Trex Company, Inc. (NYSE:TREX) Q3 2023 Earnings Call Transcript

Philip Ng: Any impact on margins and incrementals?

Bryan Fairbanks: We focus on continually improving our margins on an ongoing basis. And some of our products have higher, some have a little bit lower along the way, but we’re looking for overall continuous improvement. I wouldn’t expect to see a significant change just because of additional focus on railing.

Operator: The next question comes from Stanley Elliott of Stifel. Please go ahead.

Stanley Elliott: Hey, everybody. Thank you all for the question Bryan, you mentioned the cost environment, you’re not really moving one way or the other. Is that more a function of just what you’re seeing in the macro? I know you guys — and I guess — you spent a lot of energy on kind of moving downstream on the recycling. I’m just curious kind of what sort of the breakdown would be from the process improvement versus just overall commodity prices?

Bryan Fairbanks: One of our strategies is to have ongoing continuous improvement programs that can offset a, let’s call it, normal amount of inflation over the course of the year and generate improvement from our overall EBITDA margin perspective. So let’s say we get back to a normal environment, we’re back down to a 2% type inflation rate. I would expect that we can continually offset that with continuous improvement. Really, the only thing that we’ve seen, I would say, over the last quarter, of course, fuel prices, diesel has gone up and then electric prices out in the Western footprint continue to grow up — go up. But again, them — those are not that significant compared to the type of inflation that we saw the prior two years, where we really had to take pricing to cover it.

Stanley Elliott: And then in terms of kind of some of the new product launches you’ve got slated for next year, you mentioned a reference, should we expect those to be more kind of in the decking category, more in some of the adjacent categories that you guys had touched on at the recent Analyst Day?

Bryan Fairbanks: Stay tuned on that. There will be some news forthcoming later on the quarter.

Operator: The next question comes from Tim Wojs of Baird. Please go ahead.

Timothy Wojs: Hey, guys. Good afternoon, Michelle. Maybe just on sell-through,, the mid-single digit that you talked about, was there any kind of variance between the different types of channels that you service?

Bryan Fairbanks: I would say the pro channel. And when I say pro, anybody selling to a contractor. So our pro channel sells to contractors, but our DIY big boxes also sell to those pro customers. That tended to be somewhat stronger than the pure DIY customer during the third quarter.

Timothy Wojs: Okay. Okay. Good. And then just on the winter buy, I guess, one is, is there any change to the kind of $50 million shift that you talked about last quarter from Q4 to Q1? And did you make any structural changes to the winter buy program at all? Or is it just — really just a one less month than what you’ve had before?

Bryan Fairbanks: That’s the — probably the biggest difference is it’s one less month. Otherwise, the program is relatively similar. We do make some adjustments based off the feedback that we get from our channel partners each year and things that we specifically want to focus on. But otherwise, it’s not too far off what we’ve done in the past.

Operator: The next question comes from Rafe Jadrosich of Bank of America. Please go ahead.

Rafe Jadrosich: Hi. Good afternoon. Thanks for taking my question. Bryan, on the 4Q marketing investments, would you be able to just quantify it a little bit for us? Like should we be thinking about SG&A dollars maybe flattish quarter-over-quarter? And is any of that a pull forward of investments?