Trex (TREX) 1 Nov 222022 Q3 Earnings call transcript

Company Profile

Participants

Viktoriia Nakhla	Investor Relations
Bryan Fairbanks	President and CEO
Dennis Schemm	Senior Vice President and CFO
Amy Fernandez	Vice President, General Counsel
Ryan Merkel	William Blair
Joe Ahlersmeyer	Deutsche Bank
Stanley Elliott	Stifel
Spencer Kaufman	UBS
Tim Wojs	Baird
Jeff Stevenson	Loop Capital
Trey Grooms	Stephens
Reuben Garner	The Benchmark Company
Alex Rygiel	B. Riley FBR
Kurt Yinger	D.A. Davidson
Keith Hughes	Truist
Phil Ng	Jefferies
Matt Bouley	Barclays
Adam Baumgarten	Zelman
Rafe Jadrosich	Bank of America
Dan Oppenheim	Credit Suisse
Michael Rehaut	JPMorgan

Call transcript

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good afternoon. And welcome to the Trex Company Third Quarter 2022 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. to conference like Nakhla. to now would turn over the Viktoriia I go Please ahead.

Viktoriia Nakhla

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

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

Amy Fernandez

Viktoriia. you, Thank

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

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

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

Bryan Fairbanks

third for XXXX and Amy, Thank evening. the discuss review to you, Thank our and our performance through outlook. joining us business quarter you today good

signaled the in results last with expectations quarter Third were quarter. line

requirements, service the drawdowns primarily partners sell-through demand our distribution dealer reorders. and to levels, consumer quarter rather While than healthy demand used through remained at inventory

be internal the Our of confidence us will XXXX. completed by intelligence inventory recalibration market and end data gives that the

period of cost demand talent, levels, retained by to took programs. ramp measures base focusing experienced our up rebounds. on our Concurrently, as efficiently with demand this production During we most rightsizing we enabling us cost inventory our the and structure efficiency destocking, employee current decreasing align to production manufacturing

lay initiatives enhanced improvements In able current were production navigate to rising the addition, profitability full healthy refocused for while us through and we to at on that growth operating these to groundwork we less resumes. rates, when efforts consumer will our effectively pursue the capacity. We we see demand. Despite allow environment macroeconomic believe continue interest

in in environment leader this category, our from we to operate strength. market our the a ability in are of position As confident

great than of is to the interest us their lower sectors. age majority who out XX many priced cash remodeling tend resilient and and are tie and their long-term old, less of years Further, further the Homeowners rate makes to sector pursue more moving and the remodel like a add especially homes value those invest with existing renovations, that mortgages in Our repair of other rates The housing inflation. deck. buyers higher average by stable driving U.S. spend. be in Trex financially impacted Trex are stock will approximately buyers existing

introductions features product We ability mitigating new product launched Transcend Trex’s forward products. continue aesthetics from decking. branding repair and our in recycled our and decking With innovation refined All QX Trex enhance to to content. to all of drive further is demand colors consumer we late been new environmentally like has The friendly decking heat remodel for and in trend continued made financial and Recall, these product with market. Trex reclaimed favorably items in it Lineage Trex invest the XX% in support XXXX. technology line and spend outdoor we plan received on solid for and living position,

Texas, fastest growth marketing distribution integrated outdoor and content support expanding campaign to ideas two amplified long-term of refreshed to XXXX transform Trex launches reality social, continues the with of distribution by digital into In September in October, locations media, service we living with in homeowners early and outdoor industry-leading partnerships additional Our continually how more. -- by retail, one launched we their dream expand to continue growing strategic Trex our and help network. markets. availability partnered the Likewise, us in highlight products online enabling and

for every superior and and offered management points, standards. to reputation longstanding manufactured work the engineering we a at while customers and products leading our collectively Distributors in distributor produce well-earned environmental the category competitive selective prefer industry. day. their relevant price relationships, customers through to our Our offer With we with the with network channel because best distributor quality sustainability Trex, in providing and levels products outstanding the service service representatives our has highest and sales to most

a central third continued increased operations, for this growth support facility our During strategy strategic in unmatched international manufacturing its have proximity coverage Arkansas to to and Coast, cladding is trends shares including will in manufacturing is skilled markets. online, flow, facility Central plant to Trex customers. our key wood cash our with advantages, the demand our repurchase this raw aspect pool for West growth materials, quarter, a for When of of Trex in Coast The free to decking due major key growth geographical the labor, of third calibrated expansion outstanding East remains serve will products. markets adjacency The opportunities also situated long-term our transportation near modular comes conversion. our and Arkansas. continued generate strong approach hubs invested common our development to we and to stock sites and qualified region

turn more over our call Dennis? Now of the will provide performance. Dennis a to view I to detailed financial

