NX - Earnings call transcript Q4 2020 | Quanex Building Products Corporation

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Fourth Quarter and Full Year 2020 Quanex Building Products Corporation Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Scott Zuehlke, Senior Vice President, CFO and Treasurer. sir. ahead, go Please,

Scott Zuehlke

the morning. joining call for this Thanks

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

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

closed, the manufacturing late May. Europe in Continental facilities government with not was stages pandemic mid-to-late until quarter For products non-GAAP mainly operations most did largely North forward-looking softer and full-year see our lower for in to of increased demand reconciliation the sales XXXX. The GAAP a now yesterday restart all And More COVID-XX to the $XXX.X decrease Conversely, of disclaimer across to statement I'll our please to of website. XXXX, by demand discuss volume-related U.K. at to issued sales Net were fourth and financial during due our more detailed measures manufacturing results. description the in in XXXX, and our million pandemic, and addition for decreased increased in a net March. our posted our measures, operating in directly early of two $XXX.X compliance due the of XQ. America earnings orders release the segments. specifically, the to to X.X% to comparable those in XQ million plants during compared

$X.XX a XXXX. for months $XX.X during loss October all three XXst, July year per October, through exceeded And sales compared diluted or a or reported XXst, of per XXXX, volume million net ended on share significantly We the October months lines. However, product of three basis. to income million in ended net the $X.XX share across $XX.X prior increased June, consolidated net diluted in

in an D&A, fees. in foreign fourth EBITDA executive for transaction quarter the and XXXX, of income or million $XX.X net diluted per non-cash non-cash XX.X% asset advisory $XX.X currency were loss quarter charges, of year. compared and both are severance and For net charges, accelerated share, million of EPS to $XX.X adjusted fiscal of to charges, from during by $XX.X Adjusted diluted to per or The share non-cash The was last changes. strategy share made per million XXXX. Cabinet a adjusted fiscal share for diluted for per to related basis, goodwill share On diluted during $X.XX fiscal attributable $XX a segment, the impairment XXXX. $XX to million quarter share per income net of North primarily $XX $XX.X in XXXX in million diluted per fourth or XXXX, to of million $X.XX compared due $X.XX adjustments $X.XX quarter losses in $XX.X million net net XXXX. impacts certain stock million in the to fourth the in we On restructuring XXXX, American a compared or quarter transaction diluted for impairment fiscal reported reported year, increased last semi-custom second year quarter to an last customer-specific or shift to $XX.X of being and of million mainly the volume impairment income market the lower $X.XX was cabinets compared to Components expectations fourth the $X.XX the basis, million fourth XXXX, or the

compared and XX, mainly leverage move increase balance activities XXXX, were $XXX.X increased now raw was of earnings EBITDA I'll October generated sheet. The October cash SG&A operating XXXX $XXX.X to for X.X%, the costs. months full by compared increase of months by in XXXX. For million, the expenses, almost to medical higher to three adjusted in million $XX.X for increases lower months in XXXX. operating ended driven XX, in XX, X% compared million which XX were provided the the ended XX year cash when primarily million October represents XXXX. on to Cash for flow costs. $XX.X to XX, to $XXX.X XX mainly XXXX, XXXX in decrease the earnings volumes, flow The due free million months by material We improved lower the an XXXX, for October to ended $XX.X in due ended in million

strong As a bank and repurchased which flow $XX of repaid XXXX. in fourth repaid we the debt fiscal during $XX.X million cash result stock million alone. of free quarter profile, our X.X million of in was

balance Our sheet healthy. is

October than net Our of ratio and liquidity times, of position stronger, strong months to is adjusted XX, is lower our which X.X exited where fiscal XXXX, getting debt XXXX. leverage XX% as EBITDA XX improved to and we last

fact, drop plus which the LIBOR lowest XXX interest on In our will is another to points. basis basis XX revolver the tier, points rate by

