Trex Company Reports Fourth Quarter and Full Year 2023 Results

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

Trex Company, Inc. (“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, 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.

For the full fourth quarter results, click here.

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 U.S.A. – and a leader in high performance, low-maintenance outdoor living products. 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 Winchester, Va., Trex is proud to have been honored with Lowe’s 2023 Sustainability Award, recognized as one of the 100 Best ESG Companies for 2023 by Investor’s Business Daily, and ranked by Newsweek magazine as one of America’s Most Responsible Companies. For more information, visit Trex.com. You may also follow Trex on Facebook (trexcompany), Instagram (trexcompany), X (Trex_Company), LinkedIn (trex-company), TikTok (trexcompany), Pinterest (trexcompany) and Houzz (trex-company-inc), or view product and demonstration videos on the brand’s YouTube channel (TheTrexCo).

Contact:

Lynn Morgen – ADVISIRY Partners – lynn.morgen@advisiry.com – (212) 750-5800

Source: Trex Company, Inc.