Good afternoon, and welcome to the Trex Company fourth quarter and full year 2022 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Viktoriia Nakhla, Investor Relations. Please go ahead. Thank you everyone for joining us today. With us on the call are Bryan Fairbanks, President and Chief Executive Officer, and Dennis Schemm, Senior Vice President and Chief Financial Officer. Joining Bryan and Dennis is Amy Fernandez, Vice President, General Counsel, as well as other members of Trex management. The company issued a press release today after market close containing financial results for the fourth quarter and full year 2022. This release is available on the company's website. This conference call is also being webcast and will be available on the investor relations page of the company's website for 30 days. I would now like to turn the call over to Amy Fernandez. Amy? Thank you, Viktoriia. Before we begin, let me remind everyone that statements on this call regarding the company's expected future performance and conditions constitute forward-looking statements within the meaning of federal securities law. These statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. For a discussion of such risks and uncertainties, please see our most recent Form 10-K and Form 10-Qs as well as our 1933 and other 1934 act filings with the SEC. Additionally, non-GAAP financial measures will be referenced in this call. A reconciliation of these measures to the comparable GAAP financial measure can be found in our earnings press release at trex.com. The company expressly disclaims any obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise. With that introduction, I will turn the call over to Bryan Fairbanks. Thank you, Amy, and good evening, everyone. Our fourth quarter operating results came in ahead of our expectations and represented a strong sequential recovery as we effectively navigated the challenges of the pro channel inventory recalibration. I'm pleased to report that, as anticipated, the inventory recalibration was completed by year-end. With good participation in the early buy season, we entered the year and upcoming season with inventory levels that align with market expectations. Consumer demand for Trex Decking and railing remained steady during the quarter, demonstrating the broad-based appeal of our product portfolio and attractiveness of the outdoor living category as an ongoing secular trend. Supported by our industry-leading brand, manufacturing efficiency, and the strength of our long-standing relationships with best-in-class channel partners, Trex offers the most relevant products and strongest service levels to customers every day. This has positioned Trex as the primary beneficiary of positive long-term trends towards outdoor living. Trex is the most widely available and purchased decking and railing brand in North America and around the world. In recent months, we expanded our distribution network in Texas, Oklahoma, and other southern states, enabling us to better service many of the fastest-growing markets. As the world's largest manufacturer and market leader of wood alternative composite decking and railing with the most expansive manufacturing and distribution network, our dealers and contractors can confidently grow sales. Q4 was the first quarter to benefit from the actions we took in July to align our cost structure with the lower sales volumes due to channel inventory recalibration. We reduced production levels, right-sized our employee base while retaining our most experienced manufacturing talent, and implemented cost efficiency programs. These actions, together with easing inflationary pressures, enabled us to drive sequential increases in fourth quarter for both gross margin and EBITDA margin of 960 basis points and 710 basis points, respectively. Further opportunities for margin expansion are expected with our ongoing investment and focus on continuous improvement programs. During the quarter, we balanced these actions aimed at improving our near-term profitability with longer-term decisions to support our growth trajectory, namely investing in the Trex brand and continuing to commercialize new products that broaden our market opportunity. We completed the sale of Trex Commercial Products. The divestiture reflects our decision to focus our resources on the most profitable opportunity for our company and its shareholders, namely accelerating conversion to composites from wood and further strengthening our industry leadership. For more than 30 years, we've invented, reinvented, and defined the composite decking category, and innovation remains a key competitive advantage for Trex. In the fourth quarter, we doubled the number of color options available nationally for our recently launched Trex Transcend Lineage Decking Collection, which incorporates heat mitigating technology with a refined color palette and finish. We also introduced a tiered warranty structure for Trex Decking that underscores the value of our industry-leading good, better, best decking lineup. More recently, we announced the regional launch of our latest decking innovation, Trex Signature Decking. This product offering elevates the premium composite decking category with the achievement of the most authentic wood aesthetics to date by rising the bar for beauty, performance, and sustainability. Trex Signature Decking is backed by an industry-leading 50-year limited residential warranty and is complemented by the full range of Trex Signature Railing. Trex innovation also extends to our robust sourcing and recycling efforts. Through the NexTrex recycling, re-recycling program, customers such as Rent the Runway, L.L.Bean, and Urban Outfitters have found a solution to transform their single-use plastic waste into beautiful and sustainable Trex decking. While the economic backdrop remains uncertain, we continue to believe our tie to the repair and remodel sector makes us more resilient than other sectors. As many homeowners are priced out of moving, they tend to invest in their existing homes and pursue renovations, especially those that add long-term value like a Trex deck. Despite