This As low and fiscal to basis, no to approximately generate in the for $XXX and should data growth Component to $XXX to intend EBITDA mid-single-digit XXXX outlook plan million pandemic. North in focus with growth ongoing current expect we $XXX single-digit Overall, net on from guidance latest based segment. XXXX creating million Fenestration our adverse Fenestration sales single-digit on Cabinet an continued the conversations the guidance our COVID-XX sales trends, consolidated We a with North segment million, between customers of million our and concentrate earnings high assumes and sales release, growth European a and on our segment, $XXX to macro executing value. this shareholder our American equate mid American section in as of and noted in impact we in expect XXXX. on adjusted sales

million $XX XXXX; approximately depreciation approximately of million $X.X million $XXX million, of a assumptions it's amortization about working $X.X a XXXX. to over capital changes systemic $XX of to XX%. rate expect approximately past very CapEx of number successful tax implemented expense managing been of spend following in million, two a From interest have of for modeling million, and the at purposes, years. appropriate the million, to and to For SG&A to We've $XX we good make $XX three standpoint,

that moving fundamental place, systemic changes capital from However, of more now benefit be all will these are difficult realize working it a to forward. in

of goal to turn George generate million flow approximately fiscal in prepared call his now XXXX. free over is the remarks. Our $XX I'll to cash for

George Wilson

Scott. Thanks

began Then, since caused closures quarter. that impact quarter and coaster XXXX results, The at our XXXX U.K. in record lines, strong ended pleased beginning the extremely year levels fourth full through especially has year levels midway temporary third the end. pandemic. product sales rebounded to order year pandemic The continued through of the were of all our like The and in year uncertainty our ride. our has second existed with and during the quarter, plant XXXX slowdowns a swiftly before We are of results business, full with all very operations volumes the We across which October. considering uncertainty started COVID roller

which XXXX, mentioned, Scott million we net X.X% in generated As than lower was $XXX.X of sales XXXX.

to improvements, adjusted were our sales on to driven in along return metric on the designed effort projects. invested reduce we a a volume by to really with capital and capital able in our implemented we improve XXXX, returns scrub have was efficiency, renewed improve the various our lower reductions. time, on focus increase in even with operational continued over Also, on The consolidated EBITDA However, SG&A capital increase processes costs, basis. expected

last the plan years, further years. the expect in over we to the and fact, of improved the course improvement have ROIC, course significantly three metric this In in coming stay and we

to forward low and of maintaining continued existing to Fast and living, and to a you of to keeping take quality everybody time giving It despite showing been operate inventory, are pickup year market proud our mortgage which Before supply they Pre-pandemic, their under-built. the in really housing macro to moment presented by that for was and COVID. and level accomplished. am discuss segment on live. the help perspective, in what communities for has the a activity, performance today, see thank challenges like believe market I can very and a and challenging all U.S. team housing suburban I the each urban from team what commitment for to ongoing other and safe, a I high their in has strongly purchases. the millennial rates, entire performance, From Quanex a resources migration move for be low to the robust customers, we Quanex markets would a growing household dedication to we appears

what should for stage Given foreseeable building demand factors, we the into all believe for is products high set the these continued future. translate for

compares restrictions been growth used travel requirements quarantine see into have American markets, as and to spending we choices for leisure, now remodel in semi-custom quarter, the semi-custom in by we total cabinet the in the shift Components stock KCMA According our X.X% in grew reported which and have discretionary In appear to of segments. continue market and favorably might the travel North from demand cabinet well the and existing In as diverted stabilization to be that growth getting repair segment. X.X% spaces. home Cabinet the to impacted cabinet historically addition, to funds data,

in line pandemic repair U.K. Continental being full at The our are in fueled repair the is the late over exited adjust market impact you replacement by versus to semi-custom year-over-year, remain in Europe the the record by this in related recent you is customer demand XXXX, If exited customer in X.X% Despite the the XXXX, uptick for for markets down Cabinet XQ. business, restrictions, with were similar and operating Europe our that levels. year. we X% same the business in market but restrictions market benefiting is dynamics Components U.S., a and negative beneficiary of segment market had through due spending. a dynamics from American period of the primarily in that ongoing we decreased Revenue that terms of and in both primarily by diversion the cabinet XQ clear and well adjust to replacement Year-to-date being and for serve. North is XQ. October, the grew that terms pandemic market in segment and if X.X% the of these discretionary of the travel under-built The and

In in addition, meet requirements. anticipate our operating three efficiency and that replaced; products energy our and these I segments. and saw all fulfill growth now Brexit are still quarterly exist Fenestration margin in COVID mandates our segment concerns, that are markets, European we so products fact each Despite windows doors governmental our highlighted by that results, will of mid-single-digit which we XXXX. the segment in in discuss expansion specifications the related

