TREX - Earnings call transcript Q3 2020

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Operator

Good afternoon, and welcome to the Trex Company Third Quarter 2020 Earnings Conference Call. [Operator Instructions] I would like now to turn the conference over to Viktoriia Nakhla, Investor Relations. Please go ahead.

Viktoriia Nakhla

Thank you, Matt, and thank you all for joining us today. With us on the call are Bryan Fairbanks, President and Chief Executive Officer; and Dennis Schemm, Vice President and Chief Financial Officer.

is as Senior of well Dennis Counsel President, Trex and Secretary, and as Bryan Bill Vice Gupp, General management. Joining other members close the issued financial Company a release after The press results quarter third market for XXXX. today containing company's This website. release on available is the call being webcast page the Relations be on and is also conference days. the Company's will of Investor website This available for XX turn I call over like Gupp. to the now would Bill to Bill?

Bill Gupp

Viktoriia. you, Thank

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

release measure press in the statements or I call publicly as future Fairbanks. risks information, forward-looking can Bryan SEC. found please of The turn events recent uncertainties, financial discussion additionally, any For measures XXXX see result trex.com. XX-Qs well to such the a the to XX-K comparable new our measures a Form be that revise any be A expressly other earnings otherwise. or update With whether in financial as of obligation with And will these most and Company filings as this GAAP of our Form call. and referenced reconciliation disclaims non-GAAP will Act our at XXXX introduction, over and to

Bryan Fairbanks

and was to of the and while fourth all and meet as Trex to you, business for discuss demand third of moment we and us for robust progressing who to to a achieve revenue our Trex that XXXX quarter that are Trex's capacity our a the Thank joining ensure a earnings call success everyone. few evening, thank Company success. can to record into to another review Bill. program pivotal take navigate areas in Good future. strong a earnings you This Thank want outlook continue quarter highlight XXXX. quarter specific with demand major I expansion environment very results helped

have have XXXX First, industry they They to many customers, the the strongest and rapidly managed growth. are to channel sales we environment that traveled retailers. through to thanks markets key in exceedingly well. Trex Trex's local team changing we has recognize our pandemic to who support contractors and Also, tirelessly the partners

and providing manufacturing who I employees Lastly, the the our to new production and the to adjusted our new team capacity install shipping and teams packaging support our working have dedication must note chain our safety many expansion. to extraordinary of products, making joining new while supply to protocols training

third Robust of will by capacity growth quarter, future has utilized not our once To facilities home residential XX% Outdoor expected capacity of to living growing for increase gains broad-based has their as It new trend. view, demand a existing strong as all long accelerated to safely sector. thank of the repair within pandemic Trex one and is work to achieve demand, comfort decking extraordinary our service another efforts us represented completed COVID-XX brought Trex's remodel the usability, a we approximately expansion, we team dedication helping members XX%. lines already forefront category. which the for and current the and categories on to successful and and is decking fastest the consumers' an minds. of continue current capacity incremental I the demand. quarter address tailwind In In providing enjoyment meet execute our the the product through in we sales customers. So for the from

cost to alternative increase steady multiple the our steady bringing with engineering a to broadest in commercial net As part posting as for labor we term, beginning the we in period opportunities residential Consumer XX% announced revenue effect Enhance We in the able the profile. To this wood to employees addressable place of expectations warranty our the and space. certain expectations. railing operating of online. providing railing recruit quarter and recently expenses set market we next efficient cost details in-house, the of ahead changing increases of our increased Commercial price for we of continues demand for experienced on report leadership and Trex share we performance highly charge entered and on train eco-friendly in Thanks take model, to significantly third in signaled products, these demand we line expand our decking. range calls, previous products. adjusted our treated an in to a affordable, income new this were quarter business exceed offset offering product to and an continue Dennis additional offset to see decking new margin high with products With margin to of pressure results production by with accelerating adjusted moment. longer expand more will total this third This and our at homeowners line quarter, and EBITDA capabilities XX%. the a year. in in this these game have performed innovate

