Executive Summary

Q4 revenue and EPS declined on channel destocking, but results were above management’s internal expectations; full-year 2024 revenue exceeded guidance and EBITDA margin reached a record 31.3% .
2025 outlook: net sales $1.21–$1.23B (+6% YoY at midpoint) and adjusted EBITDA $378–$385M with margin >31%; Q1 2025 revenue guided to $325–$330M as ~$40M shifts to later quarters under the new inventory strategy .
Mix remains premium-led; management targets double-digit growth in railing supported by expanded product portfolio and distributor exclusivity commitments—a medium-term share gain catalyst .
Capex remains elevated at ~$200M in 2025 for the Arkansas campus (pellet processing ramping in Q2’25), with free cash flow inflecting in 2026 as spending normalizes .

What Went Well and What Went Wrong

What Went Well
- Premium products (Transcend Lineage with “SunComfortable” heat-mitigating technology) continued to outperform; products launched in the last 36 months represented ~18% of FY24 revenue .
- Railing growth strategy advanced with a broadened portfolio (steel, aluminum, cable, frameless glass) and exclusivity wins with major distributors, positioning for double-digit railing growth in 2025 .
- Structural cost-out and higher utilization supported record FY24 EBITDA margin of 31.3% despite macro softness in entry-level demand .
What Went Wrong
- Q4 sales fell 14.4% YoY to $168M due to an estimated ~$45M channel inventory reduction; gross margin contracted to 32.7% (from 36.1%) on lower utilization .
- EBITDA margin dropped to 17.2% in Q4 (21.0% prior year), reflecting deleverage; EPS was $0.09 vs $0.20 last year .
- Entry-level product demand remained soft; management reiterated a flat 2025 repair & remodel market, implying limited top-line help from macro tailwinds near term .

Financial Results

Metric	Q4 2023	Q2 2024	Q3 2024	Q4 2024
Revenue ($USD Millions)	$195.7	$376.5	$233.7	$167.6
Diluted EPS ($)	$0.20	$0.80	$0.37	$0.09
Gross Margin %	36.1%	44.7%	39.9%	32.7%
EBITDA ($USD Millions)	$41.1	$130.4	$67.9	$28.9
EBITDA Margin %	21.0%	34.6%	29.1%	17.2%

Notes: Q4’24 revenue down 14.4% YoY; channel destock impact approx. $45M .

Consensus vs Actual (S&P Global)

Revenue, EPS, EBITDA: S&P Global consensus data were unavailable at the time of analysis due to access limits; therefore, beat/miss vs consensus cannot be quantified. Values would normally be retrieved from S&P Global.*

FY24 Summary (for context)

Revenue $1.15B (+5.2% YoY), EPS $2.09 (+10.2% YoY), EBITDA $360M (+10.4%), EBITDA margin 31.3% (+150 bps) .

Segment/KPI Highlights

Channel inventory reductions: ~$70M in Q3’24 and ~$45M in Q4’24 .
New inventory strategy will shift ~$40M of revenue out of Q1’25 into later 2025 .
Contractor lead times continued to average 6–8 weeks during Q3; premium sell-through continued to outperform entry-level .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Net Sales ($B)	FY2025	N/A	$1.21–$1.23B (midpoint +6% YoY)	New
Adjusted EBITDA ($M)	FY2025	N/A	$378–$385M; margin >31%	New
SG&A (% sales)	FY2025	N/A	~16%	New
Interest Expense ($M)	FY2025	N/A	$4–$6	New
D&A ($M)	FY2025	N/A	$60–$63	New
Effective Tax Rate	FY2025	N/A	~25–26%	New
One-time items (aggregate)	FY2025	N/A	~$15–$20M (Arkansas start-up, digital transformation, railing transition)	New
Capex ($M)	FY2025	N/A	~ $200 (Arkansas campus, incl. warehouse)	New
Revenue ($M)	Q1 2025	N/A	$325–$330	New
Revenue	Q2 2025	N/A	Similar to last year (qualitative)	New
Net Sales ($B)	FY2024	$1.13–$1.15 (Q2’24) ; $1.14 midpoint & EBITDA margin high end 30.5% (Q3’24)	Actual: $1.151B; EBITDA margin 31.3%	Achieved/Exceeded

