\nTrex Company, Inc. (NYSE:TREX), the world\u2019s #1 brand of high-performance, low-maintenance and eco-friendly composite decking, railing and outdoor living products, today reported first quarter 2023 results.<\/p>\n
First Quarter 2023 Highlights<\/span><\/b><\/p>\n CEO Comments<\/span><\/b><\/p>\n \n\u201cOur performance in the first quarter demonstrated the broad-based appeal of our product line and the continued attractiveness of the outdoor living category as an ongoing secular trend. Supported by our industry-leading brand, manufacturing efficiency, and the strength of our decades-long relationships with best-in-class channel partners in the industry, Trex continued to generate industry-leading margins and profitability,” said Bryan Fairbanks, President and CEO of Trex.<\/p>\n \n\u201cFirst quarter results were broadly consistent with our plan as channel inventory levels and market demand aligned with our expectations. Additionally, we strengthened our market leadership position and stimulated demand with innovative new products that meet the evolving needs of the marketplace and that have earned positive feedback from channel partners and consumers. Our plants are producing at an annual revenue rate of one billion dollars, with the ability to quickly and efficiently flex production up or down based on the demand environment. We achieved a sequential increase in gross margin during a period of lower utilization through improved raw material usage and by capitalizing on the opportunity to upgrade our equipment and generate operating efficiencies. Our first quarter EBITDA margin of 28.8% was attained while also making significant investments in research and development to drive long-term growth,\u201d said Fairbanks.<\/p>\n First Quarter 2023 Results<\/span><\/b><\/p>\n \nFirst quarter 2023 consolidated net sales were $239 million compared to $339 million in the prior-year quarter. The decrease was primarily due to a decrease in volume, attributable to more cautious purchase patterns by the channel in the face of softening economic conditions. Also impacting first quarter earnings is the absence of revenue from Trex Commercial, which was sold on December 30,2022. Trex Residential net sales in the year ago quarter were $327 million.<\/p>\n \nConsolidated gross profit as a percentage of net sales, gross margin, was 39.6% in the first quarter of 2023 compared to consolidated gross margin of 39.8% and Residential gross margin of 40.9% in the same quarter last year. The decrease was primarily the result of lower capacity utilization due to a decrease in production levels. The decrease was offset, in part, by improved manufacturing performance and other cost containment actions.<\/p>\n \nSelling, general and administrative expenses in the 2023 first quarter were $37 million, or 15.7% of net sales, compared to $40 million, or 11.8% of net sales, in the 2022 first quarter. The decrease was primarily related to a $3.5 million decrease in personnel related expenses, primarily driven by the divestiture of Trex Commercial and, to a lesser extent, a decrease at Trex Residential.<\/p>\n \nNet income for the 2023 first quarter was $41 million, or $0.38 per diluted share, compared to net income of $71 million, or $0.62 per diluted share, reported in the year ago quarter. EBITDA was $69 million compared to $105 million in the 2022 first quarter.<\/p>\n Recent Developments and Recognitions<\/span><\/b><\/p>\n Summary and Outlook<\/span><\/b><\/p>\n \n\u201cYear-to-date market demand has been consistent with our expectations and aligned with the repair and remodel sector, which historically has been more resilient than other sectors. Trex decking and railing products provide consumers with multiple options to add value to their homes through renovation, while enjoying their re-imagined outdoor living space, and we are encouraged by the positive response to our new Lineage and Signature decking lines. Throughout 2023, we expect to continue to prioritize projects to drive further operating efficiencies, while continuing progress on the construction of our Arkansas plant. Additionally, given our continued financial and operating strength and our confidence in the company\u2019s long-term growth prospects, the Trex Board of Directors adopted a new stock repurchase program of up to 10.8 million shares of its outstanding common stock, and terminated the existing stock repurchase program. This program has no expiration date.<\/p>\n \n\u201cWe anticipate second quarter 2023 net sales to be in the range of $310 million to $320 million. First quarter margin performance supports our expectation for full year 2023 EBITDA margin in the range of 26% to 27%. Capital expenditures for 2023 are expected to be in the $130 million to $140 million range, primarily related to the modular build out of our Arkansas facility, which will be calibrated to demand trends,\u201d Fairbanks concluded.<\/p>\n First Quarter 2023 Conference Call and Webcast Information<\/span><\/b><\/p>\n \nTrex will hold a conference call to discuss its first quarter 2023 results on Monday, May 8, 2023 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.<\/p>\n \nA live webcast of the conference call will be available in the Investor Relations section of the Trex Company website at 1Q23 Earnings Webcast<\/a>. For those who cannot listen to the live broadcast, an audio replay of the conference call will be available on the Trex website for 30 days.<\/p>\n Use of Non-GAAP Measures<\/span><\/b><\/p>\n \nThe 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 earnings before interest, income taxes, depreciation and amortization (EBITDA) and EBITDA as a percentage of net sales, 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\u2019 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\u2019s 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\u2019s 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.<\/p>\n \nReconciliation of net income (GAAP) to EBITDA (non-GAAP) is as follows:<\/p>\n\n
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