer demonstrates consolidated products due timing to to of in and spoke about

by sequential in XXX in gross Trex the margin meet the points until XX of a Residential that XX.X% quarter. margin I'm to prior we quarter the reported although end XXXX. and fourth gross Products the the enhanced the to XX.X% increased XXXX year-over-year year to will to XX.X%, was started continue third improvement complete added report pleased XX.X% below we reported basis we to quarter. the the points in basis target remove projected design quarter Consolidated in the compared product February, now from largely of material be of original

the investments growth and expect the Group second this Trex Products -- second change XX.X% low-margin our XXXX. rolled benefit primarily throughput margin required, as off Commercial from expand to Most overall equipment beginning execution. to importantly, we quarter. Due Commercial Trex contracts increased project drove Commercial XX.X% will will legacy change in product of gross this half improvement the in

on moment performance. commercial Let spend me a

for made, not been of have our profitability levels improvements been attained. increased While expectations yet have

year, growth Commercial to the most New is an the trusted beginning Trex largest Commercial a has and place are the closely some leadership installation for and sales profitability. as complex railing of team systems provider of this overall with reputation we in and of drive excellent environments. since working and

high also many extensive rise, relationships public have win residential relationships and complexes retail national as These We with strong architects, and capabilities and to developers projects. are buildings, projects office such leveraged installers. less being

We is a equity believe brand, product the project improved performance results. Trex Commercial to financial opportunity relationship greater and into translate there

produced. residential and expertise in to that engineering commercial aesthetically are us design new and enabling the area appealing efficiently Additionally, is railing options offer our

XXXX in of quarter fourth $XX fourth the compared of the quarter $XX in expenses to SG&A XXXX. were million million

SG&A to diluted sales, income declined net while diluted $XX XX% XX.X%. million, was per to $XX from margin XX% million the XX% respectively share, of EBITDA up from $XX.X XX.X% fourth in percentage share and to quarter million per or Net $X.XX XXXX. reported of was a up or As $X.XX XX.X%. EBITDA increased

increase will attributable on me to and a our Sales XX.X% was a to $XXX Products basis Full-year sales Product let decline from factors, consolidated Now, were gross margin XX% margin in for by comment XXXX. which Trex led XXXX XX.X%. XXXX. most to increase declined performance XX.X% Residential Residential not reoccur margin in points full-year in compared Trex gross was million. million representing XXX $XXX of X% XXXX certain to XXXX. This

with in of The half primary factor is manufacturing efficiencies first ramp-up the slower-than-anticipated enhanced production the of XXXX. decking associated

from to to million, the of were benefit XX.X%. original weighted Products to expanded As be remove XXX margin reductions. the work will basis year. the to this Recall, design points we providing the XXXX Consolidated expenses also back $XXX for due benefit, material P&L discussed half SG&A earlier, second the enhanced will year-over-year. flat to decking Commercial material Trex the

basis percentage SG&A declined sales, of to a by XX.X%. XXX points As

in further The of our spending efficiencies driven SG&A was in significant entry level by volume and across same the spend which enhanced does higher the line, product carry branding level not leverage organization.

increase from EBITDA to a for of lower share, per year-over-year the slightly XX.X% the XX.X% while decreased X% effective to part XX.X% EBITDA of The first year. rate X%. the income year full XX.X%, due the of mainly million, $XXX gross or XXXX in margin margin Net up Full-year tax diluted was $XXX to $X.XX was ago. for was a year million below representing

XXXX. cash million, full-year XX% was Our operating ahead $XXX flow of

additional the additional XXXX, second the in is quarter which our and plans. million million and at Capital expansion XXXX bring multi-year be tied lines expenditures up of amounted At capacity program majority and We employees announced is time, capacity. to to in same Virginia. the two expansion our sales already have in in an added in announced margin gross XXXX, of capacity train additional that growth an some line headwinds facility. hire the will related in there ramp of $XX facility three of quarterly Nevada June Late the Nevada Virginia online with capacity for line We ramp-up double-digit additional This The to and we're facility will as XXXX. as trajectory compares to of it lines progressing we $XX the ramp-up. planned. full-year in our advance we strong this expecting

has facility As notified already cement site. engineering building November ground our our pouring start Virginia to new existing team at in lab to expect construct Today, XXXX, the up line the us and of in XXXX. building early in staff that new ramping the adjacent announced a broken have started we to Winchester,

we further XXX,XXX XXXX, shares price of While our capital average to share remains an our $XX the opportunities repurchase program our of at million. priority, $XX capital continue expansion outstanding with In Company allocation per a totaling share, program. capacity stock repurchased common pursue

