TREX - Earnings call transcript Q2 2022

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Operator

Good afternoon, and welcome to the Trex Company Second Quarter 2022 Earnings Conference Call. [Operator Instructions]. I would now like to turn the conference over to Viktoriia Nakhla. Please go ahead.

Viktoriia Nakhla

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

Amy Fernandez

Viktoriia. Thank you,

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

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

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

Bryan Fairbanks

you our and and Trex performed good in second operating financial to us second 'XX exceedingly outlook. and today quarter. joining Amy, measures, for you, quarter the all in well evening, business performance the everyone. our By discuss Thank Thank review

with coupled growth Trex last for against a with by continued top comparison line outdoor difficult execution performance. even drove products team XX% the demand year's entire robust Solid living

Our XXXX reflected improved market the excellence performance increase category, Trex of The an high and execution in secular continues build Residential seen taken driven in wood-to-composite our X outdoor the in XXXX consumer XXXX, margin was as product inventory in inherent controls share leverage was demand operational XXXX, business in net growth channel was and than strong coupled support accelerated opportunities, growth rates. part our and constraints that growth our model. even sales strategy efficiencies actions spending in continued production reflect lines a inventory sales as volume in trends Transcend living with the spend. of conversion, demonstrated of by historically as pricing following channel to capacity decking, to due built cost-saving our of expected well of and the along what but margin expansion EBITDA we and actions, brand allocations. years investment Pricing launch Lineage also more resulted positive consequence availability product to

an diluted and $X.XX. per margin XX% a generated XX.X% we increase result, share in a As earnings EBITDA to of

over reduction in by sentiment consumer rates, easing sudden from expectations our a experienced spurred in our a and we June, of end general of distribution interest economy. declining a demand the consumer partners, concerns rising to Towards slowing demand due in potential the

the industry. ensure that to in Trex production measures actions changed we immediately cost response current to impact will than inventories. rather We a in be reductions, cost next as including product drawdown producer X In other nature. through labor will and likely environment, inventory manage selective We expect lowest reordering partners drawdown slowdown, current partially optimization, meaningful believe our the the demand the as channel quarters to meet maintaining force remains production took this and well to

of not refocus high-return executing manufacturing efforts contributed able has successfully an to this expanded wood conversion During long-term production addressable Trex XXX a were eye history market expansion. basis Basics, effectively estimated production conversion. programs will enhanced points Naturals And that experienced portfolio improvement period effectively lay resumes. during only have paid lower be to our that on we by strategy when retaining an margin growth up profitability to with as to sales the occurring initiatives and of In product that also priced our expanded allow the has with groundwork products -- value of decking wood we the and towards economic us These the XXXX, navigate with industry-leading adding year. talent, ramp rebound. quickly for able slowdown, our through That Enhance but utilization introduction most of off long Trex prior rates, an

was During recycled with XX% all channel Trex was coming launches plan aesthetics. Trex Trex made decking Lineage the high-impact year. market-leading is Transcend decking have appeal Select content. the by retained This we the to on expansion like partners, decking, the advanced performance materials introduction with and technology in of expansion portfolio refined the product end launch attributes our for second from At at of welcomed with the product homeowners of and looking product their our time, broad our further and high focus same the heat-mitigating with aesthetics, trend-forward market colors, and, Trex Transcend reclaimed quarter, of

allowed come. unsurpassed expertise performance, financial the full brand organization capacity our collaboration market-leading Trex engineering competitors. our teams and to opportunity. and industry-leading premium as recognition R&D wood team view market of product our distribution to family accounts suite past category, by remains of I'm decks from the and of to and proud contractors market for partnerships. opportunity and regain extended supported our and this accounts of few entered of could drive will distributors that have as economic in our and strength and conversion growth long-term decks channels. the years not wood capabilities, the innovations retailers, force additional and for current a that and We an further depth strength product secular aggressively strength, recognize brand of of retail distribution lines, as years whose over to convert convert industry-leading well a level share retail Trex ideal our more both decking our served expand of enable sheet, driving dealers, the We the in strong Trex brand dedication of to position, and the and we the position composite to and accelerate enduring expanded our With period balance and products sales capacity from Trex be railing, our Our uncertainty new strengthen

that XXXX, use ESG remain our and reclaimed our to Trex the in products. also end more our I wood than I'm you pounds combined to goals. in at report to billion We published encourage proud June. polyethylene review committed latest report X upcycled of for ESG recycled film of waste

addition, charter. In formalized reduced its in Scope Corporate matters gas of Nominating at X previous the Board emissions ESG Governance compared matters the Trex In with XX% greenhouse XXXX, level X including intensity Trex now by the oversight ESG and year. to Committee and

