NX - Earnings call transcript Q3 2024 | Quanex Building Products Corporation

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Operator

Good day, and thank you for standing by, and welcome to the Q3 2024 Quanex Building Products Corporation Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Scott Zuehlke, Senior Vice President, CFO and Treasurer. Please go ahead.

Scott Zuehlke

Thanks for joining the call this morning.

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

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

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

George Wilson

good I'll to call. served our morning overview of markets, the joining the be on performance, perspective an macroeconomic and the of Today, quarterly everyone environment. and Thanks, state our providing Scott, our

recent last return to the the we third for quarter I'll quarter, with acquisition reinforcing challenging forward. Overall, year prior Despite more those and demand decreased X.X% in more on moving EBITDA revenue of year, by period our comments our adjusted XX.X%. about a performance environment, and Scott a across traditional compared seasonality but our expectations the including pattern Tyman, will analysis, a as all consensus we a are fell orders. detailed for of a provide consolidated by same basis, to of third metrics. Additionally, this quarter expectations discuss exceeded exceeded the integration second satisfied volumes operational our plans

uncertainty. cadence served the previous align across confidence with geographic markets comments regions, somewhat to third these quarter. than softer on expectations our results macro-related our due Although and low prior and remains consumer all In year, our for the the

projects the a Fed season these beneficial calendar cut having to low interest stability generate financial our in growth operational our year. Even XXXX Quanex These U.K. future orders spacer improvement the sealants rather While business. from for the vinyl an soft build of and introduction product this extrusion expected continued are expansion opportunities. the capacity impact include to free investments we invest improvements. of cuts to these into mixing before significant more beyond. organic the and bear operational enabled for year, move initiatives end All remains on and solid funding in of This fruit as several specialty in than expect resulting flow rates business products the to the of confidence, us has likely to the for we has are be lines, XXXX current consumer our cash new relatively with team focused

strengths on vote organizations. an leverages vote both overwhelmingly Shareholder the with the and approval that our acquisition on for from was of XX% for this closure XX% both on to X. look of deal recent an forward the Moving We to transformational update were announce of and Tyman. the successful a to sides from shareholders for creating new shareholders. pleased the on company Tyman We Quanex transaction positive August improved

companies, engaging rationale that will acquisition. closely work future. establish This and scalable team. structure that integration continuing a from and strong to includes our are organizational was cross-functional management this office hit us successfully and consultants, Once new We set support quickly with we financial a up legacy integration working leaders deal by to ground underscores Tyman into we strategic full-time while finalized, the running the the solid behind also legacy drive both the the with is

achieving not that reinforces our to to identify progress confidence capture previously our X to made additional achievable our within are date forward, We towards integration we may updates teams management The synergies publicly on of identified Our our years. plan quarterly achieving working and in we have XXXX, in to and million moving synergies provide both organizational understood. stated in unveil collaboratively, goal progress early to plan cost structure these calendar new $XX synergies synergies.

excited system capabilities improvements. create innovative this and except value teams opportunities will and breadth are the for add the our that for leverage and window development cost new everything about the new door product we reduce our in glass, manufacturing customers. our solutions Additionally, challenge development expanded to market, product we and With to engineering

pleased enhanced with has product positioned navigate believe and are company In The and established summary, depth. Tyman macroeconomic we've any dynamics. the to is foundation of our condition the the scale well we market acquisition operational regardless

team engaged combined of will and is create company leverage either both legacy we than that greater to confident I'm actively companies alone. strengths process, Our in something integration standing the the

are about ability confident and to growth, while above-market We shareholders. optimistic for future in value achieve creating the our our

to call discuss more who I'll results over Scott, will detail. now turn the our financial in

Scott Zuehlke

represents $XXX.X which was Thanks, XXXX, decrease X.X% reported third we the to market quarter attributable million of George. of decrease during On during softer third to The across compared $XXX.X demand segments. consolidated XXXX. million of operating mostly a net of a sales the basis, quarter all

in operating year. American XX, the X ended for in million for adjusting an market of to for softer costs related year. On to The After quarter $X.XX diluted million million mostly per decreased quarter million for combined higher diluted $XX.X months because with $XX.X for basis, per the per North ended decreased net same $X.XX compared share diluted share for the share decrease $XX.X income XXXX, XX, onetime material $XX.X to or the compared XXXX, last same of period $XX.X of decreased or to to adjusted diluted for months ended the the demand, leverage earnings period XXXX. July of million to $X.XX million or due to lower compared both $X.XX our July was decreased EBITDA the Net adjusted X income July to items, months volumes per XX, segments. $XX last during or X share

