Strong Fourth Quarter Sales Cap a Year of
Resilient Consumer Demand for Trex Decking & Railing
Full Year Gross Margin Expanded By 480 Basis
Points
2024 Guidance Anticipates Double-Digit Sales
Growth and Further Margin Expansion
Trex Company, Inc. (NYSE:TREX) (Trex or Company), the world’s #1
brand of high-performance, low-maintenance and eco-friendly decking
and railing and a leader in outdoor living products, today
announced financial results for its fourth quarter and full year
2023.
Fourth Quarter and
Full Year 2023 Highlights
- Quarterly net sales of $196 million; Full year net sales of
$1.1 billion.
- Fourth quarter gross margin of 36.1%; Full year gross margin of
41.3%.
- Quarterly net income of $22 million and diluted earnings per
share of $0.20; Full year net income of $205 million and diluted
earnings per share of $1.89.
- Fourth quarter EBITDA of $41 million and EBITDA margin of
21.0%; Full year EBITDA of $326 million and EBITDA margin of
29.8%.
CEO
Comments
“Fourth quarter results represented a strong finish to the year.
Sales were above the high end of our guidance range, reflecting
strong demand for Trex products heading into 2024. Channel
sell-through remained at mid-single-digit levels in the fourth
quarter and channel inventories ended the year at historically low
levels,” said Bryan Fairbanks, President and CEO. “Also, our
recently launched products are continuing to gain traction in the
marketplace. Notably, our Trex Transcend® Lineage™ decking line,
which offers consumers the look and feel of wood together with heat
mitigation technology has garnered considerable consumer interest,
along with Trex Select® T-Rail, our high-performance, value-priced
composite rail system, and the premium Trex Signature® decking
line, which replicates the graining and color richness of tropical
hardwoods. All launched within the last 18 months, these additions
to our portfolio have extended the appeal of Trex products to a
broader consumer base, expanding our addressable market
opportunity. Product launches in 2024 include Trex’s new color
matched fastener system and innovative cable and glass railing
systems that add two new specialty options to our premium railing
line,” continued Mr. Fairbanks.
“Our full year performance demonstrates the resilience of
Trex-branded products during periods of economic uncertainty and
the positive impact of the Trex continuous improvement program,
which were key to the margin improvement achieved in 2023.
Throughout the year, we worked closely with our channel partners to
optimize inventory levels and lead times to address the dynamic
market environment. Additionally, we increased our investment in
sales, marketing, and branding programs, along with new product
development to drive our future growth. These expenditures are
aligned with our strategy to take full advantage of the strong
long-term secular trends that have made the Outdoor Living category
one of the fastest-growing segments of the Repair & Remodel
sector,” said Mr. Fairbanks.
Fourth Quarter 2023
Results
Fourth quarter 2023 consolidated net sales were $196 million,
compared to $192 million reported in the prior-year quarter and
8.4% above Trex Residential net sales of $181 million in the year
ago quarter. The growth in net sales was due primarily to increased
volume and the absence of the residual channel inventory drawdown
that occurred in the 2022 fourth quarter.
Gross margin was 36.1% in the fourth quarter of 2023 compared,
to reported consolidated gross margin of 34.1% and Trex Residential
gross margin of 36.1% in the same quarter last year.
Selling, general and administrative expenses were $43 million,
or 21.7% of net sales. This compares to $35 million, or 18.5% of
net sales, in the 2022 fourth quarter. In the 2023 fourth quarter,
the Company elevated spending on branding and merchandising related
to new products launching in 2024, increased R&D to drive
growth and returned to normalized personnel and incentive
costs.
Net income for the 2023 fourth quarter was $22 million, or $0.20
per diluted share, compared to $10 million, or $0.09 per diluted
share, reported in the 2022 fourth quarter. EBITDA was $41 million,
compared to $26 million and EBITDA margin was 21.0%, compared to
13.4%.
Full Year 2023
Results
Full year consolidated net sales were $1.1 billion, comparable
to 2022 consolidated levels and $35 million higher than Trex
Residential net sales in 2022. Gross margin was 41.3%, compared to
consolidated gross margin of 36.5% and Trex Residential gross
margin of 37.7% in 2022. Selling, general and administrative
expenses were $176 million, or 16.1% of net sales, compared to $142
million, or 12.8% of net sales, in 2022.
