Q1 2022 Trex Company Inc Earnings Call
Good afternoon, and welcome to the tricks company first quarter 2022 earnings Conference call.
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Please note. This event is being recorded I would now like to hand, the conference over to Victoria. Please go ahead.
Good afternoon, and thank you everyone for joining us today without the nickel or Bryan Fairbanks, President and Chief Executive Officer, and Dennis Schott, Senior Vice President and Chief Financial Officer.
Joining Brian and Dennis.
Okay, Vice President General Counsel.
Thanks much.
The company issued a press release today after market close containing financial results for the first quarter 2022.
The release is available on the company's website. This conference call is also being webcast and will be available on the industrial relations page of the company's website for 30 days.
I would now like to turn the call over to Amy.
Amy.
Thank you Victoria.
We began 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 19 thirty-three. Another 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 Truckstop 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.
That introduction I will turn the call over to Bryan Fairbanks.
Thank you Amy and good evening.
We appreciate everybody joining us to discuss our first quarter performance and business outlook for the remainder of the year.
We are pleased with our strong first quarter performance results led by a robust 40% increase in trucks residential sales, reflecting double digit increases in both volume and pricing.
This performance is a clear indicator of our success in engaging with consumers contractors and channel partners, which in turn leads to increased market share. Thanks.
Thanks to our recognition as the number one brand in outdoor living together with our new expanded capacity, we are confident that Texas, capturing more than its share of the ongoing conversion from wood to composite products.
Similar to prior periods, we successfully leveraged our 38% increase in consolidated net sales to drive even stronger growth in earnings.
Evidenced by our 49% year over year growth in EBITDA, and 48% growth in diluted earnings per share.
Margin expansion in the first quarter reflected benefits from price realization and manufacturing cost reductions through continuous improvement initiatives.
We delivered on the near term, we continue to advance our longer term strategic initiatives by investing in our brand cost improvement initiatives R&D capacity and share repurchases.
In the first quarter, we made strategic investments to enhance the support of our brand and channel partners, including the debut of our new metrics, we used to get to marketing campaign. After two years of reduced marketing spend.
We also launched trucks Academy and online multimedia content hub dedicated to helping the do it yourself customer bring their deck dreams to life by providing how to content. We are already seeing great results in just the first month after its launch.
Continuous improvement is part of our DNA attracts and we are investing to drive margin enhancement through supply chain and manufacturing cost out programs.
We recently hired a new director to lead a team dedicated to spearheading these initiatives.
Innovation has long been a priority of trucks and through investments in people processes and capabilities, our R&D pipeline is robust.
Customers will have the opportunity to experience some of our latest development as we expect to launch new products in the coming months.
Well, we recently wrapped up our deck and capacity expansion in Virginia in Nevada, we're making investments in little rock as we move closer to breaking ground, while adding incremental rail capacity in our existing facilities to keep pace with the growth in demand.
We believe there is significant opportunity to continue to increase the attachment rate of our railing products to our decking sales.
And in the first quarter, our strong cash flows and balance sheet allowed us to return value to share owners by repurchasing $75 million in Trek stock.
We continue to be in the market during the second quarter.
With the recent pullback in the shares we really view repurchasing <unk> stock is a compelling investment.
In March I spent time meeting with investors, while Dennis participated in several non deal Roadshows. This gave us the opportunity to hear directly from many of our largest investors and several sell side analyst about concerns regarding the impact of current macroeconomic trends on our business.
As the market leader, we have access to substantial real time data from a wide range of channel partners contractors and consumers.
And while we won't deny that a certain level of uncertainty exists. We are confident in our selling environment given the following factors that allow us to operate from a position of strikes.
First we believe that our tight are tied to the repair and remodel sector makes us more resilient than many other sectors.
Monitors priced item moving tend to invest in their existing homes and pursue renovations, especially those that add value to their real estate.