us great conversion a remains runway start, we as to is market years ample to for of ahead off this Enhance pursue come. While share there

conscious product and Select line of to the consumer our growth its the we Transcend With premium our are across of and decking product entire Enhance and portfolio. railing lines, continued appeal and success the seeing success cost

increasingly aesthetics a of Since homeowners for from their inception, projects this feedback for Trex, These relationships we've the the DIY most magazine a widely seek Trex than outdoor around top abating. the developed spaces. on making Proving and and to and XXX continues and healthy indicate positive, channel retailers Transcend signs Fastest-Growing Companies. of with point, the the throughout who industry nurtured the brand world. be Fortune dealers the best with one backlog purchased position bar that design longstanding set relationships material available within the pro Trex's recently for For distributors, of contractors and fundamental inclusion are performance announced elements more and no North America for specialty decade, and has

living participating Recently, As our to needs and the we makes content this billion their our uses Leadership outdoor honor in business meet our continue XXXX to the the earn Business reached best recognizing content aluminum Trex the our in will recycled retailers distributors of latest systems. to early monumental and of we led winning Trex as consumers sustainability program customers by in our positive past, is distributors, Intelligence recycling measurable commitment to impacts. the raw our and NexTrex partners, in a easy plastic which programs From the railing commercial Trex effective done have GBPX products of recycle highly responsibly and as recycled recycling illustrated a product they milestone also material XX% In Group homeowners through in decking and Key NexTrex environmental partners. waste. and market-leading from recycling our as alongside it materials Sustainability community Award with grow well inception ensuring the of process, industry deliver we includes channel recycled proprietary seeking by improve has The collected through honored invest investors sustainability. retailers, for that the to October, brand the ongoing focus Company's needs and on program, lines of spaces. recycled use dealers were manufacturing

growth forward to look share pass strong double-digit the call year-over-year midpoint to sales As and we and - of guidance fourth details quarter year, the will next the Dennis our XX% sales share I for guidance. we And of fourth at financial points on growth. performance. XXXX, our to more to quarter now expect

Dennis Schemm

million XX% Thank XX% net you, sales an Residential product quarter, the our the contributed end XX% quarter, afternoon. increased market Trex from Products by ago reflected net and quarter. led $XX consolidated the residential $XXX sales growth lines. Consolidated in across Commercial to sales net in increase Trex third robust during Products of Bryan year demand million good that to

gross year through compared the third a this was for the XXXX. third issue $XXX,XXX to quarter or flaking margin our the to is charge XXXX. the this warranty products less surface at for to Products manufactured the gross quarter. During year-ago the $X.X we our warranty cash perspective, the quarter, margin charge, than Consolidated XX.X% after XX.X%, affected the quarter. amount in per prior charge one-time warranty in XX.X% XX.X% adjusting To for was Residential put XX.X% Trex adjusting a to of XXXX million plant in legacy recognized portion impact Nevada XX.X% that third compared after for reserve average or

XX% COVID in partially by year's to third across performed the in in compared weight posting XXXX hiring by impacted our margin increase capacity was at was margin depreciation commercial additional in the announced costs quarter, the management last railing Commercial price expectations steady products line on gross XX.X% of in Trex due to managing Gross compared and at To growth to multiple we costs, up profile offset Trex a quarter. material training XX.X% mid-single-digit our and target. Commercial growth the recently anticipated, decking to continued in our expenditures expansion offset ramp our lower advance with we to underlying due our As reflecting revenue enhanced and cost the portfolio. quarter, segment. costs third these Virginia third favorable capital

third SG&A basis our a million XXX to in sales. the from X% resulting operational of to quarter $XX.X reduction in increasing leverage expense continue of XXXX, SG&A million infrastructure, as $XX in only percentage point We by

with to at operating rate leverage than growing slower continue gain sales. to net expect expenses significant We a SG&A

