Trex(TREX) - 2025 Q2 - Quarterly Results

Financial & Operational Highlights Trex Company exceeded Q2 sales guidance with $388 million, driven by new products and strong market position, reaffirming full-year 2025 guidance Second Quarter 2025 Financial Highlights Q2 2025 Key Financial Metrics | Metric | Value | | :--- | :--- | | Net Sales | $388 million | | Gross Profit | $158 million | | Adjusted Gross Profit | $161 million | | Net Income | $76 million | | Diluted EPS | $0.71 | | Adjusted Net Income | $79 million | | Adjusted Diluted EPS | $0.73 | | Adjusted EBITDA | $122 million | CEO Commentary - Product innovation is a key driver, with new products launched in the last 36 months representing 22% of second-quarter sales, a significant increase from 13% in the prior-year period[5] - The company is seeing positive momentum in its railing products, with year-to-date sales tracking towards double-digit growth in 2025, aiming to double its market share in the $3 billion railing market within five years[6] - Consumer demand remains resilient, particularly for high-end products like Transcend Lineage® and the expanded mid-priced Select® line, with increased market penetration in the western U.S[7] - The new Arkansas plastic processing facility is performing above expectations, improving vertical integration and reducing the need for external material purchases[8] Financial Performance Analysis Q2 2025 net sales grew 3% to $388 million, but net income declined due to production strategy and start-up costs Second Quarter 2025 Results Q2 2025 vs Q2 2024 Performance | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $388M | $376M | +3% | | Gross Profit | $158M | $168M | -6% | | Gross Margin | 40.8% | 44.7% | -390 bps | | Net Income | $76M | $87M | -13% | | Diluted EPS | $0.71 | $0.80 | -11% | - The decrease in gross margin was attributed to a revised inventory strategy to level-load production, costs for performance refinements to Enhance® decking boards, railing conversion costs, and start-up expenses for the Arkansas plant[12] - Selling, general, and administrative (SG&A) expenses increased to $56 million (14.4% of sales) from $51 million (13.6% of sales) in the prior year, driven by investments in branding and one-time start-up costs[13] Year-to-Date Results YTD 2025 vs YTD 2024 Performance | Metric | YTD 2025 | YTD 2024 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $728M | $750M | -3% | | Gross Profit | $296M | $338M | -12% | | Gross Margin | 40.7% | 45.0% | -430 bps | | Net Income | $136M | $176M | -23% | | Diluted EPS | $1.27 | $1.62 | -22% | - The year-to-date decrease in net sales was attributed to the company's revised inventory and level-load production strategies[16] Summary and Outlook Trex reaffirmed full-year 2025 guidance for 5-7% revenue growth and >31% adjusted EBITDA margin, with Q3 sales projected at $295-305 million Business Summary & Strategic Initiatives - Strategic initiatives strengthening market leadership include the launch of new decking with SunComfortable™ technology, expansion of the railing portfolio, and the rollout of Trex-engineered fastening solutions[21] - A revised inventory strategy involving level-loading production is being implemented to reduce channel stocking volatility and enhance operational efficiency[22] - The company has mitigated most of the impact from tariffs, with less than 5% of its cost of sales projected to be affected, primarily related to aluminum and steel purchases[23] Full Year 2025 and Q3 2025 Guidance Financial Guidance | Period | Metric | Guidance | | :--- | :--- | :--- | | Full Year 2025 | Sales Growth | 5% to 7% | | Full Year 2025 | Adjusted EBITDA Margin | > 31% | | Q3 2025 | Net Sales | $295M to $305M | | Q3 2025 | Gross Margin | ~100 bps sequential expansion | Non-GAAP Financial Measures Reconciliation Non-GAAP reconciliations are provided, with Q2 2025 adjustments for railing conversion, Arkansas facility start-up, and digital transformation costs Reconciliation of Gross Profit (GAAP to Non-GAAP) Q2 2025 Gross Profit Reconciliation ($ in thousands) | Description | Q2 2025 | | :--- | :--- | | Gross profit (GAAP) | $158,132 | | Railing conversion | $1,424 | | Arkansas start-up | $1,281 | | Adjusted gross profit (non-GAAP) | $160,837 | Reconciliation of Net Income (GAAP to Non-GAAP) Q2 2025 Net Income Reconciliation ($ in thousands) | Description | Q2 2025 | | :--- | :--- | | Net income (GAAP) | $75,909 | | Railing conversion | $1,424 | | Digital transformation | $478 | | Arkansas start-up | $1,888 | | Income tax effect | ($982) | | Adjusted net income (non-GAAP) | $78,717 | Reconciliation of EBITDA (GAAP to Non-GAAP) Q2 2025 EBITDA Reconciliation ($ in thousands) | Description | Q2 2025 | | :--- | :--- | | Net income (GAAP) | $75,909 | | Interest income | ($77) | | Income tax expense | $26,566 | | Depreciation and amortization | $15,807 | | EBITDA (non-GAAP) | $118,205 | | Railing conversion | $1,424 | | Digital transformation | $478 | | Arkansas start-up | $1,888 | | Adjusted EBITDA (non-GAAP) | $121,995 | Consolidated Financial Statements (Unaudited) Unaudited statements show Q2 and YTD net income decline, increased total assets to $1.54 billion, and improved operating cash flow to $95.7 million Condensed Consolidated Statements of Comprehensive Income Income Statement Summary (In thousands) | Metric | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :--- | :--- | :--- | | Net sales | $387,801 | $727,794 | | Gross profit | $158,132 | $295,863 | | Income from operations | $102,398 | $184,062 | | Net income | $75,909 | $136,343 | | Diluted EPS | $0.71 | $1.27 | Condensed Consolidated Balance Sheets Balance Sheet Summary (In thousands) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total current assets | $453,464 | $318,908 | | Total assets | $1,537,855 | $1,324,298 | | Total current liabilities | $419,357 | $342,477 | | Total liabilities | $548,599 | $474,156 | | Total stockholders' equity | $989,256 | $850,142 | Condensed Consolidated Statements of Cash Flows Cash Flow Summary - Six Months Ended June 30 (In thousands) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $95,739 | $19,641 | | Net cash used in investing activities | ($130,987) | ($73,096) | | Net cash provided by financing activities | $39,479 | $52,668 | | Net increase (decrease) in cash | $4,231 | ($787) | | Cash and cash equivalents at end of period | $5,523 | $1,172 | Company Overview & Forward-Looking Statements Trex is the 1 wood-alternative decking brand, with forward-looking statements subject to market, economic, and raw material risks About Trex Company - Trex is the world's 1 brand of sustainably made wood-alternative decking and railing, with products sold through more than 6,700 retail outlets across six continents[35] - The company has received numerous accolades for trust and sustainability, including being named America's Most Trusted® Outdoor Decking for 5 consecutive years (2021-2025) and listed on Barron's 100 Most Sustainable U.S. Companies[35] Forward-Looking Statements - The company's performance is subject to risks including market acceptance of new products, general economic conditions, seasonal demand fluctuations, raw material availability and cost (scrap polyethylene, wood fiber), inflation, and tariffs[39]