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Trex Company Reports Fourth Quarter and Full Year 2023 Results

WINCHESTER, Va. , February 26 /Businesswire/ - 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

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