Second our data indicates that less than 10% of deck installations are purchased on credit and then general Trek stacking appeals to a more financially stable consumer.
Third the wood detracts conversion is underway and we have the brand recognition the product lineup and capacity to efficiently capture additional share.
Fourth.
For the first time in several years, both our pro and retail channels are well stocked for the season and we have the capacity in place to meet the surge demand and supply new customers.
Finally, if market conditions change, we have multiple levers to pull to ensure that tracks remains resilient.
These factors support our confidence in <unk> company has the ability to grow and perform at a rate that is above industry average.
The <unk> brand is synonymous with the highest quality outdoor living products available are <unk>.
Products retain their appeal with minimal maintenance, representing both a favorable long term value proposition in an environmentally responsible choice for consumers visa.
These attributes have been crucial to our success to date and will continue to drive our progress in the future.
Now I will turn the call to Dennis to provide a more detailed view of our first quarter financial performance Dennis.
Thank you, Brian and good evening, everyone I'm pleased to report on <unk> record first quarter results and provide our expectations for the second quarter and full year 2022.
We had a very strong start to the year with first quarter sales rising 38% to 339 million driven by a 40% growth in net sales at <unk> residential.
The increase in <unk> residential net sales reflects double digit volume growth from strong secular trends and the benefit from pricing actions to address inflationary pressures.
<unk> commercial contributed 12 million to sales during the quarter.
Consolidated gross margin in the first quarter was 39, 8%, representing an 80 basis point expansion year over year <unk> residential.
<unk> gross margin was 49%, reflecting price realization and production efficiencies more than offset inflationary pressures on raw material labor and logistics. We also benefited from a more stable labor situation, allowing us to reliably hire and train our workforce to support our expanded.
<unk>.
<unk> commercial gross margin was 10, 4% compared to 17, 2% in the first quarter of 2021.
SG&A expenses as a percentage of sales decreased by 100 basis points to 11, 8% as a result of improved operating leverage supported by strong topline growth and.
And more than offset increased promotional spend or are new at tricks, we see it to branding campaign.
Net income for the 2022 first quarter was $71 million or 62 per diluted share representing increases of 47%, 48%, respectively from net income of 49 million or <unk> 42 per diluted share in the year ago quarter.
EBITDA increased 49% to 105 million with EBITDA.
<unk> margins strengthening to 31, 1% compared to 28, 9% in the first quarter of 2021.
We generated cash from operations of $74 million in the first quarter and invested $22 million or capex, primarily related to cost reduction initiatives.
Our new Arkansas facility and capacity expansion initiatives at our existing facilities.
Given our strong cash flow our confidence in the company's long term growth prospects and our belief that tricks shares represent a compelling value, we repurchased 833963 shares of our outstanding common stock for $75 million in the first quarter.
As at the ended the quarter, we have an additional $7 2 million shares remaining that may be repurchased under the existing program.
Turning to our financial outlook, we are providing the following metrics for the second quarter and full year 2022.
Second quarter consolidated net sales are expected to range from 375 million to 385 million representing year on year growth of 22% at the midpoint.
For the full year 2022, we're expecting strong double digit growth.
Inclusive of the one time channel infill that occurred during the second half of 2021.
SG&A is expected to be in the range of 12% to 13% of sales for the full year.
We anticipate incremental EBITDA margin to be between 30% to 35% when compared to 2021 adjusted EBITDA.
Our tax rate is anticipated at approximately 25%.
Depreciation will range from 40 million to $45 million.
Capex will be in the range of $200 million to $220 million inclusive of the construction of our third facility in Arkansas, which is also a modular the new corporate headquarters and additional investments in our core business.
Now I will turn the call back to Brian .
Thank you Dennis to sum up our first quarter performance has set the stage for a year of strong double digit revenue growth in 2022 and reflects our continued ability to provide the consumer with a broad range of product choices and deliver meaningful and measurable value throughout the channel.
