Quanex Building Products Corporation · NYSE:NX

Quanex Building Products — Investor Presentation (March 2023)

34 slides from Quanex Building Products's investor presentation, March 2023

  1. Slide 1: Investor Presentation March 2023

    I N V E S TO R P R E S E N TAT I O N MARCH 2023 © 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 U A 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 FY 2022 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 se

  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 Enhance durability, Largest selection of condensation

  6. Slide 6: Leading Components 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 CUSTOM SCREENS AND U.S. VINYL CABINET I G S PA C E R S EXTRUSIONS MIXING ACCESSORIES EXTRUSIONS COMPONENTS Market A global market leader Top 5 manufacturer in U.K. A market leader in the U.S. A market leader in U.S. Top 5 manufact

  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

    COR E M AN U FAC TU RING CAPABIL ITIES WITH BROAD APPL ICATIONS 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

  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: Shifting Demand Trends Benefiting Quanex

    SHIFTING DEMAND TRENDS BENEFITING QUANEX 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 Current Market Conditions Impact on Outsourcing Trends Outsourcing Allows OEM Labor Labor Continues To Be A Major Force To Focus On Product And Growth Constraint System Assembly Weak Payback For OEMs On

  11. Slide 11: 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

  12. Slide 12: 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

  13. Slide 13: 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

  14. Slide 14: 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 $2,000 3 2 $1,222 $1,072 1 1 2 3 4 5 Near-Term Long-Term Inorganic Long-Term FY 2022 Organic Growth Organic Growth M&A Activity Target • Price and volume growth • Continued volume and growth • Expanding target m

  15. Slide 15: 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

  16. Slide 16: Strategy for Inorganic Growth in Target Markets

    STRATEGY FOR INORGANIC GROWTH IN TARGET MARKETS WHO WE WANT TO BE: Attractive Category With New Opportunities for Growth Broader Channel Diversification Beyond OEM Value Added Positioning In The House On The House Outside The House with Secular Growth Drivers Cabinetry IG Spacers Decking Current Est

  17. Slide 17: LMI Acquisition Consistent with Quanex Growth Strategy

    L M I A C Q U I S I T I O N C O N S I S T E N T W I T H Q U A N E X G R O W T H S T R AT E G Y • Acquired substantially all the assets of LMI Custom Mixing, LLC (“LMI”) on 11/1/22 Transaction • LMI is a custom polymer mixing compounder that produces high-quality, customized rubber compounds used in

  18. Slide 18: Attractive and Highly Complementary Business

    AT T R A C T I V E A N D H I G H LY C O M P L E M E N TA R Y B U S I N E S S Highly complementary business Black & Custom Color Polymer Compounds • Fits squarely within Quanex’s material science and process engineering expertise Compounds • Compounding is a core competency of Quanex • Located on sam

  19. Slide 19: 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

  20. Slide 20: 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) $1,222 $153 $1,072 $127 $894 $852 $103 $105 FY 2019 FY 2020 FY 2021 FY 2022 FY 2019 FY 2020 FY 2021 FY 2022 % YoY Growth % Margin 0.4% (4.7%) 25.9% 13

  21. Slide 21: 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) • Cumulative Free Cash Flow of ~$385M since FY 2017  Free Cash Flow weighted to second half of each fiscal year 1.2x Significant Balance Sheet capacity providing meaningful flexibilit

  22. Slide 22: Strong Execution Driving 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) 18.9% 14.8% 9.8% 7.7% FY 2019 FY 2020 FY 2021 FY 2022 R E T U R N O N E Q U I T Y ( R O E ) (2) 20.8% 15.1% 11.9% 8.7% FY 2019 FY 2020

  23. Slide 23: 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 Targeted & Repurchased Since ~$58M Paid Out Investment of Opportunistic F

  24. Slide 24: FY23 Guidance

    F Y 2 3 G U I DA N C E ~$1.12 – $1.16B ~$130 – $142M ~$50-55M Net Sales Adjusted EBITDA Free Cash Flow ➢ Y/Y sales decline primarily driven by lower ➢ Margin expansion possible in 2H as consumer ➢ Free Cash Flow has historically been second- volume confidence improves and volumes recover half weight

  25. Slide 25: 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

  26. Slide 26: Appendix

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

  27. Slide 27: GAAP/Non-GAAP Reconciliation

    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 ) FY22, FY21, FY20 & FY19 ADJUSTED NET INCOME & ADJUSTED EBITDA Twelve Months Ended Twelve Months Ended Twelve Months Ended Twelve Months Ended Reconciliation of Adjusted Net Income and Adjusted EPS October 31, 2022 October 31,

  28. Slide 28: GAAP/Non-GAAP Reconciliation: LTM

    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 Total Reconciliation of Adjusted Net Income and Adjusted EPS January 31, 2023 October 31, 2022 July 31, 2022

  29. Slide 29: 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

  30. Slide 30: 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 cash. ($ in thousands) 10.31.19 10.31.20 10.31.21 10.31.22 1.31.23 Rev

  31. Slide 31: 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 FY22 10.31.22 FY23 1.31.23 Cash & Cash Equivalents $30,868 $51,621 $40,061 $55,093 $43,055 Senior Secured Revolving Credit Facility due 202

  32. Slide 32: 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: 25.0% FY18 FY 2019 FY 2020 FY 2021 FY 2022 Adj. Net Income $31.4 $40.7 $58.6 $88.9 Adj. EBITDA $89.9 $102.7 $104.5 $126.8 $152.5 D&A $51.8 $49.6 $47.2 $42.7 $40.1 Adj. EBIT $38.1 $53.1 $57.

  33. Slide 33: 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 2023 Annual Incentive Award • 40% weig

  34. Slide 34: 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

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