News Release Details

Robust Revenue Growth Across All Operating Segments
Balance Sheet & Liquidity Remain Strong
FY22 Guidance Points to Another Record Year of Revenue and Earnings

HOUSTON, March 03, 2022 (GLOBE NEWSWIRE) -- Quanex Building Products Corporation (NYSE:NX) (“Quanex” or the “Company”) today announced its results for the three months ended January 31, 2022.  

The Company reported the following selected financial results:

George Wilson, President and Chief Executive Officer, stated, “Overall, we are pleased with our results for the first quarter of 2022, especially considering the challenges related to inflation and the supply chain. Demand was healthy during the quarter and we were able to report solid revenue growth. Labor absenteeism, caused by the Omicron variant, and supply chain challenges impacted the quarter, but these issues have started to stabilize. Rapid cost escalation and the time lags related to the contractual pricing mechanisms for passing through cost increases on certain raw materials to our customers in North America also played a role in margin compression during the first quarter. The rate of inflation is currently our biggest challenge, but we expect inflationary pressures to subside in the second half of the year, which should allow for margin expansion at that time.

“As is typical, we were a net borrower during the first quarter, but our balance sheet and liquidity remain strong. We are well-positioned and have the flexibility to consider multiple options as we continue to navigate the path towards creating value for shareholders. In the near-term we will stay focused on executing our plan, paying down debt and opportunistically repurchasing our stock. Our expectation is that we will be debt free by the end of our current fiscal year.” (See Non-GAAP Terminology Definitions and Disclaimers section for additional information)

First Quarter 2022 Results Summary   

The Company reported net sales of $267.0 million during the three months ended January 31, 2022, which represents year-over-year growth of 16.0%. The increase was largely attributable to volume increases in the fenestration segments combined with higher prices related to the pass through of raw material cost inflation. More specifically, Quanex realized net sales growth of 14.5% in its North American Fenestration segment, 15.5% in its North American Cabinet Components segment and 18.6% in its European Fenestration segment, excluding the foreign exchange impact. (See Sales Analysis table for additional information)

The increase in earnings for the three months ended January 31, 2022 was attributable to continued strong demand, operational efficiency gains and increased pricing; however, a decrease in margin percentage was driven by inflationary pressures and supply chain challenges.

Balance Sheet & Liquidity Update

As of January 31, 2022, Quanex had total debt of $78.0 million and its leverage ratio of Net Debt to LTM Adjusted EBITDA was 0.4x.   (See Non-GAAP Terminology Definitions and Disclaimers section for additional information)

The Company’s liquidity decreased slightly to $289.2 million as of January 31, 2022, consisting of $31.7 million in cash on hand plus availability under its Senior Secured Revolving Credit Facility due 2023, less letters of credit outstanding.

Share Repurchases

Quanex’s Board authorized a $75 million share repurchase program in December of 2021. Repurchases under this program will be made in open market transactions or privately negotiated transactions, subject to market conditions, applicable legal requirements, and other relevant factors. The Company did not repurchase any shares of common stock during the three months ended January 31, 2022.

Outlook        

George Wilson, President and Chief Executive Officer, commented, “Demand remains healthy, but the rate of inflation continues to cause pressure on margins.  However, based on our improvements in labor performance, the expected continuation of our pass-through pricing strategy, conversations with our customers, and the latest macro data, we are now comfortable providing guidance for fiscal 2022, which points to another record year of revenue and earnings. We expect high-single digit revenue growth in our North American Fenestration segment, low to mid-single digit revenue growth in our North American Cabinet Components segment and mid-single digit revenue growth in our European Fenestration segment. Overall, on a consolidated basis and assuming the current inflation and supply chain challenges do not worsen materially, we estimate this will equate to net sales of $1.13 billion to $1.15 billion, which we expect will generate approximately $135 million to $140 million in Adjusted EBITDA* in fiscal 2022.   Due to the current inflationary environment, we expect revenue growth to be mostly driven by price as opposed to increased volume and we expect some margin expansion in the second half of the year.”

*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 scheduled a conference call for Friday, March 4, 2022, at 11:00 a.m. ET (10:00 a.m. CT).   To participate in the conference call dial (877) 388-2139 for domestic callers and (541) 797-2983 for international callers, in both cases using the conference passcode 2054849, and ask for the Quanex call a few minutes prior to the start time. A link to the live audio webcast will also be available on the Company’s website at http://www.quanex.com in the Investors section under Presentations & Events. A telephonic replay of the call will be available approximately two hours after the live broadcast ends and will be accessible through March 11, 2022. To access the replay dial (855) 859-2056 for domestic callers and (404) 537-3406 for international callers, in both cases referencing conference passcode 2054849.  

About Quanex

Quanex Building Products Corporation is an industry-leading manufacturer of components sold to Original Equipment Manufacturers (OEMs) in the building products industry.  Quanex designs and produces energy-efficient fenestration products in addition to kitchen and bath cabinet components.   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, 2021, 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.

Source: Quanex Building Products Corporation