Fenestration million North $XXX reported was from prior only down Our segment revenue fourth QX, American slightly of year which quarter. in

of in across lower X, was related demand offset occurred costs X.X% compares higher costs, grew up and QX, more offset year, Solid million segment European was foreign that million shipments. in January one levels than of favorably this prior quarter. $XX loss, in our was QX, better of our customer the start-up overtime segment XX.X% and XXXX. EBITDA with this Absent after impact. than or million impacts, all prior in $XX.X XX.X% excluding by associated exchange profile Fenestration material the than product which Volume million generated the Adjusted segment revenue industry X.X% SG&A, loss in or year screens at to plant Pennsylvania. year-over-year We of lines favorable which $XX.X the or vinyl on $X.X new higher fourth

points leverage, million approximately was of by expansion margin The quarter record QX margin pricing. continued throughout in This As in related QX the quickly represents mentioned our operating after record a higher of sales uptick basis June the quarterly July and on quarter levels Adjusted over call, plus prior related rebounded improvement favorable COVID $XX.X for and segment. the volumes volumes and in EBITDA resulted expired. shutdowns was year. in driven in third also XXX revenue material

quarter, wood which the increase million material prior $X.X X.X% fourth with $XX.X represents opportunities QX, have better supply Components and demand, the Our year some of combined successful lower Component we reported was chain million, than of created better with all continued markets for the than in Cabinet prior import on Cabinet Strong to been North yields which net by in EBITDA an expenses, American medical benefits, Adjusted the year. disruptions in combined favorable Volume compared capitalizing contributed quarter. XX.X% into segment, was opportunities. those sales to and of pricing, favorable during performance raw period. segment anticipated

Finally, that the unallocated a incentive corporate all to decision bonus expenses higher were fourth incentive and the of true-ups, combined employees a our participate make SG&A discretionary not quarter. costs primary higher do were prior than with higher year The to plan. $X.X million of formal payment in drivers

ahead Like will everyone on need look we recent news our excited in we this remain finally related of the the some else, navigating fundamentals. and very and we view But vaccine macro XXXX, are know of market to As at to continue we to optimistic dynamics by near-term. tunnel. light pandemic the begin seeing encouraged we end challenges

stated million sales $XXX $XXX of in XXXX. million to of EBITDA Scott expect $XXX to As earlier, and net million deliver $XXX we to million adjusted

Quanex to generate on strong sheet $XX in continue and million expecting generating remain will cash of capital cash our flow. free succeed approximately and focus We position our flow with still hard while We've to improving and invest will invested to free on cash returns balance flow. profile the very to worked business,

We since further in when continue In ways We the solid value. to which on a pandemic our stable a year with revenue us are as financial take now base we to capitalize operational macroeconomic year will strong execution, our forward on strategy, execute have we a another even opportunities, more to position create summary, some on renewed provide tailwinds to ready for that, environment. this strong should look to potential that also XXXX. focus expected We And with continued will of operator, put the in combined shareholder we us focus on feel have uncertain serve. markets in tailwinds growth questions. that successfully future in we have has we indicators performance to now make another with and

Operator

Certainly. Moore the comes [Operator Securities. question from Daniel line Instructions] Our of CJS from first

please. question Your

Daniel Moore

good Scott, question. taking morning. George and for the Thanks

George Wilson

morning. Hey, good

Daniel Moore

manufacturing and forward, the with of kind market going words, one-to-one in are production? catch-up that we much exceptional and year your that of how QX Europe, it shutdowns Starting is QX in process? strength of other a sort in versus for forward, would demand to carrying attribute obviously more you through end now earlier In

George Wilson

is George. Dan, this

So there. your the size catch-up doesn't question, inventory. the vinyl that we especially actually the it that profile. demand feel we a isn't reason the bulkiness on that, allow is the answer nature really of take for position The product of like the really product And to it why is building of and of

it continue the near-term a one-for-one to this And not any So, job expect XXXX. site. is will we do and see shipment the we throughout slowdowns that in

Daniel Moore

growth gave And estimates of each XXXX. the Helpful. fiscal you of for segments in

would similar better to fiscal a QX? the a you helpful. year Europe? cadence Are little that just of little in And bit doing experiencing in perhaps You're relatively around really start bit guide be growth maybe

Scott Zuehlke

Dan, Hey, is this handle can Scott. one. I that

percentage things, much quarter. on side stronger would of to I a than full the unlike So the cadence year. that's more far revenue this where in think Typically, XX% it's that a I XX%, think from is a standpoint, year quarter in first history maybe first already. any – the recent modeling been revenue other And as prior of for closer around I little be

Daniel Moore

correct? just Not Overall, Europe?