our general optimism, we are moving forward cautiously to ensure that we emerge from this period as an even stronger company. We have several key advantages that position Trex to outperform in both the near and long term. First, the Trex brand, which is synonymous with high performance and low maintenance, continues to receive the most significant and prestigious recognition in the industry, including recently being named America's most trusted composite decking brand by Lifestory Research. Earning the highest trust rating amongst nine decking brands included in the survey, receiving the best reviews and satisfaction scores among survey respondents, and being the only decking brand to earn the maximum five-star rating. Second, the 95% recycled and reclaimed content of our decking boards, coupled with our sustainable manufacturing process, makes us the ideal choice for today's increasingly eco-conscious consumer and an appealing investment for ESG and growth investors. Third, we have the highest production efficiency in the composite industry. Fourth, we have the industry's leading network of channel partner with products sold through more than 6,700 retail outlets across six continents. Our brand appeal and strength has recently allowed Trex to gain additional stocking positions in the pro channel and to extend our market-leading availability in the home center channel. Fifth, Trex's company history of cash flow generation and balance sheet positions us for today and into the future. As we look to the long term, our new manufacturing facility in Arkansas will give us the capacity to take full advantage of demand growth. While we are continuing with the modular build-out of this facility in 2023, when Arkansas comes online, Trex will have unmatched geographical coverage with East, West, and central sites to serve our decking and railing customers and to drive additional long-term growth through expansion of our international sales in addressing the adjacent cladding market. While we are committed to the build-out of the Arkansas facility, we expect the build-out will extend beyond the originally planned 2024 timing, with gradual manufacturing ramp starting with processing of recycled materials and then moving to decking manufacturing currently estimated to start in early 2026. We've entered 2023 with a position of strength, supported by our brand and market leadership and a strong balance sheet. At the same time, we remain mindful of the macroeconomic environment, and as such, we're taking a conservative approach to full year planning. We expect to decrease our balance sheet inventory to more normalized levels throughout 2023, which will improve cash flow. As we've noted in prior calls, we've elected to run our facilities with the assumption of a $1 billion revenue run rate for the year. If demand differs from expectations, we have the ability to quickly flex our production level accordingly. I'll now turn the call over to Dennis to provide a more detailed view of our financial performance and our outlook. Thank you, Bryan, and good afternoon, everyone. Consolidated net sales were $192 million in the fourth quarter, which exceeded expectations. Trex Residential and Trex Commercial net sales were $181 million and $11 million, respectively. As previously discussed, fourth quarter residential sales were impacted by the inventory recalibration in the pro channel, spurred by concerns over a potential easing in consumer demand due to rising interest rates, declining consumer sentiment, and expectations of a general slowing in the economy. However, as Bryan mentioned, we are pleased to report that the pro channel inventory correction was completed by year-end 2022, as anticipated. In response to the inventory recalibration, we immediately took aggressive actions to better align our cost structure with current demand by reducing production, rightsizing our employee base, and focusing on the cost reduction programs. As a result, we posted a significant sequential recovery in consolidated gross margin and Trex Residential gross margin, which increased to 34.1% and 36.1%, respectively, in the fourth quarter. In the year ago period, consolidated gross margin was 38.9%, and Trex Residential gross margin was 39.7%. Selling, general, and administrative expenses were $35.4 million or 18.5% of net sales in the fourth quarter, compared to $36.7 million or 12.1% of net sales in the fourth quarter of 2021. Excluding $4.3 million of other expenses related to the sale of Trex Commercial and non-executive retention compensation, SG&A was $31.2 million or 16.2% of net sales. During the fourth quarter, we completed the sale of our wholly-owned subsidiary and reportable segment, Trex Commercial. The divestiture reflects our decision to focus on the driving the most profitable growth strategy for the company and its shareholders through the execution of our outdoor living strategy. The sale resulted in a $15.4 million loss in the fourth quarter. Beginning in 2023, the company will operate in one reportable segment, Trex Residential. We posted the relevant quarterly data in our earnings release and on our website in our investor presentation for ease of comparison. 2022 4th quarter net income was $10 million or $0.09 per diluted share, compared to $25 million or $0.22 per diluted share in the year-ago quarter. Excluding the loss on the sale and other expenses related to the divestiture of Trex Commercial and non-executive retention compensation, Adjusted Net Income was $25 million or $0.23 per diluted share. We are pleased to have delivered Adjusted EBITDA of $46 million or 24.1% of net sales in line with our expectations. We used our strong balance sheet and cash flow to repurchase 1.1 million shares of our outstanding stock in Q4, returning $50 million to shareholders. We also upsized our revolver by $150 million, bringing our total debt capacity to $550 million to provide us with the additional financial flexibility. Summarizing our full-year results, consolidated net sales were $1.1 billion compared to $1.2 billion in 2021. Trex Residential net sales were $1.1 billion, with Trex Commercial