Trex Company Reports Third Quarter 2023 Results
- Trex reported strong Q3 2023 results with net sales of $304 million, representing an increase from $188 million in the prior-year quarter.
- Gross margin for Q3 2023 was 43.1%, compared to 24.5% in the same quarter last year.
- Net income for Q3 2023 was $65 million, or $0.60 per diluted share, compared to $14 million, or $0.13 per diluted share, in Q3 2022.
- Adjusted EPS for Q3 2023 was $0.57, excluding a warranty reserve benefit of $3.8 million.
- Adjusted EBITDA for Q3 2023 was $96 million, with an adjusted EBITDA margin of 31.5%.
- Trex raised its full year 2023 revenue guidance to $1.09 billion, an increase from the previous guidance of $1.04 billion to $1.06 billion.
- The company also raised its full year adjusted EBITDA margin guidance to 29% to 29.5%.
- None.
Resilient Consumer Demand Drives Robust Sales Growth
Improved Volume and Cost Out Program Generated Strong Profit Growth
Raising Full Year 2023 Revenue and Adjusted EBITDA Guidance
Third Quarter 2023 Highlights
-
Net sales of
$304 million -
Gross margin of
43.1% ;41.8% excluding$3.8 million -
Net income of
$65 million $0.60 -
Adjusted EPS of
$0.57 -
Adjusted EBITDA of
$96 million 31.5%
CEO Comments
“The third quarter was another quarter of strong results as underlying consumer demand for Trex products, together with operating efficiencies and improved utilization, drove robust performance across all key financial metrics. Channel sell-through growth remained at mid-single-digit levels. Revenue growth benefitted from the success of new product launches and ongoing brand and marketing investments that educate consumers on the value proposition of converting from wood to Trex decking and railing products. Our recently launched premium Trex Transcend® Lineage™ and Trex Signature® decking lines have been favorably received in the marketplace and recognized for their respective attributes: Lineage’s refined look and heat-mitigating technology and Signature’s authentic aesthetics that replicate the graining and color richness of tropical hardwoods. We also gained traction with Trex Select® T-Rail, our high-performance, low-maintenance composite rail system that is priced to compete with low-cost vinyl railing systems,” said Bryan Fairbanks, President and Chief Executive Officer.
“Higher sales volume, increased utilization rates and the benefits from our investments in production efficiencies drove a significant improvement in gross margin in the third quarter and again demonstrated our ability to achieve strong performance on less-than-full capacity. Our return to normalized brand spending is showing returns as the market continues to demonstrate mid-single digit sell through growth, despite economic uncertainties. During the quarter the Company achieved an adjusted EBITDA margin of
“Year-to-date results reflect the resilience of consumer demand for Trex products and the strength of the outdoor living category. With a full range of product offerings in decking, railing and complementary accessories, we have and will continue to expand our addressable market, positioning Trex for continued long term growth and profitability.”
Third Quarter 2023 Results
Third quarter 2023 consolidated net sales were
Consolidated gross profit as a percentage of net sales, gross margin, was
Selling, general and administrative expenses were
Net income for the 2023 third quarter was
During the 2023 third quarter, the Company recognized a benefit of
Year-to-Date Results
Year-to-date consolidated net sales were
Selling, general and administrative expenses were
Net income year-to-date was
Excluding the warranty benefit, consolidated gross margin was
Recent Developments and Recognitions
- Trex Transcend® Lineage™ decking has been recognized in Good Housekeeping’s 2023 Home Renovation Awards in the Exterior Enhancements category.
- A joint initiative by Trex Company and Keep Arkansas Beautiful was celebrated as the “2023 Recycling Education Program of the Year” by the Arkansas Recycling Coalition.
- Trex Company has been named a 2023 Eco-Leader, the highest honor awarded by Green Builder Media, North America’s leading media group focused on green building and responsible growth.