XX% partners. respectively. for a to and to carrying XX.X% million income higher channel XX% better operating from quarter tax our calls, XX.X% were for EBITDA million Receivables expand per of was $XXX EBITDA $XXX was indicator cash million or basis representing support levels the per a stock per which XX.X% warranty results, $X.XX of respectively. XX% share, the as and share, the million net up the to XX. was respectively while $XXX consolidated believe XXXX Summarizing share, We term, we warranty unchanged X% more rate and to to accounts our the EBITDA return Exclusive and to margin $X.XX increase basis up $XXX income Year-to-date $X.XX XX.X%. previous level year while was $XX the per to XXXX. basis September incentive or $XXX $XX year-ago of our XX.X% per points increase in that to of charge, the and addition, improve $X.XX took was XX% diluted provided XX.X%. million million share, was from programs million to million, that charge, $XX million. in our XX% diluted and million from margin million balance increase net $XXX adjusted the $XX usual to of or reported were sales sales to by $X.XX sales net points. increased diluted quarter, Residential see or receivable, share In in an or we EBITDA will million EBITDA compared respectively. and $XXX the respectively performance, XX% XX% respectively. Net the or sheet compared XX% as when effect to in for XXX per increased year-to-date were a income on third and diluted and and EBITDA up margin EBITDA the $X.XX charge, was $XXX EBITDA split. financial up XX end. warranty related quarter we Trex XX% continue net split our stock XX% $XX margin at and and Adjusted margin. diluted to for up are flow, share, net XXX mentioned will effective third X% over of expanded long normalized EBITDA And adjusted million, diluted X% Adjusted EBITDA leverage than XX.X% Related points our relatively income an was

increased have of foresee period online accounts our related for fully expansion. receivables. period We compared capacity are production nor nine-month $XXX new had nine-month our the facility facility through first the to issues, at ongoing any issues operational continue quarter Nevada million, to Virginia Capital our coming production lines new ramp the start primarily to the and no expenditures $XX Three up with XXXX second for XXXX and our collectability in quarter. XXXX to the the lines will in of million

and untapped flow borrowing cash quarter million from end, of needs capital an capacity. our revolver no all had $XXX fund additional to continue We available Trex under at providing borrowings with

living, Board million demand at the of repurchases, our Directors repurchased share and Board provide of growth million to our been in will our Directors share. the outdoor $XX.XX additional the of in million XXXX, reinstated share program. Given shares regarding $X up an confidence have XX.X insight underlying totaling cost to average I In X.X per now buyback guidance. Trex date authorized

net We $XXX to quarter the expect million. of million be for the sales to Xth consolidated $XXX in range

We expect margin of X% to end full at range. lower incremental year be to gross the the XX%

but approach additional costs inflation our facility Virginia higher expenses of associated Excluding online. related inclusive as the we and covered reserve, start-up logistics coming warranty with

by a improve percentage as approximately ramp basis We sales expect we facility. year. to points year projected as the consolidated over Full XXX is persist continue XXXX to to SG&A prior of the start-up cost into

is tax of XX%. Our approximately rate anticipated

CapEx We of million in million. be $XXX spending range the to to expect full on $XXX spend year

capital normalize For the to historical full year, working will levels.

turn to Now back call I'll Bryan. the

Bryan Fairbanks

we reflects sales to line-up entry products. our to positive in effectively Dennis. follow a our up category, not Trex fourth slowing we you, at more decking midpoint. and quarter of put strong level product Thank growth double-digit guidance growth, to importantly, that see the Even do level compete the us another on outdoor outlook from railing growth with XX% results the year XXXX. record living allows strength leadership expect including with and Year-to-date brand the of and for premium the track This combination

now questions. to excited be to significant to about to Operator, continue the conversion from call I'd wood Trex opportunity the like products. open We

Operator

[Operator Securities. Instructions] Hughes Our with Keith Please first question comes from Truist go ahead.

