Quanex Building Products Corporation · NYSE:NX
Quanex Building Products — Investor Presentation (September 2023)
31 slides from Quanex Building Products's investor presentation, September 2023
Slide 1: Investor Presentation September 2023
I N V E S TO R P R E S E N TAT I O N SEPTEMBER 2023 © 2023 Quanex | Q U A N E X . C O M © 2023 Quanex | Q U A N E X . C O M
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
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
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
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
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
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
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
Slide 9: 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
Slide 10: 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
Slide 11: Growth with Purpose
GROWTH WITH PURPOSE © 2022 Quanex | Q U A N E X . C O M © 2023 Quanex | Q U A N E X . C O M
Slide 12: 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 Engaged to maximize R Responsive to ideas strategy targeting development driving strategy incorporating approach that leverages positive impact on all and opportunities existing and new
Slide 13: 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 $1,072 1 1 2 3 4 5 Near-Term Long-Term Inorganic Long-Term FY 2022 Organic Growth Organic Growth M&A Activity Target • Price and volume growth • Continued volume and growth • Expanding target m
Slide 14: Investing in the Core; Expanding the Core
INVESTING IN THE CORE: REINFORCING SECTOR LEADERSHIP ▲Growth in existing markets and reinforcing leadership positions enabling improved relative positioning with material suppliers driving continued volume growth and share gains – Significant increase in scale will create a more effective platform f
Slide 15: Strategy for Inorganic Growth in Target Markets
STRATEGY FOR INORGANIC GROWTH IN TARGET MARKETS WHO WE WANT TO BE: Attractive Category With New Opportunities for Growth Broader Channel Diversification Beyond OEM Value Added Positioning In The House On The House Outside The House with Secular Growth Drivers Cabinetry IG Spacers Decking Current Est
Slide 16: Financial Results
FINANCIAL RESULTS © 2022 Quanex | Q U A N E X . C O M © 2023 Quanex | Q U A N E X . C O M
Slide 17: Strong Financial Results with Clear Operating Objectives
S T R O N G F I N A N C I A L R E S U LT S W I T H C L E A R O P E R AT I N G O B J E C T I V E S REVENUE NET INCOME & ADJ. EBITDA ($ in millions) ($ in millions) $1,222 Net Income Adj. EBITDA $153 $1,072 $127 $103 $105 $88 $894 $852 $57 $38 FY 2019(1) FY 2020 FY 2021 FY 2022 FY 2019 FY 2020 FY 2021
Slide 18: 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 Balance Sheet capacity providing • Cumulative Free Cash Flow of ~$470M since FY 2017 meaningful flexibility around internal as well Free Cash Flow weighted to second half
Slide 19: 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) 20.2% 15.7% 10.4% 8.2% 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 202
Slide 20: 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 ~$72M Focused Targeted & Repurchased Since ~$63M Paid Out Investment of Opportunistic F
Slide 21: FY23 Guidance
F Y 2 3 G U I DA N C E ~$1.125B $150 – $155M $90-95M Net Sales Adjusted EBITDA Free Cash Flow ➢ Y/Y sales decline primarily driven by lower ➢ Margin expansion expected in 2H as consumer ➢ Free Cash Flow has historically been second- volume confidence improves and volumes recover half weighted to mat
Slide 22: Investment Appeals
INVESTMENT APPEALS A G R O W I N G M A N U FA C T U R I N G B U S I N E S S W I T H C O R E C A PA B I L I T I E S & B R O A D A P P L I C AT I O N S 1 A Global market leader aligned with top OEMs across all product categories 2 Profitable above-market growth, strong free cash flow generation & sign
Slide 23: Appendix
APPENDIX © 2022 Quanex | Q U A N E X . C O M © 2023 Quanex | Q U A N E X . C O M
Slide 24: GAAP/Non-GAAP Reconciliation
G A A P/ N O N - G A A P R E C O N C I L I AT I O N ( U N A U D I T E D ) FY22, FY21, FY20 & FY19 ADJUSTED NET INCOME & ADJUSTED EBITDA Twelve Months Ended Twelve Months Ended Twelve Months Ended Twelve Months Ended Reconciliation of A djusted Net Income and A djusted EPS October 31, 2022 October 31
Slide 25: GAAP/Non-GAAP Reconciliation: LTM Adjusted Net Income & EBITDA
G A A P/ N O N - G A A P R E C O N C I L I AT I O N ( U N A U D I T E D ) LTM ADJUSTED NET INCOME & ADJUSTED EBITDA Reconciliation of Adjusted Net Income and Adjusted EPS Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended Net Diluted Net Diluted Net Diluted Net Diluted Income
Slide 26: GAAP/Non-GAAP Reconciliation: Free Cash Flow
G A A P/ N O N - G A A P R E C O N C I L I AT I O N ( U N A U D I T E D ) FREE CASH FLOW ($ 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) $4
Slide 27: GAAP/Non-GAAP Reconciliation: Net Debt
G A A P/ N O N - G A A P R E C O N C I L I AT I O N ( U N A U D I T E D ) NET DEBT The following table reconciles the Company's Net Debt which is defined as total debt principal of the Company plus finance lease obligations minus cash. ($ in thousands) 10.31.19 10.31.20 10.31.21 10.31.22 1.31.23 4.3
Slide 28: 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 Q1 1.31.23 Q2 4.30.23 Q3 7.31.23 Cash & Cash Equivalents $30,868 $51,621 $40,061 $55,093 $43,055 $43,496 $73,252 Senior Secur
Slide 29: 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 Tax Rate Assumption: 20.0% 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 $57.3 $84
Slide 30: 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
Slide 31: 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 © 2023 Quanex | Q U A N E X . C O M
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