Good day and welcome to the Trex Company, Inc. First Quarter 2026 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 will now turn the conference over to Lee Coker, Vice President for Corporate Development and Investor Relations. Please go ahead. Thank you for joining us today and good morning everyone. With us on the call are Adam Zambanini, President and Chief Executive Officer, and Prith Gandhi, Senior Vice President and Chief Financial Officer. The company issued a press release earlier this morning containing financial results for the first quarter of 2026. This release is available on the company's website. This conference call is also being webcasted and will be available on the investor relations page of the company's website for 30 days. 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 laws. 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 on such risks and uncertainties, please see our most recent Form 10-K and Form 10-Q, 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 Adam. Thank you Lee, and good morning everyone. Before turning to the quarter, I want to acknowledge my first earnings call as CEO of Trex. Having been with the company for over 20 years, most recently as COO, I approach this role focused on continuity, execution, and accelerating the strategy already in place. Our five-year plan is clear. Our priorities are set, and our focus remains on disciplined growth, operational excellence, and delivering long-term value for the shareholders. As part of that work, our leadership team has sharpened focus, Trex vision, mission, and values to ensure that we remain aligned as we scale. This evolution, not a reset, and it reflects both where Trex is today and where we are going. Trex vision is to shape the future of outdoor living through purposeful innovation that enriches people's lives. To support our ambitious growth and galvanize the organization, we recently codified five long-term strategic priorities. These priorities are designed to sharpen our focus and better leverage our strengths across marketing, innovation, and execution. Given their importance to our future growth, profitability, and long-term shareholder value creation, I'd like to touch on each priority in detail. Our five long-term strategic priorities are as follows. First, it is to create an unbreakable bond with our end users, meeting the homeowner and pro contractors. Our goal is to deepen the Trex brand preference and loyalty through superior marketing, product experience, and service. While Trex remains the undisputed brand leader in the wood alternative market, we are committed to further strengthening that position through a continued investment. We have already increased our investment in the branding and the marketing, highlighted by the launch of the next phase of our consumer and pro-focused campaign centered around performance engineered for your life outdoors brand platform. This multi-channel media campaign will sharpen the focus on wood to composite conversion while also emphasizing many of our key differentiators of Trex products, including our technical innovations like sun-comfortable heat mitigating technology, as well as our marine and fire-rated solutions. I'm excited about the momentum that this campaign has produced and expect Trex to become increasingly visible with both the homeowner and pro contractors moving forward. Meanwhile, we are investing in technology to improve our proactive lead generation among our programs to better support our valued pro contractors. This last quarter, we experienced significant double-digit increase in lead generation. Pointing to the early success of this investment, we are confident that these actions will help drive Trex's future growth. Our continued focus on high-performance innovation. As I mentioned on the last quarter's call, driving high-performance innovation remains a central pillar of my leadership mandate. Shortly after joining the company, I led the development of the launch of the game-changing technology that redefined the standards in the decking category, Trex Transcend Decking. Transcend was the first capped composite decking product that set a new standard of performance and aesthetics while serving as a catalyst to drive market share expansion over the following decade. At its heart, Trex is the world leader in material science. We intend to sharpen our focus and leverage our tremendous development capabilities to invent and deliver a continuous stream of next-generation outdoor living solutions designed with what we believe is called separator technology. Trex makes the hardest innovation in the building products category imaginable. Our goal is to move forward, simply competing with our industry by introducing products with highly differentiated performance that effectively place us in a category of one. Building on the legacy of Transcend, our current pipeline focuses on category-defining performance. We are currently on track for a potential game-changing regional launch in 2027, followed by a more impactful national launch in 2028 through 2030. We are excited about our best-in-class products and our innovation pipeline, and look forward to sharing more in the future. Our third priority is to optimize the channels for growth. Distribution remains a key component of the Trex business model, ensuring that our products are readily available with the pro contractors and homeowners. As a reminder, Trex already has the most comprehensive distribution network with not only national coverage by two-step distributors, but also one of the very few brands in the world that has a meaningful presence at both national home centers. The distribution channel has seen many changes over the last five years, with significant consolidation with both distributors and dealers in the two-step channel. We have seen rapid expansion of the home center retailers into the pro channel segment as we move beyond a purely on-shelf DIY focus. We expect the distribution landscape to continue evolving. Our goal remains clear: to maintain strong channel relationships at both the two-step channel and the home center retailers, so that our products reach both the homeowner and the pro contractors across geographies. Our recent additional shelf space wins at the home center, along with expanded territories with two key distributors are proof that Trex's strong distribution network and demand for our comprehensive portfolio of products. Our recently redefined incentive and marketing programs have been well-received by our two-step partners as we convert business away from the competition, further strengthening these valued relationships. Our fourth priority is more of a specific target, namely lowering the cost of railing. Railing represents a material and rapidly growing part of our revenue mix. With a large target of doubling our railing business in five years, its importance will only increase. Due to greater manufacturing complexity and a broader range of raw material components, the railing portfolio currently operates a lower margin than decking, presenting opportunities for operational and cost optimization. We see a clear path to improvement. We are applying the same continuous improvement initiatives and vertical integration strategies that successfully elevated our decking margins to our rapidly growing railing portfolio. Of course, as the product line continues to grow, we expect a natural margin expansion due to the economies of scale and