Dennis Schemm

our the fourth annual afternoon good I provide results year-to-date and everyone. will to financial discuss performance, quarter for and third guidance for Bryan, you, outlook Trex’ quarter XXXX. Thank reaffirm and

Third by same dealers $XXX our partially recalibration rather our reflecting with inventory net quarter Residential $XXX and an last year. Trex as reordering million, were demand sales $XXX inventory sales to XXXX in million they in million, through the met distributors drawdowns were than guidance net quarter, line quarter compared product. last

As million quarter growth expectations previously communicated, volume built to year, between the the $XXX of inventory third quarter this and the approximately due XXXX. for of in the XXXX second channel of

will was the and current will sell-through severance in SG&A channel flat our quarter our concerns of a channel quarter. general in expect The reflective call, the second year, reestablishes recalibration. inventory year-on-year calendar decrease sales XX.X% was in XXXX year administrative XX.X% inventory of included $X.X were to new lower to million the in of noted consumed expectations. as third million macroeconomic XXXX, primarily reductions. levels SG&A XXXX the the and back of the XXXX. next compared Inventories at this As Selling, $XX $X.XX quarter for prior expenses In with have due and net XX.X% charge the from decrease this in enter is and spend, branding diluted targets third net in the quarter. or Trex the share through be production inventory in anticipate XX.X% dealer charge. $XX we lower half $X.XX related in $XX in to our compared primarily incentive or XXXX XXXX. inventories in declined partially per share, income our was sales, decrease quarter year and Residential costs, by Net $XX distribution the to roughly third third the to million compared gross than company resulting offset an margin quarter ago marketing the The Consolidated with quarter. million per severance diluted a or increase or employee for in line million

charge million quarter $X.XX income the severance XXXX, of in the was net Excluding share. or per third $XX

was and XX.X%, was EBITDA expectations. with XXXX consistent million quarter $XX our Third margin EBITDA

was charge, severance Excluding the XX%. margin EBITDA

third that quarter end the common XXXX, as the program. repurchased million our shares outstanding X.X under During quarter stock remaining million have the of million of the shares $XXX repurchased of be X.X may and totaling we

net increased Consolidated results. $XXX million million, will were increase XXXX SG&A million the or Trex for $XXX year-to-date year sales from Commercial period. spend the sales $XXX of net we was sales to with of contributing sales $XXX volumes. in million million. to million, year summarizing briefly a XXXX, net up support compared or prior X% $XX Now of net percentage ago expect Trex XX.X% SG&A Residential for as net year-to-date reported to sales, period. $XXX increased XX.X% sales In branding to contrast, due

cash resulting in million per incentive compared EBITDA also per a period diluted EBITDA to or $XXX to of to million year-to-date margin more $X.XX expense. $XXX of share, or to compared $XXX Net for We return and share. normalized million, $X.XX million EBITDA nine-month $XXX expect was From diluted the into generated same was and primarily management EBITDA XX%, XX.X% an income during the million Arkansas of margin a We investments CapEx, of facility related corporate operations flow year. the headquarters. period perspective, back new core, and the the other reduction new we $XXX to manufacturing cash initiatives million in invested year-to-date. $XXX in from cost prior our

drawdown supply will net reaffirm chain in sales reflects to production we to season. improvements. be decisive right-size $XXX XX%. actions turn of substantially the for line million completed be end margin our significant that by margin cost inventory We sequential base, believe in and XXXX million our and As EBITDA inventory the EBITDA the and the increase guidance of including to channel and start year we the to The $XXX QX will outlook, XX% then employee our channel XXXX to optimization

turning guidance. our Now to XXXX annual

depreciation Trex the is Bryan. now of XX% of sales; guidance margin the and facility seeing continue million Capital in build in will the rate measured demand to XX%; With for XX%; the $XX to million approximately of This SG&A are call in of We range to to products. calibrated living the million tax effective to our back out $XXX range a million. expenditure XX% range pace. that, we an development at as Residential $XXX net of remains outdoor turn I following; EBITDA $XX trends to modular to of XX% Arkansas

Bryan Fairbanks

Thank you, Dennis.

in than economic and more XX years, position. this defined decking and outdoor has competitive uncertainty entered Trex the For of and strongest its composite reinvented period category. Trex living invented,

challenges. market, in a well leader Trex As navigate we is effectively economic are positioned a to confident growing that

composites on operate focused of converting to and socially to while the responsible manner. advantages in remains a performance consumers sustainable wood, strategy over Our continuing

long-term brand, manufacturing advantage We industry-leading Operator, are poised please the to growth focus on to our efficiency. open people, call channel by cost opportunities of partners, market-leading low relentless products, supported take questions. and

Operator

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

Ryan Merkel

the taking for Thanks guys. Hi, questions.

