Robust First Quarter Sales Reflect
Double-Digit Sell-Through for Premium Products and Early Buy
Program
Gross Margin Expansion Driven by Higher
Utilization and Cost Efficiencies
Guiding to Second Quarter Revenues of $380
million to $390 million
Reaffirms Full Year 2024 Guidance
Trex Company, Inc. (NYSE:TREX) (Trex or Company), the world’s #1
brand of high-performance, low-maintenance and eco-friendly
composite decking and railing and a leading brand in outdoor living
products, today announced financial results for the first quarter
of 2024.
First Quarter
Financial 2024 Highlights
- Net sales of $374 million
- Gross margin of 45.4%
- Net income of $89 million and diluted earnings per share of
$0.82
- EBITDA of $133 million and EBITDA margin of 35.6%
CEO
Comments
“This was an exceptionally strong quarter for Trex, reflecting
the continued appeal of the Outdoor Living category and
demonstrating strong consumer demand for Trex branded products.
Sell-through for premium products was at double-digit levels in the
first quarter, as our expanded portfolio drove strong end-market
demand, and our channel partners took advantage of our Early Buy
program, after ending the year with historically low inventories,”
said Bryan Fairbanks, President and CEO.
“First quarter trends and feedback from the Trex dealer and
distributor network indicate that the industry has returned to
stability and normalized stocking behaviors. Channel inventories
are at appropriate levels, and those inventories were built to
support our partners’ ability to meet the seasonal nature of the
decking and railing business.
“Profitability outpaced sales growth once again as higher
utilization and our investments in production efficiencies more
than offset the expected increase in SG&A costs.
“Supporting our strategy to gain share and expand addressable
markets through the development of new ancillary products, we
announced and began accepting orders for Trex®-branded deck
fasteners in the first quarter. This category expansion, when fully
seeded in 2024, will include solutions for every composite deck
fastening and finishing need, and is engineered to make
installation easier and more efficient for contractors. In
addition, the new Trex-branded deck fasteners will deliver a clean,
cohesive esthetic to the consumer, make it easy for customers to
choose Trex for their entire project and position Trex as a
one-stop supplier for decking, railing, and accessories,” Mr.
Fairbanks noted.
First Quarter 2024
Results
First quarter 2024 net sales were $374 million, up 57% compared
to $239 million reported in the prior-year quarter. The growth in
net sales was driven, in part, by the shift of our Early Buy season
from the fourth quarter of 2023 that added approximately $75
million in incremental first quarter 2024 sales, the channel
recalibrating inventories to prepare for the seasonal demand and
increased consumer demand. Total sell-through increased at a
mid-single digit rate in the first quarter.
Gross profit was $170 million and gross margin was 45.4%, up 80%
and 580 basis points, respectively, compared to the $94 million and
39.6% reported in the same quarter last year. Gross margin
benefitted from a combination of increased capacity utilization
along with related production efficiencies, and continued
implementation of our cost improvement initiatives.
Selling, general and administrative expenses were $51 million,
or 13.5% of net sales, compared to $37 million, or 15.7% of net
sales, in the 2023 first quarter. This increase is aligned with
accelerated branding and marketing program spend for newly launched
products, and new product development initiatives.
Net income for the 2024 first quarter was $89 million, or $0.82
per diluted share, compared to $41 million, or $0.38 per diluted
share, reported in the 2023 first quarter. EBITDA was $133 million,
compared to $69 million, and EBITDA margin was 35.6%, compared to
28.8% in the prior year period.
Recent Developments
& Recognitions
- Builders FirstSource honored Trex with the Morris Tolly
National Supplier of the Year award and as Supplier of the Year for
the Northeast Region.
- Barron’s recognized Trex as one of the “100 Most Sustainable
U.S. Companies”, a reflection on Trex’s commitment to
sustainability, innovation, and corporate responsibility. Trex is
the only decking brand to be included on this year’s list.
- Trex was named Green Builder Media’s Sustainable Brand Leader
in the decking category. Trex is the only brand in the building
industry to win top honors in its category every year since the
program started in 2010.
