Quanex Building Products (NX) 8 Mar 242024 Q1 Earnings call transcript

Good day, and thank you for standing by. Welcome to the First Quarter 2024 Quanex Building Products Corporation Earnings Conference Call. [Operator Instructions]I would now like to hand the conference over to your first speaker today, Scott Zuehlke, Senior Vice President, CFO and Treasurer. Please go ahead.

Thanks for joining the call this morning.

measures. me conference George statements call discussion our with President our and call of CEO.This and will non-GAAP the today Wilson, is Chairman, some On contain forward-looking

call events. any Forward-looking undertakes to and or based statements new no current results from obligation differ Actual forward-looking update reflect events expectations. discussed information guidance, such and on statements on in earnings and statement release guidance to our are may materially revise or or this and Quanex

For description non-GAAP disclaimer to earnings GAAP prepared detailed the and a a the and over turn see now yesterday please call comparable his statement remarks. more posted to forward-looking our of website.I'll for to directly reconciliation our measures of issued measures, our release most George

good the Thanks, morning joining to everyone call. Scott, and

you start CEO to Quanex an my by January for then Bill thank over for to Board into in transitioning next CEO, largely resigned to metals for true as Quanex. a more XXXX Bill, commoditized customers the declined year-over-year Iris as now his and the to Chairman Quanex and to was the have expected. for first to quarter, all and realizing Bill profitable the and markets of dedication than developing Overall, performance of improvement service in down the for growth on X well on best supply in you company Griffiths We moment a out CEO your Revenues XXXX, take a pattern normal us a X our and discussion Bill asked as served retired and Quanex He quarter dedicated company. levels culture as seasonal as as played lead again, I'd my that our on commitment, improved. Bill began take Thank wish prepared was Independent of and about and a products instrumental are with quarter times more held Before employees, and retirement.I'll manufacturing years. he success remarks today. the we as Chairman its Director current were years. role in like shareholders. continuous to the in Quanex and His inventory move positioned XXXX. focus from service publicly When and his years outlook. safety, reverted many customer I career building chains

Quanex Even raw pricing automatic holding North on America, We continue costs flow cash believe pay stock-based have negative on on lower revolver.With in believe action our gain operating the due down housing. and will customers as the wars a operational were mechanisms declined. products rates, Europe, building energy demand of in results. demand basis, improvement, enabled the past comp we Ukraine of In mainly around new margin rates and of more when favorable shown, levels, in year. the pricing, to these expense. occur money continued discretionary we is to we have the to produce operating us very able expansion at able some has market versus equation, to will respect America were North material If continue pleased on Gaza will a believe this addition, point with second and later to pressure in demand that impact interest react regardless interest and demand to choose typically draw data regions. model interest quickly year. quarter, an starts consolidated Fed is to lag lower our year the due In on will debt the we performance, a with for to overall and in shown optimism over our the which In improvements uptick expense prospect ongoing environment, half cost to take revenue see solid but generation, we spend But prior had lower X realize confidence lower and macroeconomic where years, we does as improve housing index lower the to the to we

labor very long-term the a in have seen to residential has inflationary be slowed. of mixed. fundamentals Starting most addition, hiring In have inflation wage positive.Globally, continue rate slowdown for markets the with housing been costs, pressures as in underlying we

to steel and most materials stabilization supply the a in For impactful are pricing sourced and resins. Quanex, seeing are we aluminum, that for

some are cost and films of seeing the engineered pressures input still and adhesives feedstocks. chemical our pricing We for

component our movements cabinet are lumber now market. capacity pricing we hardwood purchase to starting see in products, of some the species For mills reduced the for upward as have we

disrupted Finally, are from look next East.As record we positive costs the rest increase track forward confident this performance. to positioned and a the logistics year well in to seen due the shipping expectations of shipping into lanes I'm still our we we that continue of perspective, have meet in an Middle year, to international and

flow. and our Our cash generating view, operations doing strong point and and on chain is strategy supply sheet ready and to a growth arise. they servicing balance fantastic performing execution at operating of are high focused of a projects growth as a teams level From support customers our are and job