Scott Zuehlke

so Correct. That's -- overall,

Daniel Moore

Got it.

Scott Zuehlke

Yes.

Daniel Moore

Understood.

Really Okay. admittedly, And despite growth. implies significant relatively guide the then, the full a for margins but helpful. flat pretty year EBITDA range

all of with is combination three? comps conservatism, SG&A, raw may higher tougher So it materials, be

George Wilson

hedged labor-related as we're I the really pressures a we material impacts. dealing margins would raw three, the still say, that but that some it's little a are some first the is well COVID combination on on seeing of with as, time thing all inflation, for we've bit

spots, positive. little still are a tends quarantining time over certain testing higher to as and people So, in be

get only and that will and we until we vaccine customers. labor for tight anticipate to that some but suppliers so, effectiveness, shows continue And be our the not us, our

Scott Zuehlke

than were medical Yes. the much forecast to XXXX somewhat And to then, we're in for lower expected. way expecting had is, normalized what that reversion XXXX. costs of we a Medical been expense prior

Daniel Moore

it, it's best time, the quite allocation, sheet shape cash. Got obviously, then, been capital some in generating And of in plenty balance is okay.

priorities You to us a more more bought willingness here? Maybe aggressive bit from stock. little your back be a on and update just little bit

George Wilson

themselves, situation everything. at roadmap. use but opportunities strategy we and significant is, obviously That our present we aggressive The that to would for shareholders. strategy plan plan, achievable five-year in as continue answer fluid we'll is as I have a look How that our our creates mind, very value

that So good baseline a we're gives us our growth. to fund where on going

them at look defined that look a they maybe they exceed going As a opportunities present at we not to obviously if take a we're have it, if growth arise, we'll different plan. profile, but or not threshold,

pay sheet to opportunities and we'll about in plan, position buy to be them value thing our down a stock when good we're a this fast. very be But, to our growth will do and is, And is we're on provides our strategic the and We shareholders. our opportunistically balance will able when we and debt often with in that can. continue that very jump position priority, to it arise, comfortable

why that's we're a it's situation, so, very spot. good fact the And a but pretty that I fluid in answered

Daniel Moore

Indeed.

Lastly pencil pieces for just run fiscal for me, enough. XXXX? the you Scott, $XX heard my million, I other Can depreciation, guide the through, of fast wasn't

Scott Zuehlke

Yes.

it Let me find here.

Daniel Moore

about that. Sorry,

Scott Zuehlke

$XX to rate million million $X.X $XXX $X.X of expense, SG&A, Depreciation, $XX tax million; million; interest million; to million; about $XX and amortization, XX%. then

Daniel Moore

And rough the million-ish free CapEx embedded Perfect. $XX cash guide in flow? that

Scott Zuehlke

million. $XX Roughly

Daniel Moore

I’ll follow-ups. back you. any Thank with Perfect. jump

George Wilson

Sure.

Scott Zuehlke

Dan. Thanks,

Operator

Thank you.

Romero Your from from comes next of & question Sidoti Company. the Julio line

Your question, please.

Julio Romero

Scott. and morning, good Hey, George

Scott Zuehlke

Good morning.

George Wilson

morning. Good

Julio Romero

pricing of any across wanted three? kind you segment, your about the any can revenue gains any embedded talk – for you outlook is Hey. appreciate by three there. about the giving just But pricing to there of I in ask Really segments.