Full year 2023 net income was $205 million, or $1.89 per diluted
share, compared to $185 million, or $1.65 per diluted share, in
2022. EBITDA was $326 million, resulting in an EBITDA margin of
29.8%, compared to EBITDA of $291 million and an EBITDA margin of
26.3% in 2022.
During the 2023 fiscal year, the Company recognized a $3.8
million benefit from a reduction in the Trex Residential warranty
reserve related to the surface flaking issue that affected a
portion of the products manufactured at the Nevada plant prior to
2007. Excluding the warranty benefit, 2023 adjusted gross margin
was 41.0%, adjusted net income was $203 million, or $1.86 per
diluted share, adjusted EBITDA was $323 million, and adjusted
EBITDA margin was 29.5%.
During 2023, Trex authorized the repurchase of up to 10.8
million shares, or approximately 10% of its existing share float,
under a new stock repurchase program. During the year the Company
returned $15.6 million to shareholders through the repurchase of
264,896 shares of its outstanding common stock.
Recent Developments
& Recognitions
- Lowe’s honored Trex with its 2023 Sustainability Award for the
Company’s commitment to manufacturing sustainably made,
wood-alternative decking.
- Investor’s Business Daily named Trex Company one of the 100
Best ESG Companies for 2023, selected from more than 6,000 global
companies, and one of only three in its industry to make the
list.
- Trex Company was ranked by Newsweek magazine as one of
America’s Most Responsible Companies 2024, reinforcing Trex’s
position as a sustainability leader.
Summary and
Outlook
“The Trex team effectively managed through an uncertain business
environment in 2023 delivering solid sales performance and improved
profitability, while investing in future growth. In 2024, we expect
to achieve double-digit sales growth, benefitting from
mid-single-digit demand growth and the shift of our Early Buy
program to the first quarter of this year from the fourth quarter
of 2023.
“For full year 2024, net sales are anticipated to range from
$1.215 billion to $1.235 billion, representing year-on-year revenue
growth of 12% at the midpoint and EBITDA margin is expected to be
in the range of 30.0% to 30.5%, representing margin expansion of
approximately 75 basis points. Approximately 60% of full year
revenues are expected to occur in the first half of the year.
Capital expenditures are expected to be approximately $220 million
primarily tied to the development of our new Arkansas campus,
including the addition of a warehouse facility,” continued Mr.
Fairbanks.
“First quarter 2024 sales are expected to be in the $360 million
to $370 million range, inclusive of $60 million to $80 million from
our Early Buy program.
“In 2024, we plan to continue to invest in areas that have
yielded substantial returns for our Company, notably branding and
sales and marketing programs, which have been very effective in
driving sales growth, and cost-out programs, which have enabled us
to expand gross margin on less-than-full capacity. New product
development will remain a priority in 2024, as will the build-out
of our world class Arkansas facility. These investments are aligned
with our strategy to capture an increasing share of decking,
railing, and adjacent products, which together represent a $14
billion addressable market for Trex,” Mr. Fairbanks concluded.
Fourth Quarter 2023
Conference Call and Webcast Information
Trex will hold a conference call to discuss its fourth quarter
and full year 2023 results on Monday, February 26, 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 4Q23
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 adjusted net income and adjusted diluted
earnings per share, earnings before interest, income taxes,
depreciation and amortization (EBITDA) and EBITDA as a percentage
of net sales, EBITDA margin, and adjusted EBITDA and adjusted
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 adjusted net income
(non-GAAP) is as follows:
Three Months Ended Year Ended December 31,
December 31, Trex Company, Inc.
2023
Consolidated 2022
Trex Residential 2022
2023
Consolidated 2022
Trex Residential 2022
(in thousands, except per share amounts)
Net Income
$
21,951
$
10,076
$
23,937
$
205,384
$
184,626
$
200,876
Warranty adjustment
-
-
-
(3,800
)
-
-
Severance charges
-
-
-
-
1,222
1,026
Loss on sale and other related expenses
-
17,159
-
-
17,159
-
Non-executive retention compensation
-
3,406
3,406
-
3,406
3,406
Income tax effect *
-
(5,182
)
(858
)
973
(5,490
)
(1,117
)
Adjusted Net Income
$
21,951
$
25,459
$
26,485
$
202,557
$
200,923
$
204,191
Diluted earnings per share
$
0.20
$
0.09
$
0.22
$
1.89
$
1.65
$
1.80
Adjusted diluted earnings per share
$
0.20
$
0.23
$
0.24
$
1.86
$
1.80
$
1.83
*Income tax effect calculated using the effective tax rate
for the applicable period of 25.6% and 25.2%.
