TREX - Earnings call transcript Q3 2024

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Operator

Good day, and welcome to the Trex Company Third Quarter 2024 Earnings Conference Call. [Operator Instructions]

Note this event is being recorded. I would now like to turn the conference over to KC Codere, Investor Relations representative. Please go ahead.

Ketan Mamtora

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

being for also and This Brenda of well page turn as for containing This members President, I Amy and Joining a available Senior conference to company management. financial available release XXXX. the the other Amy after press and as Officer will will results Fernandez. release over on website. on is is be company's of Vice of the call today the Brian XX now webcast Investor Secretary; Chief Relations Amy? is The Legal call quarter company's issued Trex third the website Fernandez, close market days.

Amy Fernandez

Thank you, Casey.

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

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

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

Bryan Fairbanks

results business for and third thank to discuss you outlook. our you, and us our joining Amy, Thank all review quarter

expectations, the thanks We are products. surpassed consumer delivered for our results proud quarter continued premium to demand our team that third priced that

to X products for of and for the with lead weeks, sell-through X norm our premium season. third quarter in high this increased contracted in times rate a the line averaged estimate at point We single-digit the

lower-priced centers year-to-date with products prior our definition flat home transactions across Additionally, mind a with remained only sell-through our quarter levels. On in includes second both partners in Pro sell-through keeping third point-of-sale normalized million, sell-through our stable that quarter in year, channel. Concurrently, consider of at of entire our and portfolio the was basis, for the and their what expectations in season. inventory we resulting within this approximately reduced with distribution by our inventory the in line the point levels $XX

original year's which maintained success adjusted we cost of the the rates reduction expected, lower effect performance continuous utilization As our full SG&A the improved diligently of margin year our and while margin our the level, guidance EBITDA XX.X% margin to positions high last range. EBITDA managed from thanks end guidance close our to programs, of to gross partially offset of increase spending. This to XXXX for us

remains growth New strategic development future key and priority a of a for product Trex. driver double-digit

year, of Investor we Day for reviewed product how launched on the to our as months during products This the consumer new with well Products of significant last accounted are approximately aligned million, railing opportunity launches further our of within demonstrating sales year-to-date our net last XX% preferences. the $XXX accelerated pace year. XX capitalize

of aluminum, highlighting product adjacencies cable project position our that $X.X Trex product the we week, of years. lines the These glass fragmented greater our a new to portfolio from our new Last railing share latest railing steel, to that logical billion along next available vinyl enhancements systems of residential issued be XXXX the Among over penetration for the extensions represented to the today our share railing products the introductions wood designed the of market. Select X the portfolio to XX% and and system railing composite our increase and approximately railing railing highly to will Entered Trex market. We railing. strengthen release with significantly conversion with and doubling share were compete X% market additions of wood the season. a detailed

development X addition the of Another X Enhance is Trex X line for new and lineage premium stacking our colors, nicking line. for transcend

on solutions these the integrate with same allowing a warranties we reduction. our end-to-end gives growing continued of All announced connection, backed new technology please channel decking decking. see mitigating as today of more rollout to our one competitive Trex of the proprietary category, which on press about them mitigating from heat capitalize earlier components popularity heat by heat supplier learn our these technology, the colors Fastener the our hardware and website. In a to release edge from deliver our the partners To by

For with Trex are paired example, by Transandecking, XX-year fasteners when warranty. a backed residential

products, of channel benefits the Colorado working of suppliers sell Our forest are for with introductions. decided partners new to previous coverage a Recently, -- of distributor an time, well, closely their exclusively news long distribution these maximize exclusive Snavely adding we Trex and Trex to to as railing product their shared the us displacing Trex Trex.

are number we decking distributors, exclusive underway our a expect with to us such the have months. announcements and coming Similar of in as additional discussions

single product share costs. I of for the want markets our residential railing, the facility sales. This gain a substantial complete to in Trex opportunities and associated development on with to decking our reinforces to promised, As start-up will our expected critical have harvest growth further of of update a effect Arkansas The drive timing market expect confidence is we to portfolio adopt railing both will and incremental growth. ability adjacent our focus aspect in XXXX, latest multiplier to review discuss have decking products manufacturing a we've will our at Arkansas with we distributors future plastic brand the exclusivity XXXX. Recycled demand in need first on you that expensive us in at Virginia share at railing and of as date for on purchase sufficient projected the Trex production our our to facilities trajectory. And XXXX. and to materials. The costs. 'XX begin to processing the us accommodate pelletized timing the Nevada the and and first used plant the to capacity campus the production of of quarter be our to substantial half this and commence more then external Brendan achieved our eliminate ask The yielded in output will efficiencies existing recycled for enabling operation

