Financial Data and Key Metrics Changes - In Q1 2025, net sales were $340 million, a decrease of 9% compared to $374 million in Q1 2024, primarily due to a $40 million benefit from channel inventory build in the previous year that did not repeat [23][25] - Gross profit was $138 million with a gross margin of 40.5%, down from $170 million and 45.4% year-over-year, attributed to railing conversion costs and lower production levels [24][25] - Net income decreased by 32% to $60 million or $0.56 per diluted share, compared to $89 million or $0.82 per diluted share in the prior year [25] Business Line Data and Key Metrics Changes - New products launched in the last 36 months accounted for approximately 22% of trailing twelve-month sales, more than double the level from the previous year [9][18] - The company is seeing strong demand for premium products across all channels, with a notable increase in dealer conversions to the Trex brand [9][20] Market Data and Key Metrics Changes - The repair and remodel market is projected to rebound, with spending expected to increase from a low of $1 per square foot in 2024 back to the long-term average of $1.26 by 2027 [16][17] - The company anticipates outperforming the repair and remodel market in 2025, driven by new product introductions and market share gains [17][26] Company Strategy and Development Direction - The company is focused on enhancing its product offerings through innovation, with a commitment to serving consumers across all price points [18][19] - Trex is expanding its distribution partnerships and enhancing brand alignment with contractors to drive sales [14][20] - The new manufacturing campus in Arkansas is expected to improve operational efficiency and reduce costs [15][21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's market position despite macroeconomic challenges and competitive pressures [28][29] - The company is maintaining its full-year guidance for 2025, expecting net sales growth between 5% to 7% and adjusted EBITDA margin to exceed 31% [26] Other Important Information - The company is implementing a new inventory strategy to reduce quarterly volatility and ensure adequate supply to meet consumer demand [11] - Tariff impacts are projected to affect less than 5% of cost of sales, with mitigation strategies in place [12][88] Q&A Session Summary Question: What drove the changes to the Enhance product line? - Management noted customer feedback led to manufacturing changes that improved the strength and aesthetics of the product [31][32] Question: What are the expectations for gross margins in Q2? - Management indicated that Q2 margins would be similar to Q1, primarily due to ongoing costs from product enhancements [33][34] Question: What is the sell-through rate for Q1? - The company reported strong demand for premium products and a turnaround in entry-level products, aligning with full-year guidance [40][41] Question: How will inventory practices affect seasonality? - Management expects a return to more normal seasonal patterns, with a strong first quarter followed by a slight decline in the third and fourth quarters [45][46] Question: What are the impacts of tariffs on costs? - The company has limited exposure to China and is exploring alternative sourcing options to mitigate tariff impacts [88][89] Question: How is the entry-level market performing? - There has been sequential improvement in entry-level products, with expectations for continued stabilization [114][115]

Report Summary 1. Investment Rating The document does not mention the industry investment rating 2. Core Viewpoints - Terminal enterprises generally adopt a defensive strategy of low - inventory operation, and the probability of enterprises reducing production or stopping work during the May Day holiday is still high. The industry may face negative feedback in May, and the upward driving force of raw material varieties is not strong [1][6] - In the short term, PTA and short - fiber are likely to maintain a weak shock within a range. The finished product inventory is generally high, the raw material inventory is extremely low, and manufacturers' willingness to replenish inventory is very low [1] 3. Summary by Directory 3.1 Strategy Overview - The terminal is in the inventory accumulation stage. Some enterprises may increase the holiday time during the May Day holiday. The high - level operation of downstream enterprises may face negative feedback pressure [6] 3.2 Terminal Inventory Hoarding意愿不高, Negative Feedback May Still Have Room to Ferment - **Tariff Impact**: Export - oriented enterprises are actively responding to tariffs. Direct US orders are basically stagnant. Enterprises are looking for alternative markets such as South America, but the short - term effect is limited. Non - US orders, mainly from Southeast Asia, are relatively good. If tariffs do not change, enterprises may increase holidays and reduce production during the May Day holiday. Upstream chemical fiber factories may take further self - discipline measures [1][7][8] - **Start - up Situation**: Most enterprises are considering increasing holiday time during the May Day holiday depending on inventory. If inventory can be balanced, some enterprises may not take long holidays. Some enterprises are still hesitating due to existing orders. Some enterprises report that the accounts receivable period has become longer [1][9] - **Inventory and Replenishment**: Without significant changes in oil prices, PTA and short - fiber are unlikely to break through previous highs and may test resistance levels, maintaining a weak shock within a range. Finished product inventory is high, raw material inventory is extremely low, and manufacturers' willingness to replenish inventory is low. Some enterprises are hesitant to hoard goods due to low prices. Enterprises with sufficient funds may make small - scale purchases if sales improve or inventory pressure eases [1][9] 3.3 Enterprise Specific Situations and Demands - **Enterprise 1 (Fabric Export Factory)**: The enterprise has a 50 - 60% start - up rate. It is mainly export - oriented, with a low proportion of direct sales to the US. It is cautious about raw material inventory and focuses on sales. It exports mainly to Southeast Asian garment factories. It will not take holidays during the May Day holiday and will not hoard goods [11][12] - **Enterprise 2 (Curtain Export Manufacturer)**: The enterprise has a full start - up rate but a large inventory of about $15 million. It is actively looking for new processing locations and markets and plans to take more holidays during the May Day holiday. It is considering relocating to Southeast Asia or looking for contract manufacturers in Egypt [13][14] - **Enterprise 3 (Fabric Trader)**: The enterprise is facing a 245% top - level tariff on its export products. It can avoid taxes by under - reporting prices and is looking for contract manufacturers in Southeast Asia and Egypt. It has the idea of shifting to the domestic market but has not implemented it yet. It has low inventory and low inventory - building willingness [15] - **Enterprise 4 (Home Textile Exporter)**: The enterprise's US orders are basically stagnant, while Russian orders are good. It has learned that the start - up rate of local dyeing factories has decreased [16][19] - **Enterprise 5 (Warp - knitting Factory)**: The enterprise has a 60% start - up rate. It is cautious about stopping production due to output and tax payment requirements. It may take more holidays during the May Day holiday depending on inventory. It had inventory losses before and currently maintains a just - in - time inventory strategy. The finished product inventory is high, and the sales volume has decreased by half [20][21][24] - **Enterprise 6 (Circular Knitting Factory)**: The enterprise has a 90% start - up rate. It is less affected by tariffs, with 60% of its products for domestic sales. It has low inventory - building willingness and may consider replenishing inventory when prices are right. The downstream orders are few, and the profit is low [25][26] - **Enterprise 7 (Texturing Factory)**: One - third of the enterprise's texturing machines are shut down, and circular knitting machines are almost fully operational. It is hesitant to reduce production after the May Day holiday. It has high - cost raw material inventory and will adopt a strategy of short - term inventory replenishment [28][29] - **Enterprise 8 (Texturing Factory)**: The enterprise's texturing machines are fully operational after cleaning up inventory. It is uncertain whether to increase holidays after the May Day holiday. It has no intention to hoard inventory currently. The downstream orders are poor, and some customers will stop production during the May Day holiday [30]