TREX - Earnings call transcript Q4 2021

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Operator

Good afternoon and welcome to the Trex Company Fourth Quarter and Full Year 2021 Earnings Conference Call. All participants will be in listen-only mode. [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

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

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

Amy Fernandez

you, Viktoriia. Thank

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

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

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

Bryan Fairbanks

our joining to good outlook. quarter Thank business you our us with XXXX year you, Amy fourth evening performance everyone. along Thank today and and full review for

best are to We billion and talent, finish employees all-time market. our contractors execute work, in an to to decking fourth who $X.XX XX% partners, deliver I'd per are full and through distributors, channel First, the XXXX sales thank professional results $X.X railing with business along in hard adjusted who record poised innovation, our the with extraordinary exceptional growth to great per composite a continue and quarter and with share. year growing million the year earnings sales XX% record increasing of to to share $XXX closed the and for and like

manufacturing and effectively spend support in to of by Rising and expanded strong products remodel their growth, us homeowners spending Our revenue inventory. wood conversion in normalized our remodel their remains rates favor outdoor momentum for partners higher and XXXX. more they existing and fastest-growing outdoor consumers values reevaluate shows home continued within channel interest strong as composite infill the product and pursue continue time. which lifestyle point and their invest market growth by share. market supported enables to allowing is supported Flexible and enhance repair ever Consumer our also significant lead-times while to more organic especially seasonality inventories the replenished capacity robust our Strong living as of demand repair remodel outdoor category activity, living reduced to repair space continue renovation where and and to to as living and essential residences spaces. than that category how

favorable of launch demand are driven and to by returning from secular right consumers, who So, over at would activities years. growth The focusing past the trends. that to our to has while few price. industry Trex by addressable products product Trex Enhance market truly January of accelerated travel other our was strong wood This significantly the expanding catalyst an convert game-changer, easing levels COVID-related restrictions remain significant are and XXXX expect pre-pandemic a in our on leisure was we

to and growth, capacity site additional drive to our in future. we the capacity in decking demand greater XX% this expected customer to continued Trex's it XXXX XX% Collectively, points expansion than in past. volume pace, Nevada successfully wood the conversions expansion we've market experienced accelerated total plus production effectively largest these installation history, facility. new rate Even As facility a our construction market To of in demand at total above position the decking XX% to of estimate at reach executed a expect which included meaningfully initiatives lines XXX increasing long-term will but we share support XX% levels. composite per we've basis approximately by Virginia program account for a us of meet with year, and current at result, composites the XXXX

raw to our domestic basis. long-term Additionally, expansion of XXXX, pool materials, can and development adjacency near plans. Show West a on plans transportation and the Composites in were exceed be Arkansas. to markets. When and pro Central market manufacturing America high numbers announced Builders' our Orlando, service labor the in on key Coast, including to and advantages international develop and that capacity impressed our Trex is North living of XXXX, strategic trends. with in skilled we facility the capacity October of to Rock this domestic learning our advantage and penetration growth essential sites growth support will Similar International situated geographical modular third in increased be expansion ways of offers about Region this strategic plant pace their of residential Trex opens, commence attendance held recent growth strong and many major more unmatched nature the where part Trex We you with conversion. also at we Coast a meet outdoor in interest opportunities demand all program wood have will we lower market to were of to East approximately Little in a can for pleased programs, this retail million markets proximity cladding with our qualified believe and previous long-term hubs a outside of coverage XXX channel will and to international have calibrated US-based Expected acres $XXX numerous operation in partners expansion

launched memorable We life's exposure, TrexPro contractors moments. helps reality, for with foundation for ideas attendance showcase on to becoming marketing an Trex how whom a also customer extended into valuable homeowners work outdoor such from the record their campaign of decking to profile participants TrexPros consumer We benefits leads, XXXX at dream San increased elite around group products, our in new that programs. warranty installation are the Trex of Antonio for highlights and Summit the their world. a transform most dedicated railing had held and many Trex provides of trex.com as

with TV more. on Integrated It We to channels. digital Our many popular retail, amplified January launched strategic Too See social, partnerships content print, commercials radio, one online and and extends campaign by video

defined that years, reinvented and and of composite outdoor category XX a creates invented, one. Trex and has with For living a new memorable differentiates this distinctive the and decking category message boldly Trex campaign

responsible As business share a remain wood. in our and socially we expands, from focused manner growing sustainable market taking on and

market. the long-lasting Trex's and sales sales to efforts new perspectives and equity so our the expansion we inclusion capacity manufacture the To pleasing to does diversity, ideas decking recycled our grow products using and in materials As and to our positive on aesthetically environment base impact employee on and our by railing most team. continue and with bringing focus growth, support a grow

Development. expanded the Dennis she President of detailed we ESG In our provide well-being. financial recently well-being prioritize call is Dennis? been that, Reflective addition utmost the of over to level, with consistently ESG to this, has a employee involved of efforts Long Marketing turn and and emphasize of the of safe more the Trex inception. our Vice at naming of steering executive since safety and I'll ESG Adkins, and employees With brand, we view a importance our also Leslie performance. practices oversight steward

Dennis Schemm

Bryan, and the and fourth provide of full for evening you I'm report results and and full year quarter Trex's expectations quarter Thank XXXX. everyone. first performance on strong pleased to good year

be impacted forecasted in in our in the by fourth the and influenced commercial quarter higher lingering pricing charge increased successful project in markets adversely to more gross to lower costs margin broad-based XX% decrease and continued reflects Trex compared to and margin efficiencies net reduction to in and $XXX in XX.X% and XXXX XX.X% project year-over-year in backlog fourth The growth XXXX. sales growth in the sales to year quarter fourth million. goodwill but ago commitments a strong forecasted million delay and fourth reduction was XX%, XXXX. gross expects led XX.X% company's The projects in resulted fulfillment were XX% the $XX expected project utilization which by of continued Residential The reporting are projects line constrained are Trex for material both quarter in to fourth due and million Commercial to $XXX to We recognized new increased increase commercial projects from The quarter Fourth virus. Commercial primarily in was to the commitments, to net quarter from delay margins backlog impairment increased top a Residential sales $XX sales we created Trex offset due to with Commercial Consolidated XXXX that resumption compared by Trex product lines capacity The Trex transportation from higher a growth that for million. previous primarily costs lead sales than Trex and net company new of net XX% in uncertainty XXXX year-on-year a pricing was COVID-XX reduced EBITDA. actions in demand at and Residential. favorable coupled the bookings retail a at of and pre-pandemic channels X% the impact gross project revenue in in increased was raw quarter. pro actions. due in across and quarter, XX.X% EBITDA. Trex revenues In all XXXX

addition, the million of occurred XXXX, fourth in to proceeds from that company recognized the during Trex Virginia Residential at gain the primarily insurance related In plant the $X.X of March. quarter a fire

of more impairment gain began and on to Excluding and marketing expenses selling, fourth related travel to increased administrative business compared expenses quarter the million, insurance general $XX the as XXXX return proceeds, $XX goodwill levels. in normalized charge to to the million and

leverage fourth our SG&A with prior gain the diluted the benefit Net quarter to a XXX decreasing was from per share. continue income $XX XX.X% operating fourth in rapid compared we or XXXX sales, points as to increase sales percentage year $X.XX basis million the quarter. from of to quarter for However, the

in Fourth fourth EBITDA performance, Residential net year or income reported the million income was XX% year XX% the of to to increases ago $XX excluding or million, EBITDA income and charge Summarizing million Excluding impairment contributing the consolidated $X.XX XXXX. with increase or growing share. million XX%, quarter billion Trex quarter. the compared sales net non-cash was proceeds diluted XX% and margin of from was goodwill $X.XX per to XXXX goodwill Full insurance share compared full net to share, adjusted net of was $XXX in $X.XX XX.X% the quarter on the XX.X% insurance net and representing a proceeds, million respectively Commercial increased $XX of per in $XX diluted gain net on charge $X.X $XX XXXX diluted million impairment Trex $XX XX% sales. EBITDA $X.XX adjusted the and fourth the quarter. XXXX sales gain billion per to year

net expansion and charge net of income proceeds adjusted $X.XX gain $X.X from adjusted was year margin $XXX impairment net of the XXXX or these representing warranty XXXX expenditures were and price flaking program, to respectively income XX%, year in million XX.X%. share surface million, $XX shares record of million mentioned, us of flow XXXX, We the million goodwill $X.XX our year Full We to per $XXX self-finance XXXX, average XX% that the in million. strength on diluted adjusted expansion in capacity per of from increases increased at enabled of XXX,XXX diluted Excluding were $XXX related cash totaling generated XX% while capital increase stock $XX our cash stock through recent million. XX% of million items adjusted share, full $XXX returning XXXX. charge. outstanding million program. from repurchased shareholders capital EBITDA per $X.X The was XXXX, of to just and Full the approximately repurchases. Net an $XXX share operations capacity of I primarily or of to insurance common EBITDA

repurchased have the December XXst X.X end of been to fourth program we same program. active As under since our shares the purchasing of under in be we and have remaining repurchase XXXX, shares quarter, repurchased under current the the stock eight Also, million have million shares program.

