TREX - Earnings call transcript Q1 2021

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Operator

Good afternoon and welcome to the Trex Company First Quarter 2021 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Viktoriia Nakhla. Please go ahead.

Viktoriia Nakhla

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

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

Bill Gupp

Viktoriia. you, Thank

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

as SEC. For XXXX Act a risks and well recent Form other uncertainties, and such the XX-K and discussion filings XX-Qs as see with our XXXX Form please of most our

Bryan otherwise. of turn that revise will update information, obligation in non-GAAP found introduction, measures any forward-looking our A be earnings to trex.com. to whether or Additionally, Fairbanks. call financial a or release company measures referenced these expressly to be any With over will the new disclaims press statements, as call. future reconciliation the financial of measures in this events publicly can comparable The GAAP result at I

Bryan Fairbanks

demand increasing consumer growth. proven aesthetics outdoor Demand to first products sustainable Thank And products, preference by as today's for with good gains first was Trex joining quality. and the Trex company's market for continued, high products broad-based business share evening, quarter drove living trends Company's as secular you, from across environmentally review for accelerated outlook. well on you Sustained driven and Bill. residential wood, performance, quarter Thank everyone. strong, us performance call and

sales As in first performance traditional from as pace we XX% grew at are Trex wood a quarter. result, share taking wood which This accelerated the market, the residential the increase. underscores prices particularly strong year-over-year

analysis typically million Our and that of a market in Consumer July, reached months. over share would to June demand our and Decks.com, to indicates April, for $XX Traffic one seen sales. from in living outdoor point annual March percentage our remains and levels seasonally more translate strongest strong. Trex.com the products gain

Our websites consumer view engage sites source products a our deck, with partner valuable are every to the then creating consumer products. the the Together, finally future dream in digital of for purchase and their resource with samples, costs, a step unique and respect intelligence our purchasing buy decking of decision-making company contractor to deck residential inform the helping and where powerful design railing, and to experiences. and for design consumer finding a at the or process, estimate and

action X, consumers, price Dennis To in XX% of on and most raw a increase review mid-single of contractors, March These notice. as days Virginia costs startup take well will will these impacted quarter, retailers, XXXX, strong the short-term distributors, our dealers, of digit we effect earnings transportation our to one products. buildings XX this margin EBITDA the growth expansion first from in in sales consolidate of the the capacity was by XX.X% advanced as his pressures inflation of impact at manufacturing our impact to commentary. August us on led inflationary campus. minimize share addition In program, growth Earnings per higher costs, and fire and on announce first pricing providing $X.XX. quarter impacts reported material our from

also respect progress Trex, but Virginia. quarter financial our for program performance, terms was not tremendous strong facility new in with to just at our in the of with manufacturing This capacity expansion

expect composite to leader Also, end believe by and the decking new facility fully installed capacity May, of railing. lines pursue poised competitive international and such ahead will decking of high-performance, to future efficient pleased XX position sales be are provide as days the and most to product marketplace, manufacturer important for is dynamic the our domestic us key initiatives, as lines we in an in wood-alternative growth. growth operational outpace new sales to also further capacity us gain performance development allow the all We demand continues our high-performance, schedule. with additional the capacity numerous The of will decking with growth and of low-maintenance industry furthering reinforces markets advantage momentum. resume This today's additional and in for

recycling to In focused will Company improving margins. XX% ever, branded and which a and environmental improving addition, utilizing Trex have compelling eco-friendly Recently, be we Packaging reclaimed products and contributed than vigorously to certification packaging that to improvement on for committed NexTrex official allows an an decking. the fully also the raw recycling our plastic acceptable footprint decking been as our verified products. recycled with using initiative, wood our we recycled solutions that boards Label to are high-performance more offers competing Trex consumers decking remains for Furthermore, plastic reclaimed Trex tested and historically and material our More continues projects pursue other into materials. to continuous best-in-class introduced has alternative and enhanced, create waste.

third initiative, this the with incorporated the heritage, improvements will awareness bins stores drive at the ESG by level We've since As on issuance. and signage in drop-off quarter. in companies report participation engagement also last to later retail and and promotion positioning part to owners encourage NexTrex our brand and will work of our Trex reporting new Furthering program. in annual plastic our ESG be second many issuing to Trex our

brand garnering Trex this in The Trex's honors quarter. We continued earned pleased are numerous about industry honors. success

XXth in years. Most the the and Familiarity, Brand Used Use year, two Builder tops Brand Brand magazine's For Brand Study past Trex Used consecutive annual Most for

For the the particularly by products evidenced leadership We're named XXth the readers and the their of decking brand magazine. because from in greenest consecutive the of Trex strength industry Trex these in who they own our of has proud Green awards been business. Builder use those year,

over financial first Now, I to CFO, call the review. the will turn Schemm Dennis for quarter our Dennis?