greater utilization. Over time, we believe railing margins can approach those of the core decking products, contributing to an overall lift in the corporate margin. Our fifth and final priority, growth enablement, underpins all the others. This priority defines our approach in investing in our culture, technology, and talent to enable long-term profitable growth. We are strengthening our organization by building capabilities in the digital and commercial excellence, and fostering an innovation-driven culture that empowers teams to move with speed and discipline. We have already enhanced our leadership team, particularly in finance, adding significant capabilities in data analytics and forecasting, creating a new internal pricing group to implement a more nuanced portfolio-level pricing strategy that balances share and margin while improving responsiveness. Over the remainder of the year, I plan to add key senior roles, including a newly created Chief Commercial Officer who will integrate sales, marketing, and IT, which will enable technology, data and analytics, and customer insights by providing sales and marketing the tools for commercial visibility that create revenue generation. Finally, we are aligning innovation and advanced manufacturing under a newly appointed Chief Operations Officer, Zach Lauer, to enable better coordination on commercializing initiatives. In parallel, our digital transformation is directly linking consumer inspiration to contractor execution, providing our TrexP ro network with highly qualified leads, and accelerate the wood-to-composite conversion cycle while optimizing our pricing analytics. As you can see, we are not waiting for repair or model demand to recover. Instead, we are taking a proactive, disciplined action to accelerate growth, strengthen margins, and position Trex for sustained outperformance. We are confident that these strategic priorities provide a clear roadmap for Trex's long-term success. Our team is laser-focused on execution, and I look forward to updating you on the tangible progress we are making in these priorities. Turning to the quarter, we started the year with solid results, especially in light of the adverse weather conditions and continued uncertain economic environment, leading many consumers to defer large-scale discretionary repair or modeling projects. However, we are actively taking advantage of the current market environment to aggressively invest, ensuring that we capture disproportionate share when the demand normalizes. The trends underpinning our industry's long-term growth runway, the ongoing conversion from wood to composite materials, demand for the low-maintenance outdoor living, and significant long-term repair or model tailwinds have not changed. With that context, I'll turn it over to Prith, who will walk you through the quarter in greater detail. Thank you, Adam, and good morning, everyone. Unless otherwise noted, all comparisons are on a year-over-year basis. As Adam mentioned, we had a solid start to the year with net sales of $343 million, an increase of 1%. First quarter volume is driven by both consumer sales and channel stocking to support the second and third quarter peak buying season. With our level load production strategy implemented in 2025, we elected to reduce channel inventories for the early part of 2026 and rely on our own inventory to support peak channel requirements later in the year, resulting in lower first quarter volume. From a channel perspective, we saw strong home center-driven do-it-yourself demand early in the quarter, which shifted over the course of the quarter towards greater strength in higher-end pro contractor-driven products. Gross profit was $139 million, with gross margin of 40.5%, about 100 basis points better than we expected. A favorable mix of higher margin premium decking products and lower sales of railing and margin improvements from continued operational excellence helped to offset an increase in depreciation expenses related to decking lines coming into production readiness at our Arkansas facility. Importantly, we did not experience any noticeable cost pressures related to the increase in oil prices related to the conflict in the Middle East. I'd like to spend a few minutes diving a bit deeper into our raw material exposure as it is the majority of our COGS, especially recycled LDPE. While recycled LDPE is a petrochemical, its pricing dynamic is quite distinct from virgin polyethylene, which is tied directly to the price of oil. Historically, recycled LDPE prices tend to lag virgin polyethylene by several quarters and generally exhibit less volatility. This reflects the substitution dynamic. Users of virgin polyethylene typically need to see sustained higher prices before adjusting their production processes to incorporate even modest levels of recycled content, which in turn increases demand and prices for recycled LDPE. Supply of this material is not an issue as we are entirely domestically sourced. As a leader in the use of recycled content, this is a significant competitive advantage, particularly during periods of raw material inflation, when competitors relying on virgin inputs are more exposed to cost volatility. While we are seeing increases in certain other input costs, such as diesel fuel and aluminum, we have a range of mitigating levers available, including cost out initiatives, operational efficiencies, and product-specific pricing actions. Importantly, these same inflationary pressures also affect our competitors. Moving on to selling, general, and administrative expenses, which were $56 million in Q1, representing 16.2% of net sales. Excluding digital transformation costs of $1 million and Arkansas facility startup expenses of $0.2 million, SG&A was $54 million. SG&A came in below our expectations despite continued investments in branding and marketing programs to drive future growth. Lower self-insured medical costs and the timing of expenses more than offset higher investments in the quarter. Because we are in the final stages of the Arkansas facility build-out and did not finish as expected in Q1, interest expenses were capitalized on the balance sheet, resulting in no P&L impact. Our full-year guidance for in-interest expense now reflects completion beginning in Q2. Putting it all together, adjusted EBITDA of $103 million grew 2% in the quarter due to positive pricing and mix, cost control, and the timing of expenses. Free cash flow was negative $143 million as we built inventory and accounts receivable ahead of our peak selling season. This was an almost 40% improvement versus prior year. As our capital investment needs decline significantly now that we're finishing the Arkansas facility, our balance sheet remains strong with our net debt leverage of 1 times EBITDA, which is at the low end of our target range of 1x- 2x. We are confident in our long-term free cash flow generation and continue to have balance sheet capacity to pursue our capital allocation agenda, which prioritizes an unwavering commitment to first drive growth, then return cash to shareholders through share repurchases, and lastly, to pursue disciplined M&A. During the quarter, the company took advantage of an opportunity in the stock price by executing continued aggressive share repurchases. For the first time in the company's history, we implemented an accelerated share repurchase or ASR to quickly buy back a large amount of stock. This $100 million ASR was part of our larger $150 