Well, we understand the uncertainty created by the current macro economy, we remain confident in our ability to outperform because treks is unmatched distribution and retail presence. The most recognized brand and a seasoned leadership team to address the opportunities and challenges that lie ahead.
Operator, please open the call to questions.
Yeah.
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 youre using a speakerphone. Please pick up your handset before pressing the keys.
Withdraw your question. Please press Star then two.
We ask that you. Please limit to one question and one follow up question, but I assume at this time, we will post a momentary symbol Eros now.
Our first question.
Comes from.
Ryan Merkel from William Blair. Please go ahead.
Yeah.
Okay.
Apologies.
From Keith Hughes Suntrust. Please go ahead.
Okay.
Residential segment, how much of the growth in the quarter was dollars verse.
Dollars of pricing versus units.
Could you repeat the question the first part of it cut out on us.
Within residential growth in the quarter, what was the breakout between price and mix versus units.
Hey, Keith this is Dennis it's a great question. So we saw growth relatively 50 50, it was a balanced growth between price and volume and units okay.
And given some of the raw material inflation that we saw end of the first quarter given the influence of the war could you just talk about where you are on price cost and is that going to play a more depressive roll in the second quarter than what we saw in the first.
We took pricing coming into the new year and that was across a significant portion of our product line we.
We took a little bit of pricing just a couple of product lines or select decking.
And signature or aluminum railing line, because that's really where we've seen a lot of inflation come through with our aluminum pricing.
So with that we feel good about where we are from a price to cost relationship at this point.
It is that going to remain in the second quarter or will you or will it be so a little bit of lag of catching up on that.
No that was the additional pricing we talk we'll start we'll be really may that we'll start seeing that come through.
Thank you.
Thanks.
Thank you. The next question comes from Jon <unk> from UBS. Please go ahead.
Hey, guys. Thank you for taking my questions.
The first one Brian I think you with.
834000 shares purchased in the quarter I mean, that's that's a start it's about 1% of your shares outstanding I think but with the stock down, but it's down year to date and your positive outlook.
Why not be much more aggressive on the repurchases.
Those are discussions that we have with our board of directors regularly regarding how we're going to allocate our capital like we've shown that share repurchases are an important part of that capital allocation, but it is something that.
We definitely have considered and if.
Something's decided there will be sure to let the market now.
Okay. Thank you and then in terms of the kind of the cadence of revenue.
The third quarter and fourth quarter should we expect sort of the normal seasonality, where third quarter and fourth quarter, both stepped down sequentially and could revenue in the third and fourth quarter actually be down on a year over year basis or negative growth on a year over year basis I should say.
Yeah, Hey, John So yeah. This is shaping up to be a more normal year. When you look at Q1. It was truly an early buy situation Q2 Q3. They are the main decking seasons for US and then Q4 looking at that more.
As a rebuild rebalance of channel inventories as the year plays out so I think you're thinking about it right I think Q2 will be the largest quarter in terms of absolute.
Followed closely by Q3, and then Q4 of course as you know we had the onetime channel infill last year that will have declined.
Thank you guys.
Thanks.
Thank you. Your next question comes from Ryan Merkel from William Blair. Please go ahead.
Hey, guys, sorry about the phone issue there no.
No problem, good evening, Brian and good evening.
A nice quarter I wanted to ask about EBITDA margins I think the prior 22 guide assumed EBITDA margins would improve from <unk> levels and I'm wondering if this is still the outlook or has the cost inflation picture changed.
So so Ryan this is Dennis so we are reconfirming, our guidance of 30% to 35% incremental EBITDA margins for the full year.
And when I take a look at consensus and see how consensus is shaping up I feel like consensus this isn't a good spot right now with regard to the Incrementals.
And so it's still early in the year.
And while we're pleased with the performance in the first quarter. There is a lot of puts and takes for us to manage inflation.
Being one of them, but also we've got some good takes in the cost outs that were working so when I put it all together I really feel good about that 30% to 35%.