Keith Hughes

the margin what a step-up guidance implies the the just kind the of quarter. quarter The That's in reported. you've for from fourth roughly gross contribution mid-XXs for fourth given year in you

it into kind for next year, down as we you is you or numbers period a you as see of would the in you would roughly this As think, capacity go add that would new that? adjust dip

Bryan Fairbanks

mentioned at we'll that I costs on cost engineering as Yes, the that. as income. the launch wouldn't perspective. of of see margin to hitting we operating X% EBITDA focus us talked And carry start-up half later as will the have that commentary, of sales. gross past his from with rest the And we've got year. important we've the product X% have really the lines, on in the opportunity will the load generally brand that both come between estimated We've in an of opportunities some at then improvement especially at also It's expect capability in year, of the line, half but to the the Trex's be Dennis first it in and the starting we to us, more of Enhance, same but

contributor over important So the that value the to very is leverage SG&A of a Company. term long

Keith Hughes

Correct? And brand advertising you or by that. like or mean

Bryan Fairbanks

Correct. Yes.

Keith Hughes

Yes.

some fourth price increase Is got with or the desirability - The the quarter? pre-load strong you're price which products. about wonderful the coming, the other thing kind for before of of channel see the going are sales, a that increase demand to I it's in just had, these here question the or some you anticipating

Bryan Fairbanks

Yes. Demand be in continues channel. to the strong

through down. of have So we elevated will some kick that demand levels October, slow are at and weather to November, in selling eventually

normalized and that up we buy of channel into run early the building a and of We April where more and start into next some early in will year back December have inventory program March again. start set through

Operator

Stanley from comes with ahead. go question Please Stifel. next Elliott Our

Stanley Elliott

have about have that how when place, should into year. a you of guys to kind next could above, moving kind in more involved plan think repurchased, plan regards In we to get a of have the share

Bryan Fairbanks

years. and plan The file can be will past very, success opportunistic and stock, on the I the buying we'll in Yes. place, think over our very XXbX-X we've been you that from see a buyback over historically, of the, back

Stanley Elliott

is the feels the limiting to like it then pretty feel demand that is you're people product? to it all ability lastly, to like right you contractors' rate And Does that now down the talking Perfect. really put guys, step good. channel the that in

Bryan Fairbanks

clearly that but perspective I attractive sure have contractors that expect right they pretty good been - through months channel, are through think timing consumer. that's extremely and launch Enhance had products of carry make and winter of next to year. where I that we that all our specifically through they has just channels into them that less and the business was strong the of to would DIY busy move The into and it's not appeal from the that DIY as the going all will backlogs necessarily

you're the up the business of contractors, shortages DIY where additional picking side that demand. say some seeing to you're So tending of

Operator

Our next Ryan William question with go comes ahead. Merkel Blair. Please from

Ryan Merkel

Keith half follow first guess I up So question. a to

fourth Your give just for us revenue much was contribution from was in? I guidance you versus quarter a than sell the sell-through better sense thinking. Can

Bryan Fairbanks

is on There marketplace. of in the lot sell-through going a still

I read then orders of mostly be from build marketplace, inventory December. of in Some back will checks some there channel those show, filled. the will are into and the there various analyst some the there in the And marketplace be out start

Ryan Merkel

gauge want to I'm quarter earnings Okay. have what one-time And excluding we would start-up been power once the then directly, you this these gross answer may but margins this just secondly, lap not trying costs? costs. to

Bryan Fairbanks

out costs estimate to that the an year next each in end provided and those that to really a be quarter. are. to what may continue into not we're that year. will We going the cost we we as We through not be of recognize moving start-up those do of We've breaking get have position