contributing $47 million. Consolidated and residential gross margins were 36.5% and 37.7% respectively, compared to 38.5% and 39.3% respectively in 2021. Selling, general and administrative expenses were $142 million or 12.8% of net sales, compared to $140 million or 11.7% of net sales in 2021. Excluding $5.5 million related to the loss on the sale and other expenses related to the divestiture of Trex Commercial, non-executive retention compensation and third quarter severance charges, SG&A expenses in 2022 were $136 million or 12.3% of net sales. Full year 2022 net income was $185 million or $1.65 per diluted share, compared to $209 million or $1.80 per diluted share in 2021. Excluding the loss on sale and other related expenses, the non-executive retention compensation and severance charges, Adjusted Net Income in 2022 was $201 million or $1.80 per diluted share. Adjusted EBITDA was $313 million, resulting in an Adjusted EBITDA margin of 28.3%, in line with guidance compared to Adjusted EBITDA of $357 million and Adjusted EBITDA margins of 29.8% in 2021. We generated a very healthy operating cash flow of $216 million in 2022. We invested $176 million in CapEx, mostly related to the new Arkansas manufacturing facility. We also invested in our high return investment cost reduction initiatives that will enable us to improve our profitability in 2023 and beyond. 2022 was also a record year for share buybacks as we returned approximately $395 million to shareholders through the repurchase of 6.5 million shares of our outstanding common stock, with 1.5 million shares remaining under this existing program. As Bryan mentioned, we are committed to Arkansas as our third production location, but we expect the investment to occur over a longer time period. Total investment is still planned at approximately $400 million, most of which was initially planned to occur through late 2024. That investment will now carry on through 2025 and into 2026. We expect to use more working capital throughout the first half of the year as we level load our production to $1 billion of sales and deploy normal early buy programming to ensure our products are properly seated in the channel. Given our strong share repurchases in 2022, we expect to be utilizing our revolver throughout the year and incurring interest expense in the range of $8 million-$9 million. As we turn to our outlook, we anticipate first quarter 2023 net sales to be in the range of $230 million-$240 million. We are seeing the following for our 2023 annual guidance. Full year 2023 EBITDA margin to be in the 26%-27% range. Selling, General and Administrative Expenses in the range of 15%-16% of net sales. An effective tax rate of approximately 25%-26%. Interest expense in the range of $8 million-$9 million. Depreciation in the range of $45 million-$47 million. Capital expenditures in the range of $130 million-$140 million, which primarily relates to the modular build-out of our Arkansas facility calibrated to demand trends. With that, I'll now turn the call back to Bryan. Thank you, Dennis. To sum up, our fourth quarter performance has set the stage for 2023 to be a year of continuous improvement and return to normalized marketing of both the Trex brand and new products. Trex will continue to provide the consumer with a broad-based product portfolio and deliver meaningful value to our channel partners. We remain confident in our ability to outperform, thanks to our brand strength and market-leading position, distribution and retail partnerships, expanded product lines, and most importantly, the dedication and collaboration of the people who make up the Trex organization. They are a key competitive advantage that cannot be replicated. Operator, please open the call to questions. We will now begin the question-and-answer session. To ask a question, you may press star and one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw from the question queue, please press star, then two. In the interest of time, please limit yourself to only one question and one follow-up. At this time, we will pause momentarily to assemble our roster. Today's first question comes from John Lovallo with UBS. Please go ahead. Good afternoon, guys. Thanks for taking my questions. The first one is I just wanna make sure I have the math right here. There was $200 million of channel inventory built starting in the third quarter of 2021. I think $100 million was in the third quarter and fourth quarter combined. The other $100 million was in 2022, and I believe last quarter you said that two-thirds of that was in the first quarter, so call it $65 million-$70 million. It looks like the revenue guide year-over-year for the first quarter is down, call it $90 million-$100 million year-over-year. Is that sort of $20 million-$30 million delta your assumption for the decline in sell-through? It's not as much the decline in sell-through as it is the channel being more conservative in the amount of inventory that they're willing to hold at this point. There is still caution within the channel itself. Our balance sheet, we have additional inventory. We talked about building that inventory going into the end of the year as we were producing at a $1 billion level, but we weren't selling at that level for the last six months of the year. We are prepared to service the marketplace. By far, the largest driver of it is a more conservative channel right now, not leaning quite as heavily into normal early buy as they have in the past. Got it. Okay. You know, at the midpoint of the EBITDA margin guide, call it $265 million, it appears that, you know, and assuming $1 billion in sales, it appears that the decremental margin would be somewhere around 80%. Are we thinking about that right? You know, what would drive such a, such a, sharp, decremental margin? Well, I think, you know, the way we're looking at it, 'cause decremental always get a little bit messy here when you're dealing with that. We're looking at 26%-27% EBITDA margins for the full year. You know, the main decreases year-over-year are going to be, you know, essentially with the step-up in SG&A, as we talked about last year in