Arkansas to in our near is wood raw hubs fully production to will central and this lower to that for regions development and equipment current our and our continue a will in located proximity most manufacturing it is on the to close key centrally Arkansas latest offer bringing efficient completed, total adopt proprietary is have campus, adjacent approach will We incorporate the site with materials lines line capacity Trek demand. Once approximately as production modular of customers. located excess size. When will technology. conversion for It operational, double of in billion major is freight $X transportation be

XXXX While lines, have the of capital and decking spending beyond. building the decline of will XXXX in we still completion and with will in significantly decking capital elevated installation spending the

with Trex outperformed that and homebuilding consistently remodel XXXX interest to repair significant to our when new next believe in single-digit increased come we products, by results our R&R index rates and provide strengthened return expect the activity. to ahead, supported guidance we more a lower has by year. further market growth we will do turnover that on Looking and the home low margin, by so year, next again and

review. Brendan I Randa? and for President will turn the CFO, our over Labtech, a to Now call financial Senior Vice

Amy Fernandez

note evening, good and a year-over-year Brian, results. all Please pleased review everyone. XXXX comparisons you, Thank quarter our noted, to I basis [Audio discuss I are unless will that otherwise third and Gap] today year-to-date am on

decrease from continue our decrease strong of to offset and for during transcend primarily and million consumer or for compared the by per spending products We or $X.XX signature in decking in was a were or share, million margin our to was XX% of net diluted warranty compared diluted utilization XX.X% sales. XX.X%, $XX XX.X% general our expenses of the was or as of those deliver or lines million down of second million as the Gross continue XX.X% share. down to $X.XX consistent basis spend income sales is product the of quarter. net to from recognized lower of or of results. Selling, related in our $XX invest remained trucks, sales, million with after we per lower delivered by $XX primarily and restrained. This benefits year healthy consumer third third sales to on $XX lineage points XX.X% offset result while continuous and incentive new product solid adjusting improvement This net marketing by in XX.X% branding net the the more than investments quarter partially proven we XXX demand to deliver returns. Net $XX which initiatives, which EBITDA what the compensation XX% period. $XX behavior have lower-priced innovation led quarter premium railing, saw prior administrative benefit million

third and per $XX XX.X%. benefit, warranty million EBITDA the million quarter income net diluted the share, XXXX Excluding $XX $X.XX was or was EBITDA was margin

per income months was a a share $X.XX to from $XXX totaled compared of January. or sales $XXX XXXX. X early our or Net $X.XX the in the program due X% the perspective, to diluted first months X X diluted From XXXX This $XXX share the first compared of first in of million of is million for year-to-date shift million buy primarily increase December to $XXX net months to per million XXXX.

by points in to stronger the improvement. primarily $XXX $XXX was from prior million million by EBITDA or year-over-year expanded from basis EBITDA in margin XX.X% XXX year, XXXX, and driven and margin XX% gross XX.X%

associated Year-to-date, with primarily common our XXXX inventories our XXXX. $XXX million repurchase in outstanding prepare this Arkansas decrease partially increase the for season. of to on railing flow was our today, on we and decking expenses compared offset by $XXX prepare alignment as our strategy The over returned shares to with was facility. In $XXX have of year construction allocation and an operating the result million execute was capital in million, million stock. as a our increased X.X railing This new we through decking to shareholders strategy, of manufacturing accrued of cash

million. of which The facilities year-to-date, build-out inflationary within the of approximately as management's for $XXX our Arkansas prior manufacturing We potential build in to the we invested have installation as on from expenditures constraints project and increase be material million decision the $XXX redundancies to million, guidance related costs. expected to total facility. The capital is this to pressures already facility production also primarily mitigate existing invested CapEx our reflects $XXX well for building

are completed, free in increase generation. Once significant our project a in resulting return expected is our levels capital expenditures flow historical to this annual to cash

to Arkansas Now our discussion. cost on start-up moving facility

begin in the pellets output and XXXX. And the will friendly processing As reducing Winchester start-up the facilities. plastic noted early by it Brian material in offset those earlier, will recycled facilities, costs as purchase raw utilizing to help at by

total We associated the the depreciation $XX the $X of onetime start-up second costs XXXX. quarter to approximately associated million of million annualized expect to in begin approximately and

at the with expected utilization this targeted point. rates ending run costs operations These to by at of start-up quarter XXXX are third