initiatives enter further our the more for a our their are financial on naming future of environment, given at our Marketing We ESG to as strength President ESG Trex's us In to effectively as appropriate leadership, for Leslie executive challenging navigate summary, steps we and secular ability ESG strategic our positions trends outdoor demonstrated economic and Vice our remodel and our the advance level These with positive the processes Development. align conditions. confident and commitment expectations and capitalize well brand cost the in segment. focus to strength living as and manufacturing also to our we ability the in market leadership. structure sustainability oversight Adkins, formalized market repair low-cost even growth

the for Dennis? to Now financial a call pass review. I'll Dennis

Dennis Schemm

our Thank outlook and evening everyone. on I'm Trex's you, year-to-date and of Bryan, second second the results and good half and performance provide pleased report for to guidance to XXXX. financial quarter

quarter to to price cost Trex reduction increase increase on million. quarter million Commercial XX.X%, quarter. XXXX. a expanded and points price Residential growth pressures net margin driven basis in XX.X% XX% Residential, to during focus well transportation. Trex a net Trex to unit, as year-over-year gross fill. as compared to XX.X%, Commercial respectively, respectively, average inflationary at XX.X% offset XX% contributed volume Residential labor sales $XX of on continued second XXX and Trex at XX% Second was the channel was increased in continuing driven by by realization for growth XX.X% sales Gross net primarily by Consolidated Residential sales of $XXX in measures, Trex and sales in our due $XXX the utilization materials, and and margin raw primarily mid-single-digit million, Trex in The inventory per increased capacity

in in XX.X% our sales for million driven increased marketing XXX of XXXX improved decreased of a as strategically of net a leverage by reduction in percentage EBITDA or we XX% EBITDA points income quarter the basis as or Even growth. Net quarter. from XX.X% and as and to accrued double-digit income and expenses quarter in our share margins the SG&A operating to incentives ago share, increased of million second net $X.XX XX% $XX with of XXXX to to compared second year diluted increases the the was diluted XX.X% million to XXXX. per $X.XX $XXX quarter per XX% respectively, of representing million spend, revenue XX.X% a $XX branding result strengthening compared $XX

net Residential or invested to leverage $XXX to the EBITDA model share in to corporate compared our invest and which business, year-to-date XXXX. provide cash common grew even Supported we Net period our prior continue and to core quarter, per the diluted Year-to-date, income XXX $XXX the by in million to million cost-reduction increased Consolidated in million of safety, shares to million of XX% expanded million shareholders. in strong outstanding million $XXX year. as $XXX believe $XXX long-term in demonstrate our primarily will support. to to manufacturing period. sales CapEx, margin the Higher Trex basis compared XX.X%. $XXX XX% investments related in initiatives, second net increase EBITDA million million $X.XX $XXX we operating primarily compared to stock, diluted Our compared new future during We cash $XXX same EBITDA per or year-to-date sales and XX% share we a the last facility, margins general driven we repurchased in growth. in generated our million was operations environmental year benefits by $X.XX were million. from Arkansas points $XX sales our to flow million new to our headquarters $XXX X.X

end under shares remain repurchase the of of the the X.X available for existing program. As quarter, million

of prospects in our Trex to view confidence flow our given represent continue will a compelling growth shares be value. Trex that buyer long-term generation, our We a cash strong our and shares

operating annual capital discipline our healthy flow by supported liquidity, forward move to our and opportunities growth current ample with with execute remain cash investments. planned environment. long-term the solid positive remains sheet We while balance cost Our strategy our on in maintaining

period, As through believe we will this and more economic work efficient we emerge challenging resilient. more Trex stronger,

to Now our turning financial outlook.

plan in has partners $XXX are levels their they We expectations a and distribution mid-XXXX. seasonality experiencing low to last that a inventory our in address we channel decline Since draw channel demand both of from and down in sudden the QX the carried levels million of slowing additional added pro approximately as economy. year, to believe inventory

provided $XXX net of net the We we fourth results, both be have channel completed will quarter our sales inventory to at channel in guidance inventory $XXX into substantially more To consolidated be million impact be third million. anticipation better projected sales million, this believe for will in quarters visibility second this year-end channel million. current in provide by easing $XXX third the will future capacity of when Total to of million drawdown consumer As enables the on-hand rebound. the low our consolidated the to $XXX our to levels. million very be us $XXX financial demand, We of revenue when year. their and supply drawdown quarter anticipate fourth range again our inventory from an $XXX half quickly to reduces and potential added range inventory operating is sales will on

expected of improvements As a EBITDA of range margins support full from the and we range are we from And sequentially labor XX%. cost-reduction margins to to our QX EBITDA margins result QX, to XX%. to the our of QX, XX%. net expect These initiatives. in range expect in is EBITDA we XX% taking and EBITDA outs. of In including the decisive lower margin of in benefit we supply full cost as SG&A sales. full from chain be to actions to lean XX% Furthermore, receive improved year XX% year in initiatives QX, production the XX% XX% our rightsize expectations cost base, utilization, to optimization,

phase rate revising $XX tax be anticipated Our spend additionally, the to from And is our million, million the will will Bryan. Depreciation Arkansas, million. construction includes million of CapEx business. our new I to our $XXX to XX%. in and turn investments range corporate facility for headquarters approximately of call at range $XX back the in initial primarily which now to we in that, the new are $XXX With core