Dennis Schemm

overhead our strong year-over-year results and for all reflecting million, quarter full you, the XXXX $XX the costs, based impact broad fire XXXX. and commercial in transportation despite buildings to a raw pleased channel I sales well temporary expansion to sustained as the continued to to were Bryan. Consolidated of margin driven materials second million in outdoor was the to trends across driven demand XXXX. at products $XXX was growth portfolio. by facility. expectations share Virginia and the review first Trex due costs, quarter products compared quarter XX.X% Trex markets. the the inflationary and pressures as at sales and depreciation capital the Thank Trex strong absorption secular increased related performance Products, our tightness reduced Gross start-up in first facility fire at strong program by Residential Virginia am interruption first our of in XX% one reflecting of This consolidated on to increase due contributed labor XX% freight our a partners, growth and the XX% year a our living across manufacturing quarter

product the margin the X to to was a effective Trex expect due in in price recently Bryan margin recover lower reflects XX.X%, Products certain commitment on products mix, mentioned, second we are of August success. expenses in channel commercial long-term will revenue increase XX.X% and QX we that million our we inflation gross over products is timing quarter. benefit strong increases projects Trex’s element quarter. announced prior of products margin, to ago, to year SG&A absorption, decreased million The year Trex most which timing the commercial key gross Residential maintaining not relationships, but compared of margin $XX the higher $X quarter. both and As offset to was partner XX.X% to the but experiencing.

the SG&A entertainment expenses XXX the a of year quarter due As quarter, of the travel to decreased primarily XX.X% of percentage compared and in prior timing first XX.X% pandemic. basis reduced to in to because points and spend sales, COVID branding on

compared to program $XX an expansion of under facility. at average When program. share expenditures price quarter million prior over outstanding per XX% was we EBITDA quarter. diluted up and from XX% stock $XX the XXXX will repurchased of $XX year Our and million tax of volume capacity first the buyback Virginia XX.X% $X.XX margin income XX.X%, and share, continued in first per completed respectively, effective rate to capacity levels. XXXX In program $X.XX Capital for XXX,XXX million the new majority to common first to add when XXXX EBITDA share in more with the quarter was the Net quarter. supporting We provide $XX Trex at share were XX.X% quarter, compared XX% expansion line expectations. end month, to shares million diluted the comparable totaling per in $XX the of XX% during capacity the XXXX. increased the million the or the $XX the or lines the with was

shares under the program have the We of of end quarter. a million as current first repurchased X.X the total of

$XX Our June another at to million loss of to because the on digit strong estimated the end year-to-date of facility. million year of us of double strong have puts the Virginia first through sales fire quarter despite our track firmly $XX growth,

additional the to second with is from XX% sales the before back-filled line to point. seasonal the We expectation normalized to million second we growth million as quarter. fully capacity growth channel more of operational. in our at This inventory fourth of range previous representing sales quarter third consolidated patterns mid in And $XXX quarter the as expect in quarter our is year-on-year net in $XXX returning

XXXX guidance for savings of reaffirming and XX% amid margin are price We drive XX% XXXX, also half normalized margin leverage second additional in the between projects as gross of full and cost EBITDA the the impact August spending. of incremental year increase the SG&A positive more

be in Depreciation million $XX to on year. CapEx million Our at from the $XXX range XX%. spending anticipated million. $XX million year to range full throughout increasing to approximately expect And of we tax $XXX will rate the is

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

Bryan Fairbanks

Thank you, Dennis.

has their in foundation of completion XXXX of against of backdrop strong growth continued performance as in contractors timing dealers, retailers, XX% entire double I market expansion for for quarter and to call second our for the wood essential of opportunity The now strength been open our hard is growth as guidance capacity demand team quarter. like want demonstrated the has to our Trex the capacity support sales additions, overall mid strong consumer to well questions. first and their the continued and distributors, growth. the I'd the program. point whose conversion digit work, the the Our laid by thank of Operator,

Operator

Please from Blair. you. first Thank Merkel Instructions] go Today's, question William ahead. Ryan [Operator with comes

Ryan Merkel

taking Hey, the thanks for question.