- Trex was recognized as a winner in Good Housekeeping’s 2024
Sustainable Innovation Awards for its innovative Trex Transcend®
Lineage™ decking.
- Trex was named “America’s Most Trusted® Outdoor Decking*” for
the fourth consecutive year in a nationwide study conducted by
Lifestory Research, highlighting the connection between consumers
and the Trex brand.
Summary and
Outlook
“Robust first quarter performance represented an excellent start
to the year and supports our expectations for substantial growth in
2024. The Outdoor Living category continues to thrive as consumers
remain in their homes longer and prioritize investments that offer
fuller enjoyment of their outdoor spaces, while increasing the
value of their homes. As the market leader, Trex remains the
primary beneficiary of the ongoing conversion from wood to
composites that is estimated at an average pace of approximately
200 basis points a year,” continued Mr. Fairbanks.
“With our Early Buy program completed in the first quarter, we
expect our second quarter sales to be in the $380 million to $390
million range.
“We are pleased to reaffirm our full year guidance for revenues
of $1.215 billion to $1.235 billion and EBITDA margin to be in the
range of 30.0% and 30.5%, representing year-on-year revenue growth
of 12% at the midpoint. In 2024, we plan to continue to invest in
marketing and branding programs, R&D, new product development,
and cost-out programs, all areas that have yielded substantial
returns for Trex,” Mr. Fairbanks concluded.
First Quarter 2024
Conference Call and Webcast Information
Trex will hold a conference call to discuss its first quarter
2024 results on Thursday, May 9, 2024, at 5:00 p.m. ET. To
participate on the day of the call, dial 1-844-792-3734, or
internationally 1-412-317-5126, approximately ten minutes before
the call, and tell the operator you wish to join the Trex Company
Conference Call.
A live webcast of the conference call will be available in the
Investor Relations section of the Trex Company website at 1Q24
Earnings Webcast. For those who cannot listen to the live
broadcast, an audio replay of the conference call will be available
within 24 hours after the call on the Trex website. The audio
replay will be available for 30 days.
Use of Non-GAAP
Measures
The Company reports its financial results in accordance with
accounting principles generally accepted in the United States
(GAAP). To supplement our consolidated financial statements
reported on a GAAP basis, we provide the following non-GAAP
financial measures of earnings before interest, income taxes,
depreciation and amortization (EBITDA) and EBITDA as a percentage
of net sales, EBITDA margin. Management believes these non-GAAP
financial measures provide investors with additional meaningful
financial information that should be considered when assessing our
underlying business performance and trends. Further, management
believes these non-GAAP financial measures also enhance investors’
ability to compare period-to-period financial results. Non-GAAP
financial measures should be viewed in addition to, and not as an
alternative for, the Company’s reported results prepared in
accordance with GAAP and are not meant to be considered superior to
or a substitute for our GAAP results. Our non-GAAP financial
measures do not represent a comprehensive basis of accounting.
Therefore, our non-GAAP financial measures may not be comparable to
similarly titled measures reported by other companies.
Reconciliations of these non-GAAP financial measures to GAAP
information are included below. Management uses these non-GAAP
financial measures in making financial, operating, compensation and
planning decisions and in evaluating the Company’s performance.
Disclosing these non-GAAP financial measures allows investors and
management to view our operating results excluding the impact of
items that are not reflective of the underlying operating
performance.
