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]

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]