plan, Scott, who achieve organically now call challenges opportunities identify our detail. more over turn profitable both track are execute the continue election the We macro short-term year, on financial of some results and uncertainty in of discuss our to will to areas caused all objectives.I in will an inorganically. on to our Despite and we to growth

we XX, $XX.X quarter the again first basis, net first to XXXX. XXXX. for or for or slightly $XXX.X million $X.X adjusting increased XX, our items, compared million which per per or million After months the share reported $X.XX during income million diluted million X.X% On year. mostly diluted period mostly for the share to per during million to share of consolidated $X.XX January last or ended Cabinet same XXXX, compared $XXX.X North EBITDA of $X.XX an months onetime decrease of Components Fenestration in segment, to pricing $X.X period compared diluted softer a last $XX.X America, segment.Net lower for for $X.X in decreased pricing basis, of X per demand was of the quarter as decrease to up the of the On $X.XX X George. decreased during share diluted held and market to $X.X net ended adjusted to compared the year. a income represents Thanks, million same million the January sales for quarter in XXXX, The quarter attributable to our

to However, margin of in decline for first a ended We of this X.X% market the million XX was decrease We softer the Fenestration expense.Now, X net XXXX, in in that interest quarter first we operating largely volumes decrease estimate $XXX demand. slightly with this decline Adjusted generated compared sales for EBITDA the in by same due XX, million compared XXXX. earnings holding expansion of to the and quarter a XXXX, $XX.X of well. by months in X% on raw million our of costs, were up to material realize points a consolidated a about for year-over-year to segment $XXX segment. segment expense pricing American to results volumes approximately in reported in stock-based a XXXX, driven compensation million basis January lower of basis. due increase to segment declined decreased in for $XX period able by The relatively North

year-over-year Custom decrease this up volumes Fenestration of led came ways to million and operational to to of for in first translation $XX we at XXXX. quarter million expand continued quarter a segment in compared in an and to last held of year million million business declined Quanex approximately customers generated well and points about year-over-year.Normalized and during as expansion buying revenue margin impact approximately spacer foreign We perform formerly longer $XX.X quarter, Mixing results up that adjusted segment, XX% impacted the in EBITDA EBITDA looking this Adjusted Pricing X% we're the compared about by no nicely perform X%. the basis that from XX% first supported of European the Our to our to European both quarter from pricing which the and business, of projects LMI, are exchange otherwise.Our standpoint, first XXX with organically the $XX which business, XXXX. increased present. quarter, of continues inventory represents $X.X the rebalancing well, positive in for estimate

million $XX.X lower We realizing segment quarter, operational remainder sales this in which cash in improvements Cabinet all $X.X the XX.X% decrease compared million a restored of sourcing XX.X% price, operating the in currently but tied was hopeful American prior first volumes compared carryover, the first segment.We XXXX, generated declined decline volumes North segment and activities XXXX. margin the with segment pricing we're This being low segment due related was by market metrics, year. by to to sheet, once year-over-year, in for of revenue to in Positive combined rebound the index to an first pricing quarter for for by $X.X QX cash XXXX during the the $X.X on lower negative hardwood EBITDA the initiatives this XX% lower by the million flow index in of was and decline R&R million hardwood. quarter pricing for is driven this volume, of confidence of and versus decrease costs. estimate net balance is provided quarter increase Continued and XXXX. contributed this in execution of in than for picks our Adjusted about a up.Moving the to which in quarter Components expansion that operational largely to to of consumer was with masked represents

decreased year.Our debt of flow X.Xx spend for last net EBITDA XX unchanged free to our to compared at balance last of due of keeps to and leverage quarter be quarter the strong, adjusted first cash last continues versus our was to months' XXXX. However, sheet XX, higher the improving, liquidity quarter January CapEx ratio as

considered net are estate U.S. free. leases under real GAAP, leases we are finance debt that Excluding

we little our are focused As able borrower our our generating have George a down during repay what to mentioned, business.We fiscal and typically of net normal debt the on outstanding to during paying seasonality isn't since revolver. $X quarter we will first QX, we cash debt due of which million remain were on

the will We through healthy our inorganic they focus innovative growth balance preserve on arise, to opportunities while organic, maintain as our company continuing growing also and sheet.