First end or is and growth off, about the conversion talk and as can has at stronger a been it prices so, broad-based? seen if low you've you boosted if lumber result, the

Bryan Fairbanks

to Good evening. talk this Ryan. to Sure, you

We or higher we're products. at entry pressure is as about all enhanced a seeing our Well, product. prices. about lumber is have broad-based our for seen selling demand And of treated $X.XX quality level across what you're a is basics reasonable the aware, $X.XX. DIY

who this opening So point, shift I conversion seeing close it's for that intending is price But price that that for consumer easier is. how a towards make primarily not would given at that point. to expect them we're wood,

all aesthetics products. basics of that product are and want, continue looking and them more our across that the those are recognized and aesthetics they're tending afford of enhanced the We the naturals. see that line, We'll look able more People Select of the the to still for the enhanced lines. to towards Transcend products see growth premium give they product the

Ryan Merkel

through my million, million to the SG&A, year, $X XQ? higher that spend $XX hear you're follow-up such should comes we that back then be maybe XQ, for Bryan. gradually exiting Thanks. than brand That's great And on assuming

Bryan Fairbanks

to definitely that quarter, the that be last the were in the we would remainder gradually We see heavily said year this We first start this than brand would year on and more said more And year we that normalized and would throughout will year. a the continue certainly we expected. reinvesting path. after of lower as be this we increase

Ryan Merkel

All right. Great Thanks. Fair. quarter.

Bryan Fairbanks

Ryan. Thanks,

Operator

And our Baird. comes next Tim with question ahead. Please from Wojs go

Tim Wojs

Hey morning Hey. afternoon. everybody, good good or

Sorry. Thanks.

in terms trending your maybe you first what relative expectations I this seeing year? you're Could earlier costs. and inflation be question, on that of So input guess might talk my initial just to now about how

Dennis Schemm

inflation across seeing are broad-based organization. the We

It's say or had XXX than that recognize into expectations many higher expected what to the was and year, coming it fair up. inflation those pick that higher is we coming Going channel XX It days the operates important we sold advance. decks in in how – to are were.

wanted jobs to give the contractors and price then the time through that, along finish their to to we So increase. work for channel enough allow pass

inflation coming we're able that our and pricing guidance. incremental in with the EBITDA we're taking, to margin So hold

Tim Wojs

Okay.

to Okay. just the And virgin, That's you yes, remind you move good. recycled to the virgin then relative could how us counterparts? input

Bryan Fairbanks

recycled The right our about inputs some now talked in a we volume we're seeing higher purchasing. And with move prior calls. of the that we're little is bit biggest that that

in, the course, we're and polyethylene now. right driver further go biggest seeing in increases that's cost increased significant to having we're of So the of transportation

Tim Wojs

Okay.

Nice hop great. back Okay, guys. I'll in job queue.

Bryan Fairbanks

Thanks.

Operator

today ahead. And Capital question with go BMO Please Mamtora comes our Ketan from Markets. next

Ketan Mamtora

you. terms for time what seeing channel Thank of so I'm this are been you curious, demand of guys has strong? just year, in given, inventories the

Bryan Fairbanks

continue that in right of first the the the that by to quarter. than quarter, We lower marketplace. And because of to We're that's inventory coming inventory building back building the seeing like, would channel we peak that's we our online channel expected, have now normally where as timeframe. inventories. capacity the be be in not why out of is Dennis all that we third would demand capacity, mentioned during would Our

Ketan Mamtora

just is left what authorization? remind way you And us by then repurchase can it. of Got

Dennis Schemm

relatively significant is us. a million shares X.X amounts There a left are It's for left.