Bryan Fairbanks

Ryan. Hey,

Ryan Merkel

afternoon. Good

demand consumer the quarter, am for seeing expect driving what So, you slowing Bryan, what is, and fourth can you here? I the comment really on quarter are at sell-through in and you

Bryan Fairbanks

demand year were the quarter. it We reduce demand the that will we the did expected that -- the quarter. inventories continue This third are saw pleased extent with in that we continue seeing into and it had the we fourth to

Now see recall, in normally demand you quarter, will the fourth fall off. sequentially

business. So our that with in to when the we seeing we But related the provided fall expectations quarter. of the it’s seasonal that of had still are end we guidance part off the second at line

Ryan Merkel

Okay.

up? is So slightly flattish, is the read that sell-through

Bryan Fairbanks

Yeah. Sell-through is flattish.

Ryan Merkel

a call with then And you to out is and margin I help se, could but in guidance big question XXXX. Okay. for looking us for any am everyone puts per not for modeling? gross takes

Dennis Schemm

Yeah.

nice see QX there a would improvements. starting on to us. for be your and best performance will proxy as So we there, a margins for is The point I then from be we layer going that guide, think

are talked CapEx into back about, Bryan investments. continuing As to investing on with work we core the

and improvement, inflation made being that would have well finally, well. investments expect We of then is continuous moderating there to some see we as as

Ryan Merkel

Got it.

margin roughly there you initiatives? the can cost XQ XX% of So on gross you from lift think some out based

Dennis Schemm

over it, XX%, now, guidance roughly you I points give QX, that we the not a because you expect you right? see So yeah, higher, to but that, will guidance around couple QX, speaking, right, above From XX%. into going of we right basis am would back improvement would projecting have when in give are to

Ryan Merkel

Perfect. Thank you.

Operator

comes question go Deutsche ahead. Joe The Please from Ahlersmeyer next Bank. with

Joe Ahlersmeyer

Thanks the evening, taking guys. for Good Hey. question.

Bryan Fairbanks

Good evening.

Joe Ahlersmeyer

just you looking channel? if did you to see in guess Maybe Yeah. may the quarter, just what destocking split the impact you split any don’t as even volume, pricing but you have out were out been could third I at -- need the year-over-year

Dennis Schemm

around X% XX% about the -- so price very quarter year-over-year is to saw hold are year-to-date, and in the up well. quarter, third and very, We continues Price we price in price holding.

Joe Ahlersmeyer

guidance the saw then cost in for on I margin. in are the Okay. the just obviously, Great. on And quarter. know slowed you levels, production gross you fourth giving XQ. those production the given unabsorbed We Does might year been? levels at inventory that normal you next to are be just going or running the going still imply channel have to where you see below otherwise you into that is where closer margin

Bryan Fairbanks

So then back large is the move we we we will half taken that year our on with and quarters as above want large do in sales of couple the to first do decreases we be strategy expect this year. well our operations are net into whipsaw have increases. next of production not of the where with We

So where we are producing we inventory. at a level building are

That You fourth see quarter. continue will will the sheet. on that’s our in balance

and If then and begin the inventory the years to first Trex build historical quarter, those you would through see back you see go with quarter, would the busy to season. decline quarter you fourth peak Trex, in inventories third

getting at back to and first quarter. the of are end year balance historical capital that of the working usage So the we

on where continue we So the gross ramp comment saw going well. next quarter, into improvement or other will those year, way, we ability we could in at through to the as least we continued up at the have pull to move the we but quarter the if economy the levels back run first fourth start probably, to margin, Dennis’ as of that

Joe Ahlersmeyer

Right. a lot. Thanks

Bryan Fairbanks

Yeah.

Operator

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

Stanley Elliott

about the taking million assumptions, but year billion-ish about and thank XXXX way perspective. guidance and make the now guys you the around destocking that whatever, year this this down be. $XXX line can fair a of up of be $X.X do X, would get think the kind are process it’s we to for don’t add discrepancy X from think top we street estimates whether then There’s a going Bryan, I huge roughly you in That’s the a or to numbers Hey, thought of to to necessarily, some want back whatever when question. right would it? for the

Bryan Fairbanks

thinking to about -- are what question next support about my that way are to The to? for levels back am comments the we right to The about we year. producing go prior now in $X are going billion it, I made we I the producing

not with this guidance year. that, very next Now also as I mentioned for is is important, that

We ability have the to up meet be our production higher able ramp to to levels.

keep what so market sure making we if producing We be necessary. But also there at throws now, we have the we pull for to to? able flexibility, right the that will us, the So back ability are are that’s our to whatever that efficiently customers. we be effectively and

Stanley Elliott

you shares guess, where given leverage I X.X thinking six million all next then, over the of the X.X kind the of And months, or credit line. today? you How are Perfect. on have left stock million use about horizon, near-term is authorization