Q3, right? We talked about the need that we needed to step that up to support more branding, to support our number one position with the brand. We wanted to also support R&D as well with new product deliveries as well as alternative formulations. Thirdly, continuing to invest in our sales force as we want to grow in, you know, the highest wood conversion opportunity areas. That would be the major ones. Thank you. Thanks, John. The next question is from Ryan Merkel with William Blair. Please go ahead. Hey, guys. Thanks for taking the questions. Hey, Ryan. First off, Bryan or Dennis, can you unpack the $1 billion revenue guide a bit more? Just looking for details on sell-through and units, remodel outlook, and any seasonality details that we should think about. Yeah, I mentioned in my opening comments a little bit about seasonality that I expect to see a steeper curve to the season than what we've seen in the past. We're building our plan assuming a $1 billion production plan. Kind of assuming from a channel perspective that what sells in sells out during the course of the year. We are not expecting any significant inventory build. As I mentioned earlier, we'll be ready to support that inventory need as the summer gets here. We also have a planning assumption where the consumer is a little bit weaker, down in that mid-single digit type range on a full year basis. It's really more of the second half of the year, there's still more concern as there's just general uncertainty in the economy still. If we do see that there's improvement, we do have the ability to, quickly flex up that production and, deliver whatever capacity is necessary. Got it. Okay, that's helpful. I know you said demand is steady. Can you just talk about sort of sell-through in 4Q, what you're seeing here in 1Q, and just, you know, contractor confidence heading into the selling season? Yeah, we continue to see good demand in the fourth quarter. October and November were flat with prior year. We did see a bit of a falloff in December, a mid-single digit type falloff. Moving into the new year, that's improved where it's roughly flat again with prior year. In talking with our contractors, backlogs have normalized, rather than them being out between eight and 12 weeks, most of them are going to be between four and six weeks at this point. Our contractors are still feeling pretty good about the season. Good to hear. Thanks. Thanks, Ryan. The next question is from Joe Ahlersmeyer with Deutsche Bank. Please go ahead. Yeah, thanks for the question. Good afternoon, guys. Hey, Joe. Hey. I wanna be really clear on what is guidance and what is not here because, Dennis, in your prepared remarks, I think you jumped right to the EBITDA margin when you were talking about 2023 guidance. You know, John did a good job of laying out the 1Q. I won't go into detail on the full year, but other than to say that it implies at a $1 billion down something in the mid-teens. I think, Bryan, I heard you say mid-single digits as your sell-through assumption. I guess the bottom line of my question is can we just be really clear on, is the $1 billion a production rate assumption, to which we'd have to add your assumptions around selling through of your inventory? Or is the $1 billion not a guide here? Like, what is the billion dollars? Historically, we've provided 1 quarter out of revenue guide, and that's what we've done this quarter. At the beginning of the year, we have provided a variety of different metrics, but in this case, providing full year guidance on EBITDA, SG&A, tax. No, the $1 billion is not a full year guide. We've not moved to that. I think given the changes in the marketplace, giving everybody here an understanding of the type of level that we're producing to because if I were sitting in your chair and we said we were producing to, let's say, a $1.4 billion type rate, I might be a little bit concerned that the customer is not strong enough to support that kind of rate. We believe that it's important that we produce at a prudent rate while we have the ability to turn on production as we see the marketplace change. Very clear. Okay. You know, your residential EBITDA margin in 2018 was around 31%. Could you maybe help reconcile or bridge that number to your 26%-27% guidance? What sort of constitutes that 400-500 basis points difference? DNA doesn't really factor in there. Mix I've always assumed is margin neutral. You're talking about having invested in productivity and having a highly trained workforce. Is there a way to think about what's driving that gap into 2023 versus 2018? I think the biggest factor there, Joe, is really coming down to utilization of capacity. you know, that would basically drive this difference that you're referencing at this point in time. We are operating at a level below our total capacity at this time. Got it. Very clear. Thank you, guys. Thanks, Joe. Yep. The next question is from Tim Wojs with Baird. Please go ahead. Yeah. Hey, guys. Good, good afternoon. Maybe just, you know, first question, just can you talk a little bit about some of the shelf space wins that you talked about in your prepared remarks? I guess maybe just expand a little bit on the value proposition or the levers that you're kind of leading with because I think there are some questions out there from investors if there's any sort of kind of pricing pressure, you know, that comes along with that. I don't think there is, but I'm just kind of curious what you're, what you're levering? No. We have not seen pricing pressure in the marketplace. Our contractors have been comfortable in selling through the product lines we've provided at the current price level. That's not something that we see that there's a high risk of. As it relates to the opportunities to win, I think we talked a little bit in the past about with Trex's leading market share, and when you have some uncertainty in the marketplace, much bigger selling proposition is go with the leading brand. The brand is important when the consumer isn't quite as strong. We've seen a number of our channel partners move exclusively to Trex or increase their commitment with Trex as