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Quanex Building Products Announces First Quarter 2023 Results and Provides Full Year 2023 Guidance

General News
Quanex Building Products Logo- Secondary Manufacturer

Quanex Building Products Corporation (“Quanex” or the “Company”) announced its results for the three months ended January 31, 2023.  

The Company reported the following selected financial results:

 Three Months Ended January 31,
($ in millions, except per share data)20232022
Net Sales$261.9$267.0
Gross Margin$51.8$55.2
Gross Margin %19.8%20.7%
Net Income$1.9$11.2
Diluted EPS$0.06$0.34
Adjusted Net Income$6.1$11.3
Adjusted Diluted EPS$0.18$0.34
Adjusted EBITDA$20.5$24.4
Adjusted EBITDA Margin %7.8%9.1%
Cash Provided by (Used For) Operating Activities$3.1($21.7
Free Cash Flow($4.4)($29.0)
(See Non-GAAP Terminology Definitions and Disclaimers section, Non-GAAP Financial Measure Disclosure table, Selected Segment Data table and reconciliation tables for additional information)

George Wilson, President and Chief Executive Officer, stated, “Our results for the first quarter of 2023 were generally as expected with the only caveat being an elevated level of customer inventory re-balancing initiatives in our fenestration segments. We believe we are seeing a return to what is normal seasonality in our business.   In addition to lower market demand year-over-year, results for the quarter were impacted by higher stock-based compensation expense from the increase in our stock price, one-time transaction and advisory fees, increased interest expense related to rising rates on the debt we incurred to fund the acquisition of LMI Custom Mixing, LLC (“LMI”), and foreign exchange translation. While results in our legacy North American Fenestration segment were impacted by market volume declines and customer inventory rebalancing initiatives, the LMI business performed well and controllable operational performance in the legacy business continues to be strong. Results in our North American Cabinet Components segment were impacted by index related price decreases and soft market demand; however, margins were consistent compared to the same period of last year. Our European Fenestration business performed well despite additional macroeconomic headwinds, including the war in Ukraine and increased energy costs. In fact, after adjusting for the foreign exchange translation impact, we generated revenue growth in Europe and margins held up nicely. As we look ahead, it is important to note that while pricing for raw materials and related surcharges are declining, inflationary pressures still exist in many areas. We are focused on making sure our product pricing takes all factors into account.

“Notwithstanding some near-term macroeconomic challenges, our balance sheet remains strong even after accounting for the debt we borrowed to fund the acquisition of LMI. The integration of LMI is going well, and we have already started realizing synergies. Despite the overall softness compared to the same period of 2022, we were still able to pay down some debt towards the end of the first quarter and our leverage remains low.”

First Quarter 2023 Results Summary   

The Company reported net sales of $261.9 million during the three months ended January 31, 2023, which represents a decrease of 1.9% compared to $267.0 million for the same period of 2022. The decrease was mostly attributable to softer demand, customer inventory rebalancing initiatives and foreign exchange translation impact. Quanex realized net sales growth of 4.3% for the first quarter of 2023 in its North American Fenestration segment, which was driven by the contribution from LMI. Excluding LMI, net sales in the North American Fenestration segment would have declined by approximately 7% year-over-year. The Company reported a decline in net sales of 12.3% in its North American Cabinet Components segment and an increase of 3.9% in net sales in its European Fenestration segment, excluding foreign exchange impact. (See Sales Analysis table for additional information)

The decrease in earnings for the three months ended January 31, 2023 was largely due to lower volumes, one-time transaction and advisory fees, foreign exchange translation, higher interest expense and increased stock-based compensation expense, mostly due to stock price appreciation.

Balance Sheet & Liquidity Update

As of January 31, 2023, the Company had total debt of $155.1 million ($100.0 million excluding real-estate leases that are considered “finance” leases under U.S. GAAP) and Quanex’s leverage ratio of Net Debt to LTM Adjusted EBITDA was 0.8x (0.4x excluding these real-estate leases). As previously disclosed, the Company borrowed $92 million to acquire substantially all the assets of LMI on November 1, 2022. As of January 31, 2023, the Company’s LTM Adjusted EBITDA was $148.6 million and LTM Net Income, the most directly comparable GAAP measure, was $79.0 million.   (See Non-GAAP Terminology Definitions and Disclaimers section, Net Debt Reconciliation table and Last Twelve Months Adjusted EBITDA Reconciliation table for additional information)

Quanex’s liquidity was $263.0 million as of January 31, 2023, consisting of $43.0 million in cash on hand plus availability under its Amended and Restated Senior Secured Revolving Credit Facility due 2027, less letters of credit outstanding.


Mr. Wilson commented, “While the near-term outlook for our business remains somewhat cautious, our long-term view has not changed, and we believe the underlying fundamentals for the residential housing market remain positive. Considering these strong market fundamentals, and our belief that we have returned to a more normalized seasonality pattern, we are cautiously optimistic that demand will improve in the second half of our fiscal year. That said, we are also proactively working to adjust our cost structure to protect margins in the event that second half improvement doesn’t materialize as currently expected. Overall, on a consolidated basis, and assuming fundamentals do not worsen materially, we estimate we will generate net sales of $1.12 billion to $1.16 billion, which we expect will yield approximately $130 million to $142 million in Adjusted EBITDA* in fiscal 2023.

As always, we will stay focused on the things we can control. Our capital allocation priorities are generating cash, paying down debt, evaluating growth opportunities and opportunistically buying back our stock.”

*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 fourth quarter results, click here.

About Quanex

Quanex is a global manufacturer with core capabilities and broad applications across various end markets. The Company currently collaborates and partners with leading OEMs to provide innovative solutions in the window, door, vinyl fencing, solar, refrigeration and cabinetry markets.  Looking ahead, Quanex plans to leverage its material science expertise and process engineering to expand into adjacent markets.


Scott Zuehlke – Senior Vice President, Chief Financial Officer & Treasurer – – (713) 877-5327

Source: Quanex Building Products Corporation