Operator

with go Our from Phil next ahead. Ng question Please Jefferies. comes

Phil Ng

for and XXXX growth. double-digit Appreciate the color strong

that? a have Is put there a double-digit on is kind a it finer little two handle? more a high-teens? that Bryan, for Does to that way color on great. Just ball growth XXXX? of Sounds

Bryan Fairbanks

Yes.

here end lot year, that things we're expect as over There the happen sitting to a the will get that out the of end of we will with XXXX. of So the color at quarter the revenue And additional XX for is days. XXXX. economy, we I next in third provide the on

of continues to this give see of we the strength continue in relevant wood and strategy that the to converting very to trying market expect an Just to environment. be idea in the

Phil Ng

caught was are XXXX, of pretty into growth And side a as standpoint. certainly year. big for at you I governor big that a fourth this as supply supply for fully from a you of know, standpoint, quarter from early like you a go Are point? the up things flush parts on

Bryan Fairbanks

It's mixed. is There about certain there'll - there and December there there we that of feel at sure other end to be that good inventory position. their pretty you'll more are talk needed, saying areas areas, I'm and the is is

Phil Ng

just last And one me. one for

first flat good the With the EBITDA have and a out of know on lot margin there a doing of the on there's we XXXX margin profile? half. price a to have that you all you're how the that cost year-over-year start-up on the but work standpoint, enough should kind to kind in costs like start increases I out, for is year, the basis EBITDA of about think guys your

Bryan Fairbanks

Yes.

first year at will a But, expand looking by in basis, EBITDA I half those we'll into margins along you the see on second more it splitting half the there think the clearly going out will margins. get way. not be when than to we really be to full We're half. pressure EBITDA look on

Operator

Baird. question ahead. comes Wjos next go Tim with Our from Please

Tim Wjos

maybe realization increase how a spend. of any commentary, in to product terms of Maybe on is that pricing maybe the and is of portfolio context us little mid-single-digit what historical the of and just just bit pricing there taking price much your first give way

Bryan Fairbanks

on not some they revoke XXX%. increases pricing industries are along Historical has It's way. realization been through like month where later price put a the then and the

we additional the areas The logistics through next the we price based the everybody market all can convert confidence moving It get sure that have that that product All how end to then rather the for line the has have is expect of there allow pressures continue because premium into pricing stay so, been also way able now. line, materials, on into said, Raw that cost, that the some put market strategy So right we entire of the of marketplace was understands the saw being is year. into have do product I'd absolute on marketplace. to going working wood and on volume the in we we to make our opportunity recognize taking the more revenue. particulars and then inflationary of details time we sales pricing to it will next communication its team and the up of we marketplace is where that it. not before to that certain be to at more sheer year. see needing of the key driver increase, be we're to the

of As materials, out it's aware, majority that something is not is our specific of a everybody the manufactured plan.

recycled plastic our will have footprint. buying products, both we our wood and are from sourcing expand to over the country, and all We

Tim Wjos

And or coming kind XX% what going marketing is growth, need I growth that, just the long-term mode, of with of in in question, you're guess later SG&A you XX% I what doing then forward? for to if rate conceptual a maybe growth percentage Enhance SG&A? guess reinvest right

Bryan Fairbanks

you to to is I'd this like The year. to - able thumb a rule I'd use. of be like reality give

beyond out much with expect of depend to see is Our And we'll make next into when where will because be way of going lower Company it but decisions we expense, of that and as leverage back pulling and our are to the that as team dollar travel those return way, growth definitely expensive to be what's marketing understanding not you the play the work, level a branding some you I the timeframe would but be, year see opportunities. probably leverage back year, lower more SG&A. along during the And come again, is we all on SG&A upon move investing of largest below medical also where on effective for quarter we it to see then really normally entertainment. put that's the extremely the start they do how occurring going in second

Operator

Matthew Barclays. ahead. go next from with Our Bouley Please question comes

Matthew Bouley

level, comment, the I it guess have a price retail two-parter number increase. a distribution into a X, you to pushing it perhaps guess of versus between Thank the wood, is and that higher what can customers? play composite increase on decision similar when number at do I you price impacts consumer X, all degree you. think, does penetration decking if at I they're comparing versus And wood?