million share repurchase announcement. We will be completing the full $150 million repurchase during the second quarter. I'm pleased to announce that the board has authorized a 10 million share increase to the company's existing share repurchase program, reflecting their confidence in the long-term intrinsic value of Trex. Turning to outlook. We are maintaining our full-year guidance based on our solid start to the year and our continued expectation for the broader repair and remodel market to be flat to down this year. We remain minimally exposed to input cost inflation. Our vertically integrated domestic recycling infrastructure and approximately 95% recycled content drive a highly stable cost profile, which helps protect margins during periods of petrochemical volatility. We continue to expect fiscal year net sales of $1.185 billion- $1.23 billion, with adjusted gross margin of approximately 37.5% and adjusted EBITDA of $315 million- $340 million. For the second quarter, we expect net sales in the range of $388 million- $403 million, and we expect to see a reversal of the gross margin benefit from product mix that we saw in Q1. Before turning the call back to Adam, I want to touch on two key metrics. The first is sell-in, sell-out. Sell-in represents Trex's sales to its distributors and home centers. Sell-out represents the sales from our distributors and home centers to dealers and end co-consumers. As we've discussed in the past. Quarterly sell-in and sell-out results can be influenced by timing, seasonality, and channel dynamics, and as a result may not always reflect the underlying long-term trends in the business. To provide a clearer view of performance and how we manage the business, we are introducing a rolling 12-month sell-in and sell-out metric, which we will report each quarter going forward. This metric smooths short-term volatility and better captures fundamental demand trends by accounting for seasonality and other factors that are not fully reflected in quarterly movements. For Q1, growth for our trailing 12-month sell-in was 7%, and growth for our trailing 12-month sell-outs was 6%. The second metric is one which we believe will experience meaningful improvement not only this year, but for many years to come: free cash flow. As many of you are aware, we plan on ramping up production at our new Arkansas facility beginning next year. More importantly, the CapEx associated with the plant build-out will end this year, with the majority of our Arkansas-related spend finishing in the first half. We anticipate total CapEx this year of $100 million-$120 million, down from $224 million in 2025, a more than $100 million improvement. With construction substantially completed at the end of this year, we expect another meaningful decline in CapEx in 2027 to maintenance levels of approximately 5%-6% of revenue, driving further improvements in free cash flow. We have built Arkansas to effectively more than double our revenue potential with just the purchase of additional lines. This upfront investment will provide us with years of capacity expansion ability with minimal additional CapEx. This gives us a strong line of sight to continuous, robust free cash flow generation, regardless of the exact timing of a significant rebound in consumer demand. With our organic expansion needs met through our Arkansas campus, our capital allocation priorities will next focus on additional share purchases and then on accretive bolt-on acquisitions. Trex will return to the free cash flow-generating machine that it had been before the recent necessary investment in capacity expansion, which started during COVID and will end this year. I will now turn the call back to Adam for his closing remarks. Thank you, Prith. Hopefully, you can feel the excitement of the Trex team, the path that we've laid out, and the great opportunities we see in front of us. While the current market environment remains challenging, we are investing in our business and aggressively innovating to capture a greater share of the growing addressable market. We remain the undeniable leader in our market, and we are infusing our team with more focused, nimble entrepreneurial culture that we had in the early days of my career at Trex. We are confident this is the right time to evolve our approach while leveraging our great history and brand. Before we close, I wanna recognize our people. Their commitment, discipline, and focus on the customer continue to be the foundation of our performance. The progress we discussed today is a direct result of their work, and they remain committed to our long-term success. We believe when our people succeed, our shareholders succeed. Operator, we'd like to open the call to questions. Yes. Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. If any time your question has been addressed and you'd like to withdraw it, please press star then two. At this time, we will pause momentarily to assemble the roster. The first question comes from Philip Ng with Jefferies. Hey, guys. Congrats on a really strong quarter. Really good execution. Adam Zambanini, congrats on the new role, and certainly, it was very noticeable in terms of the energy you've laid out in terms of your longer-term strategic plans going forward. Kinda give us a little perspective in terms of some of the things that you're looking to impact, right? We've noticed that there's been new leadership changes. You called out the new COO role and certainly a new head of marketing. There appears to be a bigger focus certainly on innovation and streamlining some of these efforts to kind of put out product quicker. Just kinda help us think through how are you guys approaching things perhaps a little differently and how that could potentially unlock things in terms of the growth engine and getting products to the market a little quicker. Phil, good morning. Thank you for the kind words. We really appreciate it. You know, when I look at the marketplace today, it's a very dynamic and challenging market. You start to look at the consolidation of national accounts and inflation, and you have to ask the things, do we have the right strategy in place? Which I believe we do, and we laid it out on the call. Do we have the right people? Absolutely. Do we have the right structure? That is really what I'm focusing on, making sure that we have the right structure to execute the strategy. On top of that, once we have that structure in place, it is how we innovate and I think that is where I add the most value to Trex, is as I talk about the separator technology, what is gonna make Trex a category of one? That focus right now is to take what Trex used to have as, let's just say, 100 initiatives, and we've boiled that down to 20 underneath five imperatives. We're working on less things that are more impactful to the organization. I want $100 million programs on everything that we work on. That is what our focus has been as an executive team and I think that has provided the organization with a tremendous amount of clarity moving forward. Super. In an uncertain macro backdrop, curious how sell-out trends shaped up interquarter. Prith, I appreciate the LTM number but just any more color in terms of how that progressed interquarter and perhaps how things are looking peak decking season, April, May, how the channel's responded to some of these programs you've rolled out and the marketing effort as well. Oh, okay. A lot to unpack there. Look, overall, in terms of, you know, the