Trex(US:TREX)2024-05-09 21:11Financial Performance - Net sales for the three months ended March 31, 2024, reached $373.6 million, a 56.5% increase from $238.7 million in the same period of 2023[82] - Gross profit for the same period was $169.6 million, reflecting a 79.6% increase compared to $94.4 million in Q1 2023[82] - Net income surged to $89.1 million, up 116.6% from $41.1 million year-over-year[82] - EBITDA for Q1 2024 was $133.2 million, a 93.4% increase from $68.9 million in Q1 2023[82] - Diluted earnings per share increased to $0.82, representing a 115.8% rise from $0.38 in the prior year[82] - Net sales increased by $134.9 million, or 56.5%, in Q1 2024 compared to Q1 2023, primarily due to increased volume and changes to the early-buy program[89] - Gross profit rose to $169.6 million, a 79.6% increase from $94.4 million in Q1 2023, with a gross margin of 45.4% compared to 39.6% in the prior year[91] - Net income for Q1 2024 was $89.1 million, up from $41.1 million in Q1 2023, with EBITDA increasing 93.4% to $133.2 million[94] Capital Expenditures and Financial Guidance - Capital expenditures in Q1 2024 totaled $37.7 million, primarily for the Arkansas manufacturing facility and capacity expansion[83] - Capital expenditures in Q1 2024 totaled $37.7 million, mainly for the Arkansas manufacturing facility and cost reduction initiatives[98] - The capital expenditure guidance for 2024 is set between $210 million and $230 million, including expenditures for the new Arkansas facility[112] - The company plans to prioritize capital allocation for internal growth, manufacturing cost reductions, and strategic acquisitions in 2024[113] Claims and Warranty - The warranty period for residential use of products sold on or after January 1, 2023, is 50 years for Transcend® decking and 35 years for Select® decking[116] - The warranty period for commercial use of products sold on or after January 1, 2023, is 10 years, with some exceptions having a 25-year warranty[116] - The number of incoming claims for the three months ended March 31, 2024, was 69, a decrease from 81 claims received in the same period in 2023[123] - The average cost per claim for the three months ended March 31, 2024, was $3,460, down from $4,114 in the same period in 2023[125] - The total number of open claims at the end of March 31, 2024, was 1,699, slightly up from 1,729 at the end of March 31, 2023[125] - The company estimates that a 10% change in the expected number of remaining claims or the expected cost to settle claims may result in approximately a $1.0 million change in the surface flaking warranty reserve[124] - The company maintains a warranty reserve for product warranty claims, adjusting estimates based on historical claims experience and future expectations[118] - The company continues to receive and settle claims for products manufactured prior to 2007 that exhibit surface flaking, maintaining a warranty reserve for these claims[119] Operational Insights - Selling, general and administrative expenses increased by $13.1 million to $50.6 million, representing 13.5% of total net sales, driven by higher personnel and marketing expenses[92] - Cash used in operating activities was $174 million in Q1 2024, compared to $115.5 million in Q1 2023, primarily due to increases in accounts receivable and inventories[97] - The company had $223 million in outstanding borrowings under the revolving credit facility, with a borrowing capacity of $327 million as of March 31, 2024[109] - Significant increases in inventory levels in the distribution channel without corresponding end-use demand could adversely affect future sales[114] - Seasonal demand for products may be affected by adverse weather conditions, but incentive programs for distributors help mitigate this impact[126] - The company has not experienced any material changes in market risk exposure during the three months ended March 31, 2024[127] Product Development and Recognition - Trex launched the Trex Signature® X-SeriesTM, expanding its railing portfolio with new cable and frameless glass rail options[82] - Trex was recognized as the most sustainable decking brand for the 14th consecutive year by Green Builder Media[82] - The company celebrated six awards for product excellence and innovation in decking and railing products from various industry organizations[82] - Trex's comprehensive fastener collection, including the Hideaway® Fastener Collection, was launched to meet diverse fastening needs[82]