Dennis Schemm

the first I'll there. take question

all will partners those Bryan. So over increase the shift second and products the receive channel of price our to question question, same across I'll multiple

Bryan Fairbanks

Yes.

converting of strategy composite of fully intact. amounts wood to is Our increased

will avoid the times, our and level linear have of product foot. of our is Enhance a aesthetics X price naturals move with still a that a for roughly higher about then product, We $X.XX retailing

Matthew Bouley

actually sense given what's any is gain well, actually I really in Second what to composite I decking in has accelerated you have all that have XXX you how decking question as I market think that increased share as the would share maybe points you. historically that and gain? strong accelerated Thank not year, this the early penetration X the been demand or guess underlying decking of guess done year just do basis versus you a is, real do you and guess, - one, of strong summer do through fall.

Bryan Fairbanks

go been lot see in not lumber fair market a what many we've continued the to organic the the empty this products to underlying couple search seen is there that goes products that's consumers composite affordable, that wood. that as were continue we taking decking cases. choice that them off making more continue because a and were educational Trex out years has they're we've year and it's still to just been there high of we by recognition strong quality absolutely they're business opportunities we'll is of that are often, Well, do trex.com past composite that results to say available do to forward coming that over with There that But and to the build demand. to of go charts. And

to to for So we of opportunities don't any go after our us growth trajectory. see shortage continue

Operator

Our FBR. Rygiel comes Alex Riley go next Please question ahead. with B from

Alex Rygiel

apologize not the last and market do the for that question what the third year? way, quarter entire Bryan know, organic the composite asking rate of for you think in you, in but Thank or sort growth was the same

Bryan Fairbanks

growth Organic rate.

if at just underlying you composites start in digits I that is you the to the once conversion growth think in we of difference start and then look on the that, going growth. of wood see to be top mid-single opportunity adding

before, a we with targeting going line For to in long time were the really right after remodeling increases. flow composites tended wood marketplace, spend

will conversion on I of well. that same a I seeing divergence but calculate we're growth international the have top at still we think I as go over time, point, this a wood little expect would opportunity. significant bit the way you of after plus remodeling,

Alex Rygiel

back authorization second what repurchase your on And remarks, that. authorization. Dennis, is balance prepared on to One right now, your coming share remaining the

Bryan Fairbanks

Well, I mean.

XX.X X.X authorized So, that. million million bottom line is the we Board date on to shares repurchased

Alex Rygiel

the million split? And split post the is XX.X that pre

Bryan Fairbanks

post split a is This number.

Operator

next Yinger Please Kurt D.A. Davidson. comes from from go ahead. question Our

Kurt Yinger

you you could stand where color, the give little with off, facility. a Bryan just more on Starting new bit Winchester

Just hiring, of year. in next and equipment terms in construction, of overall I ahead guess being place

Bryan Fairbanks

Sure.

XX you ramp and about X facility quarters point, we lines open and of be year, whole two this a the first will all to the At in walls the months into with those point as it going so an January piece continue this the July having we're year. this equipment XXXX a, on at we of of and to an in lot just land track recall, from building. went As to announced then last we expected we move through of building start-up in of

Kurt Yinger

pressures update on polyethylene my in for mover us about other horizon. what the then seeing little scale up, you it's not but second then where pricing, Virgin on of guys, inflationary freight bit huge Enhance a with and kind talk the and could a I realize And you're you just one, stand needle for you any