Reconciliation of net income (GAAP) to EBITDA (non-GAAP) is as
follows:
Three Months Ended March 31,
2024
2023
($ in thousands)
Net Income
$
89,070
$
41,131
Interest (income) expense, net
(5
)
1,985
Income tax expense
29,947
13,832
Depreciation and amortization
14,154
11,914
EBITDA
$
133,166
$
68,862
Net income as a percentage of net sales
23.8
%
17.2
%
EBITDA as a percentage of net sales (EBITDA margin)
35.6
%
28.8
%
About Trex
Company
For more than 30 years, Trex Company [NYSE: TREX] has invented,
reinvented and defined the composite decking category. Today, the
Company is the world’s #1 brand of sustainably made,
wood-alternative decking and deck railing, and a leader in high
performance, low-maintenance outdoor living products. The
undisputed global leader, Trex boasts the industry’s strongest
distribution network with products sold through more than 6,700
retail outlets across six continents. Through strategic licensing
agreements, the Company offers a comprehensive outdoor living
portfolio that includes deck drainage, flashing tapes, LED
lighting, outdoor kitchen components, pergolas, spiral stairs,
fencing, lattice, cornhole and outdoor furniture – all marketed
under the Trex® brand. Based in Winchester, Va., Trex is proud to
have been named America’s Most Trusted® Outdoor Decking* four years
in a row (2021-2024). The Company was also recently included on
Barron’s list of the 100 Most Sustainable U.S. Companies 2024,
named one of America’s Most Responsible Companies 2024 by Newsweek
and ranked as one of the 100 Best ESG Companies for 2023 by
Investor’s Business Daily. For more information, visit Trex.com.
You may also follow Trex on Facebook (trexcompany), Instagram
(trexcompany), X (Trex_Company), LinkedIn (trex-company), TikTok
(trexcompany), Pinterest (trexcompany) and Houzz
(trex-company-inc), or view product and demonstration videos on the
brand’s YouTube channel (TheTrexCo).
*Trex received the highest numerical score in the proprietary
Lifestory Research 2021-2024 America’s Most Trusted® Outdoor
Decking studies. Study results are based on experiences and
perceptions of people surveyed. Your experiences may vary. Visit
www.lifestoryresearch.com.
Forward-Looking
Statements
The statements in this press release regarding the Company’s
expected future performance and condition constitute
“forward-looking statements” within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. These statements are subject to risks and
uncertainties that could cause the Company’s actual operating
results to differ materially. Such risks and uncertainties include,
but are not limited to: the extent of market acceptance of the
Company’s current and newly developed products; the costs
associated with the development and launch of new products and the
market acceptance of such new products; the sensitivity of the
Company’s business to general economic conditions; the impact of
seasonal and weather-related demand fluctuations on inventory
levels in the distribution channel and sales of the Company’s
products; the availability and cost of third-party transportation
services for the Company’s products and raw materials; the
Company’s ability to obtain raw materials, including scrap
polyethylene, wood fiber, and other materials used in making our
products, at acceptable prices; increasing inflation in the
macro-economic environment; the Company’s ability to maintain
product quality and product performance at an acceptable cost; the
Company’s ability to increase throughput and capacity to adequately
match supply with demand; the level of expenses associated with
warranty claims, product replacement and consumer relations
expenses related to product quality; the highly competitive markets
in which the Company operates; cyber-attacks, security breaches or
other security vulnerabilities; the impact of current and upcoming
data privacy laws and the EU General Data Protection Regulation and
the related actual or potential costs and consequences; material
adverse impacts from global public health pandemics and
geopolitical conflicts; and material adverse impacts related to
labor shortages or increases in labor costs. Documents filed with
the U.S. Securities and Exchange Commission by the Company,
including in particular its latest annual report on Form 10-K and
quarterly reports on Form 10-Q, discuss some of the important
factors that could cause the Company’s actual results to differ
materially from those expressed or implied in these forward-looking
statements. 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.
TREX COMPANY, INC.
Condensed Consolidated Statements of Comprehensive Income
(In thousands, except share and per share data)
Three
Months EndedMarch 31,
2024
2023
(Unaudited) Net sales
$
373,635
$
238,718
Cost of sales
204,023
144,290
Gross profit
169,612
94,428
Selling, general and administrative expenses
50,600
37,480
Income from operations
119,012
56,948
Interest (income) expense, net
(5
)
1,985
Income before income taxes
119,017
54,963
Provision for income taxes
29,947
13,832
Net income
$
89,070
$
41,131
Basic earnings per common share
$
0.82
$
0.38
Basic weighted average common shares outstanding
108,640,168
108,771,958
Diluted earnings per common share
$
0.82
$
0.38
Diluted weighted average common shares outstanding
108,790,625
108,916,261
Comprehensive income
$
89,070
$
41,131
TREX COMPANY, INC.