Ketan Mamtora

back helpful. you. I’ll in jump Thank Very it. Got queue. the

Bryan Fairbanks

Thanks

Operator

our from ahead. And Hughes next Keith comes Truist. go question with Please

Keith Hughes

Thanks.

how the release the on of items quarter us the that pressures statements of and in you give about about much an capacity. ramp – the in around prepared or up the fire Can of some of numbers and much cost idea, in talked the You two quarter? how the those the

Dennis Schemm

and the XX%. that's degradation a XXX with will year despite you at that expenses. basis the a question. Keith, at our dealing full for unchanged great the of remain in look issues, – we're margin XXX gross the very the And still fire, it's startup and when say, between expense, was another points But of startup a Yes, these that all proud incrementals was take XX% to I'd about inflation, quarter, relative inflation,

Keith Hughes

dollar include points Or of? basis is that that's XXX higher cost that just like kind Does D&A? more the

Dennis Schemm

does. well. includes D&A some It It of higher the as

Keith Hughes

end cost And does all sales that of D&A coming in cost of goods or – excuse that of in SG&A? in up some

Dennis Schemm

little SG&A, There's course line. of in COGS the major – is a in the CapEx bit but the major

Keith Hughes

that excuse the then that Is price me, coming are final me And Okay. on entire in? on – the increase. Trex excuse price on release, the portfolio increases across question product those the

Bryan Fairbanks

of It's most across our products.

Keith Hughes

Thank Okay. you.

Bryan Fairbanks

Keith. Thanks,

Operator

from And our next go ahead. comes question with today Please Stanley Stifel. Elliott

Stanley Elliott

the taking for all you thank guys, question. Hey

any to of in the sort the around price color seeing. traffic you're terms instead of but really In love is demand like get restock XQ guidance, web especially that, of some we'd of this of increase, impressive. the that context the feels It true high very ahead

Bryan Fairbanks

and then demand I You're there's demand now, inventory that we'll but It spot fourth get back quarter, on in occur third in of seasonal comments. be the is a will going saying all would prefer some pattern and more that inventory demand that with into that the of your build the some type building be to expect normal, of we to second as quarter. to in quarter, driven.

Stanley Elliott

online coming all And targeted. you had with Great. expansion than faster what the

start in can completed May? once with moving wishlist You mentioned projects. you those on expansion of growth a How the handful you get of quickly kind

Bryan Fairbanks

number point. that a at got are this the of in queue We've projects

of already the are path in Some have we pipeline. investment. they're There's other the down where parts where it still

increasing ahead but come I those that once manufacturing lines. need the able to to start to be existing done output be opportunity to on of talked still able capacity of of we years see downtime replace get our back We you'll think an assets. the some to of a That's about some go it, those we of us, more with ago. we're piece number

Stanley Elliott

of Thanks guys. it. Appreciate Best luck.

Bryan Fairbanks

Thanks.

Operator

comes And with Please question go next Matthew today from Bouley Barclays. our ahead.

Matthew Bouley

Good evening, everyone.

Bryan Fairbanks

Matt. Hi

Matthew Bouley

last Follow-up question. to that

by capacity end being the May. operational the fully of On

it think you, actually then the my Just make sense, need broader question like of however, is strength the one, define know number does really sound waves these you don't point of want what but around? have it you capacity. initiatives, growth I think given that. does room Thank to demand, utilization; suggest additional actually about next to the Bryan. that next at what does you Because or you'll after go to the

Bryan Fairbanks

Yes. Thanks.

sophisticated supply do seven for five, And out and sales our to XX a have we to making and there, what from determinations need We are. looking capacity. they're what with expectations group as chain years growth

something that regularly talk we here. So it's about

now, we utilization XXX%. As talk about right utilization is a at

running of marketplace. We single assets all linear and the every to have of foot out getting decking railing are we the and

Matthew Bouley

understood. Okay,

the Second got you become to you sounds one, you more plastics the that up at mentioned scale along lines, a quickly, It you're the NexTrex source you. as material. does kind like recycled just interesting need scale quickly, store and ability some this constraint obviously of but Thank going all. same to more actually here efforts as you've this the with

Bryan Fairbanks

time We've of size the now, recognizing is the out been and working to some opportunity. scale conversion for that there the growth

of freight are own want as their ESG the increases. plastic what's it, There of of the look right do, challenges there plentiful and lot at and market supply now. a principles supplies homeowners to while to right related So environment related to some more it as is that companies more for