Earnings Call Themes & Trends

Topic	Previous Mentions (Q-2 and Q-1)	Current Period (Q4 2024)	Trend
Premium mix and innovation	Q2: Premium-led growth; new colors and railing additions . Q3: Premium sell-through high-single digit; new Lineage/Enhance colors and broadened railing .	Continued premium outperformance; “SunComfortable” branding of heat-mitigating tech; many 2025 launches (incl. next-gen Select) .	Positive, sustained focus on premium and innovation
Railing expansion	Q2: Portfolio expansion (Signature X-Series) . Q3: Goal to double railing share (6%→12% in 5 yrs) .	Double-digit growth expected; distributor exclusivity broadening; merchandising resets first half .	Accelerating execution
Distribution strategy	Q3: Shifts and exclusivity progressing .	Expect 2025 to be “much calmer”; infill and inventory swaps ongoing .	Stabilizing after 2024 realignment
Inventory/channel strategy	Q3: ~$70M channel destock .	~$45M Q4 destock; new strategy shifts ~$40M out of Q1’25, smooths quarterly swings .	Reduces quarterly volatility
Arkansas capacity/capex	Q3: Pellet processing early 2025; campus capex ~$550M; decking start-up 1H’27 .	Pellet processing employees hired; start-up costs $5–$8M in 2025; D&A ~$10M; capex ~$200M 2025; FCF inflect in 2026 .	On schedule; FCF story building
Pricing/incentives	Q3: Margin management via cost-out .	<1% 2025 pricing; increased incentives/rebates offset inflation .	Neutral to slightly negative net price/mix offset by incentives
Macro (R&R)	Q2: Softness in entry-level; cautious 2H . Q3: Flat-ish outlook implied .	2025 R&R expected flat YoY; premium demand resilient .	Macro steady/flat; premium pockets strong
Tariffs/sourcing	Not highlighted prior.	Low COGS exposure to overseas; dual/local sourcing to mitigate .	Managed risk
Digital transformation	New CIO appointed (Nov’24) .	Accelerating digital initiatives; some restructuring/write-offs; benefits to ops and customer experience .	Investment phase, LT efficiency upside

Management Commentary

“The significant EBITDA outperformance in the fourth quarter demonstrated the positive leverage of our business model on higher utilization, driven, in part, by our year-end inventory build, as well as the benefits of our continuous cost-out programs.” — Bryan Fairbanks, CEO .
“Products launched within the last 36 months represented approximately 18% of 2024 revenues… we plan to incorporate [SunComfortable] in future products.” — Bryan Fairbanks .
“We revised our channel inventory strategy to reduce the quarterly volatility… approximately $40 million shifting out of the first quarter into the remainder of the year.” — Company outlook .
“Adjusted EBITDA margin is expected to exceed 31%, consistent with 2024 despite the increased investment levels.” — Company outlook .
“Once [Arkansas] is completed, our capital expenditures are expected to return to historical levels of 5% to 6% of revenue which will result in a significant increase in our annual free cash flow beginning in 2026.” — Brenda Lovcik, CFO .

Q&A Highlights

Distribution environment: Expect a “much calmer” 2025 as exclusivity and territory changes settle; Q1 to see some infill and inventory swapping across distributors .
Railing outlook: Double-digit growth expected in 2025; commitments involve distribution, retail/pro channels, and consumer pull-through; merchandising and dealer resets concentrated in 1H’25 .
Margin cadence: 2025 EBITDA margin more back-half weighted; SG&A heavier in 1H on new product launches and retail wins; gross margin roughly flat vs high FY24 base with D&A pressure from Arkansas .
Macro/volume cadence: R&R assumed flat for 2025; Q2 2025 revenues expected similar to last year due to inventory strategy; stronger YoY comps in H2’25 .
Pricing/tariffs: <1% list pricing with more incentives; low overseas COGS exposure and dual/local sourcing mitigate tariff risks .
Railing attach rate baseline ~20% overall (varies by region); aim to increase materially over 5 years .

Estimates Context

S&P Global consensus for Q4’24 (revenue, EPS, EBITDA) was unavailable at the time of analysis due to access limits, so formal beats/misses vs consensus cannot be provided. Management noted Q4 sales exceeded internal expectations and the company exceeded full-year revenue guidance, with EBITDA strength in Q4 on utilization and cost actions .
Implications: Given the guide for a $40M revenue timing shift out of Q1 and double-digit railing growth, we would expect estimate revisions to skew toward back-half 2025 and to reflect slightly higher SG&A in 1H’25 and stable FY margin >31% .

Key Takeaways for Investors

The 2025 setup is a “bridge year” on timing: ~$40M revenue shift from Q1 to later quarters plus a flattish R&R macro create back-half weighting; watch H2 execution and sell-through .
Strategic catalyst: Railing expansion and distributor exclusivity should drive share gains and higher attachment over time; management expects double-digit railing growth in 2025 .
Premium resilience continues to differentiate TREX vs entry-level; ongoing innovation (SunComfortable across lines, next-gen Select) supports mix and brand equity .
Margin durability: Despite higher D&A and front-loaded SG&A, adjusted EBITDA margin targeted >31% again in 2025—a constructive signal for long-term earnings power .
Capex peak near-term, FCF inflection in 2026 as Arkansas spend normalizes; potential capital return remains a lever (repurchased $100M in 2024) .
Near-term trading lens: Expect lumpy quarterly prints (inventory strategy) with focus on Q2 “flat” and H2 acceleration; progress on railing adoption, distributor resets, and Arkansas ramp are key stock catalysts .

*Consensus estimates note: S&P Global consensus values were unavailable at the time of analysis due to access limitations. If desired, we can refresh and add beat/miss deltas once access is restored.

TREX CO INC (TREX)·Q4 2024 Earnings Summary