Bryan Fairbanks

the that majority out there but of Yes, is on largely we're of going our final couple getting a vast sure. remove has from product the We've it. line, product still lines in, equipment working today enhanced at weight weight lower lower, the the

was? second Your point

Dennis Schemm

forth. divestitures About margin gross and so

further And into continue we're we're we we're pressures And about another these advance is raw we Bryan to here for inflation of to bring going it's taken of XX% our to point to about to it, more to we've stretching the we more to labor looking in as make talked to supply safe lower important so, costs are continue quarter. the lines. on think on what's XX%. out range what, start-up, that as footprint that's as and end fourth is materials of I keep I continue us mean see the secure new got basically people out for workforce our as incurring

Bryan Fairbanks

facility to a had be see the quite training many hiring general done with who tight is working to planned labor point, so of trades at coming you where on it's bit people labor of say as that's to not as a we in ago at start-up of would that's this directly risk will something well advance year as Virginia We've our without market continue I that talked, indirect It especially have lines, and we talked very probably heads, skilled challenge. along the today. and about

Operator

ahead. go The Reuben Company. comes next Please from question Our with Benchmark Garner

Reuben Garner

I at to hate you increased more So, Trex's well, one that priced do follow-up puts to least to was pricing just you does I premium have how harp the there it - Is seen, but guess, any competitively your now there how on I prices, compared does, you question, a have line. know peers? And normally the larger out risk that puts do and a than seen you you there Are others are others? same. at you in you pricing,

Bryan Fairbanks

our what sets reviews on can't against the understand else I We we've over our product annual are in everybody, lines. pricing everybody in what marketplace, built that we very for is Trex we the strategies basis. on that doing While really as up feel marketplace the though time. it but else an where well comment

Reuben Garner

the capacity your incremental And you on that in the maybe then that I mentioned opportunity guess, impacted the able much constraint the kind capacity opportunity, business up to you has much Bryan, how And to adding, other how open or growth does how your markets? be grow - you're faster of there? - does of international

Bryan Fairbanks

our as there. Yes. rocket we'll international to to We've In short-term next they'd business year love out markets. into again drive in and capacity, product fuel some put and and able marketplace some great back growth have limited, into we it's more move that and we the that have really partners definitely opportunities more growth overseas in be got

Operator

Our Berenberg. from next question comes Alex Maroccia go Please with ahead.

Alex Maroccia

competitors Heading getting your since into the aggressive more can on you marketing some of discuss are strategy visibility. especially XXXX, brand

Bryan Fairbanks

Sure.

the other as that are As we wholly to more a Trex-owned a products as to composites advertising up from composite built are them in we marketing with, that's to bring which would trex.com deck. use an likely market we specifically past website look marketplace, to who and to hit understanding Trex move buyers affordable. aesthetic try will that wood cases, decks.com, website or and start it's able search well a heavily strategy many to appeals primarily in on out that use perspective through the targets better could but a do aesthetic, their paid also be XXXX, people looking that be are we'll that into And consumers we've decking venues then who as for and will in will that our rely on then at

see in successfully the now. team is marketing as working that more done our well things past to So what I new very as we have on you'll of expect that continue

Alex Maroccia

you've historically construction then limited new seen exposure. And

labor strength build However, now you are market deck? right any environment the that and for difficult in given the changes propensity to remodeling new homebuilders in contractors, seeing

Bryan Fairbanks

I builds think those get we building of home a can improve decks now own new as great and out longer but opportunity focused on us homebuilders see an of longer penetration it's get backlogs their the way, are term. built, for plain the on the the definitely homebuilders over right to opportunity simple, term homes over the you home the along Trex the

Operator

comes Stephens. question Please from Trey next go Our ahead. with Grooms

Trey Grooms

dissect ramping implemented. time thing, much fully of related or the the would how be really to but and costs of how related increase to - costs continuing off, may how guess, like true capacity trying to of be, what on that you a how once and this, is would some the and maybe one of cost more touched I better have understanding just we costs up maybe first think get about can the So to and capacity, start-up that type I'm kind related are depreciation new