For sales Incremental of financial a expected. XX%. for modeling as XXXX, compared as is purposes, are full-year estimated Slight XXXX improvement is our to gross margin of expectations SG&A, at follows. percentage

this cost million We our be approximately tax and build to at the beginning majority expect for $XXX year. projected expansion approximately other projects in reduction the our of Capital rate is half program earmarked spending to second to XX%. $XXX million with

in we second quarter working historical extend as program favorable more the this also to payment full of normalize But part year, higher anticipate and will year. distributor capital We more as for a levels. our of terms XXXX DSOs the third

Now, Jim will to closing the call remarks. his I back for turn

Jim Cline

to as to revenue With a contractors express and I'd drive wood, and expanded that buy in distributors outlook for our the strong XXXX. Bryan. capacity to backdrop as share you, in my confidence remodeling easy from ensure products we positive and growth as all and Thank projections to expansion spend plans repair double-digit are dealers, growth expect install our to for territory, retailers, The well and customers. consumer remains Trex take opportunity firmly thanks our are high. economic this who continue and to like

recall, generally both As sold available distribution is through period many the is for and season. March at channel spring the stocking to December is you readily of levels the start product dealer may of considered when ensure a building that

first the period an we XXXX, of year. of approximately last same sales increase For quarter $XXX the consolidated from million, expect of XX%

mentioned, of As for Bryan will the to be the growth closely sales the cadence capacity. full-year tied the XXXX increased

like I'd for up call now to Operator, open the questions.

Operator

and will Stifel. first We the from question answer today session. question comes with Our now Instructions] John [Operator begin Baugh

John Baugh

for both the and Jim Thank Congratulations Bryan you. transition.

Jim Cline

Thank you.

Bryan Fairbanks

John. Thanks

John Baugh

the late in QX, additional expectation is line is I'll that in I of see. that production? you Virginia was full operating said a and -- think, with Let's capacity, that start was line start planned, the out the

Jim Cline

these That to accessory don't our full run some that move going are products into the prior that the was in that included at capacity expectation, allowed Winchester decking out. products of lines same ramp-up are rates our run to and our

allows a those the run newer of can at some lower profiles, to smaller decking same our efficiency. we don't to us that run couple the of use most run to these level lines it largest of So, SKUs efficient volume assets and use while

John Baugh

with I D&A we assume even 'XX help any and ramping. will 'XX? start Bryan, then, And go that Okay. through as maybe

Bryan Fairbanks

XX% DNA the the margin. it's So in inclusive incremental

provided haven't anything We for XXXX.

there's and behind can flavor any look a we provide take me if that. Let see additional

John Baugh

in down year-over-year? being the that anything receivables Is Okay. there timing? And just was

Bryan Fairbanks

a we evenly that the the level timing. just and due December. more When year, buy to look throughout purchases ahead year, significant There on didn't loaded we This of at was Really there is there increase. Transcend was price last in quarter. price see increase, no

John Baugh

if than XX% in the with granularity about the help. of in appreciate takes. mean, 'XX and puts Okay. normal calculation. don't what And any a the more And you'd obviously, I share moving that bunch I I pieces know us

You mentioned to is going obviously D&A training going and up up. go

can at if don't you all. I help know about So us that. Think

Bryan Fairbanks

biggest start-up in drivers excuse quarter the first half in be to going expenses the first we The Yes. had -- of the the are me, that of lack year.

we'll completed the third the start reducing out little in that see quarter, to we second, pretty material our get a expect product We the some first in enhanced well bit the lines in as the of year. into but quarter

are So both on the side. those positive

we side, On will depreciation. the higher have unfavorable

up You as need of can that in one. they efficient so well our the did that can capital spending are we trained, see sure significantly before to these increase hiring XXXX, ramp We going. on lines well be day as make get and employees the

John Baugh

on product comment and gross Is there relates to any as volumes it margin? mix

Bryan Fairbanks

our on We've in We expectations. into are splits product the expectations product say with mix with any that pleased except selling that line it's the It's the we're channel. we lines the line that had. overall in historically with to provided not

John Baugh

and you good Thank Okay. luck.

