Trex Company, Inc. (NYSE:TREX) Q1 2024 Earnings Call Transcript

Bryan Fairbanks: We operate the organization the right way to service our customers, first and foremost. As we talk, and we get the appropriate amount of inventory in the channel, depending upon what’s happening in the marketplace. And I look at this year of getting back to much more normal environment. When we look at that $135 million of revenue growth, about $75 million of that is relating to timing, and that’s going to a three-month early buy versus the historical four-month early buy that we’ve had. An additional $40 million of, that is back to normalizing channel inventories to the correct level. If you go all the way back to a year ago when we were having this call, I specifically mentioned, I would have liked to see an additional $40 million to $50 million in the channel to support our consumers correctly as we went through the season itself.

So, approximately $40 million of that growth is related to normalizing the channel inventory to the right level. And then the last $20 million accounting for about 8% is what we look at as growth in sell-through. We looked at just purely normal year-over-year if everything had normalized, then we probably would have delivered 8% for the quarter. And then you would have continued to see growth in the second, third quarter, fourth quarter. But there is normalizing of the seasonality that absolutely is entering into our quarterly performance right now.

Matthew Bouley: Perfect. Okay, that’s helpful, Bryan. Thank you for that. And that of course, then leads back to the gross margin question. We are talking about reducing utilization as you go through the year. So I mean, it sounds like that’s largely related to simply the cadence of revenues through the year. Is there any kind of incremental need to sort of work down inventories from current levels or it’s really just kind of matching that cadence of revenues?

Bryan Fairbanks: It’s matching the cadence of revenues, no. There is no need to be working down either the inventory that we have on our ground, which that will work itself down as we move through second, third quarter. The channel inventory will work itself down through second and third quarter. It’s just normally the way the channel works as the overall marketplace normalizes back to pre-pandemic type behaviors.

Matthew Bouley: Great. Thanks Bryan. Good luck, guys.

Bryan Fairbanks: Thank you.

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

Bryan Fairbanks: Thank you for participating in today’s call. We look forward to seeing many of you at the upcoming conferences. Good night.