Matthew Bouley

Bryan, Wonderful. and luck. the Well, details, thank good you for

Bryan Fairbanks

it. Matt. Thanks Appreciate

Operator

Capital. ahead. comes Jeff from Loop with Please go our question And Stevenson

Jeff Stevenson

is EBITDA incremental first be it get or of will think still it range, progresses? the how taking expectation? to weighted sooner than about we XX% cadence to my to year questions the margin capacity back Should program thanks Hi, that completed today. should for as earlier the one original has half be My XX% the now

Dennis Schemm

the because will go effect X. question, And August QX not margins great damping seeing. our a of inflation Jeff. into And a until It’s does increase little we're be price that

expansion the and will of running that's half, be up of then fully definitely higher even a be expect full be – will and than and running to QX will definitely this, be because out all will lines margin you QX should EBITDA QX back higher. our we see So and more be

occur. how that's So the ramp should

Jeff Stevenson

Okay, about impact demand wondered a I great. And into how the that at Uri whether from also quarter? just as the as March storm heading just and far much result could fire of goes, exit the pent-up demand April and rate Virginia plant the second how and winter was

Bryan Fairbanks

that wouldn't demand. could orders unable that have were drove say They We the I do that pent-up the during to were that. quarter. we filled

the in there are earlier, those out comes the to orders. channel on, as at more work We'd mentioned As we'll this fill to like I have inventories and low capacity point. the

Jeff Stevenson

it. you. Thank Got

Bryan Fairbanks

Jeff. Thanks,

Operator

question next Please with today Rehaut go from our comes ahead. Michael JPMorgan. And

Michael Rehaut

Congrats Good the thanks. everyone. on results. afternoon, Yes,

Bryan Fairbanks

afternoon. Good you. Thank

Michael Rehaut

it to is Demand make. be had not was guidance remain capacity. much a in about obviously quarter the you as the ramp just on your on you can in part second I continued – – as you in that's sell half. question based First the the and can how in Obviously back to continues think problem, revenue gave backdrop where a doesn't and

up XQ was last let's a lines factor at seasonality of should it argument's as look again, in we further So, that run standpoint, year? about May, of the think much and isn't rate sake – say as being XQ operational from case by for that just as as the and fully coming the you how end

Dennis Schemm

even fully growth only really gives a QX us of operational the will a lot QX feel growth about that, move be after here XX% clipping part off right. good of XX% of as rate at our sees the QX a than be midpoint year we entire for and momentum. I in the rate to expect into all lines bigger QX a QX, Yes, for growth

seasonal and QX return things So start be bigger than QX to levels for more will normalized then QX. should to

Michael Rehaut

you helpful. Right. that. Very That's for great. Thank

On price improving, I'm the also believe seem SG&A, a about gross we kind startup the should be second to basis. back you have on those should should obviously be cadence costs side, sequentially It should year. increases, line, on also gross to seeing flipping moderate the as going year into something the back question, leverage I decline and thinking would still full mean, if wondering half the positive a But talked I you you margin in the of throughout the less. about basis, some obviously or and similar to about year-over-year on be the a we talked of of type we be top just a dollar margin expecting kick as case. better degree, XQ

kind a for there, the sorry two-parter So bossiness. of

Dennis Schemm

problem No, all. no at

really going So the be to relative be year. SG&A, throughout we're to so just clear, to increasing SG&A

were QX So, COVID. actually of there Because year significant a will right? last headwind pullback year-over-year be a because

because So the of back QX. pretty on because significantly throttling well, were QX, strong. pulled QX, we're SG&A entertainment. We and In pulled was branding back going demand QX, spend and be, as to so up definitely QX travel in we reduced the QX,

year. so to impacted. story, we of be expect as a light through Relative Right, we term because clearly to long over So QX more and SG&A We the so returning normalized move to leveraged – story. expected too. we'll here, was be the longer fully COVID be levels it SG&A

as inflation. we lines leveraged gross being expenses. And year muted, this have We coming about Relative well. get We little on. higher talked have we a still to margin, the will QX despite start-up

into August And price – take does until so our increase not into X. come effect

be we’re we'll so into have to move to you're utilization in – Also QX, out, expecting will full with increase QX QX price running have well. will But behind QX, be and as we well. exposed. as be us the capacity So as very very, going strong

see in you'll gross margin QX increases So performance. QX ratable and our

Michael Rehaut

I appreciate that.