Bryan Fairbanks

you, Dennis. Thank

brand of the navigate the business economic environment As long-term success. the to investing of the of Trex's the pro fundamental of brand inception, the uncertainty, and Operator, please industry confident distributors, North recognition, America long-standing around retailers, questions. nurtured capitalize network I'm leader, distribution we've available and top are These lowest of and namely elements to open widely to developed material key purchased ability relationships call Trex channel face parallel structure. opportunity and while specialty us. our throughout to cost capture competitive and dealers making one Trex the most Since relationships front continues our on world. DIY strongest on advantages, Trex's in In also with this

Operator

Instructions]. [Operator

from comes question with first Your John UBS. Lovallo

John Lovallo

first can XX% like absorption, the it's of of decrementals, spend? margins first material EBITDA about in - one talking quarter? walk little mean just us third I bit mean implying adjusted seems seems from which you this fixed lost a the the the The to in to I XX% half you're much it help the that XX% about XX% how heavy. ad cost is cost loss is,

would help Just any there be helpful.

Dennis Schemm

with in on of doing cost in came the is That's the quarter, the improving deployments Yes. decisive that position. decrease very, being CapEx The plant bunch -- furloughs our issue done, lot second absorption help to supply volume lost actions cost late very work as end the a is the the very, of at main a us from chain our we're taken reason the though, we've as that The well very second our quarter. we've for that at offset, very the by at takedown. of in optimization some plus

And until the to we're calling you're XX% so those cost to step-up we've QX, and been see We from that's QX why benefits now. won't be XX% that able to the those seeing QX. realizing XX% outs to full activities that significant to XX% of from

John Lovallo

delayed? That's about year's next Okay. think CapEx, helpful. terms should And in of And this of year of how then sort bleed into what projects savings? are from the being we kind

Bryan Fairbanks

As was that, look when economy continuing the line. rate that the expectation at the double-digit we time top guidance, CapEx at stronger there would we a of our more provided we deliver at

investments quite will that some for So isn't capacity smaller railing, the we those urgency of in with the making, them. occur, the were example, but same still

important As us. for Little is Rock, to Rock Little it strategically still relates

investment modular that with continue as to going we are We go forward.

some have those of out of cash I flows year. pushed assets just on timing the to some supply chain of because constraints, next Some those of

Operator

with question Your comes Merkel William next from Blair. Ryan

Ryan Merkel

help half. you My outlook guidance? the first the into on assumptions understand question for is second us revenue that Can the went revenue that just

Bryan Fairbanks

were to along past not a our absolutely. have Yes, of the dealers with looking fully up until as year and and of higher and had couple And case uncertainty go to that, started had years. inventories been see is a that their as level really building recognize this significant the we distributors the They began mid-June quite the channel they that similar We were to regular growth meetings been to and right down. was adjustment. be expecting take way to economic they the lines seeing all to probably going of communicating the us, well of

especially is million between continued first moved the where today, of dealer million. half million of to $XXX at So telling And year. when had built in approximately out first you that $XXX not channel. of coming then also at last inventory be we the in and we distribution, level. quarter, we look the year Remember, about where at second variance And through just the this split, we're as expected that the it's and about we but half build of to the $XXX we

largest short These for had well. of most inventory in built our loyal dealers pretty Our rightsize dealers to been are inventory and their years. looking heavy and as pro X inventories, channel marketplace. They the they're

related So other million general there's $XXX the is market that $XXX softness. then million. And to

Ryan Merkel

Got it.

How that destock? explains That magnitude, about to similar is you needs Okay. see retail think risks the channel then follow-up, sized that do And Bryan. risk? my there a the

Bryan Fairbanks

more us. their a into moves product distribution And basis. centers put are revenue. store, inventories the to it We it by Retail consignment when closely generates managed on then

of that going a we've So how same we there got of limited pushed be into don't to that can with course, the in But risk decides channel. that's there's see material the and amount that, DIY stores, much good visibility be.

Operator

Hughes with Your Truist. next from question Keith comes

Keith Hughes

I dealer for And second guess year have sellout even they seeing for you question a versus on in up? prior that? the first the of are year on coming half what feel Do or distribution the versus and sellout market. the

Bryan Fairbanks

it's year, the give the I prior -- of year been half year. don't number. flat the Dennis, prior relatively with First

Dennis Schemm

the... for Number

Bryan Fairbanks

Sell-through first in the half.