quarter itself, as we said in my remarks, you know, we managed to sell into the channel based on our level loading strategy. Essentially, overall, you know, demand is progressing as we expected in our overall assumptions for the year. We expect as we go through the busy season, the channel is kind of in the lighter end in terms of the inventory they're carrying, so they're more closer to the 30-40 days of inventory. We expect, you know, assuming kind of normal busy season, that we will see, you know, more impetus for, you know, more sell in as we progress through the second and third quarter. Okay, that's helpful. The less inventory on the channel side Prith, that is a function of your decision to take out the volatility. Perhaps, at any early read in terms of how the channel is kind of progressing, how things are shaping up, just very dynamic macro environment uncertainty on the consumer side. Yeah. Just to give you some high level as we looked at Q1, January and February were fairly challenging. I think most people came out of those two months wondering how this year was gonna pan out. We saw a nice rebound in March as we moved into April. You know, everybody's still projecting to flat to slightly down in the market but we're expecting to outperform. The one trend that we've seen over the last year or two is more and more national accounts have acquired independent lumber yards. They're carrying less inventory. In many cases, they would carry 90 or even upwards to 120 days of inventory. Now we see some of them carrying around 30 days of inventory. What that means is probably less trucks as we go through Q1. When the in-season demand hits, like in Q2, that's where you gotta make sure you have the inventory on the ground to make sure you can execute 'cause there's gonna be, you know, some quick pull-through from that perspective. Okay. Appreciate all the great color. Thank you so much. Thank you. Thank you. The next question comes from Ryan Merkel with William Blair. Hey, everyone. Thanks for the question. First topic is gross margin. You beat your internal expectation pretty nicely. Can you just unpack what happened? It sounds like mix might have been favorable. Yeah. Hey, Ryan. It's Prith. Thanks for the question. Yes, in Q1, you know, relative to our forecast, we were ahead by about 100 basis points, and it was largely driven by favorable mix from decking. You know, if you recall, we announced a price increase around our aluminum railing in January, we did see some pull forward in Q4. As a result, you know, a lower mix of railing in Q1. That was the primary driver of why gross margin performed better in Q1. Got it. Okay. SG&A also beat a little bit. I guess the guide still assumes that it's up year-over-year the rest of the way. Was there some kind of timing issue in 1Q? Yeah, so- Just curious there. Yeah, good question. In Q1, our SG&A came in about $5 million lower than we had planned and it's driven by two things. One is favorability in medical claims, and that's a hard one to forecast. Again, we feel good about the full year but in any quarter, you know, things can move around and that's what we think happened here. Second, there was timing around certain expenses, again, related to our, you know, investments in growth and brand awareness and so forth. We expect those to come through in the second quarter. Just to level set everyone, we still expect full year SG&A to be around 18% of sales. In Q2, we expect a significant sequential dollar lift in SG&A. That spend is based on the certain of these expenses that should have been incurred in Q1. They're gonna move into Q2. Second, in line with what we've been telling you, that's in line with our strategic priorities. We will continue to invest in marketing and innovation that drives our growth and our brand awareness. With, with those things, you should see a dollar step up, you know, Q1 to Q2. Yeah, Ryan, I think we also were trying to be, from that perspective, responsible in terms of that, you know, the Iran war broke out in Q1 and manage the manageables. That was one of the areas that we looked at it from an SG&A perspective. As things have calmed down on there, of course, we're gonna continue through with the execution of our plan. All right. Very helpful. Good luck in 2Q. Thank you. Thank you. The next question comes from John Lovallo with UBS. Good morning, guys. Thanks for taking my questions as well. The first one is, you know, the revenue outlook seems to imply a decent de-sell in the second half. I mean, understanding that there's seasonality in the business, it does seem to imply roughly 5% year-over-year growth in the second half, despite, you know, what's a fairly easy comp in the fourth quarter. Is this, I mean, really just conservatism given, you know, the, you know, the conflict in the Middle East and just macroeconomic uncertainty, or is there anything else you're trying to message here? Yeah, yeah, I think you nailed it. In terms of the growth, it's around 4%. I think our number is, like, 4.8%. From that perspective, you have that correct. You know, when we look at this year, there's still some things that we wanna see from, you know, how the war and that is going to pan out. If this is still gonna keep going on and on over the next several months, then yeah, there's some conservative from that perspective. If we do think this thing is gonna settle down, then there is some opportunities for us in terms of the execution. I think that is one of the things that's a wild card for us. We still see the high end's been doing really well as we look at the decking side. We are definitely focused on converting more of that wood market. 75% of the market is still wood, but we still see those consumers on the lower end are still struggling right now, so we're getting more and more creative as to how we're gonna convert that opportunity. Yeah. Hey, a couple other things, John, in terms of just, you know, around the second half and the rest of the year. One of the, you know, in terms of things that we've been doing, we did introduce a Refuge PVC product. Most of those sales will occur in the, you know, Q2-Q4 timeframe. That's one of the, you know, the drivers that should help in terms of their, you know, revenue growth. Second is in line with the, you know, the rest of the industry. We have announced a mid-quarter price increase, again, around aluminum railing, so that was not in our forecast before. The third is, you know, our continued investments around marketing and innovation. We are seeing the green shoots, and, you know, Adam pointed those out in his prepared remarks. Lead generation, sample orders, all those things are progressing really well, and we do expect to drive some conversion from all of that. Okay. That's helpful. I'm just trying to get a better understanding of the quarterly cadence in adjusted EBITDA margin. I mean, the second quarter revenue is expected to be up sequentially but is it possible that the EBITDA margin is actually down quarter-over-quarter, just given some of the factors you mentioned, like the step up in SG&A spend? From 2025 to 2026 Q2, you should expect some, you know, EBITDA margin difference between last year and this year and being lower this year back to, again, we expect some of the gross margin favorability we saw in Q1. You know, we saw 100 basis points of favorability. Expect a little more than half of that to reverse in Q2. You know, again, on SG&A, expect a significant dollar step-up between Q1 and Q2. Once you do those two things, I think you'll see a different EBITDA profiles in Q2 of last year. sequentially 1Q to 2Q, it could be down, is what you're suggesting? The margin, you're asking Q1 to Q2? Yes. Correct. -you were asking year-over-year. Okay. Yeah, Q1 to Q2 as well, you should see some decline in EBITDA margin. Okay. Thank you, guys. Thank you. The next question comes from Michael Rehaut with JP Morgan. Hi, this is Nick Kalra on for Michael. Thanks for taking my question. First wanted to ask sort of along the, along the previous question on the cadence throughout the year in the back half. Can we just get a update on how you're looking at the R&R backdrop and how connect that to the range that you've given for the full year guidance, and how we should be thinking about that and maybe what you're seeing? When you look at it, let's just look at the home center business. There's been a lot on the forecast from negative 1% to 1% growth. We've seen a lot of people on the forecast have it flat to slightly down. We're doing about low to mid single digit growth. If you look at the full year, it's about 3% right now when we look at year-over-year in terms of our growth right now and our guidance. Yeah. Got it. has changed, Nick, in terms of our overall macro assumption on, you know, repair and remodel. We're still, you know, flat to down with some of the, you know, the back half being better than the first half. That's sort of the big picture macro assumption, in line with kind of all the same you read, like LIRA, et cetera. Got it. Got it. makes sense. You mentioned, the relative strength between DIY and Pro and how that shifted throughout the quarter. Could you provide, like, a little more detail on that and, you know, how you're thinking about that going forward as well? Yeah. The one thing I wanna focus on for a second is we are a marketing powerhouse and we had to get back to our roots. If you look at it, that's really the territory that I've come from, and we had to reinvest in that platform. We've made structural changes in marketing. We filled out that department, and I feel like we're in a really great spot. That's what really helps drive that high end of the marketplace. That investment is what we've seen is, once again, products like Trex Transcend or even our Select Decking are doing really well and even some of our higher end lines of the railing. Those are the consumers that are out there buying right now, right? We got that part going really well, and then the focus is how do we get that low end? How do we can convert more of those wood users over to Trex? Then also on the high end, there's been focus on the PVC area, not just on the PVC introduction of Trex Refuge, but we have some other products that, depending on the range, they compete in that fire segment, and we're going after it with those products as well. Plenty of opportunity here, but that's why I believe a lot of the premium and mid to premium end of the market is doing well is because our marketing is working. Got it. Thanks. Thank you. The next question comes from Kurt Yinger with D.A. Davidson. Great. Thanks and good morning, everyone. I was just hoping to talk a little bit more about the retail shelf space commentary. Is there any way you could maybe help us frame the magnitude of that expansion, kinda how you expect that business to ramp over the next couple quarters, and maybe just some sense on kinda price point? Yeah. Good morning. I think we basically have characterized it as meaningful. We've not really given a number around there, but we have picked up both decking and railing slots here in the recent line reviews. You will see that Trex was one of what we believe was two winners at retail here as we move forward. There were some people that didn't do as well in terms of how that line review unfolded. We won't give you a specific number, but we will tell you that that was meaningful in terms of how we look at some of our growth. Is that something that we'll kind of see phase in over the course of the year? Yes. Would that already be evident in Q1? We would have liked it to, but as we just look at how we started to get off, as you're trying to do shelf resets, getting that exact timing is always challenging. We will start to see some of those reset and some of the products in place now as we move into Q2, that'll pick up momentum as we move from Q2 into Q3 and Q4. Okay. That's super helpful. I appreciate that. just a two-parter on the railing side. Can you just talk about kind of the pace that you believe you can drive some improvements, at least in those controllable cost areas, and how M&A may factor into that? Second, how does the ability to lower costs there also potentially act as a catalyst in terms of the market share objectives you have and maybe the pace of kind of volume growth going forward? That's a great question. Once again, going back to my comments, this is really about growth on decking and railing is about material science. There's some things that I've seen here even this year that we're gonna unlock on the material science part of the portfolio that is gonna lower the raw material cost of railing. In many cases, this is going to be margin expansion on the railing side. I do believe Trex is the most aggressively priced in every single one of the segments, whether it's the opening price point that you'll find at the home center, that could be anywhere from $20-$25 a foot, all the way up to we offer railing systems that are $250 a foot. From that perspective, most of that, you know, things in terms of material science and that, many of them will drop to the bottom line. On the vertical integration and some of the acquisition side, that's very small companies that we're looking at from an M&A perspective, but a very meaningful impact in terms of what we can do and how we can lower our raw material streams. In some cases, we can be strategic, and there could be some markets we could be more aggressive to convert. I would tell you, we're very satisfied with where railing is sitting at today and the conversions that are already happened. Really the focus is gonna be how we expand margins. Okay. Yeah. Kurt, just one. Go ahead. [crosstalk] Just to add to what Adam said. Yeah, I think back in 2023, we said we would, you know, double our business by 2028. We're on track to do that. Okay. Appreciate the color, guys. Thank you. Thank you. Thank you. The next question comes from Susan Maklari with Goldman Sachs. Good morning, this is Charles Perron in for Susan. Thanks for taking my question. I guess the first one, I wanna talk about some of the price priorities that you mentioned earlier. Where do you see the biggest opportunity to drive above-market growth in the near term relative to the ones that are maybe more helpful in the long run? Can you say that again in terms of the priorities? Go ahead. Yes. Within the five that you mentioned, which will provide the biggest upside, I would say, in the near term to drive above-market growth relative to those more beneficial in the longer run? Yeah. Right now I'd say the first one would be to create unbreakable bond with end users. Getting back to basics, it's all on the marketing side and having the people in the right spots, right? To convert more downstream with the contractor and more with the consumer. That's gonna be the near term in terms of what we do. Not too far out from there, the launching the high-performance innovation, as I mentioned on the remarks there, we will start to have, you know, regional launch as we move into 2027, and then a much more meaningful impact as we move from 2028 through 2030 on some of those national launches. I would say in the near term, it's to create unbreakable bond with end users. Got it. Okay. That's very helpful. I guess my follow-up, you know, you talk about opportunities to optimize the channels for growth. What does it mean in terms of expanding your presence, you know, in retail versus making changes to your wholesale? You know, we're seeing some consolidation coming through at the wholesale level. How does it provide more opportunities for you to grow, and where do you see the biggest opportunities between the two? Yeah. I think when it comes to, once again, we created this pricing department, how we price our products and the products by channel. A lot of times what you wanna do is you want to avoid any forms of channel conflict that are sold, whether between the home center channel and the pro channel. Sometimes those products cross-pollinate. From our perspective is to make sure we have the right products at the right channels at the right price. That is one of the things that we need to focus more on is because there's been a very dynamic market today with a lot of consolidation at the dealer, at the distributor, and as there's been consolidations, there's gonna be channel changes in the way that we sell here longer term. From that perspective, we gotta make sure we got the right pricing strategy for each one of those channels with the right products. There's a lot of work that goes into it, but we've been creating that structure in order to, once again, allow us to take market share but also maximize margins over time. Got it. Thank you for the color guys and good luck. Thank you. Thank you. The next question comes from Ketan Mamtora with BMO Capital. Good morning. Thanks for taking my question. Perhaps, is there a way for us to think about when I look at your full year guidance, what is embedded within that in terms of sell-out, both, decking and railing? In total, again, our selling growth, you know, it's through you, what we've said is about 3% growth. Again, in terms of the sell-out, we're assuming something close to that, in terms of the overall market. I see. Okay. That would imply kind of a meaningful, you know, slow down from kind of the trailing 12 months, which was about 6%. You're not seeing anything today which seems to suggest that, you know, that slowdown is happening. Is that fair? Again, I think as Adam said, you know, the year started off slowly, because some of it driven by weather and so forth. Since March, we've seen, you know, good, you know, order intake and that continues as we're moving through April. Overall, we don't see anything that, you know, would cause us to think what you said. Understood. Okay. Just switching to capital allocation. You talked about, you know, CapEx coming down. As we sit here today and you all have been active with share repurchases, can you talk a little bit about how the M&A pipeline, is today, and kind of how do you rank order, the priorities between share repurchases and M&A? Thank you. Yes. Good question. One, you know, as you know, Lee's just joined us a couple of months ago, and we're currently, you know, actively doing the work. Adam's talked about before in terms of areas of interest. Number one is looking at, you know, opportunities for vertical integration and margin expansion. Two is looking at the whole outdoor living from the fence back to the deck of the house. Then third, and you know, more distant is probably things around the building on exterior building envelope. That's the playing field. We're doing the strategy work right now to identify targets and, you know, areas that we think would be very synergistic. We should have a point of view around all of that here shortly, and then from there, you know, start to build out the pipeline. We're still early days around the, you know, M&A piece. In terms of, you know, capital allocation, and you know this, you know me from Beacon and Owens Corning. I always look at, you know, capital allocation or for M&A against share buybacks, right. That's where I always start and look at kind of where's our share price, how much cash flow do we have, and what we think is the intrinsic value of the company, and look at the return of buying back shares versus, okay, if we instead use that capital to do an M&A transaction, what would be the return on that in that case? The one big difference is the M&A gives you future growth options. Share buybacks don't do that. That's the sort of the analysis we go through as a team. Very helpful. Thanks. With that, I'll turn it over. Good luck. Thank you. Next question comes from Trevor Allinson with Wolfe Research. Hi, good morning. Thank you for taking my questions. A follow-up question on your goal to lower the cost of railing and drive margin improvements there. Are there any numbers you can put around that for us? What the opportunity in terms of cost reduction or margin improvement? And I think you talked about eventually pushing margins closer to your decking margins. Is that something that can happen in a five-year timeframe or is that something that's gonna take longer to play out? Yeah. In our strategic plan that we laid out, that is something that can happen in a five-year timeframe, and we have it broken out by year, but that is not something we've shared at this time. Okay. Understood. The second question is on your expectations for inflation here in 2026. You mentioned some reasons why you should be shielded from inflation on LDPE. Can you put some numbers around potential inflationary pressures moving forward across your portfolio? Then relatedly, what are you expecting in terms of price cost relative to that inflation? Thanks. Yeah. You know, as we said, Trevor, at the start of the year, in terms of price cost and, you know, and how that came through in the forecast, it was relatively neutral for the full year. We continue to have that expectation. Back to inflation. There's, you know, three areas where there is some exposure, but again, we've taken steps to mitigate exposure. One is around the virgin resins, right? On that front, we've essentially, you know, have a fixed cost for the rest of the year. We know what that is, and that's already baked into the forecast. The second place of exposure is around, you know, diesel prices where we, you know, we pay for our freight for inbound materials and then certainly for, you know, transfers between our plants and so forth. Even there, we've again, we've taken steps to, you know, push back against vendors on kind of the actual cost of raw materials, so we offset some of that, the diesel price inflation. We're managing, you know, how we do our internal transfers and so forth to again mitigate any impact from diesel costs. Look, the third place is, you know, on PVC, the new product that we've introduced. Our costs are fixed for, you know, again, as you remember, this is a product that we source to a third party. Our cost is fixed through the balance of 2026. On all these fronts, we're well-positioned in terms of managing any inflationary impact. Very helpful. Thank you for all the color, and good luck moving forward. Thank you. Thank you. The next question comes from Jeffrey Stevenson with Loop Capital. Hey, thanks for taking my questions today. You mentioned a cold start to the year