Trex(TREX) - 2024 Q2 - Quarterly Results

Second Quarter 2024 Financial Highlights Trex reported Q2 2024 net sales of $376 million, with a gross margin of 44.7%, net income of $87 million, or $0.80 per diluted share, and EBITDA of $130 million, resulting in an EBITDA margin of 34.6% Q2 2024 Key Financial Metrics | Metric | Value | | :--- | :--- | | Net Sales | $376 million | | Gross Margin | 44.7% | | Net Income | $87 million | | Diluted EPS | $0.80 | | EBITDA | $130 million | | EBITDA Margin | 34.6% | CEO Commentary The CEO highlighted that second-quarter sales growth was driven by premium products, which continue to see double-digit sell-through, while lower-priced products underperformed due to softness in entry-level consumer demand, with margin expansion achieved through higher production utilization and cost-saving initiatives, and a focus on strategic new product introductions to expand market appeal - Sales growth was led by premium products like Trex Transcend® Lineage and Trex Signature® decking, which saw double-digit sell-through, while lower-priced product lines underperformed due to softness in entry-level consumer demand[2] - Gross margin expanded by 80 basis points and EBITDA margin by 180 basis points, driven by higher utilization, cost-out programs, and other efficiency initiatives[3] - The company is strategically launching new products, including additions to its railing portfolio, new color options for Trex Enhance® decking, and new branded deck fasteners[4] Detailed Financial Results In Q2 2024, net sales increased 6% year-over-year to $376 million, primarily from premium product volume, with gross margin improving to 44.7% and net income growing 13% to $87 million, while for the first half of 2024, net sales rose 26% to $750 million, with net income up 49% to $176 million Second Quarter 2024 Results This section provides a comparative overview of Trex's Q2 2024 financial performance against Q2 2023, detailing key revenue, profit, and margin metrics Q2 2024 vs Q2 2023 Performance | Metric | Q2 2024 | Q2 2023 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $376 million | $357 million | +6% | | Gross Profit | $168 million | $156 million | +8% | | Gross Margin | 44.7% | 43.9% | +80 bps | | Net Income | $87 million | $77 million | +13% | | Diluted EPS | $0.80 | $0.71 | +13% | | EBITDA | $130 million | $117 million | +11% | | EBITDA Margin | 34.6% | 32.8% | +180 bps | Year-to-Date 2024 Results This section presents Trex's year-to-date financial performance for the first half of 2024 compared to 2023, detailing sales, profit, and margin trends First Half 2024 vs First Half 2023 Performance | Metric | H1 2024 | H1 2023 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $750 million | $595 million | +26% | | Gross Profit | $338 million | $251 million | +35% | | Gross Margin | 45.0% | 42.1% | +290 bps | | Net Income | $176 million | $118 million | +49% | | Diluted EPS | $1.62 | $1.09 | +49% | | EBITDA | $264 million | $186 million | +42% | | EBITDA Margin | 35.1% | 31.2% | +390 bps | Recent Developments & Recognitions Trex has recently expanded its product line with new railing systems, earned its 14th consecutive Sustainable Brand Leader award from Green Builder Media, and published its 2023 Sustainability Report highlighting its commitment to circularity and efficiency - Expanded the Trex Signature® Railing line with the new X-Series™ Cable Rail and X-Series™ Frameless Glass Rail[8] - Named Sustainable Brand Leader in the decking category by Green Builder Media for the 14th consecutive year[8] - Published its 2023 Sustainability Report, detailing progress in circularity, safety, manufacturing efficiency, and community engagement[8] Summary and Outlook Due to an uncertain economic outlook and softness in the entry-level market, Trex has adjusted its full-year 2024 revenue guidance to a range of $1.13 billion to $1.15 billion, while maintaining its full-year EBITDA margin guidance of 30.0% to 30.5%, with third-quarter revenue expected to be between $220 million and $230 million Q3 and Full Year 2024 Guidance | Metric | Q3 2024 Guidance | Full Year 2024 Guidance | | :--- | :--- | :--- | | Revenue | $220 million - $230 million | $1.13 billion - $1.15 billion | | EBITDA Margin | - | 30.0% - 30.5% | | SG&A (% of sales) | - | ~16% (flat YoY) | | Depreciation & Amortization | - | $53 million - $55 million | | Tax Rate | - | 25% - 26% | - The company expects channel inventory levels at the end of 2024 to be slightly lower than at the end of 2023[10] - Long-term growth is supported by secular trends, including the large number of aging decks needing replacement, growth in home remodeling, and the ongoing conversion from wood to composite materials[11] Consolidated Financial Statements This section presents the unaudited condensed consolidated financial statements for the periods ended June 30, 2024, including the Statements of Comprehensive Income, Balance Sheets, and Statements of Cash Flows, along with a reconciliation of GAAP to non-GAAP measures Reconciliation of GAAP to Non-GAAP Measures This section reconciles Trex's GAAP net income to non-GAAP EBITDA, detailing adjustments for interest, taxes, depreciation, and amortization EBITDA Reconciliation (in thousands) | Line Item | Q2 2024 | Q2 2023 | H1 2024 | H1 2023 | | :--- | :--- | :--- | :--- | :--- | | Net Income (GAAP) | $86,998 | $77,036 | $176,068 | $118,167 | | Interest expense (income), net | — | $1,305 | $(6) | $3,289 | | Income tax expense | $29,906 | $26,426 | $59,853 | $40,258 | | Depreciation and amortization | $13,451 | $12,283 | $27,606 | $24,198 | | EBITDA (Non-GAAP) | $130,355 | $117,050 | $263,521 | $185,912 | | EBITDA Margin | 34.6% | 32.8% | 35.1% | 31.2% | Condensed Consolidated Statements of Comprehensive Income This section presents Trex's condensed consolidated statements of comprehensive income, detailing revenue, gross profit, operating income, and net income Statement of Comprehensive Income Highlights (in thousands) | Line Item | Q2 2024 | Q2 2023 | H1 2024 | H1 2023 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $376,470 | $356,538 | $750,105 | $595,256 | | Gross profit | $168,110 | $156,448 | $337,721 | $250,876 | | Income from operations | $116,904 | $104,767 | $235,915 | $161,714 | | Net income | $86,998 | $77,036 | $176,068 | $118,167 | | Diluted EPS | $0.80 | $0.71 | $1.62 | $1.09 | Condensed Consolidated Balance Sheets This section provides Trex's condensed consolidated balance sheets, outlining assets, liabilities, and stockholders' equity Balance Sheet Highlights (in thousands) | Line Item | June 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $1,172 | $1,959 | | Inventories | $148,858 | $107,089 | | Total current assets | $433,814 | $172,254 | | Total assets | $1,269,934 | $932,885 | | Total current liabilities | $244,401 | $91,062 | | Total liabilities | $375,034 | $216,214 | | Total stockholders' equity | $894,900 | $716,671 | Condensed Consolidated Statements of Cash Flows This section details Trex's condensed consolidated statements of cash flows, summarizing cash from operating, investing, and financing activities Cash Flow Highlights - Six Months Ended June 30 (in thousands) | Line Item | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $19,641 | $107,781 | | Net cash used in investing activities | $(73,096) | $(82,357) | | Net cash provided by (used in) financing activities | $52,668 | $(33,523) | | Net decrease in cash and cash equivalents | $(787) | $(8,099) | | Cash and cash equivalents at end of period | $1,172 | $4,226 |