Dennis Schemm

don't No, have I that.

Bryan Fairbanks

was in Sell-through similar the half year first to numbers. our of last growth

the As that they them, was taking channel. inventory, were shipping moving the we through were

very dynamic the a between different years. X So

Keith Hughes

rate? percentage X they the versus been or seeing what normal so last a in And run of What sellout decline? kind of month have kind

Bryan Fairbanks

would they see were this if flat June, June. I built comment, year. remember, my growth in as through they type XX%, went you mentioned been through assuming They've But -- they seeing prior XX%

that did elevated like buying last that to of down back market need to be they a the consumer revised the reduce level at the year, size. year level remains rest to if normalized they support able still they is to flat, the more assume So inventory that

Keith Hughes

seems based you're -- you kind final building out It there be the right on am assuming conservatism some question further it's now? that in this. of Is the Or pretty demand. And like reduction given on of of just I one that units, terms consumer in there's correctly? are going some guidance, particularly to reading uncertain

Bryan Fairbanks

we that This is what the from of channel. knowledge best of inventory the in marketplace the we see have the

been And the It's not various consumer some to too sell-through fair it's out wouldn't expect now. about business the would from all of with flat any our to perspective. news concern think that's through I a well. flow mentioned, I say year-to-date, there as as that a aggressive to there's little be right there, probably be

Operator

from comes question Tim with next Your Wojs Baird.

Timothy Wojs

seen on that mean distributor what's some you've just mentioned about I underserved the at conversations. or pricing any pricing? entailed pushback those the of just accounts. Maybe I from have And you at you level consumers dealers or kind curious in guess, I'm level. distributor, of kind consumer regained

Bryan Fairbanks

that look of small beginning the they've Select the to the got past the that. So in of accounts to we've aluminum year as at to serve took April. pricing able just right long some had the in pricing show capacity, of our concerns X product working not service be product have to able be active couple we very lineup over then those term. We And been took beginning serve of our years, team capacity decking be regain a we in that past our on occurring to any of with them that the and the future, line the and lines, we'll been from very able the has the to over sales to them we've accounts have able to the that

channel that to got think We linear pricing haven't products anywhere a the per I through. products linear all market at the And the way We've and to $X foot point. time is this frame. $X you're adjusting purchasing since the that depending foot, to $X.XX go from upon up $X.XX which any had pricing

price it's other similar think the to new of has I because adjusting realities products. So the market they're quickly remodeling still fair to to how say moved

Timothy Wojs

Okay.

I staff kind guess, sure in it hire Is a how on the things back something would And XXXX, just what's I that back? cost that of mean, difficult $XX the actions million come make to then come potentially million, number? when you you savings. I lot cost production the and the range? that annualized do And of don't could the How lose Okay. $XX in be guess -- like volumes as

Bryan Fairbanks

let I'll Dennis side it of here. number up the pick

skills We are within trying to technical maintain organization. highest the our

the a we reacting that correctionary of that moved some labor as so of team into higher June happened it bit us to days. to the bit But end to reduce a with will come skilled quickly a very period. the able But So this recognizing been cost, putting is you can't there. ship little turn will cost. the that together XX the course get has little very, Unfortunately, be quickly, plans over Dennis? of take time of It

Dennis Schemm

Yes.

be I at think, Tim, $XX million these the somewhere start mean ballpark. could QX, QX kind that now savings pushing $XX through million in you're rates of run how of we here. to when around moves I I range annual in looking and in to the seeing

SG&A come We're of are the vast heavily well. So those at side. the to from be as going to the lines COGS going majority looking savings

Timothy Wojs

volumes as of of guess, kind of those cost mean, come return, out also I costs will permanently structure? those potentially would Or the I And are kind back?

Dennis Schemm

to costs come more adding scenarios. going utilization as as we -- then on those people to start back you be Some lines, will up we're bring improve into back we and

So with and there'll going efficient. growth, be -- more just we're to come will some be some that believe back much I

Operator

Trey from Stephens Grooms comes Inc. question with next Your

Trey Grooms

-- the just rebalance a So the bit clarity of again. inventory on little

that much, could guide was the reduction Or year? But all there that of place into how that that clarity, was inventory XQ? any, due the the million, over for was portion or take $XXX here just if of to spill think, inventory. mentioned to the You rebalancing I out was of that rebalancing this needs

Bryan Fairbanks

inventory to we're talking very already is about that we've inventory levels, what distributors, this expect what meetings of I it growth to Yes. we -- say, going comes will with able to to given going be have do build back our had were get conservative. last as to dollar-wise, serve the the again. them the year low to from be to be going lower magnitude the distributors would capacity into inventory We're that than back forward market be want we as and our expecting where rebalancing We