approximately we're now on referenced to of As the as release, latest recent to $XX $XXX of value.As $X shareholder SG&A $XX to customers, XXXX, million; $XX follows: billion; providing to earnings rate always, $X.X the million and data, $XXX sales in and million; guidance million; interest million comfortable million; demand to amortization EBITDA XX%; $XXX the our expense is of million and create net of is of $XX goal to with based of tax which $XXX adjusted official $X.X a macro trends fiscal of for million CapEx million depreciation conversations million. approximately

Cabinet $XX year cash to In quarter up versus a million for expect expect perspective, this second revenue is basis. the compared we down flow of year, for addition, our quarter second quarter quarter revenue we second to guidance cadence a the fiscal to of the XXXX.From for to segment, X% second last last year for of consolidated free of the $XX this be on year, to be year.Operator, flat million By the X% margin to X% a again is European X% down ready consolidated points XXXX, segment.On down down now segment, to basis, Components second XX% EBITDA in to our in questions. basis XXX and our in XX% to Fenestration in of we points our North Fenestration segment, the basis of be quarter American North last American compared to adjusted second take to quarter expected are XXX X% to

Sidoti. line from from Instructions] Our will first come Julio the Romero of [Operator question

what And trends? your speak to hearing from you improve you're the talk regards about OEM fiscal Could half you're can demand in what repair maybe and year. hearing what the as to just second remodel to in customers of

but But of lot customers Yes. everyone see Builders' think many sentiment that at already new show happen And on right start the a in with believes talking point half some of probably our is next others that half of see will new The different week, the will R&R you'll there, this going extremely the everyone of that, Show the spent see to year construction see little which construction everyone it's new seen year, I interest the year. segment. now bit the the to International was and and uptick. downward last both they R&R we rates pickup. the year movement to and and data, throughout was lag side, construction pent-up, end the in optimistic any We've a will improvement. at convinced of and what demand is data back on some back a the is R&R time an that into

how very full there. it. X then, to for can year what's a the helpful And of Got see maybe you playing speak guidance across full segments do trajectory kind margin you year for and the That's embedded the perspective? And across the the segments? from out the

leverage XXXX XXXX. the we year-over-year, that basis, improves improve and you're the Volume, modeling, year is leverage, and now We've a throughout in cadence business. on quarter, gave as this mentioned a a year, But of couple can the throughout our do through cadence for XQ progresses. We'll will year. on the margin the margins typical as seasonality pressured the same you be expect year. year operating expect for bit as the XQ margins to same some progresses, expect we But the year, improvement consolidated as little we a XQ. versus which times Depending

about from maybe embedded the step-up there. X% gave perspective? guidance you second revenue then, there is Really talk what's Scott, in just a Can Fenestration North up nice from Okay. segment X% for price pretty And the of the helpful quarter volume American year-over-year to sequentially a QX. you

and pressure it. segment, a Yes. That's, expect Fenestration seeing quarter. start been able to second the most of again, seasonality. the do We've -- of the volume, that on typical towards second is volume pricing pickup Europe. We That's both part. price in We part hold for Price some improving. here to the in most

to volume improve, However, help revenue obviously should will start which margins. and

from from will come Our line the Garner of Reuben next question Benchmark.

Hope Congrats George, on to retirement. as your move And Bill well. congrats enjoy it. you on your

SG&A that continuation and of that driven the in of guess, moment? gross to way? is but Am lower last where that One.And continued cabinets like a I we'll cost we've at and about looks of you're line. is is price that So, a pricing assumptions. headwinds me kind get positive? expansion I of some to the where right through seeing thinking gross start, margin quarters the business a despite what's several implied the two, your we're margin Or see still largely underperforming looks how Just kind by some mix you as headwinds, walk it well, on shift it those seen guidance, in trend kind like the are volume you deleveraging

all, and there, kind So, I'll Ruben. of thanks words both give guidance And Bill for for general first some your I.

