Quanex Building Products Announces First Quarter 2024 Results and Provides Full Year 2024 Guidance

Margin Expansion on a Consolidated Basis 
Repaid $5 Million in Bank Debt 
Balance Sheet and Liquidity Remain Strong 
Cautiously Optimistic on Second Half of 2024 
Positive Long-Term View on Residential Housing Market Remains Intact

HOUSTON, March 07, 2024 (GLOBE NEWSWIRE) --  Quanex Building Products Corporation (NYSE:NX) (“Quanex” or the “Company”) today announced its results for the three months ended January 31, 2024.  

The Company reported the following selected financial results:

   Three Months Ended January 31,
($ in millions, except per share data)  2024 2023
Net Sales  $239.2 $261.9
Gross Margin  $51.4 $51.8
Gross Margin %  21.5% 19.8%
Net Income  $6.2 $1.9
Diluted EPS  $0.19 $0.06
Adjusted Net Income  $5.8 $6.1
Adjusted Diluted EPS  $0.18 $0.18
Adjusted EBITDA  $19.3 $20.5
Adjusted EBITDA Margin %  8.1% 7.8%
Cash Provided by Operating Activities  $3.9 $3.1
Free Cash Flow  ($5.7) ($4.4)

(See Non-GAAP Terminology Definitions and Disclaimers section, Non-GAAP Financial Measure Disclosure table, Selected Segment Data table and reconciliation tables for additional information)

George Wilson, President and Chief Executive Officer, stated, “We were able to realize margin expansion on a consolidated basis for the first quarter of 2024 despite market volume softness related to normal seasonality combined with ongoing macroeconomic challenges, and some pricing pressure. Our focus on generating cash and managing working capital enabled us to pay down our bank debt by $5 million during the quarter, which is encouraging considering we have historically been a net borrower during the first quarter of our fiscal year due to the seasonality of our business. Our balance sheet remains strong, and we continue to be positioned well to explore and evaluate both organic and inorganic growth opportunities.”

First Quarter 2024 Results Summary   

Quanex reported net sales of $239.2 million during the three months ended January 31, 2024, which represents a decrease of 8.7% compared to $261.9 million for the same period of 2023. The decrease was largely attributable to softer market demand and lower pricing in North America. Quanex reported a 3.3% decline in net sales for the first quarter of 2024 in its North American Fenestration segment. In its North American Cabinet Components segment, Quanex reported a decline of 21.1% in net sales for the first quarter. Excluding foreign exchange impact, the Company realized a decrease in net sales of 8.4% for the first quarter in its European Fenestration segment. (See Sales Analysis table for additional information)

The increase in earnings for the three months ended January 31, 2024 was mostly attributable to a decline in raw material costs, a decrease in stock-based compensation expense and lower interest expense.  

Balance Sheet Update

As of January 31, 2024, Quanex had total debt of $65.2 million ($13.5 million excluding real-estate leases that are considered “finance” leases under U.S. GAAP) and the Company’s leverage ratio of Net Debt to LTM Adjusted EBITDA was unchanged at 0.1x (Net Debt free excluding these real-estate leases). As of January 31, 2024, Quanex’s LTM Adjusted EBITDA was $158.4 million and LTM Net Income, the most directly comparable GAAP measure, was $86.8 million.   (See Non-GAAP Terminology Definitions and Disclaimers section, Net Debt Reconciliation table and Last Twelve Months Adjusted EBITDA Reconciliation table for additional information)


Mr. Wilson commented, “As mentioned on our December call, we entered this year with a somewhat cautious outlook for the first half due to the ongoing macroeconomic challenges, but we remain optimistic that demand for our products will improve in the second half as consumer confidence is restored over time. Based on conversations with our customers, recent demand trends, and the latest macro data, we are now comfortable providing guidance for fiscal 2024. Overall, on a consolidated basis, we estimate we will generate net sales of approximately $1.1 billion, which we expect will yield approximately $145 million to $150 million in Adjusted EBITDA* in fiscal 2024. While the near-term outlook for our business remains somewhat cautious, our long-term view has not changed, and we believe the underlying fundamentals for the residential housing market remain positive.”