Summary and Outlook
“Our year-to-date performance reflects a substantial year-on-year recovery supported by consumer demand for our expanded portfolio of Trex products. Decking, railing and adjacencies represent a
“Based on our current market visibility we are projecting fourth quarter revenues of
“Additionally, we now expect our full year adjusted EBITDA margin to range from
Third Quarter 2023 Conference Call and Webcast Information
Trex will hold a conference call to discuss its second quarter 2023 results on Monday, October 30, 2023 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 3Q23 Earnings Webcast. For those who cannot listen to the live broadcast, an audio replay of the conference call will be available on the Trex website 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 |
Nine Months Ended |
|||||||||||||||||
September 30, |
September 30, |
|||||||||||||||||
| Trex Company, Inc. |
|
2023 |
|
Consolidated
|
Trex
|
|
2023 |
|
Consolidated
|
Trex
|
||||||||
(in thousands, except per share amounts) |
||||||||||||||||||
| Net Income | $ |
65,266 |
|
$ |
14,423 |
|
$ |
15,287 |
|
$ |
183,433 |
|
$ |
174,549 |
|
$ |
176,939 |
|
| Warranty adjustment | $ |
(3,800 |
) |
$ |
- |
|
$ |
- |
|
$ |
(3,800 |
) |
$ |
- |
|
$ |
- |
|
| Severance charges |
|
- |
|
|
1,222 |
|
|
1,026 |
|
|
- |
|
|
1,222 |
|
|
1,026 |
|
| Income tax effect * |
|
969 |
|
|
(305 |
) |
|
(256 |
) |
|
969 |
|
|
(305 |
) |
|
(256 |
) |
| Adjusted Net Income | $ |
62,435 |
|
$ |
15,340 |
|
$ |
16,057 |
|
$ |
180,602 |
|
$ |
175,466 |
|
$ |
177,709 |
|
| Diluted earnings per share | $ |
0.60 |
|
$ |
0.13 |
|
$ |
0.14 |
|
$ |
1.69 |
|
$ |
1.55 |
|
$ |
1.57 |
|
| Adjusted diluted earnings per share | $ |
0.57 |
|
$ |
0.14 |
|
$ |
0.15 |
|
$ |
1.66 |
|
$ |
1.56 |
|
$ |
1.58 |
|
| * Effective tax rate for 2023 and 2022 of |
||||||||||||||||||
Reconciliation of net income (GAAP) to EBITDA and adjusted EBITDA (non-GAAP) is as follows:
Three Months Ended |
Nine Months Ended |
|||||||||||||||||
September 30, |
September 30, |
|||||||||||||||||
| Trex Company, Inc. |
|
2023 |
|
Consolidated
|
Trex
|
|
2023 |
|
Consolidated
|
Trex
|
||||||||
($ in thousands) |
||||||||||||||||||
| Net Income | $ |
65,266 |
|
$ |
14,423 |
|
$ |
15,287 |
|
$ |
183,433 |
|
$ |
174,549 |
|
$ |
176,939 |
|
| Interest expense (income), net |
|
(734 |
) |
|
- |
|
|
- |
|
|
2,555 |
|
|
(103 |
) |
|
(103 |
) |
| Income tax expense |
|
21,831 |
|
|
4,928 |
|
|
5,211 |
|
|
62,089 |
|
|
57,665 |
|
|
58,454 |
|
| Depreciation and amortization |
|
12,996 |
|
|
11,465 |
|
|
11,194 |
|
|
37,194 |
|
|
33,270 |
|
|
32,435 |
|
| EBITDA | $ |
99,359 |
|
$ |
30,816 |
|
$ |
31,692 |
|
$ |
285,271 |
|
$ |
265,381 |
|
$ |
267,725 |
|
| Warranty adjustment |
|
(3,800 |
) |
|
- |
|
|
- |
|
|
(3,800 |
) |
|
- |
|
|
- |
|
| Severance charges |
|
- |
|
|
1,222 |
|
|
1,026 |
|
|
- |
|
|
1,222 |
|
|
1,026 |
|
| Adjusted EBITDA | $ |
95,559 |
|
$ |
32,038 |
|