a the see ahead, XXXX. double-digit in top line Looking channel with of we inclusive infill strong one-time growth XXXX

first following also year the are full We providing XXXX. metrics of quarter for the and

sales from consolidated quarter $XXX year-on-year to to are at million of XX% First $XXX growth representing midpoint. net expected range million, the

we pre-pandemic XXXX For normalized double-digit in patterns XXXX, the rates year to with to expect return revenues XXXX. full a similar to seasonal cadence experienced growth we to

market that anticipate we a improved. offset addition, have material for XX% the year inflationary now in higher in we have realization full sales to and ramped modest In inventories our pricing marketing more the than and environment. XX% new includes investment to up the SG&A, labor of will raw expected and range capacity is spend more of be branding which

incremental to, be EBITDA when compared to we the adjusted For margin XX% discussed anticipate, the earlier. to year EBITDA XX% full between XXXX, figures

is approximately core headquarters range expect corporate from year business. be the we at CapEx million Depreciation inclusive additional XX%. $XXX expansion, million, the Rock into Little and million the back $XX tax new will investments in to of million. our Our of $XXX anticipated to spending capacity rate to on And full $XX range

Now, turn the I Bryan. back call to will

Bryan Fairbanks

Thank you, Dennis.

we we advantages XXXX and consumers Our actions deliver beneficiary now of strong wood. take Supported program, XXXX. long-term double-digit outdoor in well we in us strategic on remain towards firmly to recent to can industry-leading put composites And positioned the as capacity robust living. continued performance trends growth Operator, the our prime converting on over questions. focused expansion remain demand and brand by track of

Operator

ahead. [Operator Keith begin We session. question-and-answer go will comes Hughes the question first now Instructions] Our Truist. from with Please

Keith Hughes

half And EBITDA is the about in you incremental guide year. year? you. margin that above think the you during you for the pace how XXXX. did Thank of will second Question that talk Can the about,

year-over-year. what could that are you bringing If about down talk takes or are take -- it puts the put and

Dennis Schemm

Hey Keith, this question. is It's Dennis. Thanks good question. for a the

we to margins EBITDA I'm move So, in QX, through expecting see highest QX sequentially we frame. our should And time year. see as quarter-to-quarter, improve EBITDA margins that the

in the the clearly here Some into full that and pricing utilization looking the takes coming primarily are, quarter. impact. of we're at biggest first puts That's

also still regards are on We're we're inflation. now fuel Secondarily, to lead spending, higher further pushed with which side gas we we transportation natural capital times expenses. some although, along. in anticipate some seeing resulting it on delayed some the of and moderating right seeing dealing with our seeing And oil. cost-outs we're costs higher is somewhat, some And our being little out headwinds a

some So in that's XXXX. with of and dealing that takes here the we're puts

Keith Hughes

on above do up If half margin. you above similar sneak ramp you'll it one think the I could in in, margins And very year-over-year the water also gross Will to gross EBITDA? XXXX? be more of first

Dennis Schemm

not on to tracks year our to is similar going continue And way follow to would margins this as and we're the That's the any attention different. margins to been I always expect focus a it gross to lot going cadence gross EBITDA the well. put and a of margins. be

coming here by quarter, inflation more first pricing we moderating about then, those somewhat. some of end again, headwinds that dealing of into And So, we're the play with. talked the

Keith Hughes

Okay. Thank you.

Operator

The Please, go next William question Blair. Ryan from ahead. Merkel is with

Ryan Merkel

Hey, guys.

Bryan Fairbanks

Hi, Ryan.

Ryan Merkel

afternoon. for morning A or questions couple me. of Good

much little will normalized So, price on more just all outlook so XXXX about first just sales then, what is talk for the unpack And How you same a off, we're bit? can page? just contribute? seasonality,

Dennis Schemm

Yes.

quarter look and I in look to about XX XX% the as would sales you and about follows Then first be we're the So move the second what third -- our quarter normalized I of as to into seasonality. normalized around I'd as be remainder. second about I about here seasonality, at of That's the would far looking when XX% quarters it guess, more XXXX, more really probably fourth like When I'm think growth think quarter sales. at here. I

to play the probably we the will pricing repair that low in that talked for So Bryan's up we've remodel about And repair in strong. is and metric. extensively and that we remodel going got we've on in doubled be pricing. And role. feel teens past remarks a We're

to we of those out you end inventory And in to take so the back upper one-time have there. you the two infill the had And growth of XXXX. you then back that the range gets that half

we kind that's to So and takes suggested. how the growth of how puts I growth double-digit see and that get for strong the we

Ryan Merkel

Got it. That's helpful.

capture going in is through higher start you increases as the then follow-up, kind and going to last is lap Okay. low a down How price year? little from my price teens than And flow higher that sort was Is for I bleed of to XXXX thinking. it of then, year?