As XXXX the of beginning Brian efficiencies our start-up to also our the at of shift able decking mentioned, have facilities. gained we due been to existing lines to

At approximately we half $XX the at depreciation onetime approximately the with of the annualized beginning million beginning the to time. XXXX associated million start-up in of that costs be same time, anticipate $XX first

are XXXX. facilities. Once but and of at also to increase of operations utilization Arkansas the it us, these us be not most will behind these targeted legacy only efficient efficiencies our our running will plant, expect rates We expenses will enable flexibility end start-up be the by

and as our Based release. the guidance the billion, expect line noted is midpoint year last pleased turning in continue to in margins guidance first for to with branding to of range and product high of guidance of today's $X.XX sales be results months in current Now we of of expected reach net of visibility SG&A year-end, the our percentage on earnings sales as we invest for XXXX reaffirm and year X end through XXXX we development. the to to new XX.X%. Full of our net EBITDA expense our are the a at remainder as

approximately be we addition, to to anticipate year rate XX%. In our full tax effective XX%

remodel challenged assumes sales approximately low assumes million of single-digit off end quarterly net continue declines. single-digit sell-through also continues sales guidance low guidance implies It with market repair at declines, much base. midpoint. This QX be Our a to smaller and be of will to consumer challenged the the $XXX albeit with

lower-than-normal million in the the call $XX With inventory QX, in to Brian year weeks We that, back market inventory his also will for anticipate will ending $XX to the channel closing reduce on by remarks. I at turn $XX million addition to million the now hand.

Bryan Fairbanks

position a is greater believe industry's a We the share to unique Trex Brenda. of growth in you, Thank opportunities. long-term capture

leader awareness market brand dealers home network the trusted and greatest centers. We largest and are distributors, of the with and the most

portfolio Our expanded with and opening our with additional products our amongst consumers. well dealers. are and introductions contractors centers and home prochannel adjacent product distributors shelf earning and railing resonated Trex's space exclusivity And have opportunities new

this the growth coming for supports in the questions. the in our confidence of please call All years. trajectory Operator, for Trex open

Operator

[Operator Instructions]

Our from first question Ryan William today Blair. comes with Merkel

Ryan Merkel

is Congrats assumptions. the on just on quarter the question fourth quarter. My first

that premium then does you I think products digits for sell-through. I'm assume the products? said down right. about heard and lower-end And if I the low single curious what that

Bryan Fairbanks

sell-through a Right. say We did from single digits low perspective.

single through products then quarter the during mid-single-digit digit high in products premium were and decline. a a at a entry-level at our Our sold

Ryan Merkel

Got it...

Bryan Fairbanks

to we yes, are Sorry, in and expecting continue QX. that

Ryan Merkel

That's EBITDA else Are I anything then simply or due do how the 'XX expanding there? for can Or that keep cost cost, to in margin is thought. there about what signaling the saying we margins Good. onetime you you takeout? exceeding guide And think Okay. XX%. ex

Brenda Lovcik

No, correct. that's

onetime as Arkansas startup margins. So to as the well in with continue costs costs we'll railing transition excluding those the expand costs, those

Operator

And Bank with comes question of our Rafe today America. Jadrosich next from

Rafe Jadrosich

maybe and Is inventory to why more you're to than look If historically, side. railing on if just the they've to Can there deck on inventory the year getting is the inventory a talk and year? structural back I hand, a lot Or change? now? carrying at next related about go ask been ready this they're next just your just wanted especially days where season higher to for launch we pre-COVID. you I

Bryan Fairbanks

times Yes, the twofold. we've past is talked a X number about months. this It over of

coming products the already of the year. by are the driven launches in up. are but them be A into is coming of most market it of beginning product market, First, that new couple will next

of of part during time, a second later up year. in for capacity it season pulled the long and the is parts ramped busiest that The our back we've it on the

reduce of organization sense bit makes size little it of the inventory are decreases to amount the the we to level. keep a line running. operations on, bring through. reduces in. When carry we the It we that more that a we high keep bring a the we believe people today, that amount then at can Given increases hiring have we efficiencies that line heavier can put the of and We and

and a years. higher is nature, that structural will it of get generally compared So you've there inventory piece will as seen be the the what year-end of to with in we in prior to levels run we when

