Quanex Building Products CORP

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The AIA achievement resulted in payments to participants as follows:

Fiscal 2026 Changes: Following the successful achievement of targeted Run Rate Synergies, for fiscal 2026 the Company reverted back to a more similar design as in years prior, with goals based on 25% Revenue, 25% Adjusted EBITDA, 25% Adjusted EBITDA Margin, and 25% Working Capital as a Percentage of Sales.

Long-Term Incentive Compensation

Purpose: We have a long-term incentive program designed to help align the interests of executive management with shareholders and reward executives for the achievement of long-term goals. Long-term incentives are also critical to the retention of key employees and provide executives an opportunity for personal capital accumulation. For these reasons we have placed more value on the long-term incentive element of compensation than on other elements. The result is that this element of compensation generally represents at least half of the named executive officers’ total direct compensation.

Competitive Positioning: Our long-term incentive philosophy targets the 50th percentile of the market. The individual performance of each named executive officer is not considered in the value of the long-term incentive awards granted. Since the goals are set prospectively, the Company’s financial performance determines the ultimate value of the award.

Participation: Participation in the program includes the named executive officers and certain key contributors to the business and is determined based on competitive practices as well as our assessment of which positions contribute to long-term value creation.

Target Award Levels: Fiscal 2025 target long-term incentive awards were determined based on a target dollar value for our executives, which has been the practice for the executive officers since fiscal 2018. The executives had the following LTI targets for fiscal 2025:

Fiscal Year 2025 Long-Term Incentive Program Design

At its December 2024 meeting, the Compensation Committee approved the following fiscal 2025 long-term incentive plan design. The performance share awards were measured by EPS with the ability to be modified 0.75x to 1.25x based on RONA results and the PRSUs were based 100% on Absolute Total Shareholder Return (“TSR”), each as measured over a three-year performance period. The LTI mix was delivered 30% in restricted stock, 30% in PRSUs, and 40% in performance shares. The allocation among the long-term incentive vehicles is determined by the Compensation Committee based on market information provided by its compensation consultant, as well as input from senior management regarding the key business drivers that will continue to promote a results-oriented culture. The Omnibus Plan does not provide for any specific subjective individual performance component in determining the ultimate value of any award.

The following chart illustrates the fiscal 2025 allocation of long-term incentives, which is 70% performance-based.

Restricted Stock

Restricted stock represents 30% of each participant’s long-term incentive value. The Compensation Committee chose 30% of the total value because it provides meaningful retentive value to key executives, helps smooth out market volatility, and is cost efficient. The restricted stock awards vest three years after grant, so long as the participant remains employed through the vesting date. We believe restricted stock awards are an effective long-term compensation vehicle through which key employees can be retained, especially through volatile periods in the market.

Performance Restricted Stock Units

PRSUs represent 30% of each participant’s long-term incentive value and are payable 100% in Company stock upon vesting. The PRSUs can be earned based on the Company’s Absolute TSR over the three-year performance period. In order for executives to receive a target payout, the Company must have Absolute TSR improvement of 20%. For PRSUs granted in fiscal 2025, Absolute TSR is calculated using the 10-day average stock price leading up to the start of the performance period (November 1, 2024) and the 10-day average stock price leading up to the end of the performance period (October 31, 2027) and includes the reinvestment of dividends. The table below illustrates the number of PRSUs that would vest based on the Company’s Absolute TSR under the PRSU awards at various levels of performance. Performance will be interpolated for any results between threshold and target or between target and maximum.

Performance Shares

Performance shares represent 40% of each participant’s long-term incentive value. Performance shares are payable 100% in cash upon vesting (with the amount of cash paid equal to the average value of a share of Quanex common stock for the last 10 trading days immediately before the end of the performance period) and are intended to motivate executives to achieve pre-set goals that are in line with critical business drivers.

For awards granted in fiscal 2025, the performance shares will be earned based on the Company’s EPS over the three-year performance period, with the ability to be modified 0.75x to 1.25x based on RONA results during the same period. RONA is defined as operating income over total assets (measured as a five-quarter trailing average), minus cash, minus current liabilities, plus current long-term debt. The number of performance shares earned is based on the level of achievement of the EPS performance goal, as modified upward or downward by the RONA modifier.

Fiscal 2025 Long-Term Incentive Grants

The number of long-term incentive awards granted during fiscal 2025 was determined by: (1) taking 30% of the participant’s target award value and dividing it by the 10-day average closing stock price between October 18, 2024 and October 31, 2024 to determine the number of restricted stock awards, (2) taking 30% of the participant’s target value and dividing it by the calculated Monte Carlo value of the PRSUs based on the 10-day average closing stock price between October 18, 2024 and October 31, 2024 to determine the number of PRSUs, and (3) taking 40% of the participant’s target award value and dividing it by the 10-day average closing stock price between October 18, 2024 and October 31, 2024 to determine the number of performance shares. The equity grant calculations apply an average stock price based on the last ten trading days in October 2024. For more information related to long-term incentive awards granted during fiscal 2025, please see the table entitled “Grants of Plan-Based Awards” in this Proxy Statement.

Long-Term Incentive Grant Timing

The Company typically makes annual grants of long-term incentive awards in early December, but may make grants at other times in connection with new hires, promotions, or other special situations. The Compensation Committee does not take material nonpublic information into account when determining the timing and terms of long-term incentive awards, andwe havenot timed the disclosure of material nonpublic information for the purpose of affecting the value of executive compensation.

Most Recently Completed Performance Period

Fiscal 2023 Performance Shares

The performance shares awarded to our executives in December 2022 (the “Fiscal 2023 Performance Shares”) became payable to executives in December 2025, with a final value determined by the Company’s performance for fiscal 2023 through fiscal 2025. Performance measures for the Fiscal 2023 Performance Shares were based on RONA (as defined above). Our performance against the RONA goals determined the payout to executives within a range from threshold to maximum. As provided in the governing plan document, the Committee adjusted the performance goal originally set in December 2022 to better reflect the combined company following the Tyman acquisition, ensuring the goals maintained their rigor while enhancing line-of-sight for the executive team, as the acquisition was not known or considered when the goals were originally set. The adjusted goals and the Company’s actual performance against the goals are set forth below, where the Company earned 0% of Target.

Fiscal 2023 Performance Restricted Stock Units

The PRSUs awarded to our executives in December 2022 (the “Fiscal 2023 PRSUs”) became payable to executives in December 2025, with a final value determined by the Company’s performance period for fiscal 2023 through fiscal 2025. The performance measure for the Fiscal 2023 PRSUs was Absolute TSR (as defined above). Our performance against this goal determined the payout to executives within a range from threshold to maximum. The plan only permitted a payout of target if Absolute TSR increased by a