George Wilson

where pricing they exist. at opportunities looking We're

pass-throughs. on America, products material of our As are most you index for in raw North know,

non-material case-by-case for opportunities on evaluated increases. the related pressures. We're a will seeing obviously inflationary be basis So

obviously those opportunities more by to dictated on index, the we'll market. and into pass those an or yes, So little where with because Europe, are things try to we be pair can aggressive will along not that growth a In back. be parlay we'll price,

Julio Romero

Got it.

top no I at line real guidance, moment? in So, right now, guess the embedded it price the

George Wilson

say limited other for what would we than index. price expect I

Scott Zuehlke

rifle And more approach. shot

Julio Romero

I it. is $XX just you're given CapEx, cash balance million expecting, million is guess the any deploy And this on $XX there -- maybe opportunity a and XXXX? you you're where above your initiatives is in the internal year? about could And sheet there deploying Got flow talk to

George Wilson

know leaders have becomes -- problem love business The the engineers my only $XX I to Well, so than is would group, it many more have million. in you too.

there's So an that organization many handle. in only can so projects bandwidth

smart emphasis launching CapEx. So projects generation, on an completing we're sure expectations. be and to and on about going and focus And them the puts our return to implementing make completing

not the for So spending money sake. just

we're methodical So in very our approach.

be an working than So able fast there rate, a to to $XX cost of or projects company's and the if profile opportunity we're at for million, capital. may invest that add projects the the especially integrate enough margin exceed more benefit

really, we So very being results drive in do. do to out of our that get the expected projects but we're the diligent

Julio Romero

Got it. followed And to then debt, guess. I reiterated pay share last priority cash you your repurchases, guess I is just by lead into opportunistic for one, my first down

net position get flow pretty to guess cash soon? free guidance, the given you'll So cash -- net I to

Scott Zuehlke

Should XXXX. -- be in by

Julio Romero

Excellent. for taking the questions. Thanks

Scott Zuehlke

Sure. Thank you, Julio.

Operator

you. Thank

from Company. next Benchmark Reuben line from of the Garner Our comes question

Your question, please.

Reuben Garner

the and congrats on Good morning, quarter. guys, you. Thank

Scott Zuehlke

Thanks.

George Wilson

Thanks, Reuben.

Reuben Garner

Is here fenestration summer the start, from in returned. it versus American And full how to started you yet, that boost benefits American kind mentioned the in? the cabinet's the starting is that cabinets see the -- kick in near-term, not fenestration North the was you for to QX at of maybe, of to -- strong growth least kind your I where in guess has nice you're growth the housing Scott, flow through Have North quarter? looking? new fenestration to is has growth

Scott Zuehlke

still seeing business And we've within just included Yes product now. expect stock. we expect all still to successful the shift think, successful in cabinet challenged battling that this navigating nine that shift this continue and for no. probably and we at to lines, future, is we're But we're been least the six What that from semi-custom I mean, I to to right strength we're past pretty across and continue months, to be year. over foreseeable the there. battling cabinets

Fenestration and you really I in the doing of follow slowed significantly, moving benefit a can has is front indicated be segment. the However, growth, coming But still as if lot us has that benefited KCMA which say forward. from well. what shift the data, release on Screens is, American that will will us North

Reuben Garner

it. Got

kind you Okay. And next not about or puts bogeys -- kind are the years to an year. segment? if guidance guys discussed years, now? What the coming margins, I of this point. of takes the thinking this growth What then this expectation the we and see continue for unreasonable of is consolidated for few at for kind from which think margin reasonable Are three either by you

Scott Zuehlke

a of tougher that's a little Yes, question.

I think bogey it there. take from opportunity a consolidated segment-by-segment standpoint, the let's our give to just just

We Fenestration list American North is the some and business our years. Components of American opportunity Cabinet in the of think left still basis points the to two would top segment. or hundred three a exceed could probably the segment. There's real, still expansion So, next couple there over margin the be cabinet that North

there, expansion good there Europe, that protect smaller frankly, quite and the you in albeit just trying we're some margin to so there. expect maintain cabinets. margins And than are So, and so healthy should margins

George Wilson

our flavor capital think talk, at past think on on focused been we And projects. as I now invested we've and -- are in the in I right heard of transcript the so you return looking

is a, just There focus of I operational -- pretty across the over on we we've I that And last metric. on diligent we opportunities plenty that some on again, of proved expectations go what the others, course excited our been has few think execution that the I -- forward. about and exceeded projects say, to that diligent think pretty we're short expansion margin years. would have on being mid-term the plate

Reuben Garner

an more risks home, do over maybe and if -- that that opportunities, U.S. with you just new guys for any changes eliminated of are efficiency were the in in have of opportunities maybe lift administration associated code advantage there goes, getting risks peers or that Okay. here And tariffs the far does the terms that or in would boats? energy all then your to as happen, kind as there

