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]

Trex (TREX) Q1 2025 Earnings Call May 08, 2025 05:00 PM ET Speaker0 note this event is being recorded. I would now like to turn the conference over to Casey Cotary. Please go ahead. Speaker1 Thank you, everyone, for joining us today. With us on the call are Brian Fairbanks, President and Chief Executive Officer and Brenda Lovechick, Senior Vice President and Chief Financial Officer. Joining Brian and Brenda is Amy Fernandez, Senior Vice President, Chief Legal Officer and Secretary as well as other members o ...