Quanex Building Products Announces Third Quarter 2022 Results and Reaffirms Full Year 2022 Guidance
Quanex Building Products Corporation (“Quanex” or the “Company”) today announced its results for the three months ended July 31, 2022.
The Company reported the following selected financial results:
|Three Months Ended July 31,||Nine Months Ended July, 31|
|($ in millions, except per share data)||2022||2021||2022||2021|
|Gross Margin %||22.4%||21.4%||22.0%||22.5%|
|Adjusted Net Income||$26.2||$14.2||$64.0||$37.8|
|Adjusted Diluted EPS||$0.79||$0.42||$1.92||$1.13|
|Adjusted EBITDA Margin %||13.6%||11.8%||12.5%||11.5%|
|Cash Provided by Operating Activities||$51.7||$18.5||$49.9||$47.4|
|Free Cash Flow||$46.0||$12.3||$30.4||$31.4|
(See Non-GAAP Terminology Definitions and Disclaimers section, Non-GAAP Financial Measure Disclosure table, Selected Segment Data table and Free Cash Flow Reconciliation table for additional information)
George Wilson, President and Chief Executive Officer, stated, “We are proud of the results we posted for the third quarter, especially considering the ongoing inflationary challenges and macro-related uncertainties. Demand for our products held up nicely for most of the third quarter and results reflected the benefit from our pass-through pricing strategy; however, we did start to experience some softness in demand in Europe towards the end of July.
“Free Cash Flow increased significantly during the third quarter of this year compared to the same period last year. The improvement in Free Cash Flow was driven by a meaningful increase in net income. We were able to repay $25 million of bank debt and repurchase $5 million of our common stock during the quarter. Overall, our balance sheet and liquidity remain strong. We will continue to focus on generating cash, maintaining a healthy balance sheet, opportunistically repurchasing our stock and evaluating growth opportunities.” (See Non-GAAP Terminology Definitions and Disclaimers section and the reconciliation of Free Cash Flow to cash provided by operating activities for additional information)
Third Quarter 2022 Results Summary
Quanex reported net sales of $324.0 million during the three months ended July 31, 2022, which represents growth of 15.8% compared to $279.9 million for the same period of 2021. The increase was mostly attributable to higher prices related to the pass through of raw material cost inflation. More specifically, the Company realized net sales growth of 25.0% in its North American Fenestration segment, 17.0% in its North American Cabinet Components segment and 8.7% 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 July 31, 2022 was largely due to increased pricing and surcharges related to the pass through of raw material cost inflation and higher volumes in the North American Fenestration segment.
Balance Sheet & Liquidity Update
As of July 31, 2022, Quanex had total debt of $38.0 million and its leverage ratio of Net Debt to LTM Adjusted EBITDA improved to 0.1x. (See Non-GAAP Terminology Definitions and Disclaimers section for additional information)
The Company’s liquidity increased to $332.0 million as of July 31, 2022, consisting of $50.0 million in cash on hand plus availability under its new Amended and Restated Senior Secured Revolving Credit Facility due 2027, less letters of credit outstanding.
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 repurchased 216,000 shares of common stock for approximately $5.0 million at an average price of $23.29 per share during the three months ended July 31, 2022. As of July 31, 2022, approximately $68.4 million remained under the existing share repurchase authorization.
Mr. Wilson commented, “We are reaffirming guidance for fiscal 2022, which is based on our strong results year-to-date coupled with ongoing conversations with our customers. Overall, demand for our products is still relatively healthy, but in addition to the softness in Europe we are starting to see signs of softness in North America, mainly in our cabinet components business. For the fourth quarter of this year, we now expect ~15% revenue growth in our North American Fenestration segment and low-single digit revenue growth in our North American Cabinet Components segment. Due to continued softness in Europe and the foreign exchange impact, we expect revenue to decline by ~15% in our European Fenestration segment in the fourth quarter. As a reminder, on a consolidated basis, we guided to net sales of $1.18 billion to $1.2 billion, which we expect will generate approximately $150 million to $155 million in Adjusted EBITDA* in fiscal 2022.
Longer-term, the underlying fundamentals remain positive for the residential housing industry in North America and in the markets we serve in Europe. Our balance sheet is strong and we are well-positioned to weather any storm, and we are also prepared to execute on our plan and create further value for shareholders over time.”
*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.
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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 email@example.com.
Source: Quanex Building Products Corporation