gross margin, material in higher felt that depreciation? raw appreciate and on kick be the and price on given higher similarly, XXX increases impact the don't clarify will XQ the Just margins that inflation therefore bip startup in that sales moderate yet. cost drag QX be the better continued the XQ? about versus than given be cost, XQ perhaps the the and ramp should startup from What – QX still Would the gross that to

Dennis Schemm

to going specific not comment Well, to expenses to but the on guidance startup down. come start margins, should

to We be full for by new the are capacity of our May. going at building end

we full QX startup So, we see should to this of the of start component expenses definitely saw decrease. those year. And the in startup expenses

Michael Rehaut

Thank you.

Bryan Fairbanks

Thanks.

Operator

And Ng our ahead. Jefferies. next question today comes with go Please from Phil

Phil Ng

Hey guys on congrats quarter. another strong

Bryan Fairbanks

Thanks, Phil.

Phil Ng

Great to Hey, new the come ahead on Bryan. capacity see of schedule.

do if is that out, demand Appreciating of standpoint capacity half? much supply on and basis have some a in for just from full So, XX% how come incremental there last XQ year-over-year you on year did already. curious, the you run a bandwidth back

Bryan Fairbanks

We haven't numbers. specific provided

think I on. an when it's sales indication capacity growth you that the coming of we're showing look at that

have two already available full mentioned, that the have by as for lines And let's us. of third come additional quarter. will because up that, increases from full have of say a course, have perspective And all months to will will lines the that the quarter, up. through we revenue come we the full, So, Dennis now the a that capacity of that quarter two

Phil Ng

will of kind more given that is back demand general to channel up return inventory XQ, Okay. XQ But be the your view backdrop, from standpoint kind caught you'll by of normal? for the

Bryan Fairbanks

part way market be at a building the we're able point that way the large it's there. point expect it's Where capacity way say we'll at whether we to large that the goes tough the inventory back get third have quarter. in with we fully we – this be Yes, there, expectation but to our of will

Phil Ng

lot. then new with What you talked you I’m Thanks markets trying actually bringing a on, And standpoint? things is really new to gauge right margin the some construction? international of from providing a to attractive as are opportunity strong about new products. versus to pursue just less the that, how now? capacity opportunity a international are in you Okay. for So, about to

Bryan Fairbanks

team that be there It's so relationships we that's out a largest that That the something have as let in can are builders and when point. with available national with product We will good working on. already upgrades a they of is them that some their know consistently have that offer them that homes. to focused

Phil Ng

right, sounds good. Okay. That's exciting. All

Bryan Fairbanks

Thanks.

Operator

with Alex our Berenberg. today go And question next Please ahead. comes Maroccia from

Alex Maroccia

questions. guys. afternoon Thanks taking for Good my

looking to shipped information is these for a timing, August, in terms be the with DCs of increases month? around price how of more until are the And booked sales increase get retail? of or the this work in they then it, can't that start Just price does end accounting from to

Dennis Schemm

our The price FOB is increase for the customers, plant X. perspective, it's August center manufacturing will the retail take it to ships our And of from accounting distribution and an out effect on when plant, store. or product from their

Alex Maroccia

the price FY’XX? the in input of in versus that it. back get increase capture the how year, costs event begin you as savings then normalizing FY’XX in cost we the would the past And Got of half Okay. much

Dennis Schemm

you you came Can across repeat that broken Sorry, up. again? a question little

Alex Maroccia

no Yes, worries.

start get in of an FY’XX how normalizing event costs second half, those much you input increase from the we this price past in FY’XX? costs savings the would that versus the capture As declines

Dennis Schemm

I making think cost we through. of would would some this changes be what flowing those be have assumptions to point real at regarding there

good you this we a that's for at So answer I provide don't can think one time.

