Colin Verdon

Colin Verdon asked for elaboration on the comment that the industry growth curve has moderated, seeking insights into Trex's long-term growth algorithm for decking and railing. He also inquired about the gross profit margin bridge, including expected inflation, continuous improvement, and the impact of lapping warranty expenses.

Answer

Bryan H. Fairbanks, President and CEO, explained that moderation refers to post-COVID growth and three consecutive down years in R&R, but expressed bullishness for the long term due to aging homes and a large existing deck population. D. Christian Keffer, Director, Trex, stated that productivity projects are expected to offset much of the gross margin decline, but higher depreciation and mix changes from railing growth will still result in an overall 100 basis point decline.

Colin Verdon asked for an expansion on the comment that the 'industry growth curve has moderated' and Trex's long-term growth algorithm for both the decking and railing industry and for Trex itself. He also sought details on the gross profit margin bridge, including expected inflation in cost categories, continuous improvement plans for 2026, and any benefits from lapping prior costs like enhanced deck boards and warranty expenses.

Answer

Bryan Fairbanks, President and CEO, clarified that the moderation refers to the period post-COVID and three consecutive down years in R&R. He expressed bullishness on the long-term R&R sector recovery due to aging homes and decks, stating Trex will invest to outperform the market when it rebounds. Prithvi Gandhi, SVP and CFO, explained that productivity projects are expected to offset much of the gross margin decline, but a 100 basis point decline is still anticipated due to depreciation headwinds and the mix shift towards higher railing growth.