Condensed Consolidated Balance Sheets (In thousands, except
share data) (unaudited)
March 31, 2024
December 31, 2023
ASSETS Current assets: Cash and cash equivalents
$
3,053
$
1,959
Accounts receivable, net
373,470
41,136
Inventories
123,885
107,089
Prepaid expenses and other assets
12,958
22,070
Total current assets
513,366
172,254
Property, plant and equipment, net
729,993
709,402
Operating lease assets
25,010
26,233
Goodwill and other intangible assets, net
18,058
18,163
Other assets
6,531
6,833
Total assets
$
1,292,958
$
932,885
LIABILITIES AND STOCKHOLDERS’ EQUITY Current
liabilities: Accounts payable
$
49,350
$
23,963
Accrued expenses and other liabilities
91,940
56,734
Accrued warranty
4,901
4,865
Line of credit
223,000
5,500
Total current liabilities
369,191
91,062
Deferred income taxes
67,226
72,439
Operating lease liabilities
17,602
18,840
Non-current accrued warranty
18,233
17,313
Other long-term liabilities
16,560
16,560
Total liabilities
488,812
216,214
Preferred stock, $0.01 par value, 3,000,000 shares
authorized; none issued and outstanding
—
—
Common stock, $0.01 par value, 360,000,000 shares authorized;
141,056,063 and 140,974,843 shares issued and 108,692,757 and
108,611,537 shares outstanding at March 31, 2024 and December 31,
2023, respectively
1,411
1,410
Additional paid-in capital
138,561
140,157
Retained earnings
1,425,128
1,336,058
Treasury stock, at cost, 32,363,306 and 32,363,306 shares at March
31, 2024 and December 31, 2023, respectively
(760,954
)
(760,954
)
Total stockholders’ equity
804,146
716,671
Total liabilities and stockholders’ equity
$
1,292,958
$
932,885
TREX COMPANY, INC.
Condensed Consolidated Statements of Cash Flows (In
thousands)
Three Months EndedMarch 31,
2024
2023
(unaudited)
Operating Activities Net income
$
89,070
$
41,131
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization
14,154
11,915
Deferred Income Taxes
(5,212
)
-
Stock-based compensation
3,155
1,972
Loss (gain) on disposal of property, plant and equipment
2,122
-
Other non-cash adjustments
121
121
Changes in operating assets and liabilities: Accounts receivable
(332,333
)
(204,014
)
Inventories
(16,796
)
13,571
Prepaid expenses and other assets
(319
)
291
Accounts payable
26,238
2,975
Accrued expenses and other liabilities
12,041
3,361
Income taxes receivable/payable
33,715
13,206
Net cash used in operating activities
(174,044
)
(115,471
)
Investing Activities Expenditures for property, plant
and equipment
(37,720
)
(39,192
)
Proceeds from sales of property, plant and equipment
106
-
Net cash used in investing activities
(37,614
)
(39,192
)
Financing Activities Borrowings under line of credit
258,500
200,500
Principal payments under line of credit
(41,000
)
(53,000
)
Repurchases of common stock
(5,145
)
(1,592
)
Proceeds from employee stock purchase and option plans
397
316
Financing costs
-
30
Net cash provided by financing activities
212,752
146,254
Net increase (decrease) in cash and cash equivalents
1,094
(8,409
)
Cash and cash equivalents at beginning of period
1,959
12,325
Cash and cash equivalents at end of period
$
3,053
$
3,916
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240509517815/en/
Brenda K. Lovcik Senior Vice President and CFO 540-542-6300
Lynn Morgen Casey Kotary ADVISIRY Partners 212-750-5800
lynn.morgen@advisiry.com casey.kotary@advisiry.com
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