Quanex Building Products Corporation · NYSE:NX

Quanex Building Products — Investor Presentation (September 2022)

36 slides from Quanex Building Products's investor presentation, September 2022

  1. Slide 1: Investor Presentation September 2022

    I N V E S TO R P R E S E N TAT I O N SEPTEMBER 2022 © 2022 Quanex | Q U A N E X . C O M © 2022 Quanex | Q U A N E X . C O M

  2. Slide 2: Safe Harbor Statement

    S A F E H A R B O R S TAT E M E N T Forward Looking Statements: Statements that use the words “estimated,” “expect,” “could,” “should,” “believe,” “will,” “might,” or similar words reflecting future expectations or beliefs are forward- looking statements. The forward-looking statements include, but

  3. Slide 3: Investment Appeals

    INVESTMENT APPEALS A G R O W I N G M A N U FA C T U R I N G B U S I N E S S W I T H C O R E C A PA B I L I T I E S & B R O A D A P P L I C AT I O N S 1 A Global market leader aligned with top OEMs across all product categories 2 Profitable above-market growth, strong free cash flow generation & sign

  4. Slide 4: Quanex at a Glance

    Q UA N E X AT A G L A N C E C O M PA N Y O V E R V I E W 2021A REVENUE BREAKDOWN • Largest domestic manufacturer and supplier of components to window and cabinet OEMs – 85-year legacy of market leadership and consistent growth Repair & Remodel 35% • Diversified business operating through three segme

  5. Slide 5: Robust Portfolio of Current Product Offerings

    ROBUST PORTFOLIO OF CURRENT PRODUCT OFFERINGS T O P S U P P L I E R T O O E M S A C R O S S A B R O A D R A N G E O F P R O D U C T C AT E G O R I E S 1 1 Insulating Glass Spacers 2 Window & Patio Screens 3 Door Components Door & Other Components 6 Enhance durability, Largest selection of condensati

  6. Slide 6: Leading Component Supplier to OEMs

    L E A D I N G C O M P O N E N T S U P P L I E R TO O E M s U.K. VINYL SCREENS AND U.S. VINYL CABINET I G S PA C E R S PROFILES ACCESSORIES PROFILES COMPONENTS Market A global market leader Top 5 manufacturer in U.K. A market leader in U.S. Top 5 manufacturer in U.S. A market leader in U.S. Position

  7. Slide 7: Differentiated Manufacturing Footprint

    D I F F E R E N T I AT E D M A N U FA C T U R I N G F O O T P R I N T 1 2 3 4 5 Ideally positioned to Extensive coast to coast Domestic footprint supports Efficient design allowing for Differentiated just-in-time, text manufacturing capacity local customer base handle international supply flexible m

  8. Slide 8: Core Manufacturing Capabilities with Broad Applications

    CORE MANUFAC TURING CAPABILITIES WITH BROAD APPLICATIONS D I F F E R E N T I AT E D , G L O B A L M A N U FA C T U R I N G F O O T P R I N T – P O S I T I O N E D T O E X PA N D O F F E R I N G S The continuous process in which rubber and other additive compounds are softened through a heated screw

  9. Slide 9: Poised to Benefit from Secular Tailwinds

    P O I S E D TO B E N E F I T F R O M S E C U L A R TA I LW I N D S Residential demand remains strong, sustaining start levels for years to come 1 • Demand is expected to remain elevated as long-term trends, including shifting demographics and de- urbanization, are coupled with a structural housing u

  10. Slide 10: Positive Construct Market Tailwinds

    P O S I T I V E C O N S T R U C T I O N M A R K E T TA I LW I N D S H E A LT H Y L E V E L S O F R E S I D E N T I A L A C T I V I T Y E L E VAT E D R E PA I R & R E M O D E L S P E N D I N G (millions of housing starts) (% growth in 4-quarter moving total spending) Single-Family Multi-Family 2.00 1

  11. Slide 11: Shifting Demand Trends Benefiting Quanex

    S H I F T I N G D E M A N D T R E N D S B E N E F I T I N G Q UA N E X A C C E L E R AT I N G O U T S O U R C I N G T R E N D S E L E VAT E D F R E I G H T R AT E S F R O M C H I N A (Shipping to U.S. West Coast, Indexed to January 2019) 400 Current Market Conditions Impact on Outsourcing Trends 350

  12. Slide 12: Accelerating ESG Trends Aligned with Quanex Identity

    A C C E L E R AT I N G E S G T R E N D S A L I G N E D W I T H Q U A N E X I D E N T I T Y ESG WOVEN INTO C O R P O R AT E C U LT U R E Continuous focus on driving improvement across the organization to create value for all key constituents including : Initiatives in process in each business segment

  13. Slide 13: Growth with Purpose

    GROWTH WITH PURPOSE © 2022 Quanex | Q U A N E X . C O M © 2022 Quanex | Q U A N E X . C O M