Jim Cline

Thanks a lot John.

Operator

from with Merkel William question comes Our Blair. next Ryan

Ryan Merkel

thanks. Hey,

the you roles. both offer me congratulations of to Let new on also my

Jim Cline

Appreciate you. Thank it.

Ryan Merkel

start with sales. two So I me questions. let had

that all, right? on online? growth to the constrained up XX%. and Is sounds that, tied like coming plan the year growth accelerate hear isn't to of by that the reason that sales capacity? through the I and First related quarter, capacity is then Did that's Is to sales for why stronger first it

Jim Cline

Yes.

more amount QX sold giving QX. Last QX why depressed is a cadence don't have of and of little expect first a that's that The in in in in. It's year milder-than-normal up the large activity a I the consumer We because see to their product that to a price just weather there year, usually, and quarter But also just beat did see the bit we due growth to it you the tailwind. fair had us at of does is takeaway aren't quarter that that And little pick was in the and that called bit probably point. a typically year. fill in fourth was this not it would normally to and out getting and importantly, you buying. percentage increase

Ryan Merkel

at Okay. add roughly That's your $XX and down right gross sure mentioned right, XX.X% back one-time that so some then implies of XXX hiring. XXXX, about thinking guidance I margin roughly, points. gross million I'm XX.X% about And I Am Is helpful. gross anything but question And the you margin there this I'm to a the costs margin. mentioned you on if I basis the D&A, thinking about had then, else? not was if way?

Bryan Fairbanks

not about in We've thinking guidance. way. one-time you're giving costs right margin an think that I as treated start-up those the

Ryan Merkel

you I And of year-over-year? of see the expand can hiring guess I sort margins the the quantify new we me, and Okay. impact of right XXXX, under-absorption lastly I'm getting what is, would guess at starting that sort initial read is sort of for of lines. gross to

Bryan Fairbanks

that margin So the XX% is guidance guidance. inclusive incremental of

the As to we roadmap we at EBITDA see level continue improved where can margins to the XXXX, drive gross look margin both out at we a also level.

Ryan Merkel

Got it. right. All Thanks.

Jim Cline

Thanks.

Operator

comes Our Keith next from Hughes SunTrust. with question

Keith Hughes

you. Thank

revenue the can you the which quarter, we're the any for and period? Commercial, us guidance between sort give of expecting On Residential first field in

Bryan Fairbanks

year. where we the significantly two we were haven't quarter over Commercial we -- we the last split year, down the were from If So out. perspective course see a of the over

business, We well year. improved that within will do growth to as both side the into the for as for are Residential Larger starting through the looking the come see XXXX. organization. quarter bookings growth We expect of

Keith Hughes

there is the terms that is off-season of you of always an periods half in where much are Okay. of year the six-month rate -- run too idea that? fourth for in or in here If give first, to noise a that does do And if that we take I -- your Residential I've Residential of done time. guidance, and use kind the

Bryan Fairbanks

There now at period. is first is more Recall noise have. quarter would historically a time than quarter fourth into and lot the what end we right the that build the of inventory normally an

So capacity complexity to that the constraints year, in that that from growth coming second what going it always the had mentioned line sales little that be growth perspective, the would for in capacity see we Jim the bit the is our doesn't rate come to situation. with due starting to additional on a indicate quarter. of

So we in the year. outer higher sales the see growth of numbers part

Keith Hughes

sounds XX% and the it on question the correct? in like Is your that final first half. And in second that above comments below gross the half contribution margin, Okay. probably directionally from

Bryan Fairbanks

What of large we would bring from right was way over And as it. it we course enhance and the remove a said the scale, the that's look build capacity we in that year to the material as start on. to at

Keith Hughes

you. Okay. Thank

Operator

Our with Yinger from next Kurt question comes Davidson. D.A.

Kurt Yinger

Good Thanks question. Jim afternoon and taking for Bryan. Yes. my

Jim Cline

Hi Kurt.

Kurt Yinger

on two you're all, lines quarter? there kind wave are and that of the you additional first can Just you those this those is say it production would Has the and of in second learnings plan kind any kind from next apply the so away to at taking gone Winchester, of at where firmly to of the one point? that

Jim Cline

for And Nevada, end that's the we've expect second we up Winchester, running are the by lines stage quarter. finally, So of excuse those the one of got me, up up one have that and running. and that's investment all fully and in to

Kurt Yinger

Okay. this point? up has to it gone Are a at pretty producing And target smoothly? they

Bryan Fairbanks

Yes.