*When Quanex provides expectations for Adjusted EBITDA on a forward-looking basis, a reconciliation of the differences between the non-GAAP expectations and corresponding GAAP measures is generally not available without unreasonable effort. Certain items required for such a reconciliation are outside of the Company’s control and/or cannot be reasonably predicted or estimated, such as the provision for income taxes.

Conference Call and Webcast Information

The Company has also scheduled a conference call for Friday, March 8, 2024 at 11:00 a.m. ET (10:00 a.m. CT) to discuss the release. A link to the live audio webcast will be available on Quanex’s website at http://www.quanex.com in the Investors section under Presentations & Events.

Participants can pre-register for the conference call using the following link: https://register.vevent.com/register/BI8100cd976cdb4a18aa0a5bcef75a89d8

Registered participants will receive an email containing conference call details for dial-in options. To avoid delays, it is recommended that participants dial into the conference call ten minutes ahead of the scheduled start time. A replay will be available for a limited time on the Company’s website at http://www.quanex.com in the Investors section under Presentations & Events.

About Quanex

Quanex is a global manufacturer with core capabilities and broad applications across various end markets. The Company currently collaborates and partners with leading OEMs to provide innovative solutions in the window, door, vinyl fencing, solar, refrigeration, custom mixing and cabinetry markets.  Looking ahead, Quanex plans to leverage its material science expertise and process engineering to expand into adjacent markets.

For more information contact Scott Zuehlke, Senior Vice President, Chief Financial Officer & Treasurer, at 713-877-5327 or scott.zuehlke@quanex.com.

Non-GAAP Terminology Definitions and Disclaimers

Adjusted Net Income (defined as net income further adjusted to exclude purchase price accounting inventory step-ups, transaction costs, certain severance charges, gain/loss on the sale of certain fixed assets, restructuring charges, asset impairment charges, other net adjustments related to foreign currency transaction gain/loss and effective tax rates reflecting impacts of adjustments on a with and without basis) and Adjusted EPS are non-GAAP financial measures that Quanex believes provide a consistent basis for comparison between periods and more accurately reflects operational performance, as they are not influenced by certain income or expense items not affecting ongoing operations. EBITDA (defined as net income or loss before interest, taxes, depreciation and amortization and other, net) and Adjusted EBITDA (defined as EBITDA further adjusted to exclude purchase price accounting inventory step-ups, transaction costs, certain severance charges, gain/loss on the sale of certain fixed assets, restructuring charges and asset impairment charges) are non-GAAP financial measures that the Company uses to measure operational performance and assist with financial decision-making.  Net Debt is defined as total debt (outstanding balance on the revolving credit facility plus financial lease obligations) less cash and cash equivalents. The leverage ratio of Net Debt to LTM Adjusted EBITDA is a financial measure that the Company believes is useful to investors and financial analysts in evaluating Quanex’s leverage. In addition, with certain limited adjustments, this leverage ratio is the basis for a key covenant in the Company’s credit agreement.

Free Cash Flow is a non-GAAP measure calculated using cash provided by operating activities less capital expenditures. Quanex uses the Free Cash Flow metric to measure operational and cash management performance and assist with financial decision-making.   Free Cash Flow is measured before application of certain contractual commitments (including capital lease obligations), and accordingly is not a true measure of the Company’s residual cash flow available for discretionary expenditures. Quanex believes Free Cash Flow is useful to investors in understanding and evaluating the Company’s financial and cash management performance.

Quanex believes that the presented non-GAAP measures provide a consistent basis for comparison between periods and will assist investors in understanding the Company’s financial performance when comparing results to other investment opportunities.  The presented non-GAAP measures may not be the same as those used by other companies. Quanex does not intend for this information to be considered in isolation or as a substitute for other measures prepared in accordance with U.S. GAAP.