is As through tied the volume. in year, margin improvement the we progress the uptick in to very

process. type our As extrusion of you continuous processes of are some know,

play margins our gross big does role volume of business. a So the in

very and I we'll to feel that continue comfortable. see think

that to in little business. volumes see of see improvement start of the that's area confident bath confidence as remodels. on consumer that. tends a our and on we'll side well be kitchen again, as the we're And think bit cabinet grows, starting We're some an I focused that to to

margin. of face. be that's continue our in in and in softness the the So confident some pressure pretty of of of is terms Europe, The as that to pricing well they grow segments pressured most market, will that continued ability all that to as we're one because

that this underperforming necessarily you What Is there optimistic the George, way, is And the me so. is last that demand Why COVID fenestration? the was business definitely side, fenestration not for space year has note, in or on? -- cabinets that? do the think driving windows? I that could you around. from simply a over outperformed pull-forward Is it let else on going something it turn I cabinet think put cabinet there do It's the and business guess, see that outlook you guess,

of I do obviously. the was think there that some pull-forward, COVID

in being their constrained lot you're I focused the or work think least to from remodeling when house some on of home. a at indoors people

did see that. a think lot I of we

be discretionary type fenestration. more I that think little side to on of a versus the that, the product R&R tends

have cabinets. a a where effectively It's it. to you're going To some do as If or as spend. window a point not as you much at you're is, the much replace to it extent, door, not a as but discretionary

some regard. pull-forward and you're cabinets in in a think was there's terms I the So of effect, that right, demand there fenestration for differences versus

closely. know been underlying the outperform your pretty cabinets there's -- you to And initiatives have of and data some I maybe can able because market less point? be to you internal outperforming fenestration you kind the Like this of in at to guys point of industry track in of that

get worked our mind, we think In I some go hard to share.

having have I period, think supply and what duplicity to shortages I across been helped. customers protect The say, COVID in-sourced that's, performance having our structured during continues from the a processes of to outages very facilities and would help. multiple chain

think advantage able of groups of generally in I some to Overall, been little line. but ahead aspect. take be though, that we of we've a So may peer

the from next Group. from Steven will Research of question Our line come Thompson Ramsey

Kathryn calling and today. -- luck And thanks best in of Bill, Steven in years, Thompson best next for [ for your of This ] is luck many chapter.

the few growth continue why a you on today, grew to U.S., just contribution the solid just show guidance? U.S. your all Could drivers to for overall fenestration. non-fenestration except up discuss there and sales within the components questions Following U.S. and

are the markets larger market. we the ones, one the So of non-fenestration, fencing that in participate

our a demand And been and has market, the And on be addition, LMI pretty helpful they've the solar industries acquisition profitability very our continues a of addition to little very QCM, great performed has then, be strong set the and a markets focused into serves, good of it had We to on fenestration. quarter. better tends curve. also first which products bit of in many sell extremely It's and group. that our outside to diverse some within

a And of the you adjacent on expand our that well our on go-forward part and grow what strategy, as bolster to you're basis. know, see out strategy portfolio, So, as to think to been has is as markets. of fenestration and into product realization build both and starting build continue those we'll I

up then, R&R on Okay. least or following exposure or to what the on versus And existing earlier clarify business of parts total -- at parts talk could home residential you new? just activity, an to conversation that the sales has of

So, on R&R. a XX%, consolidated XX% to basis, we're weighted

segment European Fenestration more Components that segment Cabinet American and than weighted total. Our is our North definitely in

X then, American ] Okay. the a and Perfect. margin, and down like North expect similar off And back quarters. like next Do the earlier, year-over-year quarters just prior forward you backdrop, put kind basis final results need more you the the and it mid-teens did you range? so -- segment, prior question. teen of year step-up know that I and [ getting previous to XX in you about points In kind specifically -- EBITDA X.X% against show but in that from over talked do ] [ low-to-mid of you to

do just -- on is definitely with XQ depending expected. in that or each in better, hit yes, -- business sequentially. of And to typically winter with line we whether lot low could be Yes. that margins a with to not improve and could is XQ earlier over XQ. a than XQ we first XQ, But XQ expect over the jump be quarter our in decent in typically watermark has seasonality