Kurt Yinger

than forward? you about like in like talked large you can that the a of lower quarter. leverage in Enhance potentially beyond enhanced Okay. the XXXX of growth across leverage be I substantial. seems portion given lot the mean has having the perhaps spend SG&A It kind opportunity of organization. SG&A products just XXXX overall lot past of be won't And Do sounds the going that a sort a a greater it think

Bryan Fairbanks

opportunities note large do important priced naturals that level it's we yes, of It's basic. SG&A. think both but I Enhance that growth a is to product, just leverage opportunity. to see higher It's not and basics ongoing entry Enhance

demand as say the in into able it's manage to XXXX marketplace. some to some the were limited fair we reductions branding to spend that our of think I those of pulled be

Kurt Yinger

was data last expectations? quarter Enhance call, cannibalization were regards on Okay. generally Makes but whether just the all in in in and a books, just touched the then big And on Transcend, XXXX with you sense. any just takeaways potentially lastly line you wondering sort new that's available with bit or from of the there lines if to to the I'm it

Bryan Fairbanks

in It were to with the surprises were material sold There nature, they was carry expectations. similar they reasonably line against favorable us, in generally weren't some because but that margins. products being

Kurt Yinger

luck Great. and very good year. Thank you, in upcoming much the

Jim Cline

it. appreciate I you. Thank

Bryan Fairbanks

Thank you.

Operator

Our comes Jefferies. Ng Phil question with from next

Phil Ng

in material to remodification way at once you and your new impact as your and using Hey, headwinds I of kind margins us retrofit guys. the Jim year risk or guess, the help least lines? the roles. with back less have Congratulations contextualize Brian done the to any start on you half any in

Bryan Fairbanks

that to we've to additional will run think Yes. the because the that that do, now to at We changes engineers That opportunity well run take reflected have throughput time would lines product able but inclusive our immediately that will changes We modification as of well in we that to is a shown and as little us need can way be to as the we make our as the capacity. the product provided. and that guidance the are running that be number remove to that full are that get able accurately to headwinds of to some make bit be love there we material.

Phil Ng

that some may It to Got last some year? your ceded pretty where you and given early a the full are lead ramping Can up, have you expect it. you capacity give running times of the your like of us with sounds you're still. recapture share out do sense customers

Bryan Fairbanks

customers they managing what's they and to the on basis, need. a we that that are that have. them situation with we our monthly of supply capacity that know They to ensure know the All have available them product

Phil Ng

about really the to depressed, target color first on the shape full more from any XX% know color of me. that be helpful. last gave one one margin us you little be the for year? year. would think but half, I for might how just incremental And a it more helpful the Okay. Any It's more

Bryan Fairbanks

will headwinds early highest We part year. from our that hit the part reductions us half material in We will see do the also But that to XXXX. then, half headwinds the of labor get us we the facility. hit of will as the facility for have have Nevada second Enhance of ramping Winchester start the in second the up ready the year of the benefit in we in labor beginning the the

Then costs. the the non-recurrence we have also of start-up

So are quite is as happens within the the it few other shown analysts To year-over-year have quarterly see mentioned, but a parts that more there. later simplify we a year, way at on improvements it, moving there basis. we are we've still in of looking that benefit

Phil Ng

thank Okay you. great,

Operator

Grooms from line Stephens. question next comes with open. your Trey Trey, Our is

Trey Grooms

hear now? me Sorry, can you

Jim Cline

We Trey. got you,

Bryan Fairbanks

Just in there.

Trey Grooms

as congratulations was with on great new and I've I retirement. your Bryan myself. a enjoyed to role Well, with conversation having working Jim, congratulate on your you want well. you

Jim Cline

Trey. you, Thank

Bryan Fairbanks

Thanks.

