Trex Company Reports Fourth Quarter and Full Year 2023 Results
- None.
- None.
Insights
The reported financial results from Trex Company, Inc. exhibit a robust performance, particularly noting the expansion of full-year gross margin by 480 basis points. This significant improvement in margin is indicative of effective cost management and operational efficiency. The guidance for 2024 forecasting double-digit sales growth and further margin expansion suggests confidence in the company's strategic initiatives and market position. Investors should consider the potential of these projections to influence the company's valuation. However, it's essential to recognize the risks associated with forward-looking statements, as they are subject to various market and economic factors.
The outdoor living products sector, as part of the broader Repair & Remodel category, is rapidly expanding. Trex's focus on eco-friendly and low-maintenance decking and railing products aligns with growing consumer trends towards sustainability and convenience. The introduction of new product lines, such as Trex Transcend® Lineage™ and the anticipation of further product launches in 2024, demonstrates the company's commitment to innovation and market expansion. The company's ability to capture a broader consumer base and address a $14 billion market opportunity could potentially increase its market share and drive long-term growth.
Trex's recognition by Lowe's with the 2023 Sustainability Award, alongside accolades from Investor’s Business Daily and Newsweek, underscores the company’s commitment to sustainable manufacturing practices. These recognitions can enhance brand reputation and appeal to a growing demographic of environmentally conscious consumers. The emphasis on sustainability is not only a corporate responsibility but also a strategic differentiator in the competitive landscape. Investors may view these recognitions as an intangible asset that could contribute to consumer loyalty and brand strength.
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
Fourth Quarter and Full Year 2023 Highlights
-
Quarterly net sales of
$196 million $1.1 billion -
Fourth quarter gross margin of
36.1% ; Full year gross margin of41.3% . -
Quarterly net income of
$22 million $0.20 $205 million $1.89 -
Fourth quarter EBITDA of
$41 million 21.0% ; Full year EBITDA of$326 million 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
Gross margin was
Selling, general and administrative expenses were
Net income for the 2023 fourth quarter was
Full Year 2023 Results
Full year consolidated net sales were
Full year 2023 net income was
During the 2023 fiscal year, the Company recognized a
During 2023, Trex authorized the repurchase of up to 10.8 million shares, or approximately
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
“First quarter 2024 sales are expected to be in the
“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
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
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 |
|||||||||||||||||
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
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
| TREX COMPANY, INC. | |||||||||||||||
| Condensed Consolidated Statements of Comprehensive Income | |||||||||||||||
| (In thousands, except share and per share data) | |||||||||||||||
| Three Months Ended December 31, |
Year Ended December 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, |
|
— |
|
|
— |
|
|||
| Common stock, |
|
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 Ended December 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 Ended December 31, 2022 |
Trex Consolidated |
Trex Commercial |
Trex Residential |
||||||
| 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 Ended December 31, 2022 |
Trex Consolidated |
Trex Commercial |
Trex Residential |
||||||
| 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
Source: Trex Company, Inc.
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