Dennis Schemm

Yeah.

the I mean always I very So have continue that’s to along, changes question. we that very, a great into balance run conservative sheet. all a future, expect would there. no

repurchases, those share the well. investments as to and opportunistic extremely core to on be we We share for will into repurchases prioritizing capital to but going be continue continue back are

question So than on see specific us X.X higher not I answer to would leverage, your times. venture

Stanley Elliott

Thanks guys. and Great, much best luck. very of

Operator

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

Spencer Kaufman

about demand quarter’s how was any do out too does on you would ripping positioned at pretty Hey, Kaufman much dollar call. you back quickly up? of this afternoon. pick there under guys. did Thank the Bryan, little here prepared questions. for on I stand one million. what Spencer in last and But Are the you that a you on are if is out $XX know, guys Good you on costs sort said basis remarks. first on This exactly actually your John. thing SG&A a you the The Maybe one touched and concerns for did

Dennis Schemm

Yeah.

we I if positioned So, pick well think, are extremely does demand up.

the So you employee That include seeing in our incentive would drop was commissions, This are the in drop. well as SG&A that the was primary as primary incentives. this quarter annual programs.

strongly to in to in though, change to continuing, There’s invest marketing very, force R&D. very win. our sales and and there, invest are We no branding,

Spencer Kaufman

the guys Okay. about environment you That you outline quarter printed just are when makes how you the sort the next sort XQ. are to XQ changing and I and sense. And given really think you results, destock, rapidly your thinking reaffirmed second guide your be of of here. thinking pre-buy two about for helpful But guys hear how quarters, would you it the

you If sort of sales historically world, look back XQ could than rather in a jump up pre-COVID greater quarter-over-quarter. XX% meaningfully

you So thinking just guys here, directionally are that? how maybe about

Bryan Fairbanks

to been marketplace. at balance happened that production have service part inventory to in and they to we inventory distributors need is, expect you is, fully the closer happen distribution serve the will may look closer year, What next the where able year. to they more as to busy to which will means the have and buy our happen We expect to lesser of are able through next will have is to serve normally be degree the your to the dealers a be first consumer, we to think be dealers build more I consumer What that questions, If able to quarter to I Yeah. less able season. build they it.

will change So it’s a which product the end that of the more of really channel to day. just be we the at shipping part in

So first the dynamics quarter change the of that all underlying won’t much.

where but it We have a may to gets bit. build little built shift inventory,

Spencer Kaufman

Okay. That makes sense. Thanks, guys.

Operator

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

Tim Wojs

and times based down them more Yeah. more wait would afternoon. approach conversations the industry the take season what quarters? get few maybe the as point, and lead see maybe the just your of especially last a them to guys. get would building inventory your and over with more what Maybe distributors, develops, maybe coming Good that on on I mean, Hey, Bryan, with about excited

Bryan Fairbanks

to they to to committed service able sure are inventory be have right distributors the the making marketplace. Our

times let right much at level. lead have already now, While that It and to will talked be times not channels them know distribution are we staying shorter be lead that our will to push inventories level -- probably appropriate weeks. to it so the three are time that run That’s appropriate to will appropriate are weeks three out channel. four weeks -- lead in

Tim Wojs

Okay.

sense. from That costs or you any I Rock, of like just just things then we overhead I margin And as or kind are perspective? think of mean, just Little XXXX, consider I Okay. sort D&A start-up guess or about should there a mean, on that that, makes

Dennis Schemm

Yeah. It there. will -- we dollars will to capital continuing invest be

be there’s through. not moving little expenses to going a start-up any going through. be So early. not depreciation any too There’s to coming It’s

Tim Wojs

Okay.

Thanks, Okay. Good. guys. Appreciate it.

Operator

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

Jeff Stevenson

Thanks for Hi. taking questions my today.

Bryan Fairbanks

Hi, Jeff.

Jeff Stevenson

Good. Hi. seen good. channel heard of product more have Doing categories. have or other well we whether retail to in line any levels, some any the with levels continue retail inventory been wondered change destocking in if as Has there you inventory building in manufacturers? I be

Bryan Fairbanks

all retail? Are to specifically you or referring DIY

Jeff Stevenson

Yeah. specifically. DIY

Bryan Fairbanks

DIY, are issues and we we never I we distribution issues that them that with manage inventory was inventory we what it, when The from Because the to center. then when a We so there. see getting VMI inventory see moves centers manage really inventory and there issue any any there, ship Company. don’t of Trex their need expect for into inventory, it they record they on out distribution an didn’t we the revenue need there basis,

Jeff Stevenson

kind has mix the through progressed the sell-through to third do from of change And remain through of we you in half overall a Okay. demand as mix as trade seen kind relatively down back line year? any move the have you of in expect Great. quarter,

Bryan Fairbanks

in haven’t We mix. material any shift seen

over of over with aesthetics But those and has customers see want past the couple best the performance Transcend continue highest and that years. We to our this time, happened line. product going

the shift product mix launching We going was product wood. of the seen of that strategy part That towards line. to up against be have Enhance

as that So from line. in we they wood, have to bring we and product come those in at customers convert will Enhance

that But that higher we we longer continue that drive to some the Trex. over will see products to that make So end we sure term, of have premium shift. the customer will

Jeff Stevenson

you. Okay. Great. Thank

Operator

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

Trey Grooms

afternoon. Good Hey.