Bryan Fairbanks

to last think, it right Yes, the will more the We the year. that's I pricing be through. of later in took year expect way coming

that we'll we'll through what see full have does we inflation move the So move as recapture XXXX. we through as year. And

Ryan Merkel

Got All Thanks. right. on. I’ll it pass it.

Bryan Fairbanks

Thanks, Ryan.

Operator

question with is go Elliott ahead. Please, Stifel. Stanley next from The

Stanley Elliott

But for kind Hey, you on the love contractors, TrexPro Thank Curious, hear high positive they talking guidance you book? the you the backlogs, about the to more. little could question about and order from nice day, I'd with congratulations what bit their telling down you guys a into the dig seems are curious, their year. that everybody. a level, very just on if of year. Obviously,

Bryan Fairbanks

the Yes, shaping very is Sure. feel positive for was year up day them. contractors about TrexPro -- how our

most these our contractors. skilled Now are largest some of

six go may quite as to well. to months. hear down we the anywhere them optimism You'd from ranks that be When to other three expect great as Backlogs large, we to months have them not talk longer backlogs. out from contractors

shift for living. marketplace not outdoor the seen they've interest So the in and a material

Stanley Elliott

was on of working how recycled to updates improving were you the on content able make wondering on I much front any be end. And kind Great. progress and that been the you've would great. then also

Bryan Fairbanks

is has ourselves in product. new recycled Where increase take use to don't continue Trex for look But for some the example in revenues using as Company out products, of products. we recyclability to and our railing prided the material strive do on continued from the waste it great content we to and a So use use some that us always XX% company, decking to it and within drive our share largest for our more aluminum to the opportunities we a allow decking. perspective, which we've of degree, of recycled approximately stream content of waste of

Stanley Elliott

it Thanks, luck. guys. Appreciate and of best

Bryan Fairbanks

Thanks.

Operator

with next Lovallo from The go question John is UBS. Please ahead.

John Lovallo

guys. for you questions taking Hey my well. as Thank

one, XXXX. step-up Can in the versus the have year. CapEx First would impression think talk just million about in to that you that? million I to the of some takes and puts I be CapEx $XXX was down under maybe million $XXX this $XXX changed that actually may

Dennis Schemm

about talked coming a And that's is John, before that to that we downsizing of announcement, right? that we CapEx I Hey will the in going you Rock so really driver if fair And earlier Little -- expected that Little was number question. the primary have know But Rock a the spend. higher.

So you've essentially, there. Little Rock in got

our have also well. as We built being corporate headquarters new

core. going CapEx So And be is back into the the to remainder spend. that's then investments some additional

John Lovallo

Got you.

follow-up, type going they can kind of canceled bit are the on And what taking a just And of space on then, there the or Okay. competitors then terms I commitments? my to of wood, reduction projects should I delayed business? commercial or were you I'm are composite project elaborate curious guess, little in in the in maybe say.

Bryan Fairbanks

certain about from commercial primarily different So products. perspective, and segment from talking staging a railing residential

During XXXX, quite were sales still strong. our net

successfully experienced that continued because company also uncertainty new we in around work backlog, commitments a the reduction COVID. of lingering as down However, to project existing

of of side all business So that had received, headwinds. the tailwinds the residential the commercial mostly the side for

to all COVID more So would back were there a look of that seeing we're were people like. opportunities. until certainty post-COVID markets it back people on life we serve outdoor on entertainment, hit sporting impact of people seeing core and go investments The and part was go significant played the what were sports back we're that commercial like hard Remember one sidelined many events business. look and office. And the at point, didn't now other to going course, office

our impairment project project reduction for policies and the So condition. XXXX conducted we the backlog was -- in of off we reduced given write-down that the our because such, impact replace was net and take And We forecasted determined we there COVID new for in that the diminished. and sales as negative decided test analysis. million on backlog, to that a assessed the our to financial an commitments knew goodwill. reduction $XX Per commitments, outlook backlog and build our based on annual

of positive And encouraged year. take starting the side on business. the first side book the some rebuilding activity order of with the see to think But the are of that in opportunity time. here, encouraged still the we I the we're on by couple it will months commercial

John Lovallo

Okay. Thank you.

Operator

The next Please Capital. question is from go Jeff Stevenson with ahead. Loop

Jeff Stevenson

Thanks a my year. strong on questions. for taking Congrats

Bryan Fairbanks

Thanks Jeff.

