Quanex Building Products Corporation · NYSE:NX

Quanex Building Products — Investor Presentation (June 2023)

33 slides from Quanex Building Products's investor presentation, June 2023

  1. Slide 1: Investor Presentation June 2023

    I N V E S TO R P R E S E N TAT I O N JUNE 2023 © 2023 Quanex | Q U A N E X . C O M © 2023 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 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 seg

  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 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 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

    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: 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 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 Ass

  10. 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

  11. 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

  12. 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

  13. 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

  14. 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

  15. 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

  16. Slide 16: 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 UA 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 a

  17. Slide 17: 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

  18. Slide 18: 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

  19. Slide 19: 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

  20. Slide 20: 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 ~$413M since FY 2017 1.2x Significant Balance Sheet capacity providing  Free Cash Flow weighted to second half of each fiscal year meaningful flexibilit

  21. Slide 21: 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) 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

  22. Slide 22: 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 ~$60M Paid Out Investment of Opportunistic F

  23. Slide 23: FY23 Guidance

    F Y 2 3 G U I DA N C E ~$1.12 – $1.16B ~$130 – $142M ~$60-65M 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 weight

  24. Slide 24: 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

  25. Slide 25: Appendix

    APPENDIX © 2022 Quanex | Q U A N E X . C O M © 2023 Quanex | Q U A N E X . C O M

  26. Slide 26: GAAP/Non-GAAP Reconciliation: FY22-FY19 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 ) 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

  27. Slide 27: 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 SIx Months Ended SIx Months Ended April 30, 2023 April 30, 2022 April 30, 2023 April 30, 2022 Reconciliation of Adjusted Net Income and Adjusted E

  28. Slide 28: 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

  29. Slide 29: 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

  30. Slide 30: 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 Cash & Cash Equivalents $30,868 $51,621 $40,061 $55,093 $43,055 $43,496 Senior Secured Revolving Credit

  31. Slide 31: 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.

  32. Slide 32: 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

  33. Slide 33: 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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