At the annual meeting of stockholders of the Company held on May 4, 2023, the Company’s stockholders approved the Trex Company, Inc. 2023 Stock Incentive Plan (Plan). The Company’s board of directors unanimously approved the Plan on April 10, 2023, subject to stockholder approval. The Plan amends and restates in its entirety the Trex Company, Inc. 2014 Stock Incentive Plan (2014 Plan), which was last approved by the Company’s stockholders at the annual meeting held on April 30, 2014. The Plan, which will be administered by the compensation committee of the board of directors, provides for the grant of stock options, restricted stock, restricted stock units, stock appreciation rights and unrestricted stock, which are referred to collectively as “awards.” Awards may be granted under the Plan to officers, directors (including non-employee directors) and other employees of the Company or any subsidiary thereof, to any adviser, consultant, or other provider of services to the Company (and any employee thereof), and to any other individuals who are approved by the board of directors as eligible to participate in the Plan. Only employees of the Company or any subsidiary thereof are eligible to receive incentive stock options. Subject to certain adjustments as provided in the Plan, the total aggregate number of shares of common stock that may be granted under the Plan is 4,000,000 shares. As of December 31, 2024, the total number of shares available for future grants was 3,832,112.

The Company recognizes stock-based compensation expense ratably over the period from grant date to the earlier of (1) the vesting date of the award, or (2) the date the grantee is eligible to retire without forfeiting the award. For performance-based restricted stock units, expense is recognized ratably over the performance and vesting period of each tranche based on management’s judgment of the ultimate award that is probable to be paid out based on the achievement of the predetermined performance measures. For the

employee stock purchase plan, compensation expense is recognized related to the discount on purchases. The following table summarizes the Company’s stock-based compensation expense (in thousands):


	Year Ended December 31,
	2024		2023		2022
Time-based restricted stock units	$	5,059	$	3,897	$	3,783
Performance-based restricted stock units		5,888		4,836		540
Stock appreciation rights		1,359		908		792
Employee stock purchase plan		329		523		214
Total stock-based compensation	$	12,635	$	10,164	$	5,329

Stock-based compensation expense is included in “Selling, general and administrative expenses” in the accompanying Consolidated Statements of Comprehensive Income.

The fair value of time-based restricted stock units is determined based on the closing price of Trex shares on the grant date. Time-based restricted stock units vest based on the terms of the awards. Unvested time-based restricted stock units are generally forfeitable upon the resignation of employment or termination of employment with cause. The total fair value of vested time-based restricted stock units granted in the years ended December 31, 2024, 2023, and 2022 was $4.6 million, $4.7 million, and $3.7 million, respectively. At December 31, 2024, there was $5.0 million of total compensation expense related to unvested time-based restricted stock units remaining to be recognized over a weighted-average period of approximately 1.7 years.

Time-based restricted stock unit activity under the Plan and all predecessor stock incentive plans is as follows:


	Time-based Restricted Stock Unit			Weighted- Average Grant Price Per Share
Nonvested at December 31, 2021		111,546		$	52.91
Granted		57,094		$	75.06
Vested		(56,719	)	$	58.13
Forfeited		(1,286	)	$	86.84
Nonvested at December 31, 2022		110,635		$	61.28
Granted		97,177		$	58.50
Vested		(81,080	)	$	56.52
Forfeited		(10,228	)	$	66.19
Nonvested at December 31, 2023		116,504		$	65.00
Granted		62,348		$	87.53
Vested		(64,261	)	$	71.29
Forfeited		(396	)	$	75.72
Nonvested at December 31, 2024		114,195		$	74.03

The fair value of performance-based restricted stock units is determined based on the closing price of Trex shares on the grant date. Unvested performance-based restricted stock units are generally forfeitable upon the resignation of employment or termination of employment with cause. The performance-based restricted shares units have a three-year vesting period, vesting one-third each year based on target earnings before interest, taxes, depreciation, and amortization (EBITDA) for 1 year, cumulative 2 years and cumulative 3 years, respectively. The number of shares that will vest, with respect to each vesting, will be between 0% and 200% of the target number of shares. At December 31, 2024, 2023, and 2022 there was $3.6 million, $4.3 million, $0.3 million, respectively, of total compensation expense related to unvested performance-based restricted stock units remaining to be recognized over a weighted-average period of approximately 1.8 years.