Jeff Stevenson

material any any first was And in logistics negative the you that from labor headwinds from And Sure. did or quarter? impact there impact will Omicron January? that have

Bryan Fairbanks

I everybody else, That down Like didn't absences probably the days. January that is But much saw Omicron. a struggle that as did were first it heavier. was guidance little provided and well. quarter. through impact guess inclusive some the Transportation, see there January. from days too some of we -- we The up bit Yes. We in we of in wasn't December in elevated

able One we of to be those offset in the things January we time over was to did more had. run absences

Jeff Stevenson

guidance Okay. how channel Great. quarter an sales related inventories your much update inventory channel right we to just And of of then is kind can And get on bill? now? first

Bryan Fairbanks

inventory third has I end dealer the significantly then inventories the through well. busiest recall, our part that's back we distributor level talked going building significantly. inventory improving to the remember into Coming the exactly So first of And the of as year, seeing. are end the you quarter, improved what level about is if of normally, the And to season. be of our the quarter to year, support

build back in and QX a support normal to QX the marketplace. inventory we're into Now

Jeff Stevenson

Got you. Thank it.

Operator

with Please Grooms question is Trey next from The go ahead. Stephens.

Trey Grooms

Hey, good afternoon.

Bryan Fairbanks

Hey, Trey.

Trey Grooms

Hey.

So sure just to this first one, I Dennis, right. make got I want

I you midpoint to kind the On into XX% the and be QX said X%. think the guidance that you implies of missing think I but full that and of probably of year mentioned, range, up of the I'm it – earlier, is outlined something going something you here, if backing just quarterly gross like kind cadence you just

growth So there the I that what math? full for so year missing am on

Bryan Fairbanks

And the when take it I think of way and out time at best takes those of the – XXXX increases what also we talk quarterly from it the about back looks it, historical to looking the of to to takes that pandemic important look decreases. frame is well like, it Enhance launch and it going takes is reason the time entire as averages but XXXX out

Trey Grooms

If No, full trying first to for the guidance kind like the that for quarter. the $XXX the yeah then revenue implies just the I of XX% something of I'm arithmetic get million reconcile all behind year? X% that's that. for the midpoint growth is

Bryan Fairbanks

XX% not is guidance. The part of our

Trey Grooms

Okay.

because making with heard I Just on I and that. math knew was off thrown that somewhere the there I sure

enough. you we'd think ramp in to – the long-term sort margin Thanks of question XX% long-term return XX% kind that, EBITDA kind flow-through? about EBITDA point that do still incrementals? Is the to frame. right think for margins, way And of the said it Okay. incremental And And think mentioned Fair at margins. I up. QX, clearing to that what is for second then guide QX time you Dennis of is should that

Dennis Schemm

Trey. Yeah

no clear. is for the to XX% to margins, incremental So XXXX just XX% guide be EBITDA

Bryan Fairbanks

bit, is normalized level expect bringing the and level move our more expenses in million as go forward the And back a travel from that that million to show to year to a where were the marketing, you'll pulled prior forward, are move our our normally we $XX $XX years. we reason of we're back I this payment little incremental. where from we normalized see we as we back

Trey Grooms

this was year. know XX% just at. that's was term what Yeah. target. I on I XX% long Thank That's good getting still I a to you. clear

Operator

with is Capital go BMO Please ahead. question The next from Mamtora Ketan Markets.

Ketan Mamtora

Can what opportunity talked and And you you Thank of kind guys bit is couple a question. size any be little on on what talk the a about. side? there? international the my There's that of the side there taking about medium-term for seeing have could you you're way opportunities to cladding

Bryan Fairbanks

that see in years. Yeah. a that the rebuild deemphasize have of through year, to coming to of continue marketplaces. did We fourth International get the were for couple inventories to back. right able we started But do these quarter to this season we

So the to being shape the see in still said growth we hold wise past opportunity. the about that in our that. I've We'll this markets I'm excited better year. able international be America outgrow to North inventory markets. I much

on years. the normalized and quoting quoting been hadn't couple We we've that of all they to so times product business cladding available it relates decking to the using our cladding much over that. As that the can that really been now lead marketplace is able start show the customers are past that interested in

marketplace. out back we're selling that So again actively into

Ketan Mamtora

Thank as embedded you for guidance just very within XXXX? my inflation your of sort And FY for Understood. what much. follow-up, is

Bryan Fairbanks

provided. -- are guidance within expectations we've the inflation baked our that The

have but earlier we year, into expect Dennis do As moderate mentioned, the through we of the year. inflation new seen as this that some rest out we to go

Ketan Mamtora

turn it. over. Thank Got it you. I’ll

Bryan Fairbanks

Thanks.

Operator

ahead. is go Benchmark question next Co. Garner Please The with from The Reuben

Reuben Garner

guys. on of strong the close Thanks, Congrats the year.