George Wilson

with that Yes, one. I'll run

identified think, time. opportunities and period have administration, the for risks about a we we've associated with both I talked new of and that

the On the changes by that open. risk those we have a tariffs side, supply think in risk, I'm And good where as opportunity margins I benefited pretty sure base not been the we a terms efficiency of to as that risk the it's cabinet road. that pressure catastrophic a put down on it's of But enough well plans not It feel customers. level about completely nonetheless the risk. some our an it's energy side weather on could is there's will but in be repealed to just our codes. that

U.S. terms and standards they're much place, years XX absolutely those to house their see better fenestration the where in in in usage. very are you those standards our and codes of can electrical And performing meet products in and passive probably of the right; lines you're add Europe, product ahead As industry. for requirements

some the an some at reinstituted. be why Star point. would our saw of products, that opportunity would of something that one like for a have believe, We for was And us. Energy drive in benefit us. So that's there we

Reuben Garner

guys you Christmas New And and a a quarter. Merry the on again have Happy Congrats Year. Great.

Scott Zuehlke

too. You

George Wilson

Thanks.

Scott Zuehlke

you. thank Reuben,

Operator

you. Thank

Thompson from Our of Steven the from Research. Ramsey comes line next question

please. question Your

Steven Ramsey

guys. good morning Hey,

George Wilson

Morning.

Scott Zuehlke

morning. Good

Steven Ramsey

this stepping oriented I versus -- to how growth start $XX is want any that increase, what, it you're in maybe up flavor enhancing? segment? little able CapEx of if two CapEx of, past are the to of million on, on driving from -- margin spent What by outlook, much is kind years. And is the more the year projects share

George Wilson

of borders. have of Sure. we trying because projects will would equipment have, from comes restricted, were actually implement some would general we could overview. more that spent our hopper of in overseas you if a across the give that And or have in XXXX, we the some we're country had probably to -- I We

to So we the could install people not of and restrictions. get quarantine travel because

on or get that equipment the though ability wasn't, into XXXX. really, projects reduce pipeline. trying the It as the cash was really just limit and the to the So It was limitation to were we logistics flow.

In terms of a start expansion fueling you're think be share. of the growth go-forward Europe, and going capacity to a towards see obviously, it in how deployed growth to certain on going basis, it's going as to continue areas, so in I take majority we

you'll our mixing some capabilities. investments see So in

Some get things of our spacer there capacity will waiting. a heavy and

then, nice the We starting mentioned, are vinyl see and a technology. fenestration, in In for America, that's of we're successful. continue our terms as And in because anticipated. larger and technology-wise. you'll profile, and improvements Scott very some oriented. segment, to margin upgrading think how been sales than -- It's investment a If business. fairly more short-term, why see sooner that results, North screen American improvement grow growth made I may runway technology we that And investment out, look the think large continued North And margin it I on in where that. two Cabinet we'll pans And in there's we some do we wood there some to things we you'll continue dictate. at do can step that that cabinets terms capacity, on of we opportunities see the to volume go is different adding to process some things on improvement

CapEx spend three next the in see terms So how to we'll flavor, that's think one our we the of years. I over way

Steven Ramsey

lead how maybe Excellent. or range? maybe XXXX much And Fenestration low-end the the factors that driving the the about markets, mid-calendar Fenestration the in Any of or times, some American end North this And on strength America guidance is in about talk impacted high-end? there might sales of you XXXX? North by swing early mid-single longer thinking for factors calendar certain you to high can single-digit, to

George Wilson

not The the down get labor would towards if demand the and lower end cannot market factors but would install be limitation our that us push everyone, and to may weigh it just windows for of range. And probably of that for Quanex, range the that dynamics. to the customers low end really stifles

piece upside and also that doors the divert opportunity -- some be, the some capitalize gives outsource to choose On if it installing of labor or of to their windows they can to that may is that. components they us then on continue to and

growth So a of – we on that range. making that to kind then the their labor. continues be higher-end rates on-screens may see to to their to play a of internally decides If company higher utilize outsource better may dynamic that a supplier out little

Steven Ramsey

one How to-date? how Maybe of you. items pulled XXXX; outlook staying then thinking those for Got coming in and COVID expenses much hit me. have much reduced? the the And then results but were as have for tightly being of other of back in that are much cost what's those embedded whatever last T&E expenses, for back in QX spring? items, back are or one come How coming those back quick