$ |
32,718 |
|
$ |
281,471 |
|
$ |
266,603 |
|
$ |
268,751 |
|
| Net income as a percentage of net sales |
|
21.5 |
% |
|
7.7 |
% |
|
8.6 |
% |
|
20.4 |
% |
|
19.1 |
% |
|
20.1 |
% |
| EBITDA as a percentage of net sales (EBITDA margin) |
|
32.7 |
% |
|
16.4 |
% |
|
17.8 |
% |
|
31.7 |
% |
|
29.0 |
% |
|
30.5 |
% |
| Adjusted EBITDA as a percentage of net sales (Adjusted EBITDA margin) |
|
31.5 |
% |
|
17.0 |
% |
|
18.4 |
% |
|
31.3 |
% |
|
29.2 |
% |
|
30.6 |
% |
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
*2023 DISCLAIMER: Trex received the highest numerical score in the proprietary Lifestory Research 2023 America’s Most Trusted® Outdoor Decking study. 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; 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
|
|
Nine Months Ended
|
||||||||||||
|
2023 |
|
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||
(Unaudited) |
||||||||||||||
| Net sales | $ |
303,836 |
|
$ |
188,472 |
$ |
899,092 |
$ |
913,950 |
|
||||
| Cost of sales |
|
172,941 |
|
|
142,264 |
|
517,321 |
|
575,452 |
|
||||
| Gross profit |
|
130,895 |
|
|
46,208 |
|
381,771 |
|
338,498 |
|
||||
| Selling, general and administrative expenses |
|
44,532 |
|
|
26,857 |
|
133,694 |
|
106,387 |
|
||||
| Income from operations |
|
86,363 |
|
|
19,351 |
|
248,077 |
|
232,111 |
|
||||
| Interest (income) expense , net |
|
(734 |
) |
|
- |
|
2,555 |
|
(103 |
) |
||||
| Income before income taxes |
|
87,097 |
|
|
19,351 |
|
245,522 |
|
232,214 |
|
||||
| Provision for income taxes |
|
21,831 |
|
|
4,928 |
|
62,089 |
|
57,665 |
|
||||
| Net income | $ |
65,266 |
|
$ |
14,423 |
$ |
183,433 |
$ |
174,549 |
|
||||
| Basic earnings per common share | $ |
0.60 |
|
$ |
0.13 |
$ |
1.69 |
$ |
1.55 |
|
||||
| Basic weighted average common shares outstanding |
|
108,583,009 |
|
|
110,140,496 |
|
108,707,699 |
|
112,609,684 |
|
||||
| Diluted earnings per common share | $ |
0.60 |
|
$ |
0.13 |
$ |
1.69 |
$ |
1.55 |
|
||||
| Diluted weighted average common shares outstanding |
|
108,702,495 |
|
|
110,300,017 |
|
108,829,374 |
|
112,787,994 |
|
||||
| Comprehensive income | $ |
65,266 |
|
$ |
14,423 |
$ |
183,433 |
$ |
174,549 |
|
||||
| TREX COMPANY, INC. | |||||||||
| Condensed Consolidated Balance Sheets | |||||||||
| (In thousands, except share data) | |||||||||
| (unaudited) | |||||||||
September 30, |
|
December 31, |
|||||||
|
2023 |
|
|
|
2022 |
|
|||
| ASSETS | |||||||||
| Current assets: | |||||||||
| Cash and cash equivalents | $ |
4,644 |
|
$ |
12,325 |
|
|||
| Accounts receivable, net |
|
200,909 |
|
|
98,057 |
|
|||
| Inventories |
|
60,384 |
|
|
141,355 |
|
|||
| Prepaid expenses and other assets |
|
7,130 |
|
|
35,105 |
|
|||
| Total current assets |
|
273,067 |
|
|
286,842 |
|
|||
| Property, plant and equipment, net |
|
671,035 |
|
|
589,892 |
|
|||
| Operating lease assets |
|
27,286 |
|
|
30,991 |
|
|||
| Goodwill and other intangible assets, net |
|