Bryan Fairbanks

Trey. Hi,

Trey Grooms

the the But we great. a end as just, mentioned, of in may how will much remind Bryan XXXX, standpoint into year the next with is place I normal inventory be it question, think recalibration XXXX, channel kind which inventory taken XQ looking first year-over-year XQ, have can completed from about think in and of So, the guess, by comp just comp? we above about as us you

Dennis Schemm

December first about we in prior we So the XXXX, million. info XXXX, like, $XXX half XX, that historic year, we of $XXX built inventory. another of million the talked of had during Then

total second much quarter channel a the of the was by of the of So in $XXX pretty million XXXX. end

Trey Grooms

I Okay. in fair? million, happened lot And of bulk in happened XQ, sell-through is that XQ, the am guessing a it $XXX of given that that maybe of that

Bryan Fairbanks

say. one-thirds I’d probably Two-thirds, from that,

Trey Grooms

then Okay. to you rightsizing with the Perfect. million savings. That’s you. super helpful. has mentioned million of taken that Thank place, $XX $XX And

going are And how we as process, I largely -- First target recent opportunity you bit you are margin look a incremental XX% a long-term, that off, the those through be it for good to of XX% to looking about still you where kind one further, it are the think to then targets? sounds used most was see sales of incrementals secondly, little like you in in maybe are are where but you process? soon, out thinking the improve?

Bryan Fairbanks

organization. when of this I long-term look think at the you

where We gross were as the EBITDA and are move we as have to as our this we forward. you we quarter both highly improve working at margin, to that back a of margin. will it can again. focused well get there end We incremental the organization Long-term, us second targets of know see when expect to margins to comes year

Trey Grooms

process? that million you $XX the that where -- $XX And are million to savings in are -- on you in Okay.

Dennis Schemm

look that guide that going continuous margin the take best then that about just Trey, at this, is through that way be to going are are roughly to we gross QX talked upon have XX% we So we build and improvement. speaking to I at think to here, continue

well. into projects as are the going be to back business with CapEx investing We

these employees the the right? with got on These long-term have are employees skills. right well-seasoned technical best working We lines, now

we going help along in set. have moderation than running better are margin combine, these We lines the some all and so improve those to with us ever are inflation, to

Bryan Fairbanks

Yeah. It as characteristics a to are right and conservative now, we sounds a like team. management are, bit that’s we our trying little be

will rest As much everybody and we get of raw this through the this we much look better into like what -- have materials will we like, to the clearer at visibility point at point. a early that quarter year, economy next and give looks update what

Trey Grooms

sense. Yeah. guys. Thanks, Understood. it. Appreciate Make

Operator

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

Reuben Garner

Thanks. Good everybody. evening,

how XXXX on that low, that have levels? First, channel, lower period levels. just on want the can any, XXXX way not to there you looked harp Dennis, -- into the it If in that I that pre recall of the some put us think, have but was perspective I kind I inventory to the mentioned to relative than you pre-XXXX kind make of was Is sure for I historically accurate? any might but that

Bryan Fairbanks

Yeah.

we is particularly relevant as I isn’t think The said, has the comparison flat because versus market year. roughly the shifted. sell-through, last

we an end very we As expect year. are organization, increase. where When the in would you a see inventory to to getting satisfied that the inventory of by you that organization, growing are

that going should mentioned, where number we But, least is were in we Dennis get level of to year. So around be we end the be than total, as in through at higher the XXXX. probably XXXX this as

Reuben Garner

more or a opportunities, player I running in likely here couple how you few years. potential of local splash for here Is big it on were guys where at a opportunity? maybe any you the there some larger partners point then pretty more pick you guess, of or know whether it’s in picking will regain up U.S. quarter. of there kind and that’s And kind up it make on something a that share the on will I or Any, some thoughts channel internationally, could is and product congrats tight regional the a -- you

Bryan Fairbanks

Yeah. have. already We

have about within We the industry. share market got XX%

a out lot opportunity Company. for don’t that of Trex So There’s of there’s have the XX% we it there.

there. opportunities be We way, will and see the an here marketplace. for the of do maybe a along we hitting a by and do may but more it lot double opportunity singles There in

Reuben Garner

on guys. for Good of year. luck rest Perfect. the Thanks, the

Bryan Fairbanks

Thanks.