Alex Maroccia

get I actually the gauge materials booked? versus Okay. when raw trying it No purchasing was worries. of time the to would you’re when just

Dennis Schemm

to XX cases shorter. a what easy XX longer some is, for raw even depending rough to upon an days there's to purpose. supply get this number Yes, many are But are some it in material think the you for way I don't

Alex Maroccia

Thank it. got Okay, you, guys.

Operator

Please from ahead. Ruben Your next Garner question today go with Company. Benchmark comes The

Ruben Garner

you. Thank congrats on guys. the And quarter

Bryan Fairbanks

Ruben. Thanks,

Ruben Garner

get underlying is So, rate there you a much, in question, guess you growth it think from maybe Is levels XX% talk how at to in get about normal for just the second a an we that planning earlier sounds that restocking you're the know we could I restock I Dennis, that? than look if you levels, assuming good back quarter much follow-up whatever market, quarter. building suggesting Can that from would like is. some be guys way you third the – stronger growing the quarter can like to add third inventory. market even to business to just normal how are like guys, on to

Bryan Fairbanks

double-digit, quarter see to supplying doesn't what overall give the growth quarter is inventory. it looking as I is market availability capacity, as for. about. second grow of do expect the that with backfilling know the you in We the you're beyond we're talking We number demand, third inclusive the well exactly where top-line

Ruben Garner

conversation a polyethylene then Virgin in on I pellet know ago, And guys were business the with Okay. handful you years follow-up the prices.

you doing the were mean, use? a take for are turning when business cheaper of or is to today. were think inputs back can capabilities north your there I into doing to got that. they OEMs guys I I the they But advantage where you I thought stand in know pretty they exactly some of imagine £X there any product into don't $X close. that quality

Bryan Fairbanks

for pellet. than attractive us the marketplace living and The outdoor commodity growth opportunity more is much

Ruben Garner

for same not do It's separate would use so Okay, capacity same a capacity. you decking? use manufacturing the would it it process, the that

Bryan Fairbanks

our That's correct, market additional right capacity that to now, built marketplace. specifically. growing is focused the on But living service we unless serving strategy outdoor

Ruben Garner

Very you, And Thank helpful. it. congrats again. guys. Got

Operator

today Yinger comes Davidson. Please from go And Kurt our with D.A. ahead. next question

Kurt Yinger

hot any talk being you contractors of of the in terms projects to perhaps that I'm a program, as is way you in to part hearing market what curious, in you. when right labor and thank demand your now? just as are quite Great, constraint

Bryan Fairbanks

people in that or the they everybody sure channel, be the our trying pro for sure aisle, get the carry. channel, to people the able to making challenge a make the registers enough lumber is to skilled they're products premium whether the be they in retailer, it that right to sell Labor have staff

that through contractors contractors, been with have them they our of some employed many the no now. have been For it’s have, different the entire And employees period. for time these pandemic fully

way. meet happy else to to roles unemployment they're that need have economy, sure the of they not off right more to pace backlogs. staffing be into like have these of those I'm be a coming bringing people quicker the jobs back along to off virtually able people everybody having the own their be much But now, they'd at in again. So, they

Kurt Yinger

story of narrative. think that Okay, makes a next And three, conversion? conversion now as is critical two, important of very second the years, then strong. five terms obviously, think part of the in one, the is curious, long-term it's most do continuing out you And over look what my your sense. real in role rate you I just accelerated right I'm

Bryan Fairbanks

wood North alone, in those million eight, on eight to XX just average decks XX ten an decks. America There's on to years

Composites, would out I So, products Composites five fair those well-known that much of than as those seven share average, come on are expect need will there. more are next to specifically, between we the market replaced. sales the to than any other Trex be gain will decks years in our along. And more they

it confident goes if was strategy and wood highly have that it even marketplace right to our now, tightened composites where though to right conversion. continue back So in tomorrow, we're the we between

Kurt Yinger

Bryan. here good All in guys. luck QX right, the it. appreciate Got And color,

Bryan Fairbanks

Thanks.