we move through this period. That continues to be an opportunity as we move forward. Okay. Okay, good. Then I guess just from a margin cadence perspective, I mean, anything to kind of call out from a seasonality perspective as we kind of, you know, think through the year, Dennis? You know, maybe using Q4 as kind of a benchmark. Yeah. That's a great question. Thanks for that. Our jumping off point, if you will, as Bryan mentioned, we got the full benefit of all of our restructuring and, you know, rightsizing our workforce in Q4. We ended up, you know, at Trex Residential at 36%. You know, we're looking to see that lift, you know, that gross margin lift by about 150-200 basis points for the full year. I would expect to see those cost savings initiatives start to, you know, ramp up. Now, when you get into, though, Q2, Q3, you're offset partially here by a slightly weaker mix as we're more DIY-oriented at that time. I would just look at it pretty much level across the year with about a 38% gross margin, 37.5%-38% gross margin. Okay. Okay, thanks guys. The next question comes from Trey Grooms with Stephens. Please go ahead. Hey, good afternoon. Thanks for taking the question. Sure. Hey, you know, the channel inventory normalization, it sounds like, you know, that's behind you. First off, you know, if you could maybe give us a little color on kind of how you're seeing the inventory levels within the channel here as we're kind of getting into peak season? Sorry if I missed it, I dropped off for just a second. You know, do you feel like it's kind of at or even below kind of normal levels within the channel or just kind of what your thoughts are on that? We attacked the excess inventory in the channel aggressively, starting in July, and it was effective in getting it down to where we want it to be by the end of the year. You heard us talk about the year will be a little bit steeper curve as we move into Q2 and Q3. Would I like to see a little bit more inventory in the channel, as we've seen historically? I'd probably be a little bit happier with that. But we recognize where the channel is coming from. We have the capacity here. We have the inventory to be able to support the reduced risk that they'd like to carry right now. Got it. Okay. As you kind of think about on the cost side of things, you know, any kind of deflation or maybe any kind of, you know, good guides on the cost side that you could point to maybe with input as we kind of look at this year? Moderation is probably the right word for it at this point rather than deflation. I hope to see that as we move through the year, we actually have some commodities that we do see some significant deflation on, but we're not really seeing that, nor are we seeing evidence of that. If you would have asked me a month ago, I would have said aluminum probably is a great opportunity. For those of you that follow aluminum, it recently shifted quite significantly, where it's kind of back to where it was in the back half of last year at those higher prices. It's something that we'll keep you up to date on, but we're not seeing a significant deflationary marketplace. We don't buy a lot of PVC in the marketplace, which has deflated quite significantly. Right. And I guess, it's fair to say then that the EBITDA margin guide of 26%-27%, if we were to see some significant deflation there for you guys, that would create some potential upside for those margins. Correct. All right. Thank you, guys. Take care. Thanks. The next question comes from Keith Hughes with Truist Securities. Please go ahead. Thank you. In response to an earlier question, I think you said, you're expecting sell-through to be down mid-single digits for the year. I just wanted to confirm that. If you could talk about what you were thinking at this point in terms of first half versus second half. Yeah, we're not necessarily expecting it to be down. We're building our production plan with that in mind. As we see this consumer is stronger as we move into Q2 and Q3 and more product is needed in the channel, we'll be able to service that. That $1 billion is based off of a mid-single digit type decline. Okay. Would you expect in the second half of the year, I mean, based on your production planning, to get back on a positive side revenue and production year-over-year? Yeah. I think in the third quarter, you would see a significant. Clearly, we've got two really tough comps in the first half, and in the back half of the year, much easier comps. In the fourth quarter, really the question will be, how do we see the consumer moving out into 2024, and how much risk is our channel willing to hold going into the end of the year? What does our early buy program look like in December, or does it start in January? Those questions are still to be answered. One final one. Could you talk about what pricing contributed in the fourth and what you're planning in the first to revenue? Yeah. Pricing was about 10.7%. In the first quarter, it's gonna be our biggest opportunity, probably, you know, around $4 million there. For the first half, it's essentially like $5 million-$6 million, maybe max. We've pretty much lapped all of our pricing. January of last year was the last significant pricing we took. We took a very small amount in April. As we get through pretty much the first quarter, all of that pricing has been lapped. Okay. Thank you. The next question is from Jeff Stevenson with Loop Capital. Please go ahead. Hi. Thanks for taking my questions today. I was just wondering if you could talk more about your conversations with dealers and distributors about sell-through demand expectations as we move into the spring selling season. Has there been any sequential change you would call out compared with, say, 90 days ago? Have expectations remained relatively steady with where they were? I'd say expectations have remained relatively steady. They continue to see good demand through the fourth quarter. Clearly, there were some questions about that from a channel perspective of would they be able to continue selling at a level to draw down inventory, but then also be able to bring in the start of an early