Trey Grooms

it. the you Understood. that, QX expecting from then Got margins QX as as as Right. And with go. far you're improvement, to an mentioned,

QX realizing frame when the So that sort a time -- it by lot and that sounds then like thing. outs be of of you'll cost

So lower in see in in fruition baking in is kind that XQ? decremental of about if should we rough the that of XQ kind the to environment a think of actually as be we volume that next that year, comes we range of

Dennis Schemm

feel that actually line would just that that volume think that a baseline I I flattish, continue as to see be for volume to running improvement get accustomed be we COGS we're more if think you better would should if this look to I as way. get would on going like us. going So right? still that And QX, that we're some is to flattish, just

Trey Grooms

talking Dennis? Right. sequentially right, there, And you're about

Dennis Schemm

correct. That's

Bryan Fairbanks

say supply the this a I the came in as we When that of so that sourcing higher we built supply level. have that is chain quickly, challenges deliver marketplace. to still chain, the we One at have have

take many things we're to. committed there's other Some that that are to out. push have already of this can that. things But We'll we

penalties, storage of additional some a here next as I say some and perspective months requirements. inventory have with material shouldn't to but costs -- production over couple raw the our begin from we inefficiency rightsize we'll So the

Operator

Thank you.

Jeff comes Loop Your question Capital. from with next Stevenson

Jeffrey Stevenson

the the that mentioned able you opportunities, won talked slowdown opportunities. service about So you you weren't accounts give gain you but demand the to also year, back last will share

Does areas the So like kind the share kind in the you I on where further grow gains forward, into those in elaborate the line could as such future was aggressively of markets? of these international grow areas you've talked of some moving to opportunities you'd capacity along that didn't up and you for just about wondering if with speed well? as to have time cladding,

Bryan Fairbanks

the market Trex We've right got So XX%-plus share. has products.

after that product. door Trex We main wood for with Trex are conversion that's our of majority message manufacturer you if walking channel in Basics compelling of got a We've at customers you're will Xx the carrying the the going receive wood. the our price a Enhance

gives us be be Trex at in opportunity today, with that XXX% may Trex that carrying or accounts not may all. So not

it's and a is Basics So and to and for more channels the message that our from to strong can working Transcend up together customers, how team how our of how up, Lineage. up sell works sales line we showing products then it the through premium Transcend Naturals

Jeffrey Stevenson

year it. seen the my Got into follow-up you've then And bidding of what Okay. Any that environment. just on there? are changes the into And is commercial your expectations 'XX? the back half

Bryan Fairbanks

it activity Commercial showing over this last positive the was of we say, with half always The ABI year. year, business. up that's in I'd XX, the significantly for consistent over where first and where bidding is, Commercial still were Yes. is

a calls, get growth year prior XXXX. this pattern XXXX, backlog into as to As I've talked about a in back we and that going rebuild is transition

Operator

comes from question Phil with next Your Jefferies. Ng

Philip Ng

but channel out? flushed heard the to Bryan, of year. that's sheet transpire help know us XXXX, you kind your uncertainty, of assume of I kind growth. now kind assuming think kind standpoint, you inventory have your about you inventory flat if when kind an flushed of to From I end of expect out your do right lot at you year. look sorted of a more that And how comments think be the we through next of all balance out, expect correctly, all by But of kind the end, growth may the what

Bryan Fairbanks

goods finished low years. the inventories had of We've past couple over

have level in and year look still So see the even careful next marketplace. down we adjustment can of can't we that our overreact would a would a so far year. to I in support be flat we to to meet goods recognize We this what quarter, production like finished with that not expect growth bring so

the of as to way out start end with have the be expect to material materials So through point. inventories at our the by work the expect rightsize we all will year. to quarter, that we us inventories first don't see end and the we'll will of well. that But get raw as I I there with then our raw normalize the demand to grow

Philip Ng

are you you're regain Got think your potentially that competitor business? largest you. you of this the do would guys lot some between look both we and out in share. pricing and about hold inventory out channel. how How backdrop looking In year, a to market next decking, And to that And then should mentioned environment will you of and declining of promotions you discounting for kind up backdrop? your think of flushing

Bryan Fairbanks

an pricing market capture This effectively that to industry share. isn't gone to has

Our the products our on know certain for to that and consumer, a value. understand how sell and carry channels value

were point. if a leverage as surprised be I'd So we used see to that be

Now have buy early go as we promotions the all into season. we

normal support of builds the normalize the have as was season. I inventories what the the QX prior into so the more much saw We course need think to end the in of back strength quite demand where to we normal because let's that you pandemic, the will first of seasonality QX. ensure to, the the strong quarter, so didn't to that incent of those marketplace through they prior to and say, the can to channel going XXXX