Rafe Jadrosich

And to And confidence next pull EBITDA assumption? to sense. That's talk getting you next have already? that is different on for XX% about to that for the market that lot R&R really the over give -- year embedded talk then the helpful. to XX% you based XX digit? to there single revenue just year, of just makes target about back levers margin an low is on Can a Or you

Bryan Fairbanks

Yes.

have there looking right -- that think we're assumption a of support outperformed mid-single we digits, to will will on in back it not mentioned back and guidance consistently at drive base is But we repair As call, our as metrics do that there growth it number. into a number growth. And that economic underlying again. number a now, that going remodel have providing right We're we the which are getting now. of we the

Operator

next from Truist. question comes today with Hughes our And Keith

Keith Hughes

million Are seeing million you other in in all that The inventory in quarter. $XX channels? channel box? fourth $XX the it big Is commentary to on reduction

Bryan Fairbanks

to the managed inventory. from channel. their primarily we our stores our be to in going distribution That's shifts into Yes, home ship consignment center with channel, that's we distribution And revenue. through when when it there, when still the book then centers,

going to know We where visibility exactly So that. to there's that's high be.

the managed It's and decrease. that. consignment we good not see With still distributors, on while basis, a that's channel we'll of where have visibility pro the

Keith Hughes

Arkansas. question Okay. recycled And in startup plastic with second the

going assume costs, one, to for landed mean other said was virgin those is you Number X number be even replacing, And with think is still that facilities. at pellets that the transportation earlier, cost cheaper a I right? I two, plants? you

Bryan Fairbanks

we palletized pellets use outside will don't some yes, virgin our recycled there We that. in to buy and operations, do this benefit will a material but be And that. materials, replace cost

Operator

Reuben Company. And with next Garner today question from Benchmark comes our the

Reuben Garner

railing. the on Question

cost. revenue Any gather be onetime from referenced $X million cost the those tied what to what a might is and particular exactly to way benefit You costs? that

Bryan Fairbanks

marketplace, to as launches be properly a X merchandising home all we And costs transition company. the the than or the to more up is certain dealers this our literature centers history over the need we've bring got a will merchandised that that upcoming into we've -- -- we market. make of are of as into We is the in as all launch had more date. as of Yes, well level many X months the sure

there correctly. that get and get it some to So into is market the done cost

Reuben Garner

Then second the is a my distribution. clarification drawdown question Okay. on at inventory

kind Am last and the wrong little product of down being that and big then retail at dots are same being distribution, more drawn at to the entry-level a hit is customer that's those the X an I here down pressures product? you're channel. the the inventory connecting consumer sort slower referenced draw product You box quarters. Or couple the different facing, of distribution a of

Bryan Fairbanks

is come to have is a surveys already bit entry-level they understanding to distribution of understanding had to coming the than wanted we're understanding about. our bit nothing did Distributors little going but year. The weaker. we that in, out as that with for next what second lighter be for expected products But a new little year-end, we're quarter, that adjusted inventory going their market have channel where inventories, the concerned we and

Operator

with today And Sachs. comes our McClare Susan question next Goldman from

Susan Maklari

question the inventories. My is on first

You are fourth $XX you start to as spring, are given hearing in you suggest mentioned early quarter. go what as contractors see demand in million the And into telling next the prebuy the we what could million into get the drawdown the to terms of that you What you? does $XX that of level year? the

Bryan Fairbanks

repair about Well, year, bit our new last went Recall, but come we feeling time prebuy positive of point, an additional top at territory. people into to a that shipped we before back so pre-buy we also the there's we remodel are of quite positive year million ahead, numbers on get next this do that. into December and year. But $XX then roughly moved

be to channel So the would season. the support ready

Given during ability infill quarter point, be We're the occur wouldn't highly serve year. additional position to inventory own our I at next would in this that confident the able expect our marketplace. to first

is channel has to team in sales to better given inventory at we the rather than year. pro a where Our though incentives this as market to with in feel good trying on push any sitting the way visibility is earlier time. the bit it And run little

Susan Maklari

then color. thinking gross Okay. That's And a maybe helpful bit about margin. the

mentioned quarter. year-end? thoughts thinking be then you about you in benefits highlight, into cost could that there projects And did utilization the to Any XXXX? this see on further You lower the want realizing benefit cost reductions you of any some that that offset that

Bryan Fairbanks

in about are we that benefit the we I have projects some is seeing. decking our given that that the Little things we're talked of underway, efficiency deferring that Rock operation driving One of the of was, start-up

projects got that, ongoing we've that in organization. the So be will like

they got organization. really engineers going improvement costs. an sophisticated We've group challenge where have We these to continuous the dedicated within after everything extremely

and well are that statement. into any benefits immune other as income we've going able number to wouldn't completely after. continues those as business, generally, benefit offset But any other from I the coming inflationary projects, to offset been it a in inflationary one thing pin to deliver on it our deliver impacts. we're costs that, cases, of And good some It's that impacts

Operator

with John And Lovallo comes from our next question today UBS.