Bryan Fairbanks

Thanks.

Reuben Garner

quantify maybe you but the way US or questions situation. the do of to you to could see my had just if walk wanted I years, last there's have internationally capacity away kind from one. because it's answered, opportunities over of to want in your whether that guys I been any on of follow-up of Most couple

the able -- way the numbers in been players up? two, smaller industry might was out often. as some you have over so three quantify maybe the or last what Is about talking trying to Specifically, benefit Trex guys that catch we're there any because leader years sold market to were missed maybe to

Bryan Fairbanks

more marketplace. for normalize I we Well, number would the we had being the as inventories walk sales to constraints back that a built we get And over normalized truly regular past away to year are. those to position capacity we've put managed not more in say of was tried right. with from started where year. a to a things are We've the years. the you're There to cadence through levels, to have couple back last what

Reuben Garner

end just I saw was guys Do how And lot XXXX last channels? year some fill strength of that of have channel? the you've that kind the started to Like could go at in you are follow-up, versus had been quick of maybe the that a after obviously of you you already just you because the -- maybe a that still point was to business of some that think trying of at was you in infill business recapturing you can much before where maybe Bryan. there now own guess your gone you've

Bryan Fairbanks

did I sales a been customers our throughout we the quarter, loyal showing both have may capacity ability fourth other plant who be team service our and well the our who brands, them. with tours have as lot competing during us customers existing carrying of to to as

Reuben Garner

Thanks, luck this good and Perfect. year guys.

Bryan Fairbanks

Thanks.

Operator

Baird. Tim is with from ahead. The next Please question go Wojs

Tim Wojs

But way infill then if question. one. some the comp same of or number just is? modeling you of sure more taking of some a so question can any modeling like channel load-in time give lead there inventory. kind dollar of on make what want sales Thanks just sort Or or we we're don't kind can -- just a had question, kind a one Yeah. picture page on put Hey, weeks quantify to you color I and comps? the of with kind us on guys. of kind is I of for the of it know the to kind bigger

Dennis Schemm

Yeah, Tim, question. good a it's

are right estimates in to infill about in happened million $XXX half our the pointing of back So that XXXX.

Tim Wojs

Okay.

to or incremental the cost of market in change that X% cost either all penetration? an Like at of kind any that incremental helpful. is penetration, then of That's positively of negatively? is Bryan And the composite to a to Okay. getting you I relative penetration on there to picture just question, bigger guess think of that to for kind retain penetration changed that as XX% market, about XX% getting

Bryan Fairbanks

an get marketing. on to we in there's pulled for a past normalized Well, short need change to back years. the We've that here incremental few cadence back term because

important of them get getting our We will we that conversion or the be make decision. in the why that. decking, wood they whether for Trex are showing wood people and it as to continue And normalized who in for name see cadence products competitive able back market to front should for driving opportunity that be into

Tim Wojs

Okay.

catch-up So got got really inventory channel of kind just and you've now and of I XXXX that is guess position? capacity a more you've the that

Bryan Fairbanks

Yeah.

Tim Wojs

for Thanks guys. XXXX on luck time. good Well the Great. Okay.

Bryan Fairbanks

Thanks.

Dennis Schemm

Thank you.

Operator

is question Research next Steven go ahead. from with Thompson Please The Group. Ramsey

Steven Ramsey

is drivers of and that growth for good Starting of of of growth is sales how adjacent evening. kicking Hi, core other how those new much with some cladding pure international wood opportunities? of conversion off the areas year, much construction, that in

Bryan Fairbanks

Yes, I'd I love there to out of there's say give break enough able you that could down those data and the numbers. in that accurate to each be marketplace

our remodeling at growth wood business. along sales looked is that to – in increase it the and at look as double-digit to always international for well repair remodel way markets, right as the we've the conversion for kind numbers that, opportunity, year. business gets of a of cladding top us the way On using the baseline growth the think I as

Steven Ramsey

you've to on line? it's is is continued infill enhanced I with mix a of Excellent. on the there penetration Okay. coming know that then increase there lower-priced the lower embedded but from that product? And channel that base any done read-through points

Bryan Fairbanks

product of across strong all in Through growth expectations. line XXXX, and we continued our to lines with see our

Steven Ramsey

Excellent. you. Thank

Operator

go with is The question ahead. Ng next Please Jefferies. from Phil

Phil Ng

guys. Hey,

You constrained years. few the in standpoint last guys from a have capacity been

I'm be standpoint? if kind maybe way of quantify ramp about up, that about you up the could think how helpful. that Little modular appreciating capacity And at capacity how much think would that phase a in capacity good that from Bryan we bandwidth free nature least is So there a first in curious of as ramp? looking to much you would XXXX, when So have in you just Rock, it's