Scott Zuehlke

but where will restrictions a Well, XXXX, that to the is for normalized as and just held the not piece item the back travel still But here based uptick that progresses over that the spend we item get quarantines so we more being back in cases really slowly say T&E in on recently. really up I T&E and to progressing is year XXXX that probably for level, we'll time. would one back in go suspect the were

George Wilson

that such learned to we've I When areas. amount to we evaluate are evolved some one SG&A, couple the way example, be item going you of money. that normalcy. trade to shows, things level timeframe, this that of that think value? have what enormous can Is and virtual of I up there look we've an be learned add at there different. during as for some we're there get I will it? a we back suspect different accrete may So do think And to the do things a and But --

that So the pre-pandemic I'm not back go regardless. was to way it will necessarily convinced it

Steven Ramsey

for the Thanks Great. color.

George Wilson

Sure.

Operator

you. Thank

KeyBanc. from of the comes line question next Our Zener from Ken

question Your please.

Ken Zener

everybody. Good morning,

George Wilson

Good morning.

Scott Zuehlke

Hi, Ken.

Ken Zener

CEO, release, lot wonder this press the I A you just is quarter. correct? at about because Impressive details. a for I looked George, being year of

George Wilson

year in a We're X. correct. is That January

Ken Zener

the that. a lot that industry This in check a guys curveballs, Bill’s but a double individual there just the came business I I COVID, your of wonder you arguably to year, one perspective of had curve I got. despite efforts, headwinds, so were operations. us could success, given and year, you Ironically, long balls know lot to if very I because and were got spacers and a of results. been good solid you But questions, you've give you delivered here, little yet do faced biggest It's have Good.

different guess, that company about being question take COVID step you could of been ago? because a to been a I come. you've An much if quarter. following year happened. about we is, is versus always CEO, just So, opportunity, I first -- it's view if the the kind a changed what a has this understand, back, company your the my very indicative now, basically just What's of of strong realizing of to things year involved. I wonder wanted just But better it's And actually

George Wilson

because get question, a to have. a it good do a opportunity reflect I breath, that's I to good step take do a you is back -- than Well, when

what haven't Bill's was on role, built really all. and with a involved changed this I and the because respect. to transition to very in taking to but the be really easier, is, made we here what over I that, we do Ken love prior we say strategy, sit to would the say me we've complete was result the that would would me I I we being wanted and focus diverted guidance, were that footprint solid a wanted internal fact and at results from CEO, strategy this lie time. that the haven't of think, how successor I that Under the accomplish, operational

across -- ways, work I to we've I has different ways board, think, together look new being forced new the terms got in a I team think, good. this, in of COVID to us different think always and it's at which allowed me things us to and in is

put five-year our I've extremely operational company about is there a that And now, time on is plan excellence strategic great position. focus solid. us that the what been has learned So in has this over

I it know pretty would what change to about opportunities we COVID but really learned that's answer. of think so, everything, And generic completely testament And year. than I course have anything that's now. the I this in thought right have during hasn't. probably the I a more place

plan. plan. We followed We have the a

process. very risk management a solid We have

god, go. here's and it's you like, So like, let's that oh, going we to execute okay, It's not are plan, simple. really been my what it do? the And it's

So I'm but away from the taking -- a I guess, I'm that's truth. diverting credit a little me, bit of

Ken Zener

do would Look, plate. you appreciate a Right. think Day right. something that. your done All to think the just as at guys I add some to since questions. should been more well, you have I to about I Analyst I that. No, it's do just while I that's reacquaint, guys That's understood. hosting have suggest, think Well,

questions. specific Some

greatest that from margin EBIT margin the And gross Your went margins was Fenestration that up Isn't of? should was EBIT your in a margin, margin a lift something thing improvement that substantially. it that that there in gross expansion Is perspective. we the the contribution is Europe saw lower pronounced, drove we aware growth and and input high be really European lot Fenestration? same costs like, or of else

George Wilson

last combination high run a extrusion lever of I of operations, they're was and it's capacity. mean, when at The majority efficient up And For can because effectively those. it full volume-driven. you year,

margin You should see expansion.