Reconciliation of net income (GAAP) to EBITDA and adjusted
EBITDA (non-GAAP) is as follows:
Three Months Ended Year Ended December 31,
December 31, Trex Company, Inc.
2023
Consolidated 2022
Trex Residential 2022
2023
Consolidated 2022
Trex Residential 2022
($ in thousands)
Net Income
$
21,951
$
10,076
$
23,937
$
205,384
$
184,626
$
200,876
Interest expense (income), net
(2,550
)
(1
)
(1
)
5
(103
)
(103
)
Income tax expense
8,727
4,548
8,859
70,815
62,212
67,313
Depreciation and amortization
12,995
11,029
10,739
50,189
44,298
43,173
EBITDA
$
41,123
$
25,652
$
43,534
$
326,393
$
291,033
$
311,259
Warranty adjustment
-
-
-
(3,800
)
-
-
Severance charges
-
-
-
-
1,222
1,026
Loss on sale and other related expenses
-
17,159
-
-
17,159
-
Non-executive retention compensation
-
3,406
3,406
-
3,406
3,406
Adjusted EBITDA
$
41,123
$
46,217
$
46,940
$
322,593
$
312,820
$
315,691
Net income as a percentage of net sales
11.2
%
5.2
%
13.3
%
18.8
%
16.7
%
19.0
%
EBITDA as a percentage of net sales (EBITDA margin)
21.0
%
13.4
%
24.1
%
29.8
%
26.3
%
29.4
%
Adjusted EBITDA as a percentage of net sales (Adjusted EBITDA
margin)
21.0
%
24.1
%
26.0
%
29.5
%
28.3
%
29.8
%
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 – all proudly
manufactured in the U.S.A. – and a leader in high performance,
low-maintenance outdoor living products. 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 honored with Lowe’s 2023 Sustainability Award, recognized
as one of the 100 Best ESG Companies for 2023 by Investor’s
Business Daily, and ranked by Newsweek magazine as one of America’s
Most Responsible Companies. 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).
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; the Company’s ability to
obtain raw materials 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 EndedDecember 31,
Year EndedDecember 31,
2023
2022
2023
2022
(Unaudited) Net sales
$
195,745
$
192,094
$
1,094,837
$
1,106,043
Cost of sales
125,108
126,602
642,430
702,054
Gross profit
70,637
65,492
452,407
403,989
Selling, general and administrative expenses
42,509
35,446
176,203
141,831
Loss on Sale
-
15,423
-
15,423
Income from operations
28,128
14,623
276,204
246,735
Interest (income) expense, net
(2,550
)
(1
)
5
(103
)
Income before income taxes
30,678
14,624
276,199
246,838
Provision for income taxes
8,727
4,548
70,815
62,212
Net income
$
21,951
$
10,076
$
205,384
$
184,626
Basic earnings per common share
$
0.20
$
0.09
$
1.89
$
1.65
Basic weighted average common shares outstanding
108,599,628
109,042,968
108,680,459
111,710,676
Diluted earnings per common share
$
0.20
$
0.09
$
1.89
$
1.65
Diluted weighted average common shares outstanding
108,750,379
109,187,280
108,809,403
111,880,488
Comprehensive income
$
21,951
$
10,076
$
205,384
$
184,626
TREX COMPANY, INC. Condensed Consolidated Balance
Sheets (In thousands, except share data) (unaudited)
December 31, December 31,
2023
2022
ASSETS Current assets: Cash and cash
equivalents
$
1,959
$
12,325
Accounts receivable, net
41,136
98,057
Inventories
107,089
141,355
Prepaid expenses and other assets
22,070
35,105
Total current assets
172,254
286,842
Property, plant and equipment, net
709,402
589,892
Operating lease assets
26,233
30,991
Goodwill and other intangible assets, net
18,163
18,582
Other assets
6,833
7,398
Total assets
$
932,885
$
933,705
LIABILITIES AND STOCKHOLDERS’ EQUITY Current
liabilities: Accounts payable
$
23,963
$
19,935
Accrued expenses and other liabilities
56,734
44,064
Accrued warranty
4,865
4,600
Line of credit
5,500
222,000
Total current liabilities
91,062
290,599
Deferred income taxes
72,439
68,224
Operating lease liabilities
18,840
23,974
Non-current accrued warranty
17,313
20,999
Other long-term liabilities
16,560
11,560
Total liabilities
216,214
415,356
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;