Performance-based restricted stock unit activity under the Plan is as follows:


	Performance- based Restricted Stock Units			Weighted- Average Grant Price Per Share
Nonvested at December 31, 2021		57,768		$	71.21
Granted		72,152		$	76.14
Vested		(57,875	)	$	64.43
Forfeited		(562	)	$	82.95
Nonvested at December 31, 2022		71,483		$	81.57
Granted		96,103		$	56.79
Vested		(30,038	)	$	66.26
Forfeited		(28,163	)	$	74.39
Nonvested at December 31, 2023		109,385		$	65.92
Granted		80,159		$	81.23
Vested		(67,710	)	$	63.83
Forfeited		(13,390	)	$	104.56
Nonvested at December 31, 2024		108,444		$	75.57

SARs are granted with a grant price equal to the closing market price of the Company’s common stock on the date of grant. These awards expire ten years after the date of grant and vest based on the terms of the individual awards. The SARs are generally forfeitable upon the resignation of employment or termination of employment with cause. The Company recognizes forfeitures as they occur. The Company recognizes compensation cost on a straight-line basis over the vesting period for the award.

As of December 31, 2024, there was $1.5 million of unrecognized compensation cost related to SARs. The fair value of each SAR is estimated on the date of grant using a Black-Scholes option-pricing model. For SARs issued in the years ended December 31, 2024, December 31, 2023, and December 31, 2022, respectively, the assumptions shown in the following table were used:


	Year Ended December 31,
	2024			2023			2022
Dividend yield		0	%		0	%		0	%
Average risk-free interest rate		4.3	%		4.0	%		1.9	%
Expected term (years)		5			5			5
Expected volatility		51.2	%		49.5	%		44.9	%

Average Risk-Free Interest Rate. The Company uses the U.S. Treasury rate having a term that most closely resembles the expected term of the option.

Expected Term. The expected term is the period of time that the SARs granted are expected to remain unexercised. SARs granted during the years ended December 31, 2024, December 31, 2023, and December 31, 2022, had a maximum term of ten years. The Company used historical exercise behavior with further consideration given to the class of employees to whom the equity awards were granted to estimate the expected term of the SAR.

Expected Volatility. Volatility is a measure of the amount by which a financial variable such as a share price has fluctuated (historical volatility) or is expected to fluctuate (expected volatility) during a period. The Company has used the historical volatility over the average expected term of the options granted as the expected volatility.

The weighted-average grant date fair value of SARs granted during the years ended December 31, 2024, December 31, 2023, and December 31, 2022, was $44.83, $27.19, and $33.90, respectively.

SAR activity under the Plan and all predecessor stock incentive plans is as follows:


	SARs			Weighted- Average Grant Price Per Share		Weighted- Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value as of December 31, 2024
Outstanding at December 31, 2021		200,998		$	33.86
Granted		32,971		$	82.01
Exercised		—		$	—
Canceled		—		$	—
Outstanding at December 31, 2022		233,969		$	40.64
Granted		51,916		$	56.80
Exercised		(53,036	)	$	11.95
Canceled		(12,969	)	$	75.25
Outstanding at December 31, 2023		219,880		$	49.34
Granted		33,277		$	90.86
Exercised		(58,767	)	$	35.77
Canceled		(4,142	)	$	89.99
Outstanding at December 31, 2024		190,248		$	59.91		6.3	$	3,145,845
Vested at December 31, 2024		122,598		$	51.41		5.1	$	2,794,991
Exercisable at December 31, 2024		122,598		$	51.41		5.1	$	2,794,991

The Company has an employee stock purchase plan (ESPP) that permits eligible employees to purchase shares of common stock of the Company at a purchase price which is the lesser of 85% of the market price on either the first day of the calendar quarter or the last day of the calendar quarter. Eligible employees may elect to participate in the plan by authorizing payroll deductions of up to 15% of gross compensation for each payroll period. On the last day of each quarter, each participant’s contribution account is used to purchase the maximum number of whole shares of common stock determined by dividing the contribution account balance by the purchase price. The aggregate number of shares of common stock that may be purchased under the plan is 2,400,000. Through December 31, 2024, employees had purchased approximately 1,918,375 shares under the plan.