Trey Grooms

going CapEx So, things capacity, you my the but one just of more been maybe other couple to most you in is talking were more? -- some of do a other course, when some but mentioned reduce the questions of you have Bryan, some costs. of seeing about have that asked, One some this things, to CapEx internal projects be the being, year, that you're

that what for dedicating savings? you're year. this some Any more and to could on cost color are mean those So maybe capital there what

Bryan Fairbanks

on. our back get there we're capabilities year, will half of the as is engineering projects to as come that of working we number Nevada up And up free some into the lines Yes, of operations. a the

on. it's of things which of a bit fair say One pause will the little we've pursuing, -- that taken to be we a probably

lines. talked We've output existing on our about additional

are to output us as So have develop yields still to that that cost improve as the well to running. lines the we gain to additional overall allow lines opportunity convert we're continuing to on improve technologies there our the and position,

be there'll half the focus in the year. on So, of that back more

Trey Grooms

year, maybe or you in see guess that be benefits And next could these half back could some would of I things 'XX? the benefit

Bryan Fairbanks

will We will more be benefits year. this some but see year it of those of next

Trey Grooms

it. Got

been be how is over fairly And curve are the rolled of there quarters, seamless? quickly on can other out seems rolling. quick and Okay. up to the ones to lines that date you it then have these pretty you've rolling Is learning get there next going It out here lines ramped. gets few or fully to like any some the that

Jim Cline

number to new Yes, shake None it of out takes this a to Trex technology to company. of weeks equipment. unknown the is

day of are aware They to of on plant be our go they're All ensure run this to we ready that it, will equipment. teams trained so how on one.

high a able quickly that have we quick So confidence a shakeout running level that up after of and they'll be to get period.

Trey Grooms

Okay.

but on know come the assumption the guidance out will can these well depending kind Once so, as that up -- you'll process full play well out at post these are And in they it your role a be seasonality there, you running running running, expansions. capacity as and fully when is I of they out and get week full pretty and well? be them [indiscernible]

Bryan Fairbanks

so. expect would I

Trey Grooms

lastly new me Okay. And is then on products. for

the show. One Builders' invested cladding in or rolled invest there is that been mentioned at few what's but for the cladding those? have for some and specifically of products, new there? then lines else that some And on that You the out you something or mentioned other a you using reception existing piece, you is lines

Bryan Fairbanks

an product to exciting Yes. opportunity The opportunity be used for on cladding in -- a an application. is existing

small commercial inventories the lot assets. Residential of that a same side but amount distributors also on a today. carry and out It's same our very code-listed application see of entities, It's the used well. So run we're for popular to a starting look a new it's on that as the becoming is

Jim Cline

five of being as is it's amount seen. years We probably on used what excitement being well far there or fair a we've six as over. received have cladding actually back And seen based ago, of Clearly, but their taking all new drive sales piece trying been have the on benefit manufacturers it it. a on think are really has market, the I and to the seen composite of

fact listing the got we've of there got excited we're that So it code pretty and on. the out

Trey Grooms

Well, luck. thanks for that's and it And questions. from good my taking Great. me

Bryan Fairbanks

Trey. Thanks,

Jim Cline

Thank you.

Operator

next Our B. Rygiel from with comes question Alex Riley.

Alex Rygiel

Thank you. Good evening, gentlemen.

Bryan Fairbanks

Alex. evening, Good

Jim Cline

Good evening, Alex.

Alex Rygiel

XQ explain questions. And in you expecting quick in inventory more you're thoughts Two you terms today? XQ? see or that the and as Can favorable out channel the it comments payment then on any

Bryan Fairbanks

Yes.

in So time programs, programs what does from are dating be. are late what those our going programs discounts, third usually of rebates, -- things XXXX when to the shift in case, quarter loyalty at look It's like to deciding be, a distributor we it going it's of And to mix time. that. this

are This we years tend we outer peak longer that the as years on we included is material felt when program year, possible certain distributors, months where when to the most to our early has discounts. service where as increased to channel they There it the ensure with was dating additional in talked There focus arrive. dating. prudent

Alex Rygiel

out the comment Is channel? on your in the in inventory

Bryan Fairbanks

All at right. Inventory this the sorry. I'm levels it channel, we for of would continues run to in year. expect time

inventory frame. to First does quarter be an build time tend

We a the of portion significant U.S. have weather across seen good

levels normalized but build, back to end winter sell-through quarter. for see and has high the put first reasonable the this been get expect we'll place be through, So as will some come more snow to months of here, we of in the at they the a continue we maybe time reasonably for us of year, through which

Alex Rygiel

Thank congratulations both to you, of and you.

Jim Cline

Thanks.

