Trex Earns 41 Cents per Share

TREX COMPANY REPORTS THIRD QUARTER 2020 RESULTS

—20% Residential Sales Growth Reflects Brand Leadership Amid Strong Secular Demand—

—Fourth Quarter Consolidated Sales Expected at $210 Million – $220 Million, Up 30% Year-on-Year at the Mid-Point—

—Strong Double-Digit Sales Growth Expected for Full Year 2021—

—Company Reinstates Share Buyback Program—

Third Quarter Highlights

– Consolidated net sales increased 19% to $232 million

– Consolidated gross margin of 36.7%; excluding the warranty reserve charge, consolidated gross margin of 39.5%

– Consolidated diluted earnings per share of $0.37; excluding the warranty charge, diluted earnings per share of $0.41

– Consolidated EBITDA margin of 26.6%; excluding the warranty charge, consolidated EBITDA margin of 29.4%

Trex (TREX), the world’s number-one brand of composite decking and railing and leader in high-performance, low-maintenance outdoor living products, and a leading national provider of custom-engineered railing and staging systems, today reported financial results for the third quarter ended September 30, 2020.

Third Quarter 2020 Results

Consolidated net sales for the 2020 third quarter were $232 million, 19% ahead of the 2019 third quarter. Trex Residential Products net sales increased 20% to $218 million with Trex Commercial Products contributing $13 million to net sales. Consolidated gross margin was 36.7%, compared to 42.4% in the year-ago quarter. Gross margin for Trex Residential Products and Trex Commercial Products was 37.4% and 24.4%, respectively. SG&A was $28 million, or 12.1% of net sales, compared to $27.4 million, or 14.1% of net sales, in the prior period. Net income for the 2020 third quarter was $43 million, or $0.37 per diluted share, representing increases of 2% and 3%, respectively, from net income of $42 million, or $0.36 per diluted share, in the 2019 third quarter. EBITDA increased 5% to $61.5 million and EBITDA margin was 26.6%.

During the 2020 third quarter, the Company recognized a charge of $6.5 million to the Trex Residential warranty reserve related to the legacy surface flaking issue that affected a portion of the products manufactured at the Nevada plant prior to 2007. Excluding the warranty charge, consolidated gross margin was 39.5%. Net income was $48 million, or $0.41 per diluted share, up 13% and 14%, respectively, and EBITDA increased 16% to $68 million and EBITDA margin was 29.4%.

“Trex brand leadership continues to position us at the forefront of strong secular trends for the composite decking and railing industry. Demand for Trex products continues to outpace supply reflecting consumer preferences for the superior aesthetics and high performance of our products and continued strength in the repair and remodel sector. Together with the compelling value proposition of our Enhance product line, these attributes are enabling Trex to accelerate conversion from the dominant wood decking market.

“Third quarter profitability, exclusive of the warranty charge, demonstrated the successful execution of our low-cost, highly-efficient operating model, which more than offset the anticipated increased labor and depreciation costs related to capacity expansion and COVID-19 management.” noted Bryan H. Fairbanks, President and Chief Executive Officer.

Outlook

“For the 2020 fourth quarter, we expect consolidated net sales of approximately $210 million to $220 million, representing 30% growth at the midpoint of the range. For full year 2020, we expect incremental gross margin to be at the low end of the 45% to 50% range, excluding the warranty charge, and reflecting COVID-19 related expenses, inflation and logistics costs associated with startup expenses as we approach our Virginia facility coming online. We expect SG&A as a percentage of net sales to improve by approximately 150 basis points for the full year compared to the prior year, driven by reduced brand spend and lower travel and entertainment costs.

“Based on current visibility, we expect 2021 to deliver another year of strong double-digit sales growth. Recently announced price increases on certain products that will go into effect at the beginning of the new year, combined with disciplined cost management and continuous improvement efforts, are expected to more than offset increased costs related to the new capacity ramp-up and expected inflation for raw materials. As a result of our improved visibility and a more stable economic backdrop, the Trex Board of Directors has reinstated our share buyback program,” Mr. Fairbanks concluded.

Posted by on November 2nd, 2020 at 4:06 pm


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