Trex Company Reports Third Quarter 2024 Results
Continued Strength in Consumer Demand for Premium Products
New Railing Product Introductions to Accelerate Market Share Gains
Provides Update on New Arkansas Facility
Reaffirms Full Year 2024 Sales Guidance and Expects to Achieve High End of
Third Quarter Financial 2024 Highlights
-
Net sales of
$234 million - Gross margin of 39.9%
-
Net income of
$41 million and diluted earnings per share of$0.37 -
EBITDA of
$68 million and EBITDA margin of 29.1% -
Trex repurchased 1.6 million shares year-to-date for
$100 million
CEO Comments
“Our third quarter results were ahead of our expectations led by sustained consumer demand for our premium-priced products, for which we estimate sell-through increased by high-single digits year-on-year and contractor lead time continued to average 6 to 8 weeks. As anticipated, sell-through of our lower-priced products was below last year’s levels, consistent with a pullback in spending by consumers in this segment, although the decline was sequentially stable and less pronounced than we had expected. During the third quarter, our channel partners reduced their inventory levels by approximately
“New product development remains a strategic priority and a key driver of future double-digit growth for Trex. In the nine months ended
“With respect to adjacencies, our recently introduced line of Trex®-branded deck fasteners continue to garner positive customer demand given their ease of installation and the cohesive aesthetic they provide to contractors and consumers. These launches, from railing to decking to fasteners, give our channel partners a competitive edge by allowing them to deliver end-to-end solutions from one supplier—Trex—and enabling them to compete more effectively at all price points while making Trex available to a wider range of homeowners,”
* Although Trex decking products with heat-mitigating technology are designed to be cooler than most other composite decking products of a similar color, on a hot sunny day, it will get hot. On hot days, care should be taken to avoid extended contact between exposed skin and the deck surface, especially with young children and those with special needs.
Third Quarter 2024 Results
Third quarter 2024 net sales were
Gross profit was
Selling, general and administrative expenses were
Net income for the 2024 third quarter was
Year-to-Date Results
Year-to-date net sales increased 9% to
Selling, general and administrative expenses were
Net income year-to-date was
Recent Developments & Recognitions
- Trex added two new colors to the brand’s popular Trex Enhance® decking line.
- Trex introduced All-In-One Post Kits for its Trex Select® and Trex Enhance® railing. Designed to simplify the railing purchase and installation process, these budget-friendly kits come complete with a composite post sleeve, post cap and post skirt, all packaged together.
-
Trex continues to demonstrate its commitment to tackling America’s plastic waste problem through the NexTrex®
Grassroots Movement , which promotes responsible disposal of polyethylene plastic waste and gives it new life as beautiful, durable and environmentally friendly Trex® composite decking. Since launching in August of 2022, this collaborative recycling initiative has experienced tremendous growth with an impressive 227% increase in participation from eco-minded businesses, municipalities, educational institutions and other organizations across the country.
Update on New Arkansas Facility
We are providing the following additional details on our new
-
Recycled plastic
processing at the Company’s new
Arkansas facility will begin in early 2025. We anticipate that the associated one-time start-up costs will total approximately$5 million beginning in the first quarter of 2025 and the associated annualized depreciation of$10 million beginning in the second quarter of 2025. We expect these operations will be running at target utilization rates by the third quarter of 2025.
-
Decking manufacturing
production efficiencies at our existing manufacturing facilities have yielded increased capacity that will allow us to meet the projected demand through 2026. Therefore, the Company plans to commence decking board production at its new
Arkansas campus in the first half of 2027. We expect the one-time start-up costs to be approximately$12 million beginning in the first half of 2027, with associated annualized depreciation of$20 million beginning at the same time. We expect these operations will be running at target utilization rates by the end of 2027.
-
Capital expenditures
for the
Arkansas facility are expected to be approximately$550 million , of which$340 million have already been disbursed. The increase from the Company’s prior guidance for the project primarily reflects management’s decision to build redundancies to mitigate potential production constraints within our existing manufacturing facilities as well as inflationary pressures on installation and building material costs. Upon completion of the project, total Company capital expenditures are expected to return to substantially lower levels, resulting in significant free cash flow generation.