Forward Looking Statements

Statements that use the words “estimated,” “expect,” “could,” “should,” “believe,” “will,” “might,” or similar words reflecting future expectations or beliefs are forward-looking statements. The forward-looking statements include, but are not limited to, the following: impacts from public health issues (including pandemics, such as the recent COVID-19 pandemic) on the economy and the demand for Quanex’s products, the Company’s future operating results, future financial condition, future uses of cash and other expenditures, expenses and tax rates, expectations relating to Quanex’s industry, and the Company’s future growth, including any guidance discussed in this press release. The statements and guidance set forth in this release are based on current expectations. Actual results or events may differ materially from this release. For a complete discussion of factors that may affect Quanex’s future performance, please refer to the Company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2022, and the Company’s Quarterly Reports on Form 10-Q under the sections entitled “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors”. Any forward-looking statements in this press release are made as of the date hereof, and Quanex undertakes no obligation to update or revise any forward-looking statements to reflect new information or events.

(In thousands, except per share data)
  Three Months Ended January 31,
   2024   2023 
Net sales $239,155  $261,916 
Cost of sales  187,723   210,149 
Selling, general and administrative  32,363   36,744 
Depreciation and amortization  11,152   10,620 
Operating income  7,917   4,403 
Interest expense  (1,068)  (2,259)
Other, net  1,042   218 
Income before income taxes  7,891   2,362 
Income tax expense  (1,642)  (453)
Net income $6,249  $1,909 
Earnings per common share, basic $0.19  $0.06 
Earnings per common share, diluted $0.19  $0.06 
Weighted average common shares outstanding:   
Basic  32,825   32,951 
Diluted  33,043   33,137 
Cash dividends per share $0.08  $0.08 

(In thousands)
  January 31, 2024 October 31, 2023
Current assets:    
Cash and cash equivalents $44,422  $58,474 
Accounts receivable, net  80,063   97,311 
Inventories  107,478   97,959 
Income taxes receivable  7,642   8,298 
Prepaid and other current assets  13,390   11,558 
Total current assets  252,995   273,600 
Property, plant and equipment, net  253,681   250,664 
Operating lease right-of-use assets  46,370   46,620 
Goodwill  185,439   182,956 
Intangible assets, net  72,008   74,115 
Other assets  2,927   3,188 
Total assets $813,420  $831,143 
Current liabilities:    
Accounts payable $55,106  $74,371 
Accrued liabilities  46,478   50,319 
Income taxes payable  -   384 
Current maturities of long-term debt  2,500   2,365 
Current operating lease liabilities  7,370   7,224 
Total current liabilities  111,454   134,663 
Long-term debt  61,594   66,435 
Noncurrent operating lease liabilities  40,084   40,361 
Deferred income taxes  30,737   29,133 
Other liabilities  14,522   14,997 
Total liabilities  258,391   285,589 
Stockholders’ equity:    
Common stock  371   372 
Additional paid-in-capital  248,715   251,576 
Retained earnings  412,922   409,318 
Accumulated other comprehensive loss  (32,060)  (38,141)
Treasury stock at cost  (74,919)  (77,571)
Total stockholders’ equity  555,029   545,554 
Total liabilities and stockholders' equity $813,420  $831,143 

(In thousands)
 Three Months Ended January 31,
  2024   2023 
Operating activities:   
Net income$6,249  $1,909 
Adjustments to reconcile net income to cash provided by operating activities:   
Depreciation and amortization 11,152   10,620 
Stock-based compensation 583   679 
Deferred income tax 1,136   179 
Other, net 1,790   1,509 
Changes in assets and liabilities:   
Decrease in accounts receivable 18,147   20,502 
(Increase) decrease in inventory (8,756)  645 
Increase in other current assets (1,680)  (1,431)
Decrease in accounts payable (19,044)  (21,379)
Decrease in accrued liabilities (7,181)  (12,686)
Increase in income taxes payable 264   536 
Increase in deferred pension benefits -   7 
Increase in other long-term liabilities 852   1,461 
Other, net 342   584 
Cash provided by operating activities 3,854   3,135 
Investing activities:   
Business acquisition -   (92,000)
Capital expenditures (9,580)  (7,582)
Proceeds from disposition of capital assets 31   98 
Cash used for investing activities (9,549)  (99,484)
Financing activities:   
Borrowings under credit facilities -   102,000 
Repayments of credit facility borrowings (5,000)  (15,000)
Repayments of other long-term debt (679)  (579)
Common stock dividends paid (2,645)  (2,661)
Issuance of common stock 400   99 
Payroll tax paid to settle shares forfeited upon vesting of stock (1,193)  (545)
Cash (used for) provided by financing activities (9,117)  83,314 
Effect of exchange rate changes on cash and cash equivalents 760   997 
Decrease in cash and cash equivalents (14,052)  (12,038)
Cash and cash equivalents at beginning of period 58,474   55,093 
Cash and cash equivalents at end of period$44,422  $43,055 