Okay.
<unk>.
Fair enough and then Brian you mentioned levers to pull I think to protect margins as sales slow.
Can you just unpack that a little bit.
Oh sure yeah, so from a well.
We would be able to react quickly from a raw material perspective, being able to pull back the buying on volumes of raw material labor, we'd be able to pull back on if we felt that it was going to be a more significant pullback in the market. We can also pull back on capital spending.
So it's something that.
Not just in times of uncertainty that we have a game plan in place for but it is something that we do prepare for and think about on a regular basis.
Very helpful Best of luck right.
Thank you. Your next question comes from Stanley Elliott with Stifel. Please go ahead.
Hey, guys. Thank you all for taking the question quick.
Quick question I know, it's still a little bit early but can you talk about any conversations you're having with dealer level right now about reorder activity or eat and if youre seeing a level of reorder activity right now.
Yeah sure. So we're seeing good inventories at our really throughout our channel, including our dealers our dealers are seeing good activity.
There were probably a couple of weeks are aware weather wasn't great, including the last couple of weeks.
We are starting to see a weather turn.
And the comments that are coming back in both from comments and from dealers have been very positive what are the opportunities that we've talked about in prior calls as this capacity comes on and inventories are refilled the through the channel we have the ability to go out and gain new business I was just with our vice president of.
Sales right before the meeting.
Going through a couple of examples where we've been able to pick up accounts that we really haven't been able to do over the past couple of years. So I expect to see more of that as we work through the season.
Yeah.
Great and.
In terms of the tracks Academy I know you guys have done a lot with working with the dealers on that could you tell us what you're learning from your.
Customer preferences insight intent to purchase anything like that would be great.
Well, we just launched the Trax Academy DIY videos about a month ago, and we are seeing a good viewership of that we're able to see from that where are they going from that video within the tracks system, whether its dex dot com or our tracks Dot com.
The type of products, they're looking for one of the things that we realized is there really wasn't much in the way of good do it yourself videos on Youtube or on other websites that would help a customer with a DIY installation. So this is really to help them.
Consumer and make our relationship more sticky with that buyer.
Perfect. Thanks for the time and best of luck.
Thanks.
Thank you. The next question comes from Josh Chan with Baird. Please go ahead.
Hi, good afternoon, Brian .
Congratulations.
Thank you.
I guess my question is on the guidance.
Could you guys kind of runs through for the year, what do you expect between volume and price and I guess ultimately does the strong double digit this quarter differ from the strong double digit yes that you expressed last quarter.
Well no.
Strong double digit we are still confirming that for the full year I think when you take a look at what we did for Q1 we.
Brought in 38% growth.
Q2, we're targeting 22% growth for for the first half that and it looks like 30%.
And as we move into the to the back half of the year of course.
We are comping, some very very strong growth quarters from 2021 remember in Q3 of 2021, we grew at 45% year on year in Q4 was another 33%.
So we've got some.
Work to do not only in Q2, but then in the back half. So we're committing are reconfirming to that full strong double digit growth guide for the full year.
Alright, great. Thanks for that color there and.
You guys also mentioned cost out in your prepared remarks I was just wondering it.
It seems like you guys already run pretty lean but.
Attunity DSD is that correct.
Over the past couple of years, our primary focus has been on bringing on additional capacity to support the.
Extremely strong marketplace, we have that capacity in place now we're able to turn our engineering skills back to looking for those cost efficiencies I noted in my prepared remarks, we've hired an executive to be able to run that area within the business and because it hasnt.
Ben the top focus for us for some time now there was quite a bit of opportunity for us to go after it we'll talk further about that in future calls.
Alright, great. Thanks for the time and good luck for the rest of you. Thanks Josh.
Thank you. Your next question comes from Alexander Leach from bearing but capital markets. Please go ahead.
Hi, guys. Thanks for taking my question.
Can we just start on the operating leverage that you saw in Q1.