Operator

from Zelman. Adam Baumgarten Your with next question comes

Adam Baumgarten

improve those how much compare you worst Just mean curious those I versus seen have to history? maybe your the And levels? times. do lead on how

Bryan Fairbanks

receive the about in an XX we was years, allocation and go we for would amount out, orders program days ship limited. Well, but X and them place ahead of before orders had where

days, allocation is We are under right more that standard our have now. program we now time but shipping XX well off lead come and that

Adam Baumgarten

you it. that just could current year, sense the could see Okay. next carryover the your And for Got us give a assuming stays pricing then we at levels? pricing

Dennis Schemm

relatively But Yes, railing. I think, expect increase. We X% would increase in though increase other about that price than should Signature took on see overall, our pricing an and that Select be pricing. flat definitely I to

Bryan Fairbanks

Yes.

So just be... will that

Dennis Schemm

very increase took April. we So a it's small flat, relatively that but in

Bryan Fairbanks

Yes.

Operator

question Your next with from Michael Rehaut JPMorgan. comes

Michael Rehaut

inventory to the understanding kind make properly rebalance the that of and back to if how market wanted the related just of of relates to wanted out demand. kind just sure, of some numbers you end impact -- to I

take the half of your guidance about you And million. as the sell-through 'XX million it. maybe is the add coming a growth, the with little heard sales also market way year, want at if bit the end of back door to half this dealers the million you around sure you're this comments correctly $XXX well. for out half the I about about $XXX XX% going end consumer. right to sales, to to If And year, out in up $XXX just maybe and you back X% of to get of first of at make think that I if growth, you

Dennis Schemm

full seeing looking looking differently. I'm I'm When at X% us a Yes. at the about year little growth, it speaking. I'm roughly down

price. -- so thinking going is of be XX% be about then by going And to and volume and I'm that XX% offset it's to that about

us down. got a full perspective, year I So from

Michael Rehaut

this of sell-in What I'm half of in And the actually doing the half the adjusting inventory in is year? in the reductions back add back inventory back 'XX. for

Bryan Fairbanks

Yes.

because consumer a the significantly year. is. year perspective, buying that are than they look was than building you better but see inventory, significantly from they better. growth Their last that different, Whereas channel Trex to I didn't it. the they half will will at be channel of the growth half be remains what we So sell-through second of growth have kind higher, especially levels our year, selling the of were very follow our assuming Their the will were the in for first that numbers, exactly going the

Now is happening. the reverse

Michael Rehaut

Right.

I Okay. to I just that to 'XX? but feel half secondly, first you identified guess if channel for there the rebuild also you're the then, -- you've continued what think about saying. was of was wanted we'll understand $XXX of any any you million understand year, offline there up Maybe if past half follow similar this if the that

Bryan Fairbanks

the inventory the at build. past years. was expecting mentioned continued channel rates to I couple that in of Well, The first the seen to to similar grow what we've in half

level required that higher a So inventory. of

half the in through to what didn't moved second starting patterns some way, their marketplace the look understand from order of when and they would As the June that's and really significant perspective. like turning that see changes

Michael Rehaut

could. if I one, One Okay. last

fourth sales, and to actions? should the cost any rate the run clarify I EBITDA ongoing first on or quarter, margin a quarter similar just into you extent you that Just in just said that -- could on based or the XQ productivity continues that that quoted, margins believe -- expecting improvement you quarterly be XQ of we type EBITDA

Dennis Schemm

what in be your the of assuming in question? So Was QX that we would are is 'XX. sales seeing QX you that

Michael Rehaut

Yes. Correct.

Dennis Schemm

because, to any were margin early that, would initiatives that be -- these going the again, to improvement cost through the for case, of So at we're to I then more level expecting and type would see P&L. I that again, roll we're continue if projection like so see EBITDA

we're that's as reach there so than if the it QX at QX. its demand in QX. stays then full think I potential start that getting same more to And level And in Again, QX. would

Operator

come question Our Dan Suisse. from next Oppenheim with Crédit

Daniel Oppenheim

sort some wondering, just taking but serving sort Little terms are thinking and the timing of how you of the thinking taking guess with in additions Rock, that that of you also rational in goal coming on? the maintaining are customers, share in of of about talks I was the given of capacity And share terms such? pricing about I sort modular versus comments about how and fully of

Bryan Fairbanks

change isn't talked is going still able urgency still point come our we the about I'd can say the at capacity have to XXXX. of be support the Little with And channel this seeing continue growth. only it that quite We we we plant. -- in the what Rock we the on was Well, show before. to are to build-out

existing within whatever service as able X be that our able We will will important our will have very and channel for sites the see to team our market Rock a do strategy to Little long-term drive, the be appropriately. provide drive to we being of capacity growth the able but to