full where did the very, started very the you lower-than-anticipated which products there the we as we're no since in there. do creep costs, back. time some of early going quarter know, and When not to raw was So, And period material extrusion. was index. has on had you're European both that are the We a see vinyl at in And spaces surprise well. volume, to case

And we inputs margins. going that's exactly are raw the higher what little lower, see when a we're So, saw. to gross bit material

Ken Zener

Is together? what Why on given different Is opposed up? based that, the to right a many scale screens. U.S. Now history? industry supplier that's extrusion, such new crews which as you been a it the construction, now both actually is you're windows, seeing that fact now called close Can upon from switching by right they edge as you that perspective? R&R, for your out spacers, what can't the can't to, having a to is perspective and your talk be Could bottlenecks. category, industry it as participants bottleneck is so

George Wilson

if house out looking XX% truly In around do head get new talking any you're I and for to or country, but I across and it's bottleneck. know it's were you build people project, your months we get with go our labor. I'm we two really and it's that sort think times, standard. to mind, from and work of install our higher to cannot out And right labor. what a lead try it's And XX%, the hearing, a customers mean, my hear in you now labor to that's unemployment hard levels because the purely -- plants.

Ken Zener

describe correct, as you saying as -- George? and in factories Could both the you're well in field,

George Wilson

Yes.

Ken Zener

Warm as your about at time reflect to Spacer, relates Day. think because it do I your lower Now you which publicly, Warm guys to last they Analyst historically, that customers volume talked Edge have a manually. lot Spacer’s, the it Edge

how X,XXX by customers to $X.X higher that larger labor new million labor. machines you down gone of volume the those share close machines has their ship, use the market machines some actually less production, are some talk cut units window that related their manufacturers, for category you get Can in half? to buying there to However, intensity that to to

George Wilson

the only of or slow manufacturers it to the number that is four pace. equipment. across No, five globe. limited There's progress suppliers Yes. steady reason that that continues is the And at of exist really equipment a slow,

in If only manufacturer there's one the U.S. example, you the or two for here really U.S., think in that

get labor strong of equipment suppliers demand COVID equipment. will to are the absolutely exists, in install anyone us. But Europe year, orders So send year. during a you and pipeline major to last really to continue and two people implementations reduce there's a over some can't on when can't they -- of will it That the automation that through that of delayed benefit

equipment out two sold So, next years. guys the for are probably the

equipment bottleneck the the is field. into So, the getting

Ken Zener

just line Is or in it eight to for publicly mean, or three. I two Right. equipment, people the And what? can reduces X,XXX what seven production units from to you that--? shift is down My in state people shift recollection that about per

George Wilson

nine It's XXX. or three people to people. Eight down

Ken Zener

Right. That's eight manual. on or nine Yeah. a

Okay.

George Wilson

Yes.

Ken Zener

it cabinets, talked Is hundred question, potential -- right? guys could doing that's Is stellar talk couple heard second, couple -- kind a or business, The of was of then exactly can Last what out in an are EBITDA, And mean, XXXX about about basis XXX points, while I'm when better. line. clarify the total? that I'm terms you points Could fourth XXX you hundred by target, I in level. a exposure on you getting it's lost But of things for did first, better, margin, is customer obviously manual EBIT. better, you you quarter, the improving. it's Scott, margin. not say. -- basis just you guess, I quantify, or of surprised of you that I that's acquired you accurate in the zero fiscal really it's that? points EBIT certainly a basis A have tailwind. market to

Scott Zuehlke

EBITDA years, couple two the what yes, margin I expansion on points over basis next A of three hundred said. to

customer million. that basis, $XX annualized the exited that $XX was million roughly On an on that to the cabinet business,

Ken Zener

you Thank gentlemen. very much,

George Wilson

Ken. Thanks

Ken Zener

right. All Thanks.

Operator

session. program the question-and-answer conclude I'd George CEO to to any remarks. the back now does for This further you. Thank hand Wilson, like

George Wilson

for opportunity take Yes, you I'd a and providing all call. very I'd next an look all like all joining we like on to you to Be wish our safe. holiday. forward to thank happy you you. Thank update earnings to this

Operator

the participation and for ladies today's This you, does conclude in program. Thank gentlemen, your conference.

Good now disconnect. may You day.

Quanex Building Products (NX) 11 Dec 202020 Q4 Earnings call transcript