Q4, it sounds as though you won't gain much operating leverage through the year.
We have to wait for that.
G&A guide to be still in that 12% to 13% can you just talk a bit about the moving parts and whether you expect for the SG&A acceleration through the year.
So the answer is yes, we do expect SG&A acceleration through the year. The key part of that is branding I mentioned, a little bit about weather in the first quarter, we always make decisions when it makes sense to turn on branding and which parts of that branding to turn off.
That has turned out quite significantly as we've moved into the second quarter. So you can see it cost to move whether it's a matter of two or three weeks you can see it move out of the first quarter into the second quarter, which is exactly what happened here. When we look at it closely to understand what will drive the largest value for bringing consumers.
In the door for trucks.
Okay, Great and can you talk a bit about.
What you've seen in terms of volumes.
Yes exited the quarter and made since Q2.
So as I mentioned, there are a couple of weeks of not so great weather in the northeast. So it differs depending upon the geography, we are talking with our distributors, where we are seeing their inventories start to go down which is normal for this type of this part of the season.
They are seeing that volume growth coming through with strong order backlogs from the pro channel.
Okay, great. Thank you guys.
<unk>.
Thank you. The next question comes from Jeff Stevenson with Loop capital. Please go ahead.
Hi, Thanks for taking my questions and congrats on the strong quarter.
Thanks, Jeff.
Can you talk more about the double digit volumes you saw in the quarter. So is this broad based or was there any specific geographies or channels driving the stronger growth that you would call out.
It was broad based so we saw our DIY customers get their inventories to the levels, where they needed to be as we move into the decking season than.
And we also saw our approach at all build inventories to where they're comfortable normally in this industry. What you'll see is the first quarter inventories tend to be the highest inventories.
They are there to be able to support the channel as it really turns on to sell decking through.
Our distributors run their inventory is anywhere between four and six turns.
And that number is a little bit higher as you come out of the first quarter. So the great news is we have not been in a position where appropriate levels of inventories for a number of years now and it goes back to the comment I made it allows us to go on offense and really start selling again and open new.
Accounts.
Great and then just on cost in place and I was just wondering if you could give any thoughts on kind of how it is currently versus your expectations coming into the year with transportation and raw materials would be higher just any thoughts on kind of anything that kind of happened differently than you were expecting them and how you.
The trend moving forward well.
We talked about inflation moderating somewhat in 2022 from 2021 and that is what we're seeing yet at the same time, we did see some raw materials in some freight cost creep up higher and that's why we went out and took price associated with those raw material increases.
<unk>.
Other than that though it continues to be continues to be moderated from last year.
Okay. Thank you and best of luck. Thanks.
Thanks.
Thank you. Your next question comes from Reuben Garner from the Benchmark Company. Please go ahead.
Thank you good evening, everybody and congrats on the strong quarter and robots driven.
So.
Brian I think you referenced the strong pro backlog have you guys noticed any.
Just in behavior with the DIY customer or end market.
Any color there would be helpful.
We have seen more strikes through the pro channel than we have within DIY.
Yet we are still seeing growth within DIY as well too, especially now that we're moving into into the decking season.
Okay, Great and then.
Further on that which is somewhat normal for DIY, you see the stronger quarters for DIY or during Q2 and Q3. So it's much more of a pronounced.
Sales growth for them in Q2, Q3, whereas the pro business tends to be not quite as much of an increase in those quarters.
Perfect very helpful. And then you mentioned new customer opportunities.
Curious.
On the international front.
If there had been any.
Progress there now that you've got some product loosen up how long do you think that'll take to kind of you.
You know pick up some some wins and do you think that that will come in the form of you know is it going to be kind of blocking and tackling or is there a big target out there that you guys can pick up.
To move some product pretty pretty quickly.
So much like my comments about North America inventories are international dealers are well stocked going into the season, it's fair to say in Continental Europe . There is a lot of macro uncertainty.