in January and February, and, you know, wondered if you saw any delays with the start of the spring selling season and seasonal markets such as the Northeast, that could, you know, benefit to key sell-through demand. Just to give you a little bit more color around that. If you look at the northern markets, let's just say New England all the way across to Minnesota and that upper northern belt, down double digits as we looked at Q1. You move to the Mid-Atlantic area, the Balt-Wash, and you just kinda drew a line all the way across the United States, about flat. Then as we went to the southern part of the United States, we started to see, once again, double-digit growth. Definitely we could see the weather influence, and we're just now starting to see some of the northern territories start to wake up. The promising part about this is where the weather has been good, we've seen some nice numbers across the board. Very helpful. Thanks for that color. Prith, you talked about, you know, the mid-quarter railing price increase. You know, can you talk about any impact from the, you know, new Section 232 valuation on, you know, your railing products and, you know, whether the increase will fully offset inflation pressure you're seeing? Yeah. In terms of, you know, we've talked about this before, tariffs in terms of our overall cost position, it's less than a 5% impact. Through our pricing initiatives, yeah, we're able to cover most of that cost increase. Great. Thank you. Thank you. The next question comes from Reuben Garner with The Benchmark Company. Thanks. Good morning, guys, and congrats on the strong start to the year. Most of my questions have been asked. I just want to ask a follow-up about inventory in the channel and then your own inventory. Your own inventory looks a little higher than usual in the first quarter. Just wondering if you could talk about that strategy. Is that just an extension of the level loading plan? Was it in part because of the slow start to the year? Is it you're more optimistic than the channel and just being prepared for a bounce back? Any color there would be helpful. We have our level loading strategy in place. We wanna make sure we're there to serve the market when the demand is ready. When I look at the channel inventory, I see it about flat the prior year. However, there's some pricing in there. From a lineal foot perspective, external to Trex, I see the inventory being slightly down. As we talked earlier in the call, you see like a lot of larger customers, like national accounts, didn't take as much inventory. We believe the demand is going to be there in Q2, therefore, we have a little bit higher inventory right now in Q1 as you look at that, because we know that once again, those customers are gonna need product right away as we move into Q2. That's really the only change as far as I see it. Great. Thanks. Congrats again and good luck. Thank you. Thank you. The next question comes from Trey Grooms with Stephens. Yep. Hey, good morning, everyone. Morning, Adam, Prith. Good morning. Prith, you I wanna dig into the railing and the impact on margins just a little bit more. You mentioned that lower railing sales helped the margins a bit in the 1Q with that mix. I think the expectation was for, you know, this higher mix of railing sales kinda through this year, to have a, you know, call it ballpark 80 basis point impact or gross margin. Is that expected to normalize in the 2Q fully? With kind of all the movements we've seen when raws and pricing that you've talked about and, you know, the initiatives to grow margins, which I understand you're not ready to fully kinda give expectations on that and timing and such, but is that still the best way to think about the margin impact for this year? Yeah, so- Maybe think about the improvement from there, more kinda in 2027. Yeah. Let's just again, let me maybe start with just reminding everyone of what we said back in November when we reported Q3 2025 results, right? At that time, we stated that we expected about 250 basis points of headwinds to adjusted gross margin in 2026 on a full year basis. We continue to have this expectation for 2026, and we finished 2025 with adjusted gross margin of 40% for the full year. Also in November, what we said was, yeah, 170-180 basis points of that 250 was entirely from the depreciation associated with bringing Arkansas to production readiness. Yeah, the balance 70%-80% is from railing growth, and we again continue to expect that for the full year this year. Now to your question, Trey, around, we had some about, as I said, in Q1, about 100 basis points of gross margin favorability from railing being smaller in the mix. In Q2, we expect about a little more than half of that to reverse. Then the rest of it will reverse through the balance of the year. That's how I would think about it. Yep. Okay. Thanks, thanks for putting all those pieces together. Adam, you mentioned, you know, you guys have historically been a marketing powerhouse, clearly. You're getting back to your roots there. Is the thought, you know, going forward, is the thought still that, you know, that branding and this marketing spin will continue at a similar level, you know, as far as, you know, to grow with sales, a similar level on a, as a percentage of sales and to grow with sales or with, you know, new product rollouts and things like this that some of these initiatives you guys have planned, where there'll be need to ramp that up more or are we at a level now where you feel that's kind of where we need to be over the long run? As long as I'm here, we're gonna be investing in marketing. The 18% is a really good number. I think what happened, especially as we got during COVID, you started seeing that SG&A number plummet. We were out of capacity from that perspective, and so we were delivering very strong numbers. If I go back in time though, would I invested more during that period? I would've, to create more awareness around the Trex brand. Will there be some leverage over time on SG&A? Sure, it won't be 100 or 200 basis points. It might be, you know, 10, 20, or 30 basis points as we expand or grow over time. I wanna make sure that we're still investing in that platform in order to get more contractors and more consumers in the door to buy Trex. We will continue to do it. When we can leverage, we will, but it's going to be very important to me that we invest in marketing moving forward. Very good. Last one for me and just a little bit of clarity, and I know it's early in your process, but more Adam, this is maybe more for you and just trying to get a better understanding of your appetite here around M&A. You know, this has become more of a focus for the company. Understand that. And you kinda noted on a few areas that you have interest. Just to get an idea, are You know, is there potential or is there appetite for, you know, larger deals out there? Are we more kinda thinking, you know, more kinda tuck in, kinda complementary stuff, all of the above? Any help on just, you know, getting more into your thinking around M&A? Our thoughts right now in our five-year strategic plan is tuck-in M&A, and I've really been very consistent from this perspective. Number one, vertical integration. When I say vertical integration, the only thing you're going to get out of it from Trex is margin expansion from that perspective. Number two, we have the license to own the backyard. From that threshold, from your sliding glass door all the