Operator

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

Alex Rygiel

of Thank to little price increase the when you. address in it, talk bit about talk XXXX? XXXX a Could price cadence was about and in you maybe the

Dennis Schemm

had a in it Yeah. that had are first XXXX. any not but any very one in price small We really of was was January The last for expecting we significance increase quarter, small, very, price the XXXX. need increase we and further

Alex Rygiel

is comment it this at is at on interesting traffic, you any somewhat telling is anything And moment? That or it helpful. then website useless point the

Bryan Fairbanks

I don’t know that it’s useless.

that’s We consumer to the seeing years, a general couple given it past basis not down on the a and huge the of year-over-year are strength of over surprise us.

where fair much valuable DIY that was it than still We provide to to over quite strong data remaining coming it couple the strength today are is it out more But read seeing past market that does It’s us say shows there. years. to some Trex are of increasing in our about consumers decks.com, is the from. which difficult information

Alex Rygiel

you. Thank Helpful.

Operator

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

Kurt Yinger

and Thanks, afternoon, everyone. good Great.

visibility talked could guess, you talk about, in little channel, little have a I feedback you or in year terms sentiment You a into bit but confidence what are from the you hoping bit around base distributor of your next and are backlogs. contractor about hearing getting

Bryan Fairbanks

positive. Overall, our have been contractors very

season, would backlogs expect of to have backlog. our contractors of are time and backlogs, but of have they carrying their from lot this come the still course, shorter Now a a peaks, down

got lot year probably sector. Trex So next in more are feeling confidence have their installation is towards about good repair important remodel putting our Pro positive. very and They feel of what’s for contractors out that next and where they are stand we and a year as they look out the still quotes

Kurt Yinger

it. Got

the then, that in helpful. landscape a of have given That’s actions you competitive terms the with channel And just of or and environment, challenges inventories anything for some the industry any front? lastly, new Okay. mean, on seen I maybe slower growth

Bryan Fairbanks

three haven’t before got to four It this is we out industry. wouldn’t anything that I say you where there. dominant seen we have that in are have seen an industry that players

good got everybody to of the have applied. each most and and take where and the the wood of is We share is think competitors But importantly, that’s I other. more away from against out looking there is most the dollars being understands focus largest opportunity industry

Kurt Yinger

it. Got

the Well, luck and good color QX. Okay. the appreciate in

Bryan Fairbanks

Thanks.

Operator

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

Keith Hughes

where year? Thank Can there. lot it’s know inflation I you year-over-year, you. a there’s pretty about trucks your inventory up substantially, to talk The last compares unit of inventory

Bryan Fairbanks

here. sheet the has numbers balance Dennis got

from strategy a were every stick that shipping we perspective, significantly last expect out manufacturing. were be year. Just still up we that to year we really would Last over

have really a quarter, inventories the to to third the quarter mentioned levels and that expect past see third of first quarter, first we inventory couple next normalized two up have I And in low back calls get I to had So past through quarter, and fourth then for think year. years. of half the

Keith Hughes

here see those head on starting towards is over costs the the of And Okay. we of earlier, raw but materials, year? roll are as you to mentioned somewhat this end some

Bryan Fairbanks

half those course, out how well was supply with in still it such Because the orders used materials much pulling our quarter, production, into raw back a had are the year. third quick down being and the in of production, shift chain of

be still price. going Probably is So have a is reduction aluminum. seen much the material coming higher on in that we that at biggest of to thing what’s in cost coming in

are We shift receiving inflation materials, is but lower at point, majority to yet. this we fair as haven’t of moderated, say on big we the slight that but been at decrease, of not there’s The a rush now. has a it right price any aluminum significant haven’t seeing seen started that deflation to recycled that cost but any

Keith Hughes

Thank Okay. you.

Bryan Fairbanks

Thanks.

Operator

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

Phil Ng

Hey, in guys. on to early R&R what’s accelerated I channel generally think in backdrop? and few step demand guess, gains back wood have XXXX relative business recession. up that you your in your really do Bryan, share holds partner’s you from taking then a read last Do the moderate heading that a see and how into years

Bryan Fairbanks

this through going as are partners their right-sized pleased to that year. be are channel Our get extremely they inventories

to expecting the be to growth overall they support the starting enter to year, of able next that have So are market. they the right levels inventory with to support or

before, part to end spend. And point, they is there consumer and their that support an composite be make for successful that able them this customers. inventories business resiliency to right of about at that mentioned I to their I it’s decking the that have As feel sure that important to they good remodeling see be in