John Lovallo

some plants. first of XXXX one production of you've pushing decking out generated Arkansas the The and efficiencies you at that existing through mentioned in is to

there's Arkansas. if curious facilities. generate incremental the And stopping sure these you're much making you production how seeing nothing side number capacity a on to on could Just just were able at that put existing production at the just that's you demand really

Bryan Fairbanks

No, to incremental not those we're going on number efficiencies. a put

we I somewhat in think been probably is market what's has XXXX. Little the when launched timing, Rock XXXX more important and weaker from

highly market a that. as the just So little can allow But also impacting with confident bit on internal just be own our that's the we it, we definitely at little existing bring later. improvements look then us rock and capacity needs that to meet

John Lovallo

of makes as million your of quarter. And repurchased we this guys think we about Okay. comes sense. the already at up through some then little it quarter like That the online? of stock $XX forward looks How should the rocks you and move about appetite remainder

Bryan Fairbanks

Yes.

So $XX million a share. year-to-date, of price we've $XXX of average shares, worth repurchased an roughly

We have an open program for roughly XX%.

that's the million coordinate Now percentage $XXX bought, plans implement make how exactly available But to go Directors we decisions as company, forward. XXbX-X is to that we we the those and that. as and of of with not impact sure Board program we the minus our still just

Operator

our today Rehard next with JPMorgan. And Michael from comes question

Michael Rehaut

to XX% your missed it, the railing number XXXX, the I apologies Arkansas XX% growth? and or own of I if the a mid-single-digit Arkansas, the growth, a some on just includes also if reference First, that. and of was costs or comments but was clarification if of transition that sales R&R that that's around the hoping market get couple And inclusive start-up or early to the the a greater,

Brenda Lovcik

$XX is those million onetime The adjusted Yes. costs. for

the for onetime costs the $X of exclude cost if the reprolines. million $X we railing transition onetime start-up for the of So and million the those costs

And we're in percent seeing based hearing the market for is right R&R we're XX-plus what R&R XXXX. for digit and single what market. EBITDA for expecting expect That's now the We line. the on

Michael Rehaut

in conceptual benefiting to as end in from decking thought growth living theoretically, from kind maybe of a the both you've positive is of seen premium of question conversion the we well trends versus outdoor of And strong market, wood that composites as the differentiation underlying double more as composite Great. Okay. view, around maybe still line always just the market. What, the lower sell-through tailwinds in positive with some end R&R grow more maybe relative trends opposed seeing you're your lower in R&R a kind giving at of made least those has the that the the kind from of to underlying not side? of recently, to premium the market in benefiting of

Bryan Fairbanks

differentiation is to going The the the customers. primarily of of entry-level off be demographic more

to going demographic you're do and an in to environment remodel asking lower income is have consumer there's where projects do So home. a the I much repair with higher That and inflation. which question my want

a that's key So definitely it. driver of

think really share note are I to important to losing that composites wood. also not

seen declining rate at we've is decline. a entry Wood than what higher our level

So market. survey at in point. that the see what's there happening our in we that support is weakness understand that Again, marketplace this there entry conversion out so at we level there. underlying is is that partners we general still a happening the But

customers the strong. still are quite premium Fortunately,

Michael Rehaut

Okay.

I that helpful. sounds that it's perhaps your of theoretically basically, a given what overall Is lot worse the saying, R&R could more implied. broader be bigger than decking very discretionary. is that's that the kind a So you're just maybe Brian, even mean and purchase like market

Bryan Fairbanks

that. say not did I

Michael Rehaut

was curious, like it just but right. directionally I Okay. all there, sounded

Operator

today Woja comes question with from next our And Harit. Tim

Timothy Wojs

the -- I seeing something Or and it. we the seen you're mean, of that really indices some driver polyethylene explain look can't that that raw materials, might some in something that what recycled that marketplace at, to you're in some grades. Maybe be? have inflation is of just any the Is seeing COGS? in Brian, I on recycled

Bryan Fairbanks

going would continue type coming tell been that you with purchases. this we a concern the the film inflation with marketplace. with it, -- I've the what Well, be really very, out year. that index polyethylene of covers pelletized market, we on levels good not I'll never and a start from of we've purchasing very seen usually it's use, in I It's the that had we're see to moderate to

Timothy Wojs

Okay.

to right. you of get call, X want And I said just the want I -- helpful. sure think different That's I kind I to guess numbers then make I Okay. it through just

you single is digits the are So year low assuming R&R market or that next mid-single up guys digits?