Bryan Fairbanks

our the the the we would the has a XX% I in So comments coming system. out is to across frame, Little to facility on about Rock Little be think what were Rock my from perspective. we size be over I the XXXX And opportunity XXXX time where best towards look capacity way largest said which as

a there's opportunity amount there. significant So of growth

Phil Ng

is XX% that Of Okay. how Bryan? any color of consumed already much that on

Bryan Fairbanks

utilization. provided not We've

Phil Ng

as opportunity for better a SG&A of there a a for percentage way more just a guidance is I to then sales sense. an to some And that about for XXXX, want leverage one SG&A quick Dennis. forward? good The going get catch-up in for XX% Okay. is XX% Is year, here? it of this a to this think or

Dennis Schemm

term part an a talked Enhance always being leverage, there about We've especially bigger portfolio. longer Right. for becomes the SG&A of as opportunity

should accelerate XXXX think I Bryan So well really see year. on more. then we start earlier it that to from there a that And becomes to start catch-up said leverage really

Phil Ng

Okay. it. All right. Appreciate

Operator

is Leach go next Markets. The Capital from with Please question Berenberg Alexander ahead.

Alexander Leach

my Hi, for question. guys. Thanks taking

drops some your inflation I but inflation accelerating us? can as been that CPI rate if been rate for your have in trending internal sounds Sorry, accelerating internal and how through QX versus do same QX? an headwinds line anywhere it though the as you You've missed isn't inflation provide off, but of persistent level. near business is mentioned you this has my And in

Bryan Fairbanks

Yes.

us built our with rate going research that a So to is business and plans inflation that we've of the see. our tells forecast

we're But call inflation course inflation is very assumed. to which that provide percentage as predict guidance going that which year. incremental that Now to and ones EBITDA provided specific to over on but the inherent it's we've as may the not the the of alleviate to it everybody in we've going knows commodities is difficult a hit

Alexander Leach

follow-up to a room if inflation still year? Sure. just business is scope the the persists And increase the as for in through there then prices,

Bryan Fairbanks

be inflation If to to going degree need economy through a that There's the we do we won't Sure. needed. we'll as pricing it's see see at roll that where opportunity. be something taken

Alexander Leach

guys. Thanks, Great. Okay.

Operator

is The JPMorgan. go with Please Michael ahead. Rehaut next from question

Michael Rehaut

Great. taking Thanks question. my for

And infill the back half similar to $XXX I first that earlier from about outlook. question actually of wanted just implies that year a the back XXXX. you to X% if to First, the math an just on give of from like circle very quarter growth. full XX% helpful million the top-line it do I also got to

I'm you think of back though headwind the sense saying $XXX double-digits obviously, maybe a comping in XXXX year? flat of are just for XQ about half of talking are comp So to XQ million this the in should year. back With how about and trying get half we in or we sales that that the the year,

Bryan Fairbanks

for calendarization. comments back a revenue clarification my through go would I the seasonality XXXX XXXX Yes, use the as guideline and to

Michael Rehaut

if for and that X% year use that full can maybe Bryan, we you you But gets offline. XX% talk that's to the the that challenge. the about

Bryan Fairbanks

revenue of improvement of course double-digit the the We've a during provided year. guidance

Michael Rehaut

Right.

the Well switching then to EBITDA. on to guidance gears the XX% margin Okay. maybe XX%

of out on year looking EBITDA that year and kind math improvement operating you're the think basis. full margin full results I works margin for an

how sense the and not it to Is companies you trying positive quarter in parity a half. close a get have kind maybe would Just year-over-year back that should the of of lot you when positive think as second we the return how about mean to getting been for the the year? during I obviously expect obviously should first well? saying on

Dennis Schemm

higher year. half see going in back inflection the to the of I think we're

cadence just would I think see pickup steady that spoke here. I about we earlier of

will quarter be second the -- than quarter. stronger quarter First first

than Third comes that stronger in But quarter. QX QX quarter the improvement will second really more frame. year-over-year that be time

Michael Rehaut

Right.

one just could. I if quick Maybe one Okay. last

expectations XXXX volume on enough pricing teens. way kind Any You XXXX? to contribution the were give in also about low versus should for of we year kind think for

Dennis Schemm

a prior Well you the was you gave strong being growth. We talked feel of about year. the the so I and just how we little guide infill that good gives we're then double-up teens. out about our backing low for at gave able to growth a index right? repair Kind on double-digits bit looking in talked the And the pricing and we remodel from the

Michael Rehaut

be So say way little? when digits strong could mean range. you Any narrow I that a to double that a wide down

Dennis Schemm

Yes.