That marketplace, but they are ready to service the market and we haven't had the materials to fully service those markets over the past couple of years, we'll have to see what the consumer behavior is we'll have a much better feel for that as we get through the second quarter.
Great. Congrats again guys. Thanks.
Thank you. Your next question comes from Matthew Bouley with Barclays. Please go ahead.
Hey, good evening, everyone. Thank you for taking the questions.
Wanted to ask a follow up on some.
The concerns you mentioned at the top Brian around.
Addressing concerns around remodeling spending I think I heard you say that less than 10% of decking installations are purchased on credit I'm curious if that you know to the extent you know this is that encompasses other forms of financing such as if someone did like a cash out refi for example, or you know even if you don't have that level of.
Details of that just curious if you have any kind.
Kind of anecdotes.
How do consumers tend to invest in these sort of bigger ticket decking projects.
Long side higher interest rates. Thank you. So the answer is yes. It does include both a fully credit whether it would be a cash out refinancing our credit line and any type of credit. So that is included in.
The 10% number we also talk to our contractors as well as our dealers to understand if they're seeing a change in sentiment in the marketplace and we've not seen a shift to date on that.
Perfect.
Any color there and then.
I wanted to follow up on the margin side.
I heard your dentists around the commentary on.
Your view to consensus and comfort with that but just kind of thinking again about last quarter. You had said that there was sequentially improving margins expected through the year and then obviously Q1 came in at least versus our model a little better than expected can you just speak again to sort of the cadence of margins.
And given how Q1 I guess kind of came in ahead of the full year incremental margin guidance.
Should we assume that there's at.
At some point, you'll you'll be.
Sort of either coming in below.
The guide through the year or just kind of steady at just sort of the view on the cadence of margin progression through the year. Thank you.
Yeah, It's a fair question.
And I'll just go back to a couple of things here. So basically we're still confirming that 30% to 35 I think you guys are in a good spot from a consensus standpoint, it's still very early in the year and so while we did come in at a pretty good clip above.
Above the 30% to 35% range, it's really only two percentage points above so it's not like we killed it or knocked it out of the park and it's in its early days and we've got some tough comps coming up in that second half and some inflation out there that we have to keep an eye on.
Got it well thank you Dennis Thanks, Brian Good luck guys.
Thanks.
Thank you. Your next question comes from the film.
We can freeze. Please go ahead.
Hey, guys.
Dennis last quarter, you guys were kind of in you were kind enough to talk through the growth Algo for 2022, I believe it was low teen price plus two times R&R.
Minus the 100 million channel infill in the back half, which I thought we interpreted as being mid to high teens sales growth can you kind of give us a refresh on how that algo looks.
You know at this point of the year.
Phil you did a nice job of putting that out there and I have no change to how youre looking at it.
Okay Super.
And it sounds like maybe pricing is a little better at this point so that that's good color.
And I guess, Brian for you I'm sorry go ahead Dennis.
Just just keep keep.
Keep aware.
That pricing.
As you know 50% of the growth now, but as you move forward in the year remember we took pricing last year. So the the contribution of price as a percent of the growth will decrease throughout the year.
Yes, the only comment I made there Dennis was just that it sounds like you guys took on some incremental pricing not big but some incremental pricing tactically. So I figured that that low teen pricing guide you guys gave coming into years more than doable. At this point is the only point I was making.
And.
And I guess for a question for Brian just just give us a little history remind us how pricing kind of held up in your business during the financial crisis and in periods of deflation I believe it held up pretty well and then you had some nuance with trans and being rolled out but any color on how to think about the pricing dynamics of your business to go through a cycle, yes, you're absolutely correct.
It did hold up through the last recession that we had during the course of that recession company pulled back about 20% over a number of years, so performed much better than many other R&R.
Companies in the marketplace.
The company also is very different today than we were back in 2007, we were going through a significant turnaround. The overall industry was losing share to wood at that point with our first generation composites.