Operator

today question ahead. comes next Please from Alex FBR. Rygiel our with And Riley B. go

Alex Rygiel

thank Bryan. guys nice Hey you. Very quarter

Bryan Fairbanks

Alex. Thanks,

Alex Rygiel

you've building drivers decking? and many sort deck a business How you to been talk long cycles? between a the lagging in years… a home composite Can for correlation Bryan, new And construction then little time. of about bit the the demand

Bryan Fairbanks

I didn't for Alex, set your while great this. you hair, around think, just you? I've on up a been

there's and XX% repair on demand cycle significant are With and see correlation there. the a out patterns you homebuilding that we Trex because not new that between homebuilding, remodel,

think of them, available have I building further build we home going in to and expansion it, next a a over more – probably as to little I'd be never years. And those on it's become build correlation. dominant is our new move relationships, couple be But forward, there’ll the business. product and we a there bit as of part

Alex Rygiel

benefit seen, clarify then have deck. Maybe of you after a the those What big the a cycle? of let When lot are kind me question. lagging homes Clearly, does develop? of decks for building without cycle built a sort housing

Bryan Fairbanks

has got on or or realize after they XX, XX floors they of is the their XX to homeowners money going where fixtures, that their then Yes, now. they usually It’s built, into and house countertops, you I the upgrade want spent be home most get to the months deck.

closed. after So, the has one house it's to two been generally years

Alex Rygiel

Thank you.

Operator

question comes Today’s go next with Instructions] Grooms ahead. Trey from Please Stephens. [Operator

Trey Grooms

Hey, good quarter. Great afternoon and congrats.

Bryan Fairbanks

Trey. Thanks

Trey Grooms

revisiting your the if it kind of would this through understood one margin incremental that, margin, the sounds So, of ramp guess understood I – you'll be I I of And kind right. around if quarter right, XQ incremental is there, the like highest incrementals, XX% just the the commentary some of to quarter incremental year. EBITDA year XX%

year? guess above exiting and EBITDA normal returning that also, here cost are margin, utilization in exiting you're thinking rate? with seasonal are excuse longer-term of at if takes be with capacity me forward and longer more the maybe come XQ, around we the Bryan? hand And good to question year run is, and incremental so, the the how beyond patterns price puts catch more XQ. Is to kind about thinking in Is takes normal about at back up should or But and looking the the we incrementals I this at highest puts term the there that? seeing, you going How that a those

Dennis Schemm

to historically. we're is continue over the Trex for longer to our think, cost in Well, known That to find position. the which of I term, one ways things improve going is

the start earlier, future. going And as expansion. so, talked going on projects about And year we're for capacity looking be as the the cost and back But into and then half is now we're of those Bryan well. at focus quickly on out right to our to pivot we'll focused the

greater for we're will, to having does our level require enhance continue we dollar we a all behind branding if as so, from enhance not as as becomes grow, and to the you branding not of dollar same us, of story lines leverage have spent. SG&A perspective well invest And because a

be So that higher than the range given clearly, we you. can have it

Trey Grooms

it you SG&A as the that, us follow-on, of to there? where kind lumpy, XQ? guess kind is more back linear for that's then Thank or give I that. ramp the of And And is ramp SG&A see better of normal. year, – there of then, Dennis a you about you Can exiting that. of got something way this is Yes, kind about, year, thinking ramp to it kind more that more functions any up talking step maybe you're

Dennis Schemm

No, it's not lumpy at all.

more In a fact, I consider this little be would linear now. to

was to impacted. spend, QX continue QX, the to to more going our branding on QX, start more QX see we're are kick to So lightest you into and be going because it stepping you When going with and was definitely and start in. travel, COVID

see entertainment with think that think more, out you'll see attending I conferences be a we'll little be from customers. we'll more, perspective, QX be be the little a and you'll So, QX, road travel and than on QX higher QX a than because and higher I meeting

Trey Grooms

pass a That's I'll on. helpful. lot. Good Thanks it luck.

Bryan Fairbanks

Thanks, Trey.

Operator

concludes and I'd ladies turn And this gentlemen Fairbanks the over question-and-answer like to closing for back conference the session. to Bryan remarks.

Bryan Fairbanks

meetings. participation today's look evening. Thank Good updated our you you keeping and forward for progress and everybody's in We on to conferences upcoming call.

Operator

thank concludes you today's all sir. We conference call. attending This today's presentation. you, Thank for

your And wonderful disconnect lines. a now may You day. have

Trex (TREX) 11 May 212021 Q1 Earnings call transcript