And to you it there. Our is digits. strong I've I guidance think given just double pieces the

So...

Michael Rehaut

Thanks Okay. very for much.

Dennis Schemm

You bet.

Operator

question with go The Please from Bouley Matthew ahead. Barclays. next is

Matthew Bouley

that Thank $XXX is which off you said you last I you. evening. double-digit mentioned are revenue Can just Dennis or the I how $XXX the layering backing kind million, think is more we follow-up out Good outlook? of million. that of for of just one about on? with Are infill on burden growth onetime channel the talking you kind year's growth strong

Bryan Fairbanks

to that because had there larger historically. normally level much year-over-year. inventory We infill that a understand than thought It's it we was to would was depleted important were see been inventories they

Matthew Bouley

as -- level the opportunity the a high just years. international on you then over keep opportunity this And because highlighting back Understood. big Okay. to the

Thank you market get that. you that And And see the markets can if where curious to channel there? a how kind do from specific more Just you of on are perspective any just where opportunity? you. go

Bryan Fairbanks

levels to interest We the in higher markets on tend Yes. incomes GDP, that focus family and generally increased have living. of outdoor

and through markets at the Australian to in into service smaller America larger the similar GDP, Caribbean primary we we into about as you're sell -- also here the in Central, out talk the Europe looking do America. what where we focus we markets when markets. But the So the well. will many higher channels to Scandinavia that's going But down and the North primarily up South be

Matthew Bouley

luck. Bryan. you, Thank Good Okay.

Bryan Fairbanks

Thanks.

Operator

ahead. Davidson. is go question with The D.A. Please from next Kurt Yinger

Kurt Yinger

Great. Thanks and good afternoon, everyone.

sustainably stronger? areas a you which push has still can harder think high-level or think of wanted you do back XXXX. where think than points levers you about two as And Just have for your any conversion guess better sounds I the the Are you're you gotten disposal, go lot have conversion. that decking few again. to the in drives of here you second, kind that first, over part to been? last It at there you dynamic like looking years what

Bryan Fairbanks

your Well over perspective hard as the first I'll pushed your here we because I years. first haven't marketing second answer of couple from one -- one think past a

looking That the they wood. There's against continue comfortable things forward of the There's they something of as that composite will sustain, it today we home and for more of their is that the that more maintain Trex time about were at consumer. decks to move education pandemic, products higher the more mouth. would assist simplicity and of the make one people were more level think have easy to spending with Through media I is word home, composite a conversion. will today.

Kurt Yinger

it. Got

side. the guess, That's I helpful. a just Okay. then, follow-up And on commercial

any of in are, the XXXX? backlog size way is of you're there your expecting where there that to Given kind the magnitude decline

Bryan Fairbanks

about to XXXX basis. be expect down I'd year-over-year XX% on Yes a

Kurt Yinger

Okay. all All good color Appreciate and That’s the right. you guys. helpful. luck to

Operator

next with Riley. Please question from B. Rygiel is go The Alex ahead.

Alex Rygiel

the at that may Thank incremental low biggest you. your coming high margin variables Can the in quarter address Nice impact end have you either gentlemen. the on the or end?

Dennis Schemm

secondarily that, Yes. pricing continuing those drive role to I about. plays followed this right, clearly, When and a we've that efficiencies talked cost-outs about think mean by in I

headwinds negative side, we've a key I the that talked some us. those of clearly, think watching for that's inflation on about concern

in I XXXX. On or the marketing the a that we're those also in ones spend transportation that Bryan that watch. side, too, a here about of well big natural to be think But couple had the are there talked we'll continuing little gas, as we driving bit

margins. So that's another incremental those variable impacting

Alex Rygiel

of relates a you target, incremental range that as of longer-term sort is XX% XXXX for to range of or of would a is margin? then target that And it XX%, that what sort call to more

Dennis Schemm

Right.

Why? requiring I to time will So XX% to that part bigger XXXX guide. XX%. talked look a branding we the get overall because less of time, And a about become leverage we that over those So over to portfolio see to SG&A we're would XX% incremental a improve as should more XX% going at margins Enhance spend. that lot

continue we're to the to manufacturing network In to help that's throughout going drive going improvement. continue costs plant addition, our us margin to with and

Alex Rygiel

much. very you Thank

Dennis Schemm

Thanks.

Operator

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

Bryan Fairbanks

conferences great evening. of attendance look many forward other conference speaking you at We events. to in and today's Bye. your during everybody, Have and with Thanks for call. a quarter, the questions

Operator

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

You may now disconnect.

Trex (TREX) 1 Mar 222021 Q4 Earnings call transcript