buy in the month of December. As you move out to the first quarter, again, we continue to see that consumers are going to both our pro channel as well as DIY customers and placing orders for Trex products. That's great to hear. I just wanted to touch on the progress you've made expanding your distribution and network. The Texas announcements were encouraging, but just how long a runway do you believe you have in expanding your distribution partnerships moving forward? Generally speaking, for Trex, it's going to be less about adding new distributors. These were a couple of marketplaces where we see the growth is quite significant. We felt that we needed to add some additional representation. The largest growth will come from additional retail outlets as well as improving our share within the existing outlets that we sell from. These were important enough in a marketplace that we do see outsized growth in the future, that we wanted to call them out specifically. Okay, thank you. Thanks. The next question is from Phil Ng with Jefferies. Please go ahead. Hey, guys. Congrats on an impressive quarter. Thanks, Phil. Question for you, Dennis, I guess. The 26%-27% EBITDA margin target, you know, appreciating you're not guiding to $1 billion of sales, but that implies mid-single-digit volume declines, give or take. What if it was, like, weaker, like, down 10%? Do you have enough levers to kinda still sustain that margin threshold in that demand backdrop? I think you saw in the past how we're able to move and get our cost structure right. I think that, you know, there are things that we would do to improve the margin structure and keep it robust. Okay. I forgot to ask, Dennis, any way to help us think how much of the cost out is driving some of that, strength and the sustainability and the strength of margins for 2023? Well, I mean, that's the baseline, right, for us moving forward. Now what you have is what, you know, the cost saving measures of continuous improvement, cost outs that we worked really hard on from a labor perspective, energy diversification, et cetera. They're all coming into play now. That's 150 to 200 basis points of gross margin improvement that we're calling out. Okay, that's helpful. Then on your CapEx guidance, the $130 million-$140 million for 2023, it's more muted than I would have thought. You know, appreciating, maybe you're adding some of this Little Rock capacity, further out down the road. Is that $130 million-$140 million, you know, sustainable? If I heard you guys correctly, you're not actually physically adding decking capacity until 2026. Is that when it hits the market? I expect that we'll start to see production out in that timeframe. I think it's really important for everybody to understand our existing facilities, we don't have room for additional buildings or additional capacity. It's important that we have the third site, and we have a building that's ready for decking capacity to be able to go in. Based off what we're looking at this point, we think that timing is early 2026 when that would start running. Okay, super. That's helpful. Thanks. The next question comes from Reuben Garner with The Benchmark Company. Please go ahead. Thank you. Good evening, everybody. Hey, Reuben. Kind of a follow-up to Phil's question on the EBITDA margin guide. I guess conversely, if the market's better than you anticipate, are you kind of managing the business to this 26%-27% level, meaning you'll have more investments to make to bring capacity on faster and, you know, SG&A investments? Or would you see some leverage in expansion on that margin if the market's better than you expect as the year progresses? Yeah, I think that's a great question. Yeah, I would expect that we would see some margin expansion. If we saw demand stronger, then we're going to, you know, see better utilization, and that will be better cost absorption for us. I think that's where you'll see that benefit. You know, we're pretty committed to keeping the SG&A rate in that range of the 15%-16%. Got it. The contractor, any update on what you're hearing about contractor backlog and, you know, even pricing of jobs? I know that was kind of a deterrent to some activity over the last couple of years, the extended lead times to get things done and pricing for the labor, and other components of the job have gotten expensive. Are you hearing that, you know, those are reversing or starting to settle in a little bit? Contractor backlogs have normalized at this point between four and eight weeks. When they had longer backlogs, and some of them they were out 10, 16 type weeks, they could price jobs wherever they wanted to, especially jobs they didn't really want to do. With a more normalized backlog, the pricing is coming back in line in the marketplace. They're looking to continue to drive that backlog, so they'll make sure that they've got competitive pricing. Great. Congrats on the strong close to the year, guys, and good luck. Thanks, Reuben. Thanks, Reuben. The next question is from Alex Rygiel with B. Riley. Please go ahead. Thank you. Good morning, gentlemen. A couple quick questions here. The mid-single-digit decline in volume assumption, can you disaggregate that between the market decline expectation and maybe some market share gain assumptions that you have implied there based upon the pro and retail markets that you've commented on? Yeah. I think the biggest question is the strength of the consumer in the back half. We've not disaggregated that number. At least for this call, we know what's coming through with some of the market share gains that we've had out there. Again, we are being conservative as we look to the back half of this year, from a production perspective and then our expectations with the consumer. Secondly, are you anticipating any product mix shift with your production plan? No, we have not seen a shift downward with any changes in the economy. Dennis did mention we will see a little bit of a mix shift only because during the summertime, we have a much higher DIY demand, which is heavier on basics, doesn't carry the same margin as our, as our other profiles along the