Operator

with Your Garner Benchmark. Reuben comes question next from

Reuben Garner

put back me do we going the to the -- company we low I'm so lower a In If you pre-COVID. Maybe Bryan, industry saw you lumber recognize pricing assuming at pressure you to levels that is it's at to maybe the you end continued gain or mentioned, it would treated overall But isn't ratio? pressure downward below could take on Xx treated to the demand, and that the scenario, with differently keep help maybe end, try see strategy board volume. on to look if Xx I for continue and at entry that level lumber. Trex, I think,

Bryan Fairbanks

lumber $X be going a was lumber range. $X.XX. that to linear $X that $X.XX are treated it to about for today pricing in projections $X.XX So to treated is to probably consistently $X.XX Pre-COVID, foot. be The will

labor, cost. Of price course, a Basics that the appropriately. it and into of does always the board, transportation, Xx channel approximately to higher of are through Enhanced things conversion to for needs We've go that the all time take those that the it, the the cost it be is wood. said chemicals of And flow the

So react. if in time, of to for going period a jump wood and to $X.XX drop to were we're not

linear time. $X.XX it it when Xx foot, react price that we at and make up went a as Just to didn't the

what expect it as is tick industry of from from I a is And as where to do that price it capacity up from our its see many to significant rightsizing So that today. customers expect hearing on well. again downward they we're don't is back pressure

Reuben Garner

you is your about the that adjustments. you you're dollar retail Okay. Just tell it? And Perfect. then about, mix of versus in or the my business to talking inventory what amounts us follow-up. trying pro talk direct-to-consumer, Can gauge however

Bryan Fairbanks

Yes. pro We're towards the geared channel. heavily still

includes DIY comes distribution. Our that within number, XX% XX%. is that that business of order special out to But a

part So that will down. of drives another that inventory what be

Operator

Jadrosich Your of next question comes America. from Rafe Bank with

Rafe Jadrosich

half. the or in volume just a earlier that the to I clarify comment just Was wanted revenue? comments on first sell-out

Bryan Fairbanks

a volume That basis. was on

Rafe Jadrosich

Okay. And then...

Bryan Fairbanks

because seen but of have growth on the volume pricing a way, along was significant basis. it They

Rafe Jadrosich

flattish the first was in volume half. The

kind do commented expectation You balanced And sellout gets destocking to the what's expect your or then year-end? inventory of XQ -- year by that at look guidance kind the completed your that you mean trends of the be you basically half seasonality year-end? has of for XQ you'd if destocking to quarter? into second quarter in in by is to that pre-pandemic, it largely the improve below expect the What assumption the peak in fourth I that historical was and your third flat quarter-over-quarter. Does and

Bryan Fairbanks

Yes.

way to given at see we they've more point. is this it. channel more at that aggressiveness what than the even destocking do concern that channel the at the over-destock concern in There got known have quarters economy this our We've some So we point. will channel, as the this that made of about our look we along

extent we quarter, see has that sell-through at perspective be from quarter where the that's a while fourth. then to lesser third done more So and will quarter, heavily seasonality during volume a fourth the lowest it in the

Rafe Jadrosich

half? assuming you're trends second And similar sell-out in the

Bryan Fairbanks

Consistent Yes. with seasonality.

Operator

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

Kurt Yinger

broader how there? kind with implications that are historical shifts And potentially that pricing, of see from kind been you long you've share think a channel curious or any inventory if when time, best Bryan, the about Trex you and parallels do to you positioned there you're think any for you current that as then of that you dynamic. about and monitoring, industry this the it's ensure shifts might be occur whether I'm benefit

Bryan Fairbanks

Yes.

composites, at property that losing selling was of was first-generation the have in last back It to wood XXXX, was time we same a pullback. of have today. look the have stain of Company a share the didn't example frame time. industry Trex and midst all turnaround. organization. to very was fade, a we So that the Trex as we scratch the a which significant XXXX different resistance The

we've lineup. look So forward, as a got high-performance we product

we and have every the out And there. serve We of marketplace. have products will best are the distribution level that DIY customers strongest that

have sell go and So we stack we feel how how knows we capacity to today. sales with up. And we've very good that out a that team got the

Kurt Yinger

it. Got

in versus incremental that Okay. I and And kind one, terms price of of my observations Lineage. terms at Transcend in there sell-through cannibalization an drawing buyer last of guess, in just higher point? early Any

Bryan Fairbanks

bring we new colors, looking wouldn't Too was said research that early heat-mitigating technology We products to always channel the us did Lineage the say. was the that that to we trend-forward stocked. showed market for with important. market until market The fully the was

available So consumers. products building right it's the industry. channel. the It's for loaded It's been now, it has into there. And

the customer out be TrexPros pictures of is marketplace. tend out see is months the But our that, are end now the to time of New able product to seeing door. the products it situated to we for But I and product about, a starting to to little in take Lineage bit to from installations, post shipping X.X get guess, that there. get starting first to and we're