compared of due the segment. American sales North XXXX, million net of a in to $XXX.X X% to volumes operating segment quarter year-over-year, quarter approximately to slight in for primarily $XXX.X of the EBITDA generated third of Now represents of decreased this a our in which million same segment increase million XXXX. $XX.X in by volume. We X.X% segment compared offset by XXXX, in for this lower Adjusted Fenestration the third for $XX.X decrease period results We decreased estimate pricing. the by to million

segment of revenue estimate the in of European foreign Our approximately exchange approximately by after adjusting which a segment quarter, compared quarter volumes generated decrease declined XX% million the third third represents $XX.X to XXXX for the million We that impact. X.X% of approximately of negative Fenestration million came a $XX.X exchange the this compared in to with pricing third EBITDA at year-over-year $XX.X about foreign Components generated of in an volumes of Adjusted by $X.X EBITDA by lower down third declined million in quarter, and than the quarter in in American for $X.X our to X% approximately lower X%. year-over-year, decreased and in third in that was volumes by impact segment driven quarter hardwoods. We translation the during This this for Cabinet segment net sales was was offset of million which index million the X.X% segment pricing lower for and by North quarter estimate $XX.X compared We this XXXX. the prior increase X% XXXX. Adjusted year. decrease quarter pricing. in slightly

to provided demand, sheet. the of the $XX.X to XXXX for by quarter, mainly million Moving tax net flow driven for on transaction softer XXXX. third by quarter Tyman of of the the a activities Cash operating in million expense. $X because $XX.X to quarter flow fees and lower decreased cash compared and related higher higher advisory million income acquisition was that balance included cash the SG&A income and third for Free

free. of last X.Xx debt said July we EBITDA was were XX way, Our XX, net net XXXX, ratio to leverage adjusted another as of or months negative debt

Tyman August this was X. course, prior acquisition the to on on closing Of

As business updated that no referenced legacy our the simply and means release, from for guidance the valid. in still in is quarter. prior longer Tyman for guidance the the Note prior comfortable is business, with acquisition we Quanex Tyman legacy our feel that completion fourth of guidance the fiscal contribution earnings the for XXXX our layering our

support for legacy now approximately XX. Performing billion, segment. following related $X.XXX as fiscal performing guidance and errors. accounts fraud accurate and $XXX XXXX. financial million count meet cost to manufacturing to verify of impact Tyman in accounts enhance and of the compliance. $X year-end match in noting prior ensuring actual regulatory to fourth should Please full the basis, physical annually which financial operational on for we inventory result incorporates at and to our EBITDA plants stock revised XXXX note inventory an that records $XXX to quarter that acquisitions a physical of reporting, the also inventory thereafter, vital integrity On expected efficiency million levels, against These results $X.XXX regulatory of a and plan we operating records sales all legacy is net fiscal separate report October that to consolidated adjusted safeguard requirements, It's billion worth Tyman million estimate a this accuracy

which As George implemented XXXX, new calendar said, Investor reporting in at unveil in will a and we early establishing fiscal XXXX. we're in operating which an be to the and Day hope segment process structure, of

XX and million of flat for QX. for the expense up on compared incorporates the In million the the this use business expect guidance the initial Tyman quarter which XXXX, adjusting Quanex after $XX perspective, the legacy of the for up mentioned segment, the this the compared basis, this expected fourth fourth Quanex year, be consolidated addition, costs. and legacy By quarter. to includes business in approximately following the business of for the approximately XX North the up advisory business for physical for $XX previously Tyman Cabinet down onetime points in the Tyman in and X% up quarter. to $XX SG&A revenue cadence to legacy million million down flat segment we third to to modeling flat Depreciation a year. On a for XX%. From third segment. We're million million to year quarter $XXX EBITDA transaction basis our revenue is fourth the of $XX amortization of Components year, third Fenestration X% to be quarter this legacy revenue to of again of flat million, be Adjusted rate to for expect to for business. counts, points year be the is XX% and Tyman of XXXX, adjusted basis this quarter related expected please quarter of business to the margin purposes, approximately of XX and costs legacy which tax consolidated fourth North a compared we year quarter inventory forecasting for the to full legacy European fourth third for and to versus American including margin segment our the $XXX $XXX in to to to basis, $XXX EBITDA quarter a American million X% Interest our of Fenestration

now will we take Operator, your questions.