18,267 |
|
|
18,582 |
|
|||
| Other assets |
|
7,157 |
|
|
7,398 |
|
|||
| Total assets | $ |
996,812 |
|
$ |
933,705 |
|
|||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||
| Current liabilities: | |||||||||
| Accounts payable | $ |
31,795 |
|
$ |
19,935 |
|
|||
| Accrued expenses and other liabilities |
|
88,919 |
|
|
44,064 |
|
|||
| Accrued warranty |
|
5,092 |
|
|
4,600 |
|
|||
| Line of credit |
|
56,500 |
|
|
222,000 |
|
|||
| Total current liabilities |
|
182,306 |
|
|
290,599 |
|
|||
| Deferred income taxes |
|
68,224 |
|
|
68,224 |
|
|||
| Operating lease liabilities |
|
20,197 |
|
|
23,974 |
|
|||
| Non-current accrued warranty |
|
17,874 |
|
|
20,999 |
|
|||
| Other long-term liabilities |
|
16,560 |
|
|
11,560 |
|
|||
| Total liabilities |
|
305,161 |
|
|
415,356 |
|
|||
| Preferred stock, |
|
— |
|
|
— |
|
|||
| Common stock, |
|
1,410 |
|
|
1,408 |
|
|||
| Additional paid-in capital |
|
137,088 |
|
|
131,539 |
|
|||
| Retained earnings |
|
1,314,107 |
|
|
1,130,674 |
|
|||
| Treasury stock, at cost, 32,363,306 and 32,098,410 shares at September 30, 2023 and December 31, 2022, respectively |
|
(760,954 |
) |
|
(745,272 |
) |
|||
| Total stockholders’ equity |
|
691,651 |
|
|
518,349 |
|
|||
| Total liabilities and stockholders’ equity | $ |
996,812 |
|
$ |
933,705 |
|
|||
| TREX COMPANY, INC. | |||||||
| Condensed Consolidated Statements of Cash Flows | |||||||
| (In thousands) | |||||||
Nine Months Ended
|
|||||||
|
2023 |
|
|
|
2022 |
|
|
(unaudited) |
|||||||
| Operating Activities | |||||||
| Net income | $ |
183,433 |
|
$ |
174,549 |
|
|
| Adjustments to reconcile net income to net cash | |||||||
| provided by operating activities: | |||||||
| Depreciation and amortization |
|
37,194 |
|
|
33,269 |
|
|
| Stock-based compensation |
|
7,384 |
|
|
3,531 |
|
|
| Loss (gain) on disposal of property, plant and equipment |
|
1,081 |
|
|
(43 |
) |
|
| Other non-cash adjustments |
|
(169 |
) |
|
(171 |
) |
|
| Changes in operating assets and liabilities: | |||||||
| Accounts receivable |
|
(102,852 |
) |
|
62,343 |
|
|
| Inventories |
|
80,971 |
|
|
(48,362 |
) |
|
| Prepaid expenses and other assets |
|
4,376 |
|
|
7,125 |
|
|
| Accounts payable |
|
10,678 |
|
|
(3,769 |
) |
|
| Accrued expenses and other liabilities |
|
39,039 |
|
|
8,842 |
|
|
| Income taxes receivable/payable |
|
27,090 |
|
|
7,079 |
|
|
| Net cash provided by operating activities |
|
288,225 |
|
|
244,393 |
|
|
| Investing Activities | |||||||
| Expenditures for property, plant and equipment |
|
(112,920 |
) |
|
(108,163 |
) |
|
| Proceeds from sales of property, plant and equipment |
|
- |
|
|
45 |
|
|
| Net cash used in investing activities |
|
(112,920 |
) |
|
(108,118 |
) |
|
| Financing Activities | |||||||
| Borrowings under line of credit |
|
509,500 |
|
|
156,000 |
|
|
| Principal payments under line of credit |
|
(675,000 |
) |
|
(80,000 |
) |
|
| Repurchases of common stock |
|