So channel. it's really just hitting the

Operator

Your next Research Thomas Steven Group. question with Ramsey comes from

Steven Ramsey

share than on other is half consumer at? And indicators half the views, difference? just given or to second website dealers optimistic you your of second any that you maybe your more look demand magnitude are on the more that what Maybe are this case, is the if

Bryan Fairbanks

I wouldn't optimistic. more say I'm

we've not years. be I at seen should a if a the of able think perspective over our reducing product that kind couple to sure, to of least get a truckload that. get they has Trex and to that that of we knowing Company today And to be then from growth walk share in of the of size the also concern that DIY their the expectations supporting we very level the days, door channel from the inventories, share a able going product of is see the we're the pro some entire some couple channel that the that and to be have volume not a given But week quickly. have our be of customers within past

Steven Ramsey

pace on geographies has this similar at And consistent second reduction been magnitude? quarter, date? the in that a that dealer has started And similar Helpful. Okay. to in then reduction all been pretty the late of

Bryan Fairbanks

we've reduce continued those to inventories as see expected. We've Yes.

Operator

BMO Your question Capital. Mamtora next from with comes Ketan

Ketan Mamtora

this if a curious just opportunity for of I'm the international an environment into sort push creates market Bryan, bigger market?

Bryan Fairbanks

is recession with challenge that point. is, are truly in whether energy U.S. back at the debating that in is is yes, this everybody The prices consumer that pulled over today, while answer. Well, has the only with the Europe a

really only year, be The significantly market would that, nice weak the back growth this of is So relatively I we've exception seen over half going still at the pretty this be that the of change strong that to year. economy point. in in to Where the I of be back expect half Australia. to The do year. expect continues the first Australian half

Ketan Mamtora

Got additional how And curious of about helpful. balance talked with then, a sort a what know about you of to I'm compelling repurchases. terms Can kind Dennis, of continuing time sheet some from capital flexibility you've of share prolonged if kind opportunity advantage share repurchases? versus the period keeping of in markets described talk think were taking weaker the standpoint, remain for about you. you allocation That's I you of as

Dennis Schemm

Well, I now. position in think we're a fantastic right

that -- flexibility as quarter, strategy, have X second as some as investing as with do continue share that end in brand, to gives We us in are the in example, X Trex its we the and of other of important long-term to of well cogs repurchases in on important very wheel. the tremendous strategic books, have just things absolutely really debt just the the investing for R&D, is the

Ketan Mamtora

opportunity? be you And an higher to be term Dennis, leverage short that to the if were there would in willing take

Dennis Schemm

that executive team. We have an as talked about

term, we but I that. And time, much that, teetering at talked X.Xx, I in at when would more be -- than the so be looking do being recession, that we've over But point this to think longer something don't we're now. a about that potentially would willing right on not the to mean,

Operator

comes Matthew Barclays. Bouley with question next from Your

Matthew Bouley

capacity that the as sell-in over-destocking today the to you you much need get will do so versus match made there? service kind of won't of kind distribution into that the and carry about foreseeable degree trade sell-through would of future? just the that kind need much made inventory other balance trade are Do levels How you comment because of may better. comment the those trade spring to So balance How suspect year, the what maybe do maybe of into the you we doesn't you do as you and next two? for the think to normally restock it kind potentially

Bryan Fairbanks

It's a fair say challenge. to it's

the We similar back again. pandemic of people last stocks and of Everybody to their in years And X rates through stock. again. gone come everybody back year, of out grow we've pulls So happening, very low end expects at with wasn't build that XXXX.

tell how is best we're the managing I So is it way communication. with can

regular relationship believe have customers, to it low that DIY we'll our the contractors pretty with from happening what we something marketplace. got good but what's perspective. We to see is a to our what's going our understand to a we meetings perfect? if service customers, visibility be the inventory address distributors, in Is No, And able clearly customer happening out there. we've that's too

Matthew Bouley

side. And it. on secondly, Got pricing follow-up then just a the

in given this winter happening the this Just you type winter inventory scenario? rebalancing like things does the here, that? how and in discounts into Early year? volume or Would typical buy still the fall is Buy see Or not really this play just out does of happen

Bryan Fairbanks

of off most that those together the of purchase. type will look Okay. customer, that impactful based the things of could it we some It's it the Historically, menu what from discounts, the above. related be pricing. pulling could be they the for menu based And we are things be all the of for off variety to and when There's Early Buy, loyalty different and of of say one this volume to marketplace. entire dating I going conditions, the a revised year-to-year at market the menu or be whole that

Operator

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

Bryan Fairbanks

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

Operator

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

disconnect. may You now

Trex (TREX) 9 Aug 222022 Q2 Earnings call transcript