(In thousands)
The following table reconciles the Company's calculation of Free Cash Flow, a non-GAAP measure, to its most directly comparable GAAP measure. The Company defines Free Cash Flow as cash provided by operating activities less capital expenditures.
   Three Months Ended January 31,
    2024   2023 
Cash provided by operating activities  $3,854  $3,135 
Capital expenditures   (9,580)   (7,582) 
Free Cash Flow  ($5,726)  ($4,447) 
The following table reconciles the Company's Net Debt which is defined as total debt principal of the Company plus finance lease obligations minus cash.
   As of January 31,
    2024   2023 
Revolving credit facility  $10,000  $100,000 
Finance lease obligations(1)   55,211   55,122 
Total debt(2)   65,211   155,122 
Less: Cash and cash equivalents   44,422   43,055 
Net Debt  $20,789  $112,067 
(1) Includes $51.7 million and $53.2 million in real estate lease liabilities considered finance leases under U.S. GAAP as of January 31, 2024 and January 31, 2023, respectively.
(2) Excludes outstanding letters of credit.     

(In thousands, except per share data)
Reconciliation of Last Twelve Months Adjusted EBITDA Three Months Ended
January 31, 2024
 Three Months Ended
October 31, 2023
 Three Months Ended
July 31, 2023
 Three Months Ended
April 30, 2023
  Reconciliation Reconciliation Reconciliation Reconciliation Reconciliation
Net income as reported $6,249  $27,382  $31,698  $21,512 $86,841
Income tax expense  1,642   4,442   4,099   5,551  15,734
Other, net  (1,042)  6,110   (402)  29  4,695
Interest expense  1,068   1,565   2,068   2,244  6,945
Depreciation and amortization  11,152   11,194   10,596   10,456  43,398
EBITDA  19,069   50,693   48,059   39,792  157,613
Cost of sales(1)  -   (35)  -   48  13
Selling, general and administrative(1),(2)  205   109   395   63  772
Adjusted EBITDA $19,274  $50,767  $48,454  $39,903 $158,398
(1) Loss on damage to manufacturing facilities caused by weather.
(2) Transaction and advisory fees.

(In thousands, except per share data)
Reconciliation of Adjusted Net Income and Adjusted EPSThree Months Ended
January 31, 2024
 Three Months Ended
January 31, 2023
Net income as reported $6,249  $0.19  $1,909  $0.06  
Net income reconciling items from below  (435) $(0.01)  4,154  $0.12  
Adjusted net income and adjusted EPS $5,814  $0.18  $6,063  $0.18  
Reconciliation of Adjusted EBITDA Three Months Ended
January 31, 2024
 Three Months Ended
January 31, 2023
  Reconciliation   Reconciliation   
Net income as reported $6,249    $1,909    
Income tax expense  1,642     453    
Other, net  (1,042)    (218)   
Interest expense  1,068     2,259    
Depreciation and amortization  11,152     10,620    
EBITDA  19,069     15,023    
EBITDA reconciling items from below  205     5,448    
Adjusted EBITDA $19,274    $20,471    
Reconciling Items Three Months Ended
January 31, 2024
 Three Months Ended
January 31, 2023
Net sales $239,155  $-  $261,916  $-  
Cost of sales  187,723   -   210,149   -  
Selling, general and administrative  32,363   (205)(1) 36,744   (5,448)(1)
EBITDA  19,069   205   15,023   5,448  
Depreciation and amortization  11,152   -   10,620   -  
Operating income  7,917   205   4,403   5,448  
Interest expense  (1,068)  -   (2,259)  -  
Other, net  1,042   (755)(2) 218   (42)(2)
Income before income taxes  7,891   (550)  2,362   5,406  
Income tax expense  (1,642)  115 (3) (453)  (1,252)(3)
Net income $6,249  $(435) $1,909  $4,154  
Diluted earnings per share $0.19    $0.06    
(1) Transaction and advisory fees. 
(2) Pension settlement refund and foreign currency transaction losses (gains). 
(3) Tax impact of net income reconciling items.         