Summary and Outlook
“Based on our year-to-date results and our channel visibility, we are pleased to reaffirm net sales guidance at the midpoint of our range,
“Looking ahead to 2025, we will be working closely with our channel partners to maximize the benefits of our expanded railing line, and we anticipate that several of our exclusive decking distributors will adopt exclusivity for Trex® railing as well. This is expected to significantly increase our penetration of the
“As the market leader, with the greatest brand awareness in the category, the largest and most trusted network of distributors, dealers and home centers in
Third Quarter 2024 Conference Call and Webcast Information
Trex will hold a conference call to discuss its third quarter 2024 results on
A live webcast of the conference call will be available in the Investor Relations section of the
Use of Non-GAAP Measures
The Company reports its financial results in accordance with accounting principles generally accepted in
Reconciliation of gross profit (GAAP) to adjusted gross profit (non-GAAP) is as follows:
Three Months Ended | Nine Months Ended | |||||||||||
|
|
|||||||||||
|
2024 |
2023 |
2024 |
2023 |
||||||||
($ in thousands) | ($ in thousands) | |||||||||||
Net sales |
$ |
233,717 |
|
$ |
303,836 |
|
$ |
983,822 |
|
$ |
899,092 |
|
Cost of sales |
|
140,512 |
|
|
172,941 |
|
|
552,896 |
|
|
517,321 |
|
Gross profit |
$ |
93,205 |
|
$ |
130,895 |
|
$ |
430,926 |
|
$ |
381,771 |
|
Warranty adjustment |
|
- |
|
|
(3,800 |
) |
|
- |
|
|
(3,800 |
) |
Adjusted Gross Profit |
$ |
93,205 |
|
$ |
127,095 |
|
$ |
430,926 |
|
$ |
377,971 |
|
Gross margin |
|
39.9 |
% |
|
43.1 |
% |
|
43.8 |
% |
|
42.5 |
% |
Adjusted Gross Margin |
|
39.9 |
% |
|
41.8 |
% |
|
43.8 |
% |
|
42.0 |
% |
Reconciliation of net income (GAAP) to adjusted net income (non-GAAP) is as follows:
Three Months Ended | Nine Months Ended | |||||||||
|
|
|||||||||
|
2024 |
2023 |
2024 |
2023 |
||||||
($ in thousands) | ($ in thousands) | |||||||||
Net Income |
$ |
40,553 |
$ |
65,266 |
|
$ |
216,620 |
$ |
183,433 |
|
Warranty adjustment |
|
- |
|
(3,800 |
) |
|
- |
|
(3,800 |
) |
Income tax effect * |
|
- |
|
969 |
|
|
- |
|
969 |
|
Adjusted Net Income |
$ |
40,553 |
$ |
62,435 |
|
$ |
216,620 |
$ |
180,602 |
|
Diluted earnings per share |
$ |
0.37 |
$ |
0.60 |
|
$ |
1.99 |
$ |
1.69 |
|
Adjusted diluted earnings per share |
$ |
0.37 |
$ |
0.57 |
|
$ |
1.99 |
$ |
1.66 |
|
*Income tax effect calculated using the effective tax rate for the applicable period of 25.5%. |
Reconciliation of net income (GAAP) to EBITDA and adjusted EBITDA (non-GAAP) is as follows:
Three Months Ended | Nine Months Ended | |||||||||||
|
|
|||||||||||
|
2024 |
2023 |
2024 |
2023 |
||||||||
($ in thousands) | ($ in thousands) | |||||||||||
Net Income |
$ |
40,553 |
|
$ |
65,266 |
|
$ |
216,620 |
|
$ |
183,433 |
|
Interest income (expense), net |
|
(5 |
) |
|
(734 |
) |
|
(11 |
) |
|
2,555 |
|
Income tax expense |
|
13,756 |
|
|
21,831 |
|
|
73,609 |
|
|
62,089 |
|
Depreciation and amortization |
|
13,611 |
|
|
12,996 |
|
|
41,218 |
|
|
37,194 |
|