Today market leader.
We've got all of the products, we need to be able to convert higher shares against wood.
So we feel as though we stack up pretty well, if we see a significant economic change.
Okay Super Thanks, a lot.
Thanks.
Thank you. Your next question comes from Alex rigor from B Riley Securities. Please go ahead.
Great. Good evening. This is min for Alex Hi, Brian Dennis a couple of quick questions for you.
Just wondering if you saw any shift in product mix growth.
Christine to enhance the lower lower priced product.
Maybe more affordability concerns at that lower end.
So the shift only shifts we saw it was in line with what we expected, but because we have the additional capacity some of our customers pulled back on some of the product lines that they were carrying so those customers are now able to bring in the full product line in most.
Of that where they pulled back would have been in the enhanced.
Enhanced product life. So we did see a slight shift to that in the first quarter that is normalized as we've moved into the second quarter again.
And that's really just the market getting healthy with its product stock and mix.
Right.
Based on customer.
Demand correct.
Okay also I haven't really talked about commercial margin I know that this is kind of a transition year for the commercial business do you expect the <unk> level to be a good run rate for the next coming quarter or is it maybe a little bit of growth in the second half of the year.
And maybe any details around the pipeline that youre seeing on the commercial side right now so from a revenue perspective that will start to increase as we get into the back half of the year.
From a margin perspective.
I think the first quarter, we worked through a number of older projects that werent appropriately inflation protected as we look at the backlog that we have as we go out Q3 or Q2 through Q4.
Those projects are mostly behind us. So we will start to see that margin improve as we work through the rest of the year.
Other thing that we saw as the.
Bookings have increased quite nicely, we had higher bookings in the first quarter of this year than we had all of last year. So with the Abi normally in this business. There is a six to nine months delay from Abi going over 50, before we start to see that bookings benefit come through and we're seeing.
That come through at this point.
Great color. Thank you.
Thank you. The next question comes from Trey Grooms with Stephens Inc. Please go ahead.
Thanks. This is a normal counts go on for Trey grooms and thanks for taking my questions.
Great. So first.
Thank you mentioned now that you've got capacity ramped up your looking to introduce some new products. Later this year and I was hoping to get a little bit more detail on that you know maybe what price category, whether it's good better best and if you expect that to have any mix impact as we look at the balance of the year.
We've mentioned in prior calls that we see some space.
At the top end of the marketplace. So it will be focused there.
Stay tuned for future product announcements, we're not going to get into the features and benefits of those products here on this call.
But it is something that is coming at us pretty quickly.
Alright, Thank you and then for my follow up.
Capex was maybe a little bit lower than we expected in the quarter, but I think you reiterated the full year guide of $200 million to $220 million. So maybe just help us understand the cadence as we look at the rest of the year on Capex.
Yes, I still reaffirm the guide I think what we're dealing with here again is the long lead times that we've talked about.
So that came a front and center with us and so that's resulting in some of the delays, but feel good about it and so clearly it's going to pick up here in Q2, and Q3 and Q4 for us to to hit the 200 to 220.
Alright, that's helpful. Thanks for taking my questions and good luck with the rest of the year.
Thanks.
Yeah.
Thank you. Your next question comes from Dan Oppenheim with Credit Suisse. Please go ahead.
Thanks very much.
I was wondering you talked about the inventory levels and then the sort of trend over the quarter, but wondering what you saw in terms of the sales activity in April versus.
March and wondering if you saw anything in terms of pre buying or your confidence in terms of just the activity based on.
Demand from that's out there for projects in touch.
I'm not sure what you're referring to you from a pre buy perspective people did build inventory to normal healthy levels. We don't have concerns about the inventory level. That's in the market, it's where it needs to be to support to the size of the market.
We are at today and as we move into April we're seeing better weather.
Absolutely seeing the shipments out increasing.
Great. Thanks very much.