140,974,843 and 140,841,833 shares issued and 108,611,537 and
108,743,423 shares outstanding at December 31, 2023 and December
31, 2022, respectively
1,410
1,408
Additional paid-in capital
140,157
131,539
Retained earnings
1,336,058
1,130,674
Treasury stock, at cost, 32,363,306 and 32,098,410 shares at
December 31, 2023 and December 31, 2022, respectively
(760,954
)
(745,272
)
Total stockholders’ equity
716,671
518,349
Total liabilities and stockholders’ equity
$
932,885
$
933,705
TREX COMPANY, INC. Condensed Consolidated Statements of
Cash Flows (In thousands)
Year EndedDecember 31,
2023
2022
(unaudited)
Operating Activities Net income
$
205,384
$
184,626
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization
50,189
44,298
Deferred Income Taxes
4,215
24,256
Loss on Sale
-
15,423
Stock-based compensation
10,164
5,329
Loss (gain) on disposal of property, plant and equipment
3,140
(27
)
Other non-cash adjustments
(48
)
(117
)
Changes in operating assets and liabilities: Accounts receivable
56,921
42,513
Inventories
34,266
(64,454
)
Prepaid expenses and other assets
(750
)
7,925
Accounts payable
2,697
(5,595
)
Accrued expenses and other liabilities
8,875
(14,385
)
Income taxes receivable/payable
14,367
(23,572
)
Net cash provided by operating activities
389,420
216,220
Investing Activities Expenditures for property, plant
and equipment
(166,089
)
(176,228
)
Proceeds from sale of assets
-
7,290
Proceeds from sales of property, plant and equipment
-
54
Net cash used in investing activities
(166,089
)
(168,884
)
Financing Activities Borrowings under line of credit
593,500
425,000
Principal payments under line of credit
(810,000
)
(203,000
)
Repurchases of common stock
(18,450
)
(398,382
)
Proceeds from employee stock purchase and option plans
1,223
1,742
Financing costs
30
(1,424
)
Net cash used in financing activities
(233,697
)
(176,064
)
Net decrease in cash and cash equivalents
(10,366
)
(128,728
)
Cash and cash equivalents at beginning of period
12,325
141,053
Cash and cash equivalents at end of period
$
1,959
$
12,325
TREX COMPANY, INC. Segment Data (in thousands)
(unaudited)
Three Months EndedDecember 31, 2022
TrexConsolidated TrexCommercial
TrexResidential Net sales
$
192,094
$
11,450
$
180,644
Cost of sales
126,602
11,199
115,403
Gross profit
65,492
252
65,240
Selling, general and administrative expenses
35,446
3,000
32,446
Loss on Sale
15,423
15,423
-
Income (loss) from operations
14,623
(18,172
)
32,795
Interest income, net
(1
)
-
(1
)
Income (loss) before income taxes
14,624
(18,172
)
32,796
Provision (benefit) for income taxes
4,548
(4,311
)
8,859
Net income (loss)
$
10,076
$
(13,861
)
$
23,937
EBITDA
$
25,652
$
(17,882
)
$
43,534
Depreciation and amortization
$
11,029
$
290
$
10,739
Capital expenditures
$
68,065
$
98
$
67,967
Total assets
$
933,705
$
-
$
933,705
TREX COMPANY, INC. Segment Data (in thousands)
(unaudited)
Year EndedDecember 31, 2022
TrexConsolidated TrexCommercial
TrexResidential Net sales
$
1,106,043
$
46,507
$
1,059,536
Cost of sales
702,054
42,365
659,689
Gross profit
403,989
4,142
399,847
Selling, general and administrative expenses
141,831
10,070
131,761
Loss on Sale
15,423
15,423
-
Income (loss) from operations
246,735
(21,351
)
268,086
Interest income, net
(103
)
-
(103
)
Income (loss) before income taxes
246,838
(21,351
)
268,189
Provision (benefit) for income taxes
62,212
(5,101
)
67,313
Net income (loss)
$
184,626
$
(16,250
)
$
200,876
EBITDA
$
291,033
$
(20,226
)
$
311,259
Depreciation and amortization
$
44,298
$
1,125
$
43,173
Capital expenditures
$
176,228
$
324
$
175,904
Total assets
$
933,705
$
-
$
933,705
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240226355096/en/
Lynn Morgen/Casey Kotary, ADVISIRY Partners 212-750-5800
lynn.morgen@advisiry.com / casey.kotary@advisiry.com
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