The latest inflation data putting more stress perhaps on household budgets who are feeling the strain of higher costs, and this in turn may put more pressure on discretionary spending, including on home improvements. Companies like Trex will be watching this closely. The company makes composite deck materials for decking, outdoor flooring. The company's CEO, Adam Zambanini is joining me right now. He's the relatively new CEO of the company. So thanks so much for being here. I think what just not even two weeks, right?

Yeah, not even a week.

Oh, well, congrats on on that new position. So, um, you know, we've been trying to sort of think through consumer spending in this environment. We earlier this hour were talking about sneaker spending. Now this brings us to decking spending. Um, what are you guys seeing out there in terms of demand and in terms of price sensitivity on the parts of your customers?

Yeah, so what we've been seeing the last several years is really that middle to high tier that's been doing exceptionally well. We even had that in quarter number one where we saw a higher mix, more profitable products that were sold through. But once again, that lower tier segment is is definitely struggling when you start to look at the gas prices that are out there today. So, from that perspective, we're investing a little bit more in marketing right now to convert those people which we consider wood consumers over into the category.

Gotcha, because composite is a little higher price point than wood typically.

That is correct.

Um, and how are you thinking about it also in terms of housing? which like I think most of the housing experts that we've talked to thought that things would be thawing a little bit by now with um rates having mortgage rates having come down, it's not really happening. If people are staying in their homes, are they building more decks? How do you how do they think about that?

Yeah, so Trex is 95% repair and remodel. Um we've not seen that category grow. the last four years repair and remodel has been down, which is something that reads the news have not seen in a really long time. Um we're seeing more and more people that, you know, we're an outdoor living experience. I don't consider us a building products company. So more and more people are spending time with their families on their deck. So, this is an opportunity, let's call it the staycation where you get to spend more time, enjoying it with your family, have your neighbors over.

Um you're looking at these decks that are spaces where they define your home. And one of the lowest cost places to invest in your home is actually your outdoor living space. And there's been a trend since COVID where more and more people are moving outside.

Um stepping into the CEO role, it comes at a time when the stock has been trending downward um over not just the last year, the last couple of years. So, how do you think about how to attack that and sort of change the business, change investor perception of the business?

Sure. So, I think we're a material conversion story. So, once again, 75% of the market is wood. So we need to bring those wood users into the category and get them to trade up. And then when you look from that perspective, there's also another category called PVC, which we've just entered into. So, we're looking for all these new markets that we're going to go out and to expand on there. Within that, I have five strategic pillars. You know, the first one is really to create an unbreakable bond with homeowners and pro contractors, making it easier for them.

So, a lot of the systems that we've done for the contractors are pre assembled making it easier to attach a railing onto your decking. Uh the second piece would be innovation. So, innovation is a big theme of of what I'm bringing to Trex where we're going to create innovation that's kind of separator technology making us a category of one. And so if I break that down and what that means is more and more people are looking for heat mitigation technology. So we've added that to our product lines, submersible marine applications or dryer fire fire prone predition um conditions out on the west coast.

Oh, okay.

We're starting to see more products in those areas. So we're going to be inventing a lot of products within those categories.

Okay, I want to ask you about the heat thing because I have sort of an anecdotal anec data point for you, which is that somebody in our team, I think it's their mom got a Trex deck, but it's hot to step on when it's when the sun is is beating down on it. So you're saying that's something that you guys are going to engineer so that it's not an issue.

Within the last couple of years, we've actually started to introduce it from the higher end of our product line, Trex transcend, we started to to add that technology. So what it does, it reflects the sun as it beats down onto your deck and reflects it up into the, into the air. We've now added that to our other product lines. So we now have it from the low end all the way to the high end of our product lines. And we've seen it be meaningful in terms of what the temperature difference underneath, underneath the sun.

Gotcha. Um, you're working on lowering the cost of railing also. I know that's one of your priorities.

Yeah, that's great. So, from that perspective, the fastest growing category that we have at Trex is railing, and there's, you know, railing can go from $20 a lineal foot to $250 a lineal foot. And so the margins on railing are slightly lower than where we are in decking. So in our five year strategic plan, the idea is while we're seeing railing grow at a higher rate, we need to continue to lower those costs of railing to expand margins over time.

Just really quickly, what is the tariff um story for you guys right now? How how much of an issue is that for you all?

Yeah, so not as much of an issue these days. It was about a year ago. So with that, there was some inflationary costs there. Some of those costs were passed along and we've taken price increases to cover the tariffs from the one thing about Trex that's really good is we're an all-American story. So, you know, we have the plants here, 100% of our decking is manufactured in America out of uh, Virginia, Nevada, and now we have a, a new green field that's opening up in Little Rock, Arkansas.

Gotcha. Yeah. All right, gotta leave it there. Thank you so much Adam for coming in. Really appreciate it.