Bryan Fairbanks

you. Thank

Operator

Alex Berenberg. from Maroccia comes with question next Our

Alex Maroccia

my taking to the of facility roles. the versus thanks discuss Hey. the Good around in the Virginia barring on questions. for And XXXX completion of capacity fulfill Can guys you any dynamics needed the congratulations timing and orders early spring that's evening, delays? new

Bryan Fairbanks

Yes.

early amount building. capacity on capacity brand new XXXX. is that coming start significant a to We expect It a in in up of ramping

there more time. will So be shakeout

While has support to familiar all all-new equipment. equipment that us, is of it

way everything have building the make is sure We to that functioning needs to. the it

So the be take slower. next even over those quarter little will a little will that little of second probably and bit the a year. into course to It those up. longer But bring first up ramp will of bit a the quarter

Alex Maroccia

Got it.

do a margin initiatives material these be the and new where secondly think and efficiency about you the you Nevada legacy and you margins legacy capacity then those? from among lines plant want normal And rate, gross lines? a these could Virginia to into the and on Okay. you consideration then, upgrade of standpoint, talked take in how How some earlier, if from could run be

Bryan Fairbanks

is at well The seen we've management SG&A our the at forward think that has with gross see done look product leveraging focus at Enhance to leverage on being look more historically. margin this able move as to and we've way branding talked about we've what lines that I team EBITDA than and that we historically. best as

on, going not coming the the So we're rate run into get on we're but a capacity it. guidance to additional excited about long-term opportunities with

Alex Maroccia

Thanks worries. a no guys. lot, Okay,

Jim Cline

Thank you.

Operator

And our Clarke next question will come from Deutsche with Seldon Bank.

Seldon Clarke

Hey and transition. guys. for the congrats question, on the Thanks

Jim Cline

Thanks.

Bryan Fairbanks

Thank you.

Seldon Clarke

just capacity think you ramping year -- start about talked utilization I this start XXX%. when capacity you a below will growth that Could revenue investments. revenue you'll will see of alongside You outpace growth? sense us give dropped mean to when

Bryan Fairbanks

seeing second during that the got We've coming quarter. the when we during second talked mostly the the us. during in to about -- with and mentioned line And on the We've XXXX. is capacity we've of Nevada early capacity come first available growth the next coming capacity on quarter year, got as the facility in

We capacity build all will of once able inventory get more be in we line. to

build working I do doing upgrades and year. we pretty talked being down inventories We back heavily the that later our to start that. in other would have equipment. that back able that to time we'll bit expect our some a little own as of I to about projects of to run bring normalized levels we can more take normal those more then,

Seldon Clarke

Okay.

we growth to that normalized more to think sort capital XXXX, rate? sustain half of level past the or intensity about if about of into of think what's back double-digit XXXX kind So

Bryan Fairbanks

But be for less be look opportunity, we year the as go capital-intensive additional Next year. there we will down wood will a the capacity. growth forward and opportunities and capital of conversion the road at

Seldon Clarke

think Any of or? about in of how terms Okay. sales sense to that

Bryan Fairbanks

Not at this time.

Seldon Clarke

you XXXX Okay. just are costs in your that -- clarification baked any guidance? have And into then, there there start-up are

Jim Cline

debugging training Absolutely. process. It learning and the These personnel. a lines do curve requires a require of a

As XX% into incremental that baked up, you all is bring lines margin. the that

Seldon Clarke

Did there think you number? that of or how sense quantify about give just to any like number

Jim Cline

we expansion. ability it gives We from to margin. that, on the think you I XX% in And incremental that model included margin didn't the based your do because

Seldon Clarke

Thanks. questions. the appreciate I right All

Bryan Fairbanks

Thank you.

Operator

any This would Jim conference for remarks. closing our I to over like to concludes question-and-answer back session. Cline turn the

Jim Cline

like with We've I'd everyone news calling of to happening for good there, Again, out things in got of today. lot lot thank a a the Company.

One on involved team Directors of is week. entire of strategic consistent planning past The this that the It I completed that path, Board like not the I'd planning that we the surprising. development think things you management strategic a in go of is glide our to model. session with away is with just

course set course. in the years changed to to relative So over have the process. the several planning continues spend wrinkle was we capacity last CapEx The the that the our one that timing be of same

you thank you forward your We look to and with again, Trex. our for interest Thank next further in earnings call. Trex talking you at goodbye. So about

Operator

concluded. Thank attending for today's presentation. now has conference The you

disconnect. may now You

Trex (TREX) 24 Feb 202019 Q4 Earnings call transcript