way. We do end up offsetting that with other continuous improvement along the way. That's probably the biggest impact, is that we see a steeper curve in the year, which drives a little bit more of those basic sales to the summer months than normal. Thank you. Thanks. The next question is from Kurt Yinger with D.A. Davidson. Please go ahead. Great. Thanks, and good afternoon, everyone. Hey, Kurt. I just wanted to start out with a high-level question on margins. Dennis, you know, earlier you said, I think the big difference between the 26%-27% EBITDA margin this year and what we've seen historically is, call it, lower utilization. I guess looking forward, you know, what are the big areas of opportunity that you see on the margin side, kind of regardless of improvements in, I guess, the volume environment? Yeah, I think, you know, if I would just go and compare 2022 - 2023, right? The largest decrement to the EBITDA margin side will be the step-up in the SG&A that we did, right? We talked about that last year, where we're stepping up in branding and R&D and the like. That was definitely part of it. I think another part that's, you know, important to think through too, right? Is we are not utilizing all of our capacity today. Maybe in round numbers here, for every $100 million in net sales that we would be producing for, I would be expecting to see about 100-150 basis points of gross margin improvement as well. You know, these are some opportunities for us to really inflect EBITDA margins higher going forward. Got it. I guess that 100- 150 basis points of gross margin, is that just all volume leverage or? Pretty much so. That would be mainly volume leverage. Got it. Okay. In the release, you know, you talked about focusing on driving accelerated wood conversion. Just curious how that element kind of factors into your 2023 outlook or kind of the framework you're using for market demand and what factors you think are working for or against you, in the current market? Yeah. In today's marketplace, wood has receded back to normalized pricing. Our basics product sells for two times the price of wood. All of the market research we did about converting that wood customer to a Trex composite customer started with that 2X price level, and then being able to upmarket that consumer to the Naturals product line, which has been highly successful over the past few years. With decks.com, we will continue to pursue that strategy. Got it. All right. Thanks for that, Bryan. Good luck here in 2023, guys. Sure. The next question is from Matthew Bouley with Barclays. Please go ahead. Hey, good evening, everyone. Thanks for taking the questions. Just one on the divesture of Commercial. What does that do from the perspective of, you know, management's focus? You know, how should we think about Trex kind of looking at any targeted M&A within residential decking or other residential adjacencies? As I mentioned in my comments, it does allow the organization to specifically focus on the Residential Segment, which by far has the largest shareholder returns and opportunity moving forward. It's one less distraction that's out there for the organization. Got it. That's helpful. Thank you for that. Just second one. You know, back on the topic of, you know, of sell-through. If we take 2022, you know, you had the $200 million of destocking at the end of the year, and the $100 million of channel infill at the beginning of the year. You sorta had that net, you know, $100 million of destock. Is it fair to say that your 2022 kinda sell-through was, you know, actually $100 million higher, right? When you talk about the $1 billion in 2023, you're actually thinking of more like a, you know, a 10% decline in sell-through? Am I overcomplicating it? Is there an assumption of price in there? Just, you know, any additional color on that. In 2022 versus 2021, if you're just looking at that net sales line, then yeah, it would appear that, you know, we're about 10% higher from a net sales out. If you look at it on more of a volume basis, linear feet basis, I'd tell you sell-through equaled sell out. Our main philosophy into 2023 is, and how we're building our plan, is really sell in is equal to sell out. There's not going to be. You know, we are not factoring in any sort of inventory build in the channel. Understood. Okay. $1 billion is effectively your view of sell out in 2023. Okay. Thanks, Dennis. Thanks, Bryan. Thank you. The next question comes from Steven Ramsey with Thompson Research Group. Please go ahead. Good evening. Wanna jump on the question there. If Q4 '23 has even some normalized level of inventory build in the channel, that would be upside to thinking about the $1 billion of production. Is that a fair way to think of it? Yes, depending upon the strength of the consumer. If the consumer behaves as we have expected with the production plan that we've built, then yes, there would be upside based on that. Okay. Helpful. Wanted to make sure I understood on the gained distribution in Texas and surrounding states. You said that was more retail-oriented than the wholesale channel. Just help us understand if that's the case and how you see that building in the guidance this year, or if that more benefits 2024? All of our distributors support both the pro channel as well as retail customers. It's really an overall channel opportunity to improve our representation in those markets and ensure that we can get product to customers where and when they need it. Helpful. Thank you. The next question comes from Adam Baumgarten with Zelman. Please go ahead. Good evening, everyone. Just given the kind of more gradual build-out of Little Rock, can you maybe talk to the overall dollar amount of capacity you have just 'cause, you know, with the return to growth in the coming years and the pushout till 2026, just curious, you know, if you have enough capacity to grow at maybe your kinda historical rates as we get into the outer years here? Yeah. We're not gonna get into the capacity of dollar value of total capacity that we have. We are confident that we have the capacity we need to be able to grow through that timeframe. If we