 (In thousands)
 This table provides gross margin, operating income (loss), EBITDA, and Adjusted EBITDA by reportable segment. Non-operating expense and income tax expense are not allocated to the reportable segments.
   NA Fenestration EU Fenestration NA Cabinet
Corp & Other
 Three months ended January 31, 2024          
 Net sales $147,995  $49,437  $43,137  $(1,414) $239,155 
 Cost of sales  118,368   31,703   38,743   (1,091)  187,723 
 Gross Margin  29,627   17,734   4,394   (323)  51,432 
 Gross Margin %  20.0%  35.9%  10.2%    21.5%
 Selling, general and administrative(1)  15,910   7,745   5,126   3,582   32,363 
 Depreciation and amortization  5,475   2,558   3,065   54   11,152 
 Operating income (loss)  8,242   7,431   (3,797)  (3,959)  7,917 
 Depreciation and amortization  5,475   2,558   3,065   54   11,152 
 EBITDA  13,717   9,989   (732)  (3,905)  19,069 
 Transaction and advisory fees  -   -   -   205   205 
 Adjusted EBITDA $13,717  $9,989  $(732) $(3,700) $19,274 
 Adjusted EBITDA Margin %  9.3%  20.2%  -1.7%    8.1%
 Three months ended January 31, 2023          
 Net sales $152,980  $54,952  $54,674  $(690) $261,916 
 Cost of sales  124,717   37,703   48,056   (327)  210,149 
 Gross Margin  28,263   17,249   6,618   (363)  51,767 
 Gross Margin %  18.5%  31.4%  12.1%    19.8%
 Selling, general and administrative(1)  13,295   7,505   4,873   11,071   36,744 
 Depreciation and amortization  5,245   2,348   2,934   93   10,620 
 Operating income (loss)  9,723   7,396   (1,189)  (11,527)  4,403 
 Depreciation and amortization  5,245   2,348   2,934   93   10,620 
 EBITDA  14,968   9,744   1,745   (11,434)  15,023 
 Transaction and advisory fees  -   -   -   5,448   5,448 
 Adjusted EBITDA $14,968  $9,744  $1,745  $(5,986) $20,471 
 Adjusted EBITDA Margin %  9.8%  17.7%  3.2%    7.8%
 (1) Includes stock-based compensation expense of $2.6 million and $4.8 million as of January 31, 2024 and January 31, 2023, respectively.

(In thousands)
  Three Months Ended October 31,
   2024   2023 
NA Fenestration:   
 United States - fenestration$111,634  $120,767 
 International - fenestration 6,144   5,127 
 United States - non-fenestration 25,791   23,066 
 International - non-fenestration 4,426   4,020 
  $147,995  $152,980 
EU Fenestration:(1)   
 International - fenestration$41,751  $42,354 
 International - non-fenestration 7,686   12,598 
  $49,437  $54,952 
NA Cabinet Components:   
 United States - fenestration$3,675  $3,908 
 United States - non-fenestration 39,179   50,049 
 International - non-fenestration 283   717 
  $43,137  $54,674 
Unallocated Corporate & Other:   
 Eliminations$(1,414) $(690)
  $(1,414) $(690)
Net Sales$239,155  $261,916 
(1) Reflects an increase of $1.0 million in revenue associated with foreign currency exchange rate impacts for the three months ended January 31, 2024.