Trex Company Reports First Quarter 2024 Results
Trex Company, Inc. reported strong financial results for the first quarter of 2024, with net sales of $374 million, gross margin of 45.4%, net income of $89 million, and diluted earnings per share of $0.82. The company's EBITDA was $133 million with an EBITDA margin of 35.6%. Trex reaffirmed its full-year 2024 guidance and highlighted the success of its Early Buy program and continued demand for premium products. Recent recognitions include awards for sustainability and innovation, positioning Trex as a leader in the outdoor living industry.
Strong first quarter financial results with net sales of $374 million, gross margin of 45.4%, and net income of $89 million.
EBITDA of $133 million and EBITDA margin of 35.6% highlight profitability and efficiency.
Reaffirmation of full-year 2024 guidance with revenues expected to be in the range of $1.215 billion to $1.235 billion.
Successful Early Buy program and strong consumer demand for premium products drove sales growth.
Recognition from various organizations for sustainability, innovation, and brand leadership further solidifies Trex's position in the market.
- None.
Insights
Gauging the financial health of Trex Company, Inc. following their Q1 2024 results is important for investors. An impressive 57% increase in net sales to
The reported net income of
Investors should note, however, that a portion of this growth is attributed to the strategic shift of the Early Buy season, resulting in an approximate
The outdoor living sector and by extension, the composite decking market, has been experiencing an uptrend, fueled by the consumer shift towards home improvement. Trex's leadership in this space, coupled with their focus on sustainability and eco-friendly products, aligns with consumer trends and enhances their competitive edge. With the home renovation market projected to continue its growth trajectory, Trex’s strategic positioning could yield long-term benefits.
The introduction of Trex-branded deck fasteners represents a vertical integration that may optimize supply chain efficiencies and improve customer retention. By expanding their product line, Trex aims to become a one-stop-shop solution, which may positively resonate with contractors and end-users, possibly leading to increased market share.
Recognition as a sustainable and responsible company not only bolsters consumer perception but also aligns with the increasing investor focus on Environmental, Social and Governance (ESG) factors. Such accolades may enhance investor confidence and potentially contribute to stock valuation premiums associated with responsible corporate practices.
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
Reaffirms Full Year 2024 Guidance
First Quarter Financial 2024 Highlights
-
Net sales of
$374 million -
Gross margin of
45.4% -
Net income of
$89 million $0.82 -
EBITDA of
$133 million 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
Gross profit was
Selling, general and administrative expenses were
Net income for the 2024 first quarter was
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
“We are pleased to reaffirm our full year guidance for revenues of
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
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
*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
| TREX COMPANY, INC. | ||||||||
|
||||||||
| Condensed Consolidated Statements of Comprehensive Income | ||||||||
| (In thousands, except share and per share data) | ||||||||
| Three Months Ended March 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,
|
December 31,
|
|||||||
| 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, |
|
— |
|
|
— |
|
||
| Common stock, |
|
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 Ended March 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
Source: Trex Company, Inc.