way out to the fence, Trex could be anywhere in that backyard, so that's where we would go after next. The last one would be the envelope of the house. The way we view this is smaller tuck-in acquisitions that can really add value, and our brand is our number one asset, so there's a lot of smaller companies out there where the Trex brand makes a lot of sense. Once again, that would help us also potentially grow our TAM. You know, we reside in a $75 billion outdoor living market. Our TAM is around $14 billion, if we can expand that over the next four to five years to $20 billion or $25 billion in terms of TAM, that's nothing but a benefit to Trex in terms of the opportunities that we can go and grow market share. Got it. That's super helpful. Thank you. Thank you all for the color. Best of luck. I wanted to say congrats also on the new role and congrats on the great quarter. Keep up the good work. Thank you. Thank you. Appreciate it. Thank you. The next question is from Matthew Bouley with Barclays. Nika Dholakia on for Matt today. Thank you for taking my questions. First off, just wanted to touch on some of the capacity dynamics. I'm curious if you take into account everything you guys have said on demand trends, what you're hearing at the contractor level in terms of overall customer sentiment. I'm curious how this kind of supports your strategy around incremental capacity, and then any details around how you would adjust the capacity network as the Arkansas facility ramps. Is the Arkansas capacity displacing any production elsewhere? Thanks. Yeah. From the contractor level, we're still seeing the contractors book out there, I'd say on the low end, it's six to eight weeks, and in some areas it's 8-10 weeks. In some cases, contractors feel slightly better this year than they did last year. From that perspective, we feel good. Although, I think a part of that is the marketing investment. We are seeing significant double-digit growth in the leads that we're giving over to our contractors, so that also could be one of the reasons why we're seeing an extended backlog from that perspective. On the capacity front, we've been very consistent saying that as we look at Little Rock and we start to look at our growth, that we would be looking at opening that in the first half of 2027, where we sit at today. Even if we didn't see as much growth, Little Rock still provides us a lot of leverage in terms of that's gonna be our lowest cost facility moving forward. We have one facility, namely, here in the Winchester footprint, that's over 30 years old. What we would do is maximize in terms of our manufacturing footprint and where that we need to go longer term. Our expectations are, we expect to see some good growth in 2027 through 2030, and we're gonna need all that capacity from Little Rock to Winchester to Nevada. Okay, great. Really helpful. Last one for me. I guess with the introduction of your PVC product, can you guys talk a little bit about more how it's faring on a regional basis? In the Northeast, West Coast, how the demand's been trending. More broadly, I think you guys had touched on a little bit pro versus DIY. Can you talk a little bit about the higher-end luxury? Is that still really outperforming opening price point, or any details around that? Thanks. Yeah. We still see outperformance from that middle to higher end consumer, which has been consistent the last several years. Trex is really on the marketing side, putting a lot more efforts on conversion to wood. We have a new marketing campaign called No Regrets. If you've ever seen it on TV, it's, it shows, you know, the dock owner that has to do all the work around maintaining the wood versus the dock owner that has the Trex deck and is just gonna go out and go, enjoy his boat for the day, which the boat's called No Regrets. It gives you a really good visual. There's a lot going on from that perspective to target wood, and that's a huge focus for Trex. On the PVC front, we've had a great rollout on the West Coast. We're actually ahead of expectations on the manufacturing front. We actually are getting an increased supply from our supplier. From that perspective, the largest market for PVC is in New England and the Mid-Atlantic, and we have quickly opened up those two regions as we rolled into Q2. You know, we think that is a good opportunity in terms of growth. That's a $500,000 million market when you look at the PVC market, and Trex has not played in that whatsoever. We have plans to expand that over time and see that as a great opportunity for growth. Great. Thank you. Thank you. Thank you. The next question comes from Rafe Jadrosich with Bank of America. Hi, good morning. Thanks for taking my questions. Prith, can you talk about how you think about the right level of leverage for the business well longer term? Would you be continued to open to buying back more stock as the free cash flow frees up next year? Yeah. Rafe, thanks for the question. I think we've said this before. You know, overall, we wanna manage the, you know, a company leverage between one and two times. Again, as we said on the call, you know, this year, free cash flow is gonna increase by, you know, call it about $100 million relative to last year. We've already, you know, we expect to complete $150 million in buyback by the end of this quarter. We'll look at the rest of the year. We'll look at where free cash flow is, how the business is doing. Certainly, you know, with the board's new authorization, we have the capacity to do more buybacks. Right now, again, based on, you know, how where the stock price is relative to what we think our intrinsic value is, I think it's still a really compelling opportunity. We'll look at that. Yeah, going forward into 2027, we'll have even more free cash flow because we'll essentially be done with all of the capacity expansion. Again, you know, share buybacks will continue to be a significant part of the capital allocation going forward. Great. Thank you. Adam, just on the investment you're making, just can you give us a little bit more color on how you think about, like, how that will be allocated and what the priorities are between, you know, how much of that is hiring more sales versus marketing? Just can you just give us a little more color on how it'll be allocated? Yeah. I think, bigger portion of this is gonna be marketing related in the investments that we're making moving forward. From creating awareness on, you know, whether it was, linear TV to streaming to podcast to any forms you can think about out there to get the Trex name, and then to drive it to trex.com, there's investments on the website that we have been making from that perspective, to investments on innovation. Once again, if you want game-changing innovation, you have to invest in some things from the R&D front. Really when I look at the major buckets, it's going to be marketing and innovation. There's some investments here as we look at sales to support the strategy and the things that they have to do to execute the strategy longer term. Thank you. Very helpful. Thank you. Thank you. That concludes the question and answer session. Now I would like to turn the floor to management for any closing comments. Thank you, everyone. Prith and I look forward to speaking to you and seeing you at the upcoming conferences in the coming weeks. Thank you. This concludes today's teleconference. Thank you for attending today's presentation, and you may now disconnect your lines.