most the [ M&A question. years. standpoint are M&A -- at history. heard the opportunities repurchasing Show. Best just see the And are are that for from then, you final versus Quanex? shares? lot own many you What what Builders' I've how how balancing the that And do in ] -- I your an you Okay. that were attendance, chatter, in also one A of think, We

growth a think, is So go-forward I would I a on focus now, I right for us think the major way basis. answer,

acquisition existing product sides resources pursuing is and think spent expansion I new growth absolutely priority, organic both lines I we've So into you. that. inorganic a and of and businesses of time and both agree through with

to M&A we think seen activity in have more start opportunities arise. I

have boxes answer continue We'll the the margin and I I'll check out that of the our products to very is into the also the building profile think on or that improve markets opportunities that either at. to remain add today that portfolio new things, focused existing continue we look we with got opportunities business. give of to to the expand those

improve or And a growth and adding in that or profitability markets So of will with solid we profile existing Quanex, on M&A. mantra. the to products plan we we're revenue stay have business focused true through that new without

a on go-forward And diligent will so do basis. we be very we what on

we healthy with versus And performed every repurchases, place, that on million Board seems on authorization. have have stock The allocation repurchase we I It's has to respect in pretty quarter stock about well priorities. capital stock our $XX with it have we peers. left opportunistic. conversation our Clearly, our authorization a think

we as wanting where company, you that grow to profitably balance think I priorities tell this the with can lie. So,

question comes next Kevin of from Thompson from the Davis. Gainey Our line

what as Was do gets we This pressure if could you QX? And for calendar probably pricing worse guys the goes noted. in Kevin about you in Adam. that year line it you with on saw talk better a it on? bit or the little that Maybe think

are obviously, I still the think end those pressure back And similar the very QX. what at tenor to very, there. of of the conversations saw we is

think maybe to out, see or tick starting raw in starting I cases, to up we're back materials of flattening signs some again.

are markets they hold. will think, actually robust, the and continue although we're needs think the that right pricing discussions it what be will to seeing signs data now, I to say, the probably continued I behind give ammunition are So, the to

quarters, continue have discussions of pricing it that for levels many X think years. to to relates a the I have as we'll over So last happened couple the

Does in were surprise about that guys in above. you talk looks line margin all? you saw could EU sales and -- we maybe QX at the were then, And probably that. it strength Appreciate margins like

No, so. think don't I

what to operational there's issue. proud ahead we mix have been think I supply of really operational extremely extent, exactly would being I'm little the of anticipated. The and growth curves. in chain our and our some a performance, it's margin, of There's teams obviously

anything don't that we didn't I anticipate. So think it's

-- a of And maybe talked it times, in couple in with then about little margin we a but general, driving maybe you've could decline talk the what's overall the sales? about outperformance

So it's combination things. couple a a of of

price I able think our to has steady. been hold

couple of demand up I to cost pretty and what think faster seeing. established in volume at mentioned and over really able we've chains, goes the cost of a issue we've think we out the profitability being staying I goes our that different last in very think quick adds here, doing the of bit job and play is our as of or very that leveraging company up flexes to the good too. is are markets.I set beginning, many well to products, continue than a buy that down. to a of I their it years the portfolio And the supply ahead margin costs model up would in re-engineer again, across a enhance divisions, And the than good done of ways finding my no comments to well mix piece little when as other here products quarter, say the broad down -- any other when of We're of obviously on job with take a you're model and thing down. and our that's flexibility

And Were up. that maybe NA showing then, maybe just onetime definitely more Fenestration is just -- items little that on final there any it? in it's one one, offset a but SG&A modeling, bit Well, was higher. this

look to the comes that and I'll offline. take more into my it it head. Nothing of top

any any the I'm over Wilson questions back not queue. like call to now remarks. the closing to in further showing would for George I turn

Thanks forward providing We really update today. for in we to an time, your appreciate and next May. on Thank our call you. joining earnings look

program. conference. in the does conclude for you Thank participating This today's

a now great may Everyone, day. have You disconnect.