Operator

TRG. first from our Ramsey comes question Steven And Instructions] [Operator from

Steven Ramsey

the by being more down wanted building why guys Maybe that think your fiscal for you are products, by product different adjust legacy your And for or about wanted you keeping in outlook? in you or many of outlook. to I maybe their anything calendar lower up within or about Can year talk and coverage hold and I reduced full demand looking context companies to to 'XX outlook? market did start were unchanged. with legacy results broadly, outlook markets or able who the outlook end company then product your this you our in

George Wilson

Steven. question, Great Yes.

for early approach of really built past in the what year our in always a think year. in terms of the lot our somewhat the I from and we've full we've had X I in projections our been Fed guidance, movement In think not conservative quarters, given

think I have more conservative thus we probably and a So basis. our little some to on were a didn't go-forward of change peers than outlook our

business roll a some the and or operating to picking offset addition some softness. And the and of done different going up of products have new our teams good some spot of that of starting helps get out onetime to things some in teams some think out. introduction trying that job sales I are

the it's us early year teams So of fairly out combination going but hard full just to in and again, stay business sales enabled with pushing think the flat. relatively spot combined has conservative get our things, I a outlook the in year being to

Steven Ramsey

And maybe Okay. get come you've more maybe where That's into to build winning this you or put years helpful. has from? that And point that share can detail this to on year. And superior you've to the the the gotten at on maybe prior more then winning a gains in in won, you in go business. calendar business and even in comparable context then business prior in years put potential maybe it

George Wilson

Yes.

especially terms -- of I supply with hasn't an think of the shifts the in or chain markets X year, some coming X.X, been challenging of themselves, pretty enormous market competitors there our out share in through amount market.

think we've had over And in fenestration really gain probably the European filed some market because I business. share competitors for So that's administration. seen most of our

a our So there's fewer market our on wins been continued of business share, all And but market get volume. I have the as products. to exist for We've some that's still that point selling some that performance as picked spacer think competitors. up for people to new nice in thermal us utilize

thermal continues efficiency windows around and the of thermal world, performance grow. As to the

find continue the to stable. wins outside of build we opportunities there. But have off sustainability had been of have kind nice that that, really think to some and globally I of platform markets

trenched we business but and think up to pick up our it's what business with when short usually I'll we spot pretty we've the there, are in, cabinet I we business of customers. see able for some been types that example, smaller see. wins do some use, term. pick Those And is it's

side a nice of on of long wins that shift business, So some lot but not spot contractual in wins. our

Steven Ramsey

one That's more for And Okay. helpful. me. then

engineered products as positive market? that the positive carry you products is the maybe product about was mix over together to the where overlap and is greater mix the on than overlap and pricing. was products the better of next X see and companies put you Tyman's the of highly there evolving any Tyman's of highly engineered of talk Can another One better go yours you companies where strategically year that limited between deal Tyman if aspects feature

George Wilson

question. another Yes, great

this and and little again, XX month we've conflict exactly days, in but that. we're products overlap we is days, what very seen one this, first diligence think, we what anticipated little through in I into what our due the XX channel do. There's in

opportunities, but us, basket customers. for of I as about effectively, full script, type mentioned being doing more So sell become able the one, pretty goods glass. excited of of my the We're in our to approach to a everything distributor you all a to

effectively time. to into see multiple find more new focus product to for the I that create types to create a something engineered new projects and doing glass development, different. you'll And it's but everything, on But ways potential to too early trying that. stronger even tell components and think excited to tell systems us migrate take exactly systems of of development, integrate doing extremely you, those will opportunity the I But we're development about

Operator

comes Julio next Company. from question Romero our Sidoti from And &

Julio Romero

the from little just a Wanted the maybe cetera, to Can et of stay on suppliers, how you for Tyman given has talk reception been bit. about post-close? first customers, integration employees, month

George Wilson

plants, meet end. to trying work do, especially Yes. visit when quarter the to very as you're out A lot to of in at many been get busy We've people.

been the a have So level see people of But the been balance. pleased in extremely it's excitement. of the with we that talent organization, we

that safety, similar -- of and are we to on our how the fairly the anxiousness are very identified most One on develop things people. important to early, we extremely our focus focus the that serve cultures customers. The things willingness importantly, us,

similar. extremely are things those of All

excited. very we're So

to the I in of management build we sides my think both of that once obviously sharing that integration the together, deal have pre-acquisition has data script table. closed, mentioned from an the folks and level of office starting I

see. and XX that working opportunities great And sort it's been though create. they're to to see and as excited energy years what And I'm are been of going to they've for these folks colleagues

engineered very very, time little supportive. well. think would what of be has solutions. Tyman create very of perceived it's And Quanex manufacturing-based have the many those strong types to strengths weaknesses when to going been something eyes, on our company, I team very strengths of build overlay are about I very, in a them commercial-driven spent think I been customers a mean very was I you and those I minimize what we think X, We learning think it's overlay each. and special. more talking job of to and our weakness. And probably I their think the the the companies And and