see it come on quicker, we would use inventory as the buffer to build ahead on that. Okay, got it. you know, in the near term, if demand does end up being stronger than anticipated, how quickly can you ramp up production? Would that just be with your, you know, existing workforce, or would you need to hire additional people to, you know, service that additional demand? It'd be a combination of both. We would bring people in. I did mention in my comments we do have a highly talented workforce today because we've kept our most experienced and long-tenured employee. So employees, so we do have the ability to bring in some less skilled, less knowledgeable individuals on day one and be able to train them on how to run our lines so they become highly skilled and are with us for a long period of time. With a much higher percentage of highly skilled individuals who know all the ins and outs of running our lines, it's much easier to bring on that line today than it was during the peak of the pandemic. Got it. Thanks a lot. Best of luck. Thanks. The next question comes from Rafe Jadrosich with Bank of America. Please go ahead. Hi, good afternoon. Thanks for taking my question. Dennis, I just wanted to follow up on an earlier comment about the gross margin cadence through the year. You're expecting relatively consistent other than some of the mix shift pressure in 2 Q and 3 Q. Does that mean that, like, in terms of the production levels, you're assuming that it stays relatively consistent through the year? I would think if production is sort of ramping, the gross margin would go up with it. Yeah. We build our plan, you know, basically assuming a level load of production to support $1 billion in sales. To answer your question, it's a level load across the quarters. Okay. That's helpful. Just on the... Are you assuming anything on the international side? Can you give a little bit of an outlook for 2023? Is there any step-up there, now that you have some excess capacity? We do have the capacity. International is a challenge, it's fair to say. Those markets are in a little bit different situation compared to North America. Their energy prices continue to be very, very high. Some of the other inflationary factors have been more elevated than what we've seen here in the States. We are expecting much weaker consumer in those marketplaces. Our customers did infill their inventories at the end of the year. They're in good shape, whatever the market throws at them along the way. I do expect this will be a difficult year with some of our international marketplaces. Thank you. That's helpful. The next question comes from Michael Rehaut with J.P. Morgan. Please go ahead. Great. thanks for taking my questions. hey, how are you? first, just wanna make sure I'm understanding it right in terms of the first quarter sales. You know, you mentioned that, you know, that the destocking, you know, is largely completed or completed by year-end. At the same time, you're looking at a, on an adjusted basis, if you take out the build from last year, still sales down about 8%-12%. The sell out, the sell through, did I hear it right that you're expecting it to be roughly flat year-over-year, so the delta would be, you know, a difference in channel inventory? Well, we're thinking sell-in will be equal to sell-out, right? I think Bryan talked a little bit about Q1 sales being a little lighter than we would like them to be at this point in time because the channel, you know, We understand the channel's position. They understand as well that we have inventory and we have capacity. However, you know, we expect things to, you know, heat up here in the second quarter and be more of a, of a shift, much higher shift in demand in Q2. That's how we're looking at that first half. First half would be, you know, larger than the second half as far as sales go. I wouldn't call it a 50/50 across the halves. I think it's important to recognize, even though the channel is not stocking to the same degree that it has in the past, it will be building inventory in the first quarter. It's a must to be able to service the marketplace during the peak part of the season as some of that inventory is built. When we talk about producing and what we're seeing the sell-through, that's on the course of the full year. Through the first quarter, we definitely expect inventory to be built in the channel. It's just much more conservative than what it has been in the past. Okay. You know, we perhaps we can follow up with that after, I guess. Secondly, I also just wanted to make sure I understood. You're talking about an expectation for gross margins to be roughly similar throughout the year at around 37.5%-38%. Would that apply the same then to SG&A? If you could just remind us how to think about SG&A for the year. I think the last time, last call, you talked about 15%-16%. I'm just curious if that still applies. Yes. For the full year guide, we're looking at 15%-16% for SG&A. You know, as you discussed before, from a gross margin perspective, we're looking at 38%, pretty much ratable or flat-ish across the quarters. I think it's just important too, over the longer term here, you know, we do expect to see gross margins, you know, increment up. I would see us getting over 40% over the longer term. As far as incremental EBITDA margins over the longer term as well, I do expect us to return to that 35%-40% incremental EBITDA margins over the longer haul. Our branding is more heavily weighted to the beginning part of the year. We start that, midway through the first quarter and then continue on that heavily through second quarter, and even into the third quarter, and then trails off significantly at the end of the year. Thanks. This concludes our question-and-answer session. I would like to turn the conference back over to Bryan Fairbanks for any closing remarks. Thank you for your questions and your attendance on today's call. We look forward to speaking with many of you during the quarter at conferences and other events. Have a great evening. Thanks. The conference has now concluded. Thank You for attending today's presentation. You may now disconnect.