Quanex Building Products Announces First Quarter 2022 Results and Full Year 2022 Guidance

Quanex Building Products Corporation (“Quanex” or the “Company”) today announced its results for the three months ended January 31, 2022.

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

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

First Quarter 2022 Results Summary

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

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

Balance Sheet & Liquidity Update

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

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

Share Repurchases

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

Outlook

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

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

For the full first quarter results, click here.

About Quanex

Quanex Building Products Corporation is an industry-leading manufacturer of components sold to Original Equipment Manufacturers (OEMs) in the building products industry. Quanex designs and produces energy-efficient fenestration products in addition to kitchen and bath cabinet components. For more information contact Scott Zuehlke, Senior Vice President, Chief Financial Officer & Treasurer, at 713-877-5327 or scott.zuehlke@quanex.com.

Contact:

Scott Zuehlke – Senior Vice President, CFO & Treasurer – scott.zuehlke@quanex.com – (713) 877-5327

Source: Quanex Building Products Corporation