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

Matthew Bouley: Hey, good evening, guys. Thanks for taking the question. So on the fourth quarter margin guide, I think even with SG&A getting to the high end of your full year guide, I mean, it still implies that step down in gross margin in the fourth quarter. I think you said earlier that the timing of some of your production economics is going to play into it. But my question is, was the production in Q3, I guess, enough to take your gross margins down to that degree in Q4? Is there anything else hitting the gross margin in the fourth quarter? Or are you just sort of building in conservatism there?

Bryan Fairbanks: It’s primarily related to the production economics. So the revenue is significantly lower than it is in Q3. Not all of the costs that go through manufacturing end up getting put into inventory. You saw that impact last year in the fourth quarter. And so that’s just a continued part of the impact from the way the costs flow through the balance sheet and inventory.

Matthew Bouley: Perfect. Got it. Okay. And second one, on the last comment that, that sort of true retail DIY was a tad weaker, how do you read into that? Historically, have you seen that DIY lead pro or perhaps not? Is it just different types of consumers? My question is really what do you make of that, Bryan?

Bryan Fairbanks: I think at the lower cost decking side of things, it has probably more of an impact in the short term. But everything that I’m seeing is that the consumer that’s looking to do the larger projects and using the higher-end material is absolutely there. We talked about the tailwinds from higher interest rates preventing people to move up, and we’re hearing that as a continued story line coming back from our contractors as well as our dealer body.

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

Bryan Fairbanks: Thanks for everybody’s participation today and your support of the Trex Company and our growth objectives. We look forward to speaking with many of you in the coming weeks. Good evening.

Operator: The conference has now concluded. Thank you for attending today’s presentation, and you may now disconnect.