EBITDA |
$ |
67,915 |
|
$ |
99,359 |
|
$ |
331,436 |
|
$ |
285,271 |
|
Warranty Adjustment |
$ |
- |
|
$ |
(3,800 |
) |
$ |
- |
|
$ |
(3,800 |
) |
Adjusted EBITDA |
$ |
67,915 |
|
$ |
95,559 |
|
$ |
331,436 |
|
$ |
281,471 |
|
Net income as a percentage of net sales |
|
17.3 |
% |
|
21.5 |
% |
|
22.0 |
% |
|
20.4 |
% |
EBITDA as a percentage of net sales (EBITDA margin) |
|
29.1 |
% |
|
32.7 |
% |
|
33.7 |
% |
|
31.7 |
% |
Adjusted EBITDA as a percentage of net sales (EBITDA margin) |
|
29.1 |
% |
|
31.5 |
% |
|
33.7 |
% |
|
31.3 |
% |
About
For more than 30 years,
**Trex received the highest numerical score in the proprietary
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
|
||||||||||||||
|
||||||||||||||
Condensed Consolidated Statements of Comprehensive Income | ||||||||||||||
(In thousands, except share and per share data) | ||||||||||||||
Three Months Ended |
Nine Months Ended |
|||||||||||||
2024 |
2023 |
2024 |
2023 |
|||||||||||
(Unaudited) | (Unaudited) | |||||||||||||
Net sales |
$ |
233,717 |
|
$ |
303,836 |
|
$ |
983,822 |
|
$ |
899,092 |
|||
Cost of sales |
|
140,512 |
|
|
172,941 |
|
|
552,896 |
|
|
517,321 |
|||
Gross profit |
|
93,205 |
|
|
130,895 |
|
|
430,926 |
|
|
381,771 |
|||
Selling, general and administrative expenses |
|
38,901 |
|
|
44,532 |
|
|
140,708 |
|
|
133,694 |
|||
Income from operations |
|
54,304 |
|
|
86,363 |
|
|
290,218 |
|
|
248,077 |
|||
Interest income (expense), net |
|
(5 |
) |
|
(734 |
) |
|
(11 |
) |
|
2,555 |
|||
Income before income taxes |
|
54,309 |
|
|
87,097 |
|
|
290,229 |
|
|
245,522 |
|||
Provision for income taxes |
|
13,756 |
|
|
21,831 |
|
|
73,609 |
|
|
62,089 |
|||
Net income |
$ |
40,553 |
|
$ |
65,266 |
|
$ |
216,620 |
|
$ |
183,433 |
|||
Basic earnings per common share |
$ |
0.37 |
|
$ |
0.60 |
|
$ |
2.00 |
|
$ |
1.69 |
|||
Basic weighted average common shares outstanding |
|
108,258,401 |
|
|
108,583,009 |
|
|
108,529,825 |
|
|
108,707,699 |
|||
Diluted earnings per common share |
$ |
0.37 |
|
$ |
0.60 |
|
$ |
1.99 |
|
$ |
1.69 |
|||
Diluted weighted average common shares outstanding |
|
108,379,416 |
|
|
108,702,495 |
|
|
108,659,118 |
|
|
108,829,374 |
|||
Comprehensive income |
$ |
40,553 |
|
$ |
65,266 |
|
$ |
216,620 |
|
$ |
183,433 |
|
||||||||
|
||||||||
Condensed Consolidated Balance Sheets | ||||||||
(In thousands, except share data) | ||||||||
(unaudited) | ||||||||
|
|
|||||||
2024 |
2023 |
|||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents |
$ |
12,838 |
|
$ |
1,959 |
|
||
Accounts receivable, net |
|
140,060 |
|
|
41,136 |
|
||
Inventories |
|
187,935 |
|
|
107,089 |
|
||
Prepaid expenses and other assets |
|
11,885 |
|
|
22,070 |
|
||
Total current assets |
|
352,718 |
|
|
172,254 |
|
||
Property, plant and equipment, net |
|
852,912 |
|
|
709,402 |
|
||
Operating lease assets |
|
36,110 |
|
|
26,233 |
|
||
|
|
19,386 |
|
|
18,163 |
|
||
Other assets |
|
6,094 |
|
|
6,833 |
|
||
Total assets |
$ |
1,267,220 |
|
$ |
932,885 |
|
||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable |
$ |
61,480 |
|
$ |
23,963 |
|
||
Accrued expenses and other liabilities |