Phil Ng

versus you your in holding do how R&R? a moderate And up see recession business

Bryan Fairbanks

am we moderate year in that earnings. as see the half economic the not change I’d year in into say on to and get those much where our guidance sure And this already give of we marketplace the year. Well, that conditions are recession next end all you I we we a of back will additional

Phil Ng

constrained. you? was are the doubles for a opportunity but there, talking then channel some And gains singles was on on in capacity especially about know you. that aware the potentially you should Got and I past, opportunity on noticeable we there line potential of partner share win. retail be in could Any be horizon terms on of the reviews channel,

Bryan Fairbanks

to review did anything. else be the year have review Depot announcements before any this by and related would that announce a customer line anybody line were Home to handled

Phil Ng

Okay. there’s that be to add that worth? have But at this point you should nothing

Bryan Fairbanks

point. add Nothing to at this

Phil Ng

All Okay. Great. Thanks. right.

Operator

Barclays. ahead. next [ph] Bouley with go question The Phil Please comes from

Matt Bouley

Matt Barclays. Hey, Bouley at guys.

there’s occurring to a that pricing not of I a likely last announcement. topic think I quarter, the think, you and expect said, be promotions, year could On new this earlier you return-to-normal promotional price we and activity mentioned

incremental promotions the what impact in size you could what have to it’s if of top that price, happening line that returning kind positive And don’t and might and activity sort like, XXXX? of you promotional if so might be just to look curious if are normal Thanks.

Bryan Fairbanks

I biggest year that noticeable think thing the will be is receivable. accounts around our next

more very, dating back to year go normalized DSOs. will where We it’s been very low this program, a a of

manage through very half for distributors, things back the channel. the the are of much on We type the first have first the of the quarter through past. an pot are as of cash quarter, the marketplace kind a well as the year. Otherwise, different promotions to flow which it from basis to perspective, from generated that in -- higher year meaningful we both what that our a of the saw what of a are is drive then that of we will and second overall year-over-year going higher normalized as been most that half accounts dealers, get the that come this funds our more move program comes retail of anything levels back receivable in year, flow being result cash in Whereas will in you as and

Matt Bouley

it. Got

then, for That’s environment. that, the Thanks competitive helpful. And Okay. secondly, Bryan. on

We know some You distribution in guys had competitor a announced weeks. expansion Texas some recent added distribution.

earlier to that, you think, I share from competition one Bryan, another. is take mentioned your trying

is competitive think next a you this think wins environment that drive a in about how perspective, out could these So business year? of pricing wins do the landscape type over as these distribution we component from

Bryan Fairbanks

the distributors is able that with our examples we things the each distribution are really fact market we had We Texas to that are are felt other we going that back is have to all when quite adding those those doubles, and there, And and important we be more scale that’s after make sure by much great of to gains that opportunity and distributors singles after. go competitive sizable. the the a of to that appropriate the go hitting marketplace

Matt Bouley

Great. luck. Well, Good thanks, Bryan.

Bryan Fairbanks

Thanks.

Operator

comes The from next ahead. Please question go with Adam Zelman. Baumgarten

Adam Baumgarten

move understand, guess been kind return four Happy just what Hey. a probably -- some from maybe the but the Thanks as you years you question. inventory? of the try it’s on my to discounting taking to are maybe or winter seeing I I for years five of historical Halloween.

Bryan Fairbanks

past inventory there buy through couple a the have that ensure expect that I been holds as years, channel and some early will Even gone of be need there program the we programs hold form of the to to have they season. and exit to bit the little about nature of business. first of the consumer we early get is year. the as seasonal quarter important product in this that, the earlier close get the I out It talked that a

as So incent prior have we seen there that will years in the behavior. be to programs

Adam Baumgarten

the it. about in for And Got you retail Okay. Can channel? talked of being point give a us think, you sale flattish. sellout I sense then,

Bryan Fairbanks

strong. Point been actually has side quite -- sale retail been on has of the

been during retailers through what with we have the We pleased been coming very quarter. have the seeing third

Adam Baumgarten

Thanks. Okay. Great.

Operator

go from Rafe comes America. ahead. with Please Bank question next Jadrosich of The

Rafe Jadrosich

pieces Thanks think are year. sales? to up next some for there. in question. growth fixed just variable and up for follow Hi, I to the taking just wanted of of next year the about the do on percent sales a How versus SG&A sensitivity SG&A then my that being your outlook as what on comments moving on we of SG&A

Dennis Schemm

address. one Yeah. That’s great question No. and a to an it’s I think important

a one we about timer incentives with the we commissions So year. had and being this year employee this here talked lower

back that to So have come will clearly XXXX. into

In are up spend branding going R&D as ramp and we some to addition, well. spend

incurring inflation premiums. merit insurance increases, in healthcare have You costs,

So looking when like if are on you it say, like, of to XX.X% in you $X XX.X% tie that so we all neighborhood sales. XX.X% probably would of billion together, of sales somewhere a business,

Rafe Jadrosich

for to? for $X but understanding or producing worse earlier that $X to that XXXX? that billion staying sellout to are helpful. that, on year, you sellout are be XXXX, really that for That’s producing the would And relative billion that not comment consistent Okay. would guidance, then trend following up What next imply the like, on that’s or better you just

Bryan Fairbanks

be sellout Well, get do I slightly would production too mentioned, right but the able have perspective from we economy ourselves to we now. ahead -- back $X below, in ability, to of in. this What as billion far add be that would don’t below is to a be want definitely

We will marketplace. have the the support able be to inventory to

operators to add whether time to not of and inventory meet that ourselves some demand in the be get employees what from labor, we it As be Dennis temporary able plants it and mentioned, increase we an ahead can whether highly market is have our full skilled or to perspective. be

Rafe Jadrosich

sense. makes That Okay.

planning So you helpful. your it That’s lower to for be capacity little today. a sellout very where than are bit Thanks. is

Bryan Fairbanks

Planning conservatively drive right higher. now with to the ability

Rafe Jadrosich

Thank clear. you. Very

Operator

The from go Credit with Dan next Please comes Suisse. question Oppenheim ahead.

Dan Oppenheim

guess of Thanks thinking much in way I the that. expectations pricing in talked to you about in about the you pricing not very the the terms for cost margins think wondering of sort about for pricing much I -- content side on there? you needing think -- terms in in that that are XXXX. how wondering with of leads your am where and as of of you terms

Bryan Fairbanks

bit see inflation we there. deflation true I I’d the some If it. signs to of start be love there, economy out think, decrease But said could out but of will of were that’s is that have point. is an this deflation not pricing we sticky, Well, saw what what there extent where a to seen seeing necessarily I changes see see we the at of inflation you some to is where inflation economy inflation, now, quite quite out see am same moderate percentages to the see we we but significantly. an going right we to

business moderate seen further even our expect it in We it have into year. next and move we as I will already

Dan Oppenheim

sort in you How online, being of -- billion are $X you thinking just that capacity of you level? that follow-up, be that I terms but on, in are bringing sort from of and at And and if guess or being bringing about the you Thanks. How that up think end modular. coming terms of actions talked very production, then we then when thereabouts thinking others? billion about are Great. you in you terms do of it you on what $X in talked number about expecting of slow of would about thinking sort

Bryan Fairbanks

investment capacity the to that It be and pace on. would bringing when of the timing as we are all about the

to ability the have pull forward. We

well. We push have the to as ability back

of that the additional at end give on will details year. the We

Dan Oppenheim

Great. Thank you.

Operator

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

Michael Rehaut

taking you questions. Appreciate Thanks. my

still in are sales that we wanted quarter, earlier, just I apologize this if well and First, think kind something -- I past but of hit this you on the verify that each sales, as for of to is that to the as XQ? $XXX are roughly that inventory is destock XQ a million represents are that thinking of to you hit and impact thinking in about how you period, still that it XQ,

Dennis Schemm

$XXX around probably saw got than in see we $XXX million in in We QX. QX. will million to that destock we think greater I out QX a

that So by well a the the recalibration along the confidence done and way be that end we why of gives it say lot are that’s us will year. to of

Michael Rehaut

Okay.

roughly the million you $XXX then expectation full for still, about but an So, are for period? talking

Dennis Schemm

full half. back the For That’s correct.

Michael Rehaut

Okay.

your outlook base trending So to think you as play your earlier, $XX of want in last back and that down core had billed to XX%. something you that’s last and the be year, to kind million are point would been if assuming of being numbers we discussed to fits I potentially am X% for out how quarter? should in if know market also of add to of you and from growth, million to that is kind million $XX quarter, $XX thinking your being has point the if the perhaps that seeing I growth maybe with way I maybe, year or fourth core those of fourth would market with the from the it that’s year’s take how this kind

Dennis Schemm

million. like way $XXX looking XXXX, built sales. we $XXX So had million probably extensively inventory, we We of So Well, million talked this right? this half were our we $XXX XXXX, around at of are in right? sellout at estimating though, pretty roughly the back end that and the in QX, worth we speaking, about something of

speaking, destock. You forward in in XXXX have million million back half, $XXX roughly we $XXX fast to sales, the of

that sellout some roughly are when that’s mean, a you some flat again you together it. looking how but there, I there’s So we at basis are on mix, there’s put Yes, year-on-year. price,

Operator

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

Bryan Fairbanks

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

Operator

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

disconnect. may now You

We use cookies on this site to provide a more responsive and personalized service. Continuing to browse, clicking I Agree, or closing this banner indicates agreement. See our Cookie Policy for more information.