Julio Romero

secondly, time? over that color reduce Scott, to count there. inventory And Absolutely. then, do do of have And also maybe how impact tracking that. Really many to helpful days? so, maybe inventory any Do some talked and you days implement cost expect if some impact then physical physical about a you and operations the that? related counts ERP, to new you lose data And you

Scott Zuehlke

Yes, get time a expecting mean, around. efficient feel much on very be that side, will to absolutely. also a downtime guidance I of is some was the to more impact. reflected this that October revenue something will going something We're affect have we be There XX in we it which to by little weren't done financial is side. get the I necessary. the There will they that quantified second that is cost gave. the

We're a it's It's something on to with process is to forward, Quanex, them efficient we're this but at process. make their going sure So partners used to here learning that a legacy going work more we're now. end.

George Wilson

and streamline. questionnaire, everything the your exist I ERPs And and from what how new the obviously match structure, the with reporting they do an we an at can to look think organizations we'll do reporting ERP that we new once finalize up within perspective, in-depth structures, legacy we'll

for customer. That's to I go-forward not that things optimize to and sure that, basis. always we'll one costs, terms trying been while think Quanex team, our in take margin, continues of focus on a a of the exist make the impacting that's out

Julio Romero

Tyman count legacy Is would you how does to that? How describe it or meaningfully for compared it. Quanex? the Got different SKU

George Wilson

I type Quanex would stock. business I is be different say has model. the more would is business. legacy on typically more SKUs of to to that made make there It to order, tends a say Tyman Tyman been

window have inventory. levels typically engineered specific higher systems. of they into So They're

aftermarket OE customer, similar you when product like system that to engineers of in life, the kind the automotive. window have into in When make it's example, your for window if manufacturing very product car an So the expires, a goes an have out regard. of build a still that even a system, to their organization with through ability for

SKUs, to kind inventory. as more a of more as do but We'll little that the different and make drive can the little little versus work a business stock, a much model. of a we So make order

Operator

next question comes Reuben our Benchmark. from Garner from And

Reuben Garner

a about deal and follow-up Julio's Tyman So on just the conversations. question customer

risks, I think other kind initial exposed to overly with synergies feedback potential the deal. would was that something was helpful. announcement kind there any customers of revenue opportunities customers thoughts what or Are that any front. get of supplier? I be around one dis-synergy the to want don't just curious there your mentioned maybe of cross-selling from on Any

George Wilson

people in development preannouncement, whole new any revenue of also initial projections they're process that We opportunities. and see breadth It's portfolio. Again, and there, upside. baked want the obviously any to of think don't to into goods, remind only revenue of of early but I our the identify in dis-synergy. a future by the selling too the I never have I'm not we sort utilizing our basket systems,

good feel that. So about we

the of our it from good supplier, everyone be I think by look I risk protection about product size the to feel will position. isn't customers the product profile. And on line necessarily sort that line of very will very, any evaluate based

has become wherewithal. Quanex smaller comes I actually protects large and the scale, pretty in I base of more a that from scale from mean, customer think become financial our think type the we of financial OE terms risk. that customers -- I supplier has that security with actually our

they product supply So risk chain one to and it's is supply chain sure lines that a able side make our have job that a understand don't they to it. terms of of in support of we that have every our that

on discussions excited. these feel a continue with where good at build to basis. have and I really at, the we'll and I'm So relationships pretty go-forward our we're customer

combination a work hear our us is engineered basis. to I to a can where do and win-win customers be our think these we be. will that's as of a I learn focus but And the you -- with and be develop that for customers going go-forward each able it lot, one solutions to think on this

Reuben Garner

in focus hear Any Got to signs just really it. it's years you're on but we've down And of then kind all? gears. front been you at cabinet few -- since Any that -- switching of standpoint, has remind cabinet's the kind had that how can a it's a a whether side. picked trade from seeing what then affordability, And ton wanted impacts both in spacers the of or you windows on just up us the business? and

George Wilson

the affordability of the I our of cabinet it on business think really think side our the impacts I side window than front, more business.

your If a you're going thing still window, to the to where the reduce trying failed globe cost. not because the energy are cost that energy to getting either is it's or mean to are we you one or point need I across seeing replace it's cheaper. get you're it's broken

get window So a more there's becoming thermally to opportunity performant. payback by and upselling an your

done end And little borrowing our redo to consumer of some kind purchase happy the a more team of day, piece be business, the and with discretionary to operationally. has require very what our spend. they at a that still cabinets. may of cabinet is tend confidence But higher-level a as The lags we're it of

to windows. So it's right be opinion we're that seeing now. in than think going the our impacted I more, And