Bryan Fairbanks

Low single digits.

Operator

our with Phil Yang Jefferies. comes question from And next

Philip Ng

clarification in inventory you're to see you buy no a earlier. just not outsized Or going are to Just to XXXX? [indiscernible] saying Susan's winter the $XX Brian, there's question million

Bryan Fairbanks

seasonal there be the will programs. Yes, this do of the reason that's seasonality And companies given buy still the early industry, a prebuy.

inventory the that is April that, program frame. season focused that in And the through really time staged yes, be absolutely off will when January so And March be kicks time frame. will a there on

Philip Ng

Okay.

just but may you little to as want a just high. at it year, be -- with I Trex year, think how inventory you're last in differently. managed are years that I and XXXX. more big the going you because how had we like I look you inventories production a a last this because about So bump. kind inventory, big inventory, know way, sounds much as this running certain not year your a it few structurally had ago, about too when levels had of mean thoughtful you I big to And guess with should run at

you that margins? risk year, production any draw would there a be which is headwind on next So down

Bryan Fairbanks

it XXXX Yes. in ran a of production at and in XXXX, quite in we definitely looking guess We're early, way we was bit did heavily. dropped I than really had inventories pretty off 'XX back then and that mid to differently back production we bring then

from cost a perspective, that. it been from perspective. We sense want make from away down perspective. an production doesn't a get it's an employment a doesn't bit up to It sense So from make and of

on a basis. So we can run can a that's where efficiently you'll utilization concerned see run more the additional more inventory too that I'm we'll perspective, have. not if we more from stable And

Philip Ng

the million on Because roughly Okay. for that made should that on load-in EPS? of I some in EBITDA and XXXX, interpret expanding on million think start-up comments a helpful. I guess earnings? And is you $XX effectively question, $X the from recycling Rock the EBITDA and you impact And it. plastic generally past, the way cost and I kept piece, are the That's stripping Little out like then million at least $X the the you

So are it to out I understand stripping just going you wanted forward.

Brenda Lovcik

Yes.

million a will rock and the for again, doesn't $X until million depreciation costs just million little depreciation, So right, you'll start $XX piece be pure in then start-up it. the QX. But have the $XX of

only will so from depreciation think it we X that of have of perspective. that So quarters

Bryan Fairbanks

Yes.

So explain We'll those numbers. we'll what give are. adjustments you adjusted

Philip Ng

will the the you know But not cost? I perhaps start-up a from will or not... adjusted numbers include

Brenda Lovcik

They start-up adjust will out those will Yes. not -- we costs.

Philip Ng

the D&A? What about

Bryan Fairbanks

be to in going not EBITDA. your It's

Philip Ng

you shipping Are to... On earnings perspective.

Bryan Fairbanks

yet. We to haven't that show as decided way. the If it helpful how it's more we'll next market, report of year we'll that

Operator

And from Capital. our Stevenson comes Loop next question today with Jeffrey

Trey Grooms

just talked I I just single-digit compared you or in there about sale any how was in clarification. low inventories Today. to the previous a year between decline. current type high the expectations And down exit expectations? believe change quarter, fourth your variance any a previously, single-digit had wondered

Bryan Fairbanks

have that Yes, did the deterioration. it's that the would a fourth high single-digit into didn't in expected. came be continued assumption moved really We as decline quarter. would deterioration It We continued we an there third be a a great and we as see question. in quarter there

September. numbers in rough, in was a improve July actually the but bit little mentioned August I was last pretty then saw and call, July we

those expect we kind see through to that Now numbers end continue it year. of the the of will

the expected. a being being that high It will full somewhat than channel year having that decline. It be a So lower in from? difference from originally flat. had of is Where inventory a inventory serviced single-digit instead low we single-digit ends where what being serviced and the high decline channel being is digit up