Thank you. Your next question comes from Michael Rehaut with Jpmorgan. Please go ahead.
Hi, Thanks for taking my question and congrats on the results.
Just wanted to get a little more clarity if possible on the <unk> hundred million.
Comp inventory infill.
In the back half of 'twenty one.
If you feel that that number is more weighted let's.
Let's say 60, 42 thirds, one third whatnot.
In <unk>.
<unk> versus <unk>.
And you know if there are any trends that might emerge that you know.
Let's say drive back half year over year growth above 10%, because I think right now if you're reaffirming the.
Mid to high teens type of total growth that would imply.
Something some growth but below 10%.
Yeah, So when we look at.
The growth and.
What are the back half as that inventory infill was about 75% in the fourth quarter at 25% in the third quarter, a onetime inventory infill so that does create a bit of a comp perspective.
As we look forward to the back half of the year I think we need to see a little more clarity from the overall economic environment before we can really take a position of can the market remain.
As strong as what we've seen over the past couple of years in the back half of this year and I think it's just a little bit too early to.
Go out that far.
Okay.
Just on that.
Before I get to my second question, just as a clarification I mean, if you're talking about 75%.
Of $100 million in the fourth quarter of 'twenty one.
Would imply fairly negligible growth outside of that in which.
Seems a little.
Pricing or even conservative I might argue.
You know given how strong the underlying market was at that point or am I not thinking about that right.
Fair to say that we're looking at the business with a conservative eye knowing that there is economic uncertainty at.
At this point.
Okay.
Maybe just the second question on kind of going back to price cost and just making sure we're thinking about it correctly.
Sure.
With the additional price increases that you've put into place in the first quarter.
Given some of the continued raw material inflation.
Yes.
No.
Price cost positive in the first quarter on a margin basis.
And with the price increases that you've put in place.
Is there anything to really think that you wanted.
Be able to sustain the gross margins that you generated.
$39 eight in the first quarter going forward or.
Is there just still some timing in there.
We're <unk>.
Cost inflation might be a bigger impact in the second quarter relative to the first.
So I think it's fair to say that from a price cost perspective in Q1, we recovered margins as we as we expected.
And then our most recent price increase went into effect may so.
That's dealing with some of the inflation that we did see at the end of the quarter and it's starting and it's more pronounced now so we feel like we're going to be in a good spot price cost wise for the remainder remainder of the year.
Okay. So if I'm understanding that right then.
Maybe price cost neutral in the first quarter, maybe a little negative in the second and then regaining it in the back half is that fair.
We've not given that level of detail I think Dennis talked earlier, where said that where the consensus is with.
Incremental EBITDA.
We're comfortable with at this point, but we have not gotten to that level of color.
Yeah.
Okay. Thank you very much thanks.
Thank you. Your next question comes from Adam Baumgarten from Zelman. Please go ahead.
Hey, Thanks for taking my questions just one for me just some of the investments you made in the first quarter. It sounds like maybe some of those were pushed out due to whether should we expect starting in Q2 incremental EBITDA margins to return back to that 30% to 35% level and then kind of stay there for the remainder of the year after outperforming in the first quarter.
Yeah, we talked about the incremental EBITDA guide of being like 30% to 35% again, we feel we feel really good about that for the for the full course of the year.
Remember if you look at Texas histories, there is going to be ups and downs, whether it's incremental gross margin or incremental EBITDA over the course of the year.
When you look at tracks on a full year basis, we've consistently delivered on those numbers. So.
So we're not going to say, it's necessarily up or necessarily down.
But we're.
We're comfortable with where the guidance is at this point and we.
We see a clear path.
Hey, Bob.
Thanks.
Thank you. This concludes our question and answer session for today I'd like to turn the conference back over to Brian Faith for any closing remarks.
Thank you for your questions and attendance in today's call. We look forward to speaking with many of you during the quarter at conferences and other events have a great evening.
Okay.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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Yeah.
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