  14. Slide 14: Journey to Becoming BIGGER

    J O U R N E Y TO B E C O M I N G : B Bold acquisition I Innovative product G Growth-focused G Globally-oriented E ESG-driven to R Responsive to ideas strategy targeting development driving strategy incorporating approach that leverages maximize positive and opportunities existing and new lines consi

  15. Slide 15: Pathway to $2 Billion of Sales

    GROWTH WITH PURPOSE PAT H WAY T O $ 2 B I L L I O N O F S A L E S ($ in millions) $2,000 3 2 $1,072 1 1 2 3 4 5 Near-Term Long-Term Inorganic Long-Term FY 2021 Organic Growth Organic Growth M&A Activity Target • Price and volume growth • Continued volume and growth • Expanding target market to forec

  16. Slide 16: Investing in the Core / Expanding the Core

    INVESTING IN THE CORE: REINFORCING SECTOR LEADERSHIP ▲Growth in existing markets and reinforcing leadership positions enabling improved relative positioning with material suppliers driving continued volume growth and share gains – Significant increase in scale will create a more effective platform f

  17. Slide 17: Strategy for Inorganic Growth in Target Markets

    STRATEGY FOR INORGANIC GROWTH IN TARGET MARKETS 1 Attractive Category With New Opportunities for Growth WHO WE WANT TO BE: 2 Broader Channel Diversification Beyond OEM 3 Value Added Positioning with Secular Growth Drivers On The House 4 Established Track Record of Execution and Financial Performance

  18. Slide 18: In the House

    W H O W E WA N T TO B E : IN THE HOUSE Hardware Current Exposure Cabinetry Expansion Opportunity Millwork Soundproofing Building Envelope Fire Protection HVAC LVT Flooring 18 © 2022 Quanex | Q U A N E X . C O M

  19. Slide 19: On the House

    W H O W E WA N T TO B E : ON THE HOUSE Solar PV Current Exposure Vinyl Profiles Expansion Opportunity Screens Roofing IG Spacers Hardware Weather Proofing Aluminum Windows & Doors 19 © 2022 Quanex | Q U A N E X . C O M

  20. Slide 20: Outside the House

    W H O W E WA N T TO B E : OUTSIDE THE HOUSE Garden Offices Fencing Decking Patio Furniture Stonework Artificial Turf Current Exposure Expansion Opportunity 20 © 2022 Quanex | Q U A N E X . C O M

  21. Slide 21: Financial Results

    FINANCIAL RESULTS © 2022 Quanex | Q U A N E X . C O M © 2022 Quanex | Q U A N E X . C O M

  22. Slide 22: Strong Financial Results with Clear Operating Objectives

    S T R O N G F I N A N C I A L R E S U LT S W I T H C L E A R O P E R AT I N G O B J E C T I V E S REVENUE ADJ. EBITDA ($ in millions) ($ in millions) $1,206 $151 $1,072 $127 $894 $852 $103 $105 FY 2019 FY 2020 FY 2021 LTM Q3 2022 FY 2019 FY 2020 FY 2021 LTM Q3 2022 % YoY Growth % Margin 0.4% (4.7%)

  23. Slide 23: Favorable Leverage Profile and Free Cash Flow Generation

    FAVO R A B L E L E V E R AG E P RO F I L E A N D F R E E C A S H F LOW G E N E R AT I O N N E T L E V E R A G E (1) • Significant reduction in net leverage since FY 2019 1.2x  Reduced leverage by ~1.0x • Cumulative Free Cash Flow of ~$355M since FY 2017  Free Cash Flow weighted to second half of e

  24. Slide 24: Strong Execution Driving Substantial Improvement in Returns

    S T R O N G E X E C U T I O N D R I V I N G S U B S TA N T I A L I M P R O V E M E N T I N R E T U R N S R E T U R N O N I N V E S T E D C A P I TA L ( R O I C ) (1) 17.8% 14.1% 9.4% 7.4% FY 2019 FY 2020 FY 2021 LTM Q3 2022 R E T U R N O N E Q U I T Y ( R O E ) (2) 17.5% 15.0% 11.9% 8.7% FY 2019 FY

  25. Slide 25: Poised to Deliver Another Year of Record Performance

    P O I S E D TO D E L I V E R A N O T H E R Y E A R O F R E C O R D P E R F O R M A N C E FY22 GUIDANCE ~$1.18 – $1.20B ~$150 – $155M ~$65 – $70M Net Sales Adjusted EBITDA Free Cash Flow ➢ ~11% top-line growth expected in FY 2022 over ➢ ~21% Adjusted EBITDA growth over FY 2021 ➢ Free Cash Flow in fir