(18,441 |
) |
|
(347,957 |
) |
|
| Proceeds from employee stock purchase and option plans |
|
925 |
|
|
1,381 |
|
|
| Financing costs |
|
30 |
|
|
(867 |
) |
|
| Net cash used in financing activities |
|
(182,986 |
) |
|
(271,443 |
) |
|
| Net decrease in cash and cash equivalents |
|
(7,681 |
) |
|
(135,168 |
) |
|
| Cash and cash equivalents at beginning of period |
|
12,325 |
|
|
141,053 |
|
|
| Cash and cash equivalents at end of period | $ |
4,644 |
|
$ |
5,885 |
|
|
| TREX COMPANY, INC. | |||||||
| Segment Data | |||||||
| (in thousands) | |||||||
| (unaudited) | |||||||
| Three Months Ended September 30, 2022 |
Trex Consolidated |
Trex Commercial |
Trex Residential |
||||
| Net sales | $ |
188,472 |
$ |
10,696 |
|
$ |
177,776 |
| Cost of sales |
|
142,264 |
|
9,608 |
|
|
132,656 |
| Gross profit |
|
46,208 |
|
1,088 |
|
|
45,120 |
| Selling, general and administrative expenses |
|
26,857 |
|
2,234 |
|
|
24,623 |
| Income (loss) from operations |
|
19,351 |
|
(1,146 |
) |
|
20,497 |
| Interest income, net |
|
- |
|
- |
|
|
- |
| Income (loss) before income taxes |
|
19,351 |
|
(1,146 |
) |
|
20,497 |
| Provision (benefit) for income taxes |
|
4,928 |
|
(283 |
) |
|
5,211 |
| Net income (loss) | $ |
14,423 |
$ |
(864 |
) |
$ |
15,287 |
| EBITDA | $ |
30,816 |
$ |
(876 |
) |
$ |
31,692 |
| Depreciation and amortization | $ |
11,465 |
$ |
271 |
|
$ |
11,194 |
| Capital expenditures | $ |
41,557 |
$ |
154 |
|
$ |
41,403 |
| Total assets | $ |
841,898 |
$ |
38,972 |
|
$ |
802,926 |
| TREX COMPANY, INC. | |||||||||
| Segment Data | |||||||||
| (in thousands) | |||||||||
| (unaudited) | |||||||||
| Nine Months Ended September 30, 2022 |
Trex Consolidated |
Trex Commercial |
Trex Residential |
||||||
| Net sales | $ |
913,950 |
|
$ |
35,058 |
|
$ |
878,892 |
|
| Cost of sales |
|
575,452 |
|
|
31,167 |
|
|
544,285 |
|
| Gross profit |
|
338,498 |
|
|
3,891 |
|
|
334,607 |
|
| Selling, general and administrative expenses |
|
106,387 |
|
|
7,070 |
|
|
99,317 |
|
| Income (loss) from operations |
|
232,111 |
|
|
(3,179 |
) |
|
235,290 |
|
| Interest income, net |
|
(103 |
) |
|
- |
|
|
(103 |
) |
| Income (loss) before income taxes |
|
232,214 |
|
|
(3,179 |
) |
|
235,393 |
|
| Provision (benefit) for income taxes |
|
57,665 |
|
|
(789 |
) |
|
58,454 |
|
| Net income (loss) | $ |
174,549 |
|
$ |
(2,390 |
) |
$ |
176,939 |
|
| EBITDA | $ |
265,381 |
|
$ |
(2,344 |
) |
$ |
267,725 |
|
| Depreciation and amortization | $ |
33,270 |
|
$ |
835 |
|
$ |
32,435 |
|
| Capital expenditures | $ |
108,163 |
|
$ |
226 |
|
$ |
107,937 |
|
| Total assets | $ |
841,898 |
|
$ |
38,972 |
|
$ |
802,926 |
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20231030194466/en/
Lynn Morgen/Viktoriia Nakhla, ADVISIRY Partners
212-750-5800
lynn.morgen@advisiry.com; vicky.nakhla@advisiry.com
Source: Trex Company, Inc.
FAQ
What were Trex's net sales in Q3 2023?
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