Reuben Garner

guide on for I in early growth that just turned going maybe starting early year-over-year a resume one a picture, know some your fourth more out? in. I'm Great. the quarter for it's can of improvement outlook, little too it maybe 'XX to to an expect kind of Is and corner flatten we've initial basis, big 'XX? kind revenue a implies to but sneak

Scott Zuehlke

it I people to are of for is year. there next thing. us sort Yes. look I get too that return And sure in mean of growth But lot like same is I'm at thinking will to next the is year. we early to good -- there say any early feel a question. prospect

I half the an we there's than half just of we're half optimistic near-term think But about is next because yes, more are I opportunity growth. that the for second in year think of more second -- the first uncertainty.

George Wilson

And the I those, and timing cut out. of jobs saw lead that starting that probably Fed we think the spectacular, more the there's nothing It's today will rates. to points came report

think here to over better So impact that that give the days, the XX next of on XX confidence, is. I be into when cut a the and a us there's and year. of kind has to strong we the Tough could consumer But see beginning large noise and year the we're opportunity that, how to of be rates will for model. We feel pretty going December still think year XXXX to decent how calendar election. it the between believe a an there's interest of potentially

Operator

from Thalhimer Adam Davis. from comes question next Thompson, our And

Adam Thalhimer

Tyman, pretty closing Tyman of on and the full that's us And quarter early. given cool. Congrats a quarter

Scott Zuehlke

Yes, it perfectly. we plan

Adam Thalhimer

Nice any and clean. in last EU? Kind wondering you are seeing was I question. of the in with green Reuben's shoots guys if line

George Wilson

seen started I the positive U.K. of bounce in in we've what yet -- has Continental and more Europe. think much back a been little as a a little little not to consumer than Europe. U.K. show in a more confidence has

longer the has has. than that more a little U.S. Bank I lagged think been of their ahead, a economy little the England but has

that U.K. bit. suffered think a market little I has the So

for that see in there Continental we Europe probably optimism -- some in So more short-term us the there's U.K. do a on is basis. think I than

Adam Thalhimer

Got it.

after Scott, was Okay. the debt the close? what net

Scott Zuehlke

it's thought pretty in Yes, haven't be. haven't we we since it's disclosed with during but it's what would line we -- fourth -- much that our not it quarter,

Adam Thalhimer

I'm if that bit then the up doing And right? XX%. correctly, this little a rate jumps tax call Okay. it, QX to, Is

Scott Zuehlke

yes. Roughly,

in So for higher so a whole year, the yes, QX. XX% little

Adam Thalhimer

like And is good tax rate to going as you that a forward?

Scott Zuehlke

patent which legacy more clarity bit uptick as there the We'll related box, that rate reason next for the little to we is did mainly is year. for Quanex, not Pretty U.K. as a which a close. we look give enjoy. into enjoy But the legacy Tyman lower

trying work to we're there a to So do help little us.

Adam Thalhimer

you what gave then count that guidance, using are not EPS share And but... QX, it. you Got for

Scott Zuehlke

roughly it's Yes, $XX million.

Adam Thalhimer

And sense company on you Okay. have then combined go-forward do for for the thoughts CapEx or any QX?

George Wilson

too go think that. run little will We're it We've in I in the a companies, of back that it for of will -- consistent. standard you probably the both the to and have place. of be rates come if look early Probably we current evaluating projects and pretty don't process were at in all

that any I any have So plant out types think of don't as plans line be anything -- and don't of we will significantly up projects like for chew there would CapEx. consolidation of that

terms So will it be a in pretty I think standard spending. year of

Scott Zuehlke

of plant our customers. we we're outside Georgia, follow I in X think bigger help mentioned past new the in that the of some Yes, the project a is expanding in Southeast. Jackson, opening We're

little So bit year. a CapEx take will of next that

George Wilson

already And ] Yes. building [ doors. was that

Operator

no questions. now for showing would call the I'm closing back remarks. I further And Wilson turn over to to George like

George Wilson

before of the thank opportunity our Tyman forward for transaction to new team all excited thank to all hard everyone this updating really us entire to as take who Thank to their and joined look would want progress. like again work move of our the again of have We're all and Quanex future with you as the And part you. I the about But integration. I on the during now for we forward today. we for do to welcome joining teammates transaction. go, together

Operator

for Thank call. participating. conference today's concludes This you

now may disconnect. You

Quanex Building Products (NX) 6 Sep 242024 Q3 Earnings call transcript