  26. Slide 26: Capital Allocation Priorities

    C A P I TA L A L L O C AT I O N P R I O R I T I E S F O C U S E D O N I N C R E A S I N G T O TA L S H A R E H O L D E R R E T U R N ORGANIC STRATEGIC STOCK DEBT DIVIDENDS GROWTH M&A BUYBACKS REPAYMENT Evaluating ~$67M Focused ~$230M Debt Targeted & Repurchased Since ~$52M Paid Out Investment of Rep

  27. Slide 27: Investment Appeals

    INVESTMENT APPEALS A G R O W I N G M A N U FA C T U R I N G B U S I N E S S W I T H C O R E C A PA B I L I T I E S & B R O A D A P P L I C AT I O N S 1 A Global market leader aligned with top OEMs across all product categories 2 Profitable above-market growth, strong free cash flow generation & sign

  28. Slide 28: Appendix

    APPENDIX © 2022 Quanex | Q U A N E X . C O M © 2022 Quanex | Q U A N E X . C O M

  29. Slide 29: GAAP/Non-GAAP Reconciliation: Adjusted Net Income & EBITDA

    G A A P/ N O N - G A A P R E C O N C I L I AT I O N ( U N A U D I T E D ) FY21, FY20 & FY19 ADJUSTED NET INCOME & ADJUSTED EBITDA Twelve Months Ended Twelve Months Ended Twelve Months Ended Reconciliation of Adjusted Net Income and Adjusted EPS October 31, 2021 October 31, 2020 October 31, 2019 Net

  30. Slide 30: GAAP/Non-GAAP Reconciliation: LTM Adjusted Net Income & EBITDA

    G A A P/ N O N - G A A P R E C O N C I L I AT I O N ( U N A U D I T E D ) LTM ADJUSTED NET INCOME & ADJUSTED EBITDA Three Months Ended Three Months Ended Three Months Ended Three Months Ended Reconciliation of Adjusted Net Income and Adjusted EPS Total July 31, 2022 April 30, 2022 January 31, 2022 O

  31. Slide 31: GAAP/Non-GAAP Reconciliation: Free Cash Flow

    G A A P/ N O N - G A A P R E C O N C I L I AT I O N ( U N A U D I T E D ) FREE CASH FLOW ($ in thousands) Q1 Q2 Q3 Q4 Fiscal 2017 Cash provided by operating activities $3,081 $13,648 $29,736 $33,313 $79,778 Capital expenditures ($8,141) ($9,409) ($9,548) ($7,466) ($34,564) Free Cash Flow ($5,060) $4

  32. Slide 32: GAAP/Non-GAAP Reconciliation: Net Debt

    G A A P/ N O N - G A A P R E C O N C I L I AT I O N ( U N A U D I T E D ) NET DEBT The following table reconciles the Company's Net Debt which is defined as total debt principal of the Company plus finance lease obligations minus ($ in thousands) 10.31.19 10.31.20 10.31.21 7.31.22 Revolving credit f

  33. Slide 33: GAAP/Non-GAAP Reconciliation: Net Leverage

    G A A P/ N O N - G A A P R E C O N C I L I AT I O N ( U N A U D I T E D ) NET LEVERAGE Capitalization ($ in thousands) FY19 10.31.19 FY20 10.31.20 FY21 10.31.21 LTM 7.31.22 Cash & Cash Equivalents $30,868 $51,621 $40,061 $50,030 Senior Secured Revolving Credit Facility due 2023 (1) 142,500 103,000 3

  34. Slide 34: GAAP/Non-GAAP Reconciliation: ROIC & ROE

    G A A P/ N O N - G A A P R E C O N C I L I AT I O N ( U N A U D I T E D ) ROIC & ROE Public Tax Rate Guidance: 28.0% FY18 FY 2019 FY 2020 FY 2021 LTM Q3 2022 Adj. EBITDA 89.9 102.7 104.5 126.8 150.5 D&A 51.8 49.6 47.2 42.7 40.7 Adj. EBIT 38.1 53.1 57.3 84.1 109.8 Debt 210.6 157.2 117.4 52.9 56.5 Cas

  35. Slide 35: Executive Compensation Aligned with Shareholders

    E X E C U T I V E C O M P E N S AT I O N ALIGNED WITH SHAREHOLDERS Performance-based compensation philosophy at target • Base salary targeted at market 50th percentile • Annual incentive award based on specific metrics • Long-term incentives as referenced below 2022 Annual Incentive Award • 45% weig

  36. Slide 36: Investor Contact

    INVESTOR CONTACT Scott Zuehlke SVP, Chief Financial Officer & Treasurer 1800 West Loop South, Suite 1500 Houston, TX 77027 (713) 877-5327 scott.zuehlke@quanex.com © 2022 Quanex | Q U A N E X . C O M © 2022 Quanex | Q U A N E X . C O M

Quanex Building Products — Investor Presentation (September 2022) on 6ix