|
113,634 |
|
|
56,734 |
|
||
Accrued warranty |
|
6,104 |
|
|
4,865 |
|
||
Line of credit |
|
70,000 |
|
|
5,500 |
|
||
Total current liabilities |
|
251,218 |
|
|
91,062 |
|
||
Deferred income taxes |
|
67,226 |
|
|
72,439 |
|
||
Operating lease liabilities |
|
26,782 |
|
|
18,840 |
|
||
Non-current accrued warranty |
|
17,530 |
|
|
17,313 |
|
||
Other long-term liabilities |
|
16,560 |
|
|
16,560 |
|
||
Total liabilities |
|
379,316 |
|
|
216,214 |
|
||
Preferred stock, |
|
— |
|
|
— |
|
||
Common stock, |
|
1,411 |
|
|
1,410 |
|
||
Additional paid-in capital |
|
145,198 |
|
|
140,157 |
|
||
Retained earnings |
|
1,552,679 |
|
|
1,336,058 |
|
||
|
|
(811,384 |
) |
|
(760,954 |
) |
||
Total stockholders’ equity |
|
887,904 |
|
|
716,671 |
|
||
Total liabilities and stockholders’ equity |
$ |
1,267,220 |
|
$ |
932,885 |
|
|
|||||||
|
|||||||
Condensed Consolidated Statements of Cash Flows | |||||||
(In thousands) | |||||||
Nine Months Ended |
|||||||
2024 |
2023 |
||||||
(unaudited) | |||||||
Operating Activities | |||||||
Net income |
$ |
216,620 |
|
$ |
183,433 |
|
|
Adjustments to reconcile net income to net cash | |||||||
provided by operating activities: | |||||||
Depreciation and amortization |
|
41,218 |
|
|
37,194 |
|
|
Deferred Income Taxes |
|
(5,212 |
) |
|
- |
|
|
Stock-based compensation |
|
9,663 |
|
|
7,384 |
|
|
Loss on disposal of property, plant and equipment |
|
2,262 |
|
|
1,081 |
|
|
Other non-cash adjustments |
|
46 |
|
|
(169 |
) |
|
Changes in operating assets and liabilities: | |||||||
Accounts receivable |
|
(98,924 |
) |
|
(102,852 |
) |
|
Inventories |
|
(80,847 |
) |
|
80,971 |
|
|
Prepaid expenses and other assets |
|
1,266 |
|
|
4,376 |
|
|
Accounts payable |
|
681 |
|
|
10,678 |
|
|
Accrued expenses and other liabilities |
|
52,125 |
|
|
39,039 |
|
|
Income taxes receivable/payable |
|
13,504 |
|
|
27,090 |
|
|
Net cash provided by operating activities |
|
152,402 |
|
|
288,225 |
|
|
Investing Activities | |||||||
Expenditures for property, plant and equipment |
|
(151,481 |
) |
|
(112,920 |
) |
|
Proceeds from sales of property, plant and equipment |
|
106 |
|
|
- |
|
|
Net cash used in investing activities |
|
(151,375 |
) |
|
(112,920 |
) |
|
Financing Activities | |||||||
Borrowings under line of credit |
|
608,300 |
|
|
509,500 |
|
|
Principal payments under line of credit |
|
(543,800 |
) |
|
(675,000 |
) |
|
Repurchases of common stock |
|
(55,655 |
) |
|
(18,441 |
) |
|
Proceeds from employee stock purchase and option plans |
|
1,007 |
|
|
925 |
|
|
Financing costs |
|
- |
|
|
30 |
|
|
Net cash provided by (used in) financing activities |
|
9,852 |
|
|
(182,986 |
) |
|
Net increase (decrease) in cash and cash equivalents |
|
10,879 |
|
|
(7,681 |
) |
|
Cash and cash equivalents at beginning of period |
|
1,959 |
|
|
12,325 |
|
|
Cash and cash equivalents at end of period |
$ |
12,838 |
|
$ |
4,644 |
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20241028672313/en/
Senior Vice President and CFO
540-542-6300
ADVISIR
212-750-5800
lynn.morgen@advisiry.com
casey.kotary@advisiry.com
Source: