Financial Data and Key Metrics Changes - In Q2 2025, net sales were $388 million, a 3% increase from $376 million in Q2 2024, achieving record quarterly sales despite adverse weather and a declining repair and remodel market [19][22] - Gross profit was $158 million with a gross margin of 40.8%, down from $168 million and 44.7% in the prior year, primarily due to one-time strategic investments and lower production levels [20][22] - Net income decreased by 13% to $76 million or $0.71 per diluted share, compared to $87 million or $0.80 per diluted share in the previous year [22][23] - Year-to-date net sales totaled $728 million, a 3% decrease from $750 million in the first half of 2024 [23] Business Line Data and Key Metrics Changes - Demand was led by strong performance in Trex composite and aluminum railing, Trex lineage decking, and the expanded mid-price select decking line [10][12] - New products launched in the last 36 months accounted for 22% of quarterly sales, significantly up from 13% in the same period last year [12][19] Market Data and Key Metrics Changes - Wood alternative products gained 170 basis points of market share from wood over the past 18 months, with Trex aggressively pursuing wood conversion as a growth strategy [10][12] - Strong demand was observed across various U.S. markets, particularly in the Western Region [10][11] Company Strategy and Development Direction - The company is focused on product development, with new products contributing significantly to sales performance and plans to continue rolling out heat mitigating technology [12][14] - Trex aims to strengthen its market position through consistent consumer messaging and commitment to channel partners, ensuring product availability at consumer purchasing points [11][27] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in outperforming the market despite a projected decline in the repair and remodel market for 2025 [15][24] - The company anticipates strong year-over-year comparisons in the second half of the year, driven by improved production levels and continuous improvement initiatives [24][25] Other Important Information - The Arkansas manufacturing facility is expected to become the most efficient production hub once fully operational, enhancing production capacity and reducing costs [17][24] - The company reaffirmed its full-year 2025 guidance, expecting net sales growth of 5% to 7% and adjusted EBITDA margins exceeding 31% [24] Q&A Session Summary Question: Clarification on gross margin comments for Q3 - Management clarified that the 100 basis point improvement refers to EBITDA margin, not gross margin, and that Q3 will benefit from the reversal of level loading and elimination of enhanced costs [33][34] Question: Demand picture and outperformance - Management noted strong contractor backlogs and continued outperformance against the repair and remodel market, driven by a significant number of aging wood decks in North America [41][42] Question: Broader R&R outlook changes - Management indicated that general consumer uneasiness about the economy has led to expectations of a slight decline in the repair and remodel market [55] Question: Capital allocation thoughts - Management plans to prioritize organic growth opportunities, potential acquisitions, and share buybacks as free cash flow generation increases [70][89] Question: Impact of adverse weather on sales - Management acknowledged that adverse weather conditions negatively impacted sales but did not quantify the effect [82] Question: New product introductions and demand shifts - Management confirmed that new product introductions would continue regardless of consumer demand fluctuations, as these are long-term investments [83]

Financial Data and Key Metrics Changes - In Q2 2025, net sales were $388 million, a 3% increase from $376 million in Q2 2024, achieving record quarterly sales despite adverse weather and a declining repair and remodel market [19][7] - Gross profit was $158 million with a gross margin of 40.8%, down from $168 million and 44.7% in the prior year, primarily due to one-time strategic investments and lower production levels [20][21] - Net income decreased by 13% to $76 million or $0.71 per diluted share, compared to $87 million or $0.80 per diluted share in the previous year [22][21] - Year-to-date net sales totaled $728 million, a 3% decrease from $750 million in the first half of 2024 [22] Business Line Data and Key Metrics Changes - Demand was led by strong performance in Trex composite and aluminum railing, Trex lineage decking, and the expanded mid-price select decking line [8][7] - New products launched in the last 36 months accounted for 22% of quarterly sales, significantly up from 13% in the same period last year [11] Market Data and Key Metrics Changes - Wood alternative products gained 170 basis points of market share from wood over the past 18 months, with Trex aggressively pursuing wood conversion as a growth strategy [8][7] - Strong demand was noted across various U.S. markets, particularly in the Western Region, supported by dealer conversions and contractor recruitment [9] Company Strategy and Development Direction - The company is focused on product development as a key element of its long-term strategy, with ongoing investments in branding and marketing to enhance consumer connection [12][10] - The Arkansas manufacturing facility is expected to become a model for efficient, vertically integrated production, supporting growth opportunities [13][16] - The company plans to continue rolling out heat mitigating technology with new product launches [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in outperforming the repair and remodel market despite projected declines, citing resilient consumer demand and successful new product launches [15][14] - The company anticipates strong year-over-year comparisons in the second half of 2025, driven by improved production levels and continuous improvement initiatives [23][14] Other Important Information - The company reaffirmed its full-year 2025 guidance, expecting net sales growth of 5% to 7% and adjusted EBITDA margins to exceed 31% [23] - Capital expenditures for 2025 are projected to be approximately $200 million, primarily for the Arkansas facility [23] Q&A Session Summary Question: Clarification on gross margin comments for Q3 - Management clarified that the 100 basis point improvement refers to EBITDA margin, not gross margin, and that Q3 will benefit from the reversal of level loading and absence of enhanced costs [34][35] Question: Demand picture and outperformance versus the market - Management noted strong contractor backlogs and continued outperformance against the repair and remodel market, driven by the need for deck replacements [44][43] Question: Pricing actions taken in 2025 - A mid-single digit price increase was implemented across many decking products, but not on railing products [66] Question: Impact of adverse weather on sales - Management acknowledged weaker sales due to adverse weather but did not quantify the impact [84][83] Question: Future capital allocation strategy - The company plans to prioritize organic growth opportunities, potential acquisitions, and share buybacks as free cash flow increases [72][71]

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 lack of channel inventory build that occurred in the previous year [21][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 [22][23] - 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 [23][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 [7][17] - The company is seeing strong demand for premium products across all channels, with a notable increase in dealer conversions to the Trex brand [6][19] Market Data and Key Metrics Changes - The repair and remodel market is projected to rebound, with spending expected to return to long-term averages by 2027, driven by the aging of existing decks [14][15] - The company anticipates outperforming the repair and remodel market in 2025, supported by new product introductions and market share gains [15][25] Company Strategy and Development Direction - The company is focused on product innovation and expanding its portfolio, with a strategy to offer a comprehensive range of decking and railing products [7][17] - A new manufacturing campus in Arkansas is expected to enhance operational efficiency and reduce costs, with production of recycled plastic pellets already underway [14][20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's market position despite macroeconomic pressures, citing strong demand for premium products and positive feedback on new offerings [26][27] - The company is maintaining its full-year guidance for 2025, expecting net sales growth between 5% to 7% and adjusted EBITDA margins exceeding 31% [25][26] Other Important Information - The company is implementing a new inventory strategy to reduce quarterly volatility and ensure adequate supply to meet consumer demand [10] - Tariff impacts are projected to affect less than 5% of cost of sales, with mitigation strategies in place to manage costs [11][84] Q&A Session Summary Question: Changes to the Enhance product line - Management explained that refinements were made based on customer feedback to improve strength and aesthetics, expecting stronger sales post-change [29][30] Question: Sell-through rates and guidance - Management confirmed strong demand for premium products and a turnaround in entry-level products, maintaining guidance for mid to high single-digit growth [38][39] Question: Seasonal trends and inventory practices - Management indicated a return to more normal seasonal patterns, with expectations for a less pronounced drop-off in Q3 compared to historical trends [42][44] Question: SG&A expenses and guidance - SG&A expenses are expected to be front-loaded due to marketing and innovation investments, with a decrease anticipated in subsequent quarters [49][50] Question: Tariff impacts and mitigation - Management noted limited exposure to China and ongoing efforts to mitigate tariff impacts through supplier negotiations and inventory strategies [84][86] Question: Capital allocation priorities - The company remains focused on organic growth, potential acquisitions, and share buybacks, with expectations for increased free cash flow in the coming years [57][115]