Trey Grooms

than going be And historical will to year, to lower that? that similar which XX% below is levels? was it Or last be

Bryan Fairbanks

be will than It year. last lower

Trey Grooms

railing that past? introduced importance much Brian, Got the products my naval the distribution announcement being such this on a the or at And at and the partners. Trex level, brands more the railing other sales just, expectation second driven were the Is as of higher over new then question of how of with Snavely then has exclusive railing it. a Got versus And was in Trex it. year distributor so? by last really

Bryan Fairbanks

a This question. great a strategy for years it's now. been about Yes, pursuing is X we've

from some so announcement understanding focused we come selling, this railings Snavely. were the benefits those on looking distributors our the way see what years. there you're further products of expect I did And that yes, type additive as all Trex distributors have starting distributors had And as were the products over what that the just brand. And selling? strategy is earlier. the see to has types the distributors starting our of the of through. are could And that. with now to come that You're I announcements have strategy of a of we I that mentioned, need to worked we the what move you'll with are sales through amount volumes with material past our products have are for. the forward Those products see of is And announced

Operator

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

Kurt Yinger

mean retail through the wanted to pull follow sense, level, right? like last picking just the how we question. Intuitively, I'm I homeowner of distribution distribution should about does in curious out I sale just it that your better how makes playing kind brand, contractor the up more help on mind? that ultimately at think still the coverage more

Bryan Fairbanks

Yes.

But will that this more are to happen pitching these thing you've street new is got locations. you've the got products. first takes industry, at in really it X generally more The on share feet availability gain years with your product, that

year, that by earlier see could that We're within. channel we where the through have excited infill now from second third potentially channel the then turning First got the you've the also and you start we we but more growth. more that really benefit work year, is seeing significant year that. you understand this

sales conversion of both home within channel. channel. with believe the at have center the and We highly we'll as Pro distribution as our accounts Our well engaged is success these team own

Kurt Yinger

Got it.

that And that. seem back surrounding implications interesting there's it some the higher-end feature adding Okay. talk thought does that? like I a portfolio, appreciate Could you about year of to technology that of the recognizing opportunity you I kind then the how lines. heat in about factor cannibalization kind mitigating maybe across cost And kind enhanced think of some the just it ahead. was about decking of and maybe of the the talked more you

about how curious Just think that. you

Bryan Fairbanks

improvement value your ongoing allow product. program add can more of advantage to The you to an having continuous

that right we've was price I've we wood entry-level those are One price of years to come that used take not any repair all a remodel no. the itself. on increases. as But is to couple the the seen questions consumers, those those a will as now that market place this of And ensure be are products. prices able capture strong going with over marketplace ago to number taken while of back, the they're right in drive I pressure And get to be now, years? best and that we to industry conversion down answer and to back value not always the providing especially within to there's you're going

Kurt Yinger

innovation think or Just would one about in. to more kind think kind about going the sneak fair being more points? price Is around more the on How it of kind of decking of expanding just side forward you to the that?

Bryan Fairbanks

to a go $XX We've up linear from a $X got $X products linear that foot. anywhere to foot

we've wide of will the and also Will will There performance new So various features and be warranties. market? come boards the be strong got marketplace. a products levels decking levels absolutely new of with to coming benefits, various there There be. aesthetics, new will to be of that selection railing there deck

these the So not I endgame we're wouldn't say either groupings. one product at with of

Operator

Allinson with today next comes Research. question Our Wolfe Trevor from

Trevor Allinson

market? about X billion entire then you decking years market market X% talked expectation in is share the next doubling you're your or out the just on that the railing referring within you the that line your over railing, question referred $X.X market And operating called to parts of the years. First Is market X with grows to the in? share really the market you

Bryan Fairbanks

entire railing market, that's going the wood be to So alternative $X.X includes other any and billion players.

off remodel. see it. projections the expect growth roughly it's those on railing so the of numbers. are repair the And same that markets with to of some in we It of doesn't quite do go and And line based the decking side

able You've all be don't roughly XX after. for railing they're than in at to inches of because get to significant but is got Dex, height, a go XX% a Trex opportunity there less

the residential marketplace. the railing at of X% share provider are #X by market We

gives that bit a you of just this fragmented an how is. So of idea industry

Trevor Allinson

currently like cycle to more about a great Yes, due Or follow to it inventory those bust seen inventory then, minutes or levels forward seeing going positioned And a build of years. last of Is I makes sounds opportunity. you specifically up? mitigate year. how to the a a of Brian, is wanted up a -- as that sense. in where comment to not we've permanent on million incremental that change is ago next that question in some $XX It load you the comment approach boom channel levels made your just couple and you're over this moving few

Bryan Fairbanks

a Yes, said, chances permit latter bit you and exactly. of change what to more try reduce a and the cycle boom the for that little bust of

Operator

next Adam Our question Baumgarten from today comes with Zelman.