Bryan Fairbanks

are about up know, when it like costs right Yes, the you now, real. think I start

lines, going to to to going going to forward. be ramp to to testing be full aspect we're out, So going about one we're them so to we think up perfect get shaking them going them capacity, be to that's be these to working

before going are to bringing all them, we're we're people cost developing as bringing them, those Secondarily, higher people, see training these lines ready. on on we're

So labor. unabsorbed that's that's unabsorbed,

all until So and those second that's up end lines hitting us as of the are right, the quarter. well, by running

and that would those to in to because on eye seen right that over-time primary we've one-timer's expenses personnel watchful folks be a be going uptick the continue precautionary see, costs think of we've I on, and COVID keep you an So would is have got being just etc. we to course quarantining very got now depreciation

that one-timer another that's So with. dealing we're

Dennis Schemm

second continue Unfortunately, may but in the solutions Hopefully I beyond out some that first through expect quarter. we'll the the continue do quarter, to at will least quarter. that first that probably see

Trey Grooms

you but know that a that selling been if about that some percent a a term? then in where the over of earlier, a while, and product total, has percent then in total? going But been now don't do as don't me. past, international, sounds of I you - where long give right it there think guys heard And there you international the so in comment headwinds sound I and I have know know on different I've recently excited there areas was I as now see right the to that is can you

Bryan Fairbanks

that The we an constraints only the business capacity have to is in as headwind that related organization.

bring it. will less We've than we're we I'm that's ready today. excited that it's of they're So the capacity as in those shipping, XX% our we up, got primed expand customers, and marketplaces, grow what to why about business

Trey Grooms

Yes.

Bryan Fairbanks

that. But, got to when exactly But will as good to time, strategies the hit will we've that the in I'm you XX%. expect we marketplaces. growing, it years, and sure of North in are side I place over those not been we've business to American can grow it it see pretty yes, right, over larger and be than a quickly the excited about you're get over

Operator

comes Bank. go Seldon Our next Please question from Deutsche Clarke ahead. with

Seldon Clarke

Just on more one pricing.

I bit be inflation the relates You've little as been increases. fairly to was years they've price selective in And than been think where implemented normal. in to a the generally, past it higher expected

So talked the raw a about little seem know some in something terms anticipating you the inflation, be you to of freight materials but year. earlier and is of seem bit that more doesn't like this you costs unexpected, in

seen awareness or So, longer over months. acceleration and just changed the all pricing term the on of curious you've if based to dynamics that couple has approach last at industry either your

Bryan Fairbanks

we to on decisions pricing what to well understanding consumer where the off pricing products, value are continue basis and the as We'll relates at our it look and as make make end inflationary based and line a an determination of as impacts. of that, annual up our

there's really a last there with taken. but some increases into we've decisions, a number has just been driver pricing inputs multiple goes So not of of that inflation the primary that

Seldon Clarke

so strategy. real change Okay, no previous to

Bryan Fairbanks

No.

Seldon Clarke

you're compared another you're of detail growth. granular you of understand ton of could expecting you like you bringing capacity just give I with expansion, but don't XX% XXXX give your us I year a another total double-digit XXXX, to current think in it then, sense of know, capacity to on And where a there. But

thinking utilization perspective it of curious sort well. a as So how trending you're capacity just from about

Just be any helpful. would sense there

Bryan Fairbanks

Well, percentage like Nevada capacity plan, much smaller the we did that came lines up expansion was overall right. about the that a talk of

So be of and we going of be the probably I remainder to said will, that think, or in in is the that Nevada about would XX% comments bulk of Virginia. that past in

Operator

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

Bryan Fairbanks

evening. speaking We at on call us this with various joining you for look good many to the forward conferences. the coming everybody evening. weeks and you of Thanks, in Thank

Operator

you is concluded. conference The Thank for today’s presentation. attending now

You disconnect. may now

Trex (TREX) 2 Nov 202020 Q3 Earnings call transcript