Reuben Garner

higher history, XXXX your would grow R&R you low I outlook, on assume Just that. would single your than digits. up said on based you

assumption EBITDA above or benefiting margin, the about include volume thinking just for not margins? leverage So any that does

Bryan Fairbanks

growth that what next for year. number is provided even We

not ourselves. ahead let's get of So too far

that. on details more provide definitely will We

Reuben Garner

premium bifurcating kind this Okay. disconnected versus Got it on in here, just the of you dynamic whole the entry-level sell-through And have then seen past? ever it.

Bryan Fairbanks

there Well, wood is that marketplace. products are I are after think going what's that conversion more changed

upgrade which is designed of can yes, consumer Xx that back, just a strategy have extra linear $XXX So for dollars, in a a an wood to XX moving buyer roughly to it $XXX, worked part but not that to an deteriorate launched just can they to composite that the educating our product $XXX installing that's line, our well. cost a settled is that, the key XXXX, XX product deck And to within extra show for foot. That go years. wood, we after going to specifically couple was enhanced of enhanced naturals has to that's for extremely and afford them hundred you And who not wood these product line. consumers

has marketplace years changed past the so. over So or X the

consumer times seeing So when of reacting how is uncertainty. that's I of enter a why difference you're bit a we economic think into in the

Operator

Group. Ramsey And Steven our Research next with Thompson question comes today from

Steven Ramsey

more, railing that? context some the on put focus ramp topic base, with us to a bit could low know railing gauge the a I a if higher help sell-through but demand a To there's it's in divergence? the up you way decking of

Bryan Fairbanks

confuse with some as And marketplace. coming to lot we do right now not right of I with now. of actual tried We've products to with do railing with sell-through these sell-in consider something we'll There's move new products forward that want Yes. as parts don't it. we, moving products of a is what to of

Steven Ramsey

Okay. premium about think goes the That's of spectrum way of helpful. to And products entry a about thinking is versus there longer railing level term there railing, where on portfolio. thinking the a on way

Bryan Fairbanks

after. of like already I decking opportunities see every us able opportunities side be to once new at always go we a lineup, these for And a products have there very be level. things, though we will much lineup. Even to strong the complete have launched, are

Operator

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

Matthew Bouley

if we think But gross for plans? you're how year going fourth correct wrong. and something asking be the production quarter? should mid-XXs exiting of keeping I about kind year I'm I is know and margin me to specifically, margin where kind this of what implying quarter, And kind in sell-through the think that the to On inventory given rebound what into were higher. your you where I'm is gross the And of is fourth potential early is, your the beyond inventories

Bryan Fairbanks

to margin Yes. quarter our We tend anyway. the have in weakest gross fourth

of sales really So lower that that as for with have lower well production as shouldn't surprise those a too be that. much

of we've like as move years, and be couple the While some over saw past will increase there we won't into level part the year. of see production the we decrease still done of our seasonal

Matthew Bouley

up sell-through the year. going channel of could entire like to not is sounded guess for down. exiting assuming And it, is I Obviously, $XX is margin. saying million year just the not fill but revenues kind be production guess on there. -- there XX% just estimate a you your you bear on if that you're EBITDA And me, And then mid-singles presumably, harp the repeat. with I to still secondly, Okay. you're back in

go and second the XXXX. is, that out assumption through be the between so it accelerating half? of see kind more Or as ratably kind would of should is And growth first guess revenue I you question half the spread you

Bryan Fairbanks

put sell think when remodel. repair inventory as repair for and now that the no the quarter. in external And first saying out and $XX talk that we're is it quarter. in. as about in, move million, There's not is right we to in reason we sell doesn't doesn't I remodel it's What showing first the that it metrics accelerating through if there

We market in sell QX. be QX the will and there. It will expect during

Operator

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

Bryan Fairbanks

your for in speaking coming evening. today. participation and you to with Good We look many the forward Thank upcoming questions you and conferences. weeks of at

Operator

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

You may now disconnect.

Trex (TREX) 28 Oct 242024 Q3 Earnings call transcript